Income Taxes

The income tax provision includes U.S. federal, state and local, and foreign income taxes and is based on the application of a forecasted annual income tax rate applied to the current quarter's year-to-date pre-tax income or loss. In determining the estimated annual effective income tax rate, the Company analyzes various factors, including projections of the Company's annual earnings, taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, the Company's ability to use tax credits and net operating loss carryforwards, and available tax planning alternatives. Discrete items, including the effect of changes in tax laws, tax rates and certain circumstances with respect to valuation allowances or other unusual or non-recurring tax adjustments are reflected in the period in which they occur as an addition to, or reduction from, the income tax provision, rather than included in the estimated effective annual income tax rate.

A reconciliation of the Company's consolidated federal statutory and effective income tax on income from continuing operations is as follows (in thousands):



	THREE MONTHS ENDED						SIX MONTHS ENDED
	JUNE 30						JUNE 30
	2013			2012			2013			2012
Income from continuing operations before income tax provision:	$	7,243		$	4,830		$	13,080		$	11,580
Statutory taxes at 35%	$	2,535		$	1,691		$	4,578		$	4,053
Discrete items:
Other	140			10			(2		)	21
	140			10			(2		)	21
Other permanent items:
NACoal percentage depletion	(711		)	(346		)	(1,297		)	(949		)
Other	132			32			232			300
	(579		)	(314		)	(1,065		)	(649		)
Income tax provision	$	2,096		$	1,387		$	3,511		$	3,425
Effective income tax rate	28.9		%	28.7		%	26.8		%	29.6		%

At June 30, 2013, the Company has a $1.8 million liability, included in Other long-term liabilities on the unaudited condensed consolidated balance sheet, for an uncertain tax position associated with pre-acquisition business activities of Reed Minerals. There is also a $1.8 million long-term asset recorded, recognizing a third party's contractual obligation to indemnify the Company in connection with this uncertain tax position. The indemnification asset was measured on the same basis as the corresponding liability.