Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes.

The provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2011			2010			2009
Current:
Federal	$	9,814		$	1,748		$	(736	)
State		1,447			522			75
Foreign		1,465			412			452
		12,726			2,682			(209	)
Deferred:
Federal		3,759			2,271			3,852
State		488			-			427
Foreign		(261	)		(212	)		(98	)
		3,986			2,059			4,181
Change in Valuation Allowance		454			215			106
Total	$	17,166		$	4,956		$	4,078

Income (loss) before provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2011		2010			2009
United States	$	37,405	$	(6,071	)	$	7,602
Foreign		4,058		1,130			1,183
	$	41,463	$	(4,941	)	$	8,785

 The components of deferred tax assets (liabilities) are as follows (in thousands):

	December 31, 2011						December 31, 2010
	Federal			State			Federal			State
Deferred income tax assets (liabilities):
Current:
Allowance for doubtful accounts	$	909		$	98		$	698		$	73
Employee related accruals		2,690			233			3,114			246
State taxes		534			-			178			-
Workers' compensation loss reserve		671			325			615			69
Medical malpractice loss reserve		3,274			7			2,990			236
Net operating loss carry-forwards		-			52			-			75
Prepaid insurance		(297	)		(22	)		(281	)		(21	)
Other		803			(6	)		749			43
Total current deferred income tax assets		8,584			687			8,063			721
Non-current:
Net operating loss carry-forwards		-			384			-			578
Stock-based compensation		3,243			185			2,244			133
Purchased intangibles		(14,180	)		(1,379	)		(9,294	)		(822	)
Depreciation and amortization expense		(3,574	)		(293	)		(2,778	)		(265	)
Employee related accruals		-			-			(72	)		(9	)
Other		661			97			108			21
Total non-current deferred income tax liabilities		(13,850	)		(1,006	)		(9,792	)		(364	)
Total deferred income tax assets (liabilities)	$	(5,266	)	$	(319	)	$	(1,729	)	$	357

The reconciliation between the amount computed by applying the U.S. federal statutory tax rate of 35.0 percent for 2011 and 34.0 percent for 2010 and 2009 to income before income taxes and the income tax provision is as follows (in thousands):

	Year Ended December 31,
	2011			2010			2009
Income tax provision at the statutory rate	$	14,512		$	(1,680	)	$	3,075
State income taxes, net of federal benefit		1,527			460			471
Impairment of goodwill		-			5,236			-
Permanent difference - (gain)/loss on cash surrender value of life insurance		13			(72	)		(178	)
Permanent difference - non deductible items		1,263			901			614
Permanent difference - settlement of earn-out		(445	)		-			-
Valuation allowance		454			215			106
Income tax contingency		(91	)		(16	)		(232	)
Return to provision adjustment		-			-			280
Foreign tax rate differential		(222	)		(181	)		46
Other		155			93			(104	)
Total	$	17,166		$	4,956		$	4,078

As of December 31, 2011, the Company had no federal net operating losses and total combined state net operating losses of $9.3 million. The state net operating losses can be carried forward up to 20 years and begin expiring in 2013. The Company has recorded a valuation allowance of approximately $0.7 million and $0.2 million at December 31, 2011 and December 31, 2010, respectively, related to state and foreign net operating loss carryforwards and credits.

At December 31, 2011, the Company had accumulated net foreign earnings of $10.7 million. The Company intends to reinvest the undistributed earnings of its foreign subsidiaries and, therefore, no U.S. income tax has been provided on the foreign earnings. The determination of additional deferred taxes that have not been provided is not practicable.

The Company had gross deferred tax assets of $14.4 million and $12.7 million and gross deferred tax liabilities of $19.9 million and $10.3 million at December 31, 2011 and 2010, respectively. Foreign deferred tax assets and liabilities were not material as of December 31, 2011 and 2010.

The Company receives a tax deduction for stock-based awards upon exercise of a non-qualified stock option or as the result of disqualifying dispositions made by directors, officers and employees. A disqualifying disposition occurs when stock acquired through the exercise of incentive stock options or the Employee Stock Purchase Plan is disposed of prior to the required holding period. The Company also receives a tax deduction upon the vesting of restricted stock units or restricted stock awards. The Company received tax deductions of $7.5 million and $3.8 million, respectively, from stock-based awards in 2011 and 2010.

As of December 31, 2011, the estimated value of the Company's uncertain tax positions is a liability of $0.2 million, which includes penalties and interest, all of which was carried in other long-term liabilities. If the Company's positions are sustained by the taxing authority in favor of the Company, the entire $0.2 million would reduce the Company's effective tax rate. The Company recognizes accrued interest and penalties related to uncertain tax positions in income tax expense.

 The following is a reconciliation of the total amounts of unrecognized tax benefits (in thousands):

	Year Ended December 31,
	2011			2010			2009
Unrecognized Tax Benefit beginning of year	$	358		$	397		$	812
Gross Decreases - tax positions in prior year		-			(39	)		-
Reductions for tax positions as a result of a lapse of the applicable statute of limitations		(107	)		-			(415	)
Unrecognized Tax Benefit end of year	$	251		$	358		$	397

During 2011, 2010 and 2009, the Company recognized ($5,000), $5,000 and $8,000, respectively, in interest on unrecognized tax benefits. Accruals for interest and penalties totaled $43,000 at December 31, 2011 and $61,000 at December 31, 2010.

The Company believes that there will be no significant increases or decreases to unrecognized tax benefits within the next twelve months.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. The IRS has examined and concluded all tax matters for years through 2006.The IRS has commenced an examination of the Company's U.S. income tax returns for the 2009 tax year. Open tax years related to federal, state and foreign jurisdictions remain subject to examination but are not considered material.