Note 7 Income Taxes

The provision (benefit) for income taxes consists of:

(dollars in thousands)	2011		2010			2009
Current:
Federal	$	24,518	$	1,578		$	30,415
State		781		(679	)		3,320
Deferred:
Federal		12,731		33,612			1,805
State		3,992		4,583			(433	)

	$	42,022	$	39,094		$	35,107

The reconciliation of income taxes computed at the federal statutory rate (35% in 2011, 2010 and 2009) to the provision for income taxes is:

(dollars in thousands)	2011			2010			2009
Income taxes at federal statutory rate	$	41,151		$	37,585		$	34,268
State income taxes, net of federal income tax benefit		2,558			2,538			1,877
Other		(1,687	)		(1,029	)		(1,038	)
Provision for income taxes (effective tax rate 35.7%, 36.4% and 35.9%, respectively)	$	42,022		$	39,094		$	35,107

Cash paid for income taxes was $21,000,000, $4,123,000 and $34,305,000 in 2011, 2010 and 2009, respectively.

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31, 2011 and December 25, 2010, are:

(dollars in thousands)	2011			2010
Deferred tax assets:
Accounts receivable	$	403		$	190
Compensated absences		495			520
Long term employment incentives		1,554			—
Employee benefit plans		3,496			4,080
General liability insurance		1,074			1,413
Postretirement benefit obligations		5,931			6,064
Net operating loss carryforwards		6,825			9,253

Total deferred tax assets		19,778			21,520

Deferred tax liabilities:
Inventories		(5,511	)		(7,191	)
Unrealized gains on marketable securities		(3,799	)		(3,477	)
Nondeductible accruals and other		(1,021	)		(195	)
Depreciation		(86,658	)		(70,823	)

Total deferred tax liabilities		(96,989	)		(81,686	)

Net deferred tax liability	$	(77,211	)	$	(60,166	)

Current deferred liability - net	$	(4,130	)	$	(5,818	)
Noncurrent deferred liability - net		(73,081	)		(54,348	)

Net deferred tax liability	$	(77,211	)	$	(60,166	)

The following table summarizes the activity related to the Company's unrecognized tax benefits:

(dollars in thousands)	2011			2010
Unrecognized tax benefits at beginning of year	$	925		$	925
Increases based on tax positions related to the current year		—			—
Additions for tax positions of prior years		—			—
Reductions for tax positions of prior years		—			—
Settlements		(764	)		—
Expiration of the statute of limitations for assessment of taxes		—			—

Unrecognized tax benefits at end of year	$	161		$	925

During 2011 the Company settled an outstanding tax claim with the state of New Jersey in the amount of $764,000. The Company accrues interest and penalties related to income tax matters as a part of the provision for income taxes. The Company had $161,000 of accrued interest and penalties at December 31, 2011, $434,000 at December 25, 2010 and $55,000 at December 26, 2009. The end of year unrecognized tax benefit of $161,000 for 2011 would impact the effective tax rate over time and if recognized would reduce the effective tax rate. Management anticipates settlement for the majority of unrecognized tax benefits within the next twelve months.

The Company's U.S. Federal income tax filings have been examined by the Internal Revenue Service through 2008. The Company or one of its subsidiaries files tax returns in various states. The tax years subject to examination in Pennsylvania, where the majority of the Company's revenues are generated, are 2008 to 2011.

The Company has net operating loss carryforwards of $105 million available for state income tax purposes. The net operating losses will begin to expire starting in 2027. The Company expects to fully utilize these net operating loss carryforwards.