(3) Income Taxes

The components of income tax expense (benefit) are:


	2011		2010			2009
Current:
Federal	$	6,070	$	(615	)	$	(2,091	)
State		1,275		61			(981	)
Foreign		535		402			293
Deferred:
Federal		4,691		4,389			(72	)
State		584		953			(898	)

	$	13,155	$	5,190		$	(3,749	)

Total income tax expense (benefit) differed from the amounts computed by applying the U.S. Federal income tax rate of 35.0% to income before income tax expense as a result of the following:


	2011			2010			2009
Computed tax expense (benefit) at statutory federal rates	$	12,328		$	5,660		$	(3,339	)
Increase (decrease) in taxes resulting from:
State taxes, net of federal income tax benefit		1,374			742			(431	)
Domestic production deduction		(826	)		(345	)		—
Income tax credits		(343	)		(315	)		(616	)
Other expenses		622			(552	)		637

	$	13,155		$	5,190		$	(3,749	)

The components of income (loss) before provision (benefit) for income taxes are as follows:


	2011		2010		2009
Domestic	$	33,399	$	14,811	$	(10,841	)
Foreign		1,824		1,363		1,303

	$	35,223	$	16,174	$	(9,538	)

Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to significant portions of the net deferred tax liability at December 31, 2011 and 2010 relate to the following:


	2011			2010
Current:
Inventories	$	2,681		$	2,395
State income taxes		34			(387	)
Vacation pay accrual		289			253
Accrued bonuses		1,445			730
Bad Debt		78			79
Prepaid expenses		(1,432	)		(1,179	)
Other		1,578			900
Fair Value Adjustment		564			0

Net deferred tax asset		5,237			2,791

Non-Current:
Plant and equipment, principally due to differences in depreciation and capitalized interest		(20,653	)		(13,518	)
NOL Carry Forward		244			266

Net deferred tax liability		(20,409	)		(13,252	)

Total net deferred tax liability	$	(15,172	)	$	(10,461	)

The following is a rollforward of the Company's total gross unrecognized tax liabilities, not including interest and penalties, for the fiscal year ended December 31, 2011:


	Gross Unrecognized Tax Liabilities
Balance at December 31, 2010	$	124
Additions for tax positions related to the current year		65
Additions for tax positions related to the prior year		38

Balance at December 31, 2011	$	227

The Company recognizes accrued interest and penalties related to contingent tax liabilities in the provision for income taxes in the Company's consolidated financial statements. As of December 31, 2011, the Company had approximately $10 in interest and penalties related to recognized tax benefits accrued.

It is expected the amount of unrecognized tax benefits will change within the next 12 months; however we do not expect the change to have a significant impact on our consolidated statements of income or consolidated balance sheet. These changes may be the result of settlement of ongoing audits. At this time, an estimate of the range of the reasonable possible outcomes cannot be made.

The Company believes it is more likely than not the deferred tax assets above will be realized in the normal course of business. Undistributed earnings of foreign subsidiaries are considered to be indefinitely reinvested and, accordingly, no provision for United States federal and state income taxes has been provided thereon. Upon distribution of earnings in the form of dividends or otherwise, the Company would be subject to both United States income taxes (subject to adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the unrecognized deferred United States income tax liability is not practical due to the complexities of a hypothetical calculation.

The Company has state net operating loss carry forwards of approximately $4,069 which will begin expiring in 2032. The net operating loss carry forward is related to a state where the utilization of the net operating loss carryover is temporarily suspended under tax law.

The Company is subject to U.S. federal income tax as well as to income tax in multiple state jurisdictions. Federal income tax returns of the Company are subject to IRS examination for the 2008 through 2010 tax years. State income tax returns are subject to examination for the 2007 through 2010 tax years.

The Company is currently under audit by the Internal Revenue Service for the year ended December 31, 2009. Federal tax adjustments are not estimatable at this time.

The Company's research and development credit is currently under audit by the California Franchise Tax Board for the years ended December 31, 2004 through December 31, 2006. The case has been accepted into the settlement program by the Franchise Tax Board's Settlement Bureau. Currently the Company believes that it has set up an adequate reserve on its claim for refund.