(3) Income Taxes

The components of income tax expense are:


	2013		2012			2011
Current:
Federal	$	12,285	$	17,448		$	6,070
State		3,007		2,528			1,275
Foreign		1,101		1,027			535
Deferred:
Federal		2,213		(590	)		4,691
State		310		(387	)		584

	$	18,916	$	20,026		$	13,155

Total income tax expense 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:


	2013			2012			2011
Computed tax expense at statutory federal rates	$	18,678		$	19,911		$	12,328
Increase (decrease) in taxes resulting from:
State taxes, net of federal income tax benefit		1,983			1,947			1,374
Domestic production deduction		(1,142	)		(1,661	)		(826	)
Income tax credits		(724	)		(395	)		(343	)
Other expenses		121			224			622

	$	18,916		$	20,026		$	13,155

The components of income before provision for income taxes are as follows:


	2013		2012		2011
Domestic	$	46,520	$	53,361	$	33,399
Foreign		7,314		3,491		1,824

	$	53,834	$	56,852	$	35,223

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, 2013 and 2012 relate to the following:


	2013			2012
Current:
Inventories	$	4,398		$	3,490
State income taxes		(331	)		(431	)
Vacation pay accrual		648			354
Accrued bonuses		1,791			2,289
Bad debt		169			192
Prepaid expenses		(1,929	)		(1,490	)
Other		1,775			473

Net deferred tax asset		6,521			4,877

Non-Current:
Plant and equipment, principally due to differences in depreciation and capitalized interest		(25,662	)		(21,993	)
Tax credit		14			73
Fair value adjustment		207			460
Other		2,111			2,297

Net deferred tax liability		(23,330	)		(19,163	)

Total net deferred tax liability	$	(16,809	)	$	(14,286	)

The following is a roll-forward of the Company’s total gross unrecognized tax liabilities, not including interest and penalties, for the fiscal year ended December 31, 2013:


	Gross Unrecognized Tax Liabilities
Balance at December 31, 2012	$	282
Additions for tax positions related to the current year		1,290
Additions for tax positions related to the prior year		161
Deletion for tax positions related to the prior year		(41	)

Balance at December 31, 2013	$	1,692

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, 2013, the Company had recognized approximately $120 in interest and penalties related to recognized tax benefits accrued.

It is expected that 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 operations 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 that the deferred tax assets detailed in the table 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. This amounted to $16,202 as of December 31, 2013. 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 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 2010 through 2012 tax years. State income tax returns are subject to examination for the 2009 through 2012 tax years.

As of July 2013, the Internal Revenue Service audit for the year ended December 31, 2009 has been closed. The Internal Revenue Service concluded that there were no federal tax adjustments.

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. Currently the Company believes that it has set up an adequate reserve on its claim for refund.