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INCOME TAXES
 12 Months Ended
Dec. 31, 2011
INCOME TAXES

9. INCOME TAXES

 

The components of the income tax expense (benefit) are as follows:

 

    2011     2010     2009  
Current                  
Federal   $ 2,347,000     $ 9,688,000     $ 5,760,000  
State     777,000       2,463,000       1,525,000  
Total Current     3,124,000       12,151,000       7,285,000  
                         
Deferred                        
Federal   $ 5,446,000     $ (62,000 )   $ (191,000 )
State     569,000       (8,000 )     (27,000 )
Total Deferred     6,015,000       (70,000 )     (218,000 )
                         
Total Income Tax Expense   $ 9,139,000     $ 12,081,000     $ 7,067,000  

 

Deferred tax assets (liabilities) consist of the following at December 31,

 

    2011     2010     2009  
                   
Deferred compensation   $ 301,000     $ 314,000     $ 55,000  
Reserves on inventory and sales     242,000       140,000       44,000  
Credit and loss carryforwards     545,000       178,000       87,000  
Stock compensation     -       601,000       581,000  
Inventory capitalization     555,000       -       -  
Other     516,000       77,000       -  
Total deferred tax assets     2,159,000       1,310,000       767,000  
                         
Unrealized gain/loss on investments     (250,000 )     (145,000 )     -  
Prepaid expenses     (426,000 )     (429,000 )     -  
Depreciation     (8,075,000 )     (1,317,000 )     (1,273,000 )
Stock compensation     (109,000 )     -       -  
                         
Total deferred tax liabilities     (8,860,000 )     (1,891,000 )     (1,273,000 )
                         
Net deferred tax liabilities   $ (6,701,000 )   $ (581,000 )   $ (506,000 )

 

The differences between the United States federal statutory tax rate and the Company's effective tax rate are as follows:

 

    2011           2010           2009        
Statutory federal tax   $ 9,688,000       35.0 %   $ 11,093,000       35.0 %   $ 6,448,000       35.0 %
State income taxes, net of federal benefit     1,015,000       3.7 %     1,699,000       5.4 %     988,000       5.4 %
Domestic manufacturer deduction     (248,000 )     -0.9 %     (861,000 )     -2.7 %     (386,000 )     -2.1 %
Other permanent differences     71,000       0.3 %     75,000       0.2 %     53,000       0.3 %
Research and development and jobs credits     (336,000 )     -1.2 %     -               -          
Other state income tax benefits     (1,051,000 )     -3.9 %     -               -          
Other     -               75,000       0.2 %     (36,000 )     -0.2 %
    $ 9,139,000       33.0 %   $ 12,081,000       38.1 %   $ 7,067,000       38.3 %

 

The decline in the effective tax rate was a result of extensive tax planning performed by the Company. As part of its tax planning process, the Company amended several returns filed in the prior years. As a manufacturing entity based in Maryland, the Company adopted the single sales factor apportionment method in addition to claiming new state job credits, reducing the Company's effective tax rate compared to the prior year.

 

The Company has federal capital loss carry forwards of approximately $459,000 that can be carried forward for five years and will expire in 2014 through 2017. Separate company state net operating loss carry forwards totaling $8.6 million will expire in 2032. Maryland company state job credit carry forwards totaling $173,000 will expire in 2016.