16. Income Taxes

Income before income taxes for the Company’s domestic and foreign operations was as follows:

	Years Ended June 30,
($ in millions)	2014		2013		2012
Domestic	$	178.6	$	198.0	$	168.4
Foreign	17.8		18.8		20.2
Income before income taxes	$	196.4	$	216.8	$	188.6

The provision (benefit) for income taxes from continuing operations consisted of the following:

	Years Ended June 30,
($ in millions)	2014			2013			2012
Current:
Federal	$	61.3		$	49.7		$	21.5
State	6.5			5.9			2.9
Foreign	5.5			5.3			5.8
Total current	73.3			60.9			30.2
Deferred:
Federal	(8.0		)	7.8			32.5
State	(1.4		)	2.5			4.1
Foreign	(0.3		)	(0.9		)	0.2
Total deferred	(9.7		)	9.4			36.8

Total income tax expense	$	63.6		$	70.3		$	67.0

The following is a reconciliation of income taxes computed at the U.S. Federal income tax rate to the Company’s effective income tax rate:

	Years Ended June 30,
(% of pre-tax income)	2014		2013		2012
Statutory federal income tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	2.5		2.0		2.2
Domestic manufacturing deduction	(3.5	)	(2.7	)	(2.3	)
Other, net	(1.6	)	(1.9	)	0.6
Effective income tax rate	32.4	%	32.4	%	35.5	%

Deferred taxes are recorded for temporary differences between the carrying amounts of assets and liabilities and their tax bases. The significant components of deferred tax assets and liabilities that are recorded in the consolidated balance sheet are summarized in the table below. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. As of June 30, 2014, the Company had state net operating loss carryforwards of $319.6 million expiring between 2015 and 2033. Based on current year and forecasted taxable state income, we determined that it was appropriate to reverse a portion of the valuation allowance in fiscal year 2014. A tax benefit was recognized through the reduction of the valuation allowance in the amount of $1.5 million in fiscal year 2014. A significant portion of the state net operating loss carryforwards are subject to an annual limitation that under current law is likely to limit future tax benefits to approximately $5 million.

	June 30,
($ in millions)	2014			2013
Deferred tax assets:
Pensions	$	82.7		$	96.5
Postretirement provisions	66.9			64.6
Net operating loss carryforwards	20.6			21.3
Derivatives and hedging activities	—			25.2
Other	35.0			32.6
Gross deferred tax assets	205.2			240.2
Valuation allowances	(17.8		)	(19.2		)
Net deferred tax assets	187.4			221.0

Deferred tax liabilities:
Depreciation	(232.3		)	(227.4		)
Intangible assets	(37.5		)	(43.0		)
Inventories	(28.8		)	(21.1		)
Other	(4.0		)	—
Total deferred tax liabilities	(302.6		)	(291.5		)

Deferred tax liabilities	$	(115.2	)	$	(70.5	)

At June 30, 2014, the Company had undistributed earnings of foreign subsidiaries, amounting to $128.4 million on which deferred income taxes have not been provided because earnings are expected to be reinvested indefinitely outside of the U.S. Upon distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes and withholding taxes in various foreign tax jurisdictions. It is not practical to calculate these taxes due to the complex and hypothetical nature of the calculations.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for uncertain tax positions is as follows:

	Years Ended June 30,
($ in millions)	2014			2013			2012
Balance, beginning	$	1.4		$	2.3		$	1.9
Additions based on tax positions of prior years	—			0.6			—
Additions based on tax positions of current years	—			—			0.4
Reductions as a result of a lapse of statute of limitations	(1.1		)	(1.3		)	—
Reductions based on tax positions of prior year	(0.1		)	(0.2		)	—
Reductions as a result of settlements with taxing authorities	(0.2		)	—			—
Balance, ending	$	—		$	1.4		$	2.3

The liability for unrecognized tax benefits as of June 30, 2014 is $0.0 million. The net amounts at June 30, 2013 and 2012 were $1.4 million and $0.8 million, respectively. It is reasonably possible that the amount of the unrecognized tax benefits will change within the next twelve months; however, any such changes should not have a significant impact on the Company’s consolidated financial statements.

It is the Company’s policy to classify interest and penalties recognized on uncertain tax positions as a component of income tax expense. The Company’s income tax expense included a benefit of $0.6 million, a benefit of $0.3 million and a charge of $0.4 million related to interest and penalties for the years ended June 30, 2014, 2013 and 2012, respectively. In addition, $0.0 million and $0.6 million were included in accrued income taxes in the consolidated balance sheet as of June 30, 2014 and 2013, respectively.

All years prior to June 30, 2010 have been settled with the Internal Revenue Service and with most significant state tax jurisdictions. The Company has not extended any statute of limitations period for any significant location in which it operates. Generally, tax years are open to examination for a period of four to six years following the filing of the tax returns.