Note 5. Income Taxes

12 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Text Block]

Note 5: Income Taxes

Major components of our income tax provision (benefit) for the years ended December 31, 2011, 2010 and 2009 are as follows (in thousands):

	2011		2010			2009
Current:
Federal	$	3,823	$	10,063		$	(1,277	)
State		752		6,694			33
Foreign		459		459			664
Total current income tax provision		5,034		17,216			(580	)
Federal and state deferred income tax (benefit) provision		76,944		(140,748	)		(7,100	)
Total income tax (benefit) provision	$	81,978	$	(123,532	)	$	(7,680	)

Domestic and foreign components of income (loss) from operations before income taxes for the years ended December 31, 2011, 2010 and 2009, are as follows (in thousands): 

	2011			2010			2009
Domestic	$	244,833		$	(66,348	)	$	59,779
Foreign		(11,691	)		(8,201	)		367
Total	$	233,142		$	(74,549	)	$	60,146

The annual tax provision (benefit) is different from the amount that would be provided by applying the statutory federal income tax rate to our pretax income (loss). The reasons for the difference are (in thousands):

	2011					2010					2009
Computed “statutory” (benefit) provision	$	81,600		35	%	$	(26,092	)	(35	)%	$	21,051		35	%
Percentage depletion		(13,751	)	(6	)		(8,858	)	(12	)		(7,953	)	(16	)
Net increase (utilization) of U.S. and foreign tax loss carryforwards		3,822		2			2,713		3			(13,098	)	(19	)
Change in valuation allowance other than utilization		—		—			(88,069	)	(118	)		(7,100	)	(12	)
Tax loss carryback from change in tax law		—		—			—		—			(1,989	)	(3	)
State taxes, net of federal taxes		10,890		5			(4,717	)	(6	)		33		—
Effect of U.S. AMT,  foreign taxes other		(583	)	(1	)		1,491		2			1,376		2
	$	81,978		35	%	$	(123,532	)	(166	)%	$	(7,680	)	(13	)%

We evaluated the positive and negative evidence available to determine the amount of valuation allowance required on our deferred tax assets.  At December 31, 2011 and 2010, the balances of our valuation allowances were $23 million and $19 million, respectively, primarily for foreign net operating loss carryforwards. For the year ended December 31, 2011, the U.S. federal and state deferred tax assets were reduced by utilization of approximately $71 million.  For the year ended December 31, 2010, the U.S. federal and state deferred tax assets for tax loss carryforwards were reduced by utilization from current taxable income of approximately $77 million.  Also, during the fourth quarter of 2010, due to increased gross profits and a favorable outlook for metal prices supporting future taxable income and our assessment that our deferred tax assets were more likely than not recoverable, we recorded a reduction in valuation allowance on U.S. deferred assets of $88 million. The amount of the deferred tax asset considered recoverable, however, could be reduced in the near term if estimates of future taxable income are reduced. The valuation allowance on losses in foreign jurisdictions and foreign tax credits increased by $3.7 million in 2011.

The components of the net deferred tax asset were as follows (in thousands):

	December 31,
	2011			2010
Deferred tax assets:
Accrued reclamation costs	$	62,225		$	129,687
Deferred exploration		18,585			14,596
Foreign net operating losses		20,234			16,850
Federal net operating losses		47,875			36,744
State net operating losses		2,445			924
AMT credit carryforwards		15,210			10,879
Unrealized loss on derivatives contracts		—			8,459
Pension and benefit obligation		9,940			3,198
Miscellaneous		16,002			14,132
Total deferred tax assets		192,516			235,469
Valuation allowance		(22,895	)		(19,073	)
Total deferred tax assets		169,621			216,396
Deferred tax liabilities:
Unrealized gain on derivatives contracts		(13,293	)		—
Properties, plants and equipment		(40,490	)		(29,037	)
Total deferred tax liabilities		(53,783	)		(29,037	)
Net deferred tax asset	$	115,838		$	187,359

We plan to permanently reinvest earnings from foreign subsidiaries. For the years 2011, 2010 and 2009 we had no unremitted foreign earnings. Foreign net operating losses carried forward are shown above as a deferred tax asset, with a corresponding valuation allowance as discussed below.

We recorded a valuation allowance to reflect the estimated amount of deferred tax assets, which may not be realized principally due to the expiration of foreign net operating losses and foreign tax credit carryforwards. The changes in the valuation allowance for the years ended December 31, 2011, 2010 and 2009, are as follows (in thousands):

	2011			2010			2009
Balance at beginning of year	$	(19,073	)	$	(104,429	)	$	(138,848	)
Increase related to non-utilization of net operating loss carryforwards and non-recognition of deferred tax assets due to uncertainty of recovery		(3,822	)		(2,713	)		—
Decrease related to net recognition of deferred tax assets		—			88,069			7,100
Decrease related to utilization and expiration of deferred tax assets		—			—			27,319
Balance at end of year	$	(22,895	)	$	(19,073	)	$	(104,429	)

As of December 31, 2011, for U.S. income tax purposes, we have federal and state net operating loss carryforwards of $137 million and $54 million, respectively.  These net operating loss carryforwards have a 20 year expiration period, the earliest of which could expire in 2020.  We have foreign net operating loss carryforwards of approximately $68 million, which expire between 2011 and 2031. We have approximately $15 million in alternative minimum tax credit carryforwards which do not expire and are eligible to reduce future U.S. tax liabilities.  Our utilization of U.S. net operating loss carryforwards may be subject to annual limitations if there is a change in control as defined under Internal Revenue Code Section 382.

In addition, at December 31, 2011 and 2010 we had $20 million and $19 million, respectively, of additional federal net operating loss carryovers relating to excess tax benefits from the exercise of employee stock options and the vesting of restricted stock awards. These amounts are not reflected in our deferred tax asset for net operating loss carryovers.  We  recognize the excess tax benefits from the exercise of employee stock options and the vesting of restricted stock awards in the period in which these tax benefits reduce income taxes payable, after net operating loss carryforwards are fully utilized.

The Company and/or its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and foreign jurisdictions.  We are no longer subject to income tax examinations by U.S. federal and state tax authorities for years prior to 1996, or examinations by foreign tax authorities for years prior to 2005.  We currently have no tax years under examination.

The Company had no unrecognized tax benefits as of December 31, 2011or December 31, 2010, and there was no change in unrecognized tax benefits during the current year.  Due to the net operating loss carryover provision, coupled with the lack of any unrecognized tax benefits, the Company has not provided for any interest or penalties associated with any uncertain tax positions.  If interest and penalties were to be assessed, our policy is to charge interest to interest expense, and penalties to other operating expense.  It is not anticipated that there will be any significant changes to unrecognized tax benefits within the next 12 months.

At December 31, 2011, we recorded a net receivable for federal and state income taxes of approximately $8.0 million, which is included in Accounts receivable: Other, net on our consolidated balance sheets.