Income Taxes

The components of income before income taxes and provision for income taxes for the years ended December 31 are as follows:



	2012			2011			2010
Income before income taxes
Domestic	$	53.1		$	107.0		$	59.6
Foreign	4.9			5.3			3.1
	$	58.0		$	112.3		$	62.7
Income tax provision
Current tax provision (benefit):
Federal	$	(1.8	)	$	28.7		$	3.9
State	1.5			2.5			1.4
Foreign	1.5			1.7			0.7
Total current	1.2			32.9			6.0
Deferred tax provision (benefit):
Federal	14.1			(0.2		)	9.3
State	0.6			0.3			0.3
Foreign	(0.1		)	(0.2		)	—
Total deferred	14.6			(0.1		)	9.6
	$	15.8		$	32.8		$	15.6

The Company made income tax payments of $20.3 million, $24.9 million and $5.6 million during 2012, 2011 and 2010, respectively. During the same periods, income tax refunds totaled $0.8 million, $0.5 million and $3.4 million, respectively.

A reconciliation of the federal statutory and effective income tax rate for the years ended December 31 is as follows:



	2012			2011			2010
Income before income taxes	$	58.0		$	112.3		$	62.7
Statutory taxes at 35.0%	$	20.3		$	39.3		$	21.9
State income taxes	1.6			1.9			1.2
Non-deductible expenses	1.1			1.3			1.2
Unremitted foreign earnings	0.1			0.1			—
Foreign statutory rate differences	(0.3		)	(1.2		)	(0.4		)
Valuation allowance	—			—			0.1
Percentage depletion	(5.0		)	(6.9		)	(7.2		)
R&D and other federal credits	(0.1		)	(0.2		)	(0.1		)
Tax controversy resolution	(0.4		)	(0.1		)	(1.1		)
Domestic production deduction	(0.7		)	—			—
Other	(0.8		)	(1.4		)	—
Income tax provision	$	15.8		$	32.8		$	15.6
Effective income tax rate	27.2		%	29.2		%	24.9		%

As of December 31, 2012, the cumulative unremitted earnings of the Company's foreign subsidiaries are approximately $9.0 million. The Company has provided a cumulative deferred tax liability in the amount of $0.1 million with respect to the cumulative unremitted earnings of the Company as of December 31, 2012 which are expected to be repatriated. The Company has continued to conclude predominately all remaining foreign earnings in excess of this amount will be indefinitely reinvested in its foreign operations and, therefore, the recording of deferred tax liabilities for such unremitted earnings is not required. It is impracticable to determine the amount of unrecognized deferred taxes with respect to these permanently reinvested earnings; however, foreign tax credits would be available to reduce, in part, U.S. income taxes in the event of a distribution.

A detailed summary of the total deferred tax assets and liabilities in the Company's Consolidated Balance Sheets resulting from differences in the book and tax basis of assets and liabilities follows:



	December 31
	2012			2011
Deferred tax assets
Tax carryforwards	$	7.0		$	12.4
Inventories	3.1			4.0
Accrued expenses and reserves	24.0			23.3
Accrued pension benefits	7.4			9.9
Other employee benefits	8.0			5.8
Other	7.2			7.0
Total deferred tax assets	56.7			62.4
Less: Valuation allowance	3.1			3.0
	53.6			59.4
Deferred tax liabilities
Depreciation and depletion	45.0			35.8
Partnership investment - development costs	19.9			18.7
Unremitted foreign earnings	0.1			0.1
Total deferred tax liabilities	65.0			54.6
Net deferred tax asset (liability)	$	(11.4	)	$	4.8

The following table summarizes the tax carryforwards and associated carryforward periods and related valuation allowances where the Company has determined that realization is uncertain:



	December 31, 2012
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	0.4	$	0.4	2019 - 2022
State losses	4.7		2.7		2013 - 2032
Alternative minimum tax credit	1.9		—		Indefinite
Total	$	7.0	$	3.1



	December 31, 2011
	Net deferred tax asset		Valuation allowance		Carryforwards expire during:
Non-U.S. net operating loss	$	0.4	$	0.4	2019 - 2022
State losses	4.9		2.6		2012-2031
Alternative minimum tax credit	5.0		—		Indefinite
Foreign tax credit	2.1		—		2019-2020
Total	$	12.4	$	3.0

The Company continually evaluates its deferred tax assets to determine if a valuation allowance is required. A valuation allowance is required where realization is determined to no longer meet the “more likely than not” standard. The establishment of a valuation allowance does not have an impact on cash, nor does such an allowance preclude the Company from using its loss carryforwards or other deferred tax assets in future periods.

Based upon the review of historical earnings and the relevant expiration of carryforwards, including utilization limitations in the various state taxing jurisdictions, the Company believes the valuation allowances are appropriate and does not expect to release valuation allowances within the next twelve months that would have a significant effect on the Company's financial position or results of operations.

The tax returns of the Company and certain of its subsidiaries are under routine examination by various taxing authorities. The Company has not been informed of any material assessment for which an accrual has not been previously provided and the Company would vigorously contest any material assessment. Management believes any potential adjustment would not materially affect the Company's financial condition or results of operations.

The following is a reconciliation of the Company's total gross unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the financial statements for the years ended December 31, 2012 and 2011. Approximately $1.7 million and $1.9 million of these gross amounts as of December 31, 2012 and 2011, respectively, relate to permanent items that, if recognized, would impact the effective income tax rate. This amount differs from the gross unrecognized tax benefits presented in the table below due to the decrease in U.S. federal income taxes which would occur upon the recognition of the state tax benefits included herein.



	2012			2011
Balance at January 1	$	3.0		$	3.3
Additions based on tax positions related to the current year	0.2			0.1
Reductions due to settlements with taxing authorities and the lapse of the applicable statute of limitations	(0.5		)	(0.4		)
Balance at December 31	$	2.7		$	3.0

The Company records interest and penalties on uncertain tax positions as a component of the income tax provision. The Company recognized a net benefit of $0.2 million and a net expense of $0.2 million in interest and penalties related to uncertain tax positions during 2012 and 2010, respectively. There were deminimus interest and penalties related to uncertain tax positions recorded during 2011. The total amount of interest and penalties accrued was $1.0 million and $1.2 million as of December 31, 2012 and 2011, respectively.

The Company expects the amount of unrecognized tax benefits will change within the next twelve months; however, the change in unrecognized tax benefits, which is reasonably possible within the next twelve months, is not expected to have a significant effect on the Company's financial position or results of operations.

In general, the Company operates in taxing jurisdictions that provide a statute of limitations period ranging from three to five years for the taxing authorities to review the applicable tax filings. The examination of the U.S. federal tax returns for the 2007 and 2008 tax years was completed in 2011 except for one issue that was settled favorably in the Internal Revenue Service Appeals process in November 2012. The examination of the 2009 and 2010 U.S. federal tax returns commenced in February 2012 and is expected to be settled in the first quarter of 2013, subject to Joint Committee review, which is expected in late 2013. The Company does not have any additional material taxing jurisdictions in which the statute of limitations has been extended beyond the applicable time frame allowed by law.