Income Tax Matters (Tables)

12 Months Ended

Dec. 31, 2013

Income before income taxes by geographic area

Tax provision. Income before income taxes by geographic area is as follows:



	Year Ended December 31,
	2013		2012		2011
Domestic	$	138.9	$	134.5	$	37.9
Foreign	4.3		5.1		3.4
Income before income taxes	$	143.2	$	139.6	$	41.3

Tax Provision

The provision for income taxes consists of:



	Federal			Foreign			State			Total
2013
Current	$	1.1		$	16.2		$	(0.2	)	$	17.1
Deferred	(49.7		)	(0.5		)	(6.7		)	(56.9		)
Benefit (expense) applied to increase (decrease) Additional capital/ Other comprehensive income	1.3			(0.1		)	0.2			1.4
Total (expense) benefit	$	(47.3	)	$	15.6		$	(6.7	)	$	(38.4	)
2012
Current	$	—		$	(2.3	)	$	0.2		$	(2.1	)
Deferred	(113.0		)	(0.2		)	(15.3		)	(128.5		)
Benefit applied to increase Additional capital/ Other comprehensive income	67.4			0.2			9.2			76.8
Total expense	$	(45.6	)	$	(2.3	)	$	(5.9	)	$	(53.8	)
2011
Current	$	1.4		$	0.3		$	0.1		$	1.8
Deferred	(2.3		)	(0.5		)	0.7			(2.1		)
Expense applied to decrease Additional capital/ Other comprehensive income	(13.5		)	(0.4		)	(2.0		)	(15.9		)
Total expense	$	(14.4	)	$	(0.6	)	$	(1.2	)	$	(16.2	)

Reconciliation of income tax provision based on effective income tax rate and statutory tax rate

A reconciliation between the provision for income taxes and the amount computed by applying the federal statutory income tax rate to income before income taxes is as follows:



	Year Ended December 31,
	2013			2012			2011
Amount of federal income tax provision based on the statutory rate	$	(50.1	)	$	(48.9	)	$	(14.5	)
Decrease in federal valuation allowances	0.1			0.1			—
Non-deductible compensation expense	(0.3		)	(0.4		)	(1.1		)
Non-deductible expense	(0.9		)	(0.3		)	(0.4		)
State income taxes, net of federal benefit¹	(4.4		)	(3.8		)	(0.8		)
Foreign income tax (expense) benefit	—			(0.5		)	0.6
Expiration of statute of limitations	4.6			—			—
Settlement with taxing authorities	4.4			—			—
Advance pricing agreement	2.9			—			—
Competent Authority settlement	5.3			—			—
Income tax provision	$	(38.4	)	$	(53.8	)	$	(16.2	)

___________________________


¹	State income taxes of $4.4 in 2013 includes a $1.2 increase in the valuation allowance relating to certain unused state net operating losses expected to expire. State income taxes of $0.8 in 2011 includes a $1.2 decrease in the valuation allowance relating to certain state net operating losses expected to be utilized before their expiration.

The table above reflects a full statutory U.S. tax provision despite the fact that the Company is only paying U.S. federal alternative minimum tax (“AMT”) and some state income taxes.

Deferred tax assets and liabilities

The components of the Company’s net deferred income tax assets are as follows:



	Year Ended December 31,
	2013				2012
Deferred income tax assets:
Loss and credit carryforwards	$	321.8			$	342.2
VEBAs (See Note 7)	6.1				7.6
Other assets	34.4				35.3
Inventories and other	2.5				1.7
Valuation allowances	(19.9		)		(18.7		)
Total deferred income tax assets	344.9				368.1
Deferred income tax liabilities:
Property, plant, and equipment	(73.0		)		(69.7		)
VEBAs (See Note 7)	(152.4		)		(136.9		)
Inventories	(14.9		)	—	—
Total deferred income tax liabilities	(240.3		)		(206.6		)
Net deferred income tax assets ¹	$	104.6			$	161.5

__________________________

Of the total net deferred income tax assets of $104.6, $36.7 was included in Prepaid expenses and other current assets, $69.1 was presented as Deferred tax assets, net and $1.2 was presented as Deferred tax liability on the Consolidated Balance Sheet as of December 31, 2013. Of the total net deferred income tax assets of $161.5, $59.5 was included in Prepaid expenses and other current assets and $102.0 was presented as Deferred tax assets, net on the Consolidated Balance Sheet as of December 31, 2012.

Reconciliation of changes in the gross unrecognized tax benefits

A reconciliation of changes in the gross unrecognized tax benefits is as follows:



	Year Ended December 31,
	2013			2012			2011
Gross unrecognized tax benefits at beginning of period	$	15.7		$	13.7		$	15.0
Gross increases for tax positions of prior years	—			1.3			0.1
Gross decreases for tax positions of prior years	(7.6		)	(0.1		)	—
Gross increases for tax positions of current years	—			0.4			0.4
Settlements	—			—			(0.5		)
Gross decrease for tax positions relating to lapse of a statute of limitation	(3.3		)	—			(0.9		)
Foreign currency translation	(1.0		)	0.4			(0.4		)
Gross unrecognized tax benefits at end of period	$	3.8		$	15.7		$	13.7

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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