Income Tax Matters

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Tax Matters

14. Income Tax Matters

The following table presents (Loss) income before income taxes by geographic area (in millions of dollars):

	Year Ended December 31,
	2021			2020		2019
Domestic	$	(30.2	)	$	35.2	$	76.3
Foreign		6.2			3.6		4.1
(Loss) income before income taxes	$	(24.0	)	$	38.8	$	80.4

Tax Benefit (Provision). Income taxes are classified as either domestic or foreign based on whether payment is made or due to the United States or a foreign country. Certain income classified as foreign is also subject to domestic income taxes.

Income tax benefit (provision) consisted of the following (in millions of dollars):

	Federal			Foreign			State			Total
Year Ended December 31, 2021
Current	$	—		$	(2.4	)	$	(3.5	)	$	(5.9	)
Deferred		2.1			0.5			4.2			6.8
Benefit applied to decrease Other comprehensive income		3.7			0.3			0.6			4.6
Income tax benefit (provision)	$	5.8		$	(1.6	)	$	1.3		$	5.5
Year Ended December 31, 2020
Current	$	6.1		$	(0.4	)	$	(0.6	)	$	5.1
Deferred		(18.8	)		(0.1	)		(2.3	)		(21.2	)
Benefit (expense) applied to decrease (increase) Other comprehensive income		5.1			(0.1	)		1.1			6.1
Income tax provision	$	(7.6	)	$	(0.6	)	$	(1.8	)	$	(10.0	)
Year Ended December 31, 2019
Current	$	5.7		$	(1.1	)	$	(1.8	)	$	2.8
Deferred		(19.6	)		(0.3	)		(4.5	)		(24.4	)
Benefit (expense) applied to decrease (increase) Other comprehensive income		2.7			(0.1	)		0.6			3.2
Income tax provision	$	(11.2	)	$	(1.5	)	$	(5.7	)	$	(18.4	)

The following table presents a reconciliation between the benefit (provision) for income taxes and the amount computed by applying the federal statutory income tax rate to (Loss) income before income taxes (in millions of dollars):

	Year Ended December 31,
	2021			2020			2019
Amount of federal income tax benefit (provision) based on the statutory rate	$	5.0		$	(8.1	)	$	(16.9	)
Decrease (increase) in federal valuation allowances		0.2			—			(0.1	)
Non-deductible compensation expense		(0.5	)		(1.1	)		(1.7	)
Non-deductible (expense) benefit		(0.2	)		0.4			0.1
State income tax benefit (provision), net of federal benefit 1		1.0			(1.5	)		(4.5	)
Research and development credit		0.6			0.4			7.7
Gross decreases (increases) for tax positions from current year		—			—			(0.3	)
Gross decreases (increases) for tax positions from prior years		—			0.4			(2.4	)
Foreign income tax expense		(0.3	)		(0.4	)		(0.1	)
Foreign undistributed earnings		(0.3	)		(0.1	)		(0.2	)
Income tax benefit (provision)	$	5.5		$	(10.0	)	$	(18.4	)

^1. The state income tax benefit was $0.7 million in 2021, reflecting an increase of $1.3 million due to state net operating loss (“NOL”) carryforward expirations and tax rate true-ups in various states, offset by a $1.6 million decrease in the valuation allowance relating to certain state net operating losses. State income taxes were $1.3 million in 2020, reflecting an increase of $3.7 million due to state NOL carryforward expirations and tax rate true-ups in various states, partially offset by a $3.5 million decrease in the valuation allowance relating to certain state net operating losses. State income taxes were $3.8 million in 2019,

reflecting a decrease of $0.7 million due to lower tax rate true-ups in various states, partially offset by an increase of $1.4 million due to a change in the valuation allowance relating to certain state net operating losses.

Deferred Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The following table presents the components of our net deferred income tax liabilities (in millions of dollars):

	As of December 31,
	2021			2020
Deferred income tax assets:
Loss and credit carryforwards	$	51.5		$	33.4
Pension Benefits		7.1			4.8
Other assets		29.0			29.4
Leased assets		11.7			7.3
Inventories		50.4			6.9
Valuation allowances		(4.6	)		(6.4	)
Total deferred income tax assets		145.1			75.4
Deferred income tax liabilities:
Property, plant and equipment		(138.9	)		(80.8	)
Leased liability		(10.9	)		(6.4	)
Undistributed foreign earnings		(2.4	)		(2.1	)
Total deferred income tax liabilities		(152.2	)		(89.3	)
Net deferred income tax liabilities	$	(7.1	)	$	(13.9	)

Tax Attributes. At December 31, 2021, we had $187.1 million of NOL carryforwards available to reduce future cash payments for federal income taxes in the United States. H.R.1, commonly referred to as the Tax Cut and Jobs Act, allows net operating losses (NOLs) generated prior to December 31, 2017 (including our NOL carryforwards) to be fully deducted against 100% of taxable income until fully utilized or expired. NOL carryforwards generated after December 31, 2017 do not expire and can be carried forward indefinitely. Deductions allowed for net operating losses arising in taxable years beginning after December 31, 2020 are limited to 80% of the excess (if any) of taxable income. Our State NOL carryforwards expire periodically through 2030.

In addition, we had $8.8 million of federal research and development (“R&D”) credit carryforwards to offset regular federal income tax requirements. Our R&D credit carryforwards expire periodically through 2041.

In assessing the realizability of deferred tax assets, management considers whether it is “more likely than not” that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers taxable income in carryback years, the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. Due to uncertainties surrounding the realization of some of our deferred tax assets, primarily including state NOL carryforwards sustained during the prior years and expiring tax benefits, we have a valuation allowance against our deferred tax assets. When recognized, the tax benefits relating to any reversal of this valuation allowance will be recorded as a reduction of income tax expense. There was a decrease in the valuation allowance of $1.8 million in 2021, a decrease in the valuation allowance of $3.5 million in 2020 and an increase in the valuation allowance of $1.5 million in 2019.

The decrease in the valuation allowance for 2021 was primarily due to the expiration of state NOL carryforwards and the related reversal of their valuation allowances. The decrease in the valuation allowance for 2020 was primarily due to the expiration of state NOL carryforwards and the related reversal of their valuation allowances. The increase in the valuation allowance for 2019 was primarily due to unutilized state NOL carryforwards and Federal Separate Return Limitation Year losses that were expected to expire.

Other. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions.

Our tax returns for certain past years are still subject to examination by taxing authorities and the use of NOL carryforwards in future periods could trigger a review of attributes and other tax matters in years that are not otherwise subject to examination.

We have gross unrecognized benefits relating to uncertain tax positions. The following table presents a reconciliation of changes in the gross unrecognized tax benefits (in millions of dollars):

	Year Ended December 31,
	2021			2020			2019
Gross unrecognized tax benefits at beginning of period	$	3.8		$	4.1		$	1.5
Gross increases for tax positions of current year		0.3			0.1			0.3
Gross increases for tax positions of prior years		0.4			—			2.3
Gross decreases for tax positions of prior years		(0.3	)		(0.4	)		—
Settlements		(0.1	)		—			—
Gross unrecognized tax benefits at end of period	$	4.1		$	3.8		$	4.1

If and when the $4.1 million of gross unrecognized tax benefits at December 31, 2021 are recognized, $4.1 million will be reflected in our income tax provision and thus affect the effective tax rate in future periods.

In addition, we recognize interest and penalties related to unrecognized tax benefits in the income tax provision. We had $0.2 million and $0.3 million accrued for interest and penalties at December 31, 2021 and December 31, 2020, respectively. Of these amounts, none were considered current and, as such, were included in Long-term liabilities on our Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020. We recognized an increase in interest and penalty of $0.1 million in our tax provision in 2019.

We do not expect our gross unrecognized tax benefits to significantly change within the next 12 months.