Note 18 - Income Taxes

12 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 18: INCOME TAXES

The components of income from continuing operations before income taxes were taxed under the following jurisdictions:

	Year Ended June 30
	2013		2012		2011
Domestic	$	126,349	$	160,892	$	136,583
Foreign		567		3,034		(16,010	)
Income before income taxes	$	126,916	$	163,926	$	120,573

Income tax expense (benefit):

	Year Ended June 30
	2013			2012			2011
Current tax expense:
Federal	$	33,318		$	49,798		$	70,894
Foreign		2,868			2,577			952
State and other		2,289			5,941			4,114
Current tax expense		38,475			58,316			75,960
Deferred tax expense (benefit):
Federal		1,035			(12,124	)		(83,700	)
Foreign		(715	)		(755	)		(653	)
State and other		812			(426	)		160
Deferred tax expense (benefit)		1,132			(13,305	)		(84,193	)
Income tax expense (benefit)	$	39,607		$	45,011		$	(8,233	)

The difference between reported income tax expense (benefit) and a tax determined by applying the applicable U.S. federal statutory income tax rate to income before income taxes is reconciled as follows:

	Year Ended June 30
	2013					2012					2011
Expected tax expense	$	44,421		35.0	%	$	57,374		35.0	%	$	42,200		35.0	%
Investment tax credit		-		-			(3,650	)	(2.2	)		(3,888	)	(3.2	)
Domestic manufacturing deduction		(4,346	)	(3.4	)		(4,880	)	(3.0	)		(4,530	)	(3.8	)
Effect of foreign operations		285		0.2			(32	)	-			1,853		1.5
Nondeductible goodwill impairment charge		-		-			849		0.5			-		-
Cellulosic biofuel credit		(4,586	)	(3.6	)		(9,040	)	(5.5	)		(51,458	)	(42.7	)
Change in valuation allowances		1,293		1.0			126		0.1			4,200		3.5
State taxes and other, net		2,540		2.0			4,264		2.6			3,390		2.9
Income tax expense (benefit)	$	39,607		31.2	%	$	45,011		27.5	%	$	(8,233	)	(6.8	)%

During 2013 and 2012, we recognized income tax benefits of $4,586 and $9,040, respectively, related to changes in our estimates of the expected incremental benefit from exchanging previously claimed alternative fuel mixture credits (“AFMC”) for cellulosic biofuel credit (“CBC”) based upon our expected ability to utilize the CBC prior to expiration. See additional discussion at Note 7, Alternative Fuel Mixture Credits / Cellulosic Biofuel Credits.

The American Recovery and Reinvestment Act of 2009 expanded the IRC Section 48 energy investment tax credit to include qualified property for facilities producing electricity using open-loop biomass. In 2012 and 2011, we recorded tax benefits relating to this tax credit of $3,650 and $3,888, respectively. In 2013 we did not record any tax benefits relating to this tax credit. We expect to realize continuing benefits from the energy investment tax credit which will reduce our effective tax rate over the next several years based on planned spending on energy projects to be placed in service at our Foley mill. We account for the investment tax credit as a reduction of federal income taxes in the year in which the credit arises by utilizing the flow-through method of accounting.

The following table summarizes the activity related to our unrecognized tax benefits:

	2013		2012			2011
Uncertain tax position balance at beginning of year	$	2,707	$	2,770		$	2,102
Increases related to current year tax positions		-		-			668
Decreases related to settlements with taxing authorities		-		(63	)		-
Uncertain tax position balance at end of year	$	2,707	$	2,707		$	2,770

All unrecognized tax benefits would affect the effective tax rate, if recognized. The balance in unrecognized tax benefits and our related interest and penalties is $2,707 and $0 in 2013 and 2012. It is reasonably possible that the amount of the benefit with respect to certain of our tax positions will change within the next twelve months, but an estimate of the range of the reasonably possible changes cannot be made. However, we do not expect that the resolution of any of our uncertain tax positions will be material.

We file income tax returns with federal, state, local and foreign jurisdictions. As of June 30, 2013, we remained subject to examinations of our U.S. federal and state income tax returns for 2002 through 2012, Canadian income tax returns for 2004 through 2012 and German tax filings for 2008 through 2012. We are currently under a U.S. income tax audit for 2009, 2010 and 2011.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) are as follows:

	June 30
	2013			2012
Deferred tax liabilities:
Property, plant and equipment	$	(49,524	)	$	(54,181	)
Inventory		(938	)		(995	)
Other		(5,626	)		(6,971	)
Total deferred tax liabilities		(56,088	)		(62,147	)
Deferred tax assets:
Postretirement benefits		11,003			11,445
Cellulosic Biofuel Credit		66,778			70,359
Net operating losses		9,821			9,676
Nondeductible reserves		1,657			1,552
Credit carryforwards		8,723			12,566
Capital losses		6,362			6,910
Other		11,103			9,238
Total deferred tax assets		115,447			121,746
Valuation allowances		(14,781	)		(13,062	)
Deferred tax assets, net of valuation allowances		100,666			108,684
Net deferred tax asset	$	44,578		$	46,537

The valuation allowances at June 30, 2013 and 2012 relate specifically to net operating losses in certain state and foreign jurisdictions and capital losses in federal and state jurisdictions. Management believes it is more likely than not that the net deferred tax assets recorded at June 30, 2013 will be fully utilized after consideration of the valuation allowance recorded.

We increased our valuation allowance from $13,062 to $14,781 during 2013 principally as a result of operating losses from foreign operations. We decreased our valuation allowance from $23,806 to $13,062 during 2012 primarily as a result of the sale of our manufacturing facility in Brazil which resulted in a decrease of $17,500, net of an increase of $6,363 related to a capital loss carryover.

During 2011 we increased the valuation allowance in Brazil by $1,799 to eliminate the tax benefit of current losses. The impacts of changes to the valuation allowance in Brazil are reflected in discontinued operations in the consolidated statement of operations for all years presented.   

During 2013, we recorded an increase to the valuation allowance in Canada of $2,013. Of this increase, $1,588 related to current year losses and $425 reflected currency translation adjustments. During 2012, we recorded an increase to the valuation allowance in Canada of $935. Of this increase, $651 related to current year losses and $284 reflected currency translation adjustments.

At June 30, 2013, the cellulosic biofuel credit deferred tax asset represents $63,765 noncurrent cellulosic biofuel credits receivable in exchange for AFMC less federal and state taxes payable on the additional CBC income and a current receivable of $3,013. At June 30, 2012, the cellulosic biofuel credit deferred tax asset represents $70,161 noncurrent cellulosic biofuel credits receivable in exchange for AFMC less federal and state taxes payable on the additional CBC income and a current receivable of $198.

Taxes paid (received) in 2013, 2012 and 2011 were $36,225, $35,269, and ($54,781), respectively. In 2011 we received a refund of $67,092 primarily due to AFMC.

At June 30, 2013, foreign net operating loss carryforwards total approximately $30,310 and have expiration dates from 2014 to 2033. Federal investment tax credit carryfowards of $8,723 expire in 2031 and 2032. State net operating loss carryforwards total $50,112 and expire between 2018 and 2032. State tax credit carryforwards were fully utilized during 2011. Federal capital loss carryforwards of $17,648 expire in 2017.

We have not recorded deferred income taxes on the unremitted earnings of our foreign subsidiaries, primarily the unremitted earnings of our German operations. It is not practicable to estimate the deferred income tax liability on the unremitted earnings.