Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note I: Income Taxes

The components of the Company’s income tax expense from continuing operations are as follows:

years ended December 31 (in millions)	2023			2022		2021
Federal income taxes:
Current	$	264.0		$	174.9	$	66.3
Deferred		(11.4	)		18.0		61.4
Total federal income taxes		252.6			192.9		127.7
State income taxes:
Current		42.7			35.1		18.7
Deferred		(3.0	)		5.3		6.5
Total state income taxes		39.7			40.4		25.2
Foreign income taxes:
Current		0.2			1.2		—
Deferred		—			0.3		0.3
Total foreign income taxes		0.2			1.5		0.3
Income tax expense	$	292.5		$	234.8	$	153.2

The Company generated foreign pretax earnings of $8.1 million, a loss of $2.3 million and earnings of $7.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company’s effective income tax rate on continuing operations varied from the statutory United States income tax rate because of the following tax differences:

years ended December 31	2023			2022			2021
Statutory income tax rate		21.0	%		21.0	%		21.0	%
(Reduction) increase resulting from:
Effect of statutory depletion		(2.3	)		(2.4	)		(3.5	)
State income taxes, net of federal tax benefit		2.1			2.9			2.3
Federal tax credits		(1.0	)		(0.9	)		(1.4	)
Other items		(0.2	)		0.9			(0.5	)
Effective income tax rate		19.6	%		21.5	%		17.9	%

The higher 2022 effective tax rate versus 2023 and 2021 was primarily driven by the impact of the divestiture of the Colorado and Central Texas ready mixed concrete businesses.

The statutory depletion deduction for all years is calculated as a percentage of sales, subject to certain limitations. Due to these limitations, the impact of changes in the sales volumes and earnings may not proportionately affect the Company’s statutory depletion deduction and the corresponding impact on the effective income tax rate.

In 2023, 2022, and 2021, the Company financed third-party railroad track maintenance. In exchange, the Company received federal income tax credits and tax deductions.

The principal components of the Company’s deferred tax assets and liabilities are as follows:

December 31	Deferred Assets (Liabilities)
(in millions)	2023			2022
Deferred tax assets related to:
Inventories	$	121.0		$	85.5
Valuation and other reserves		34.2			30.9
Net operating loss carryforwards		2.8			3.6
Accumulated other comprehensive loss		53.8			50.1
Lease liabilities		141.9			139.6
Other items, net		3.6			1.9
Gross deferred tax assets		357.3			311.6
Valuation allowance on deferred tax assets		(2.5	)		(2.6	)
Total net deferred tax assets		354.8			309.0
Deferred tax liabilities related to:
Property, plant and equipment		(828.0	)		(843.8	)
Goodwill and other intangibles		(168.3	)		(143.9	)
Right-of-use assets		(142.3	)		(140.8	)
Partnerships and joint ventures		(34.0	)		(32.5	)
Employee benefits		(56.8	)		(62.3	)
Total deferred tax liabilities		(1,229.4	)		(1,223.3	)
Deferred income taxes, net	$	(874.6	)	$	(914.3	)

The Company had $1.2 million and $1.3 million of domestic federal net operating loss (NOL) carryforwards at December 31, 2023 and 2022, respectively. The Company had domestic state NOL carryforwards of $42.8 million and $55.3 million at December 31, 2023 and 2022, respectively. These carryforwards have various expiration dates through 2043. At December 31, 2023 and 2022, deferred tax assets associated with these carryforwards were $2.8 million and $3.6 million, respectively, net of the federal benefit of the state deduction, for which valuation allowances of $2.0 million and $2.1 million, respectively, were recorded. The Company also had domestic state tax credit carryforwards of $2.1 million and $1.3 million at December 31, 2023 and 2022, respectively, which have various expiration dates through 2043. At December 31, 2023 and 2022, deferred tax assets associated with these carryforwards were $1.7 million and $1.0 million, respectively, net of the federal benefit of the state deduction.

The Company expects to reinvest the earnings from its wholly-owned Canadian and Bahamian subsidiaries indefinitely, and accordingly, has not provided deferred taxes on the subsidiaries’ undistributed net earnings or basis differences. The Company believes that the tax liability that would be incurred upon repatriation of the foreign earnings was immaterial at December 31, 2023 and 2022.

The following table summarizes the Company’s unrecognized tax benefits, excluding interest and correlative effects of $0.1 million for the years ended December 31, 2023, 2022 and 2021:

years ended December 31 (in millions)	2023			2022			2021
Unrecognized tax benefits at beginning of year	$	3.6		$	5.4		$	8.2
Gross increases – tax positions in prior years		0.3			—			0.5
Gross decreases – tax positions in prior years		—			—			—
Gross increases – tax positions in current year		0.3			0.2			0.1
Gross decreases – tax positions in current year		—			—			—
Lapse of statute of limitations		(3.1	)		(2.0	)		(3.4	)
Unrecognized tax benefits at end of year	$	1.1		$	3.6		$	5.4
Amount that, if recognized, would favorably impact    the effective tax rate	$	1.2		$	3.7		$	5.5

Unrecognized tax benefits are reversed as a discrete event if an examination of applicable tax returns is not initiated by a federal or state tax authority within the statute of limitations or upon effective settlement with federal or state tax authorities. Management believes its accrual for unrecognized tax benefits is sufficient to cover uncertain tax positions reviewed during audits by taxing authorities.

The Company anticipates that it is reasonably possible that its unrecognized tax benefits may decrease up to $0.3 million, excluding interest and correlative effects, during the twelve months ending December 31, 2024, due to the expiration of the statutes of limitations for the 2020 tax year and all prior open tax years.

The Company’s tax years subject to federal, state or foreign examinations are 2019 through 2023.