Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes

Income Taxes

Note 3. Income Taxes

        The company files a consolidated federal income tax return. Net cash paid for taxes was $46.9 million and $75.9 million for the years ended December 31, 2012 and 2011, respectively, and net cash received for taxes was $66.3 million for the year ended December 31, 2010. The current and deferred federal and state income tax expense (benefit) for the years ended December 31 is as follows (in thousands):

	2012		2011		2010
Current income tax expense	$	11,334	$	128,209	$	39,554
Deferred income tax expense		50,451		30,418		44,306
Total income tax expense	$	61,785	$	158,627	$	83,860

        A reconciliation of the statutory tax rates to the actual effective tax rates for the years ended December 31, are as follows:

	2012			2011			2010
Statutory federal tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal benefit		3.4			3.5			3.2
Audit settlements		(9.6	)		—			—
Other permanent differences		1.5			(1.1	)		1.1
Effective tax rate		30.3	%		37.4	%		39.3	%

        Significant components of the company's deferred tax assets and liabilities at December 31 are as follows (in thousands):

	2012			2011
Deferred tax assets
Accrued expenses and allowances	$	22,714		$	31,670
Inventories		9,643			9,287
Other		10,680			3,150
Total deferred tax assets		43,037			44,107
Deferred tax liabilities
Property, plant and equipment		(465,273	)		(428,699	)
Intangible assets		(79,998	)		(68,500	)
Other		(11,621	)		(11,482	)
Total deferred tax liabilities		(556,892	)		(508,681	)
Net deferred tax liability	$	(513,855	)	$	(464,574	)

        Certain deferred tax asset and liability amounts at December 31, 2011 were reclassified to conform with the presentation at December 31, 2012. There was no effect on the total net deferred tax liability, or current and noncurrent classification of such reclassifications at December 31, 2011.

        A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2012			2011			2010
Balance at January 1	$	64,555		$	49,396		$	49,587
Increases related to current year tax positions		—			2,046			300
Increases related to prior year tax positions		741			13,785			1,361
Decreases related to prior year tax positions		(40,741	)		(196	)		(496	)
Lapses in statutes of limitations		—			—			(1,128	)
Settlements with taxing authorities		(2,310	)		(476	)		(228	)
Balance at December 31	$	22,245		$	64,555		$	49,396

        Included in the balance of unrecognized tax benefits at December 31, 2012 are potential benefits of $9.5 million that, if recognized, would affect the effective tax rate. The company recognizes interest and penalties related to its tax contingencies on a net-of-tax basis in income tax expense. During the year ended December 31, 2012, the company recognized benefits from the reduction of interest expense of $5.9 million, net of tax, and benefits from the reduction of penalties of $413,000. In addition to the unrecognized tax benefits in the table above, the company had $6.2 million accrued for the payment of interest and penalties at December 31, 2012.

        The company files income tax returns in the U.S. federal jurisdiction as well as income tax returns in various state jurisdictions. The Internal Revenue Service (IRS) has completed its examinations of the years 2004 through 2009 and has effectively settled those years with the company. The IRS is currently examining the company's federal income tax returns for the years 2010 and 2011. At this time the company does not believe there will be any significant examination adjustments that would result in a material change to the company's financial position or results of operations. It is reasonably possible that the amount of unrecognized tax benefits could change in the next twelve months as a result of these state and federal income tax audits. Based on the current audits in process, the payment of taxes as a result of audit settlements could be in an amount from zero to $12.6 million by the end of 2013. With few exceptions, the company is no longer subject to federal, state and local income tax examinations by tax authorities for years ended before 2009.