NOTE 5 – INCOME TAXES

The provision for income taxes consisted of the following:


		2011			2010			2009
Current:
Federal	$	111.2		$	105.8		$	178.1
State		19.6			.6			24.9
Foreign		1.1			1.0			(.2	)
		131.9			107.4			202.8
Deferred:
Federal		(34.2	)		.6			(38.3	)
State		(15.1	)		(3.4	)		(2.6	)
Foreign		.4			.7			(5.0	)
		(48.9	)		(2.1	)		(45.9	)
Income taxes		83.0			105.3			156.9
Deferred income taxes on equity earnings		-			-			5.6
Total provision for income taxes	$	83.0		$	105.3		$	162.5

The foreign deferred income taxes shown above include benefits of operating loss carryforwards of $.2, $7.7, and $10.5 in 2011, 2010, and 2009, respectively.

A reconciliation of income taxes with amounts computed at the statutory federal rate follows:


		2011			2010			2009
Computed tax at federal statutory rate (35%)	$	(36.5	)	$	109.9		$	158.5
State income taxes, net of federal tax benefit		1.7			2.9			17.7
Non-deductible goodwill impairment		127.7			-			-
Domestic production activities deduction		(11.9	)		(9.3	)		(7.2	)
Adjustments to reserve for uncertain tax positions		.7			.2			.4
Other, net (none in excess of 5% of computed tax)		1.3			1.6			(6.9	)
	$	83.0		$	105.3		$	162.5

The effective tax rate was 79.7% (negative), 33.5%, and 35.9% for fiscal 2011, 2010, and 2009, respectively. The effective tax rate for fiscal 2011 was significantly affected by the non-deductible goodwill impairment loss, as shown above. For both fiscal 2011 and 2010, the effective rate was reduced by the effects of increases in the Domestic Production Activities Deduction and adjustments to current and deferred income tax assets and liabilities to revise the estimates previously recorded to the actual amounts per subsequent tax return filings for prior years,

including the effects of lower than anticipated effective state rates (and for fiscal 2010, the final tax effects of the sale of Vail shares, described in Note 6).

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets (liabilities) were as follows:


		September 30, 2011									September 30, 2010
		Assets			Liabilities			Net			Assets			Liabilities			Net
Current:
Accrued liabilities	$	15.4					$	15.4		$	17.6					$	17.6
Inventories		2.1						2.1			2.0						2.0
Other items		2.1						2.1			-		$	(9.0	)		(9.0	)
		19.6			-			19.6			19.6			(9.0	)		10.6
Noncurrent:
Property				$	(237.9	)		(237.9	)					(231.9	)		(231.9	)
Intangible assets					(529.4	)		(529.4	)					(584.9	)		(584.9	)
Pension and other postretirement benefits		61.5						61.5			52.2						52.2
Deferred and stock-based compensation		36.5						36.5			32.1						32.1
Insurance reserves		3.8						3.8			3.1						3.1
NOL and tax credit carryforwards		25.3						25.3			41.9						41.9
Other items		8.3						8.3			6.9						6.9
		135.4			(767.3	)		(631.9	)		136.2			(816.8	)		(680.6	)
Total deferred taxes		155.0			(767.3	)		(612.3	)		155.8			(825.8	)		(670.0	)
Valuation allowance (noncurrent)		(3.7	)					(3.7	)		(4.5	)					(4.5	)
Net deferred taxes	$	151.3		$	(767.3	)	$	(616.0	)	$	151.3		$	(825.8	)	$	(674.5	)

As of September 30, 2011, the Company had state operating loss carryforwards totaling approximately $50.0, of which approximately $4.5, $13.9, and $31.6 have expiration dates in 2012-2016, 2017-2021, and 2022-2031, respectively. As of September 30, 2011, the Company had state tax credit carryforwards totaling approximately $7.0, of which approximately $3.0 have no expiration date and $4.0 have expiration dates in 2012-2025. Due to the uncertainty of the realization of certain tax carryforwards (specifically due to a lack of evidence that sufficient taxable income would be generated in certain states), the Company carried a valuation allowance against these carryforward benefits in the amount of $1.8 as of September 30, 2008, which was management's estimate of the amount of related deferred tax assets that were not more likely than not to be realized. Based on significant increases in taxable income generated in the related states in fiscal 2009 and after, the Company reduced this portion of its valuation allowance to zero as of September 30, 2009.

As of September 30, 2011, the Company had foreign operating loss carryforwards totaling approximately $56.7, of which approximately $1.0 have no expiration date, $2.7 have expiration dates in 2012-2016 and approximately $52.9 have expiration dates in 2027-2031. Due to the uncertainty of the realization of certain tax carryforwards (specifically due to a lack of evidence that sufficient taxable income would be generated in certain jurisdictions before expiration), the Company carried a valuation allowance against these carryforward benefits in the amount of approximately $.7 and $1.3 as of September 30, 2011 and 2010, respectively, which were management's estimates of the amounts of related deferred tax assets that were not more likely than not to be realized.

For each of fiscal years 2011, 2010, and 2009, total foreign income before income taxes was less than $5.0. As of September 30, 2011, no provision for income taxes was made for approximately $20.2 of the cumulative undistributed earnings of one of the Company's Canadian subsidiaries (other than approximately $1.7 of Canadian withholding taxes paid), because those earnings are not taxable in Canada (except for the withholding tax required by treaty) and would become taxable in the U.S. only to the extent that they are repatriated in the future. Since the Company considers the undistributed earnings to be permanently invested in Canada, the related deferred tax liability (which is estimated to be approximately $7.1 as of September 30, 2011) has not been recorded, and a valuation allowance was recorded against the foreign tax credit for Canadian taxes paid of $3.0, $3.2, and $2.3 as of September 30, 2011, 2010, and 2009, respectively.

Unrecognized tax benefits for uncertain tax positions and related accrued interest totaled approximately $1.6 at September 30, 2008. Minor adjustments increased the total amount to approximately $2.0 at September 30, 2009. Along with minor adjustments in fiscal 2010, the Company recorded $2.7 for acquired businesses, resulting in a total reserve of $4.9 at September 30, 2010. Minor adjustments increased the total amount to approximately $5.6 as of September 30, 2011, all of which would affect the effective tax rate if recognized. Federal returns for tax years after September 30, 2007 remain subject to examination, along with various state returns for the past two to six years and various foreign returns for the past six years. One state uncertainty is currently being addressed with the state taxing authority and is expected to be resolved within the next 12 months, so related unrecognized tax benefits totaling $.8 were classified as "Other current liabilities" on the balance sheet as of September 30, 2011, while approximately $4.7 of unrecognized tax benefits were classified in "Other Liabilities."