Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note J: Income Taxes

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

years ended December 31 (in millions)	2022		2021		2020
Federal income taxes:
Current	$	174.9	$	66.3	$	91.9
Deferred		18.0		61.4		45.4
Total federal income taxes		192.9		127.7		137.3
State income taxes:
Current		35.1		18.7		21.0
Deferred		5.3		6.5		8.7
Total state income taxes		40.4		25.2		29.7
Foreign income taxes:
Current		1.2		—		1.2
Deferred		0.3		0.3		—
Total foreign income taxes		1.5		0.3		1.2
Income tax expense	$	234.8	$	153.2	$	168.2

For the years ended December 31, 2022, 2021 and 2020, there was a foreign pretax loss of $2.3 million, and earnings of $7.5 million and $8.9 million, 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	2022			2021			2020
Statutory income tax rate		21.0	%		21.0	%		21.0	%
(Reduction) increase resulting from:
Effect of statutory depletion		(2.4	)		(3.5	)		(2.8	)
State income taxes, net of federal tax benefit		2.9			2.3			2.6
Federal tax credits		(0.9	)		(1.4	)		(1.3	)
Other items		0.9			(0.5	)		(0.6	)
Effective income tax rate		21.5	%		17.9	%		18.9	%

The higher 2022 effective tax rate versus 2021 and 2020 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 2022, 2021 and 2020, 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)	2022			2021
Deferred tax assets related to:
Inventories	$	85.5		$	100.2
Valuation and other reserves		30.9			23.3
Net operating loss carryforwards		3.6			2.6
Accumulated other comprehensive loss		50.1			69.7
Lease liabilities		139.6			150.1
Other items, net		1.9			2.2
Gross deferred tax assets		311.6			348.1
Valuation allowance on deferred tax assets		(2.6	)		(2.8	)
Total net deferred tax assets		309.0			345.3
Deferred tax liabilities related to:
Property, plant and equipment		(843.8	)		(840.6	)
Goodwill and other intangibles		(143.9	)		(160.2	)
Right-of-use assets		(140.8	)		(155.2	)
Partnerships and joint ventures		(32.5	)		(29.1	)
Employee benefits		(62.3	)		(55.5	)
Total deferred tax liabilities		(1,223.3	)		(1,240.6	)
Deferred income taxes, net	$	(914.3	)	$	(895.3	)

The Company had $1.3 million of domestic federal net operating loss (NOL) carryforwards at December 31, 2022 and 2021. The Company had domestic state NOL carryforwards of $55.3 million and $40.7 million at December 31, 2022 and 2021, respectively. These carryforwards have various expiration dates through 2042. At December 31, 2022 and 2021, deferred tax assets associated with these carryforwards were $3.6 million and $2.6 million, respectively, net of the federal benefit of the state deduction, for which valuation allowances of $2.1 million and $2.2 million, respectively, were recorded. The Company also had domestic state tax credit carryforwards of $1.3 million and $0.9 million at December 31, 2022 and 2021, respectively, which have various expiration dates through 2042. At December 31, 2022 and 2021, deferred tax assets associated with these carryforwards were $1.0 million and $0.7 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 was immaterial at December 31, 2022 and 2021.

The following table summarizes the Company’s unrecognized tax benefits, excluding interest and correlative effects of $0.2 million for the years ended December 31, 2022, 2021 and 2020:

years ended December 31 (in millions)	2022			2021			2020
Unrecognized tax benefits at beginning of year	$	5.4		$	8.2		$	25.5
Gross increases – tax positions in prior years		—			0.5			0.2
Gross decreases – tax positions in prior years		—			—			—
Gross increases – tax positions in current year		0.2			0.1			0.1
Gross decreases – tax positions in current year		—			—			(0.2	)
Lapse of statute of limitations		(2.0	)		(3.4	)		(17.4	)
Unrecognized tax benefits at end of year	$	3.6		$	5.4		$	8.2
Amount that, if recognized, would favorably impact    the effective tax rate	$	3.7		$	5.5		$	6.4

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. For the year ended December 31, 2022, $2.1 million was reversed into income upon the statute of limitations expiration for 2018. For the year ended December 31, 2021, $1.6 million was reversed into income upon the statute of limitations expiration for 2017. For the

year ended December 31, 2020, $9.7 million was reversed into income upon the statute of limitations expiration for 2016 and all prior open tax years. 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 $2.0 million, excluding interest and correlative effects, during the twelve months ending December 31, 2023, due to the expiration of the statutes of limitations for the 2019 tax year.

The Company’s tax years subject to federal, state or foreign examinations are 2018 through 2022.