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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Taxes [Abstract] |
Income Taxes | 10. Income Taxes Provisions for income taxes are as follows:
|  | 2011 |  |  | 2010 |  |  | 2009 |
|  | (In Thousands) |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 33,006 |  |  | $ | 13,723 |  |  | $ | 2,456 |
State |  |  | 4,514 |  |  |  | 3,754 |  |  |  | 1,337 |
Total Current |  | $ | 37,520 |  |  | $ | 17,477 |  |  | $ | 3,793 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 7,543 |  |  | $ | 1,602 |  |  | $ | 9,611 |
State |  |  | 1,145 |  |  |  | 708 |  |  |  | 1,620 |
Total Deferred |  | $ | 8,688 |  |  | $ | 2,310 |  |  | $ | 11,231 |
Provisions for income taxes |  | $ | 46,208 |  |  | $ | 19,787 |  |  | $ | 15,024 |
The current provision for federal income taxes shown above includes regular federal income tax after the consideration of permanent and temporary differences between income for GAAP and tax purposes. The current provision for state income taxes includes regular state income tax and provisions for uncertain income tax positions. In addition to the income tax provision from continuing operations, we allocated an income tax benefit of approximately $80,000, $78,000 and $155,000 to discontinued operations for 2011, 2010 and 2009, respectively. During June 2010, we determined that certain nondeductible expenses had not been properly identified relating to the 2007-2009 provisions for income taxes. As a result, we recorded an additional income tax provision of approximately $800,000 for 2010. For 2010, the effect of this adjustment decreased basic and diluted net income per share by $.04 and $.03, respectively. Management of the Company evaluated the impact of this accounting error and concluded the effect of this adjustment was immaterial to our 2007-2010 consolidated financial statements. The deferred tax provision results from the recognition of changes in our prior year deferred tax assets and liabilities, and the utilization of state NOL carryforwards and other temporary differences. We reduce income tax expense for investment tax credits in the year they arise and are earned. At December 31, 2011, our gross amount of the investment tax credits available to offset state income taxes was minimal. These investment tax credits do not expire and carryforward indefinitely. We utilized approximately $0.2 million, $0.7 million and $2.2 million of state NOL carryforwards to reduce tax liabilities in 2011, 2010 and 2009, respectively. At December 31, 2011, we have remaining state tax NOL carryforwards of approximately $8.0 million that begin expiring in 2013. For 2011, 2010 and 2009, we determined it was more-likely-than-not that approximately $6.9 million, $6.1 million and $7.1 million, respectively, of the state NOL carryforwards would not be able to be utilized before expiration and a valuation allowance for the deferred tax assets associated with these state NOL carryforwards, net of federal benefit of approximately $0.3 million, $0.3 million and $0.4 million, respectively, was maintained. We considered both positive and negative evidence in our determination. The negative evidence considered primarily included our history of losses by certain entities and jurisdictions, both as to amount and trend and uncertainties surrounding our ability to generate sufficient taxable income in the individual jurisdictions to utilize these state NOL carryforwards. When non-qualified stock options (“NSOs”) are exercised, the grantor of the options is permitted to deduct the spread between the fair market value of the stock issued and the exercise price of the NSOs as compensation expense in determining taxable income. Income tax benefits related to stock-based compensation deductions in excess of the compensation expense recorded for financial reporting purposes are not recognized in earnings as a reduction of income tax expense for financial reporting purposes. As a result, the stock-based compensation deduction recognized in our income tax return will exceed the stock-based compensation expense recognized in earnings. The excess tax benefit realized (i.e., the resulting reduction in the current tax liability) related to the excess stock-based compensation tax deduction of $1.3 million, $0.6 million and $0.9 million in 2011, 2010, and 2009, respectively, which is included in the net change in capital in excess of par value rather than a decrease in the provision for income taxes. In addition, if the grantor of NSOs will not currently reduce its tax liability from the excess tax benefit deduction taken at the time of the taxable event (option exercised) because it has a NOL carryforward that is increased by the excess tax benefit, then the tax benefit should not be recognized until the deduction actually reduces current taxes payable. At December 31, 2011 and 2010, we had no unrecognized federal and state tax benefits resulting from the exercise of NSOs. Deferred tax assets and liabilities include temporary differences and carryforwards as follows:
|  | December 31, |
|  | 2011 |  |  | 2010 |
|  | (In Thousands) |
Deferred tax assets |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  | $ | 872 |  |  | $ | 723 |
Asset impairment |  |  | 756 |  |  |  | 725 |
Inventory |  |  | 1,724 |  |  |  | 2,214 |
Deferred compensation |  |  | 4,096 |  |  |  | 3,996 |
Other accrued liabilities |  |  | 5,474 |  |  |  | 4,929 |
Hedging |  |  | 1,033 |  |  |  | 575 |
Net operating loss carryforwards |  |  | 392 |  |  |  | 361 |
Other |  |  | 1,069 |  |  |  | 1,210 |
Total deferred tax assets |  |  | 15,416 |  |  |  | 14,733 |
Less valuation allowance on deferred tax assets |  |  | (344 | ) |  |  | (310 | )
Net deferred tax assets |  | $ | 15,072 |  |  | $ | 14,423 |
Deferred tax liabilities |  |  |  |  |  |  |  |
Property, plant and equipment |  | $ | 28,766 |  |  | $ | 19,886 |
Prepaid and other insurance reserves |  |  | 2,504 |  |  |  | 1,852 |
Investment in unconsolidated affiliate |  |  | 640 |  |  |  | 837 |
Other |  |  | 713 |  |  |  | 713 |
Total deferred tax liabilities |  | $ | 32,623 |  |  | $ | 23,288 |
Net deferred tax liabilities |  | $ | (17,551 | ) |  | $ | (8,865 | )
Consolidated balance sheet classification: |  |  |  |  |  |  |  |
Net current deferred tax assets |  | $ | 4,275 |  |  | $ | 5,396 |
Net non-current deferred tax liabilities |  |  | (21,826 | ) |  |  | (14,261 | )
Net deferred tax liabilities |  | $ | (17,551 | ) |  | $ | (8,865 | )
Net deferred tax liabilities by tax jurisdiction: |  |  |  |  |  |  |  |
Federal |  | $ | (15,724 | ) |  | $ | (8,202 | )
State |  |  | (1,827 | ) |  |  | (663 | )
Net deferred tax liabilities |  | $ | (17,551 | ) |  | $ | (8,865 | )
All of our income before taxes relates to domestic operations. Detailed below are the differences between the amount of the provision for income taxes and the amount which would result from the application of the federal statutory rate to “Income from continuing operations before provision for income taxes”.
|  | 2011 |  |  | 2010 |  |  | 2009 |
|  | (In Thousands) |
Provisions for income taxes at federal statutory rate |  | $ | 45,567 |  |  | $ | 17,326 |  |  | $ | 12,906 |
State current and deferred income taxes |  |  | 5,088 |  |  |  | 3,259 |  |  |  | 1,832 |
Domestic production activities deduction |  |  | (3,091 | ) |  |  | (1,371 | ) |  |  | (282 | )
Effect of tax return to tax provision reconciliation |  |  | (958 | ) |  |  | (126 | ) |  |  | 676 |
Other |  |  | (398 | ) |  |  | 699 |  |  |  | (108 | )
Provisions for income taxes |  | $ | 46,208 |  |  | $ | 19,787 |  |  | $ | 15,024 |
A reconciliation of the beginning and ending amount of uncertain tax positions is as follows:
|  | 2011 |  |  | 2010 |  |  | 2009 |
|  | (In Thousands) |
Balance at beginning of year |  | $ | 700 |  |  | $ | 608 |  |  | $ | 898 |
Additions based on tax positions related to the current year |  |  | 217 |  |  |  | 131 |  |  |  | 48 |
Additions based on tax positions of prior years |  |  | — |  |  |  | — |  |  |  | 82 |
Reductions for tax positions of prior years |  |  | (51 | ) |  |  | (35 | ) |  |  | (355 | )
Settlements |  |  | (157 | ) |  |  | (4 | ) |  |  | (65 | )
Balance at end of year |  | $ | 709 |  |  | $ | 700 |  |  | $ | 608 |
We expect that the amount of unrecognized tax benefits may change as the result of ongoing operations, the outcomes of audits, and the expiration of statute of limitations. This change is not expected to have a significant impact on our results of operations or the financial condition. The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was $461,000, $455,000 and $400,000, net of federal expense, in 2011, 2010, and 2009, respectively. We record interest related to unrecognized tax positions in interest expense and penalties in operating other expense. During 2011, 2010, and 2009, we recognized $42,000, $104,000 and $150,000, respectively, in interest and penalties associated with unrecognized tax benefits. We had approximately $213,000 and $215,000 accrued for interest and penalties at December 31, 2011 and 2010, respectively. LSB and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the 2008-2010 years remain open for all purposes of examination by the U.S. Internal Revenue Service (“IRS”) and other major tax jurisdictions. Currently, we are under examination by the IRS and certain state tax authorities for the tax years 2007-2010.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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