Danaher 2009 Annual Report Download - page 45

Table of Contents
in 2009 compared to 2008 more than offset higher average invested cash balances. Interest income during 2008 was higher than during 2007 as a result of
higher average invested cash balances as less cash was deployed for acquisitions during 2008.
INCOME TAXES
General
Income tax expense and deferred tax assets and liabilities reflect management’s assessment of future taxes expected to be paid on items reflected in the
Company’s financial statements. The Company records the tax effect of discrete items and items that are reported net of their tax effects in the period in which
they occur.
The Company’s effective tax rate can be affected by changes in the mix of earnings in countries with differing statutory tax rates (including as a result of
business acquisitions and dispositions), changes in the valuation of deferred tax assets and liabilities, accruals related to contingent tax liabilities, the results
of audits and examinations of previously filed tax returns (as discussed below), the implementation of tax planning strategies and changes in tax laws. The
Company’s effective tax rate for 2009 differs from the United States federal statutory rate of 35% primarily as a result of lower effective tax rates on certain
earnings from operations outside of the United States. No provisions for United States income taxes have been made with respect to earnings that are planned
to be reinvested indefinitely outside the United States. The amount of United States income taxes that may be applicable to such earnings is not readily
determinable given the various tax planning alternatives the Company could employ should it decide to repatriate these earnings. As of December 31, 2009, the
total amount of earnings planned to be reinvested indefinitely outside the United States for which deferred taxes have not been provided was approximately
$6.5 billion.
The amount of income taxes the Company pays is subject to ongoing audits by federal, state and foreign tax authorities, which often result in proposed
assessments. Management performs a comprehensive review of its global tax positions on a quarterly basis and accrues amounts for contingent tax liabilities.
Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities and the closure of tax years subject to tax audit,
reserves are adjusted as necessary. For a discussion of risks related to these and other tax matters, please refer to “Item 1A. Risk Factors”.
Year-Over-Year Changes in Tax Provision and Effective Tax Rate
The Company’s effective tax rate related to continuing operations for the years ended December 31, 2009, 2008 and 2007 was 19.2%, 24.7% and 25.8%,
respectively.
The Company’s 2009 effective tax rate of 19.2% includes the impact of approximately $97.2 million, or $0.29 per diluted share, related to gains from the net
reduction of reserves associated with the resolution of uncertain tax positions and discrete items. The impact of expensing transaction costs in accordance with
the new business combination accounting standard, much of which are not deductible for income tax purposes, partially offset these beneficial factors.
The Company’s 2008 effective tax rate of 24.7% includes the impact of approximately $9.5 million, or $0.03 per diluted share, related to gains from the net
reduction of reserves associated with uncertain tax positions and discrete items recorded primarily during the second quarter. The effective tax rate also reflects
the impact of the continued growth in earnings outside of the United States. Refer to Note 14 in the Consolidated Financial Statements for additional
information.
The effective tax rate for 2010 is expected to be approximately 25%.
43
Source: DANAHER CORP /DE/, 10-K, February 24, 2010 Powered by Morningstar® Document Research℠
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.