Graco 2008 Annual Report Download - page 68

Newell Rubbermaid Inc. 2008 Annual Report
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A reconciliation of the U.S. statutory rate to the effective income tax rate is as follows for the years ended December 31,:
2008 2007 2006
Statutory rate 35.0)% 35.0)% 35.0)%
Add (deduct) effect of:
State income taxes, net of federal income tax effect 104.3 0.4 0.1
Foreign tax credit (2,649.9) (1.5) (1.5)
Foreign rate differential and other 1,440.5 1.1 (5.1)
Resolution of tax contingencies (1,204.9) (11.2) (4.8)
Tax basis differential on goodwill impairment 5,705.0 — —
Reversal of previously recorded valuation reserve (452.3) — —
Impact of legal entity restructuring — — (15.1)
Effective rate 2,977.7)% 23.8)% 8.6)%
The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.
The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2005. During the three months ended December 31,
2008, the Company received an IRS Revenue Agent Report for tax years 2005 and 2006, assessing additional tax and interest relating to the Company’s tax
treatment of the financing entity described in Footnote 9. The Company disagrees with the IRS’ characterization of the entity and the associated assessment,
and in January 2009, the Company filed a protest with the IRS and requested a conference with the IRS Appeals Office. The Company believes it is adequately
reserved for the uncertain tax position relating to this issue. The Company’s Canadian income tax returns are subject to examination for years after 2000.
With few exceptions, the Company is no longer subject to other income tax examinations for years before 2005.
It is reasonably possible that there could be a change in the amount of the Company’s unrecognized tax benefits within the next 12 months due to
activities of the IRS or other taxing authorities, including proposed assessments of additional tax, possible settlement of audit issues, or the expiration of
applicable statutes of limitations. The range of the possible change in unrecognized tax benefits within the next 12 months cannot be reasonably estimated
at December 31, 2008.
The components of net deferred tax assets are as follows as of December 31, (in millions):
2008 2007
Deferred tax assets:
Accruals not currently deductible for tax purposes $ 147.1 $ 132.1
Postretirement liabilities 59.0 62.9
Inventory reserves 2.2 2.0
Pension liabilities 108.8 62.4
Self-insurance liability 10.5 7.9
Foreign tax credit carryforward 84.7 45.3
Foreign net operating losses 227.0 201.8
Other 137.4 110.0
Total gross deferred tax assets 776.7 624.4
Less valuation allowance (303.3) (272.6)
Net deferred tax assets after valuation allowance $ 473.4 $ 351.8
Deferred tax liabilities:
Accelerated depreciation $ (81.6) $ (68.9)
Amortizable intangibles (179.6) (146.1)
Other (4.0) (5.4)
Total gross deferred tax liabilities (265.2) (220.4)
Net deferred tax assets $ 208.2 $ 131.4
Current deferred income tax assets $ 100.4 $ 102.0
Noncurrent deferred income tax assets 107.8 29.4
$ 208.2 $ 131.4
No U.S. deferred taxes have been provided on the undistributed non-U.S. subsidiary earnings that are considered to be indefinitely invested. At
December 31, 2008, the estimated amount of total unremitted non-U.S. subsidiary earnings is $605.8 million. It is not practical to estimate the amount
of U.S. tax that might be payable on the eventual remittance of such earnings.