Kimberly-Clark 2007 Annual Report Download - page 93

KIMBERLY-CLARK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
in Latin America and utilization of excess foreign tax credits. Valuation allowances at the end of 2007 primarily
relate to excess foreign tax credits in the U.S. and income tax loss carryforwards of $869.0 million, which
potentially are not useable primarily in jurisdictions outside the U.S. If not utilized against taxable income,
$323.7 million of the loss carryforwards will expire from 2008 through 2027. The remaining $545.3 million has
no expiration date.
Realization of income tax loss carryforwards is dependent on generating sufficient taxable income prior to
expiration of these carryforwards. Although realization is not assured, management believes it is more likely than
not that all of the deferred tax assets, net of applicable valuation allowances, will be realized. The amount of the
deferred tax assets considered realizable could be reduced or increased if estimates of future taxable income
change during the carryforward period.
Presented below is a reconciliation of the income tax provision computed at the U.S. federal statutory tax
rate to the provision for income taxes:
Year Ended December 31
2007 2006 2005
Amount Percent Amount Percent Amount Percent
(Millions of dollars)
Income before income taxes ................... $2,317.5 $1,844.9 $1,968.9
Tax at U.S. statutory rate applied to income before
income taxes ............................. $ 811.1 35.0% $ 645.7 35.0% $ 689.1 35.0%
State income taxes, net of federal tax benefit ...... 38.2 1.6 15.0 .8 23.8 1.2
Statutory rates other than U.S. statutory rate ....... (46.3) (2.0) (19.9) (1.1) (25.4) (1.3)
Net operating losses realized ................... (63.5) (2.7) (8.0) (.4) (14.2) (.7)
Synthetic fuel credits ......................... (60.0) (2.6) (60.5) (3.3) (169.2) (8.6)
Recognition of additional prior year foreign tax
credits ................................... —— (35.9) (1.9) — —
Taxes on American Jobs Creation Act dividends . . . —— — — 55.5 2.8
Other—net(a) ................................ (143.0) (6.2) (67.2) (3.7) (121.2) (6.1)
Provision for income taxes .................... $ 536.5 23.1% $ 469.2 25.4% $ 438.4 22.3%
(a) Other—net is comprised of numerous items, none of which is greater than 1.4 percent of income from continuing operations.
The 2004 American Jobs Creation Act (the “Act”) provided, among other things, for a one-time deduction
for certain foreign earnings that are repatriated to and reinvested in the U.S. During 2005, the Corporation
repatriated approximately $985 million of previously unremitted earnings of certain of its non-U.S. subsidiaries
under the provisions of the Act. As a result, the Corporation recorded income tax expense and a related income
tax liability of approximately $55.5 million in 2005.
At December 31, 2007, U.S. income taxes have not been provided on approximately $4.4 billion of
unremitted earnings of subsidiaries operating outside the U.S. These earnings, which are considered to be
invested indefinitely, would become subject to income tax if they were remitted as dividends, were lent to the
Corporation or a U.S. affiliate, or if the Corporation were to sell its stock in the subsidiaries. Determination of the
amount of unrecognized deferred U.S. income tax liability on these unremitted earnings is not practicable
because of the complexities associated with this hypothetical calculation.
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