Lexmark 2007 Annual Report Download - page 81

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The amount of unrecognized tax benefits at December 31, 2007, was $53.5 million, of which $43.5 million
would affect the Company’s effective tax rate if recognized. The Company recognizes accrued interest and
penalties associated with uncertain tax positions as part of its income tax provision. As of December 31,
2007, the Company had $7.4 million of accrued interest and penalties. During 2007, releases of $3.7 million
of accrued interest and penalties were included in the Company’s results of operations.
FIN 48 Additional Disclosures
It is reasonably possible that the total amount of unrecognized tax benefits will increase or decrease in the
next 12 months. Such changes could occur based on the expiration of various statutes of limitations or the
conclusion of ongoing tax audits in various jurisdictions around the world. If those events occur within the
next 12 months, the Company estimates that its unrecognized tax benefits amount could decrease by an
amount in the range of $0 to $18 million, the impact of which would affect the Company’s effective tax rate.
Several tax years are subject to examination by major tax jurisdictions. In the U.S., federal tax years 2004
and after are subject to examination. The Internal Revenue Service (“IRS”) is currently auditing tax years
2004 and 2005. In France, tax years 2006 and after are subject to examination. In Switzerland, tax years
2002 and after are subject to examination. In most of the other countries where the Company files income
tax returns, 2002 is the earliest tax year that is subject to examination. The Company believes that
adequate amounts have been provided for any adjustments that may result from those examinations.
A reconciliation of the total beginning and ending amounts of unrecognized tax benefits is as follows:
Balance at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59.8
Increases/(decreases) in unrecognized tax benefits as a result of tax positions taken during
a prior period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5.5)
Increases/(decreases) in unrecognized tax benefits as a result of tax positions taken during
the current period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.4
Increases/(decreases) in unrecognized tax benefits relating to settlements with taxing
authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11.2)
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of
limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53.5
Provision for Income Taxes
The Provision for income taxes consisted of the following:
2007 2006 2005
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35.4 $ 96.0 $143.4
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.8 37.2 61.0
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 9.6 15.3
76.7 142.8 219.7
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7.9) (31.5) (7.8)
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20.0) 12.3 (14.1)
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) (2.7) (0.4)
(28.0) (21.9) (22.3)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48.7 $120.9 $197.4
75