Lexmark 2008 Annual Report Download - page 96

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as of December 31, 2008. It is not practicable to estimate the amount of additional tax that may be payable on
the foreign earnings. The Company does not plan to initiate any action that would precipitate the payment of
income taxes.
FIN 48 Disclosures
The Company adopted the provisions of FIN 48 and related guidance on January 1, 2007. As a result of the
implementation of FIN 48, the Company reduced its liability for unrecognized tax benefits and related
interest and penalties by $7.3 million, which resulted in a corresponding increase in the Company’s
January 1, 2007, retained earnings balance. The Company also recorded an increase in its deferred tax
assets of $8.5 million and a corresponding increase in its liability for unrecognized tax benefits as a result of
adopting FIN 48.
The amount of unrecognized tax benefits at December 31, 2008, was $29.3 million, all of which would
affect the Company’s effective tax rate if recognized. 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, 2008, the Company had $3.7 million of accrued interest and
penalties. For 2008, the Company recognized in its statement of earnings a net benefit of $1.0 million
related to interest and penalties. As of December 31, 2007, the Company had $7.4 million of accrued
interest and penalties. For 2007, the Company recognized in its statement of earnings a net benefit of
$4.2 million for interest and penalties.
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 $6 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 2006
and after are subject to examination. The Internal Revenue Service (“IRS”) is currently auditing tax years
2006 and 2007. In France, tax years 2006 and after are subject to examination. In Switzerland, tax years
2003 and after are subject to examination. In most of the other countries where the Company files income
tax returns, 2003 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:
2008 2007
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53.5 $ 59.8
Increases/(decreases) in unrecognized tax benefits as a result of tax positions
taken during a prior period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5.1) (5.5)
Increases/(decreases) in unrecognized tax benefits as a result of tax positions
taken during the current period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9 10.4
Increases/(decreases) in unrecognized tax benefits relating to settlements with
taxing authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24.2) (11.2)
Reductions to unrecognized tax benefits as a result of a lapse of the applicable
statute of limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.8) —
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29.3 $ 53.5
Other
Cash paid for income taxes was $97.8 million, $76.1 million and $134.4 million in 2008, 2007 and 2006,
respectively.
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