Lexmark 2009 Annual Report Download - page 116

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A reconciliation of the provision for income taxes using the U.S. statutory rate and the Company’s effective
tax rate was as follows:
Amount % Amount % Amount %
2009 2008 2007
Provision for income taxes at statutory rate . . . . . $ 65.4 35.0% $ 96.6 35.0% $122.3 35.0%
State and local income taxes, net of federal tax
benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 1.7 4.8 1.7 6.8 2.0
Foreign tax differential . . . . . . . . . . . . . . . . . . . . (20.8) (11.1) (44.6) (16.2) (42.2) (12.1)
Research and development credit . . . . . . . . . . . . (5.1) (2.7) (5.4) (1.9) (5.6) (1.6)
Tax-exempt interest, net of related expenses . . . . (0.1) —(0.8) (0.3) (1.4) (0.4)
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . (1.1) (0.6) (0.6) (0.2) 0.2 0.1
Reversals of previously accrued taxes . . . . . . . . . (2.3) (1.2) (11.6) (4.2) (18.4) (5.3)
Adjustments to previously recorded taxes . . . . . . — ———(11.2) (3.2)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9 0.9 (2.7) (1.0) (1.8) (0.6)
Provision for income taxes . . . . . . . . . . . . . . . . . $ 41.1 22.0% $ 35.7 12.9% $ 48.7 13.9%
The effective income tax rate was 22.0% for the year ended December 31, 2009. The 9.1 percentage point
increase of the effective tax rate from 2008 to 2009 was due to a geographic shift in earnings
(5.1 percentage points) toward higher tax jurisdictions in 2009 and the reversal of previously-accrued
taxes (3.1 percentage points) in 2008 that did not recur in 2009, along with a variety of other factors
(0.9 percentage points).
The effective income tax rate was 12.9% for the year ended December 31, 2008. The effective income tax
rate was 13.9% for the year ended December 31, 2007. The 1.0 percentage point reduction of the effective
tax rate from 2007 to 2008 was due to a reduction of 5.3 percentage points, primarily related to the
geographic shift in earnings to lower tax jurisdictions in 2008, along with a variety of other factors, partially
offset by a smaller amount of reversals and adjustments to previously accrued taxes in 2008 (increase of
4.3 percentage points) when compared to reversals and adjustments recorded in 2007. During 2008, the
Company reversed $11.6 million of previously accrued taxes principally due to the settlement of the
U.S. tax audit for years 2004 and 2005, while in 2007, the Company reversed a total of $29.6 million of
previously accrued taxes which pertained to the settlement of a tax audit outside the U.S. and other
adjustments to previously recorded tax amounts.
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