Lexmark 2009 Annual Report Download - page 118

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Tax Positions
The Company adopted FASB guidance on accounting for uncertainty in taxes on January 1, 2007. As a
result of the implementation of this guidance, 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 this guidance.
The amount of unrecognized tax benefits at December 31, 2009, was $33.0 million, all of which would
affect the Company’s effective tax rate if recognized. 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, 2009, the Company had $4.5 million of accrued interest and
penalties. For 2009, the Company recognized in its statement of earnings a net expense of $0.8 million for
interest and penalties. 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 related to 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
2004 and after are subject to examination. In most of the other countries where the Company files income
tax returns, 2004 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:
2009 2008 2007
Balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29.3 $ 53.5 $ 59.8
Increases/(decreases) in unrecognized tax benefits as a result of tax
positions taken during a prior period . . . . . . . . . . . . . . . . . . . . . . . . . . (0.6) (5.1) (5.5)
Increases/(decreases) in unrecognized tax benefits as a result of tax
positions taken during the current period . . . . . . . . . . . . . . . . . . . . . . . 5.8 5.9 10.4
Increases/(decreases) in unrecognized tax benefits relating to
settlements with taxing authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.2) (24.2) (11.2)
Reductions to unrecognized tax benefits as a result of a lapse of the
applicable statute of limitations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.3) (0.8) —
Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33.0 $ 29.3 $ 53.5
Other
Cash paid for income taxes was $41.3 million, $97.8 million and $76.1 million in 2009, 2008 and 2007,
respectively.
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