Lexmark 2010 Annual Report Download - page 111

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Earnings before income taxes were as follows:
2010 2009 2008
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $178.6 $ 38.3 $ 69.7
Non-U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242.9 148.7 206.2
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $421.5 $187.0 $275.9
The Company realized an income tax benefit from the exercise of certain stock options and/or vesting of
certain RSUs and DSUs in 2010, 2009 and 2008 of $4.5 million, $2.8 million, and $3.4 million, respectively.
This benefit resulted in a decrease in current income taxes payable.
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 %
2010 2009 2008
Provision for income taxes at
statutory rate . . . . . . . . . . . . . . . . . $147.5 35.0% $ 65.4 35.0% $ 96.6 35.0%
State and local income taxes, net of
federal tax benefit . . . . . . . . . . . . . 4.3 1.0 3.2 1.7 4.8 1.7
Foreign tax differential. . . . . . . . . . . . (50.0) (11.9) (20.8) (11.1) (44.6) (16.2)
Research and development credit . . . (5.6) (1.3) (5.1) (2.7) (5.4) (1.9)
Tax-exempt interest, net of related
expenses. . . . . . . . . . . . . . . . . . . . 0.0 —(0.1) —(0.8) (0.3)
Valuation allowance . . . . . . . . . . . . . (0.2) —(1.1) (0.6) (0.6) (0.2)
Reversals of previously accrued
taxes....................... (15.5) (3.7) (2.3) (1.2) (11.6) (4.2)
Other ........................ 1.0 0.2 1.9 0.9 (2.7) (1.0)
Provision for income taxes . . . . . . . . $ 81.5 19.3% $ 41.1 22.0% $ 35.7 12.9%
The effective income tax rate was 19.3% for the year ended December 31, 2010. The 2.7 percentage point
decrease of the effective tax rate from 2009 to 2010 was due to the reversal of previously-accrued taxes in
2010 (decrease of 2.5 percentage points), a geographic shift in earnings toward lower tax jurisdictions in
2010 (decrease of 0.8 percentage points), the U.S. R&E credit being a smaller percentage of consolidated
earnings before income taxes in 2010 (increase of 1.4 percentage points), and a variety of other factors
(decrease of 0.8 percentage points).
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 toward higher
tax jurisdictions in 2009 (increase of 5.1 percentage points), the reversal of previously-accrued taxes in
2008 that did not recur in 2009 (increase of 3.1 percentage points), and a variety of other factors (increase
of 0.9 percentage points).
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