Lexmark 2011 Annual Report Download - page 122

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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:
2011 2010 2009
Amount % Amount % Amount %
Provision for income taxes at statutory rate ...... $144.8 35.0 % $147.5 35.0 % $ 65.4 35.0 %
State and local income taxes, net of federal tax
benefit ................................... 7.0 1.7 4.3 1.0 3.2 1.7
Foreign tax differential ........................ (45.8) (11.0) (50.0) (11.9) (20.8) (11.1)
Research and development credit .............. (6.0) (1.5) (5.6) (1.3) (5.1) (2.7)
Tax-exempt interest, net of related expenses ..... 0.0 —0.0 —(0.1) —
Valuation allowance ......................... 2.6 0.6 (0.2) —(1.1) (0.6)
Adjustments to previously accrued taxes ........ (5.4) (1.4) (15.5) (3.7) (2.3) (1.2)
Other ..................................... (4.5) (1.0) 1.0 0.2 1.9 0.9
Provision for income taxes .................... $ 92.7 22.4 %$ 81.5 19.3 % $ 41.1 22.0 %
The jurisdictions having the greatest impact on the foreign tax differential reconciling item were
Switzerland, Ireland, and Philippines.
The reconciling item for adjustments to previously accrued taxes represents adjustments to income tax
expense amounts that were recorded in prior years. For the years indicated, the principal reason for
these adjustments was to record the release of uncertain tax positions accrued in prior years. The
adjustments to the uncertain tax positions were made either because the amount that the Company
was required to pay pursuant to an income tax audit was different than the amount the Company
estimated it would have to pay or because the statute of limitations governing the year of the accrual
expired and no audit of that year was ever conducted by the local tax authorities.
The effective income tax rate was 22.4% for the year ended December 31, 2011. The 3.1 percentage
point increase of the effective tax rate from 2010 to 2011 was due to the adjustment to previously
accrued taxes in 2011 (increase of 2.3 percentage points), a geographic shift in earnings toward higher
tax jurisdictions in 2011 (increase of 0.9 percentage points), the U.S. R&E credit being a larger
percentage of consolidated earnings before income taxes in 2011 (decrease of 0.2 percentage points),
and a variety of other factors (increase of 0.1 percentage points).
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).
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