Lexmark 2011 Annual Report Download - page 124

Deferred income taxes have not been provided for the undistributed earnings of foreign subsidiaries
because such earnings are indefinitely reinvested. Undistributed earnings of non-U.S. subsidiaries
included in the consolidated retained earnings were approximately $1,635.4 million as of December 31,
2011. 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.
Tax Positions
The amount of unrecognized tax benefits at December 31, 2011, was $23.1 million, all of which would
affect the Company’s effective tax rate if recognized. The amount of unrecognized tax benefits at
December 31, 2010, was $25.5 million, all of which would affect the Company’s effective tax rate if
recognized. 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 Company recognizes accrued interest and penalties associated with uncertain tax positions as
part of its income tax provision. As of December 31, 2011, the Company had $2.4 million of accrued
interest and penalties. For 2011, the Company recognized in its statement of earnings a net benefit of
$0.5 million for interest and penalties. As of December 31, 2010, the Company had $2.9 million of
accrued interest and penalties. For 2010, the Company recognized in its statement of earnings a net
benefit of $1.6 million for interest and penalties. 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.
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 million to $10 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
2008 and after are subject to examination. The Internal Revenue Service is currently auditing tax years
2008 and 2009. In France, tax years 2008 and after are subject to examination. The French Tax
Administration commenced their audit of tax years 2008 and 2009 in 2011. In Switzerland, tax years
2007 and after are subject to examination. In most of the other countries where the Company files
income tax returns, 2006 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:
2011 2010 2009
Balance at January 1 $25.5 $33.0 $29.3
Increases / (decreases) in unrecognized tax benefits as a result of tax
positions taken during a prior period ................................ 2.6 1.2 (0.6)
Increases / (decreases) in unrecognized tax benefits as a result of tax
positions taken during the current period ............................ 1.4 5.1 5.8
Increases / (decreases) in unrecognized tax benefits relating to settlements
with taxing authorities ............................................ (1.6) (4.2) (0.2)
Reductions to unrecognized tax benefits as a result of a lapse of the
applicable statute of limitations .................................... (4.8) (9.6) (1.3)
Balance at December 31 .......................................... $23.1 $25.5 $33.0
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