Black & Decker 2010 Annual Report Download - page 125

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reinvested, consistent with the Company’s overall growth strategy internationally, including acquisitions and
long-term financial objectives. No provision has been made for taxes that might be payable upon remittance of
these undistributed foreign earnings and determination of the amount of any unrecognized deferred tax liability
is not practical.
The Company’s liabilities for unrecognized tax benefits relate to U.S. and various foreign jurisdictions. The
following table summarizes the activity related to the unrecognized tax benefits:
(Millions of Dollars) 2010 2009 2008
Balance at beginning of year ............................ $30.3 $47.8 $49.1
Adjustment for 2010 Merger and acquisitions. . .............. 318.1 --
Additions based on tax positions related to current year ........ 18.4 1.4 5.6
Additions based on tax positions related to prior years ......... 0.7 2.3 7.7
Reductions based on tax positions related to prior years ........ (36.3) (10.6) (5.9)
Settlements ......................................... (41.0) (2.3) -
Statute of limitations expirations ......................... (16.6) (8.3) (8.7)
Balance at end of year................................. $273.6 $30.3 $47.8
The gross unrecognized tax benefits at January 1, 2011 and January 2, 2010 includes $228 million and
$26.1 million, respectively, of tax benefits that, if recognized, would impact the effective tax rate. The liability
for potential penalties and interest related to unrecognized tax benefits was decreased by $6.5 million in 2010,
decreased by $1.2 million in 2009 and increased by $1.3 million in 2008. The liability for potential penalties
and interest totaled $40.5 million as of January 1, 2011 and $4.4 million as of January 2, 2010. The Company
classifies all tax-related interest and penalties as income tax expense. During the second quarter 2010, the
Company recognized a tax benefit of $36 million attributable to a favorable settlement of certain tax
contingencies, due to a change in facts and circumstances that did not exist at the acquisition date related to
the resolution of a legacy Black & Decker income tax audit.
The Company considers many factors when evaluating and estimating our tax positions and the impact on
income tax expense, which may require periodic adjustments and which may not accurately anticipate actual
outcomes. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our
unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes
may be the result of settlement of ongoing audits or final decisions in transfer pricing matters. At this time, an
estimate of the range of reasonably possible outcomes is $3 million to $8 million.
The Company is subject to the examination of its income tax returns by the Internal Revenue Service and
other tax authorities. For The Black & Decker Corporation, tax years 2004 and 2005 have been settled with
the Internal Revenue Service as of January 1, 2011, tax years 2006 and 2007 are under current audit. For
Stanley Black & Decker, Inc. tax years 2007 and forward remain subject to Internal Revenue Service
examination. The Company also files many state and foreign income tax returns in jurisdictions with varying
statutes of limitations. Tax years 2007 and forward generally remain subject to examination by most state tax
authorities. In significant foreign jurisdictions, tax years 2002 and forward generally remain subject to
examination, while in Germany tax years 1999 and forward remain subject to examination.
R. COMMITMENTS AND GUARANTEES
COMMITMENTS — The Company has non-cancelable operating lease agreements, principally related to
facilities, vehicles, machinery and equipment. Minimum payments have not been reduced by minimum
sublease rentals of $1.8 million due in the future under non-cancelable subleases. Rental expense, net of
sublease income, for operating leases was $157.0 million in 2010, $65.2 million in 2009 and $66.4 million in
2008.
Marketing and other commitments are comprised of: $51.1 million in marketing and advertising obligations,
$7.8 million in utilities, $4.0 million in outsourcing and professional services and $8.9 million in other.
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