Black & Decker 2011 Annual Report Download - page 102

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90
The components of earnings from continuing operations before income taxes consisted of the following:
(Millions of Dollars)
2011
2010
2009
United States………………………………………………………………
$ 236.0
$ (182.7) $ 115.1
Foreign…………………………………………………………………….
543.8
422.5
167.5
Earnings from continuing operations before income taxes……………….
$ 779.8
$ 239.8
$ 282.6
Except for certain legacy Black & Decker foreign earnings as described below, all undistributed foreign earnings of the Company at
December 31, 2011, in the amount of approximately $ 3,614 million are considered to be invested indefinitely or will be remitted
substantially free of additional tax. Accordingly, no provision has been made for tax that might be payable upon remittance of such
earnings, nor is it practicable to determine the amount of this liability. As of March 12, 2010, the Company made a determination to
repatriate $1,636.1 million of legacy Black & Decker foreign earnings on which U.S. income taxes had not previously been provided.
As a result of this repatriation decision, the Company has recorded deferred tax liabilities of $421.7 million at December 31, 2011.
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)
2011
2010
2009
Balance at beginning of year……………………………………………….
$ 273.6
$ 30.3
$ 47.8
Adjustment for 2010 Merger and acquisitions……………………………..
—
318.1
—
Additions based on tax positions related to current year…………………..
46.3
18.4
1.4
Additions based on tax positions related to prior years……………………
26.7
0.7
2.3
Reductions based on tax positions related to prior years…………………..
(97.1) (36.3) (10.6)
Settlements…………………………………………………………………
(22.4) (41.0) (2.3)
Statute of limitations expirations…………………………………………..
(12.9) (16.6) (8.3)
Balance at end of year……………………………………………………...
$ 214.2
$ 273.6
$ 30.3
The gross unrecognized tax benefits at December 31, 2011 and January 1, 2011 includes $185.4 million and $228 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 $14.5 million in 2011, $6.5 million in 2010 and $1.2 million in 2009. The
liability for potential penalties and interest totaled $25.9 million as of December 31, 2011 and $40.5 million as of January 1, 2011.
The Company classifies all tax-related interest and penalties as income tax expense. During 2011 and 2010, the Company recognized
tax benefits of $73.4 million and $36.0 million attributable to favorable settlements of certain tax contingencies, due to a change in the
facts and circumstances that did not exist at the acquisition date related to the resolution of legacy Black & Decker income tax audits.
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 2006 and 2007 have been settled with the Internal Revenue Service as of December 31,
2011, tax years 2008, 2009 and March 12, 2010 are under current audit. For Stanley Black & Decker, Inc. tax years 2008 and 2009 are
currently under audit. 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 $2.6 million due in the future
under non-cancelable subleases. Rental expense, net of sublease income, for operating leases was $151.0 million in 2011,
$156.3 million in 2010 and $65.2 million in 2009.