Danaher 2011 Annual Report Download - page 99

Table of Contents
The Company’s effective tax rate related to continuing operations for each of 2011, 2010 and 2009 differs from the U.S. federal statutory rate of 35% due
principally to the Company’s earnings outside the United States that are indefinitely reinvested and taxed at rates lower than the U.S. federal statutory rate.
The tax rates are also lower than the U.S. statutory rate due to recognition of tax benefits associated with certain international and domestic tax positions being
resolved in the Company’s favor, tax rulings, court decisions and the lapse of statutes of limitations. The impact of the favorable resolutions have been treated
as discrete items in the period they were resolved and, in addition to changes in estimates related to reserves associated with prior period uncertain tax positions
reduced the provision for income taxes by approximately 240 basis points ($59 million or $0.08 per diluted share), 60 basis points ($12 million, or $0.02 per
diluted share), and 730 basis points ($97 million, or $0.15 per diluted share) during the years ended December 31, 2011, 2010, and 2009, respectively.
The Company made income tax payments related to continuing operations of $303 million, $282 million, and $283 million in 2011, 2010 and 2009,
respectively. In addition, the Company made tax payments related to discontinued operations, including the gain on the sale of PSA (refer to Note 3) totaling
$129 million in 2011. Current income tax payable has been reduced by $25 million, $57 million, and $53 million in 2011, 2010 and 2009, respectively, for
tax deductions attributable to stock-based compensation. The net income tax benefit attributable to stock-based compensation in excess of the benefit recorded
for financial reporting purposes has been recorded as an increase to additional paid-in capital.
Included in deferred income taxes as of December 31, 2011 are tax benefits for U.S. and non-U.S. net operating loss carryforwards totaling $337 million (net
of applicable valuation allowances of $316 million). Certain of the losses can be carried forward indefinitely and others can be carried forward to various
dates from 2012 through 2031. In addition, the Company had general business and foreign tax credit carryforwards of $210 million (net of applicable
valuation allowances of $1 million) at December 31, 2011. Included in the deferred tax asset related to net operating loss carryforwards and tax credits is $140
million associated with the indirect impact of certain unrecognized tax benefits (see below).
As of December 31, 2011, gross unrecognized tax benefits totaled approximately $518 million ($451 million, net of offsetting indirect tax benefits and
including $129 million associated with potential interest and penalties). As of December 31, 2010, gross unrecognized tax benefits totaled approximately $518
million ($402 million, net of offsetting indirect tax benefits and including $84 million associated with potential interest and penalties). The Company
recognized approximately $56 million, $25 million and $18 million in potential interest and penalties associated with uncertain tax positions during 2011,
2010 and 2009, respectively. To the extent unrecognized tax benefits (including interest and penalties) are not assessed with respect to uncertain tax positions,
amounts accrued will be reduced and reflected as a reduction of the overall income tax provision. Unrecognized tax benefits and associated accrued interest and
penalties are included in taxes, income and other in accrued expenses as detailed in Note 9.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding amounts accrued for potential interest and penalties, is as follows
($ in millions):
  
Unrecognized tax benefits, beginning of year $517.5 $439.3 $ 446.9
Additions based on tax positions related to the current year 46.6 62.2 33.4
Additions for tax positions of prior years 77.1 101.8 82.3
Reductions for tax positions of prior years (59.7) (50.0) (11.8)
Acquisitions 85.5 5.7 3.0
Lapse of statute of limitations (124.3) (32.8) (104.5)
Settlements (21.2) (4.9) (21.6)
Effect of foreign currency translation (3.2) (3.8) 11.6
Unrecognized tax benefits, end of year $ 518.3 $517.5 $439.3
The Company and its subsidiaries are routinely examined by various taxing authorities. The Internal Revenue Service (“IRS”) has initiated examinations of
certain of the Company’s federal income tax returns for the years 2008 and 2009. It is expected that these examinations will be completed in early 2013. In
addition, the Company has subsidiaries in Austria, Belgium, Germany, Denmark, Canada, France, Hong Kong, India, Australia and various other states,
provinces and countries that are currently under audit for years ranging from 2000 through 2010.
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Source: DANAHER CORP /DE/, 10-K, February 24, 2012 Powered by Morningstar® Document Research℠
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