Graco 2009 Annual Report Download - page 76

Newell Rubbermaid Inc. 2009 Annual Report
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A reconciliation of the U.S. statutory rate to the effective income tax rate is as follows for the years ended December 31,:
2009 2008 2007
Statutory rate 35.0% 35.0% 35.0%
Add (deduct) effect of:
State income taxes, net of federal income tax effect 1.2 49.4 0.4
Foreign tax credit (7.3) (1,255.2) (1.5)
Foreign rate differential and other 2.5 620.8 1.0
Resolution of tax contingencies (0.7) (570.7) (11.2)
Tax basis differential on goodwill impairment — 2,702.4 —
Reversal of previously recorded valuation reserve 0.9 (214.3) —
Stock compensation 1.7 61.5 0.2
Effective rate 33.3% 1,428.9% 23.9%
The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.
The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2005. The Company has received an IRS Revenue
Agent Report for tax years 2005 and 2006, assessing additional tax and interest relating to the Company’s tax treatment of the financing entity described
in Footnote 9 under “Receivables-Related Borrowings.” The Company disagrees with the IRS’ characterization of the entity and the associated assessment,
and in January 2009, the Company filed a protest with the IRS and requested a conference with the IRS Appeals Office. The Company believes it is
adequately reserved for the uncertain tax position relating to this issue. The Company’s Canadian income tax returns are subject to examination for years
after 2000. With few exceptions, the Company is no longer subject to other income tax examinations for years before 2006.
It is reasonably possible that there could be a change in the amount of the Company’s unrecognized tax benefits within the next 12 months due to
activities of the IRS or other taxing authorities, including proposed assessments of additional tax, possible settlement of audit issues, or the expiration of
applicable statutes of limitations. The range of the possible change in unrecognized tax benefits within the next 12 months cannot be reasonably estimated
at December 31, 2009.
The components of net deferred tax assets are as follows as of December 31, (in millions):
2009 2008
Deferred tax assets:
Accruals not currently deductible for tax purposes $ 180.9 $ 147.1
Postretirement liabilities 60.3 59.0
Inventory reserves 3.7 2.2
Pension liabilities 88.4 108.8
Self-insurance liability 10.3 10.5
Foreign tax credit carryforward 97.1 84.7
Foreign net operating losses 275.8 227.0
Other 105.2 137.4
Total gross deferred tax assets 821.7 776.7
Less valuation allowance (320.2) (303.3)
Net deferred tax assets after valuation allowance $ 501.5 $ 473.4
Deferred tax liabilities:
Accelerated depreciation $ (89.9) $ (81.6)
Amortizable intangibles (228.1) (179.6)
Other — (4.0)
Total gross deferred tax liabilities (318.0) (265.2)
Net deferred tax assets $ 183.5 $ 208.2
Current deferred income tax assets $ 183.8 $ 100.4
Noncurrent deferred income tax (liabilities) assets (0.3) 107.8
$ 183.5 $ 208.2
No U.S. deferred taxes have been provided on the undistributed non-U.S. subsidiary earnings that are considered to be indefinitely invested. At December 31,
2009, the estimated amount of total unremitted non-U.S. subsidiary earnings is $558.4 million. It is not practical to estimate the amount of U.S. tax that might be
payable on the eventual remittance of such earnings.
Of the Company’s $2.8 billion of goodwill at December 31, 2009, approximately $1.1 billion is deductible for tax purposes.