Graco 2011 Annual Report Download - page 77

NEWELL RUBBERMAID 2011 Annual Report 75
2011 Financial Statements and Related Information
FOOTNOTE 16
INCOME TAXES
As of December 31, 2011 and 2010, the Company had unrecognized tax benefits of $89.5 million and $96.8 million, respectively.
If recognized, $79.8 million and $90.4 million as of December 31, 2011 and 2010, respectively, would affect the effective tax rate.
The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense.
As of December 31, 2011 and 2010, the Company had recorded accrued interest and penalties related to the unrecognized tax benefits
of $11.0 million and $16.3 million, respectively. During 2011 and 2010, the Company recognized income tax benefits of $5.1 million and
$27.4 million, respectively, due to the reduction in the reserves for interest and penalties.
The following table summarizes the changes in gross unrecognized tax benefits for the years ended December 31, (in millions):
2011 2010
Unrecognized tax benefits balance at January 1, $ 96.8 $147.9
Increase in tax positions for prior years 7.9 8.0
Decreases in tax positions for prior years — (41.9)
Increases in tax positions for current year 15.1 16.7
Settlements with taxing authorities — (31.1)
Lapse of statute of limitations (30.3) (2.8)
Unrecognized tax benefits balance at December 31, $ 89.5 $ 96.8
The provision for income taxes consists of the following for the years ended December 31, (in millions):
2011 2010 2009
Current:
Federal $(36.7) $(63.6) $ 56.4
State 5.1 (0.5) 8.1
Foreign 57.5 76.6 62.6
Total current 25.9 12.5 127.1
Deferred (8.0) (6.9) 15.7
Total provision $ 17.9 $ 5.6 $142.8
The non-U.S. component of income before income taxes was $118.2 million, $242.6 million and $169.6 million in 2011, 2010 and
2009, respectively.
A reconciliation of the U.S. statutory rate to the effective income tax rate is as follows for the years ended December 31,:
2011 2010 2009
Statutory rate 35.0% 35.0% 35.0%
Add (deduct) effect of:
State income taxes, net of federal income tax effect 2.2 1.8 1.2
Foreign tax credit (12.2) (10.1) (7.4)
Foreign rate differential (20.3) (0.2) 1.1
Resolution of tax contingencies, net of increases (20.3) (20.3) 3.1
Tax basis differential on goodwill impairment 38.0 — —
Valuation allowance reserve increase (decrease) 0.7 (2.5) 0.9
Stock compensation 1.5 1.9 1.7
Other (12.9) (3.7) (2.3)
Effective rate 11.7% 1.9% 33.3%
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 2008.
During 2011, the Company’s effective tax rate was impacted by $76.2 million of tax benefits associated with impairment charges
recorded during the year. The Company’s effective tax rate was favorably impacted by $49.0 million associated with the realization of
unrecognized tax benefits, including interest and penalties, due to the expiration of various worldwide statutes of limitation. The effective
tax rate for the year ended December 31, 2011 was also favorably impacted by a change in the geographical mix in earnings.