Graco 2011 Annual Report Download - page 78

76 NEWELL RUBBERMAID 2011 Annual Report
2011 Financial Statements and Related Information
During 2010, the Company settled its 2005 and 2006 U.S. federal income tax return examinations, including all issues that were
at the IRS Appeals Office, and as part of this settlement, entered into binding closing agreements relating to specific issues under
examination, resulting in a reduction to the Company’s unrecognized tax benefits in the amount of $63.6 million, including relevant
penalties and interest. In addition, the Company’s effective tax rate was favorably impacted by $8.2 million due to the reversal of certain
tax reserves upon resolution of a tax examination and was adversely affected by $6.7 million due primarily to the write-off of deferred tax
assets determined not to be realizable upon the vesting of equity-based compensation. The Company’s Canadian income tax returns are
subject to examination for years after 2004. With few exceptions, the Company is no longer subject to other income tax examinations for
years before 2007.
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, 2011.
The components of net deferred tax assets are as follows as of December 31, (in millions):
2011 2010
Deferred tax assets:
Accruals not currently deductible for tax purposes $ 153.1 $ 187.2
Postretirement liabilities 65.6 69.2
Inventory reserves 5.8 —
Pension liabilities 174.7 97.2
Self-insurance liability 3.9 27.1
Foreign tax credit carryforward 120.0 139.6
Foreign net operating losses 339.4 321.5
Other 147.6 136.8
Total gross deferred tax assets 1,010.1 978.6
Less valuation allowance (441.6) (419.8)
Net deferred tax assets after valuation allowance $ 568.5 $ 558.8
Deferred tax liabilities:
Accelerated depreciation $ (67.4) $ (53.8)
Amortizable intangibles (253.3) (283.3)
Other (9.6) (3.9)
Total gross deferred tax liabilities $ (330.3) $(341.0)
Net deferred tax assets $ 238.2 $ 217.8
Current deferred income tax assets $ 130.7 $ 179.2
Current deferred income tax liabilities (10.4) —
Noncurrent deferred income tax assets 120.2 38.6
Noncurrent deferred income tax liabilities (2.3) —
$ 238.2 $ 217.8
The foreign tax credit carryforwards expire from 2016 to 2021, and a majority of the foreign net operating loss carryforwards do not
expire except for $110.6 million expiring from 2012 to 2025. The increase in deferred tax asset valuation allowance relates predominantly
to foreign jurisdictions where the Company maintains a full valuation allowance on all deferred tax assets.
At December 31, 2011, the estimated amount of total unremitted non-U.S. subsidiary earnings is $704.4 million. Those earnings are
considered to be indefinitely reinvested and, accordingly, no U.S. federal or state deferred income taxes have been provided thereon. Upon
distribution of those earnings in the form of dividends or otherwise, the Company would be subject to U.S. income taxes and withholding
taxes payable in various non-U.S. jurisdictions, which could potentially be offset by foreign tax credits. Determination of the amount of
unrecognized deferred U.S. income tax liability is not practicable because of the complexities associated with its hypothetical calculation.
Of the Company’s $2.4 billion of goodwill at December 31, 2011, approximately $878.7 million is deductible for tax purposes.