LabCorp 2011 Annual Report Download - page 39

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13. Income Taxes
The sources of income before taxes, classified between
domestic and foreign entities are as follows:
Pre-tax income
2011 2010 2009
Domestic $ 834.0 $ 876.1 $ 848.0
Foreign 32.1 39.5 36.6
Total pre-tax income $ 866.1 $ 915.6 $ 884.6
The provisions for income taxes in the accompanying
consolidated statements of operations consist of the following:
Years Ended December 31,
2011 2010 2009
Current:
Federal
$ 269.7 $ 269.9 $ 266.2
State
54.3 50.4 41.0
Foreign
6.8 10.8 12.2
$ 330.8 $ 331.1 $319.4
Deferred:
Federal
$ 5.0 $ 12.2 $ 25.3
State
(4.4) (0.5) (15.5)
Foreign
1.6 1.2 (0.2)
2.2 12.9 9.6
$ 333.0 $ 344.0 $ 329.0
A portion of the tax benefit associated with option exercises
from stock plans reducing taxes currently payable are recorded
through additional paid-in capital. The benefits recorded through
additional paid-in capital are approximately $11.0, $7.8 and
$1.1 in 2011, 2010 and 2009, respectively.
The effective tax rates on earnings before income taxes are
reconciled to statutory federal income tax rates as follows:
Years Ended December 31,
2011 2010 2009
Statutory federal rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal income tax effect 3.7 3.5 1.9
Other (0.3) (0.9) 0.3
Effective rate 38.4% 37.6% 37.2%
The effective tax rate for 2011 was negatively impacted by
a decrease in unrecognized income tax benefits compared to
2010, the divestiture of certain Orchid paternity contracts,
and foreign losses not tax effected. The effective tax rate for
2010 was favorably impacted by a benefit relating to the net
decrease in unrecognized income tax benefits. In 2009, the
Company recorded favorable adjustments of $21.5 to its tax
provision relating to the resolution of certain state tax issues
under audit, as well as the realization of foreign tax credits.
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred
tax liabilities are as follows:
December 31, December 31,
2011 2010
Deferred tax assets:
Accounts receivable
$ 27.1 $ 2.6
Employee compensation and benefits 123.9 96.3
Self insurance reserves 20.7 27.1
Postretirement benefit obligation 20.5 16.3
Acquisition and restructuring reserves 18.8 10.2
Tax loss carryforwards 68.5 50.1
279.5 202.6
Less: valuation allowance (14.4) (11.4)
Net deferred tax assets $ 265.1 $ 191.2
Deferred tax liabilities:
Deferred earnings
$ (25.3) $ (18.0)
Intangible assets
(373.7) (343.8)
Property, plant and equipment (71.5) (63.3)
Zero-coupon subordinated notes (105.5) (145.2)
Currency translation adjustment (90.1) (94.3)
Other
(3.6) (5.1)
Total gross deferred tax liabilities $ (669.7) $ (669.7)
Net deferred tax liabilities $ (404.6) $ (478.5)
The Company has state tax loss carryovers of approximately
$0.3, which expire in 2011 through 2024. The state tax loss
carryovers have a full valuation allowance. The Company has
foreign tax loss carryovers of $10.8 with a full valuation allow-
ance. Most of the foreign losses have an indefinite carryover.
In addition, the Company has federal tax loss carryovers of
approximately $57.4 expiring periodically through 2030. The
utilization of the tax loss carryovers is limited due to change of
ownership rules. However, at this time the Company expects
to fully utilize substantially all federal tax loss carryovers.
The gross unrecognized income tax benefits were $52.7
and $53.6 at December 31, 2011 and 2010, respectively. It is
anticipated that the amount of the unrecognized income tax
benefits will change within the next twelve months; however,
these changes are not expected to have a significant impact
on the results of operations, cash flows or the financial position
of the Company.
The Company recognizes interest and penalties related to
unrecognized income tax benefits in income tax expense.
Accrued interest and penalties related to uncertain tax positions
totaled $10.8 and $12.2 as of December 31, 2011 and 2010,
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements