| Notes to Consolidated Financial Statements |
Becton, Dickinson and Company
|
6 Income Taxes
The provision for income taxes from continuing operations consisted of:
| |
2006 |
2005 |
2004 |
|
Current:
Federal |
$ |
273,612 |
|
$ |
120,172 |
|
$ |
91,669 |
|
| State and local, including Puerto Rico |
|
11,304 |
|
|
4,269 |
|
|
3,362 |
|
| Foreign |
|
123,709 |
|
|
124,901 |
|
|
106,678 |
|
|
| |
|
408,625 |
|
|
249,342 |
|
|
201,709 |
|
|
Deferred:
Domestic |
|
(118,938 |
) |
|
75,948 |
|
|
(4,308 |
) |
| Foreign |
|
(10,321 |
) |
|
(12,719 |
) |
|
(27,037 |
) |
|
| |
|
(129,259 |
) |
|
63,229 |
) |
|
(31,345 |
) |
|
| |
$ |
279,366 |
|
$ |
312,571 |
|
$ |
170,364 |
|
|
The components of Income From Continuing Operations
Before Income Taxes consisted of:
| |
2006 |
2005 |
2004 |
|
| Domestic, including Puerto Rico |
$ |
397,634 |
|
$ |
433,670 |
|
$ |
291,973 |
|
| Foreign |
|
637,323 |
|
|
571,184 |
|
|
460,895 |
|
|
| |
$ |
1,034,957 |
|
$ |
1,004,854 |
|
$ |
752,868 |
|
|
Deferred tax assets and liabilities are netted on the balance sheet by separate tax jurisdictions. At September 30, 2006 and 2005, net current deferred tax assets of $181,406 and $75,382, respectively, were included in Prepaid expenses, deferred taxes and other. Net non-current deferred tax assets of $32,582 and $21,819, respectively, were included in Other. Net current deferred tax liabilities of $2,184 and $1,949, respectively, were included in Current Liabilities-Income taxes. Net non-current deferred tax liabilities of $143,435 and $119,826, respectively, were included in Deferred Income Taxes and Other. Deferred taxes are not provided on undistributed earnings of foreign subsidiaries that are indefinitely reinvested. At September 30, 2006, the cumulative amount of such undistributed earnings indefinitely reinvested outside the United States was $1.0 billion. Determining the tax liability that would arise if these earnings were remitted is not practicable. Deferred taxes are provided for earnings outside the United States when those earnings are not considered indefinitely reinvested.
In October 2004, the American Jobs Creations Act of 2004 (the “AJCA”) was signed into law. The AJCA creates a temporary incentive for U.S. multinationals to repatriate accumulated income earned outside the United States. As a result of the passage of the AJCA, the Company revisited its policy of indefinite reinvestment of foreign earnings and made a decision to repatriate approximately $1.3 billion in 2006 pursuant to its approved repatriation plan. The Company recorded a charge of $77,200 in 2005 attributable to the
planned repatriation of these earnings. During 2006, the Company repatriated approximately $1.3 billion in accordance with its planned repatriation under the AJCA. The actual tax charge associated with this repatriation was $65,768.
Deferred income taxes at September 30 consisted of:
| |
2006 |
2005 |
|
| |
Assets |
Liabilities |
Assets |
Liabilities |
|
| Compensation and benefits |
$ |
146,432 |
|
$ |
— |
|
$ |
154,085 |
|
$ |
— |
|
| Property and equipment |
|
— |
|
|
144,365 |
|
|
— |
|
|
147,188 |
|
Repatriation of foreign
earnings under the AJCA |
|
— |
|
|
— |
|
|
— |
|
|
77,200 |
|
| Loss and credit carryforwards |
|
111,388 |
|
|
— |
|
|
78,806 |
|
|
— |
|
| Other |
|
199,997 |
|
|
159,853 |
|
|
176,583 |
|
|
137,544 |
|
|
| |
|
457,817 |
|
|
304,218 |
|
|
409,474 |
|
|
361,932 |
|
| Valuation allowance |
|
(85,230 |
) |
|
— |
|
|
(72,116 |
) |
|
— |
|
|
| |
$ |
372,587 |
|
$ |
304,218 |
|
$ |
337,358 |
|
$ |
361,932 |
|
|
Valuation allowances have been established for capital loss carryforwards, state deferred tax assets, net of federal tax, related to net operating losses and credits and other deferred tax assets for which the Company has determined it is more likely than not that these benefits will not be realized. At September 30, 2006, the Company had deferred state tax assets for net state operating losses and credit carryforwards of $28,091 for which a valuation allowance has been established due to the uncertainty of generating sufficient taxable income in the state jurisdictions to utilize the deferred tax assets before they principally expire between 2007 and 2012. The Company also has federal and state capital loss carryforward deferred tax assets of $51,428 for which a full valuation allowance has been established due to the uncertainty of recognizing the benefit from these losses before they principally expire in 2010.
A reconciliation of the federal statutory tax rate to the Company’s effective tax rate was as follows:
| |
2006 |
2005 |
2004 |
|
| Federal statutory tax rate |
35.0 |
% |
35.0 |
% |
35.0 |
% |
State and local income taxes,
net of federal tax benefit |
0.4 |
|
0.6 |
|
0.3 |
|
Effect of foreign and Puerto Rico
earnings and foreign tax credits |
(7.8 |
) |
(10.3 |
) |
(9.9 |
) |
Effect of Research, Empowerment
Zone, Extraterritorial Income
tax benefits |
(1.3 |
) |
(2.0 |
) |
(2.5 |
) |
Repatriation of foreign earnings
under the AJCA |
(1.1 |
) |
7.7 |
|
— |
|
Acquired in-process research and
development related to GeneOhm |
1.8 |
|
— |
|
— |
|
| Other, net |
— |
|
0.1 |
|
(0.3 |
) |
|
| |
27.0 |
% |
31.1 |
% |
22.6 |
% |
|
The approximate dollar and diluted earnings per share amounts of tax reductions related to tax holidays in various countries in which the Company does business were: 2006-$70,000 and $0.27; 2005-$75,150 and $0.29; and 2004-$55,461 and $0.21. The tax holidays expire at various dates through 2023.
The Company made income tax payments, net of refunds, of $398,808 in 2006, $183,867 in 2005 and $146,574 in 2004.
|
