Estee Lauder 2010 Annual Report Download - page 126

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THE EST{E LAUDER COMPANIES INC. 125
million reflecting sales returns (less a related cost of sales of
$2.5 million) and a write-off of inventory associated with
exiting unprofitable operations of $10.4 million. For the
year ended June 30, 2009, the Company recorded $8.1
million reflecting sales returns (less a related cost of sales
of $1.2 million) and a write-off of inventory of $8.0 million
associated with exiting unprofitable operations. The total
amounts expected to be incurred, including those
recorded through June 30, 2010 plus other initiatives
approved through June 30, 2010 is between $35 million
and $39 million related to sales returns and approximately
$15 million related to inventory write-offs.
Total charges associated with restructuring activities
included in operating income for the years ended June 30,
2010 and 2009 was $84.7 million and $91.7 million,
respectively.
Income tax reserve adjustments represent changes in the
Company’s net liability for unrecognized tax benefits
related to prior-year tax positions including tax settlements
and lapses of the applicable statutes of limitations.
Federal income and foreign withholding taxes have not
been provided on approximately $1,068 million of undis-
tributed earnings of international subsidiaries at June 30,
2010. The Company intends to reinvest these earnings in
its foreign operations indefinitely, except where it is able
to repatriate these earnings to the United States without
material incremental tax provision. As of June 30, 2009
and 2008, the Company had not provided federal income
and foreign withholding taxes on approximately $975 mil-
lion and $813 million, respectively, of undistributed earn-
ings of international subsidiaries. The determination and
estimation of the future income tax consequences in all
relevant taxing jurisdictions involves the application of
highly complex tax laws in the countries involved, particu-
larly in the United States, and is based on the tax profile of
the Company in the year of earnings repatriation. Accord-
ingly, it is not practicable to determine the amount of tax
associated with such undistributed earnings.
NOTE 8
—
INCOME TAXES
The provision for income taxes is comprised of the following:
YEAR ENDED JUNE 30 2010 2009 2008
(In millions)
Current:
Federal $ 16.0 $ 42.6 $ 141.4
Foreign 205.6 174.5 214.1
State and local 9.0 7.0 20.0
230.6 224.1 375.5
Deferred:
Federal (16.4) (84.0) (110.9)
Foreign (7.5) (23.6) (4.1)
State and local (0.8) (0.6) (0.6)
(24.7) (108.2) (115.6)
$205.9 $ 115.9 $ 259.9
2010
$ 16.0
205.6
9.0
230.6
(16.4)
(7.5)
(0.8)
(24.7)
$205.9
A reconciliation of the U.S. federal statutory income tax rate to our actual effective tax rate on earnings before income
taxes is as follows:
YEAR ENDED JUNE 30 2010 2009 2008
Provision for income taxes at statutory rate 35.0% 35.0% 35.0%
Increase (decrease) due to:
State and local income taxes, net of federal tax benefit 1.5% 2.0% 1.0%
Effect of foreign operations (0.9)% (4.4)% (0.1)%
Income tax reserve adjustments (5.6)% 0.1% (0.9)%
Other, net (0.1)% 1.1% (0.1)%
Effective tax rate 29.9% 33.8% 34.9%
2010
35.0%
1.5%
(0.9)%
(5.6)%
(0.1)%
29.9%