Estee Lauder 2013 Annual Report Download - page 157

Income tax reserve adjustments represent changes in the
Company’s net liability for unrecognized tax benefits
related to prior-year tax positions including tax settle-
ments and lapses of the applicable statutes of limitations.
Federal income and foreign withholding taxes have
not been provided on approximately $1,980 million of
undistributed earnings of foreign subsidiaries at June 30,
2013. 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, 2012
As of June 30, 2013 and 2012, the Company had current
net deferred tax assets of $296.0 million and $247.8 mil-
lion, respectively, substantially all of which are included in
Prepaid expenses and other current assets in the accom-
panying consolidated balance sheets. In addition, the
Company had noncurrent net deferred tax assets of
$50.3 million and $103.1 million as of June 30, 2013 and
2012, respectively, substantially all of which are included
in Other assets in the accompanying consolidated
balance sheets.
As of June 30, 2013 and 2012, certain subsidiaries
had net operating loss and other carryforwards for tax
purposes of approximately $349 million and $262 million,
respectively. With the exception of approximately $340
million of net operating loss and other carryforwards
with an indefinite carryforward period as of June 30,
2013, these carryforwards expire at various dates through
fiscal 2032. Deferred tax assets, net of valuation allow-
and 2011, the Company had not provided federal income
and foreign withholding taxes on approximately $1,618
million and $1,208 million, respectively, of undistributed
earnings of foreign 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.
ances, in the amount of $9.0 million and $3.3 million as of
June 30, 2013 and 2012, respectively, have been recorded
to reflect the tax benefits of the carryforwards not utilized
to date.
A full valuation allowance has been provided for those
deferred tax assets for which, in the opinion of manage-
ment, it is more-likely-than-not that the deferred tax assets
will not be realized.
Earnings before income taxes include amounts contrib-
uted by the Company’s foreign operations of approxi-
mately $1,220 million, $1,172 million and $1,039 million
for fiscal 2013, 2012 and 2011, respectively. A portion of
these earnings are taxed in the United States.
As of June 30, 2013 and 2012, the Company had
gross unrecognized tax benefits of $64.0 million and
$78.5 million, respectively. The total amount of unrecog-
nized tax benefits that, if recognized, would affect the
effective tax rate was $47.2 million.
THE EST{E LAUDER COMPANIES INC. 155
Significant components of the Company’s deferred income tax assets and liabilities were as follows:
JUNE 30 2013 2012
(In millions)
Deferred tax assets:
Compensation related expenses $ 177.0 $ 161.8
Inventory obsolescence and other inventory related reserves 76.1 65.1
Retirement benefit obligations 81.5 112.8
Various accruals not currently deductible 179.9 176.3
Net operating loss, credit and other carryforwards 89.6 66.7
Unrecognized state tax benefits and accrued interest 19.0 22.8
Other differences between tax and financial statement values 83.4 89.4
706.5 694.9
Valuation allowance for deferred tax assets (92.9) (73.2)
Total deferred tax assets 613.6 621.7
Deferred tax liabilities:
Depreciation and amortization (249.9) (252.7)
Other differences between tax and financial statement values (17.4) (18.1)
Total deferred tax liabilities (267.3) (270.8)
Total net deferred tax assets $ 346.3 $ 350.9
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