Estee Lauder 2015 Annual Report Download - page 72

THE EST{E LAUDER COMPANIES INC. 69
PROVISION FOR INCOME TAXES
The provision for income taxes represents U.S. federal,
foreign, state and local income taxes. The effective rate
differs from the federal statutory rate primarily due to the
effect of state and local income taxes, the taxation of for-
eign income and income tax reserve adjustments, which
represent changes in our net liability for unrecognized tax
benefits including tax settlements and lapses of the appli-
cable statutes of limitations. Our effective tax rate will
change from quarter to quarter based on recurring and
non-recurring factors including, but not limited to, the
geographical mix of earnings, enacted tax legislation,
state and local income taxes, tax reserve adjustments, the
ultimate disposition of deferred tax assets relating to
stock-based compensation and the interaction of various
global tax strategies. In addition, changes in judgment
from the evaluation of new information resulting in the
recognition, derecognition or remeasurement of a tax
position taken in a prior annual period are recognized
separately in the quarter of change.
The effective rate for income taxes was 29.9% and
32.0% for fiscal 2015 and 2014, respectively. The decrease
of 210 basis points was principally attributable to a lower
effective tax rate related to our foreign operations, which
included Venezuela remeasurement charges in fiscal 2015
and 2014 of $5.3 million and $38.3 million, respectively,
for which no tax benefit was provided. This reduction was
partially offset by an increase in income tax reserve
adjustments recorded in the current year.
NET EARNINGS ATTRIBUTABLE TO
THE EST{E LAUDER COMPANIES INC.
Net earnings attributable to The Estée Lauder Companies
Inc. as compared with the prior year decreased 10%, or
$115.2 million, to $1,088.9 million and diluted net
earnings per common share decreased 8% from $3.06
to $2.82.
NON-GAAP FINANCIAL MEASURES
We use certain non-GAAP financial measures, among
other financial measures, to evaluate our operating
performance, which represent the manner in which we
conduct and view our business. Management believes
that excluding these items that are not comparable
from period to period helps investors and others
compare operating performance between two periods.
While we consider the non-GAAP measures useful in
analyzing our results, they are not intended to replace,
or act as a substitute for, any presentation included in
the con solidated financial statements prepared in con-
formity with U.S. GAAP. The following tables present
Net Sales, Operating Income and Diluted net earnings
per common share adjusted to exclude the impact
of accelerated orders associated with the July 2014
SMI rollout, adjustments associated with restructuring
activities and the Venezuela remeasurement charges.
The tables provide reconciliations between these non-
GAAP financial measures and the most directly compara-
ble U.S. GAAP measures.
Year Ended June 30 % Change
in Constant
2015 2014 Variance % Change Currency
($ in millions)
Net Sales, as reported $10,780.4 $10,968.8 $(188.4) (2)% 3%
Accelerated orders associated with SMI rollout 178.3 (178.3) 356.6
Adjustments associated with restructuring activities — (0.1) 0.1
Net Sales, as adjusted $10,958.7 $10,790.4 $ 168.3 2% 6%
Year Ended June 30 % Change
in Constant
2015 2014 Variance % Change Currency
($ in millions)
Operating Income, as reported $1,606.3 $1,827.6 $(221.3) (12)% (5)%
Accelerated orders associated with SMI rollout 127.2 (127.2) 254.4
Venezuela remeasurement charge 5.3 38.3 (33.0)
Total adjustments associated with
restructuring activities — (2.9) 2.9
Operating Income, as adjusted $1,738.8 $1,735.8 $ 3.0 0% 8%