Estee Lauder 2015 Annual Report Download - page 97

94 THE EST{E LAUDER COMPANIES INC.
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 $2,918 million of undis-
tributed earnings of foreign subsidiaries at June 30, 2015.
The Company intends to reinvest these earnings in its
foreign operations indefinitely, except where it is able to
As of June 30, 2015 and 2014, the Company had current
net deferred tax assets of $279.0 million and $295.1
million, respectively, substantially all of which are included
in Prepaid expenses and other current assets in the
accompanying consolidated balance sheets. In addition,
the Company had noncurrent net deferred tax assets of
$72.1 million and $85.5 million as of June 30, 2015 and
2014, respectively, substantially all of which are included
in Other assets in the accompanying consolidated
balance sheets.
repatriate these earnings to the United States without
material incremental tax provision. 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.
As of June 30, 2015 and 2014, certain subsidiaries had
net operating loss and other carryforwards for tax pur-
poses of approximately $430 million and $424 million,
respectively. With the exception of approximately $416
million of net operating loss and other carryforwards with
an indefinite carryforward period as of June 30, 2015,
these carryforwards expire at various dates through fiscal
2035. Deferred tax assets, net of valuation allowances, in
the amount of $4.6 million and $11.1 million as of June 30,
2015 and 2014, respectively, have been recorded to reflect
the tax benefits of the carryforwards not utilized to date.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s actual effective tax rate on earnings before
income taxes is as follows:
YEAR ENDED JUNE 30 2015 2014 2013
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 1.1 1.4 1.3
Taxation of foreign operations (6.8) (4.0) (4.9)
Income tax reserve adjustments 0.5 (0.5) (1.0)
Other, net 0.1 0.1 0.2
Effective tax rate 29.9% 32.0% 30.6%
Significant components of the Company’s deferred income tax assets and liabilities were as follows:
JUNE 30 2015 2014
(In millions)
Deferred tax assets:
Compensation related expenses $ 218.5 $ 199.1
Inventory obsolescence and other inventory related reserves 82.2 80.1
Retirement benefit obligations 97.4 94.0
Various accruals not currently deductible 167.1 174.5
Net operating loss, credit and other carryforwards 117.5 111.3
Unrecognized state tax benefits and accrued interest 25.8 19.3
Other differences between tax and financial statement values 87.0 83.9
795.5 762.2
Valuation allowance for deferred tax assets (120.9) (115.2)
Total deferred tax assets 674.6 647.0
Deferred tax liabilities:
Depreciation and amortization (279.6) (248.0)
Other differences between tax and financial statement values (43.9) (18.4)
Total deferred tax liabilities (323.5) (266.4)
Total net deferred tax assets $ 351.1 $ 380.6