Estee Lauder 2005 Annual Report Download - page 69

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THE EST{E LAUDER COMPANIES INC. 68
A reconciliation between the provision for income taxes computed by applying the statutory Federal income tax rate to
earnings before income taxes and minority interest and the actual provision for income taxes is as follows:
YEAR ENDED JUNE 30 2005 2004 2003
(In millions)
Provision for income taxes at statutory rate $247.3 $215.9 $173.4
Increase (decrease) due to:
State and local income taxes, net of Federal tax benefit 11.6 12.7 11.7
Effect of foreign operations 4.6 (2.8) (1.0)
AJCA incremental dividend 27.5 ——
Preferred stock dividends not deductible for U.S. tax purposes 0.3 6.1 —
Other nondeductible expenses 2.0 2.7 1.7
Tax credits (2.6) (1.3) (12.5)
Other, net 0.6 (0.7) (10.0)
Provision for income taxes $291.3 $232.6 $163.3
Effective tax rate 41.2% 37.7% 32.9%
Significant components of the Company’s deferred income tax assets and liabilities as of June 30, 2005 and 2004 were
as follows:
2005 2004
(In millions)
Deferred tax assets:
Deferred compensation and other payroll related expenses $ 44.4 $ 69.5
Inventory obsolescence and other inventory related reserves 53.0 56.7
Postretirement benefit obligations 23.3 21.0
Various accruals not currently deductible 63.1 83.1
Net operating loss and credit carryforwards 8.2 5.7
Other differences between tax and financial statement values 3.7 7.3
195.7 243.3
Valuation allowance for deferred tax assets (5.1) (4.2)
Total deferred tax assets 190.6 239.1
Deferred tax liabilities:
Depreciation and amortization (126.4) (102.2)
Prepaid pension costs (3.2) (10.1)
AJCA and other foreign dividends (35.0) —
Other differences between tax and financial statement values (8.8) (7.7)
Total deferred tax liabilities (173.4) (120.0)
Total net deferred tax assets $ 17.2 $ 119.1