Estee Lauder 2014 Annual Report Download - page 87

THE EST{E LAUDER COMPANIES INC. 85
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 2014 2013 2012
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 1.4 1.3 1.1
Taxation of foreign operations (4.0) (4.9) (4.2)
Income tax reserve adjustments (0.5) (1.0) (0.8)
Other, net 0.1 0.2 0.7
Effective tax rate 32.0% 30.6% 31.8%
22
014014
35.0%35.0%
1.41.4
(4.0)(4.0)
(0.5)(0.5)
0.10.1
32.0%32.0%
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 $2,403 million of undis-
tributed earnings of foreign subsidiaries at June 30, 2014.
The Company intends to reinvest these earnings in its for-
eign operations indefinitely, except where it is able to
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.
Significant components of the Company’s deferred income tax assets and liabilities were as follows:
JUNE 30 2014 2013
(In millions)
Deferred tax assets:
Compensation related expenses $ 199.1 $ 177.0
Inventory obsolescence and other inventory related reserves 80.1 76.1
Retirement benefit obligations 94.0 81.5
Various accruals not currently deductible 174.5 179.9
Net operating loss, credit and other carryforwards 111.3 89.6
Unrecognized state tax benefits and accrued interest 19.3 19.0
Other differences between tax and financial statement values 83.9 83.4
762.2 706.5
Valuation allowance for deferred tax assets (115.2) (92.9)
Total deferred tax assets 647.0 613.6
Deferred tax liabilities:
Depreciation and amortization (248.0) (249.9)
Other differences between tax and financial statement values (18.4) (17.4)
Total deferred tax liabilities (266.4) (267.3)
Total net deferred tax assets $ 380.6 $ 346.3
22
014014
$$
199.1199.1
80.180.1
94.094.0
174.5174.5
111.3111.3
19.319.3
83.983.9
762.2762.2
(115.2)(115.2)
647.0647.0
(248.0)(248.0)
(18.4)(18.4)
(266.4)(266.4)
$$
380.6380.6
As of June 30, 2014 and 2013, the Company had current
net deferred tax assets of $295.1 million and $296.0
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
$85.5 million and $50.3 million as of June 30, 2014 and
2013, respectively, substantially all of which are included
in Other assets in the accompanying consolidated
balance sheets.
As of June 30, 2014 and 2013, certain subsidiaries had
net operating loss and other carryforwards for tax pur-
poses of approximately $429 million and $349 million,
respectively. With the exception of approximately $412
million of net operating loss and other carryforwards with
an indefinite carryforward period as of June 30, 2014,
these carryforwards expire at various dates through fiscal
2034. Deferred tax assets, net of valuation allowances, in
the amount of $11.1 million and $9.0 million as of
June 30, 2014 and 2013, respectively, have been recorded