Fashion retailer Estée Lauder reaches settlement with IRS
26 Jul '06
2 min read
The Estée Lauder Companies announced that it has reached a settlement with the Internal Revenue Service (IRS) regarding its examination of the Company's consolidated Federal income tax returns for the fiscal years ended June 30, 1998 through June 30, 2001.
The settlement resolves previously disclosed issues raised during the IRS's examination, including transfer pricing and foreign tax credit computations. While the settlement concludes the audit for fiscal years 1998 through 2001, the statement of earnings impact related to these issues also has been computed for all subsequent periods and the aggregate impact is recorded in the fiscal year ended June 30, 2006.
The settlement resulted in an increase to the Company's fiscal 2006 income tax provision and a corresponding decrease in fiscal 2006 net earnings of approximately $46 million, or approximately $.21 per diluted common share.
In anticipation of the settlement, the Company made a cash payment to the U.S. Treasury of approximately $70 million on June 30, 2006. The payment, which reflected additional taxes and interest, represented the Company's liability for all issues under the examination period, as well as for settlement of the transfer pricing issue for the fiscal years ended June 30, 2002 through June 30, 2004.
In addition, during the fourth quarter of fiscal 2006, the Company completed the repatriation of foreign earnings through intercompany dividends as required under the provisions of the American Jobs Creation Act of 2004 (AJCA). In connection with the repatriation, the Company finalized computations of the related aggregate tax impact, resulting in a favorable adjustment of approximately $11 million, or approximately $.05 per diluted common share, to the Company's initial tax charge of $35 million recorded in fiscal 2005.
marketing@alchempro.com
