SLE » Topics » Income Taxes

This excerpt taken from the SLE 10-Q filed Feb 6, 2008.

Income Taxes

According to the original Letter of Understanding, you were responsible for a hypothetical effective income tax rate that was determined by applying your pre-assignment Dutch, Swiss and U.S. employment contracts. Effective February 1, 2005, this hypothetical tax obligation was updated and you are currently responsible for a fixed 35% U.S. federal and 3% Illinois state income tax on Sara Lee salary, bonus and supplemental income.

The other specifics included in the original Letter of Understanding remain in effect and are documented in the attachment.

Please sign and return one copy of this acknowledgment to me for our files.

 

Acknowledged: /s/ L.M. de Kool   Date: January 31, 2008  

 

CC:    Brenda Barnes
   Dan Ryan
   Faye Jaraczewski

 

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This excerpt taken from the SLE 10-Q filed May 10, 2006.

Income Taxes

The corporation’s transformation plan includes the disposition of several significant businesses and these actions will impact future results and liquidity in several ways. First, the tax expense or benefit directly associated with each of these dispositions will impact the net income and liquidity of the corporation in the periods they are recognized. Second, if the disposal of the Branded Apparel Americas/Asia business is completed, the effective tax rate of the continuing business will likely increase. The Branded Apparel Americas/Asia operations have historically had a lower effective tax rate than the remainder of the business and generate a significant amount of operating cash flow. The elimination of this cash flow may require the corporation to remit a greater portion of the future earnings of foreign subsidiaries to the U.S. than has historically been the case, and may result in higher levels of tax expense and cash taxes paid. The corporation has indicated that it expects its effective tax rate to increase to approximately 29% to 31% after the business transformation is completed.

The corporation’s tax returns are routinely audited and settlements of issues raised in these audits affect the corporation’s tax expense. The corporation has ongoing audits in the U.S. and a number of international jurisdictions. The examination of the U.S. federal income tax returns is current through June 29, 2002. Consistent with prior experience, the Internal Revenue Service has initiated the audits of the tax returns of fiscal 2003 and 2004. The obligations recognized in the financial statements reflect the probable finalization of anticipated worldwide audits. In addition, the corporation believes that it has sufficient cash resources to fund the settlement of these audits.

 

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Additionally, tax legislation in the jurisdictions in which the corporation does business may change in future periods. While such changes cannot be predicted, if they occur, the impact on the corporation’s tax assets, obligations and liquidity will need to be measured and recognized in the financial statements.

This excerpt taken from the SLE 10-Q filed Feb 9, 2006.

Income Taxes

 

The corporation’s transformation plan includes the planned disposition of several significant businesses and these actions will impact future results and liquidity in several ways. First, the tax expense or benefit directly associated with these dispositions will impact the net income and liquidity of the corporation. At this time, the terms and conditions of all of the dispositions have not been determined, and accordingly it is not possible to estimate the impact of such transactions on the tax expense and liquidity of the corporation. Second, if the disposal of the Branded Apparel Americas Asia business is completed, the effective tax rate of the continuing business will likely increase. The Branded Apparel Americas Asia operations have historically had a lower effective tax rate than the remainder of the business and generate a significant amount of operating cash flow. The elimination of this cash flow may require the corporation to remit a greater portion of the future earnings of foreign subsidiaries to the U.S. than has historically been the case, and may result in higher levels of tax expense and cash taxes paid. The corporation has indicated that it expects its effective tax rate to increase to approximately 29% to 31% after the business transformation is completed.

 

The corporation’s tax returns are routinely audited and settlements of issues raised in these audits affect the corporation’s tax expense. The corporation has ongoing audits in the U.S. and a number of international jurisdictions. The examination of the U.S. federal income tax returns is current through June 29, 2002. Consistent with prior experience, the Internal Revenue Service has initiated the audits of the tax returns of fiscal 2003 and 2004. The obligations recognized in the financial statements reflect the probable finalization of anticipated worldwide audits. In addition, the corporation believes that it has sufficient cash resources to fund the settlement of these audits.

 

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Additionally, tax legislation in the jurisdictions in which the corporation does business may change in future periods. While such changes cannot be predicted, if they occur, the impact on the corporation’s tax assets, obligations and liquidity will need to be measured and recognized in the financial statements.

 

This excerpt taken from the SLE 10-Q filed Nov 10, 2005.

Income Taxes

 

The corporation’s transformation plan includes the planned disposition of several significant businesses and these actions will impact future results and liquidity in several ways. First, the tax expense or benefit directly associated with these dispositions will impact the net income and liquidity of the corporation. At this time, the terms and conditions of future dispositions have not been determined, and accordingly it is not possible to estimate the impact of such transactions on the tax expense and liquidity of the corporation. Secondly, if the disposal of the Americas and Asia Apparel business is completed, the effective tax rate of the continuing business will likely increase. The Americas and Asian Apparel operations have historically had a lower effective tax rate than the remainder of the business and generate a significant amount of operating cash flow. The elimination of this cash flow may require the corporation to remit a greater portion of the future earnings of foreign subsidiaries to the U.S. than has historically been the case, and may result in higher levels of tax expense and cash taxes paid. The corporation has indicated that it expects its effective tax rate to increase to approximately 29% to 31% after the business transformation is completed.

 

The corporation’s tax returns are routinely audited and settlements of issues raised in these audits affect the corporation’s tax expense. The corporation has ongoing audits in the U.S. and a number of international jurisdictions. The examination of the U.S. federal income tax returns is current through June 29, 2002. Consistent with prior experience, the Internal Revenue Service has initiated the audits of the tax returns of fiscal 2003 and 2004. The obligations recognized in the financial statements reflect the probable finalization of anticipated worldwide audits. In addition, the corporation believes that it has sufficient cash resources to fund the settlement of these audits.

 

Additionally, tax legislation in the jurisdictions in which the corporation does business may change in future periods. While such changes cannot be predicted, if they occur, the impact on the corporation’s tax assets, obligations and liquidity will need to be measured and recognized in the financial statements.

 

This excerpt taken from the SLE 8-K filed Apr 26, 2005.

Income Taxes

 

Two significant events impacted the corporation’s income tax provision in the first nine months of fiscal 2005. During the third quarter of fiscal 2005, the corporation decided upon a plan to bring $928 million of accumulated earnings back to the United States under the repatriation provisions of the American Jobs Creation Act of 2004. As a result of this decision, the corporation recognized income tax expense of $51 million in the third quarter of fiscal 2005.

 

During the second quarter of fiscal 2005, the government of the Netherlands passed legislation that will reduce the statutory tax rate on profits from 34.5% to 30.0% in calendar year 2008. The impact of this change reduced the corporation’s deferred tax liability by $24 million and this benefit was recognized in the tax provision in the second quarter of fiscal 2005.

 

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