Annual report pursuant to Section 13 and 15(d)

Income Taxes (Tables)

v2.4.0.6
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2012
Components of Income Before Income Taxes

The components of income before income taxes are as follows (in millions):

 

     Year Ended December 31,  
     2012      2011      2010  

Domestic

   $ 172.3       $ 143.9       $ 69.5   

Foreign

     478.6         415.9         310.6   
  

 

 

    

 

 

    

 

 

 

Total

   $ 650.9       $ 559.8       $ 380.1   
  

 

 

    

 

 

    

 

 

 
Components of Income Tax Expense

Income taxes are as follows (in millions):

     Year Ended December 31,  
     2012     2011     2010  

Current:

      

Foreign

   $ 89.6      $ 94.7      $ 75.6   

Federal

     84.2        57.8        30.3   

State

     8.9        7.6        8.3   
  

 

 

   

 

 

   

 

 

 
     182.7        160.1        114.2   
  

 

 

   

 

 

   

 

 

 

Deferred:

      

Foreign

     (5.6     (12.4     (3.2

Federal

     (4.6     (0.1     (30.7

State

     1.2        (0.4     0.6   
  

 

 

   

 

 

   

 

 

 
     (9.0     (12.9     (33.3
  

 

 

   

 

 

   

 

 

 
   $ 173.7      $ 147.2      $ 80.9   
  

 

 

   

 

 

   

 

 

 
Deferred Tax Assets and Liabilities

The significant categories of temporary differences that gave rise to deferred tax assets and liabilities are as follows (tax effected in millions):

     Year EndedDecember 31,  
     2012     2011  

Deferred income tax assets:

    

Accruals not currently deductible

   $ 48.0      $ 47.1   

Tax loss carry forwards of certain foreign subsidiaries

     22.0        2.8   

Depreciation/amortization

     13.5        11.9   

Deferred compensation plan

     35.6        26.2   

Deferred interest expense

     186.9        205.6   

Accrued vacation

     4.6        4.0   

Inventory reserve

     6.4        4.2   

Hyperinflationary adjustment

     3.5        7.4   

Other

     8.6        11.3   
  

 

 

   

 

 

 

Gross deferred income tax assets

     329.1        320.5   

Less: valuation allowance

     (209.3     (208.3
  

 

 

   

 

 

 

Total deferred income tax assets

   $ 119.8      $ 112.2   
  

 

 

   

 

 

 

Deferred income tax liabilities:

    

Intangible assets

   $ 111.7      $ 113.1   

Unremitted foreign earnings

     13.9        8.7   

Other

     4.5        4.7   

Total deferred income tax liabilities

   $ 130.1      $ 126.5   

Total net deferred tax liabilities

   $ (10.3   $ (14.3
  

 

 

   

 

 

 
Reconciliation Between Provision for Income Taxes at Statutory Rate and Provision for Income Taxes

The applicable statutory income tax rate in the Cayman Islands was zero for Herbalife Ltd. for the years being reported. For purposes of the reconciliation between the provision for income taxes at the statutory rate and the provision for income taxes at the effective tax rate, a notional 35% tax rate is applied as follows (in millions):

 

     Year Ended December 31,  
     2012     2011     2010  
     (In millions)  

Tax expense at United States statutory rate

   $ 227.8      $ 195.9      $ 133.0   

Increase (decrease) in tax resulting from:

      

Differences between U.S. and foreign tax rates on foreign income, including withholding taxes

     (68.7     (134.1     (77.8

U.S. tax (benefit) on foreign income net of foreign tax credits

     1.8        (8.8     (19.3

Increase (decrease) in valuation allowances

     0.4        86.0        64.6   

State taxes, net of federal benefit

     7.6        5.5        5.9   

Unrecognized tax benefits

     6.6        1.1        (10.9

Venezuela DASTM hyperinflationary impact

                   (14.5

Other

     (1.8     1.6        (0.1
  

 

 

   

 

 

   

 

 

 

Total

   $ 173.7      $ 147.2      $ 80.9   
  

 

 

   

 

 

   

 

 

 
Changes Occurred in Amount of Unrecognized Tax Benefits

The following changes occurred in the amount of unrecognized tax benefits during the years ended December 31, 2012, 2011, and 2010 (in millions):

 

     Year Ended
December 31,
2012
    Year Ended
December 31,
2011
    Year Ended
December 31,
2010
 

Beginning balance of unrecognized tax benefits

   $ 32.4      $ 31.6      $ 39.3   

Additions for current year tax positions

     7.8        5.5        4.3   

Additions for prior year tax positions

     4.5        2.0        1.1   

Reductions for prior year tax positions

     (0.1     (0.9     (2.3

Reductions for audit settlements

     (0.3     (0.7     (8.6

Reductions for the expiration of statutes of limitation

     (4.9     (4.5     (2.4

Changes due to foreign currency translation adjustments

     0.3        (0.6     0.2   
  

 

 

   

 

 

   

 

 

 

Ending balance of unrecognized tax benefits (excluding interest and penalties)

   $ 39.7      $ 32.4      $ 31.6   

Interest and penalties associated with unrecognized tax benefits

     7.4        6.6        6.9   
  

 

 

   

 

 

   

 

 

 

Ending balance of unrecognized tax benefits (including interest and penalties)

   $ 47.1      $ 39.0      $ 38.5