NEW YORK — Charming Shoppes Inc. on Tuesday said it has reached an approximately $23.5 million preliminary settlement with the Internal Revenue Service stemming from an audit of its corporate-owned life insurance, or COLI, program.
This story first appeared in the April 23, 2003 issue of WWD. Subscribe Today.
In an annual report filed with the Securities and Exchange Commission, the Bensalem, Pa.-based operator of Lane Bryant, Fashion Bug and Catherines Plus Sizes said it anticipates that the cost of the settlement will include $18.5 million of income taxes and $5 million of interest, net of a $2.7 million tax benefit. Of the $18.5 million of income taxes, $16.1 million will be paid through the use of existing operating loss and tax credit carrybacks. The net cash payment under the settlement will be $7.4 million.
Moreover, as part of the proposed settlement, the company will surrender its existing life insurance policies, which have a cash surrender value of approximately $15.9 million. Charming Shoppes will receive that cash upon surrender of the policies.
Charming Shoppes added that the net liability for the settlement has been included in income taxes payable in its consolidated balance sheet as of Feb. 1, 2003.
While a Charming Shoppes spokeswoman did not return calls by press time, in the annual report the company stated: “Although the ultimate outcome of this matter cannot be predicted with certainty, we do not believe that [the] settlement will have a material impact on our financial condition or results of operations.”
A spokeswoman for the IRS said federal law prohibits the agency from discussing taxpayer returns.