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Guess says Italian tax assessment to be reviewed by public prosecutor

Guess disclosed in a regulatory filing that, based on audit reports, the company believed it was likely to receive a formal tax assessment from the Italian tax authority for the company’s Italian subsidiaries for the 2008 and 2009 fiscal years for roughly $11M. Subsequent to the filing of its 10-Q, the company received a formal tax assessment that was largely consistent with the company’s prior expectations, with a total tax assessment for the periods of approximately $12M. Similar or even larger assessments for periods subsequent to fiscal 2009 or other claims or charges related to the matter continue to be possible, the company said. Also, the company has been advised by its Italian counsel that tax audits like this one in Italy involving proposed income adjustments greater than EUR2M are automatically referred for review by a public prosecutor who may seek to pursue charges or close the matter and that resulting criminal charges, if any, would be instituted against individuals rather than against the affected companies under Italian law. Consistent with this process, a review proceeding by a prosecutor in Italy has been initiated with respect to three current and former members of the Guess European management team and the company’s former President. As of October 23 the prosecutor has not made a final determination regarding this matter, the company said. The company continues to disagree with the positions that the Italian tax authority has indicated it may take and intends to vigorously contest this matter.