Estee Lauder 2002 Annual Report Download - page 76

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THEEST{E LAUDER COMPANIES INC.
In 1998, the State notified the Company and fifteen
other entities that they are PRPs with respect to the
Huntington/East Northport landfill. The cleanup costs are
estimated at $20 million. No litigation has commenced.
The Company and other PRPs are in discussions with the
State regarding possible settlement of the matter. While
no assurance can be given as to the ultimate outcome,
management believes that the matter will not have a
material adverse effect on the Company’s consolidated
financial condition.
The Company is involved in various routine legal pro-
ceedings incident to the ordinary course of its business.
In management’s opinion, the outcome of pending legal
proceedings, separately and in the aggregate, will not
have a material adverse effect on the Company’s business
or consolidated financial results.
NOTE 16 – NET UNREALIZED INVESTMENT GAINS
Under SFAS No. 115, “Accounting for Certain Investments
in Debt and Equity Securities”, available-for-sale securities
are recorded at market value. Unrealized holding gains
and losses, net of the related tax effect, on available-for-
sale securities are excluded from earnings and are
reported as a component of stockholders’ equity until
realized. The Company’s investments subject to the pro-
visions of SFAS No. 115 are treated as available-for-sale
and, accordingly, the applicable investments have been
adjusted to market value with a corresponding adjust-
ment, net of tax, to net unrealized investment gains in
accumulated other comprehensive income. Included
in accumulated other comprehensive income was an
unrealized investment loss (net of deferred taxes) of $0.1
million at June 30, 2002 and an unrealized investment
gain (net of deferred taxes) of $2.9 million at June 30, 2001.
NOTE 17 – STATEMENT OF CASH FLOWS
Supplemental disclosure of significant
non-cash transactions
As a result of stock option exercises, the Company
recorded tax benefits of $2.9 million, $7.2 million and
$13.4 million during fiscal 2002, 2001 and 2000, respec-
tively, which are included in additional paid-in capital in
the accompanying consolidated financial statements.
NOTE 18 – SEGMENT DATA AND
RELATED INFORMATION
Reportable operating segments, as defined by SFAS No.
131, “Disclosures about Segments of an Enterprise and
Related Information”, include components of an enter-
prise about which separate financial information is avail-
able that is evaluated regularly by the chief operating
decision maker (the “Chief Executive”) in deciding how
to allocate resources and in assessing performance. As a
result of the similarities in the manufacturing, marketing
and distribution processes for all of the Company’s prod-
ucts, much of the information provided in the consoli-
dated financial statements is similar to, or the same as,
that reviewed on a regular basis by the Chief Executive.
Although the Company operates in one business seg-
ment, beauty products, management also evaluates
performance on a product category basis.
While the Company’s results of operations are also
reviewed on a consolidated basis, the Chief Executive
reviews data segmented on a basis that facilitates com-
parison to industry statistics. Accordingly, net sales, depre-
ciation and amortization, and operating income are
available with respect to the manufacture and distribution
of skin care, makeup, fragrance, hair care and other prod-
ucts. These product categories meet the Financial
Accounting Standards Board’s definition of operating
segments and therefore, additional financial data are
provided below. The “other” segment includes the sales
and related results of ancillary products and services that
do not fit the definition of skin care, makeup, fragrance
and hair care.
The Company evaluates segment performance based
upon operating income, which represents earnings before
income taxes, minority interest and net interest income
or expense. The accounting policies for each of the
reportable segments are the same as those described in
the summary of significant accounting policies, except for
depreciation and amortization charges, which are
allocated, primarily, based upon net sales. The assets and
liabilities of the Company are managed centrally and are
reported internally in the same manner as the consoli-
dated financial statements, thus no additional information
is produced for the Chief Executive or included herein.
75