Estee Lauder 2004 Annual Report Download - page 78

THE EST{E LAUDER COMPANIES INC.
401(k) Savings Plan (U.S.)
The Company’s 401(k) Savings Plan (“Savings Plan”) is a
contributory defined contribution plan covering substan-
tially all regular U.S. employees who have completed the
hours and service requirements, as defined by the plan
document. Effective January 1, 2002, regular full-time
employees are eligible to participate in the Plan on the
first day of the second month following their date of hire.
The Savings Plan is subject to the applicable provisions of
ERISA. The Company matches a portion of the partici-
pant’s contributions after one year of service under a
predetermined formula based on the participant’s contri-
bution level and years of service. The Company’s contri-
butions were approximately $9.1 million for the fiscal
years ended June 30, 2004 and 2003 and $6.7 million
for the fiscal year ended June 30, 2002. Shares of the
Company’s Class A Common Stock are not an investment
option in the Savings Plan and the Company does not use
such shares to match participants’ contributions.
Deferred Compensation
The Company accrues for deferred compensation and
interest thereon and for the increase in the value of share
units pursuant to agreements with a key executive,
a former executive and outside directors. The amounts
included in the accompanying consolidated balance
sheets under these plans were $135.4 million and $109.2
million as of June 30, 2004 and 2003, respectively.
The expense for fiscal 2004, 2003 and 2002 was $16.6
million, $17.4 million and $11.6 million, respectively.
NOTE 11– POSTEMPLOYMENT BENEFITS
OTHER THAN TO RETIREES
The Company provides certain postemployment benefits
to eligible former or inactive employees and their
dependents during the period subsequent to employ-
ment but prior to retirement. These benefits include
health care coverage and severance benefits. Generally,
the cost of providing these benefits is accrued and any
incremental benefits were not material to the Company’s
consolidated financial results.
NOTE 12 – $6.50 CUMULATIVE REDEEMABLE
PREFERRED STOCK, AT REDEMPTION VALUE
Effective July 1, 2003, in accordance with SFAS No. 150,
the $6.50 Cumulative Redeemable Preferred Stock was
reclassified to long-term debt (see Note 8). Such shares of
preferred stock were exchanged for the 2015 Preferred
Stock on December 31, 2003.
As of June 30, 2003, the Company’s authorized capital
stock included 23.6 million shares of preferred stock, par
value $.01 per share, of which 3.6 million shares were out-
standing and designated as $6.50 Cumulative
Redeemable Preferred Stock. The outstanding preferred
stock was issued in June 1995 in exchange for nonvoting
common stock of the Company then owned by The Estée
Lauder 1994 Trust.
Holders of the $6.50 Cumulative Redeemable Pre-
ferred Stock were entitled to receive cumulative cash div-
idends at a rate of $6.50 per annum per share payable in
quarterly installments. Such dividends had preference
over all other dividends of stock issued by the Company.
Shares were subject to mandatory redemption on June
30, 2005 at a redemption price of $100 per share. Fol-
lowing such date and so long as such mandatory redemp-
tion obligations had not been discharged in full, no
dividends could be paid or declared upon the Class A or
Class B Common Stock, or on any other capital stock
ranking junior to or in parity with such $6.50 Cumulative
Redeemable Preferred Stock and no shares of Class A or
Class B Common Stock or such junior or parity stock
could be redeemed or acquired for any consideration by
the Company. Under certain circumstances, the Company
could redeem the stock, in whole or in part, prior to the
mandatory redemption date. Holders of such stock could
put such shares to the Company at a price of $100 per
share upon the occurrence of certain events.
The Company recorded the $6.50 Cumulative
Redeemable Preferred Stock at its redemption value of
$360.0 million and charged this amount, net of the par
value of the shares of nonvoting common stock
exchanged, to stockholders’ equity in fiscal 1995.
NOTE 13 – COMMON STOCK
As of June 30, 2004, the Company’s authorized common
stock consists of 650 million shares of Class A Common
Stock, par value $.01 per share, and 240 million shares of
Class B Common Stock, par value $.01 per share. Class B
Common Stock is convertible into Class A Common
Stock, in whole or in part, at any time and from time to
time at the option of the holder, on the basis of one share
of Class A Common Stock for each share of Class B Com-
mon Stock converted. Holders of the Company’s Class A
Common Stock are entitled to one vote per share and
holders of the Company’s Class B Common Stock are
entitled to ten votes per share.
Information about the Company’s common stock out-
standing is as follows:
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