Estee Lauder 2004 Annual Report Download - page 79

THE EST{E LAUDER COMPANIES INC.
Class A Class B
(Shares in thousands)
Balance at June 30, 2001 125,176.0 113,490.3
Acquisition of treasury stock (1,500.0) —
Conversion of Class B to Class A 5,077.8 (5,077.8)
Stock option programs 436.3 —
Balance at June 30, 2002 129,190.1 108,412.5
Acquisition of treasury stock (11,245.2) —
Conversion of Class B to Class A 950.0 (950.0)
Share grants 4.0 —
Share units converted 0.8 —
Stock option programs 1,094.0 —
Balance at June 30, 2003 119,993.7 107,462.5
Acquisition of treasury stock (2,832.6) —
Conversion of Class B to Class A 14,449.6 (14,449.6)
Share grants 2.0 —
Stock option programs 2,901.4 —
Balance at June 30, 2004 134,514.1 93,012.9
On September 18, 1998, the Company’s Board of Direc-
tors authorized a share repurchase program to repurchase
a total of up to 8.0 million shares of Class A Common
Stock in the open market or in privately negotiated trans-
actions, depending on market conditions and other fac-
tors. The Board of Directors authorized the repurchase of
up to 10.0 million additional shares of Class A Common
Stock in October 2002 and another 10.0 million in May
2004 increasing the total authorization under the share
repurchase program to 28.0 million shares. As of June 30,
2004, approximately 16.7 million shares have been pur-
chased under this program.
NOTE 14 – STOCK PROGRAMS
The Company has established the Fiscal 2002 Share
Incentive Plan, the Fiscal 1999 Share Incentive Plan, the
Fiscal 1996 Share Incentive Plan and the Non-Employee
Director Share Incentive Plan (collectively, the “Plans”)
and, additionally, has made available stock options and
share units that were, or will be, granted pursuant to these
Plans and certain employment agreements. These stock-
based compensation programs are described below.
Total net compensation expense attributable to the
granting of share units and the increase in value of exist-
ing share units was $7.8 million and $1.4 million in fiscal
2004 and 2003, respectively. Total net compensation
income attributable to the granting of share units and the
related decrease in value of existing share units was $0.2
million in fiscal 2002.
Share Incentive Plans
The Plans provide for the issuance of 30,750,000 shares
to be awarded in the form of stock options, stock appre-
ciation rights and other stock awards to key employees
and stock options, stock awards and stock units to non-
employee directors of the Company. As of June 30, 2004,
4,083,900 shares of Class A Common Stock were
reserved and were available to be granted pursuant to the
Plans. The exercise period for all stock options generally
may not exceed ten years from the date of grant. Pursuant
to the Plans, stock option awards in respect of 2,693,500,
6,651,200 and 2,175,300 shares were granted in fiscal
2004, 2003 and 2002, respectively, and share units in
respect of 62,100, 57,800 and 50,000 shares were
granted in fiscal 2004, 2003 and 2002, respectively.
During fiscal 2004, there were no share units converted
while in fiscal 2003, approximately 800 share units were
converted into shares of Class A Common Stock. During
fiscal 2002, 40,700 share units were cancelled without
the issuance of any shares, but the value of such units
was transferred to a deferred compensation account.
Generally, the stock options become exercisable at vari-
ous times through February 2008, while the share units
will be paid out in shares of Class A Common Stock at a
time to be determined by the Company. In the case of
one senior executive, his share units may be converted by
the Company into a cash equivalent amount that would
be placed in his deferred compensation account.
In addition to awards made by the Company, certain
outstanding stock options were assumed as part of
the October 1997 acquisition of Sassaby. Of the 221,200
originally issued options to acquire shares of the
Company’s Class A Common Stock, 4,100 were out-
standing as of June 30, 2004, all of which were exercis-
able and will expire through May 2007.
Executive Employment Agreements
The executive employment agreements provide for the
issuance of 11,400,000 shares to be awarded in the form
of stock options and other stock awards to certain key
executives. The Company has reserved 660,400 shares of
its Class A Common Stock pursuant to such agreements
as of June 30, 2004. In accordance with such employment
agreements approximately 1,200, 1,400 and 900 share
units were granted in fiscal 2004, 2003 and 2002, respec-
tively. The reserve is solely for dividend equivalents on
units granted pursuant to one of the agreements. Most of
the stock options granted pursuant to the agreements are
exercisable and expire at various times from November
2005 through July 2009. The share units may be paid out
in shares of Class A Common Stock at a time to be deter-
mined by the Company, but no later than 90 days subse-
quent to the termination of employment of the executive,
or the Company may convert all or some of the share
units into a cash equivalent amount that would be placed
in the executive’s deferred compensation account.
77