Estee Lauder 2004 Annual Report Download - page 82

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THE EST{E LAUDER COMPANIES INC.
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 unre-
alized investment gain (net of deferred taxes) of $0.1 mil-
lion and $0.7 million at June 30, 2004 and 2003,
respectively.
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 $19.3 million, $7.9 million and
$2.9 million during fiscal 2004, 2003 and 2002, respec-
tively, which are included in additional paid-in capital in
the accompanying consolidated financial statements.
As of June 30, 2004, the Company had a current liabil-
ity and an equal and offsetting decrease in long-term debt
of $12.5 million reflecting the fair market value of an inter-
est rate swap which was classified as a fair value hedge of
the 6% Senior Notes (see Note 8). As of June 30, 2003,
the Company had a current asset and an equal and
offsetting increase in long-term debt of $8.1 million
reflecting the fair market value of an interest rate swap
which was classified as a fair value hedge of the 6%
Senior Notes.
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 con-
solidated 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
segment, 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, accordingly, 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 allo-
cated, 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.
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