Estee Lauder 2007 Annual Report Download - page 83

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less the discounted present value of the dividends
expected to be paid on the shares during the vesting
period.
The following is a summary of the status of the Com-
pany’s RSUs as of June 30, 2007 and activity during the
fi scal year then ended:
Weighted-Average
Shares Grant Date Fair Value
(Shares in thousands)
Nonvested at June 30, 2006 111.1 $35.00
Granted 603.1 39.21
Vested (37.0) 35.00
Forfeited (17.8) 39.27
Nonvested at June 30, 2007 659.4 $38.74
Share Units
The Company grants share units to certain non-employee
directors under the Non-Employee Director Share Incen-
tive Plan. The share units are convertible into shares of
Class A Common Stock as provided for in that plan. Share
units are accompanied by dividend equivalent rights that
are converted to additional share units when such
dividends are declared. The following is a summary of the
status of the Company’s share units as of June 30, 2007
and activity during the fi scal year then ended:
Weighted-Average
Shares Grant Date Fair Value
(Shares in thousands)
Outstanding at June 30, 2006 13.1 $36.79
Granted 4.3 40.35
Dividend equivalents 0.2 41.25
Converted (3.8) 37.98
Outstanding at June 30, 2007 13.8 $37.65
Cash Units
Certain non-employee directors defer cash compensation
in the form of cash payout share units, which are not
subject to the Plans. These cash units are classifi ed as lia-
bilities and, as such, their fair value is adjusted to refl ect
the current market value of the Company’s Class A
Common Stock. The Company recorded $0.8 million,
$0.5 million and $0.1 million as compensation expense to
refl ect additional deferrals and the change in the market
value for fi scal 2007, 2006 and 2005, respectively.
82 THE EST{E LAUDER COMPANIES INC.
NOTE 14
—
COMMITMENTS AND CONTINGENCIES
Contractual Obligations
The following table summarizes scheduled maturities of the Company’s contractual obligations for which cash fl ows are
fi xed and determinable as of June 30, 2007:
Payments Due in Fiscal
Total 2008 2009 2010 2011 2012 Thereafter
(In millions)
Debt service(1) $2,198.7 $ 122.4 $ 63.6 $ 62.6 $ 61.9 $304.4 $1,583.8
Operating lease commitments(2) 1,240.6 166.3 156.6 139.8 118.9 103.3 555.7
Unconditional purchase obligations(3) 1,553.0 1,046.1 132.5 99.9 63.9 36.9 173.7
Total contractual obligations $4,992.3 $1,334.8 $352.7 $302.3 $244.7 $444.6 $2,313.2
(1) Includes long-term and short-term debt and the related projected interest costs, and to a lesser extent, capital lease commitments. Refer to
Note 8 — Debt.
(2) Total rental expense included in the accompanying consolidated statements of earnings was $201.6 million in fi scal 2007, $182.9 million in fi scal
2006 and $179.5 million in fi scal 2005.
(3) Unconditional purchase obligations primarily include inventory commitments, estimated future earn-out payments, estimated royalty payments
pursuant to license agreements, advertising commitments, capital improvement commitments, planned funding of pension and other post-
retirement benefi t obligations, commitments pursuant to executive compensation arrangements and obligations related to the Company’s cost
savings initiative. Future earn-out payments and future royalty and advertising commitments were estimated based on planned future sales for the
term that was in effect at June 30, 2007, without consideration for potential renewal periods.
Legal Proceedings
The Company is involved, from time to time, in litigation
and other legal proceedings incidental to its business.
Management believes that the outcome of current litiga-
tion and legal proceedings will not have a material adverse
effect upon the Company’s results of operations or fi nan-
cial condition. However, management’s assessment of the
Company’s current litigation and other legal proceedings
could change in light of the discovery of facts with respect
to legal actions or other proceedings pending against the
Company not presently known to the Company or
determinations by judges, juries or other fi nders of fact
which are not in accord with management’s evaluation
of the possible liability or outcome of such litigation
or proceedings.
On March 30, 2005, the United States District Court
for the Northern District of California entered into a Final
Judgment approving the settlement agreement the
Company entered into in July 2003 with the plaintiffs, the
other Manufacturer Defendants (as defi ned below) and