Estee Lauder 2010 Annual Report Download - page 104

THE EST{E LAUDER COMPANIES INC. 103
Pension and Post-retirement Plan Funding
Several factors influence the annual funding requirements
for our pension plans. For the U.S. Qualified Plan, our
funding policy consists of annual contributions at a rate
that provides for future plan benefits and maintains appro-
priate funded percentages. Such contribution is not less
than the minimum required by the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), and
subsequent pension legislation, and is not more than the
maximum amount deductible for income tax purposes.
For each international plan, our funding policies are deter-
mined by local laws and regulations. In addition, amounts
necessary to fund future obligations under these plans
could vary depending on estimated assumptions as
detailed in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Critical
Accounting Policies and Estimates.” The effect of our pen-
sion plan funding on future operating results will depend
on economic conditions, employee demographics,
mortality rates, the number of participants electing to take
lump-sum distri butions, investment performance and
funding decisions.
The unprecedented economic downturn that started in
fiscal 2009 created a difficult investment environment. For
the U.S. Qualified Plan, we maintain an investment strat-
egy of matching the duration of a substantial portion of
the plan assets with the duration of the underlying plan
liabilities. This strategy, as well as the recovery of equity
investments in fiscal 2010, helped mitigate the negative
effects of the downturn and assisted in maintaining a
funded ratio of more than 100% as of June 30, 2010. For
fiscal 2010 and 2009, there was no minimum contribution
to the U.S. Qualified Plan required by ERISA. We made
discretionary contributions totaling $39.0 million and
$17.0 million to the U.S. Qualified Plan during fiscal 2010
and 2009, respectively. We made a discretionary contri-
bution to our post-retirement plan in the United States of
$6.0 million during fiscal 2010. At this time, we do not
expect to make cash contributions to the U.S. Qualified
Plan or our post-retirement plan in the United States
during fiscal 2011. However, as we continue to monitor
the performance of our plan assets, we may decide to
make discretionary contributions.
For fiscal 2010 and 2009, we made benefit payments
under our non-qualified domestic noncontributory
pension plan of $7.7 million and $8.1 million, respectively.
We expect to make benefit payments under this plan
during fiscal 2011 of approximately $8 million. For fiscal
2010 and 2009, we made cash contributions to our
international defined benefit pension plans of $68.2 mil-
outstanding. These activities were partially offset by lower
net earnings and an increase in income tax receivables as
compared with fiscal 2008, as well as a reduction in cash
provided by certain working capital components, includ-
ing payments for accounts payable and other liabilities.
Net cash used for investing activities was $281.4 mil-
lion, $339.5 million and $478.5 million in fiscal 2010,
2009 and 2008, respectively. The decrease in investing
cash outflows during fiscal 2010 primarily reflected lower
acquisition activity in the current year as compared with
the acquisitions of Applied Genetics Incorporated
Dermatics (“AGI”) and businesses engaged in the whole-
sale distribution and retail sale of Aveda products in the
prior year. The change also reflected lower cash payments
in the current year related to counters and leasehold
improvements. The decrease in investing activities during
fiscal 2009 primarily reflected lower capital expenditure
activity and the fiscal 2008 acquisition of Ojon Corpora-
tion, partially offset by the fiscal 2009 acquisitions of AGI
and Aveda distributors.
Net cash used for financing activities was $406.1 mil-
lion in fiscal 2010, net cash provided by financing activi-
ties was $125.8 million in fiscal 2009 and net cash used
for financing activities was $78.1 million in fiscal 2008.
The change in net cash flows used for financing activities
as compared with net cash flows provided by financing
activities in fiscal 2009 was primarily driven by the prior
year’s net proceeds from the issuance of the 2013 Senior
Notes and the current year’s partial redemption of the
2012 and 2013 Senior Notes. Also contributing to this
change was an increase in treasury stock purchases and
repayments related to Ojon promissory notes, partially
offset by higher cash inflows from stock option exercises
and the prior year’s repayment of commercial paper
borrowings. The fiscal 2009 increase in cash provided by
financing activities primarily reflected the issuance of the
2013 Senior Notes and a decrease in treasury stock
purchases, partially offset by repayments of outstanding
commercial paper.
Dividends
On November 13, 2009, the Board of Directors declared
an annual dividend of $.55 per share on our Class A and
Class B common stock, of which an aggregate of $109.1
million was paid on December 16, 2009 to stockholders
of record at the close of business on November 30, 2009.
The annual common stock dividend declared during fiscal
2009 was $.55 per share, of which an aggregate of $108.4
million was paid on December 17, 2008 to stockholders
of record at the close of business on December 1, 2008.