Estee Lauder 2010 Annual Report Download - page 143

142 THE EST{E LAUDER COMPANIES INC.
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 finan-
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 determi-
nations by judges, juries or other finders of fact which are
not in accord with management’s evaluation of the pos-
sible liability or outcome of such litigation or proceedings.
NOTE 15 — COMMON STOCK
As of June 30, 2010, 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
Common 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:
Class A Class B
(Shares in thousands)
Balance at June 30, 2007 112,523.4 81,804.8
Acquisition of treasury stock (3,106.3) —
Conversion of Class B to Class A 3,737.5 (3,737.5)
Stock-based compensation 3,685.2 —
Balance at June 30, 2008 116,839.8 78,067.3
Acquisition of treasury stock (1,401.2) —
Stock-based compensation 3,188.3 —
Balance at June 30, 2009 118,626.9 78,067.3
Acquisition of treasury stock (4,901.9) —
Conversion of Class B to Class A 985.3 (985.3)
Stock-based compensation 5,931.3 —
Balance at June 30, 2010 120,641.6 77,082.0
NOTE 14 — COMMITMENTS AND CONTINGENCIES
Contractual Obligations
The following table summarizes scheduled maturities of the Company’s contractual obligations for which cash flows are
fixed and determinable as of June 30, 2010:
Payments Due in Fiscal
Total 2011 2012 2013 2014 2015 Thereafter
(In millions)
Debt service(1) $2,072.6 $ 84.1 $188.7 $ 67.2 $277.5 $ 35.1 $1,420.0
Operating lease commitments(2) 1,203.3 200.2 175.7 152.3 131.9 115.8 427.4
Unconditional purchase obligations(3) 2,212.9 1,302.3 214.6 204.1 94.8 96.2 300.9
Gross unrecognized tax benefits and
interest — current(4) 41.3 41.3 — — — — —
Total contractual obligations $5,530.1 $1,627.9 $579.0 $423.6 $504.2 $247.1 $2,148.3
(1) Includes long-term and short-term debt and the related projected interest costs, and to a lesser extent, capital lease commitments. Interest costs
on long-term and short-term debt are projected to be $60.6 million in fiscal 2011, $60.8 million in fiscal 2012, $53.6 million in fiscal 2013, $44.0
million in fiscal 2014, $35.0 million in fiscal 2015 and $619.8 million thereafter. Projected interest costs on variable rate instruments were calculated
using market rates at June 30, 2010. Refer to Note 10—Debt.
(2) Minimum operating lease commitments only include base rent. Certain leases provide for contingent rents that are not measurable at inception
and primarily include rents based on a percentage of sales in excess of stipulated levels, as well as common area maintenance. These amounts are
excluded from minimum operating lease commitments and are included in the determination of total rent expense when it is probable that the
expense has been incurred and the amount is reasonably measurable. Such amounts have not been material to total rent expense. Total rental
expense included in the accompanying consolidated statements of earnings was $272.8 million in fiscal 2010, $250.6 million in fiscal 2009 and
$230.8 million in fiscal 2008.
(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 benefit obligations, commitments pursuant to executive compensation arrangements, obligations related to the Company’s cost savings
initiatives and acquisitions. 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, 2010, without consideration for potential renewal periods.
(4) Refer to Note 8—Income Taxes for information regarding unrecognized tax benefits. During the fourth quarter of fiscal 2010, the Company made
a cash payment of $20.5 million to the U.S. Treasury as an advance deposit, which is not reflected as a reduction to the $41.3 million. As of
June 30, 2010, the noncurrent portion of the Company’s unrecognized tax benefits, including related accrued interest and penalties was $152.7
million. At this time, the settlement period for the noncurrent portion of the unrecognized tax benefits, including related accrued interest and
penalties, cannot be determined and therefore was not included.