Estee Lauder 2010 Annual Report Download - page 91

90 THE EST{E LAUDER COMPANIES INC.
•฀ ฀Turnaround or Exit Unprofitable Operations— To
improve the profitability in certain of our brands and
regions, we have selectively exited certain channels of
distribution, categories and markets. During the first
quarter of fiscal 2010, we approved the exit from the
global wholesale distribution of our Prescriptives brand,
which was completed during the fiscal year. In connec-
tion with these activities, we recorded a reserve for
product returns, wrote off inventory and incurred costs
to reduce workforce and other exit costs. Also during
fiscal 2010, we approved a restructuring initiative that
included the reformulation of Ojon brand products.
•฀ ฀Outsourcing— In order to balance the growing need for
information technology support with our efforts to pro-
vide the most efficient and cost effective solutions, we
continued the outsourcing of certain information tech-
nology processes. We incurred costs to transition ser-
vices to an outsource provider.
long-range forecast for operating margin reflects these
anticipated savings, net of strategic investments.
The Program focuses on a redesign of our organiza-
tional structure in order to integrate the Company in a
more cohesive way and operate more globally across
brands and functions. A principal aspect of the Program is
the reduction of the workforce by approximately 2,000
employees. Specific actions taken during the year ended
June 30, 2010 included:
•฀ Resize and Reorganize the Organization—We con-
tinued the realignment and optimization of our organi-
zation to better leverage scale, improve productivity and
reduce complexity in each region and across various
functions. This included reduction of the workforce
which occurred through the consolidation of certain
functions through a combination of normal attrition and
job eliminations.
The following table presents aggregate restructuring charges related to the Program:
Employee-Related Asset Contract
Costs Write-offs Terminations Other Exit Costs Total
(In millions)
Fiscal 2009 $60.9 $ 4.2 $3.4 $1.8 $ 70.3
Fiscal 2010 29.3 11.0 2.3 6.2 48.8
Charges recorded through
June 30, 2010 $90.2 $15.2 $5.7 $8.0 $119.1
The total amount of restructuring charges expected to be incurred (including those recorded as set forth in the table
above), plus other initiatives approved through August 17, 2010, include approximately $112 million to $113 million for
employee-related costs, approximately $18 million in asset write-offs, which includes $8.8 million related to the impair-
ment of other intangible assets, and approximately $23 million of contract terminations and other exit costs.
The following table presents accrued restructuring and the related activity under the Program:
Employee-Related Asset Contract
Costs Write-offs Terminations Other Exit Costs Total
(In millions)
Charges $ 60.9 $ 4.2 $ 3.4 $ 1.8 $ 70.3
Cash payments (7.5) — (0.5) (1.6) (9.6)
Non-cash write-offs — (4.2) — — (4.2)
Translation adjustments 0.6 — — — 0.6
Other adjustments (2.4) — — — (2.4)
Balance at June 30, 2009 51.6 — 2.9 0.2 54.7
Charges 29.3 11.0 2.3 6.2 48.8
Cash payments (49.5) — (5.1) (6.0) (60.6)
Non-cash write-offs — (11.0) — — (11.0)
Translation adjustments (0.8) — — — (0.8)
Balance at June 30, 2010 $ 30.6 $— $ 0.1 $ 0.4 $ 31.1
Accrued restructuring charges at June 30, 2010 are
expected to result in cash expenditures funded from cash
provided by operations of approximately $25 million and
$6 million in fiscal 2011 and 2012, respectively.
We recorded other special charges in connection with
the implementation of the Program for the years ended
June 30, 2010 and 2009 of $12.3 million and $10.1 mil-
lion, respectively, related to consulting, other professional
services, and accelerated depreciation. The total amount