Estee Lauder 2011 Annual Report Download - page 150

148 THE EST{E LAUDER COMPANIES INC.
Deferred Compensation
The Company accrues for deferred compensation and
interest thereon, and for the increase in the value of share
units pursuant to agreements with certain key executives
and outside directors. The amounts included in the
accompanying consolidated balance sheets under these
plans were $65.8 million and $61.2 million as of June 30,
2011 and 2010, respectively. The expense for fiscal 2011,
2010 and 2009 was $9.9 million, $1.7 million and $5.4
million, respectively.
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, 2011:
Payments Due in Fiscal
Total 2012 2013 2014 2015 2016 Thereafter
(In millions)
Debt service(1) $2,043.3 $ 202.1 $ 67.7 $285.2 $ 46.2 $ 46.2 $1,395.9
Operating lease commitments(2) 1,364.4 247.7 218.7 182.6 153.1 129.3 433.0
Unconditional purchase obligations(3) 1,881.5 810.8 275.1 169.5 165.1 105.3 355.7
Gross unrecognized tax benefits
and interest — current(4) 13.0 13.0 — — — — —
Total contractual obligations $5,302.2 $1,273.6 $561.5 $637.3 $364.4 $280.8 $2,184.6
(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 $71.5 million in fiscal 2012, $64.3 million in fiscal 2013, $55.1 million in fiscal 2014, $46.2
million in fiscal 2015, $46.2 million in fiscal 2016 and $595.9 million thereafter. Projected interest costs on variable rate instruments were calculated
using market rates at June 30, 2011. 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 $290.9 million in fiscal 2011, $272.8 million in fiscal 2010 and
$250.6 million in fiscal 2009.
(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-retire-
ment 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, 2011, without consideration for potential renewal periods.
(4) Refer to Note 8 — Income Taxes for information regarding unrecognized tax benefits. As of June 30, 2011, the noncurrent portion of the Company’s
unrecognized tax benefits, including related accrued interest and penalties was $129.5 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.
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 financial condition. However, management’s assess-
ment 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
finders of fact which are not in accord with management’s
evaluation of the possible liability or outcome of such
litigation or proceedings. Reasonably possible losses in
addition to the amount accrued for litigation and other
legal proceedings are not material to the Company’s
consolidated financial statements.
NOTE 15 — COMMON STOCK
As of June 30, 2011, 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.