Estee Lauder 2013 Annual Report Download - page 173

for litigation and other legal proceedings are not material
to the Company’s consolidated financial statements.
During the fiscal 2007 fourth quarter, the former
owner of the Darphin brand initiated litigation in the Paris
Commercial Court against the Company and one of its
subsidiaries seeking to recover €60.0 million ($78.3 mil-
lion at the exchange rate at June 30, 2013) that he claims
he was owed as additional consideration for the sale of
Darphin to the Company in April 2003. On December 23,
2011, the Paris Commercial Court issued its judgment,
awarding the former owner €22.9 million ($29.9 million at
the exchange rate at June 30, 2013) plus interest from
2007. The Company has filed its appeal with the Paris
Court of Appeal and oral arguments for the appeal are
scheduled for December 2013. In accordance with the
judgment, in January 2012, the Company paid €25.3
million ($33.0 million at the exchange rate at June 30,
2013) to the former owner and received from him a bank
guarantee to assure repayment to the Company of such
sum (or any part thereof) in the event that the judgment
is reversed by the Paris Court of Appeal. Based upon its
assessment of the case, as well as the advice of external
counsel, the Company is maintaining the amount it
previously accrued as an amount that it believes will
ultimately be paid based on the probable outcome of the
appeal. Such amount is less than the Paris Commercial
Court’s award.
Other Income
During the fiscal 2013 second quarter, the Company
amended the agreement related to the August 2007 sale
of Rodan + Fields (a brand then owned by the Company)
to receive a fixed amount in lieu of future contingent
consideration and other rights. Prior to this amendment,
the Company earned and recognized $1.8 million during
the three months ended September 30, 2012 as contin-
gent consideration in accordance with the original terms
of the agreement, of which $0.7 million was received. The
remaining $1.1 million of unpaid consideration was
included under the amended agreement, whereas the
Company is to receive a principal amount of $22.8 mil-
lion. As of June 30, 2013, the Company received $6.0 mil-
lion of the principal amount. The remaining $16.8 million
principal amount is due in payments of $8.4 million on
March 31, 2014 and March 31, 2015 and are included in
Prepaid expenses and other current assets and Other
assets, respectively, in the accompanying consolidated
balance sheet as of June 30, 2013. As a result of the
original and amended terms of this agreement, the
Company recognized $23.1 million as other income in
the consolidated statement of earnings during fiscal 2013.
In November 2011, the Company settled a commercial
dispute with third parties that was outside its normal oper-
ations. In connection therewith, the Company received a
$10.5 million cash payment, which has been classified as
other income in its consolidated statement of earnings
during fiscal 2012.
NOTE 14 — COMMON STOCK
As of June 30, 2013, the Company’s authorized common
stock consists of 1,300 million shares of Class A Common
Stock, par value $.01 per share, and 304 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, 2010 241,283.3 154,164.1
Acquisition of treasury stock (10,515.1) —
Conversion of Class B to Class A 2,200.0 (2,200.0)
Stock-based compensation 9,630.7 —
Balance at June 30, 2011 242,598.9 151,964.1
Acquisition of treasury stock (11,980.2) —
Conversion of Class B to Class A 186.0 (186.0)
Stock-based compensation 6,314.8 —
Balance at June 30, 2012 237,119.5 151,778.1
Acquisition of treasury stock (6,718.8) —
Conversion of Class B to Class A 2,800.0 (2,800.0)
Stock-based compensation 5,815.5 —
Balance at June 30, 2013 239,016.2 148,978.1
The Company is authorized by the Board of Directors to
repurchase up to 216.0 million shares of Class A Common
Stock in the open market or in privately negotiated
transactions, depending on market conditions and other
factors. As of June 30, 2013, the cumulative total of
acquired shares pursuant to the authorization was 167.1
million, reducing the remaining authorized share repur-
chase balance to 48.9 million. Subsequent to June 30,
2013, the Company purchased approximately 0.6 million
additional shares of Class A Common Stock for $41.8
million pursuant to its share repurchase program.
The Company transitioned to a quarterly dividend pay-
out schedule for its Class A and Class B Common Stock
beginning in the fiscal 2013 third quarter.
THE EST{E LAUDER COMPANIES INC. 171