Estee Lauder 2015 Annual Report Download - page 115

112 THE EST{E LAUDER COMPANIES INC.
Market Share Unit
The Company had one outstanding market share unit,
which vested on June 30, 2014. The market share unit
had a grant date fair value of $10.6 million that was
estimated using a lattice model with a Monte Carlo
simulation and the following assumptions: contractual life
of 41 months, a weighted-average expected volatility of
29%, a weighted- average risk-free interest rate of 1.6%
and a weighted- average dividend yield of 1.0%. The
Company used an expected stock-price volatility assump-
tion that is a combination of both current and historical
implied volatilities from options on the underlying stock.
The implied volatilities were obtained from publicly avail-
able data sources. The expected life was equal to the con-
tractual term of the grant. The average risk-free interest
rate was based on the U.S. Treasury strip rates over the
contractual term of the grant and the average dividend
yield was based on historical experience. In accordance
with the terms of the grant, the maximum award of
320,000 shares of the Company’s Class A Common Stock
were issued, and related dividends were paid. The num-
ber of shares equaled the maximum payout under the
award, because the average closing stock price per share
of the Company’s Class A Common Stock on the New
York Stock Exchange during the last 20 trading days
ending on June 30, 2014 exceeded $75.00 per share.
Share Units
The Company grants share units to certain non-employee
directors under the Non-Employee Director Share Incen-
tive Plan. The share units are convertible into shares of the
Company’s Class A Common Stock as provided for in that
plan. Share units are accompanied by dividend equivalent
rights that are converted to additional share units when
such dividends are declared.
The following is a summary of the status of the Com-
pany’s share units as of June 30, 2015 and activity during
the fiscal year then ended:
Weighted-Average
Grant Date
Shares Fair Value Per Share
(Shares in thousands)
Outstanding at June 30, 2014 98.8 $37.67
Granted 10.2 71.33
Dividend equivalents 1.3 78.44
Converted — —
Outstanding at June 30, 2015 110.3 41.24
Cash Units
Certain non-employee directors defer cash compensation
in the form of cash payout share units, which are not
subject to the Plans. These share units are classified as
liabilities and, as such, their fair value is adjusted to reflect
the current market value of the Company’s Class A
Common Stock. The Company recorded $3.4 million,
$2.4 million and $3.0 million as compensation expense to
reflect additional deferrals and the change in the market
value for fiscal 2015, 2014 and 2013, respectively.
NOTE 17 — NET EARNINGS ATTRIBUTABLE TO THE EST{E LAUDER COMPANIES INC. PER COMMON SHARE
Net earnings attributable to The Estée Lauder Companies Inc. per common share (“basic EPS”) is computed by dividing
net earnings attributable to The Estée Lauder Companies Inc. by the weighted-average number of common shares out-
standing and contingently issuable shares (which satisfy certain conditions). Net earnings attributable to The Estée Lauder
Companies Inc. per common share assuming dilution (“diluted EPS”) is computed by reflecting potential dilution from
stock-based awards.
A reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows:
YEAR ENDED JUNE 30 2015 2014 2013
(In millions, except per share data)
Numerator:
Net earnings attributable to The Estée Lauder Companies Inc. $1,088.9 $1,204.1 $1,019.8
Denominator:
Weighted-average common shares outstanding — Basic 379.3 386.2 387.6
Effect of dilutive stock options 4.6 5.0 5.5
Effect of PSUs 0.1 0.1 —
Effect of RSUs 1.6 1.4 1.4
Effect of performance share units based on TSR 0.1 0.1 0.1
Effect of MSU — 0.3 0.3
Weighted-average common shares outstanding — Diluted 385.7 393.1 394.9
Net earnings attributable to The Estée Lauder Companies Inc. per common share:
Basic $ 2.87 $ 3.12 $ 2.63
Diluted 2.82 3.06 2.58