Estee Lauder 2002 Annual Report Download - page 63

THEEST{E LAUDER COMPANIES INC.
In June 2002, the Financial Accounting Standards
Board issued SFAS No. 146, “Accounting for Costs Asso-
ciated with Exit or Disposal Activities”. This statement
covers restructuring type activities beginning with plans
initiated after December 31, 2002. Should the Company
enter into activities covered by this standard after that
date, the provisions of SFAS No. 146 would be applied.
As a result of this standard, there is no impact on the
Company’s consolidated financial position or results of
operations for the periods presented.
NOTE 3 – PUBLIC OFFERINGS
During October 2001, a member of the Lauder family
sold 5,000,000 shares of Class A Common Stock in a reg-
istered public offering. The Company did not receive any
proceeds from the sale of these shares.
During May and June 2000, members of the Lauder
family sold 8,482,000 shares of Class A Common Stock
in a registered public offering. The Company did not
receive any proceeds from the sale of these shares.
NOTE 4 – ACQUISITION OF BUSINESSES
At various times during fiscal 2002, 2001 and 2000, the
Company acquired businesses engaged in the wholesale
distribution and retail sale of Aveda products, as well as
other products, in the United States and other countries.
In fiscal 2002, the Company purchased an Aveda whole-
sale distributor business in Korea and bought out the
minority interest of its Aveda joint venture in the United
Kingdom. The Company also bought out the minority
interest of its joint venture in Chile.
In fiscal 2001, the Company purchased a wholesale
distributor business in Israel, a majority interest of the
wholesale distributor business in Chile and created a joint
venture in Greece in which the Company owns a con-
trolling majority interest.
In June 2000, the Company acquired, for cash, a con-
trolling majority equity interest in Bumble and Bumble
Products, LLC,a marketer and distributor of hair care
products, and Bumble and Bumble, LLC, which operates
a salon in New York City.
In April 2000, the Company acquired, for cash,
the business of Gloss.com, Inc. a multi-brand Internet
beauty site.
In October 1999, the Company acquired Jo Malone
Limited, a London-based marketer of prestige skin care
and fragrance products, for cash.
In August 1999, the Company acquired the business
of Stila Cosmetics, Inc., a manufacturer and marketer of
makeup products, for cash.
The aggregate purchase price for these transactions,
which includes acquisition costs, was approximately $18.5
million, $16.0 million, and $186.6 million in fiscal 2002,
2001 and 2000, respectively, and each transaction was
accounted for using the purchase method of accounting.
Accordingly, the results of operations for each of the
acquired businesses are included in the accompanying
consolidated financial statements commencing with its
date of original acquisition. Pro forma results of opera-
tions, as if each of such businesses had been acquired as
of the beginning of the year of acquisition, have not been
presented, as the impact on the Company’s consolidated
financial results would not have been material.
NOTE 5–RESTRUCTURING AND OTHER
NON-RECURRING EXPENSES
During the fourth quarter of fiscal 2002, the Company
recorded a restructuring related to repositioning certain
businesses as part of its ongoing efforts to drive long-term
growth and increase profitability. The restructuring
focused on cost reduction opportunities related to the
Internet, supply chain, globalization of the organization
and distribution channel refinements. The Company has
committed to a defined plan of action, which resulted in
an aggregate pre-tax charge of $117.4 million, of which
$59.4 million is cash related. On an after-tax basis, the
aggregate charge was $76.9 million, equal to $.32 per
diluted share.
Specifically, the charge includes the following:
• Internet. In an effort to achieve strategic objectives,
reduce costs and improve profitability, the Company
outsourced Gloss.com platform development and main-
tenance efforts to a third-party provider. Additionally,
Gloss.com closed its San Francisco facility and consoli-
dated its operations in New York. As a result, included in
the charge is a $23.9 million provision for restructuring
the Gloss.com operations, including benefits and sever-
ance packages for 36 employees as well as asset write-
offs. The Company also took a $20.1 million charge to
write-off the related Gloss.com acquisition goodwill.
• Supply Chain. Building on previously announced sup-
ply chain initiatives, the Company restructured certain
manufacturing, distribution, research and development,
information systems and quality assurance operations in
the United States, Canada and Europe which included
benefits and severance packages for 110 employees.
Acharge of $23.7 million was recorded related to
this effort.
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