Estee Lauder 2002 Annual Report Download - page 75

THEEST{E LAUDER COMPANIES INC.
Subsequent to June 30, 2002, the Company granted
options under the terms of the Plans described above to
purchase an additional 6,410,700 of the Company’s Class
ACommon Stock with an exercise price equal to fair
market value on the date of grant. In addition, subsequent
to June 30, 2002 the Company granted approximately
55,100 share units to a key executive pursuant to the
terms of the Fiscal 2002 Share Incentive Plan.
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Total rental expense included in the accompanying con-
solidated statements of earnings was $142.8 million in
fiscal 2002, $120.9 million in fiscal 2001 and $100.7 mil-
lion in fiscal 2000. At June 30, 2002, the future minimum
rental commitments under long-term operating leases are
as follows:
YEAR ENDING JUNE 30 (In millions)
2003 $ 98.7
2004 91.6
2005 79.3
2006 53.6
2007 46.9
Thereafter 173.4
$543.5
In August 2000, an affiliate of Revlon, Inc. sued the
Company and its subsidiaries in the U.S. District Court,
Southern District of New York, for alleged patent infringe-
ment and related claims. Revlon alleges that five Estée
Lauder products, two Origins foundations, a La Mer con-
cealer and a jane foundation infringe its patent. Revlon is
seeking, among other things, treble damages, punitive
damages, equitable relief and attorneys’ fees. The Com-
pany filed counterclaims, which, among other things, chal-
lenge the validity of the patent. Mediation directed by the
Court took place in August 2001 and in January 2002, but
did not result in resolution of the litigation. In January
2002, the Court indefinitely postponed the trial date (then
set for February 2002) and established a schedule for pre-
trial motions. Both parties have filed summary judgment
motions, and the Court is expected to schedule oral
argument on the motions. The Company intends to
defend the lawsuit vigorously. Although the final outcome
cannot be predicted with certainty, based on legal
analysis and the discovery proceedings in the litigation,
management believes that the case will not have a
material adverse effect on the Company’s consolidated
financial condition.
In February 2000, the Company and eight other man-
ufacturers of cosmetics (the “Manufacturer Defendants”)
were added as defendants in a consolidated class action
lawsuit that had been pending in the Superior Court of
the State of California in Marin County. The plaintiffs pur-
port to represent a class of all California residents who
purchased prestige cosmetic products at retail for per-
sonal use from a number of department stores that sold
such products in California (the “Department Store
Defendants”). Plaintiffs filed their initial actions against the
Department Store Defendants in May 1998. In May 2000,
plaintiffs filed an amended complaint alleging that the
Department Store Defendants and the Manufacturer
Defendants conspired to fix and maintain retail prices and
to limit the supply of prestige cosmetic products sold by
the Department Store Defendants in violation of Califor-
nia state law. The plaintiffs are seeking, among other
things, treble damages, equitable relief, attorneys’ fees,
interest and costs. Pre-trial proceedings and discovery
have commenced. Court-directed mediation and related
settlement discussions are continuing. The Company
intends to defend the lawsuit vigorously. While no assur-
ance can be given as to the ultimate outcome, based on
preliminary investigation, management believes that
the case will not have a material adverse effect on the
Company’s consolidated financial condition.
In 1998, the Office of the Attorney General of the State
of New York (the “State”) notified the Company and ten
other entities that they are potentially responsible parties
(“PRPs”) with respect to the Blydenburgh landfill in Islip,
New York. Each PRP may be jointly and severally liable for
the costs of investigation and cleanup, which the State
estimates to be $16 million. While the State has sued
other PRPs in connection with the site, the State has not
sued the Company. The Company and certain other PRPs
are in discussions with the State regarding possible settle-
ment of the matter. While no assurance can be given as to
the ultimate outcome, management believes that the
matter will not have a material adverse effect on the
Company’s consolidated financial condition.
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