Estee Lauder 2003 Annual Report Download - page 68

THEEST{E LAUDER COMPANIES INC.67
The restructuring charge was recorded in other accrued
liabilities or, where applicable, as a reduction of the
related asset. During fiscal 2003 and 2002, $32.2 million
and $9.3 million, respectively, related to this restructuring
was paid. As of June 30, 2003 and 2002, the restructuring
accrual balance was $21.9 million and $54.1 million,
respectively, and the Company expects to settle a major-
ityofthe remaining obligations by the end of fiscal 2004
with certain additional payments made ratably through
fiscal 2006.
During the fourth quarter of fiscal 2001, the Company
recorded one-time charges for restructuring and special
charges related to repositioning certain businesses as part
of the Company’s ongoing efforts to drive long-term
growth and increase profitability. The restructuring and
special charges focused on four areas: product fixtures
for the jane brand; in-store “tommy’s shops”; information
systems and other assets; and global brand reorganiza-
tion. The Company committed to a defined plan of action,
which resulted in an aggregate pre-tax charge of $63.0
million, of which $35.9 million is cash related. On an after-
tax basis, the aggregate charge was $40.3 million, equal to
$.17 per diluted share.
Specifically, the charge included the following:
• jane. jane switched from its traditional wall displays to a
carded program. The charge included a $16.1 million
write-down of existing jane product fixtures and the
return of uncarded product from virtually all of the
distribution outlets in the United States.
• “tommy’s shops.” The Company restructured the
in-store “tommy’s shops” to focus on the most pro-
ductive locations and decided to close certain shops
that underperformed relative to expectations. As a
result, the Company recorded a $6.3 million provision
for the closing of 86 under-performing in-store
“tommy’s shops,” located in the United States, and for
related product returns.
• Information systems and other assets. In response to
changing technology and the Company’s new strategic
direction, the charge included a $16.2 million provision
for costs associated with the reevaluation of supply
chain systems that the Company no longer utilized and
with the elimination of unproductive assets related to
the change to standard financial systems.
• Global brand reorganization. The Company recorded
$20.8 million related to benefits and severance pack-
ages for 75 management employees who were affected
by the reconfiguration to a global brand structure and
another $3.6 million related to infrastructure costs.
Following is a summary of the charges as recorded in the consolidated statement of earnings for fiscal 2001:
Net Sales Cost of Sales Operating Expenses Special Charges Total
(In millions)
jane $5.7 $ 1.5 $ 4.8 $ 4.1 $16.1
“tommy’s shops” 2.3 (0.4) 4.4 — 6.3
Information systems and
other assets — — 4.6 11.6 16.2
Global brand reorganization —— 23.8 0.6 24.4
Total charge $8.0 $ 1.1 $37.6 $16.3 63.0
Tax effect (22.7)
Net charge $40.3
Restructuring
The restructuring charge was recorded in other accrued
liabilities or as a reduction of fixed assets. During fiscal
2003, 2002 and 2001, $4.7 million, $26.7 million and
$0.7 million, respectively, was paid. As of June 30, 2003
and 2002, the remaining obligation was $2.6 million and
$7.1 million, respectively, with remaining payments
expected to be made ratably through fiscal 2004.