Estee Lauder 2005 Annual Report Download - page 51

THE EST{E LAUDER COMPANIES INC.
We believe that our cash on hand, cash generated from
operations, available credit lines and access to credit
markets will be adequate to support currently planned
business operations and capital expenditures on both
a near-term and long-term basis.
Cash Flows
Net cash provided by operating activities was $479.2 mil-
lion in fiscal 2005 as compared with $675.4 million in fiscal
2004 and $558.6 million in fiscal 2003. The net decrease in
operating cash flows for fiscal 2005 as compared with fis-
cal 2004 reflected changes in certain working capital
accounts, partially offset by decreases in net deferred taxes
and an increase in net earnings from continuing opera-
tions. The change in other accrued liabilities primarily
reflected the payment of significant deferred compensa-
tion and supplemental payments made to retired execu-
tives in fiscal 2005. Accounts receivable increased as a
result of sales growth in the current fiscal year, reflecting
growth in international markets and customers which gen-
erally carry longer payment terms. The timing of payments
from certain domestic customers as well as shipments that
occurred later in the period also contributed to increased
accounts receivable. The increase in inventory was prima-
rily due to actual and anticipated sales levels, the building
of safety stock in our new distribution center in Europe,
and, to a lesser extent, the inclusion of new points of distri-
bution such as Kohl’s Department Stores for our Beauty-
Bank brands and new affiliate activities. The shift in cash
activities related to accounts payable reflected the timing
of disbursements year-over-year as well as the initiation of
a vendor-managed inventory program. Net deferred taxes
decreased primarily as a result of the anticipated repatria-
tion of foreign earnings in fiscal 2006 as a result of the
AJCA and the realization of the tax benefits related to
payments made to retired executives. The improvement in
net operating cash flows for fiscal 2004 as compared with
fiscal 2003 reflected increased net earnings from continu-
ing operations and an increase in accrued costs. Changes
in operating assets and liabilities reflected partially offset-
ting increases in accounts payable and inventory in antici-
pation of product launches in fiscal 2005, higher accounts
receivable in line with sales growth, and changes in other
assets and accrued liabilities that reflect receipts and
accruals from employee compensation and benefit related
transactions as well as selling, advertising and merchandis-
ing activities.
Net cash used for investing activities was $237.0 mil-
lion in fiscal 2005, compared with $213.6 million in fiscal
2004 and $198.0 million in fiscal 2003. Net cash used in
investing activities in fiscal 2005 and 2004 primarily related
to capital expenditures. Net cash used in investing activi-
ties during fiscal 2003 primarily related to capital expendi-
tures and the acquisition of Darphin and certain Aveda
distributors. In fiscal 2006, we expect to make a payment of
approximately $38 million to satisfy an earn-out provision
related to our acquisition of Jo Malone Limited in October
1999, which payment may be satisfied by the issuance of a
note to the seller.
Capital expenditures amounted to $229.6 million,
$212.1 million and $168.6 million in fiscal 2005, 2004 and
2003, respectively. Incremental spending in fiscal 2005 pri-
marily reflected the beginning of a company-wide initia-
tive to upgrade our information systems as well as the
investment in leasehold improvements in our corporate
offices. We plan to continue to invest in the upgrade of our
information systems in fiscal 2006 and beyond. Capital
expenditures in fiscal 2004 and 2003 primarily reflected
the continued upgrade of manufacturing equipment, dies
and molds, new store openings, store improvements,
counter construction and information technology enhance-
ments. The lower level of capital expenditures in fiscal
2003 reflected tight control on our spending in light of
then-prevailing economic conditions.
Cash used for financing activities was $300.4 million,
$216.0 million and $555.0 million in fiscal 2005, 2004 and
2003, respectively. The net cash used for financing activi-
ties in fiscal 2005 primarily reflected common stock repur-
chases and dividend payments, partially offset by the
issuance of short-term commercial paper to fund working
capital needs and the receipt of proceeds from employee
stock option transactions. The net cash used for financing
activities in fiscal 2004 primarily related to the redemption
of $291.6 million aggregate principal amount of the 2015
Preferred Stock, common stock repurchases and dividend
payments partially offset by proceeds from the issuance of
the 5.75% Senior Notes and from employee stock option
transactions. Net cash used for financing during fiscal 2003
primarily related to common stock repurchases, the repay-
ment of long-term debt and dividend payments.
Dividends
On November 3, 2004, the Board of Directors declared an
annual dividend of $.40 per share on our Class A and Class
B Common Stock, which was paid on December 28, 2004
to stockholders of record at the close of business on
December 10, 2004. Common stock dividends paid in fis-
cal 2005, 2004 and 2003 were $90.1 million, $68.5 million
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