Estee Lauder 2005 Annual Report Download - page 78

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THE EST{E LAUDER COMPANIES INC.
401(k) Savings Plan (U.S.)
The Company’s 401(k) Savings Plan (“Savings Plan”) is a
contributory defined contribution plan covering substan-
tially all regular U.S. employees who have completed the
hours and service requirements, as defined by the plan
document. Regular full-time employees are eligible to par-
ticipate in the Savings Plan on the first day of the second
month following their date of hire. The Savings Plan is sub-
ject to the applicable provisions of ERISA. The Company
matches a portion of the participant’s contributions after
one year of service under a predetermined formula based
on the participant’s contribution level and years of service.
The Company’s contributions were approximately $9.8
million
for the fiscal year ended June 30, 2005 and
$9.1 million for
the fiscal years ended June 30, 2004 and
2003. Shares of the Company’s Class A Common Stock are
not an investment option in the Savings Plan and the
Company does not use such shares to match participants’
contributions.
Deferred Compensation
The Company accrues for deferred compensation and
interest thereon, and for the increase in the value of share
units pursuant to agreements with certain key executives
and outside directors. The amounts included in the
accompanying consolidated balance sheets under these
plans were $71.0 million and $135.4 million as of June 30,
2005 and 2004, respectively. The expense for fiscal 2005,
2004 and 2003 was $10.2 million, $16.6 million and $17.4
million, respectively. During 2005, the Company made
deferred compensation payments to a former executive of
$71.2 million.
NOTE 11– POSTEMPLOYMENT BENEFITS
OTHER THAN TO RETIREES
The Company provides certain postemployment benefits
to eligible former or inactive employees and their depend-
ents during the period subsequent to employment but
prior to retirement. These benefits include health care cov-
erage and severance benefits. The cost of providing these
benefits is accrued and any incremental benefits were not
material to the Company’s consolidated financial results.
NOTE 12 – COMMON STOCK
As of June 30, 2005, the Company’s authorized common
stock consists of 650 million shares of Class A Common
Stock, par value $.01 per share, and 240 million shares of
Class B Common Stock, par value $.01 per share. Class B
Common Stock is convertible into Class A Common Stock,
in whole or in part, at any time and from time to time at
the option of the holder, on the basis of one share of Class
A Common Stock for each share of Class B Common Stock
converted. Holders of the Company’s Class A Common
Stock are entitled to one vote per share and holders of the
Company’s Class B Common Stock are entitled to ten
votes per share.
Information about the Company’s common stock out-
standing is as follows:
Class A Class B
(Shares in thousands)
Balance at June 30, 2002 129,190.1 108,412.5
Acquisition of treasury stock (11,245.2) —
Conversion of Class B to Class A 950.0 (950.0)
Share grants 4.0 —
Share units converted 0.8 —
Stock option programs 1,094.0 —
Balance at June 30, 2003 119,993.7 107,462.5
Acquisition of treasury stock (2,832.6) —
Conversion of Class B to Class A 14,449.6 (14,449.6)
Share grants 2.0 —
Stock option programs 2,901.4 —
Balance at June 30, 2004 134,514.1 93,012.9
Acquisition of treasury stock (10,720.0) —
Issuance of treasury stock 1.5 —
Conversion of Class B to Class A 5,372.0 (5,372.0)
Share grants 1.2 —
Stock option programs 3,494.6 —
Balance at June 30, 2005 132,663.4 87,640.9
On September 18, 1998, the Company’s Board of Directors
authorized a share repurchase program to repurchase a
total of up to 8.0 million shares of Class A Common Stock
in the open market or in privately negotiated transactions,
depending on market conditions and other factors. The
Board of Directors authorized the repurchase of up to 10.0
million additional shares of Class A Common Stock in both
October 2002 and May 2004, and an additional 20.0 mil-
lion in May 2005, increasing the total authorization under
the share repurchase program to 48.0 million shares. As of
June 30, 2005, approximately 27.4 million shares have
been purchased under this program.
In May 2005, the Company purchased 1,872,000
shares of Class A Common Stock from a related party for
$73.5 million.
NOTE 13 – STOCK PROGRAMS
The Company has established the Fiscal 2002 Share Incen-
tive Plan, the Fiscal 1999 Share Incentive Plan, the Fiscal
1996 Share Incentive Plan and the Non-Employee Director
Share Incentive Plan (collectively, the “Plans”) and,
additionally, has made available stock options and share
units that were, or will be, granted pursuant to these Plans
and certain employment agreements. These stock-based
compensation programs are described below.
77