Estee Lauder 2005 Annual Report Download - page 82

THE EST{E LAUDER COMPANIES INC.
NOTE 15 – NET UNREALIZED INVESTMENT GAINS
Under SFAS No. 115, “Accounting for Certain Investments
in Debt and Equity Securities,” available-for-sale securities
are recorded at market value. Unrealized holding gains and
losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported
as a component of stockholders’ equity until realized.
The Company’s investments subject to the provisions of
SFAS No. 115 are treated as available-for-sale and, accord-
ingly, the applicable investments have been adjusted to
m arket value with a corresponding adjustment, net of tax,
to net unrealized investment gains in accumulated other
comprehensive income. Included in accumulated other
comprehensive income was an unrealized investment gain
(net of deferred taxes) of $0.4 million and $0.1 million at
June 30, 2005 and 2004, respectively.
NOTE 16 – STATEMENT OF CASH FLOWS
Supplemental disclosure of significant
non-cash transactions
As a result of stock option exercises, the Company
recorded tax benefits of $19.7 million, $19.3 million and
$7.9 million during fiscal 2005, 2004 and 2003, respec-
tively, which are included in additional paid-in capital in the
accompanying consolidated financial statements.
As of June 30, 2005, and 2004, the Company had a
current liability and an equal and offsetting decrease in
long-term debt of $2.9 million and $12.5 million, respec-
tively, reflecting the fair market value of an interest rate
swap which was classified as a fair value hedge of the
6% Senior Notes (see Note 8).
As of June 30, 2005, the Company had a current liability
with an equal and offsetting increase in goodwill of $37.7
million related to an expected payment to be made in fiscal
2006 to satisfy an earn-out provision related to the Com-
pany’s acquisition of Jo Malone Limited in October 1999,
which payment may be satisfied by the issuance of a note
to the seller. In addition, in fiscal 2005, the Company had
acquired $10.9 million of machinery and equipment
through capital lease arrangements, of which the related
liability is included in short-term and long-term debt.
NOTE 17– SEGMENT DATA AND
RELATED INFORMATION
Reportable operating segments, as defined by SFAS No.
131, “Disclosures about Segments of an Enterprise and
Related Information,” include components of an enterprise
about which separate financial information is available that
is evaluated regularly by the chief operating decision
maker (the “Chief Executive”) in deciding how to allocate
resources and in assessing performance. As a result of the
similarities in the manufacturing, marketing and distribu-
tion processes for all of the Company’s products, much of
the information provided in the consolidated financial
statements is similar to, or the same as, that reviewed
on a regular basis by the Chief Executive. Although
the Company operates in one business segment, beauty
products, management also evaluates performance on
a product category basis.
While the Company’s results of operations are also
reviewed on a consolidated basis, the Chief Executive
reviews data segmented on a basis that facilitates compari-
son to industry statistics. Accordingly, net sales, deprecia-
tion and amortization, and operating income are available
with respect to the manufacture and distribution of skin
care, makeup, fragrance, hair care and other products.
These product categories meet the FASB’s definition of
operating segments and, accordingly, additional financial
data are provided below. The “other” segment includes the
sales and related results of ancillary products and services
that do not fit the definition of skin care, makeup, fragrance
and hair care.
The Company evaluates segment performance based
upon operating income, which represents earnings before
income taxes, minority interest, net interest expense and
discontinued operations. The accounting policies for each
of the reportable segments are the same as those
described in the summary of significant accounting poli-
cies, except for depreciation and amortization charges,
which are allocated, primarily, based upon net sales. The
assets and liabilities of the Company are managed centrally
and are reported internally in the same manner as the con-
solidated financial statements; thus, no additional informa-
tion is produced for the Chief Executive or included herein.
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