Estee Lauder 2007 Annual Report Download - page 50

THE EST{E LAUDER COMPANIES INC. 49
graphics, mortality rates, the number of participants
electing to take lump-sum distributions, investment
performance and funding decisions.
For fiscal 2007 and 2006, there was no minimum
contribution to the U.S. Qualifi ed Plan required by ERISA.
During the first quarter of fiscal 2007, the Pension
Protection Act of 2006 was adopted into law in the
United States. Certain provisions of this law changed the
calculation related to the maximum contribution amount
deductible for income tax purposes. As a result of these
provisions, we made discretionary contributions totaling
$20.0 million to the U.S. Qualifi ed Plan during fi scal 2007.
We did not make any cash contributions pursuant to the
plan during fi scal 2006. During fi scal 2008, we expect to
make cash contributions totaling $20.0 million to the U.S.
Qualifi ed Plan.
For fi scal 2007 and 2006, we made benefi t payments
under our non-qualified domestic noncontributory
pension plan of $5.3 million and $7.4 million, respectively.
We expect to make benefi t payments under this plan dur-
ing fi scal 2008 of $11.7 million. For fi scal 2007 and 2006,
we made cash contributions to our international defi ned
benefi t pension plans of $24.0 million and $25.7 million,
respectively. We expect to make contributions under
these plans during fi scal 2008 of $21.0 million.
In September 2006, the Financial Accounting Standards
Board (“FASB”) issued SFAS No. 158, “Employers’
Accounting for Defi ned Benefi t Pension and Other Post-
retirement Plans, an amendment of FASB Statements
No. 87, 106, and 132(R)” (“SFAS No. 158”). SFAS No. 158
requires employers to recognize a net liability or asset and
an offsetting adjustment to accumulated other compre-
hensive income to report the funded status of defi ned
benefi t pension and other postretirement benefi t plans.
Previous standards required employers to disclose the
complete funded status of its plans only in the notes to
the fi nancial statements. Changes in the funded status of
these plans will be recognized as they occur through
other comprehensive income. Additional minimum
liability adjustments are no longer recognized upon adop-
tion of SFAS No. 158. As of June 30, 2007, we prospec-
tively adopted the balance sheet recognition provisions of
SFAS No. 158. Additionally, SFAS No. 158 requires
employers to measure plan assets and obligations at their
year-end balance sheet date. Our principal pension and
post-retirement benefi t plans are measured as of June 30;
therefore, the measurement provisions of SFAS No. 158
did not affect our existing valuation practices. The adop-
tion of SFAS No. 158 did not impact the consolidated
statements of earnings or our fi nancial debt covenant. As
of June 30, 2007, we recognized other assets of $128.0
credit facility that we entered into in March 2006. The
net cash used for financing activities in fiscal 2005
primarily reflected common stock repurchases 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.
Dividends
On October 25, 2006, the Board of Directors declared an
annual dividend of $.50 per share on our Class A and
Class B Common Stock, of which an aggregate of $103.6
million was paid on December 27, 2006 to stockholders
of record at the close of business on December 8, 2006.
The annual common stock dividend declared during fi scal
2006 was $.40 per share, of which an aggregate of $85.4
million was paid on December 28, 2005 to stockholders
of record at the close of business on December 9, 2005.
Dividends on the 2015 Preferred Stock were $0.5 million
for fi scal 2006 and were characterized as interest expense
in the accompanying consolidated statement of earnings.
2015 Preferred Stock was redeemed in October 2005.
Pension Plan Funding and Expense
We maintain pension plans covering substantially all
of our full-time employees for our U.S. operations and
a majority of our international operations. Several
plans provide pension benefits based primarily on
years of service and employees’ earnings. In the United
States, we maintain a trust-based, noncontributory quali-
fi ed defi ned benefi t pension plan (“U.S. Qualifi ed Plan”).
Additionally, we have an unfunded, non-qualifi ed domes-
tic noncontributory pension plan to provide benefi ts in
excess of statutory limitations. Our international pension
plans are comprised of defined benefit and defined
contribution plans.
Several factors infl uence our annual funding require-
ments. For the U.S. Qualifi ed Plan, our funding policy
consists of annual contributions at a rate that provides for
future plan benefi ts and maintains appropriate funded
percentages. Such contribution is not less than the mini-
mum required by the Employee Retirement Income Secu-
rity Act of 1974, as amended (“ERISA”), and subsequent
pension legislation, and is not more than the maximum
amount deductible for income tax purposes. For each
international plan, our funding policies are determined by
local laws and regulations. In addition, amounts necessary
to fund future obligations under these plans could vary
depending on estimated assumptions (as detailed in
“Critical Accounting Polices and Estimates”). The effect of
our pension plan funding on future operating results will
depend on economic conditions, employee demo-