Estee Lauder 2007 Annual Report Download - page 80

401(k) Savings Plan (U.S.)
The Company’s 401(k) Savings Plan (“Savings Plan”) is a
contributory defi ned contribution plan covering substan-
tially all regular U.S. employees who have completed the
hours and service requirements, as defi ned by the plan
document. Regular full-time employees are eligible to par-
ticipate in the Savings Plan on the fi rst day of the second
month following their date of hire. During fi scal 2007, the
Savings Plan was enhanced to accelerate new regular full-
time employee eligibility, to increase the rate of Company
contributions and to provide an automatic enrollment
feature. The Savings Plan is subject 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. The Company’s contributions were
approximately $13.7 million, $10.6 million and $9.8 mil-
lion for the fi scal years ended June 30, 2007, 2006 and
2005, respectively. 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 $69.6 million and $71.0 million as of June 30,
2007 and 2006. The expense for fi scal 2007, 2006 and
2005 was $8.5 million, $11.6 million and $10.2 million,
respectively.
NOTE 11 — POST-EMPLOYMENT BENEFITS
OTHER THAN TO RETIREES
The Company provides certain post-employment benefi ts
to eligible former or inactive employees and their depen-
dents during the period subsequent to employment but
prior to retirement. These benefi ts include health care cov-
erage and severance benefi ts. The cost of providing these
benefi ts is accrued and any incremental benefi ts were not
material to the Company’s consolidated fi nancial results.
NOTE 12 — COMMON STOCK
As of June 30, 2007, 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
outstanding is as follows:
Class A Class B
(Shares in thousands)
Balance at June 30, 2004 134,514.1 93,012.9
Acquisition of treasury stock (10,720.0) —
Conversion of Class B to Class A 5,372.0 (5,372.0)
Stock-based compensation 3,497.3 —
Balance at June 30, 2005 132,663.4 87,640.9
Acquisition of treasury stock (11,216.3) —
Conversion of Class B to Class A 2,335.0 (2,335.0)
Stock-based compensation 2,673.0 —
Balance at June 30, 2006 126,455.1 85,305.9
Acquisition of treasury stock (22,477.6) —
Conversion of Class B to Class A 3,501.1 (3,501.1)
Stock-based compensation 5,044.8 —
Balance at June 30, 2007 112,523.4 81,804.8
On September 18, 1998, the Company’s Board of Direc-
tors 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 trans-
actions, 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 million in both May 2005 and February
2007, increasing the total authorization under the share
repurchase program to 68.0 million shares. As of June 30,
2007, approximately 61.1 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. The repurchase was part of the program
described in the previous paragraph.
Accelerated Share Repurchase Program
In March 2007, the Company repurchased approximately
15,960,800 shares of its outstanding Class A Common
Stock for $750.0 million through an accelerated share
repurchase program with a fi nancial counterparty. These
shares were accounted for as treasury stock, carried at
cost, and refl ected as a reduction to stockholders’ equity.
The financial counterparty is expected to purchase
shares for its own account in the open market over a
period ending no later than October 2007. At the end of
that period, the Company will receive or pay a price
adjustment based on the volume weighted average price
THE EST{E LAUDER COMPANIES INC. 79