Estee Lauder 2008 Annual Report Download - page 104

Legal Proceedings
The Company is involved, from time to time, in litigation
and other legal proceedings incidental to its business.
Management believes that the outcome of current litiga-
tion and legal proceedings will not have a material adverse
effect upon the Company’s results of operations or fi nan-
cial condition. However, management’s assessment of the
Company’s current litigation and other legal proceedings
could change in light of the discovery of facts with respect
to legal actions or other proceedings pending against the
Company not presently known to the Company or deter-
minations by judges, juries or other fi nders of fact which
are not in accord with management’s evaluation of the pos-
sible liability or outcome of such litigation or proceedings.
In 1999, the Offi ce of the Attorney General of the State
of New York (the “State”) notifi ed the Company and ten
other entities that they had been identifi ed as potentially
responsible parties (“PRPs”) with respect to the Blyden-
burgh landfi ll in Islip, New York. Each PRP may be jointly
and severally liable for the costs of investigation and
cleanup, which the State estimated in 2006 to be approx-
imately $19.7 million for all PRPs. In 2001, the State sued
other PRPs (including Hickey’s Carting, Inc., Dennis C.
Hickey and Maria Hickey, collectively the “Hickey
Parties”), in the U.S. District Court for the Eastern District
of New York to recover such costs in connection with the
site, and in September 2002, the Hickey Parties brought
contribution actions against the Company and other
Blydenburgh PRPs. These contribution actions seek to
recover, among other things, any damages for which the
Hickey Parties are found liable in the State’s lawsuit
against them, and related costs and expenses, including
attorneys’ fees. In June 2004, the State added the Com-
pany and other PRPs as defendants in its pending case
against the Hickey Parties. In April 2006, the Company
and other defendants added numerous other parties to
the case as third-party defendants. The Company and cer-
tain other PRPs have engaged in settlement discussions
which to date have been unsuccessful. Settlement nego-
tiations with the new third-party defendants, the State, the
Company and other defendants began in July 2006. The
Company has accrued an amount which it believes would
be necessary to resolve its share of this matter. If settle-
ment discussions are not successful, the Company intends
to vigorously defend the pending claims. While no assur-
ance can be given as to the ultimate outcome, manage-
ment believes that the resolution of the Blydenburgh
matters will not have a material adverse effect on the
Company’s consolidated fi nancial condition.
102 THE EST{E LAUDER COMPANIES INC.
NOTE 15 — COMMITMENTS AND CONTINGENCIES
Contractual Obligations
The following table summarizes scheduled maturities of the Company’s contractual obligations for which cash fl ows are
fi xed and determinable as of June 30, 2008:
Payments Due in Fiscal
Total 2009 2010 2011 2012 2013 Thereafter
(In millions)
Debt service(1) $2,192.2 $ 176.6 $ 70.4 $ 61.1 $309.8 $ 56.8 $1,517.5
Operating lease commitments(2) 1,338.5 200.8 180.9 156.0 132.6 119.3 548.9
Unconditional purchase obligations(3) 2,081.2 1,157.0 228.4 191.3 158.4 150.0 196.1
Gross unrecognized tax benefi ts and
interest — current(4) 75.7 75.7 — — — — —
Total contractual obligations $5,687.6 $1,610.1 $479.7 $408.4 $600.8 $326.1 $2,262.5
(1) Includes long-term and short-term debt and the related projected interest costs, and to a lesser extent, capital lease commitments. Interest costs
on long-term and short-term debt are projected to be $57.6 million in fi scal 2009, $58.8 million in fi scal 2010, $57.4 million in each of the
years from fi scal 2011 through fi scal 2012, $42.5 million in fi scal 2013 and $713.8 million thereafter. Projected interest costs on variable rate
instruments were calculated using market rates at June 30, 2008. Refer to Note 11.
(2) Total rental expense included in the accompanying consolidated statements of earnings was $230.8 million in fi scal 2008, $201.6 million in fi scal
2007 and $182.9 million in fi scal 2006.
(3) Unconditional purchase obligations primarily include inventory commitments, estimated future earn-out payments, estimated royalty payments
pursuant to license agreements, advertising commitments, capital improvement commitments, planned funding of pension and other
post- retirement benefi t obligations, commitments pursuant to executive compensation arrangements and obligations related to the Company’s
cost savings initiative. Future earn-out payments and future royalty and advertising commitments were estimated based on planned future sales for
the term that was in effect at June 30, 2008, without consideration for potential renewal periods.
(4) Refer to Note 9 for information regarding unrecognized tax benefi ts. During the fourth quarter of fi scal 2008, the Company made a cash payment
of $35.0 million to the U.S. Treasury as an advance deposit, which is not refl ected as a reduction to the $75.7 million. As of June 30, 2008, the
noncurrent portion of the Company’s unrecognized tax benefi ts, including related accrued interest and penalties was $177.3 million. At this time,
the settlement period for the noncurrent portion of the unrecognized tax benefi ts, including related accrued interest and penalties, cannot be
determined and therefore was not included.