Estee Lauder 2008 Annual Report Download - page 71

THE EST{E LAUDER COMPANIES INC. 69
higher treasury stock repurchases in the prior year, which
were partially funded by the issuance of long-term debt.
Also contributing to the change in net cash used for
financing activities was an increase in outstanding
commercial paper, partially offset by lower cash infl ows
from stock option exercises. The improvement in cash
fl ows used for fi nancing activities from fi scal 2006 to fi scal
2007 refl ected a net increase in short-term and long-term
borrowings and an increase in proceeds from employee
stock transactions, partially offset by increases in treasury
stock repurchases and an increase in dividends paid
to stockholders.
Dividends
On November 9, 2007, the Board of Directors declared
an annual dividend of $.55 per share on our Class A and
Class B Common Stock, of which an aggregate of $106.6
million was paid on December 27, 2007 to stockholders
of record at the close of business on December 7, 2007.
The annual common stock dividend declared during fi scal
2007 was $.50 per share, 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.
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 benefi ts based primarily on years of
service and employees’ earnings. In the United States, we
maintain a trust-based, noncontributory qualifi ed defi ned
benefi t pension plan (“U.S. Qualifi ed Plan”). Additionally,
we have an unfunded, non-qualified domestic non-
contributory pension plan to provide benefi ts in excess
of statutory limitations. Our international pension plans
are comprised of defi ned benefi t and defi ned contribu-
tion 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
minimum required by the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), and subse-
quent pension legislation, and is not more than the maxi-
mum amount deductible for income tax purposes. For
each international plan, our funding policies are deter-
mined 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
compensation. Approximately $91 million of the change
in deferred income taxes was offset by a correlative
change in noncurrent accrued income taxes refl ecting the
balance sheet presentation of unrecognized tax benefi ts
(see Note 9 of Notes to Consolidated Financial State-
ments for further discussion). These changes were par-
tially offset by the timing and level of payments on trade
payables in North America and higher accounts receiv-
able levels, primarily refl ecting the continuing signifi cant
sales growth from our international operations, which
carry longer customer payment terms.
The net decrease in operating cash fl ows from fi scal
2006 to fi scal 2007 refl ected higher domestic and interna-
tional inventory levels primarily driven by growth in new
and emerging international markets, increased regulatory
requirements and the building of safety stock for the
implementation of SAP as part of our Strategic Modern-
ization Initiative at our Aveda manufacturing facility. In
addition, the decrease in operating cash fl ows refl ected
higher accounts receivable balances, primarily related to
signifi cant sales growth from our international operations.
Cash fl ows were also impacted by cash payments made
during fiscal 2007 related to our fiscal 2006 cost
savings initiative. Partially offsetting the decrease was an
improvement in cash generated from net earnings from
continuing operations.
Net cash used for investing activities was $478.5 mil-
lion, $373.8 million and $303.2 million in fi scal 2008,
2007 and 2006. The increase during fi scal 2008 primarily
refl ected cash payments related to the acquisition of Ojon
Corporation and the exclusive rights to sell and distribute
Ojon products worldwide, and to a lesser extent, the
acquisition of an Aveda distributor. Capital expenditures
also increased from the prior year refl ecting incremental
spending for counters and the higher costs of technology
related to our continuing company-wide initiative to
upgrade our information systems. The increase in cash
fl ows used for investing activities from fi scal 2006 to fi scal
2007 primarily reflected capital expenditures, which
refl ected our company-wide initiative to upgrade our
information systems, as well as store improvements and
counter construction. Fiscal 2007 investing activities also
refl ected the purchase of the remaining equity interest in
Bumble and Bumble Products, LLC and Bumble and
Bumble, LLC, as well as the acquisition of businesses
engaged in the wholesale distribution and retail sale of
our products in the United States and other countries.
Cash used for fi nancing activities was $78.1 million,
$411.6 million and $594.6 million in fi scal 2008, 2007
and 2006, respectively. The fi scal 2008 improvement in
cash used for financing activities primarily reflected