Estee Lauder 2009 Annual Report Download - page 110

THE EST{E LAUDER COMPANIES INC. 109
continue to monitor the performance of our plan assets,
we may decide to make discretionary contributions.
For fi scal 2009 and 2008, we made benefi t payments
under our non-qualifi ed domestic noncontributory pen-
sion plan of $8.1 million and $7.7 million, respectively. We
expect to make benefi t payments under this plan during
fi scal 2010 of approximately $8 million. For fi scal 2009
and 2008, we made cash contributions to our inter-
national defi ned benefi t pension plans of $41.8 million
and $35.3 million, respectively. We expect to make
contributions under these plans during fi scal 2010 of
approximately $32 million.
Commitments and Contingencies
Certain of our business acquisition agreements include
“earn-out” provisions. These provisions generally require
that we pay to the seller or sellers of the business addi-
tional amounts based on the performance of the acquired
business. Since the size of each payment depends upon
performance of the acquired business, we do not expect
that such payments will have a material adverse impact on
our future results of operations or fi nancial condition.
For additional contingencies, refer to “Item 3. Legal
Proceedings.”
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 operat-
ing results will depend on economic conditions, employee
demographics, mortality rates, the number of participants
electing to take lump-sum distributions, investment per-
formance and funding decisions.
The unprecedented economic downturn during fi scal
2009 created a diffi cult investment environment. For the
U.S. Qualifi ed Plan, we maintain an investment strategy of
matching the duration of the plan assets with the duration
of the underlying plan liabilities. This strategy helped miti-
gate the negative effects of the downturn and assisted in
maintaining a funded ratio of more than 100% as of
June 30, 2009. For fi scal 2009 and 2008, there was no
minimum contribution to the U.S. Qualifi ed Plan required
by ERISA. We made discretionary contributions totaling
$17.0 million and $25.0 million to the U.S. Qualifi ed Plan
during fi scal 2009 and 2008, respectively. We do not
currently expect to make cash contributions to the
U.S. Qualifi ed Plan during fi scal 2010. However, as we
Contractual Obligations
The following table summarizes scheduled maturities of our contractual obligations for which cash fl ows are fi xed and
determinable as of June 30, 2009:
Payments Due in Fiscal
Total 2010 2011 2012 2013 2014 Thereafter
(In millions)
Debt service(1) $2,402.7 $ 110.9 $ 83.9 $327.9 $ 74.5 $347.7 $1,457.8
Operating lease commitments(2) 1,274.2 202.0 182.1 154.8 135.7 122.3 477.3
Unconditional purchase obligations(3) 1,659.9 831.9 234.4 173.1 162.1 56.0 202.4
Gross unrecognized tax benefi ts
and interest — current(4) 78.5 78.5 — — — — —
Total contractual obligations $5,415.3 $1,223.3 $500.4 $655.8 $372.3 $526.0 $2,137.5
(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 $76.5 million in fi scal 2010, $75.6 million in each of fi scal 2011 and fi scal 2012, $60.7 million
in fi scal 2013, $47.6 million in fi scal 2014 and $657.6 million thereafter. Projected interest costs on variable rate instruments were calculated using
market rates at June 30, 2009. Refer to Note 10 of Notes to Consolidated Financial Statements.
(2) Minimum operating lease commitments only include base rent. Certain leases provide for contingent rents that are not measurable at inception
and primarily include rents based on a percentage of sales in excess of stipulated levels, as well as common area maintenance. These amounts are
excluded from minimum operating lease commitments and are included in the determination of total rent expense when it is probable that the
expense has been incurred and the amount is reasonably measurable.
(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-retire-
ment benefi t obligations, commitments pursuant to executive compensation arrangements and obligations related to our cost savings initiatives.
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, 2009, without consideration for potential renewal periods.
(4) Refer to Note 8 of Notes to Consolidated Financial Statements for information regarding unrecognized tax benefi ts. During the fourth quarter of
fi scal 2008, we 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 $78.5
million. As of June 30, 2009, the noncurrent portion of our unrecognized tax benefi ts, including related accrued interest and penalties was $248.5
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.