Estee Lauder 2009 Annual Report Download - page 148

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 determi-
nations 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 Par-
ties”), 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. Settlement negotia-
tions with the new third-party defendants, the State, the
Company and other defendants began in July 2006 and
have resulted in a proposed consent decree to resolve the
case. The consent decree requires court approval, which
the parties are seeking. The Company has accrued an
THE EST{E LAUDER COMPANIES INC. 147
NOTE 14 — 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, 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.
(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. Such amounts have not been material to total rent expense. Total rental
expense included in the accompanying consolidated statements of earnings was $250.6 million in fi scal 2009, $230.8 million in fi scal 2008 and
$201.6 million in fi scal 2007.
(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 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 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 $78.5 million. As of June 30, 2009, the
noncurrent portion of the Company’s 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.