Estee Lauder 2011 Annual Report Download - page 113

THE EST{E LAUDER COMPANIES INC. 111
Twelve Months Ended June 30, 2011(1)
($ in millions)
Consolidated EBITDA:
Net earnings attributable to
The Estée Lauder Companies Inc. $ 700.8
Add:
Provision for income taxes 321.7
Interest expense, net(2) 63.9
Depreciation and amortization(3) 298.1
Extraordinary non-cash charges(4) (5) 47.4
Less:
Extraordinary non-cash gains(5) —
$1,431.9
Consolidated Interest Expense:
Interest expense, net $ 63.9
Interest expense coverage ratio 22 to 1
(1) In accordance with the Prior Facility, this period represents the four
most recent quarters.
(2) Includes interest expense, net and interest expense on debt
extinguishment.
(3) Excludes amortization of debt discount, and derivative and debt
issuance costs as they are already included in interest expense, net.
(4) Includes goodwill and other intangible asset impairments and
non-cash charges associated with restructuring activities.
(5) As provided for in the Prior Facility.
We have a fixed rate promissory note agreement with
a financial institution pursuant to which we may borrow
up to $150.0 million in the form of loan participation
notes through one of our subsidiaries in Europe. The inter-
est rate on borrowings under this agreement is at an all-in
fixed rate determined by the lender and agreed to by
us at the date of each borrowing. At June 30, 2011,
no borrowings were outstanding under this agreement.
Debt issuance costs incurred related to this agreement
were de minimis.
We have an overdraft borrowing agreement with a
financial institution pursuant to which our subsidiary in
Turkey may be credited to satisfy outstanding negative
daily balances arising from its business operations. The
total balance outstanding at any time shall not exceed
40.0 million Turkish lira ($24.6 million at the exchange
rate at June 30, 2011). The interest rate applicable to each
such credit shall be up to a maximum of 175 basis points
per annum above the spot rate charged by the lender or
the lender’s floating call rate agreed to by us at each bor-
rowing. There were no debt issuance costs incurred
related to this agreement. The outstanding balance at
June 30, 2011 ($8.2 million at the exchange rate at June
30, 2011) is classified as short-term debt in our consoli-
dated balance sheet.
We have a 1.5 billion Japanese yen ($18.7 million at
the exchange rate at June 30, 2011) revolving credit
facility that expires on March 31, 2012. The interest rate
on borrowings under this credit facility is based on TIBOR
(Tokyo Interbank Offered Rate) plus .75% and the facility
fees incurred on the undrawn balance is 25 basis points.
At June 30, 2011, no borrowings were outstanding under
this facility.
Total debt as a percent of total capitalization (exclud-
ing noncontrolling interest) decreased to 32% at June 30,
2011 from 39% at June 30, 2010, primarily as a result of
the increase in stockholders’ equity, driven by higher net
earnings during fiscal 2011.
Cash Flows
Net cash provided by operating activities was $1,027.0
million, $956.7 million and $696.0 million in fiscal 2011,
2010 and 2009, respectively. Cash flows from operating
activities increased in fiscal 2011 as compared with fiscal
2010, primarily reflecting the increase in net earnings and
the timing and level of accrued income taxes. This
increase was partially offset by an increase in accounts
receivable balances due to timing of collections, as well as
lower levels of accounts payable due to timing of pay-
ments and an increase in inventory in line with forecasted
sales activity and to ensure acceptable levels of service.
The increase in operating cash flows in fiscal 2010 as
compared with fiscal 2009 primarily reflected higher net
earnings, an increase in accounts payable due to the tim-
ing of payments and, to a lesser extent, a decrease in
accounts receivable. This increase also reflected higher
accrued employee compensation and advertising, mer-
chandising and sampling, partially offset by higher cash
paid in fiscal 2010 for restructuring and severance. These
changes were partially offset by the building of safety
stock for the April 2010 implementation of SAP at our
North American manufacturing plants, the fiscal 2009
impact of significant inventory reductions, and higher dis-
cretionary pension contributions. Approximately $60 mil-
lion of the change in deferred income taxes was offset by
a correlative change in noncurrent accrued income taxes,
reflecting the balance sheet presentation of unrecognized
tax benefits.
Net cash used for investing activities was $606.9 mil-
lion, $281.4 million and $339.5 million in fiscal 2011, 2010
and 2009, respectively. The increase in cash flows used
for investing activities as compared with fiscal 2010 pri-
marily reflected the July 2010 acquisition of Smashbox
Beauty Cosmetics, as well as higher cash payments for
counters and computer hardware and software. The
decrease in investing cash outflows during fiscal 2010 as
compared with fiscal 2009 primarily reflected lower
acquisition activity in fiscal 2010 as compared with the
acquisitions of Applied Genetics Incorporated Dermatics