Estee Lauder 2012 Annual Report Download - page 121

THE EST{E LAUDER COMPANIES INC. 119
For the U.S. Qualified Plan, we maintain an investment
strategy of matching the duration of a substantial portion
of the plan assets with the duration of the underlying plan
liabilities. This strategy assisted in maintaining a funded
ratio of more than 100% as of June 30, 2012. For fiscal
2012 and 2011, we met or exceeded all minimum contribu-
tion s required by ERISA for the U.S. Qualified Plan. These
cash contributions to the U.S. Qualified Plan totaled $75.6
million and $35.6 million during fiscal 2012 and 2011,
respectively. We made discretionary cash contributions to
our post-retirement medical plan in the United States of
$9.4 million and $8.4 million during fiscal 2012 and 2011,
respectively. As we continue to monitor the performance
of our plan assets, we may decide to make discretionary
cash contributions to the U.S. Qualified Plan or our post-
retirement plan in the United States during fiscal 2013,
but do not have plans to do so at this time.
For fiscal 2012 and 2011, we made benefit payments
under our non-qualified domestic noncontributory
pension plan of $6.6 million and $8.8 million, respectively.
We expect to make benefit payments under this plan
during fiscal 2013 of approximately $10.8 million. For
fiscal 2012 and 2011, we made cash contributions to our
international defined benefit pension plans of $29.7 mil-
lion and $34.1 million, respectively. We expect to make
contributions under these plans during fiscal 2013 of
approximately $24.7 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 financial condition.
For additional contingencies refer to “Note 14 —
Commitments and Contingencies” of Notes to Consolidated
Financial Statements.
Contractual Obligations
The following table summarizes scheduled maturities of our contractual obligations for which cash flows are fixed and
determinable as of June 30, 2012:
Payments Due in Fiscal
Total 2013 2014 2015 2016 2017 Thereafter
(In millions)
Debt service(1) $2,066.7 $ 286.2 $291.6 $ 46.6 $ 46.4 $346.3 $1,049.6
Operating lease commitments(2) 1,537.9 266.6 243.5 209.3 182.8 153.5 482.2
Unconditional purchase obligations(3) 2,178.6 1,130.0 213.1 197.5 185.0 114.5 338.5
Gross unrecognized tax benefits and
interest — current(4) 0.9 0.9 — — — — —
Total contractual obligations $5,784.1 $1,683.7 $748.2 $453.4 $414.2 $614.3 $1,870.3
(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 $64.4 million in fiscal 2013, $55.1 million in fiscal 2014, $46.2 million in each of the years
from fiscal 2015 through fiscal 2017 and $549.8 million thereafter. Projected interest costs on variable rate instruments were calculated using
market rates at June 30, 2012. Including the 2022 Senior Notes and 2042 Senior Notes and redemption of the 2013 Senior Notes, debt service
costs are projected to increase $247.2 million in fiscal 2013, decrease $223.9 million in fiscal 2014, increase $15.1 million in each of the years from
fiscal 2015 through fiscal 2017, and increase $768.2 million thereafter. Refer to “Note 10 — Debt” 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-
retirement benefit obligations, commitments pursuant to executive compensation arrangements, obligations related to our cost savings initiatives
and acquisitions. 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, 2012, without consideration for potential renewal periods.
(4) Refer to “Note 8 — Income Taxes” of Notes to Consolidated Financial Statements for information regarding unrecognized tax benefits. As of
June 30, 2012, the noncurrent portion of our unrecognized tax benefits, including related accrued interest and penalties was $106.2 million.
At this time, the settlement period for the noncurrent portion of the unrecognized tax benefits, including related accrued interest and penalties,
cannot be determined and therefore was not included.