Estee Lauder 2012 Annual Report Download - page 156

154 THE EST{E LAUDER COMPANIES INC.
Deferred Compensation
The Company accrues for deferred compensation and
interest thereon, and for the increase in the value of share
units pursuant to agreements with certain key executives
and outside directors. The amounts included in the
accompanying consolidated balance sheets under these
plans were $66.6 million and $65.8 million as of June 30,
2012 and 2011, respectively. The expense for fiscal 2012,
2011 and 2010 was $8.4 million, $9.9 million and $1.7
million, respectively.
NOTE 14 — COMMITMENTS AND CONTINGENCIES
Contractual Obligations
The following table summarizes scheduled maturities of the Company’s 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.
(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 $304.9 million in fiscal 2012, $290.9 million in fiscal 2011 and
$272.8 million in fiscal 2010.
(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 the Company’s 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 for information regarding unrecognized tax benefits. As of June 30, 2012, the noncurrent portion of the Company’s
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.
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
litigation and legal proceedings will not have a material
adverse effect upon the Company’s results of operations,
financial condition or cash flows. However, manage-
ment’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 determinations by judges,
juries or other finders of fact which are not in accord with
management’s evaluation of the possible liability or
outcome of such litigation or proceedings. Except as
disclosed below, reasonably possible losses in addition to
the amounts accrued for litigation and other legal pro-
ceedings are not material to the Company’s consolidated
financial statements.
During the fiscal 2007 fourth quarter, the former
owner of the Darphin brand initiated litigation in the Paris
Commercial Court against the Company and one of its
subsidiaries seeking to recover €60.0 million ($75.5 mil-
lion at the exchange rate at June 30, 2012) that he claims
he was owed as additional consideration for the sale of
Darphin to the Company in April 2003. On December 23,
2011, the Paris Commercial Court issued its judgment,
awarding the former owner €22.9 million ($28.8 million at