Estee Lauder 2014 Annual Report Download - page 101

THE EST{E LAUDER COMPANIES INC. 99
NOTE 13 — 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, 2014:
Payments Due in Fiscal
Total 2015 2016 2017 2018 2019 Thereafter
(In millions)
Debt service(1) $2,330.6 $ 79.7 $ 68.0 $ 364.8 $ 44.7 $ 44.6 $1,728.8
Operating lease commitments(2) 2,010.6 291.7 274.0 240.5 215.9 190.6 797.9
Unconditional purchase obligations(3) 2,280.1 1,091.6 437.3 430.5 243.7 37.8 39.2
Gross unrecognized tax benefits
and interest — current(4) 1.1 1.1 — — — — —
Total contractual obligations $6,622.4 $1,464.1 $779.3 $1,035.8 $504.3 $273.0 $2,565.9
(1) Includes long-term and current debt and the related projected interest costs, and to a lesser extent, capital lease commitments. Interest costs on
long-term and current debt are projected to be $61.3 million in each of the years from fiscal 2015 through fiscal 2017, $44.6 million in fiscal 2018 and
fiscal 2019 and $728.7 million thereafter. Projected interest costs on variable rate instruments were calculated using market rates at June 30, 2014.
Refer to Note 9 — 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 $356.1 million, $332.4 million and $304.9 million in fiscal 2014, 2013 and 2012, respectively.
(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 acqui-
sitions. 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, 2014, without consideration for potential renewal periods.
(4) Refer to Note 7 — Income Taxes for information regarding unrecognized tax benefits. As of June 30, 2014, the noncurrent portion of the Company’s
unrecognized tax benefits, including related accrued interest and penalties was $69.5 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.
401(k) Savings Plan (U.S.)
The Company’s 401(k) Savings Plan (“Savings Plan”) is a
contributory defined contribution plan covering substan-
tially all regular U.S. employees who have completed the
hours and service requirements, as defined by the plan
document. Regular full-time employees are eligible to par-
ticipate in the Savings Plan thirty days following their date
of hire. The Savings Plan is subject to the applicable provi -
sions of ERISA. The Company matches a portion of the
participant’s contributions after one year of service under
a predetermined formula based on the participant’s con-
tribution level. The Company’s contributions were $33.3
million, $25.1 million and $23.6 million for fiscal 2014,
2013 and 2012, respectively. Shares of the Company’s
Class A Common Stock are not an investment option in
the Savings Plan and the Company does not use such
shares to match participants’ contributions.
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 $69.0 million and $72.1 million as of June 30,
2014 and 2013, respectively. The expense for fiscal 2014,
2013 and 2012 was $10.6 million, $12.2 million and $8.4
million, respectively.
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, management’s assess-
ment 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 liti-
gation or proceedings. Except as disclosed below, reason-
ably possible losses in addition to the amounts accrued
for litigation and other legal proceedings are not material
to the Company’s consolidated financial statements.