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66 THE EST{E LAUDER COMPANIES INC.
For fiscal 2014 and 2013, we made benefit payments
under our non-qualified domestic noncontributory pen-
sion plan of $7.2 million and $6.1 million, respectively. We
expect to make benefit payments under this plan during
fiscal 2015 of approximately $14.4 million. For fiscal 2014
and 2013, we made cash contributions to our inter-
national defined benefit pension plans of $27.9 million
and $25.9 million, respectively. We expect to make contri-
butions under these plans during fiscal 2015 of approxi-
mately $24.0 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 13 —
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, 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” 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, 2014, without consideration for potential renewal periods.
(4) Refer to “Note 7 — Income Taxes” of Notes to Consolidated Financial Statements for information regarding unrecognized tax benefits. As of June 30,
2014, the noncurrent portion of our 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.
Derivative Financial Instruments and
Hedging Activities
We address certain financial exposures through a con-
trolled program of risk management that includes the use
of derivative financial instruments. We enter into foreign
currency forward contracts and may enter into option
contracts to reduce the effects of fluctuating foreign
currency exchange rates and interest rate derivatives to
manage the effects of interest rate movements on our
aggregate liability portfolio. We also enter into foreign
currency forward contracts and may use option contracts,
not designated as hedging instruments, to mitigate the
change in fair value of specific assets and liabilities on the
balance sheet. We do not utilize derivative financial instru-
ments for trading or speculative purposes. Costs associ-
ated with entering into these derivative financial
instruments have not been material to our consolidated
financial results.
For each derivative contract entered into where we
look to obtain hedge accounting treatment, we formally