Estee Lauder 2002 Annual Report Download - page 69

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The estimated fair values of the Company’s financial instruments are as follows:
JUNE 30, 2002 JUNE 30, 2001
Carrying Amount Fair Value Carrying Amount Fair Value
(In millions)
Nonderivatives
Cash and cash equivalents $546.9 $546.9 $346.7 $346.7
Long-term debt,including current portion 410.5 415.6 416.5 418.1
Cumulative redeemable preferred stock 360.0 374.9 360.0 362.6
Derivatives
Foreign exchange and interest rate contracts (14.8) (14.8) (2.5) (2.5)
THEEST{E LAUDER COMPANIES INC.
Cumulative redeemable preferred stock:
The fair value of the cumulative redeemable preferred
stock is estimated utilizing a cash flow analysis at a
discount rate equal to rates available for debt with terms
similar to the preferred stock.
Foreign exchange and interest rate contracts:
The fair value of forwards, swaps and options is the
estimated amount the Company would receive or pay to
terminate the agreements.
68
NOTE 10 – PENSION, DEFERRED COMPENSATION
AND POSTRETIREMENT BENEFIT PLANS
The Company maintains pension plans covering substan-
tially all of its full-time employees for its U.S. operations
and a majority of its international operations. Several plans
provide pension benefits based primarily on years of
service and employees’ earnings. In certain instances, the
Company adjusts benefits in connection with international
employee transfers.
Retirement Growth Account Plan (U.S.)
The Retirement Growth Account Plan is a trust-based,
noncontributory defined benefit pension plan. The Com-
pany’s funding policy consists of an annual contribution
at a rate that provides for future plan benefits and main-
tains appropriate funded percentages. Such contribution
is not less than the minimum required by the Employee
Retirement Income Security Act of 1974, as amended
(“ERISA”) and subsequent pension legislation and is not
more than the maximum amount deductible for income
tax purposes.
Restoration Plan (U.S.)
The Company also has an unfunded, nonqualified domes-
tic benefit Restoration Plan to provide benefits in excess
of Internal Revenue Code limitations.
International Pension Plans
The Company maintains International Pension Plans, the
most significant of which are defined benefit pension
plans. The Company’s funding policies for these plans are
determined by local laws and regulations.
Postretirement Benefits
The Company maintains a domestic contributory post-
retirement benefit plan which provides certain medical
and dental benefits to eligible employees. Employees
hired after January 1, 2002 will not be eligible for retiree
medical benefits when they retire. Retired employees
who are receiving monthly pension benefits are eligible
for participation in the plan. Contributions required and
benefits received by retirees and eligible family mem-
bers
are dependent on the age of the retiree. It is the
Company’s practice to fund these benefits as incurred.
The cost of the Company-sponsored programs is not
significant.
Certain of the Company’s international subsidiaries
and affiliates have postretirement plans, although most
participants are covered by government-sponsored or
administered programs.