Estee Lauder 2004 Annual Report Download - page 70

THE EST{E LAUDER COMPANIES INC.
As of June 30, 2004 and 2003, certain international
subsidiaries had tax loss carryforwards for local tax pur-
poses of approximately $24.5 million and $14.7 million,
respectively. With the exception of $12.1 million of losses
with an indefinite carryforward period as of June 30,
2004, these losses expire at various dates through fiscal
2017. Deferred tax assets in the amount of $5.7 million
and $2.9 million as of June 30, 2004 and 2003, respec-
tively, have been recorded to reflect the tax benefits of
the losses not utilized to date. A full valuation allowance
has been provided for those deferred tax assets for which,
in the opinion of management, it is more likely than not
that the deferred tax assets will not be realized.
Earnings before income taxes and minority interest
include amounts contributed by the Company’s inter-
national operations of $523.0 million, $393.1 million
and $283.4 million for fiscal 2004, 2003 and 2002,
respectively. Some of these earnings are taxed in the
United States.
Furthermore, the Company provides tax reserves for
Federal, state and international exposures relating to audit
results, planning initiatives and compliance responsi-
bilities. The development of these reserves requires
judgments about tax issues, potential outcomes and
timing, and is a subjective critical estimate.
NOTE 7 – OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following:
JUNE 30 2004 2003
(In millions)
Advertising and promotional accruals $290.2 $276.0
Employee compensation 236.9 191.1
Restructuring and special charges 32.7 46.5
Other 311.7 190.4
$871.5 $704.0
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NOTE 8 – DEBT
The Company’s short-term and long-term debt and available financing consist of the following:
Debt at June 30
Available financing at June 30
2004 2003 2004 2003 2004 2003
(In millions)
6.00% Senior Notes, due January 15, 2012 $236.6 $257.1 $— $— $—$—
5.75% Senior Notes, due October 15, 2033 197.3 —————
1.45% Japan loan payable, due on
March 28, 2006 27.6 25.2 ————
2015 Preferred Stock 68.4 —————
Other long-term borrowings —1.3 ————
Other short-term borrowings 5.4 7.8 ——167.9 156.6
Commercial paper ————750.0 750.0
Revolving credit facility ——400.0 400.0 ——
Shelf registration for debt securities ————300.0 500.0
535.3 291.4 $400.0 $400.0 $1,217.9 $1,406.6
Less current maturities (73.8) (7.8)
$461.5 $283.6
UncommittedCommitted
In September 2003, the Company issued and sold $200.0
million of 5.75% Senior Notes due October 2033 (“5.75%
Senior Notes”) in a public offering. The 5.75% Senior
Notes were priced at 98.645% with a yield of 5.846%.
Interest payments, which commenced April 15, 2004,
are required to be made semi-annually on April 15 and
October 15 of each year. In May 2003, in anticipation of
the issuance of the 5.75% Senior Notes, the Company
entered into a series of treasury lock agreements on a
notional amount totaling $195.0 million at a weighted
average all-in rate of 4.53%. The treasury lock agreements
were settled upon the issuance of the new debt and the
Company received a payment of $15.0 million that will
be amortized against interest expense over the life of the
5.75% Senior Notes. As a result of the treasury lock agree-
ments, the debt discount and debt issuance costs, the
effective interest rate on the 5.75% Senior Notes will be
5.395% over the life of the debt.