Estee Lauder 2004 Annual Report Download - page 74

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THE EST{E LAUDER COMPANIES INC.
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 serv-
ice 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 noncontributory pension 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 postretirement
benefit plan which provides certain medical and dental
benefits to eligible employees. Employees hired after
January 1, 2002 are not eligible for retiree medical bene-
fits when they retire. Certain retired employees who are
receiving monthly pension benefits are eligible for partic-
ipation in the plan. Contributions required and benefits
received by retirees and eligible family members 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.
72
The estimated fair values of the Company’s financial instruments are as follows:
JUNE 30, 2004 JUNE 30, 2003
Carrying Amount Fair Value Carrying Amount Fair Value
(In millions)
Nonderivatives
Cash and cash equivalents $611.6 $611.6 $364.1 $364.1
Long-term debt, including current portion 535.3 545.5 291.4 320.9
Cumulative redeemable preferred stock —— 360.0 389.8
Derivatives
Forward exchange contracts 1.7 1.7 (6.5) (6.5)
Foreign currency option contracts 2.7 2.7 3.6 3.6
Interest rate swap contract (12.5) (12.5) 8.1 8.1
Treasury rate lock contracts —— 2.6 2.6