Estee Lauder 2007 Annual Report Download - page 72

rate interest on its outstanding 2017 Senior Notes to
variable interest rates based on six-month LIBOR.
As of June 30, 2007, the Company had outstanding
$239.7 million of 2012 Senior Notes consisting of $250.0
million principal, an unamortized debt discount of $0.5
million, and a $9.8 million adjustment to reflect the
remaining termination value of an interest rate swap. The
2012 Senior Notes, when issued in January 2002, were
priced at 99.538% with a yield of 6.062%. Interest pay-
ments are required to be made semi-annually on January
15 and July 15. In May 2003, the Company entered into
an interest rate swap agreement with a notional amount
of $250.0 million to effectively convert the fi xed rate inter-
est on its outstanding 2012 Senior Notes to variable
interest rates based on six-month LIBOR. In April 2007,
the Company terminated this interest rate swap. The
instrument, which was classifi ed as a liability, had a fair
value of $11.1 million at cash settlement, which included
$0.9 million of accrued interest payable to the counter-
party. Hedge accounting treatment was discontinued pro-
spectively and the offsetting adjustment to the carrying
amount of the related debt will be amortized to interest
expense over the remaining life of the debt.
As of June 30, 2007, the Company had outstanding
$197.4 million of 2033 Senior Notes consisting of $200.0
million principal and unamortized debt discount of $2.6
million. The 2033 Senior Notes, when issued in September
2003, were priced at 98.645% with a yield of 5.846%.
Interest payments are required to be made semi-annually
on April 15 and October 15. 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
2033 Senior Notes. As a result of the treasury lock agree-
ments, the debt discount and debt issuance costs, the
effective interest rate on the 2033 Senior Notes will be
5.395% over the life of the debt.
In October 2006, the Company entered into an
overdraft borrowing agreement with a fi nancial institution
pursuant to which its subsidiary in Turkey may be credited
to satisfy outstanding negative daily balances arising from
its business operations. The total balance outstanding at
any time shall not exceed 20.0 million Turkish lira. The
interest rate applicable to each such credit shall be 40
basis points per annum above the spot rate charged by
the lender or the lender’s fl oating call rate agreed to by
the Company at each borrowing. There were no debt
issuance costs incurred related to this agreement. The
outstanding balance at June 30, 2007 ($9.4 million at the
exchange rate at June 30, 2007) is classifi ed as short-term
debt on the Company’s consolidated balance sheet.
In March 2006, the Company entered into a 3.0 billion
yen revolving credit facility that expires on March 24,
2009. The interest rate on borrowings under the credit
facility is based on TIBOR (Tokyo Interbank Offered Rate)
and a 10 basis point facility fee is incurred on the undrawn
balance. The Company borrowed 3.0 billion yen under
the new facility on March 28, 2006 to repay the previ-
ously outstanding 1.45% Japan term loan that matured on
that date. At June 30, 2007, the Company did not have
any borrowings outstanding under this facility.
In May 2006, the Company entered into a fi xed rate
promissory note agreement with a fi nancial institution for
the primary purpose of funding cash dividend repatria-
tions from certain of its international affiliates to the
United States as permitted by the AJCA. Under the agree-
ment, the Company may borrow up to $150.0 million in
the form of loan participation notes through one of the
Company’s subsidiaries in Europe. The interest rate on
borrowings under this agreement will be an all-in fi xed
rate determined by the lender and agreed to by the
Company at the date of each borrowing. Debt issuance
costs incurred related to this agreement were de minimis.
At June 30, 2007, the Company did not have any borrow-
ings outstanding under this agreement.
The Company has a $750.0 million commercial paper
program under which it may issue commercial paper in
the United States. The Company’s commercial paper is
currently rated A-1 by Standard & Poor’s and P-1 by
Moody’s. The Company’s long-term credit ratings are A
with a stable outlook by Standard & Poor’s and A2 with a
stable outlook by Moody’s. At June 30, 2007, the
Company had $26.5 million of commercial paper out-
standing, due at various dates through July 2007 at an
average interest rate of 5.40%, which may be refi nanced
on a periodic basis as it matures at then-prevailing market
interest rates.
Effective April 2007, the Company entered into a
$750.0 million senior unsecured revolving credit facility,
expiring on April 26, 2012, primarily to provide credit sup-
port for its commercial paper program, to repurchase
shares of its common stock and for general corporate pur-
poses. The new facility replaced the Company’s prior,
undrawn $600.0 million senior unsecured revolving credit
facility, which was effective since May 27, 2005. Up to the
equivalent of $250 million of the facility is available for
multi-currency loans. The interest rate on borrowings
under the credit facility is based on LIBOR or on the
higher of prime, which is the rate of interest publicly
announced by the administrative agent, or 1 /2% plus the
THE EST{E LAUDER COMPANIES INC. 71