Estee Lauder 2010 Annual Report Download - page 102

THE EST{E LAUDER COMPANIES INC. 101
cost of our revolving credit facility as discussed below.
Downgrades in our credit ratings may reduce our ability
to issue commercial paper and/or long-term debt and
would likely increase the relative costs of borrowing. A
credit rating is not a recommendation to buy, sell, or hold
securities, is subject to revision or withdrawal at any time
by the assigning rating organization, and should be evalu-
ated independently of any other rating. As of August 13,
2010, our commercial paper is rated A-1 by Standard &
Poor’s and P-1 by Moody’s and our long-term debt is
rated A with a stable outlook by Standard & Poor’s and
A2 with a stable outlook by Moody’s.
expenditures, potential stock repurchases, commitments
and other contractual obligations on both a near-term and
long-term basis.
The effects of inflation have not been significant to our
overall operating results in recent years. Generally, we
have been able to introduce new products at higher prices
or increase prices sufficiently to offset cost increases,
which have been moderate.
Credit Ratings
Changes in our credit ratings will likely result in changes in
our borrowing costs. Our credit ratings also impact the
Debt
At June 30, 2010, our outstanding borrowings were as follows:
Long-term Debt Short-term Debt Total Debt
($ in millions)
6.00% Senior Notes, due May 15, 2037 (“2037 Senior Notes”)(1)(7) $ 296.3 $ — $ 296.3
5.75% Senior Notes, due October 15, 2033 (“2033 Senior Notes”)(2) 197.6 — 197.6
5.55% Senior Notes, due May 15, 2017 (“2017 Senior Notes”)(3)(7) 338.3 — 338.3
7.75% Senior Notes, due November 1, 2013 (“2013 Senior Notes”)(4)(7) 230.0 — 230.0
6.00% Senior Notes, due January 15, 2012 (“2012 Senior Notes”)(5) 118.3 — 118.3
Promissory note due August 31, 2012(6) 7.3 — 7.3
Turkish lira overdraft facility — 4.6 4.6
Other borrowings 17.2 18.8 36.0
$1,205.0 $23.4 $1,228.4
(1) Consists of $300.0 million principal and unamortized debt discount of $3.7 million.
(2) Consists of $200.0 million principal and unamortized debt discount of $2.4 million.
(3) Consists of $300.0 million principal, unamortized debt discount of $0.4 million and a $38.7 million adjustment to reflect the fair value of outstanding
interest rate swaps.
(4) Consists of $230.1 million principal and unamortized debt discount of $0.1 million.
(5) Consists of $120.0 million principal, unamortized debt discount of $0.1 million and a $1.6 million adjustment to reflect the remaining termination
value of an interest rate swap that is being amortized to interest expense over the life of the debt.
(6) Consists of $6.8 million face value and unamortized premium of $0.5 million. On July 30, 2010, we repaid $3.4 million (plus $0.7 million of accrued
interest) at the request of the holder.
(7) As of June 30, 2010, we were in compliance with all restrictive covenants, including limitations on indebtedness and liens, and expect continued
compliance.
We have a $750.0 million commercial paper program
under which we may issue commercial paper in the
United States. At June 30, 2010, there was no commercial
paper outstanding. We also have $189.5 million in addi-
tional uncommitted credit facilities, of which $10.3 million
was used as of June 30, 2010. We do not anticipate diffi-
culties in securing this form of working capital financing.
We have an undrawn $750.0 million senior unsecured
revolving credit facility that expires on April 26, 2012. This
facility may be used primarily to provide credit support for
our commercial paper program, to repurchase shares of
our common stock and for general corporate purposes.
Up to the equivalent of $250 million of the credit 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 Federal funds rate. We incurred costs of approxi-
mately $0.3 million to establish the facility which will be
amortized over the term of the facility. The credit facility
has an annual fee of $0.4 million, payable quarterly, based
on our current credit ratings. This facility also contains a
cross-default provision whereby a failure to pay other
material financial obligations in excess of $50.0 million
(after grace periods and absent a waiver from the lenders)
would result in an event of default and the acceleration of
the maturity of any outstanding debt under this facility. As
of June 30, 2010, we were in compliance with all related
financial and other restrictive covenants, including limita-
tions on indebtedness and liens, and expect continued
compliance. The financial covenant of this facility requires
an interest expense coverage ratio of greater than 3:1 as