Estee Lauder 2010 Annual Report Download - page 131

130 THE EST{E LAUDER COMPANIES INC.
accompanying consolidated balance sheet at present value
using effective rates of 5.11% and 5.42%, respectively.
The Company has a $750.0 million commercial paper
program under which it may issue commercial paper in
the United States. At June 30, 2010, there was no com-
mercial paper outstanding.
As of June 30, 2010, the Company had an overdraft
borrowing agreement with a financial institution pursuant
to which its subsidiary in Turkey may be credited to satisfy
outstanding negative daily balances arising from its busi-
ness operations. The total balance outstanding at any time
shall not exceed 40.0 million Turkish lira ($25.3 million at
the exchange rate at June 30, 2010). The interest rate
applicable to each such credit shall be up to a maximum
of 175 basis points per annum above the spot rate charged
by the lender or the lender’s floating 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, 2010 ($4.6 million at
the exchange rate at June 30, 2010) is classified as short-
term debt on the Company’s consolidated balance sheet.
As of June 30, 2010, the Company had a fixed rate
promissory note agreement with a financial institution
pursuant to which the Company may borrow up to $150.0
million in the form of loan participation notes through
one of its subsidiaries in Europe. The interest rate on bor-
rowings under this agreement is at an all-in fixed rate
determined by the lender and agreed to by the Company
at the date of each borrowing. At June 30, 2010, no bor-
rowings were outstanding under this agreement. Debt
issuance costs incurred related to this agreement were
de minimis.
As of June 30, 2010, the Company had a 1.5 billion
Japanese yen ($16.9 million at the exchange rate at
June 30, 2010) revolving credit facility that expires on
March 31, 2011 and a 1.5 billion Japanese yen ($16.9 mil-
lion at the exchange rate at June 30, 2010) revolving
credit facility that expires on March 31, 2012. The interest
rates on borrowings under these credit facilities are based
on TIBOR (Tokyo Interbank Offered Rate) plus .45% and
.75%, respectively, and the facility fees incurred on
undrawn balances are 15 basis points and 25 basis points,
respectively. At June 30, 2010, no borrowings were out-
standing under these facilities.
The Company has 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 the Company’s commercial paper program, to
repurchase shares of its common stock and for general
million principal and an unamortized debt discount of
$0.1 million. The 2013 Senior Notes, when issued in
November 2008, were priced at 99.932% with a yield of
7.767%. Interest payments are required to be made semi-
annually on May 1 and November 1.
As of June 30, 2010, the Company had outstanding
$118.3 million of 2012 Senior Notes consisting of $120.0
million principal, an unamortized debt discount of $0.1
million, and a $1.6 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
payments 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 fixed rate interest 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 classified 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
counterparty. Hedge accounting treatment was discontin-
ued prospectively 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.
On May 24, 2010, the Company completed a cash ten-
der offer for $130.0 million principal amount of its 2012
Senior Notes at a price of 108.500% of the principal
amount and for $69.9 million principal amount of its 2013
Senior Notes at a tender price of 118.813% of the princi-
pal amount. During the fourth quarter of fiscal 2010, the
Company recorded a pre-tax expense on the extinguish-
ment of debt of $27.3 million representing the tender
premium of $24.2 million, the pro-rata write-off of $2.4
million of unamortized terminated interest rate swap, issu-
ance costs and debt discount, and $0.7 million in tender
offer costs associated with both series of notes.
The purchase price related to the July 2007 acquisition
of Ojon Corporation included (i) a promissory note due
July 31, 2009 with a notional value of $7.0 million and
capitalized interest of $0.7 million, bearing interest at
10.00% due at maturity, which was paid as of June 30,
2010 and (ii) a promissory note due August 31, 2012 with
a notional amount of $13.5 million, of which a payment of
$6.7 million was made during January 2010, and unamor-
tized premium of $0.5 million (present value of $7.3 mil-
lion at June 30, 2010), bearing interest at 10.00% payable
annually on July 31. These notes were recorded in the