Estee Lauder 2013 Annual Report Download - page 166

which is based on an income approach. The significant
observable inputs to the model, such as swap yield curves
and currency spot and forward rates, were obtained from
an independent pricing service. To determine the fair
value of contracts under the model, the difference
between the contract price and the current forward rate
was discounted using LIBOR for contracts with maturities
up to 12 months, and swap yield curves for contracts with
maturities greater than 12 months.
NOTE 12 — PENSION, DEFERRED COMPENSATION
AND POST-RETIREMENT 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 service and employees’ earnings. In certain instances,
the Company adjusts benefits in connection with inter-
national employee transfers.
Retirement Growth Account Plan (U.S.)
The Retirement Growth Account Plan is a trust-based,
noncontributory qualified defined benefit pension plan.
The Company’s funding policy consists of contributions at
a rate that provides for future plan benefits and maintains
appropriate funded percentages. Such contribution is
not less than the minimum required by the Employee
Retirement Income Security Act of 1974 (“ERISA”), as
amended, 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, non-qualified
domestic noncontributory pension Restoration Plan
to provide benefits in excess of Internal Revenue Code
limitations.
Current and long-term debt — The fair value of the
Company’s debt was estimated based on the current rates
offered to the Company for debt with the same remaining
maturities. To a lesser extent, debt also includes capital
lease obligations for which the carrying amount approxi-
mates the fair value. The Company’s debt is classified
within Level 2 of the valuation hierarchy.
The estimated fair values of the Company’s financial
instruments are as follows:
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. The Company’s
most significant defined benefit pension obligations are
included in the plan summaries below.
Post-retirement Benefit Plans
The Company maintains a domestic post-retirement ben-
efit 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 par-
ticipation 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 and to provide
discretionary funding for the future liability up to the max-
imum amount deductible for income tax purposes.
Certain of the Company’s international subsidiaries
and affiliates have post-retirement plans, although most
participants are covered by government-sponsored or
administered programs.
164 THE EST{E LAUDER COMPANIES INC.
JUNE 30, 2013 JUNE 30, 2012
Carrying Amount Fair Value Carrying Amount Fair Value
(In millions)
Nonderivatives
Cash and cash equivalents $1,495.7 $1,495.7 $1,347.7 $1,347.7
Available-for-sale securities 6.5 6.5 5.9 5.9
Note receivable 16.8 16.9 ——
Current and long-term debt 1,344.3 1,387.8 1,288.1 1,478.9
Derivatives
Foreign currency forward contracts — asset 12.6 12.6 11.5 11.5
JU
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