Estee Lauder 2013 Annual Report Download - page 168

Other than
Pension Plans Pension Plans
U.S. International Post-retirement
2013 2012 2011 2013 2012 2011 2013 2012 2011
($ in millions)
Components of net periodic
benefit cost:
Service cost, net $ 33.8 $ 27.7 $ 25.8 $ 24.0 $ 22.3 $ 21.5 $ 4.3 $ 3.8 $ 3.8
Interest cost 26.6 29.8 27.8 17.9 18.8 19.5 7.8 8.6 7.8
Expected return on assets (45.2) (38.9) (34.7) (19.2) (21.1) (21.9) (2.0) (1.2) (0.5)
Amortization of:
Actuarial loss (gain) 14.5 7.9 9.7 9.3 4.9 5.8 4.4 1.9 1.7
Prior service cost 0.7 0.7 0.7 2.8 3.3 2.5 0.8 0.3 (0.1)
Transition (asset) obligation — — — (0.1) — — — — —
Settlements — — — 0.7 (0.3) 9.1 — — —
Curtailments — — — (0.2) — — — — —
Special termination benefits — — — 2.2 — — — — —
Net periodic benefit cost $ 30.4 $ 27.2 $ 29.3 $ 37.4 $ 27.9 $ 36.5 $15.3 $13.4 $12.7
Weighted-average assumptions
used to determine benefit
obligations at June 30
:
Discount rate 4.30– 3.90% 5.40% 1.00– 1.00– 1.25– 4.75– 3.70– 5.40–
4.90% 7.25% 7.00% 8.25% 8.75% 8.65% 8.75%
Rate of compensation increase 4.00– 4.00– 4.00– 1.00– 1.00– 2.00– N/A N/A N/A
12.00% 12.00% 12.00% 5.50% 6.00% 6.00%
Weighted-average assumptions
used to determine net
periodic benefit cost for
the year ended June 30:
Discount rate 3.90% 5.40% 5.30% 1.00– 1.25– 1.25– 3.70– 5.40– 5.30–
7.00% 8.25% 8.00% 8.65% 8.75% 9.00%
Expected return on assets 7.50% 7.75% 7.75% 2.25– 2.00– 2.50– 7.50% 7.75% 7.75%
7.00% 8.25% 8.00%
Rate of compensation increase 4.00– 4.00– 4.00– 1.00– 2.00– 2.00– N/A N/A N/A
12.00% 12.00% 12.00% 6.00% 6.00% 6.00%
20
1
3
$
33.
8
2
6
.
6
(45.2
)
14.
5
0
.
7
—
—
—
—
$
30.
4
4.
30
–
4
.90
%
4.
00
–
12.00
%
3.90
%
7
.50
%
4.
00–
12.00
%
20
13
$
24.
0
1
7.
9
(19.2
)
9
.
3
2.
8
(0.1
)
0
.
7
(0.2
)
2.2
$
37.
4
1
.
00–
7.25
%
1
.
00–
5.50
%
1
.
00–
7
.00
%
2
.
2
5–
7
.00
%
1.
00–
6.00
%
20
13
$
4.
3
7.
8
(2.0
)
4
.4
0.
8
—
—
—
—
$
15.3
4.7
5
–
8.75
%
N
/A
3
.7
0
–
8.65
%
7.50
%
N
/
A
The discount rate for each plan used for determining future net periodic benefit cost is based on a review of highly rated
long-term bonds. The discount rate for the Company’s Domestic Plans is based on a bond portfolio that includes only
long-term bonds with an Aa rating, or equivalent, from a major rating agency. As of June 30, 2013, the Company used an
above-mean yield curve, rather than the broad-based yield curve it used before, because it believes it represents a better
estimate of an effective settlement rate of the obligation, and the timing and amount of cash flows related to the bonds
included in this portfolio are expected to match the estimated defined benefit payment streams of the Company’s Domes-
tic Plans. For the Company’s international plans, the discount rate in a particular country was principally determined based
on a yield curve constructed from high quality corporate bonds in each country, with the resulting portfolio having a
duration matching that particular plan. In determining the long-term rate of return for a plan, the Company considers the
historical rates of return, the nature of the plan’s investments and an expectation for the plan’s strategies.
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. The
assumed weighted-average health care cost trend rate for the coming year is 6.51% while the weighted-average ultimate
trend rate of 4.56% is expected to be reached in approximately 15 years. A one-percentage-point change in assumed
health care cost trend rates for fiscal 2013 would have had the following effects:
One-Percentage-Point Increase One-Percentage-Point Decrease
(In millions)
Effect on total service and interest costs $ 1.3 $ (1.1)
Effect on post-retirement benefit obligations $12.4 $(11.1)
166 THE EST{E LAUDER COMPANIES INC.