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104 THE EST{E LAUDER COMPANIES INC.
Other than
Pension Plans Pension Plans
U.S. International Post-retirement
2015 2014 2013 2015 2014 2013 2015 2014 2013
($ in millions)
Components of net periodic
benefit cost:
Service cost $ 31.7 $ 31.6 $ 33.8 $ 23.8 $ 24.8 $ 24.0 $ 3.3 $ 3.4 $ 4.3
Interest cost 30.4 31.2 26.6 17.3 19.1 17.9 7.6 8.0 7.8
Expected return on assets (50.1) (46.8) (45.2) (21.5) (20.8) (19.2) (2.3) (2.0) (2.0)
Amortization of:
Actuarial loss (gain) 9.8 7.4 14.5 10.4 9.2 9.3 1.5 0.8 4.4
Prior service cost 0.6 0.7 0.7 2.1 2.9 2.8 0.8 0.8 0.8
Transition (asset) obligation — — — — — (0.1) — — —
Settlements — — — (0.5) 0.6 0.7 — — —
Curtailments — — — (0.9) — (0.2) — — —
Special termination benefits — — — 0.5 — 2.2 — — —
Net periodic benefit cost $ 22.4 $ 24.1 $ 30.4 $ 31.2 $ 35.8 $ 37.4 $10.9 $11.0 $15.3
Weighted-average assumptions
used to determine benefit
obligations at June 30:
Discount rate 3.70– 3.60– 4.30– .75– .50– 1.00– 4.25– 4.10– 4.75–
4.40% 4.30% 4.90% 7.00% 6.75% 7.25% 9.00% 9.00% 8.75%
Rate of compensation increase
3.00– 3.00– 4.00– 0– 1.00– 1.00– N/A N/A N/A
7.00% 7.00% 12.00% 5.50% 5.50% 5.50%
Weighted-average assumptions
used to determine net
periodic benefit cost for
the year ended June 30:
Discount rate 3.60– 4.30– 3.90% .50– 1.00– 1.00– 4.10– 4.75– 3.70–
4.30% 4.90% 6.75% 7.25% 7.00% 9.00% 8.75% 8.65%
Expected return on assets 7.50% 7.50% 7.50% 2.00– 2.25– 2.25– 7.50% 7.50% 7.50%
6.75% 7.25% 7.00%
Rate of compensation increase
3.00– 4.00– 4.00– 1.00– 1.00– 1.00– N/A N/A N/A
7.00% 12.00% 12.00% 5.50% 5.50% 6.00%
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. The Company used an above-mean yield curve
which represents an estimate of the 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 Domestic Plans. For the Company’s international plans, the discount rate in a particular country was principally
deter mined based on a yield curve constructed from high quality corporate bonds in each country, with the resulting port folio
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 investment 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 6.85% while the weighted-average ultimate
trend rate of 4.54% is expected to be reached in approximately 13 years. A one-percentage-point change in assumed health
care cost trend rates for fiscal 2015 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 $ (1.0)
Effect on post-retirement benefit obligations $15.1 $(10.1)