Estee Lauder 2003 Annual Report Download - page 70

THEEST{E LAUDER COMPANIES INC.69
recorded to reflect the tax benefits of the losses not uti-
lized to date. A full valuation allowance has been provided
since, in the opinion of management, it is more likely than
not that the deferred tax assets will not be realized.
Earnings before income taxes and minority interest
include amounts contributed by the Company’s inter-
national operations of $393.1 million, $283.4 million and
$307.2 million for fiscal 2003, 2002 and 2001, respectively.
Some of these earnings are taxed in the United States.
NOTE 7 – OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following:
JUNE 30 2003 2002
(In millions)
Advertising and promotional accruals $266.2 $213.5
Employee compensation 195.9 169.9
Restructuring and special charges 46.5 61.2
Other 195.4 182.0
$704.0 $626.6
NOTE 8 – DEBT
The Company’s short-term and long-term debt and available financing consist of the following:
Debt at June 30
Available financing at June 30
2003 2002 2003 2002 2003 2002
(In millions)
Commercial paper with an average interest rate
of 1.81% in fiscal 2002 $— $130.0 $— $— $ 750.0 $620.0
6% Senior Notes, due January 15, 2012 257.1 248.9 ————
2% Japan loan payable, due in installments
through April 2003 —5.8 ————
1.45% Japan loan payable, due on March 28, 2006 25.2 25.0 ————
Other long-term borrowings 1.3 —————
Other short-term borrowings 7.8 0.8 ——156.6 22.9
Revolving credit facility ——400.0 400.0 ——
Shelf registration for debt securities ————500.0 150.0
291.4 410.5 $400.0 $400.0 $1,406.6 $792.9
Less current maturities (7.8) (6.6)
$283.6 $403.9
UncommittedCommitted
Historically, outstanding commercial paper had been clas-
sified as long-term debt based upon the Company’s intent
and ability to refinance maturing commercial paper on a
long-term basis. It is the Company’s policy to maintain
backup facilities to support the commercial paper pro-
gram and its classification as long-term debt. During
fiscal 2003, the Company repaid all of its outstanding
commercial paper obligations.
As of June 30 2003, the Company had outstanding
$257.1 million of 6% Senior Notes due January 2012
(“6% Senior Notes”) consisting of $250.0 million princi-
pal, an unamortized debt discount of $1.0 million, and an
$8.1 million adjustment to reflect the fair value of an out-
standing interest rate swap. The 6% 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 of each
year.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 our
outstanding 6% Senior Notes to variable interest rates
based on LIBOR.
During fiscal 1998, the Company entered into a 2%
loan payable in Japan. Principal repayments of 350.0 mil-
lion yen, approximately $2.9 million at current rates, were
made semi-annually through 2003. As of June 30, 2003,
this loan had been repaid.
As of June 30, 2003, other long-term borrowings con-
sisted primarily of several term loans held by the Darphin
group of companies, which was acquired by the Com-
pany in April 2003 (see Note 4). These loans have various
maturities through July 2007 with variable and fixed inter-
est rates ranging from 2.5% to 5.8%.
The Company maintains uncommitted credit facilities
in various regions throughout the world. Interest rate
terms for these facilities vary by region and reflect
prevailing market rates for companies with strong credit
ratings. During fiscal 2003 and 2002, the monthly average