Estee Lauder 2005 Annual Report Download - page 71

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THE EST{E LAUDER COMPANIES INC.
As of June 30, 2005, the Company had outstanding $246.3
million of 6% Senior Notes due January 2012 (“6% Senior
Notes”) consisting of $250.0 million principal, an unamor-
tized debt discount of $0.8 million, and a $2.9 million
adjustment to reflect the fair value of an outstanding inter-
est 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 con-
vert the fixed rate interest on its outstanding 6% Senior
Notes to variable interest rates based on six-month LIBOR.
As of June 30, 2005, the Company had outstanding
$197.4 million of 5.75% Senior Notes due October 2033
(“5.75% Senior Notes”) consisting of $200.0 million prin-
cipal and unamortized debt discount of $2.6 million.
Interest payments, which commenced April 15, 2004,
are required to be made semi-annually on April 15 and
October 15 of each year. In May 2003, in anticipation of
the issuance of the 5.75% Senior Notes, the Company
entered into a series of treasury lock agreements on a
notional amount totaling $195.0 million at a weighted aver-
age all-in rate of 4.53%. The treasury lock agreements were
settled upon the issuance of the new debt and the Com-
pany received a payment of $15.0 million that will be
amortized against interest expense over the life of the
5.75% Senior Notes. As a result of the treasury lock agree-
ments, the debt discount and debt issuance costs, the
effective interest rate on the 5.75% Senior Notes will be
5.395% over the life of the debt.
Effective July 1, 2003, the Company adopted SFAS
No. 150, “Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity” (“SFAS
No. 150”). In connection with this pronouncement, the
Company’s cumulative redeemable preferred stock was
reclassified as a component of total debt and the related
dividends thereon have been characterized as interest
expense. On June 28, 2005, the Company received a
notice of exercise of the put right from the holder of the
remaining $68.4 million of the 2015 Preferred Stock, which
requires the Company to purchase the preferred stock,
plus any cumulative and unpaid dividends thereon, on or
before October 26, 2005. The Company plans to purchase
the preferred stock on that date and to pay the anticipated
dividends through that date of $0.5 million at a rate based
on the after-tax yield on six-month U.S. Treasuries of
2.10%, which was reset on July 1, 2005.
The Company has a $750.0 million commercial paper
program under which it may issue commercial paper in the
United States. The Company’s commercial paper is cur-
rently rated A-1 by Standard & Poor’s and P-1 by Moody’s.
The Company’s long-term credit ratings are A+ with a
stable outlook by Standard & Poor’s and A1 with a stable
outlook by Moody’s. At June 30, 2005, the Company had
$148.0 million of commercial paper outstanding at an
average interest rate of 3.08%.
Effective May 27, 2005, the Company entered into a
five-year $600 million senior revolving credit facility, expir-
ing on May 27, 2010. The new facility replaced its prior,
unused $400 million revolving credit facility, which was
effective since June 28, 2001. The new revolving credit
70
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
2005 2004 2005 2004 2005 2004
(In millions)
6.00% Senior Notes, due January 15, 2012 $246.3 $236.6 $— $— $—$—
5.75% Senior Notes, due October 15, 2033 197.4 197.3 ————
1.45% Japan loan payable, due on
March 28, 2006 27.2 27.6 ————
2015 Preferred Stock 68.4 68.4 ————
Other long-term borrowings 7.4 —————
Other short-term borrowings 20.0 5.4 ——152.3 167.9
Commercial paper 148.0 ———602.0 750.0
Revolving credit facility ——600.0 400.0 ——
Shelf registration for debt securities ————300.0 300.0
714.7 535.3 $600.0 $400.0 $1,054.3 $1,217.9
Less short-term debt including current maturities
(263.6) (73.8)
$451.1 $461.5
UncommittedCommitted