Estee Lauder 2005 Annual Report Download - page 76

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THE EST{E LAUDER COMPANIES INC.
Other than
Pension Plans Pension Plans
2005 2004 2003 2005 2004 2003 2005 2004 2003
($ in millions)
Components of net periodic
benefit cost:
Service cost, net $ 19.3 $ 16.9 $ 15.1 $ 11.3 $10.4 $ 8.5 $3.5 $3.2 $ 2.2
Interest cost 21.2 20.0 21.2 9.8 8.3 8.1 4.2 3.8 3.2
Expected return on assets (24.1) (20.6) (18.3) (11.2) (9.9) (9.2) ———
Amortization of:
Transition (asset) obligation —— (1.5) —0.3 0.3 ———
Prior service cost 0.5 0.5 0.2 1.2 0.3 0.2 ———
Actuarial loss (gain) 4.6 6.2 5.1 4.0 3.3 1.5 0.2 0.3 (0.1)
Special termination benefits
———2.0 1.5 — ———
Settlements and curtailments
——— —0.7 2.3 ———
Net periodic benefit cost $ 21.5 $ 23.0 $ 21.8 $ 17.1 $14.9 $11.7 $7.9 $7.3 $ 5.3
Weighted-average assumptions
used to determine benefit
obligations at June 30:
Pre-retirement discount rate 5.25% 6.00% 5.75% 1.75– 2.25– 2.25– 5.25% 6.00% 5.75%
5.25% 6.00% 6.00%
Postretirement discount rate 4.75% 5.00% 4.75% 1.75– 2.25– 2.25– 5.25% 6.00% 5.75%
5.25% 6.00% 6.00%
Rate of compensation increase
3.00– 3.00– 3.00– 1.75– 1.75– 1.75– N/A N/A N/A
9.50% 9.50% 9.50% 4.50% 4.00% 3.75%
Weighted-average assumptions
used to determine net
periodic benefit cost for the
year ending June 30:
Pre-retirement discount rate 6.00% 5.75% 7.00% 2.25– 2.25– 2.75– 6.00% 5.75% 7.00%
6.00% 6.00% 7.00%
Postretirement discount rate 5.00% 4.75% 5.75% 2.25– 2.25– 2.75– 6.00% 5.75% 7.00%
6.00% 6.00% 7.00%
Expected return on assets 7.75% 8.00% 8.50% 3.25– 3.25– 4.50– N/A N/A N/A
7.50% 7.50% 8.25%
Rate of compensation increase
3.00– 3.00– 4.50– 1.75– 1.75– 1.75– N/A N/A N/A
9.50% 9.50% 11.00% 4.00% 3.75% 4.00%
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 12.20% while the ultimate trend rate of 4.50%
is expected to be reached in fiscal 2015. A one-percentage-point change in assumed health care cost trend rates for fiscal
2005 would have had the following effects:
One-Percentage-Point Increase One-Percentage-Point Decrease
(In millions)
Effect on total service and interest costs $ 1.1 $(1.0)
Effect on postretirement benefit obligations $10.1 $(9.1)
PostretirementInternationalU.S.
75