Estee Lauder 2008 Annual Report Download - page 101

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Other than
Pension Plans Pension Plans
U.S. International Post-retirement
2008 2007 2006 2008 2007 2006 2008 2007 2006
($ in millions)
Components of net periodic
benefi t cost
:
Service cost, net $ 19.7 $ 18.4 $ 21.5 $ 17.1 $ 16.2 $ 16.2 $ 3.8 $ 4.1 $ 5.1
Interest cost 26.2 25.0 21.2 15.1 12.8 10.8 6.2 5.9 5.6
Expected return on assets (31.7) (28.7) (24.9) (15.3) (13.8) (12.1) — — —
Amortization of:
Transition (asset) obligation — — — 0.1 0.1 0.1 — — —
Prior service cost 0.7 0.6 0.8 0.3 0.3 0.2 — — —
Actuarial loss (gain) 1.7 1.7 6.1 5.9 7.8 8.3 0.1 0.2 1.3
Settlements and curtailments
— — — 0.7 0.5 (0.7) — — —
Acquisitions, divestitures,
adjustments — — — — (1.7) — — — —
Special termination benefi ts — — — 1.2 1.6 0.3 — — —
Net periodic benefi t cost $ 16.6 $ 17.0 $ 24.7 $ 25.1 $ 23.8 $ 23.1 $10.1 $10.2 $12.0
Weighted-average assumptions
used to determine benefi t
obligations at June 30:
Pre-retirement discount rate 6.75% 6.25% 6.25% 2.00– 2.25– 2.25– 6.25– 5.50– 5.75–
9.00% 6.25% 6.25% 6.75% 6.25% 6.25%
Post-retirement discount rate 5.00% 5.25% 5.25% 2.00– 2.25– 2.25– 6.25– 5.50– 5.75–
9.00% 5.75% 5.75% 6.75% 6.25% 6.25%
Rate of compensation increase 4.00– 3.00– 3.00– 1.75– 1.75– 1.75– N/A N/A N/A
12.00% 9.50% 9.50% 6.00% 5.00% 5.00%
Weighted-average assumptions
used to determine net
periodic benefi t cost for
the year ending June 30:
Pre-retirement discount rate 6.25% 6.25% 5.25% 2.25– 2.25– 1.75– 5.50– 5.75– 5.25%
8.25% 6.25% 5.50% 6.25% 6.25%
Post-retirement discount rate 5.25% 5.25% 4.75% 2.25– 2.25– 1.75– 5.50– 5.75– 5.25%
8.25% 5.75% 5.50% 6.25% 6.25%
Expected return on assets 7.75% 7.75% 7.75% 3.00– 2.75– 2.75– N/A N/A N/A
8.25% 7.25% 7.50%
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% 6.00% 5.00% 5.00%
The pre-retirement discount rate for each plan used for determining future net periodic benefi t cost is based on a review
of highly rated long-term bonds. The pre-retirement rate for the Company’s U.S. 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 believes the
timing and amount of cash fl ows related to the bonds included in this portfolio is expected to match the estimated defi ned
benefi t payment streams of its U.S. Plans. 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 signifi cant effect on the amounts reported for the health care plans. The
assumed weighted-average health care cost trend rate for the coming year is 9.34% while the ultimate trend rate of 5.00%
is expected to be reached in fi scal 2016. A one-percentage-point change in assumed health care cost trend rates for fi scal
2008 would have had the following effects:
One-Percentage-Point Increase One-Percentage-Point Decrease
(In millions)
Effect on total service and interest costs $ 1.2 $(1.1)
Effect on post-retirement benefi t obligations $10.9 $(9.8)
THE EST{E LAUDER COMPANIES INC. 99