Estee Lauder 2008 Annual Report Download - page 95

Notes, when issued in May 2007, were priced at 99.845%
with a yield of 5.570%. Interest payments are required to
be made semi-annually on May 15 and November 15. In
April 2007, the Company entered into interest rate swap
agreements with a notional amount totaling $250.0
million to effectively convert the fi xed rate interest on its
outstanding 2017 Senior Notes to variable interest rates
based on six-month LIBOR.
As of June 30, 2008, the Company had outstanding
$242.0 million of 2012 Senior Notes consisting of $250.0
million principal, an unamortized debt discount of $0.4
million, and a $7.6 million adjustment to reflect the
remaining termination value of an interest rate swap. The
2012 Senior Notes, when issued in January 2002, were
priced at 99.538% with a yield of 6.062%. Interest pay-
ments are required to be made semi-annually on January
15 and July 15. In May 2003, the Company entered into
an interest rate swap agreement with a notional amount
of $250.0 million to effectively convert the fi xed rate inter-
est on its outstanding 2012 Senior Notes to variable inter-
est rates based on six-month LIBOR. In April 2007, the
Company terminated this interest rate swap. The instru-
ment, which was classifi ed as a liability, had a fair value of
$11.1 million at cash settlement, which included $0.9 mil-
lion of accrued interest payable to the counterparty.
Hedge accounting treatment was discontinued prospec-
tively and the offsetting adjustment to the carrying
amount of the related debt will be amortized to interest
expense over the remaining life of the debt.
In July 2007, the Company acquired Ojon Corporation.
As part of the purchase price, the Company issued (i) a
promissory note due July 31, 2009 with a notional value
of $7.0 million (present value of $7.4 million at June 30,
2008), bearing interest at 10.00% due at maturity and
(ii) a promissory note due August 31, 2012 with a notional
amount of $13.5 million (present value of $15.7 million at
June 30, 2008), bearing interest at 10.00% payable annu-
ally on July 31. The notes due in 2009 and 2012 were
recorded in the accompanying consolidated balance
sheet at present value using effective rates of 5.11% and
5.42%, respectively.
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
currently 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 A2 with a
stable outlook by Moody’s. At June 30, 2008, the
Company had $83.9 million of commercial paper out-
standing, due at various dates through July 2008 at an
average interest rate of 2.24%, which may be refi nanced
on a periodic basis as it matures at then-prevailing market
interest rates.
As of June 30, 2008, the Company had an overdraft
borrowing agreement with a fi nancial institution pursuant
to which its subsidiary in Turkey may be credited to satisfy
outstanding negative daily balances arising from its
business operations. The total balance outstanding at any
time shall not exceed 20.0 million Turkish lira. The interest
rate applicable to each such credit shall be 40 basis points
per annum above the spot rate charged by the lender or
the lender’s fl oating call rate agreed to by the Company at
each borrowing. There were no debt issuance costs
incurred related to this agreement. The outstanding bal-
ance at June 30, 2008 ($13.1 million at the exchange rate
at June 30, 2008) is classifi ed as short-term debt on the
Company’s consolidated balance sheet.
As of June 30, 2008, the Company had a fi xed rate
promissory note agreement with a fi nancial institution
pursuant to which the Company may borrow up to $150.0
million in the form of loan participation notes through one
of its subsidiaries in Europe. The interest rate on borrow-
ings under this agreement is at an all-in fixed rate
determined by the lender and agreed to by the Company
at the date of each borrowing. At June 30, 2008, no bor-
rowings were outstanding under this agreement. Debt
ssuance costs incurred related to this agreement were
de minimis.
As of June 30, 2008, the Company had a 3.0 billion
yen revolving credit facility that expires on March 24,
2009. The interest rate on borrowings under the credit
facility is based on TIBOR (Tokyo Interbank Offered Rate)
and a 10 basis point facility fee is incurred on the undrawn
balance. At June 30, 2008, the Company did not have any
borrowings outstanding under this facility.
The Company has an undrawn $750.0 million senior
unsecured revolving credit facility that expires on April 26,
2012. This facility may be used primarily to provide credit
support for the Company’s commercial paper program, to
repurchase shares of its common stock and for general
corporate purposes. Up to the equivalent of $250 million
of the credit facility is available for multi-currency loans.
The interest rate on borrowings under the credit facility is
based on LIBOR or on the higher of prime, which is the
rate of interest publicly announced by the administrative
agent, or 1/2% plus the Federal funds rate. The Company
incurred costs of approximately $0.3 million to establish
the facility which will be amortized over the term of the
THE EST{E LAUDER COMPANIES INC. 93