Estee Lauder 2008 Annual Report Download - page 98

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96 THE EST{E LAUDER COMPANIES INC.
Information regarding the Company’s interest rate swap agreements is presented in the following table:
YEAR ENDED OR AT JUNE 30, 2008 YEAR ENDED OR AT JUNE 30, 2007
Notional Weighted Average Notional Weighted Average
Amount Pay Rate Receive Rate Amount Pay Rate Receive Rate
($ in millions)
Interest rate swaps on 2017 Senior Notes $250.0 3.17% 5.55% $250.0 5.70% 5.55%
YEAR ENDED OR AT JUNE 30, 2008
Amount Pay Rate Receive Rate
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of fi nancial instruments for
which it is practicable to estimate that value:
Cash and cash equivalents:
The carrying amount approximates fair value, primarily because of the short maturity of cash equivalent instruments.
Investment securities:
Investment securities are primarily designated as available-for-sale securities and are recorded at market value based on
quoted market prices.
Note receivable:
The fair value of the note receivable refl ects the creditworthiness of the counterparty, interest rates prevailing in the market
for notes with comparable remaining maturities and an assessment of the ultimate collectability of the instrument.
Short-term and long-term debt:
The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the
same remaining maturities. To a lesser extent, debt also includes capital lease obligations for which the carrying amount
approximates the fair value.
Foreign exchange and interest rate contracts:
The fair value of forwards, swaps and options is the estimated amount the Company would receive or pay to terminate
the agreements based on quoted market prices at June 30.
The estimated fair values of the Company’s fi nancial instruments are as follows:
JUNE 30, 2008 JUNE 30, 2007
Carrying Amount Fair Value Carrying Amount Fair Value
(In millions)
Nonderivatives
Cash and cash equivalents $ 401.7 $ 401.7 $ 253.7 $ 253.7
Investment securities(1) 15.8 15.8 17.3 17.3
Note receivable(1) — — 11.1 11.1
Short-term and long-term debt 1,196.9 1,159.9 1,088.5 1,082.0
Derivatives
Foreign currency forward contracts —
asset (liability) (2.0) (2.0) (0.4) (0.4)
Foreign currency option contracts —
asset (liability) 3.5 3.5 — —
Interest rate swap contracts —asset (liability) 10.8 10.8 (8.6) (8.6)
JUNE 30, 2008
Carrying Amount Fair Value
(1) The fi scal 2008 carrying amount and fair value included an increase in valuation reserves refl ecting the diminishing likelihood of realizing value
from a promissory note and convertible preferred stock received in connection with the fi scal 2006 divestiture of the reporting unit that marketed
and sold Stila products.