Estee Lauder 2009 Annual Report Download - page 108

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 pub-
licly announced by the administrative agent, or
1
/ 2 % plus
the Federal funds rate. We incurred costs of approximately
$0.3 million to establish the facility which will be amor-
tized over the term of the facility. The credit facility has an
annual fee of $0.4 million, payable quarterly, based on our
current credit ratings. This facility also contains a cross-
default provision whereby a failure to pay other material
fi nancial obligations in excess of $50.0 million (after grace
periods and absent a waiver from the lenders) would
result in an event of default and the acceleration of the
maturity of any outstanding debt under this facility. As of
June 30, 2009, we were in compliance with all related
fi nancial and other restrictive covenants, including limita-
tions on indebtedness and liens, and expect continued
compliance. The fi nancial covenant of this facility requires
an interest expense coverage ratio of greater than 3:1 as
of the last day of each fi scal quarter. The interest expense
coverage ratio is defi ned in the credit agreement as the
ratio of Consolidated EBITDA (which does not represent
a measure of our operating results as defi ned under U.S.
generally accepted accounting principles) to Consolidated
Interest Expense and is calculated as stipulated in the
agreement as follows:
Twelve Months Ended June 30 2009(1)
($ in millions)
Consolidated EBITDA:
Net earnings $218.4
Add:
Provision for income taxes 115.9
Interest expense, net 75.7
Depreciation and amortization(2) 251.7
Extraordinary non-cash charges(3) 75.3
Less:
Extraordinary non-cash gains —
$737.0
Consolidated Interest Expense:
Interest expense, net $ 75.7
Interest expense coverage ratio 10 to 1
(1) In accordance with the credit agreement, this period represents the
four most recent quarters.
(2) Excludes amortization of debt discount, and derivative and debt
issuance costs as they are already included in Interest expense, net .
(3) Includes goodwill, intangible asset and other long-lived asset impair-
ments and non-cash charges associated with restructuring activities.
In November 2008, we issued and sold $300.0 million
of 7.75% Senior Notes due November 1, 2013
(“7.75% Senior Notes due 2013”) in a public offering.
The 7.75% Senior Notes due 2013 were priced at 99.932%
with a yield of 7.767%. Interest payments are required to
be made semi-annually on May 1 and November 1, com-
mencing May 1, 2009. The net proceeds of this offering
were used to repay then-outstanding commercial paper
balances upon their maturity.
The purchase price related to the July 2007 acquisition
of Ojon Corporation included (i) a promissory note due
July 31, 2009 with a notional value of $7.0 million and
capitalized interest of $0.7 million (present value of $7.7
million at June 30, 2009), 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 and unamortized
premium of $1.7 million (present value of $15.2 million at
June 30, 2009), bearing interest at 10.00% payable
annually on July 31. These notes were recorded in the
accompanying consolidated balance sheet at present
value using effective rates of 5.11% and 5.42%, respec-
tively. The note due July 31, 2009, and the related interest
thereon, was paid subsequent to year-end upon maturity.
We have a fi xed rate promissory note agreement with
a fi nancial institution pursuant to which we may borrow
up to $150.0 million in the form of loan participation notes
through one of our subsidiaries in Europe. The interest
rate on borrowings under this agreement is at an all-in
fi xed rate determined by the lender and agreed to by us
at the date of each borrowing. At June 30, 2009, no bor-
rowings were outstanding under this agreement. Debt
issuance costs incurred related to this agreement were
de minimis.
We have an overdraft borrowing agreement with a
fi nancial institution pursuant to which our 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
30.0 million Turkish lira ($19.6 million at the exchange rate
at June 30, 2009). The interest rate applicable to each
such credit shall be up to a maximum of 175 basis points
per annum above the spot rate charged by the lender or
the lender’s fl oating call rate agreed to by us at each bor-
rowing. There were no debt issuance costs incurred
related to this agreement. The outstanding balance at
June 30, 2009 ($12.5 million at the exchange rate at
June 30, 2009) is classifi ed as short-term debt in our
consolidated balance sheet. Subsequent to year-end, the
borrowing authorization under this facility was increased
to 40.0 million Turkish lira ($26.1 million at the exchange
rate at June 30, 2009).
Our 3.0 billion Japanese yen revolving credit facility
expired on March 24, 2009. This facility was replaced with
a 1.5 billion Japanese yen ($15.7 million at the exchange
rate at June 30, 2009) revolving credit facility that expires
on March 31, 2010 and a 1.5 billion Japanese yen ($15.7
THE EST{E LAUDER COMPANIES INC. 107