Estee Lauder 2009 Annual Report Download - page 138

million principal and an unamortized debt discount of
$0.2 million. The 2013 Senior Notes, when issued in
November 2008, 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.
As of June 30, 2009, the Company had outstanding
$244.2 million of 2012 Senior Notes consisting of $250.0
million principal, an unamortized debt discount of $0.3
million, and a $5.5 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.
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 annu-
ally on July 31. These notes were recorded in the accom-
panying 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 negative outlook by Standard & Poor’s and A2 with
a stable outlook by Moody’s. At June 30, 2009, there was
no commercial paper outstanding.
As of June 30, 2009, 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 busi-
ness operations. The total balance outstanding at any time
shall not exceed 30.0 million Turkish lira ($19.6 million at
THE EST{E LAUDER COMPANIES INC. 137
As of June 30, 2009, the Company had outstanding
$296.3 million of 2037 Senior Notes consisting of $300.0
million principal and unamortized debt discount of $3.7
million. The 2037 Senior Notes, when issued in May 2007,
were priced at 98.722% with a yield of 6.093%. Interest
payments are required to be made semi-annually on
May 15 and November 15. In April 2007, in anticipation of
the issuance of the 2037 Senior Notes, the Company
entered into a series of forward-starting interest rate swap
agreements on a notional amount totaling $210.0 million
at a weighted average all-in rate of 5.45%. The forward-
starting interest rate swap agreements were settled upon
the issuance of the new debt and the Company recog-
nized a loss in other comprehensive income of $0.9
million that will be amortized to interest expense over the
life of the 2037 Senior Notes. As a result of the forward-
starting interest rate swap agreements, the debt discount
and debt issuance costs, the effective interest rate on the
2037 Senior Notes will be 6.181% over the life of the debt.
As of June 30, 2009, the Company had outstanding
$197.5 million of 2033 Senior Notes consisting of $200.0
million principal and unamortized debt discount of $2.5
million. The 2033 Senior Notes, when issued in Septem-
ber 2003, were priced at 98.645% with a yield of 5.846%.
Interest payments are required to be made semi-annually
on April 15 and October 15. In May 2003, in anticipation
of the issuance of the 5.75% Senior Notes, the Company
entered into a series of treasury lock agreements on a
notional amount totaling $195.0 million at a weighted
average all-in rate of 4.53%. The treasury lock agreements
were settled upon the issuance of the new debt and the
Company received a payment of $15.0 million that will be
amortized against interest expense over the life of the
2033 Senior Notes. As a result of the treasury lock agree-
ments, the debt discount and debt issuance costs, the
effective interest rate on the 2033 Senior Notes will be
5.395% over the life of the debt.
As of June 30, 2009, the Company had outstanding
$324.1 million of 2017 Senior Notes consisting of $300.0
million principal, an unamortized debt discount of $0.4
million, and a $24.5 million adjustment to refl ect the fair
value of outstanding interest rate swaps. The 2017 Senior
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 mil-
lion to effectively convert the fi xed rate interest on its out-
standing 2017 Senior Notes to variable interest rates
based on six-month LIBOR.
As of June 30, 2009, the Company had outstanding
$299.8 million of 2013 Senior Notes consisting of $300.0