Estee Lauder 2009 Annual Report Download - page 145

Other than
Pension Plans Pension Plans
U.S. International Post-retirement
2009 2008 2007 2009 2008 2007 2009 2008 2007
($ in millions)
Components of net periodic
benefi t cost :
Service cost, net $ 20.9 $ 19.7 $ 18.4 $ 16.3 $ 17.1 $ 16.2 $ 3.6 $ 3.8 $ 4.1
Interest cost 28.1 26.2 25.0 18.1 15.1 12.8 7.6 6.2 5.9
Expected return on assets (33.4) (31.7) (28.7) (18.8) (15.3) (13.8) — — —
Amortization of:
Transition (asset) obligation — — — 0.1 0.1 0.1 — — —
Prior service cost 0.7 0.7 0.6 2.3 0.3 0.3 — — —
Actuarial loss (gain) 1.7 1.7 1.7 0.6 5.9 7.8 0.5 0.1 0.2
Settlements and curtailments — — — 1.3 0.7 0.5 — — —
Acquisitions, divestitures,
adjustments — — — — — (1.7) — — —
Special termination benefi ts — — — 2.4 1.2 1.6 — — —
Net periodic benefi t cost $ 18.0 $ 16.6 $ 17.0 $ 22.3 $ 25.1 $ 23.8 $11.7 $10.1 $10.2
Weighted-average assumptions
used to determine benefi t
obligations at June 30
:
Discount rate 6.50% 6.75% 6.25% 1.75– 2.00– 2.25– 6.50– 6.25– 5.50–
8.75% 9.00% 6.25% 9.00% 6.75% 6.25%
Rate of compensation increase 4.00– 4.00– 3.00– 1.75– 1.75– 1.75– N/A N/A N/A
12.00% 12.00% 9.50% 5.50% 6.00% 5.00%
Weighted-average assumption s
used to determine net
periodic benefi t cost for
the year ending June 30:
Discount rate 6.75% 6.25% 6.25% 2.00– 2.25– 2.25– 6.25– 5.50– 5.75–
9.00% 8.25% 6.25% 8.75% 6.25% 6.25%
Expected return on assets 7.75% 7.75% 7.75% 3.25– 3.00– 2.75– N/A N/A N/A
9.00% 8.25% 7.25%
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% 6.00% 5.00%
The 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 discount 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 7.96% while the weighted-average ultimate
trend rate of 4.99% is expected to be reached in approximately 8 years. A one-percentage-point change in assumed
health care cost trend rates for fi scal 2009 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 $8.8 $(8.4)
144 THE EST{E LAUDER COMPANIES INC.