Estee Lauder 2011 Annual Report Download - page 138

136 THE EST{E LAUDER COMPANIES INC.
As of June 30, 2011, the Company had outstanding
$296.4 million of 2037 Senior Notes consisting of $300.0
million principal and unamortized debt discount of $3.6
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 agree-
ments 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 mil-
lion that will be amortized to interest expense over the life
of the 2037 Senior Notes. As a result of the forward-start-
ing 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, 2011, the Company had outstanding
$197.7 million of 2033 Senior Notes consisting of $200.0
million principal and unamortized debt discount of $2.3
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, 2011, the Company had outstanding
$341.5 million of 2017 Senior Notes consisting of $300.0
million principal, an unamortized debt discount of $0.3
million and a $41.8 million adjustment to reflect the
remaining termination value of an interest rate swap. 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. During fiscal 2011, the Company termi-
nated its interest rate swap agreements with a notional
amount totaling $250.0 million which had effectively con-
verted the fixed rate interest on its outstanding 2017
Senior Notes to variable interest rates. The instrument,
which was classified as an asset, had a fair value of $47.4
million at the date of cash settlement. This net settlement
is classified as a financing activity on the consolidated
statements of cash flows. Hedge accounting treatment
was discontinued prospectively and the fair value adjust-
ment to the carrying amount of the related debt will be
amortized against interest expense over the remaining life
of the debt.
As of June 30, 2011, the Company had outstanding
$230.0 million of 2013 Senior Notes consisting of $230.1
million principal and an unamortized debt discount of
$0.1 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, 2011, the Company had outstanding
$119.4 million of 2012 Senior Notes consisting of $120.0
million principal and a $0.6 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
payments are required to be made semi-annually on Janu-
ary 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 fixed
rate interest on its outstanding 2012 Senior Notes to
variable interest rates based on six-month LIBOR. In April
2007, the Company terminated this interest rate swap.
The instrument, which was classified as a liability, had a
fair value of $11.1 million at cash settlement, which
included $0.9 million of accrued interest payable to the
counterparty. Hedge accounting treatment was discontin-
ued prospectively 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 Company has a $750.0 million commercial paper
program under which it may issue commercial paper in
the United States. At June 30, 2011, there was no com-
mercial paper outstanding.
As of June 30, 2011, the Company had an overdraft
borrowing agreement with a financial 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 40.0 million Turkish lira ($24.6 mil-
lion at the exchange rate at June 30, 2011). The interest
rate applicable to each such credit shall be up to a maxi-
mum of 175 basis points per annum above the spot rate
charged by the lender or the lender’s floating call
rate agreed to by the Company at each borrowing. There
were no debt issuance costs incurred related to this
agreement. The outstanding balance at June 30, 2011