Estee Lauder 2011 Annual Report Download - page 146

144 THE EST{E LAUDER COMPANIES INC.
Other than
Pension Plans Pension Plans
U.S. International Post-retirement
2011 2010 2009 2011 2010 2009 2011 2010 2009
($ in millions)
Components of net periodic
benefit cost
:
Service cost, net $ 25.8 $ 22.5 $ 20.9 $ 21.5 $ 17.9 $ 16.3 $ 3.8 $ 3.3 $ 3.6
Interest cost 27.8 29.3 28.1 19.5 19.3 18.1 7.8 8.0 7.6
Expected return on assets (34.7) (32.4) (33.4) (21.9) (19.8) (18.8) (0.5) — —
Amortization of:
Transition (asset) obligation — — — — — 0.1 — — —
Prior service cost 0.7 0.8 0.7 2.5 2.3 2.3 (0.1) — —
Actuarial loss (gain) 9.7 4.1 1.7 5.8 1.9 0.6 1.7 0.6 0.5
Settlements and curtailments — — — 9.1 2.7 1.3 — — —
Acquisitions, divestitures,
adjustments — — — — — — — — —
Special termination benefits — — — — 1.1 2.4 — — —
Net periodic benefit cost $ 29.3 $ 24.3 $ 18.0 $ 36.5 $ 25.4 $ 22.3 $12.7 $11.9 $11.7
Weighted-average assumptions
used to determine benefit
obligations at June 30:
Discount rate 5.40% 5.30% 6.50% 1.25– 1.25– 1.75– 5.40– 5.30– 6.50–
8.25% 8.00% 8.75% 8.75% 9.00% 9.00%
Rate of compensation increase 4.00– 4.00– 4.00– 2.00– 2.00– 1.75– N/A N/A N/A
12.00% 12.00% 12.00% 6.00% 6.00% 5.50%
Weighted-average assumptions
used to determine net
periodic benefit cost for
the year ended June 30:
Discount rate 5.30% 6.50% 6.75% 1.25– 1.75– 2.00– 5.30– 6.50– 6.25–
8.00% 8.75% 9.00% 9.00% 9.00% 8.75%
Expected return on assets 7.75% 7.75% 7.75% 2.50– 2.75– 3.25– N/A N/A N/A
8.00% 8.75% 9.00%
Rate of compensation increase 4.00– 4.00– 4.00– 2.00– 1.75– 1.75– N/A N/A N/A
12.00% 12.00% 12.00% 6.00% 5.50% 6.00%
The discount rate for each plan used for determining future net periodic benefit 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
flows related to the bonds included in this portfolio is expected to match the estimated defined benefit 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 significant effect on the amounts reported for the health care plans. The
assumed weighted-average health care cost trend rate for the coming year is 6.84% while the weighted-average ultimate
trend rate of 4.57% is expected to be reached in approximately 17 years. A one-percentage-point change in assumed
health care cost trend rates for fiscal 2011 would have had the following effects:
One-Percentage-Point Increase One-Percentage-Point Decrease
(In millions)
Effect on total service and interest costs $ 1.1 $(1.0)
Effect on post-retirement benefit obligations $10.3 $(9.7)