Estee Lauder 2012 Annual Report Download - page 144

142 THE EST{E LAUDER COMPANIES INC.
As of June 30, 2012, 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
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, 2012, 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, 2012, the Company had outstanding
$334.9 million of 2017 Senior Notes consisting of $300.0
million principal, an unamortized debt discount of $0.2
million and a $35.1 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 is being
amortized against interest expense over the remaining life
of the debt.
As of June 30, 2012, the Company had outstanding
$230.1 million principal of 2013 Senior Notes. 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 discussed below, the 2013
Senior Notes have been called for redemption on
September 4, 2012.
On January 15, 2012, the Company repaid the out-
standing principal of its 2012 Senior Notes with cash from
operations.
In August 2012, the Company issued $250.0 million of
2.35% Senior Notes due August 15, 2022 (“2022 Senior
Notes”) and $250.0 million of 3.70% Senior Notes due
August 15, 2042 (“2042 Senior Notes”) in a public offer-
ing. The 2022 Senior Notes were priced at 99.911% with
a yield of 2.360%. The 2042 Senior Notes were priced at
99.567% with a yield of 3.724%. Interest payments on
both notes are required to be made semi-annually on
February 15 and August 15, commencing February 15,
2013. On August 2, 2012, the Company called for
redemption all of the outstanding 2013 Senior Notes on
September 4, 2012. The Company intends to use approx-
imately $250 million of the net proceeds of the offering
for the redemption and to use the remaining amounts for
general corporate purposes.
The Company has a $750.0 million commercial paper
program under which it may issue commercial paper in
the United States. At June 30, 2012, the Company had
$200.0 million of short-term commercial paper outstand-
ing, due at various dates through July 2012 at an average
interest rate of 0.18%, which may be refinanced on a
periodic basis as it matures at then-prevailing market
interest rates.
As of June 30, 2012, 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 busi-
ness operations. The total balance outstanding at any time
shall not exceed 25.0 million Turkish lira ($13.8 million at
the exchange rate at June 30, 2012). The interest rate
applicable to each such credit shall be up to a maximum