The Estée Lauder Companies Inc. (NYSE: EL) today reported net sales for
its third quarter ended March 31, 2013 of $2.29 billion, a 2% increase
compared with $2.25 billion in the prior-year quarter. Excluding the
impact of foreign currency translation, net sales increased 3%. The
Company reported a 130 basis-point increase in operating margin and net
earnings for the quarter rose 37% to $178.8 million, compared with
$130.4 million last year. Diluted net earnings per common share rose 38%
to $.45, compared with $.33 in the prior year.
The fiscal 2013 third-quarter results included net adjustments
associated with restructuring activities of $1.7 million ($1.0 million
after tax). The fiscal 2012 third quarter results included charges
associated with restructuring activities of $28.8 million ($18.8 million
after tax), equal to $.05 per diluted common share.
Excluding these charges in the third quarters of fiscal 2013 and 2012,
net earnings increased 19% to $177.8 million and diluted net earnings
per common share rose 20% to $.45, versus a comparable $.38 in the
prior-year period. A reconciliation between GAAP and non-GAAP financial
measures is included in this release.
Fabrizio Freda, President and Chief Executive Officer, said, “Organic
sales growth this quarter was in line with our expectations and earnings
per share were better than expected. Adjusting for the shift of sales
orders related to our Strategic Modernization Initiative (SMI)
implementation, our local currency sales increased more than five
percent. Despite macroeconomic headwinds, particularly in Southern
Europe and Korea, and short term global supply planning issues related
to SMI, we delivered solid growth ahead of the industry and a 20 percent
earnings per share increase. The strength of our strategy and our
ability to execute on it continues to produce consistent and reliable
results.
“Looking at the remainder of fiscal 2013, we are on track to deliver
another record year of solid sales and a double-digit increase in
earnings per share. In our fiscal fourth quarter, we expect an
acceleration of our top-line growth. For the full fiscal year, we are
expecting sales growth of approximately 6% in local currency and are
raising our earnings per share guidance, before charges, to $2.56 to
$2.61. Our performance this year reflects a combination of our strong
innovation pipeline and targeted investment spending behind the greatest
opportunities to foster global growth. Our future is bright and I am
confident we are on track to attain our long-term financial goals. We
intend to build upon our success by continuing to support major
initiatives in our biggest brands and markets in order to further
increase profitability and gain share.”
Globally, prestige beauty continues to experience mixed results and
overall growth has slowed from the prior year, as the Company expected.
Nonetheless, the Company’s performance was broad based, generating local
currency sales gains in each of its geographic regions and most product
categories.
During the quarter, the Company made meaningful progress on its
strategic goals and realized a strong improvement in cost of sales as a
percentage of net sales. In connection with the long-term strategic plan
and certain ongoing initiatives, the Company realized savings of $29
million during the quarter. As planned, the Company increased global
advertising spending versus the prior-year quarter to build momentum and
gain share in its key markets and product categories.
In the second quarters of fiscal 2013 and fiscal 2012, some retailers
accelerated their sales orders in advance of the Company’s January 2013
and January 2012 implementation of SMI in certain of its locations and
brands. Those additional orders would have likely occurred in the
Company’s fiscal 2013 and 2012 third quarters. The impact of these
shifts is included in this release. The net overall change in net sales
and operating income for the quarter in each product category and
geographic region was unfavorably impacted by these accelerated orders.
Some temporary challenges emerged during the quarter related to the
Company’s global supply planning component of its latest SMI
implementation, which caused some customer service delays. The issues
have been addressed and the Company expects full resolution by the end
of its current fiscal year.
|
Results by Product Category
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|
Three Months Ended March 31
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(Unaudited; Dollars in millions)
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|
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|
Net Sales
|
|
|
|
Percent Change
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|
|
|
Operating
Income (Loss)
|
|
|
|
Percent Change
|
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
Reported Basis
|
|
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Local
Currency
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
Reported Basis
|
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|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
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|
Skin Care
|
|
|
|
|
|
$
|
1,015.0
|
|
|
|
$
|
1,019.0
|
|
|
|
—
|
%
|
|
|
|
—
|
%
|
|
|
|
$
|
134.4
|
|
|
|
$
|
156.3
|
|
|
|
(14
|
)%
|
Makeup
|
|
|
|
|
|
919.2
|
|
|
|
877.0
|
|
|
|
5
|
|
|
|
|
5
|
|
|
|
|
107.3
|
|
|
|
90.2
|
|
|
|
19
|
|
Fragrance
|
|
|
|
|
|
233.2
|
|
|
|
231.3
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
(0.2
|
)
|
|
|
(8.5
|
)
|
|
|
98
|
|
Hair Care
|
|
|
|
|
|
116.2
|
|
|
|
110.1
|
|
|
|
6
|
|
|
|
|
6
|
|
|
|
|
5.1
|
|
|
|
7.4
|
|
|
|
(31
|
)
|
Other
|
|
|
|
|
|
8.2
|
|
|
|
10.8
|
|
|
|
(24
|
)
|
|
|
|
(22
|
)
|
|
|
|
(3.2
|
)
|
|
|
(5.1
|
)
|
|
|
37
|
|
Subtotal
|
|
|
|
|
|
2,291.8
|
|
|
|
2,248.2
|
|
|
|
2
|
|
|
|
|
3
|
|
|
|
|
243.4
|
|
|
|
240.3
|
|
|
|
1
|
|
Returns and charges associated
with restructuring activities
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.7
|
|
|
|
(28.8
|
)
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
2,291.8
|
|
|
|
$
|
2,248.2
|
|
|
|
2
|
%
|
|
|
|
3
|
%
|
|
|
|
$
|
245.1
|
|
|
|
$
|
211.5
|
|
|
|
16
|
%
|
|
|
Excluding the impact of the shifts of accelerated retailer orders due to
the Company’s implementation of SMI:
-
Reported net sales in skin care, makeup, fragrance and hair care would
have increased 3%, 7%, 4% and 6%, respectively, and 5% in total.
-
Operating results in skin care, makeup, fragrance and hair care would
have increased/(decreased) 3%, 38%, 100+% and (12)%, respectively, and
22% in total.
Skin Care
-
The skin care category is a strategic priority for the Company. The
Company gained share in this category during the quarter in certain
countries where its products are sold.
-
Recent launches of Advanced Time Zone, Advanced Night Repair Eye Serum
Infusion and Perfectionist CP+R from Estée Lauder and The Moisturizing
Soft Cream from La Mer contributed to sales growth, which was entirely
offset by the shift in orders due to SMI.
-
Operating income declined on flat sales growth and an increase in
investment spending.
Makeup
-
Higher makeup sales primarily reflected strong growth from M•A•C brand
products.
-
New product introductions from Clinique, such as Even Better Compact
Makeup and increased sales of the Tom Ford line of cosmetics,
contributed to the category’s growth.
-
The overall increase in net sales and operating income reflected a
favorable comparison to the prior-year period, which included a
provision for then-anticipated returns of approximately $16 million,
as a result of repositioning certain products due to changes in
regulations related to sunscreen products in the United States. These
regulations were subsequently deferred and, accordingly, the Company
reversed this provision in the fiscal 2012 fourth quarter.
-
The increase in makeup operating income also reflected improved
results from the M•A•C brand, partially offset by heritage brands and
an increase in investment spending.
Fragrance
-
In fragrance, notable sales increases were generated from higher-end
fragrance products from Jo Malone and Tom Ford, as well as incremental
sales from the recent launch of Coach Love.
-
Fragrance operating loss decreased sharply, primarily reflecting the
success of recent launches, partially offset by lower results from
certain of the Company’s designer fragrances.
Hair Care
-
Hair care net sales growth was driven by Aveda, reflecting the
continued success of its Invati line of products and the recent
launches of Pure Abundance Style Prep and Be Curly Curl Controller.
-
The category also benefited from expanded global distribution, in
particular to salons.
-
Sales declined at Ojon, due, in part, to a reduction of its business
in the direct response television channel.
-
Hair care operating income decreased, due in part to increased product
support spending and additional investments related to distribution
expansion initiatives.
|
Results by Geographic Region
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|
|
|
|
|
|
|
Three Months Ended March 31
|
(Unaudited; Dollars in millions)
|
|
|
|
|
|
Net Sales
|
|
|
|
Percent Change
|
|
|
|
Operating
Income (Loss)
|
|
|
|
Percent Change
|
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
Reported Basis
|
|
|
|
Local Currency
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
Reported Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Americas
|
|
|
|
|
|
$
|
988.1
|
|
|
|
$
|
974.3
|
|
|
|
1
|
%
|
|
|
|
2
|
%
|
|
|
|
$
|
68.0
|
|
|
|
$
|
86.2
|
|
|
|
(21
|
)%
|
Europe, the Middle East & Africa.
|
|
|
|
|
|
847.9
|
|
|
|
823.6
|
|
|
|
3
|
|
|
|
|
3
|
|
|
|
|
137.5
|
|
|
|
101.0
|
|
|
|
36
|
|
Asia/Pacific
|
|
|
|
|
|
455.8
|
|
|
|
450.3
|
|
|
|
1
|
|
|
|
|
3
|
|
|
|
|
37.9
|
|
|
|
53.1
|
|
|
|
(29
|
)
|
Subtotal
|
|
|
|
|
|
2,291.8
|
|
|
|
2,248.2
|
|
|
|
2
|
|
|
|
|
3
|
|
|
|
|
243.4
|
|
|
|
240.3
|
|
|
|
1
|
|
Returns and charges associated
with restructuring activities
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.7
|
|
|
|
(28.8
|
)
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
2,291.8
|
|
|
|
$
|
2,248.2
|
|
|
|
2
|
%
|
|
|
|
3
|
%
|
|
|
|
$
|
245.1
|
|
|
|
$
|
211.5
|
|
|
|
16
|
%
|
|
|
Excluding the impact of the shifts of accelerated retailer orders due to
the Company’s implementation of SMI:
-
Reported net sales in the Americas, Europe, the Middle East & Africa
and Asia/Pacific would have increased 4%, 4% and 6%, respectively.
-
Operating income in the Americas, in Europe, the Middle East & Africa
and in Asia/Pacific would have increased 4%, 45% and 11%, respectively.
The Americas
-
The net sales increase in the region reflects growth from the
Company’s makeup artist brands and Aveda.
-
Double-digit sales growth in Latin America was offset by sales
declines in the United States, reflecting the shifts of accelerated
retailer orders, and Canada.
-
The sales improvement also reflected a favorable comparison to the
prior-year period, which included a provision for then-anticipated
returns of makeup products of approximately $16 million.
-
Operating income in the Americas decreased, primarily
reflecting a decline in certain of the Company’s heritage brands as a
result of the accelerated retailer orders, partially offset by
improved results from makeup artist brands. The decrease also
reflected higher investment spending during the current-year period,
as well as the favorable comparison to the prior-year period regarding
the provision mentioned above.
Europe, the Middle East & Africa
-
In constant currency, net sales increased in a number of countries in
the region. Economic uncertainties in Southern European countries
impacted the beauty markets, but the Company continued to outperform
the industry in many markets.
-
In constant currency, double-digit net sales growth was recorded in a
number of areas, including travel retail, the Middle East and South
Africa.
-
The Company’s net sales in travel retail grew double-digits. Sales at
retail also grew double-digits, which was more than twice the increase
in airline passenger traffic.
-
These increases were partially offset by lower net sales, primarily in
Switzerland and France, which included the impact of accelerated
retailer orders, as well as Spain and the Balkans.
-
The Company estimates that it gained share in certain countries within
its distribution in this region during the quarter.
-
Operating income in the region increased, led by travel retail, the
Middle East and Spain, which was partially offset by lower results in
France and the Balkans.
Asia/Pacific
-
In the region, the Company’s strongest local currency sales growth was
generated in Hong Kong, Thailand and Australia, primarily reflecting
strong sales of skin care products.
-
Lower sales were experienced in China and Taiwan, both of which
reflected the accelerated retailer orders, as previously discussed.
-
Results in China included sales to new consumers in expanded
distribution in tier two and three cities. Excluding the shift in
retailer orders, sales in China grew strong double-digits. Sales at
retail also continued to grow strong double-digits.
-
Korea reflected difficult economic conditions and competitive
pressures. The Company expects to see continued weakness in prestige
beauty in Korea, which also impacted the travel retail channel.
-
The Company estimates that for the quarter it gained share in certain
countries, including China, within its points of distribution.
-
In Asia/Pacific, operating income decreased, with higher results from
Australia, Hong Kong, New Zealand and Thailand, being more than offset
by lower operating results in China and Japan. The lower results in
China reflect the impact from the timing of orders as mentioned above.
Nine-Month Results
-
For the nine months ended March 31, 2013, the Company reported net
sales of $7.77 billion, a 4% increase from $7.46 billion in the
comparable prior-year period. Excluding the impact of foreign currency
translation, net sales increased 5%. Net sales grew in each of the
Company’s geographic regions and major product categories.
-
The Company reported net earnings of $925.8 million for the nine
months ended March 31, 2013, a 15% increase from the $805.7 million in
the same period last year. Diluted net earnings per common share for
the nine months ended March 31, 2013 increased 16% to $2.35, compared
with $2.03 reported in the prior-year period.
-
The fiscal 2013 nine-month results included returns and charges
associated with restructuring activities of $13.3 million ($8.9
million after tax), equal to $.02 per diluted common share.
Additionally, during the nine months ended March 31, 2013, the Company
redeemed $230.1 million principal amount of its 7.75% Senior Notes due
2013. As a result, the Company recorded a pre-tax charge to earnings
of $19.1 million ($12.2 million after tax), for the impact of the
extinguishment of debt, equal to $.03 per diluted common share.
-
The fiscal 2012 nine-month results included returns and charges
associated with restructuring activities of $39.0 million ($26.1
million after tax), equal to $.07 per diluted common share.
-
Excluding these returns and charges, net earnings for the nine months
ended March 31, 2013 rose 14% to $946.9 million and diluted net
earnings per common share rose 15% to $2.40, versus a comparable $2.10
in the prior-year period.
Cash Flows
-
For the nine months ended March 31, 2013, net cash flows provided by
operating activities increased 7% to $934.2 million, compared with
$869.7 million in the prior-year period.
-
The increase primarily reflected the higher net earnings and a
favorable change in other assets, partially offset by a net decrease
in cash from certain working capital components.
-
Days of inventory at March 31, 2013 were 15 days higher compared to
March 31, 2012. This increase primarily reflects the remaining safety
stock related to the Company’s implementation of SMI at certain
locations.
Outlook for Fiscal 2013 Full Year
The Company has benefited from the strength in prestige beauty in North
America and China. While overall the Company’s business is performing
well, Southern European countries and Korea continue to face weakness
due to economic uncertainties.
-
Net sales are forecasted to grow approximately 6% in constant currency.
-
Foreign currency translation is expected to negatively impact sales
approximately 1.0% versus the prior year.
-
The Company is raising the range of its diluted net earnings per share
estimate, including charges associated with restructuring activities
and the impact of the early extinguishment of debt, to $2.49 to $2.54.
-
The Company expects to take charges associated with restructuring
activities in fiscal 2013 of about $25 million, equal to approximately
$.04 per diluted common share. The recording of charges will depend on
when the relevant accounting criteria are met.
-
As mentioned in this press release, the impact of the extinguishment
of debt is equal to $.03 per diluted common share.
-
Diluted net earnings per share before charges associated with
restructuring activities and the impact of the early extinguishment of
debt are now projected to be $2.56 to $2.61, up 13% to15%.
-
The Company’s broad-based growth is expected to continue ahead of the
prestige beauty industry for the full fiscal year.
Conference Call
The Estée Lauder Companies will host a conference call at 9:30 a.m. (ET)
today, May 2, 2013 to discuss the quarterly results. The dial-in number
for the call is 888-294-4716 in the U.S. or 706-902-0101 internationally
(conference ID number: 52045999). The call will also be webcast live at http://investors.elcompanies.com.
Forward-Looking Statements
The forward-looking statements in this press release, including those
containing words like “expect,” “plans,” “may,” “could,” “anticipate,”
“estimate,” “projected,” “forecasted,” those in Mr. Freda’s remarks and
those in the “Outlook for Fiscal 2013 Full Year” section involve risks
and uncertainties. Factors that could cause actual results to differ
materially from those forward-looking statements include the following:
(1)
|
|
increased competitive activity from companies in the skin care,
makeup, fragrance and hair care businesses, some of which have
greater resources than the Company does;
|
(2)
|
|
the Company’s ability to develop, produce and market new products on
which future operating results may depend and to successfully
address challenges in the Company’s business;
|
(3)
|
|
consolidations, restructurings, bankruptcies and reorganizations in
the retail industry causing a decrease in the number of stores that
sell the Company’s products, an increase in the ownership
concentration within the retail industry, ownership of retailers by
the Company’s competitors or ownership of competitors by the
Company’s customers that are retailers and our inability to collect
receivables;
|
(4)
|
|
destocking and tighter working capital management by retailers;
|
(5)
|
|
the success, or changes in timing or scope, of new product launches
and the success, or changes in the timing or the scope, of
advertising, sampling and merchandising programs;
|
(6)
|
|
shifts in the preferences of consumers as to where and how they shop
for the types of products and services the Company sells;
|
(7)
|
|
social, political and economic risks to the Company’s foreign or
domestic manufacturing, distribution and retail operations,
including changes in foreign investment and trade policies and
regulations of the host countries and of the United States;
|
(8)
|
|
changes in the laws, regulations and policies (including the
interpretations and enforcement thereof) that affect, or will
affect, the Company’s business, including those relating to its
products or distribution networks, changes in accounting standards,
tax laws and regulations, environmental or climate change laws,
regulations or accords, trade rules and customs regulations, and the
outcome and expense of legal or regulatory proceedings, and any
action the Company may take as a result;
|
(9)
|
|
foreign currency fluctuations affecting the Company’s results of
operations and the value of its foreign assets, the relative prices
at which the Company and its foreign competitors sell products in
the same markets and the Company’s operating and manufacturing costs
outside of the United States;
|
(10)
|
|
changes in global or local conditions, including those due to the
volatility in the global credit and equity markets, natural or
man-made disasters, real or perceived epidemics, or energy costs,
that could affect consumer purchasing, the willingness or ability of
consumers to travel and/or purchase the Company’s products while
traveling, the financial strength of the Company’s customers,
suppliers or other contract counterparties, the Company’s
operations, the cost and availability of capital which the Company
may need for new equipment, facilities or acquisitions, the returns
that the Company is able to generate on its pension assets and the
resulting impact on its funding obligations, the cost and
availability of raw materials and the assumptions underlying the
Company’s critical accounting estimates;
|
(11)
|
|
shipment delays, commodity pricing, depletion of inventory and
increased production costs resulting from disruptions of operations
at any of the facilities that manufacture nearly all of the
Company’s supply of a particular type of product (i.e., focus
factories) or at the Company’s distribution or inventory centers,
including disruptions that may be caused by the implementation of
SAP as part of the Company’s Strategic Modernization Initiative or
by restructurings;
|
(12)
|
|
real estate rates and availability, which may affect the Company’s
ability to increase or maintain the number of retail locations at
which the Company sells its products and the costs associated with
the Company’s other facilities;
|
(13)
|
|
changes in product mix to products which are less profitable;
|
(14)
|
|
the Company’s ability to acquire, develop or implement new
information and distribution technologies and initiatives on a
timely basis and within the Company’s cost estimates and the
Company’s ability to maintain continuous operations of such systems
and the security of data and other information that may be stored in
such systems or other systems or media;
|
(15)
|
|
the Company’s ability to capitalize on opportunities for improved
efficiency, such as publicly-announced strategies and restructuring
and cost-savings initiatives, and to integrate acquired businesses
and realize value therefrom;
|
(16)
|
|
consequences attributable to local or international conflicts around
the world, as well as from any terrorist action, retaliation and the
threat of further action or retaliation;
|
(17)
|
|
the timing and impact of acquisitions and divestitures, which depend
on willing sellers and buyers, respectively, and;
|
(18)
|
|
additional factors as described in the Company’s filings with the
Securities and Exchange Commission, including its Annual Report on
Form 10-K for the fiscal year ended June 30, 2012.
|
The Company assumes no responsibility to update forward-looking
statements made herein or otherwise.
The Estée Lauder Companies Inc. is one of the world’s leading
manufacturers and marketers of quality skin care, makeup, fragrance and
hair care products. The Company’s products are sold in over 150
countries and territories under the following brand names: Estée Lauder,
Aramis, Clinique, Prescriptives, Lab Series, Origins, M•A•C, Bobbi
Brown, Tommy Hilfiger, Kiton, La Mer, Donna Karan, Aveda, Jo Malone,
Bumble and bumble, Darphin, Michael Kors, American Beauty,
Flirt!, GoodSkin Labs, Grassroots Research Labs, Tom Ford, Coach, Ojon,
Smashbox, Ermenegildo Zegna, Aerin Beauty, Osiao and Marni.
An electronic version of this release can be found at the Company’s
website, www.elcompanies.com.
|
THE ESTÉE LAUDER COMPANIES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited; In millions, except per share data and percentages)
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
|
|
|
|
Percent Change
|
|
|
|
Nine Months Ended
March 31
|
|
|
|
|
Percent Change
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales (A)
|
|
|
|
|
|
$
|
2,291.8
|
|
|
|
|
$
|
2,248.2
|
|
|
|
|
|
2
|
%
|
|
|
|
$
|
7,774.3
|
|
|
|
|
$
|
7,462.4
|
|
|
|
|
|
4
|
%
|
Cost of Sales (A)
|
|
|
|
|
|
|
443.1
|
|
|
|
|
|
469.3
|
|
|
|
|
|
|
|
|
|
|
|
1,550.3
|
|
|
|
|
|
1,554.6
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
1,848.7
|
|
|
|
|
|
1,778.9
|
|
|
|
|
|
4
|
%
|
|
|
|
|
6,224.0
|
|
|
|
|
|
5,907.8
|
|
|
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
|
|
|
|
80.7
|
%
|
|
|
|
|
79.1
|
%
|
|
|
|
|
|
|
|
|
|
|
80.1
|
%
|
|
|
|
|
79.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
|
|
1,605.3
|
|
|
|
|
|
1,539.0
|
|
|
|
|
|
|
|
|
|
|
|
4,831.8
|
|
|
|
|
|
4,623.4
|
|
|
|
|
|
|
|
Restructuring and other charges (A)
|
|
|
|
|
|
|
(1.7
|
)
|
|
|
|
|
28.4
|
|
|
|
|
|
|
|
|
|
|
|
12.0
|
|
|
|
|
|
39.2
|
|
|
|
|
|
|
|
Impairment of other intangible assets (B)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
|
6.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,603.6
|
|
|
|
|
|
1,567.4
|
|
|
|
|
|
2
|
%
|
|
|
|
|
4,843.8
|
|
|
|
|
|
4,669.3
|
|
|
|
|
|
4
|
%
|
Operating Expense Margin
|
|
|
|
|
|
|
70.0
|
%
|
|
|
|
|
69.7
|
%
|
|
|
|
|
|
|
|
|
|
|
62.3
|
%
|
|
|
|
|
62.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
|
245.1
|
|
|
|
|
|
211.5
|
|
|
|
|
|
16
|
%
|
|
|
|
|
1,380.2
|
|
|
|
|
|
1,238.5
|
|
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income Margin
|
|
|
|
|
|
|
10.7
|
%
|
|
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
17.8
|
%
|
|
|
|
|
16.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
12.6
|
|
|
|
|
|
14.5
|
|
|
|
|
|
|
|
|
|
|
|
41.8
|
|
|
|
|
|
47.1
|
|
|
|
|
|
|
|
Interest expense on debt extinguishment (C)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
19.1
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
Other income (D)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
23.1
|
|
|
|
|
|
10.5
|
|
|
|
|
|
|
|
Earnings before Income Taxes
|
|
|
|
|
|
|
232.5
|
|
|
|
|
|
197.0
|
|
|
|
|
|
18
|
%
|
|
|
|
|
1,342.4
|
|
|
|
|
|
1,201.9
|
|
|
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
53.6
|
|
|
|
|
|
65.7
|
|
|
|
|
|
|
|
|
|
|
|
414.5
|
|
|
|
|
|
393.6
|
|
|
|
|
|
|
|
Net Earnings
|
|
|
|
|
|
|
178.9
|
|
|
|
|
|
131.3
|
|
|
|
|
|
36
|
%
|
|
|
|
|
927.9
|
|
|
|
|
|
808.3
|
|
|
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to noncontrolling interests
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
(2.1
|
)
|
|
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
Net Earnings Attributable to The Estée Lauder
Companies Inc.
|
|
|
|
|
|
$
|
178.8
|
|
|
|
|
$
|
130.4
|
|
|
|
|
|
37
|
%
|
|
|
|
$
|
925.8
|
|
|
|
|
$
|
805.7
|
|
|
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to The Estée Lauder Companies
Inc. per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
$
|
.46
|
|
|
|
|
$
|
.34
|
|
|
|
|
|
38
|
%
|
|
|
|
$
|
2.39
|
|
|
|
|
$
|
2.07
|
|
|
|
|
|
15
|
%
|
Diluted
|
|
|
|
|
|
|
.45
|
|
|
|
|
|
.33
|
|
|
|
|
|
38
|
%
|
|
|
|
|
2.35
|
|
|
|
|
|
2.03
|
|
|
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
387.2
|
|
|
|
|
|
388.2
|
|
|
|
|
|
|
|
|
|
|
|
387.5
|
|
|
|
|
|
388.5
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
394.0
|
|
|
|
|
|
396.3
|
|
|
|
|
|
|
|
|
|
|
|
394.7
|
|
|
|
|
|
397.0
|
|
|
|
|
|
|
|
|
(A) In February 2009, the Company announced the implementation of a
multi-faceted cost savings program (the “Program”) to position it to
achieve long-term profitable growth. As of December 31, 2012, the
Company closed the Program. As a result of the closure of the Program
and evaluation of the initiatives that have been implemented as of March
31, 2013, the Company anticipates total cumulative restructuring charges
and other costs to implement those initiatives to total between $325
million and $350 million, before taxes. Since the inception of the
Program, the Company approved cost savings initiatives to resize the
organization, reorganize certain functions, turnaround or exit
unprofitable operations and outsource certain services. The impact of
returns, charges and adjustments related to the Program for each fiscal
period are set forth in tables that follow these notes.
(B) The Company performs annual impairment tests for each of its
reporting units. In addition, the Company may perform interim impairment
tests as a result of changes in circumstances and certain financial
indicators. Such tests may conclude that the carrying value of certain
assets exceed their estimated fair values, resulting in the recognition
of impairment charges.
During the second quarter of fiscal 2012, the Company recognized an
impairment charge related to the Ojon reporting unit of $6.7 million for
its trademark.
(C) In the first quarter of fiscal 2013, the Company redeemed $230.1
million principal amount of its 7.75% Senior Notes due November 1, 2013.
As a result, the Company recorded a pre-tax charge to earnings of $19.1
million ($12.2 million after tax), for the impact of the extinguishment
of debt, equal to $.03 per diluted common share.
(D) In December 2012, the Company amended the agreement related to the
August 2007 sale of Rodan + Fields to receive a fixed amount in lieu of
future contingent consideration and other rights. As a result of the
original and amended terms of this agreement, the Company recognized
$23.1 million as other income in the consolidated statement of earnings
during the nine months ended March 31, 2013.
In November 2011, the Company settled a commercial dispute with third
parties that was outside its normal operations. In connection therewith,
the Company received a $10.5 million cash payment, which has been
classified as other income in the consolidated statement of earnings for
the nine months ended March 31, 2012.
This earnings release includes some non-GAAP financial measures relating
to charges associated with restructuring activities, the extinguishment
of debt and accelerated orders associated with the Company’s
implementation of SMI. The following is a reconciliation between the
non-GAAP financial measures and the most directly comparable GAAP
measure for certain consolidated statements of earnings accounts before
and after the returns and charges associated with restructuring
activities, the extinguishment of debt and accelerated orders associated
with the Company’s implementation of SMI. The Company uses the non-GAAP
financial measure, among other things, to evaluate its operating
performance and the measure represents the manner in which the Company
conducts and views its business. Management believes that excluding
these items that are special in nature or that are not comparable from
period to period helps investors and others compare operating
performance between two periods. While the Company considers the
non-GAAP measures useful in analyzing its results, it is not intended to
replace, or act as a substitute for, any presentation included in the
consolidated financial statements prepared in conformity with GAAP.
The Company operates on a global basis, with the majority of its net
sales generated outside the United States. Accordingly, fluctuations in
foreign currency exchange rates can affect the Company’s results of
operations. Therefore, the Company presents certain net sales
information excluding the effect of foreign currency rate fluctuations
to provide a framework for assessing the performance of its underlying
business outside the United States. Constant currency information
compares results between periods as if exchange rates had remained
constant period-over-period. The Company calculates constant currency
information by translating current-period results using prior-year
period weighted-average foreign currency exchange rates.
|
THE ESTÉE LAUDER COMPANIES INC.
Reconciliation of Certain Consolidated Statements of Earnings
Accounts Before and After Returns and Charges
(Unaudited; In millions, except per share data and percentages)
|
|
|
|
|
|
|
Three Months Ended
March 31, 2013
|
|
|
|
Three Months Ended
March 31, 2012
|
|
|
|
|
|
|
|
|
As Reported
|
|
|
Returns/
Charges
|
|
|
Before
Returns/
Charges
|
|
|
|
|
As Reported
|
|
|
|
Returns/
Charges
|
|
|
|
Before
Returns/
Charges
|
|
|
|
% Change
versus Prior
Year Before
Returns/Charges
|
Net Sales
|
|
|
|
|
|
$
|
2,291.8
|
|
|
|
|
$
|
0.0
|
|
|
|
$
|
2,291.8
|
|
|
|
|
$
|
2,248.2
|
|
|
|
|
$
|
0.0
|
|
|
|
|
$
|
2,248.2
|
|
|
|
|
2
|
%
|
Cost of sales
|
|
|
|
|
|
|
443.1
|
|
|
|
|
|
0.0
|
|
|
|
|
443.1
|
|
|
|
|
|
469.3
|
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
468.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
1,848.7
|
|
|
|
|
|
0.0
|
|
|
|
|
1,848.7
|
|
|
|
|
|
1,778.9
|
|
|
|
|
|
0.4
|
|
|
|
|
|
1,779.3
|
|
|
|
|
4
|
%
|
Gross Margin
|
|
|
|
|
|
|
80.7
|
%
|
|
|
|
|
|
|
|
|
80.7
|
%
|
|
|
|
|
79.1
|
%
|
|
|
|
|
|
|
|
|
|
79.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
1,603.6
|
|
|
|
|
|
1.7
|
|
|
|
|
1,605.3
|
|
|
|
|
|
1,567.4
|
|
|
|
|
|
(28.4
|
)
|
|
|
|
|
1,539.0
|
|
|
|
|
4
|
%
|
Operating Expense Margin
|
|
|
|
|
|
|
70.0
|
%
|
|
|
|
|
|
|
|
|
70.1
|
%
|
|
|
|
|
69.7
|
%
|
|
|
|
|
|
|
|
|
|
68.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
|
245.1
|
|
|
|
|
|
(1.7
|
)
|
|
|
|
243.4
|
|
|
|
|
|
211.5
|
|
|
|
|
|
28.8
|
|
|
|
|
|
240.3
|
|
|
|
|
1
|
%
|
Operating Income Margin
|
|
|
|
|
|
|
10.7
|
%
|
|
|
|
|
|
|
|
|
10.6
|
%
|
|
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
10.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
53.6
|
|
|
|
|
|
(0.7
|
)
|
|
|
|
52.9
|
|
|
|
|
|
65.7
|
|
|
|
|
|
10.0
|
|
|
|
|
|
75.7
|
|
|
|
|
|
|
Net Earnings Attributable to
The Estée Lauder Companies Inc.
|
|
|
|
|
|
|
178.8
|
|
|
|
|
|
(1.0
|
)
|
|
|
|
177.8
|
|
|
|
|
|
130.4
|
|
|
|
|
|
18.8
|
|
|
|
|
|
149.2
|
|
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings attributable
to The Estée Lauder Companies
Inc. per common share
|
|
|
|
|
|
|
.45
|
|
|
|
|
|
.00
|
|
|
|
|
.45
|
|
|
|
|
|
.33
|
|
|
|
|
|
.05
|
|
|
|
|
|
.38
|
|
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
March 31, 2013
|
|
|
|
Nine Months Ended
March 31, 2012
|
|
|
|
|
|
|
|
|
|
As Reported
|
|
|
Returns/
Charges
|
|
|
Before
Returns/
Charges
|
|
|
|
|
As Reported
|
|
|
|
Returns/
Charges
|
|
|
|
Before
Returns/
Charges
|
|
|
|
% Change
versus Prior
Year Before
Returns/Charges
|
Net Sales
|
|
|
|
|
|
$
|
7,774.3
|
|
|
|
|
$
|
0.1
|
|
|
|
$
|
7,774.4
|
|
|
|
|
$
|
7,462.4
|
|
|
|
|
$
|
(0.6
|
)
|
|
|
|
$
|
7,461.8
|
|
|
|
|
4
|
%
|
Cost of sales
|
|
|
|
|
|
|
1,550.3
|
|
|
|
|
|
(1.2
|
)
|
|
|
|
1,549.1
|
|
|
|
|
|
1,554.6
|
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
1,554.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
6,224.0
|
|
|
|
|
|
1.3
|
|
|
|
|
6,225.3
|
|
|
|
|
|
5,907.8
|
|
|
|
|
|
(0.2
|
)
|
|
|
|
|
5,907.6
|
|
|
|
|
5
|
%
|
Gross Margin
|
|
|
|
|
|
|
80.1
|
%
|
|
|
|
|
|
|
|
|
80.1
|
%
|
|
|
|
|
79.2
|
%
|
|
|
|
|
|
|
|
|
|
79.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
4,843.8
|
|
|
|
|
|
(12.0
|
)
|
|
|
|
4,831.8
|
|
|
|
|
|
4,669.3
|
|
|
|
|
|
(39.2
|
)
|
|
|
|
|
4,630.1
|
|
|
|
|
4
|
%
|
Operating Expense Margin
|
|
|
|
|
|
|
62.3
|
%
|
|
|
|
|
|
|
|
|
62.2
|
%
|
|
|
|
|
62.6
|
%
|
|
|
|
|
|
|
|
|
|
62.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
|
1,380.2
|
|
|
|
|
|
13.3
|
|
|
|
|
1,393.5
|
|
|
|
|
|
1,238.5
|
|
|
|
|
|
39.0
|
|
|
|
|
|
1,277.5
|
|
|
|
|
9
|
%
|
Operating Income Margin
|
|
|
|
|
|
|
17.8
|
%
|
|
|
|
|
|
|
|
|
17.9
|
%
|
|
|
|
|
16.6
|
%
|
|
|
|
|
|
|
|
|
|
17.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on debt
extinguishment
|
|
|
|
|
|
|
19.1
|
|
|
|
|
|
(19.1
|
)
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
414.5
|
|
|
|
|
|
11.3
|
|
|
|
|
425.8
|
|
|
|
|
|
393.6
|
|
|
|
|
|
12.9
|
|
|
|
|
|
406.5
|
|
|
|
|
|
|
Net Earnings Attributable to
The Estée Lauder Companies Inc.
|
|
|
|
|
|
|
925.8
|
|
|
|
|
|
21.1
|
|
|
|
|
946.9
|
|
|
|
|
|
805.7
|
|
|
|
|
|
26.1
|
|
|
|
|
|
831.8
|
|
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings attributable
to The Estée Lauder Companies
Inc. per common share
|
|
|
|
|
|
|
2.35
|
|
|
|
|
|
.05
|
|
|
|
|
2.40
|
|
|
|
|
|
2.03
|
|
|
|
|
|
.07
|
|
|
|
|
|
2.10
|
|
|
|
|
15
|
%
|
|
|
THE ESTÉE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; Dollars in millions)
|
|
|
|
|
|
|
|
Nine Months Ended March 31
|
|
|
|
|
|
|
Net Sales
|
|
|
|
Percent Change
|
|
|
|
Operating
Income (Loss)
|
|
|
|
Percent Change
|
|
|
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
Reported Basis
|
|
|
|
Local Currency
|
|
|
|
2013
|
|
|
|
2012
|
|
|
|
Reported Basis
|
Results by Geographic Region
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Americas
|
|
|
|
|
|
$
|
3,310.4
|
|
|
|
$
|
3,151.0
|
|
|
|
5
|
%
|
|
|
|
5
|
%
|
|
|
|
$
|
372.4
|
|
|
|
$
|
347.8
|
|
|
|
7
|
%
|
Europe, the Middle East & Africa.
|
|
|
|
|
|
2,778.1
|
|
|
|
2,728.1
|
|
|
|
2
|
|
|
|
|
4
|
|
|
|
|
659.0
|
|
|
|
598.8
|
|
|
|
10
|
|
Asia/Pacific
|
|
|
|
|
|
1,685.9
|
|
|
|
1,582.7
|
|
|
|
7
|
|
|
|
|
7
|
|
|
|
|
362.1
|
|
|
|
330.9
|
|
|
|
9
|
|
Subtotal
|
|
|
|
|
|
7,774.4
|
|
|
|
7,461.8
|
|
|
|
4
|
|
|
|
|
5
|
|
|
|
|
1,393.5
|
|
|
|
1,277.5
|
|
|
|
9
|
|
Returns and charges associated
with restructuring activities
|
|
|
|
|
|
(0.1
|
)
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13.3
|
)
|
|
|
(39.0
|
)
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
7,774.3
|
|
|
|
$
|
7,462.4
|
|
|
|
4
|
%
|
|
|
|
5
|
%
|
|
|
|
$
|
1,380.2
|
|
|
|
$
|
1,238.5
|
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results by Product Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skin Care
|
|
|
|
|
|
$
|
3,408.4
|
|
|
|
$
|
3,257.8
|
|
|
|
5
|
%
|
|
|
|
6
|
%
|
|
|
|
$
|
750.1
|
|
|
|
$
|
692.2
|
|
|
|
8
|
%
|
Makeup
|
|
|
|
|
|
2,928.9
|
|
|
|
2,789.4
|
|
|
|
5
|
|
|
|
|
6
|
|
|
|
|
495.1
|
|
|
|
458.3
|
|
|
|
8
|
|
Fragrance
|
|
|
|
|
|
1,039.6
|
|
|
|
1,029.2
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
130.5
|
|
|
|
113.0
|
|
|
|
15
|
|
Hair Care
|
|
|
|
|
|
362.0
|
|
|
|
335.3
|
|
|
|
8
|
|
|
|
|
9
|
|
|
|
|
25.9
|
|
|
|
25.0
|
|
|
|
4
|
|
Other
|
|
|
|
|
|
35.5
|
|
|
|
50.1
|
|
|
|
(29
|
)
|
|
|
|
(29
|
)
|
|
|
|
(8.1
|
)
|
|
|
(11.0
|
)
|
|
|
26
|
|
Subtotal
|
|
|
|
|
|
7,774.4
|
|
|
|
7,461.8
|
|
|
|
4
|
|
|
|
|
5
|
|
|
|
|
1,393.5
|
|
|
|
1,277.5
|
|
|
|
9
|
|
Returns and charges associated
with restructuring activities
|
|
|
|
|
|
(0.1
|
)
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13.3
|
)
|
|
|
(39.0
|
)
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
7,774.3
|
|
|
|
$
|
7,462.4
|
|
|
|
4
|
%
|
|
|
|
5
|
%
|
|
|
|
$
|
1,380.2
|
|
|
|
$
|
1,238.5
|
|
|
|
11
|
%
|
|
As part of the Company’s Strategic Modernization Initiative, the Company
anticipates the continued migration of its operations to SAP-based
technologies, with the majority of its locations being enabled through
2014. As a result, the Company has experienced, and may continue to
experience, fluctuations in its net sales and operating results
resulting from accelerated orders from certain of its retailers to
provide adequate safety stock to mitigate any potential short-term
business interruption associated with the SMI rollout. In particular,
approximately $94 million of accelerated orders were recorded as net
sales in the fiscal 2013 second quarter that likely would have occurred
in the fiscal 2013 third quarter. Similarly, approximately $30 million
of accelerated orders were recorded as net sales in the fiscal 2012
second quarter that likely would have occurred in the fiscal 2012 third
quarter.
Combined, these actions created a difficult comparison between the
fiscal 2013 and fiscal 2012 third quarters of approximately $64 million
in net sales and approximately $55 million in operating income, equal to
$.09 per diluted common share and impacted the Company’s operating
margin comparisons. The Company believes the presentation of certain
comparative information in the discussions of the quarterly results in
this release that exclude the impact of the timing of these orders is
useful in analyzing the net sales and operating results of its business.
Excluding the impact of the accelerated orders and charges associated
with restructuring activities, net sales and operating income for the
three months ended March 31, 2013 would have increased 5% and 22%,
respectively.
|
THE ESTÉE LAUDER COMPANIES INC.
Reconciliation of Certain Consolidated Statements of Earnings
Accounts Before and After
Returns and Charges and Accelerated Orders Associated with the
Company’s Implementation of SMI
(Unaudited; In millions, except per share data and percentages)
|
|
|
Three Months Ended
March 31, 2013
|
|
Three Months Ended
March 31, 2012
|
|
|
|
|
|
|
|
|
As
Reported
|
|
|
Returns/
Charges
|
|
|
SMI
Adjust-
ments
|
|
|
Before
Charges
/SMI
|
|
|
|
|
As
Reported
|
|
|
|
Returns/
Charges
|
|
|
|
SMI
Adjust-
ments
|
|
|
|
Before
Charges
/SMI
|
|
|
% Change
versus Prior
Year Before
Charges/SMI
|
Net Sales
|
|
|
|
|
|
$2,291.8
|
|
|
|
|
$ 0.0
|
|
|
|
|
|
$ 94.3
|
|
|
|
$2,386.1
|
|
|
|
|
$2,248.2
|
|
|
|
|
$ 0.0
|
|
|
|
$ 29.6
|
|
|
|
$2,277.8
|
|
|
5%
|
Cost of sales
|
|
|
|
|
|
443.1
|
|
|
|
|
0.0
|
|
|
|
|
|
16.2
|
|
|
|
459.3
|
|
|
|
|
469.3
|
|
|
|
|
(0.4
|
)
|
|
|
6.4
|
|
|
|
475.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
1,848.7
|
|
|
|
|
0.0
|
|
|
|
|
|
78.1
|
|
|
|
1,926.8
|
|
|
|
|
1,778.9
|
|
|
|
|
0.4
|
|
|
|
23.2
|
|
|
|
1,802.5
|
|
|
7%
|
Gross Margin
|
|
|
|
|
|
80.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80.8
|
%
|
|
|
|
79.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
79.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
1,603.6
|
|
|
|
|
1.7
|
|
|
|
|
|
—
|
|
|
|
1,605.3
|
|
|
|
|
1,567.4
|
|
|
|
|
(28.4
|
)
|
|
|
—
|
|
|
|
1,539.0
|
|
|
4%
|
Operating Expense Margin
|
|
|
|
|
|
70.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67.3
|
%
|
|
|
|
69.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
67.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
245.1
|
|
|
|
|
(1.7
|
)
|
|
|
|
|
78.1
|
|
|
|
321.5
|
|
|
|
|
211.5
|
|
|
|
|
28.8
|
|
|
|
23.2
|
|
|
|
263.5
|
|
|
22%
|
Operating Income Margin
|
|
|
|
|
|
10.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.5
|
%
|
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
11.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
53.6
|
|
|
|
|
(0.7
|
)
|
|
|
|
|
25.0
|
|
|
|
77.9
|
|
|
|
|
65.7
|
|
|
|
|
10.0
|
|
|
|
7.8
|
|
|
|
83.5
|
|
|
|
|
Net Earnings Attributable to
The Estée Lauder
Companies Inc.
|
|
|
|
|
|
178.8
|
|
|
|
|
(1.0
|
)
|
|
|
|
|
53.1
|
|
|
|
230.9
|
|
|
|
|
130.4
|
|
|
|
|
18.8
|
|
|
|
15.4
|
|
|
|
164.6
|
|
|
40%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
attributable to The Estée
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lauder Companies Inc. per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common share
|
|
|
|
|
|
.45
|
|
|
|
|
.00
|
|
|
|
|
|
.13
|
|
|
|
.59
|
|
|
|
|
.33
|
|
|
|
|
.05
|
|
|
|
.04
|
|
|
|
.42
|
|
|
41%
|
|
|
The negative impact of accelerated orders from certain retailers
associated with the Company’s implementation of SMI on net sales and
operating results by product category and geographic region is as
follows:
|
(Unaudited; In millions)
|
|
Three Months Ended March 31, 2013
|
|
|
|
Three Months Ended March 31, 2012
|
|
|
Net Sales
|
|
|
|
Operating
Results
|
|
|
|
Net Sales
|
|
|
|
Operating
Results
|
Product Category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skin Care
|
|
$
|
48
|
|
|
|
$
|
40
|
|
|
|
$
|
16
|
|
|
|
$
|
13
|
Makeup
|
|
|
32
|
|
|
|
|
26
|
|
|
|
|
9
|
|
|
|
|
6
|
Fragrance
|
|
|
10
|
|
|
|
|
9
|
|
|
|
|
2
|
|
|
|
|
2
|
Hair Care
|
|
|
4
|
|
|
|
|
3
|
|
|
|
|
3
|
|
|
|
|
2
|
Other
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
Total
|
|
$
|
94
|
|
|
|
$
|
78
|
|
|
|
$
|
30
|
|
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Americas
|
|
$
|
29
|
|
|
|
$
|
23
|
|
|
|
$
|
2
|
|
|
|
$
|
1
|
Europe, the Middle East & Africa
|
|
|
15
|
|
|
|
|
12
|
|
|
|
|
3
|
|
|
|
|
3
|
Asia/Pacific
|
|
|
50
|
|
|
|
|
43
|
|
|
|
|
25
|
|
|
|
|
19
|
Total
|
|
$
|
94
|
|
|
|
$
|
78
|
|
|
|
$
|
30
|
|
|
|
$
|
23
|
|
THE ESTÉE LAUDER COMPANIES INC.
Excluding the impact of the shift in orders associated with the
Company’s implementation of SMI and returns and charges associated with
restructuring activities, net sales and operating results for the three
months ended March 31, 2013 would have increased/(decreased)
as follows:
|
(Unaudited; In millions)
|
|
|
|
|
|
Net Sales As Adjusted
|
|
|
|
|
|
|
|
|
|
|
Reported
Basis
|
|
|
|
Local
Currency
|
|
|
|
Operating
Results As
Adjusted
|
Product Category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skin Care
|
|
|
|
|
|
|
3
|
%
|
|
|
|
3
|
%
|
|
|
|
3
|
%
|
Makeup
|
|
|
|
|
|
|
7
|
|
|
|
|
8
|
|
|
|
|
38
|
|
Fragrance
|
|
|
|
|
|
|
4
|
|
|
|
|
4
|
|
|
|
|
100
|
+
|
Hair Care
|
|
|
|
|
|
|
6
|
|
|
|
|
7
|
|
|
|
|
(12
|
)
|
Other
|
|
|
|
|
|
|
(21
|
)
|
|
|
|
(19
|
)
|
|
|
|
43
|
|
Total
|
|
|
|
|
|
|
5
|
%
|
|
|
|
5
|
%
|
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Region:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Americas
|
|
|
|
|
|
|
4
|
%
|
|
|
|
4
|
%
|
|
|
|
4
|
%
|
Europe, the Middle East & Africa
|
|
|
|
|
|
|
4
|
|
|
|
|
5
|
|
|
|
|
45
|
|
Asia/Pacific
|
|
|
|
|
|
|
6
|
|
|
|
|
8
|
|
|
|
|
11
|
|
Total
|
|
|
|
|
|
|
5
|
%
|
|
|
|
5
|
%
|
|
|
|
22
|
%
|
|
|
THE ESTÉE LAUDER COMPANIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; In millions)
|
|
|
|
|
|
|
March 31
2013
|
|
|
|
June 30
2012
|
|
|
|
March 31
2012
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
$
|
1,438.6
|
|
|
|
|
$
|
1,347.7
|
|
|
|
|
$
|
1,192.8
|
Accounts receivable, net
|
|
|
|
|
|
1,361.9
|
|
|
|
|
1,060.3
|
|
|
|
|
1,304.8
|
Inventory and promotional merchandise, net
|
|
|
|
|
|
989.3
|
|
|
|
|
983.6
|
|
|
|
|
898.7
|
Prepaid expenses and other current assets
|
|
|
|
|
|
496.4
|
|
|
|
|
463.5
|
|
|
|
|
503.6
|
Total Current Assets
|
|
|
|
|
|
4,286.2
|
|
|
|
|
3,855.1
|
|
|
|
|
3,899.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, net
|
|
|
|
|
|
1,296.0
|
|
|
|
|
1,231.8
|
|
|
|
|
1,181.8
|
Other Assets
|
|
|
|
|
|
1,512.9
|
|
|
|
|
1,506.1
|
|
|
|
|
1,519.8
|
Total Assets
|
|
|
|
|
|
$
|
7,095.1
|
|
|
|
|
$
|
6,593.0
|
|
|
|
|
$
|
6,601.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current debt
|
|
|
|
|
|
$
|
20.0
|
|
|
|
|
$
|
219.0
|
|
|
|
|
$
|
144.0
|
Accounts payable
|
|
|
|
|
|
388.2
|
|
|
|
|
493.8
|
|
|
|
|
406.6
|
Other current liabilities
|
|
|
|
|
|
1,507.7
|
|
|
|
|
1,413.0
|
|
|
|
|
1,507.6
|
Total Current Liabilities
|
|
|
|
|
|
1,915.9
|
|
|
|
|
2,125.8
|
|
|
|
|
2,058.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
1,329.2
|
|
|
|
|
1,069.1
|
|
|
|
|
1,065.9
|
Other noncurrent liabilities
|
|
|
|
|
|
643.2
|
|
|
|
|
650.6
|
|
|
|
|
621.9
|
Total Noncurrent Liabilities
|
|
|
|
|
|
1,972.4
|
|
|
|
|
1,719.7
|
|
|
|
|
1,687.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
|
|
|
|
3,206.8
|
|
|
|
|
2,747.5
|
|
|
|
|
2,855.5
|
Total Liabilities and Equity
|
|
|
|
|
|
$
|
7,095.1
|
|
|
|
|
$
|
6,593.0
|
|
|
|
|
$
|
6,601.5
|
|
|
SELECT CASH FLOW DATA
(Unaudited; In millions)
|
|
|
Nine Months Ended March 31
|
|
|
2013
|
|
2012
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
$
|
927.9
|
|
|
|
|
|
$
|
808.3
|
|
Depreciation and amortization
|
|
|
|
|
|
|
247.2
|
|
|
|
|
|
|
215.4
|
|
Deferred income taxes
|
|
|
|
|
|
|
(43.3
|
)
|
|
|
|
|
|
(28.7
|
)
|
Impairment of other intangible assets
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
6.7
|
|
Other items
|
|
|
|
|
|
|
99.6
|
|
|
|
|
|
|
56.6
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in accounts receivable, net
|
|
|
|
|
|
|
(297.0
|
)
|
|
|
|
|
|
(397.0
|
)
|
Decrease (increase) in inventory and promotional merchandise
|
|
|
|
|
|
|
(4.2
|
)
|
|
|
|
|
|
66.0
|
|
Increase in other assets, net
|
|
|
|
|
|
|
(24.0
|
)
|
|
|
|
|
|
(100.8
|
)
|
Increase in accounts payable and other liabilities
|
|
|
|
|
|
|
28.0
|
|
|
|
|
|
|
243.2
|
|
Net cash flows provided by operating activities
|
|
|
|
|
|
$
|
934.2
|
|
|
|
|
|
$
|
869.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
305.5
|
|
|
|
|
|
|
271.9
|
|
Payments to acquire treasury stock
|
|
|
|
|
|
|
363.2
|
|
|
|
|
|
|
550.0
|
|
Dividends paid
|
|
|
|
|
|
|
349.3
|
|
|
|
|
|
|
204.0
|
|
|