The Estée Lauder Companies Reports Fiscal 2014 Second Quarter Results

  The Estée Lauder Companies Reports Fiscal 2014 Second Quarter Results

     – Net Sales in Line with Expectations, EPS Better Than Anticipated –

       – Company Remains on Track to Deliver Strong Full Year Results –

Business Wire

NEW YORK -- February 5, 2014

The Estée Lauder Companies Inc. (NYSE:EL) today reported net sales for its
second quarter ended December 31, 2013 of $3.02 billion, a 3% increase
compared with $2.93 billion in the prior-year quarter. Excluding the impact of
foreign currency translation, net sales increased 4%. Net earnings for the
quarter were $432.5 million, compared with $447.5 million last year, and
diluted net earnings per common share were $1.09, compared with $1.13 reported
in the prior year.

The fiscal 2014 second-quarter results included net adjustments associated
with restructuring activities of $(3.5) million ($(2.3) million after tax),
equal to $(.01) per diluted common share. The fiscal 2013 second-quarter
results included returns and charges associated with restructuring activities
of $14.6 million ($9.5 million after tax), equal to $.02 per diluted common
share.

Excluding these restructuring activities in the second quarters of fiscal 2014
and 2013, net earnings for the three months ended December 31, 2013 were
$430.2 million, and diluted net earnings per common share were $1.09, versus a
comparable $1.16 in the prior-year period. A reconciliation between GAAP and
non-GAAP financial measures is included in this release.

Comparisons between the current fiscal year and the prior year second quarters
were affected by the accelerated sales orders shifted into the Company’s
fiscal 2013 second quarter from its third quarter in advance of the Company’s
January 2013 implementation of SAP as part of its Strategic Modernization
Initiative (SMI). This amounted to approximately $94 million in sales and $78
million in operating income, equal to approximately $.13 per diluted common
share.

Excluding the impact of the shift and restructuring activities, net sales in
local currency and operating income for the three months ended December 31,
2013 would have increased 7% and 11%, respectively.

Additionally, in the prior-year second quarter, the Company amended the
agreement related to the August 2007 sale of Rodan + Fields to receive a fixed
amount in lieu of future consideration and other rights and, as a result,
recognized $21.3 million as other income, equal to approximately $.04 per
diluted common share.

Fabrizio Freda, President and Chief Executive Officer, said, “Our fiscal
second quarter sales growth was in line with our expectations, despite softer
than expected markets in some geographies. Earnings per share exceeded our
forecast, due to strong results in several of our brands and high margin
channels, as well as our ability to leverage costs. These results confirm that
our business strategy is sound and effective. Adjusting for the accelerated
sales orders in the prior year, our local currency sales increased more than
7%. Underscoring our sustainable growth is our strong and diverse portfolio of
brands that is balanced by geography, product category and channel. Key
drivers of our sales gains in the quarter were the United States and the
United Kingdom, our luxury and makeup artist brands, and online and travel
retail channels. These factors and continued strength overall in emerging
markets more than compensated for soft results in certain European countries
and solid but slowing Chinese market growth.

“Our strategy prioritizes the fastest growing areas of our business to drive
top-line growth and increase profitability and margins. To achieve this, we
plan to continue appropriate levels of targeted investment spending, while
leveraging efficient cost management in other expense categories. At the same
time, we will bring a steady flow of new products to market and increase brand
awareness by further expanding digital and social media capabilities and
high-touch in-store service innovation.

“With half of our year behind us, we are narrowing our full fiscal year sales
estimate to 6% to 7% in local currency, reflecting softening in some key
markets. At the same time, we are reaffirming our earnings per share estimate
of $2.80 to $2.87 for the full fiscal year. Our forecast reflects our ability
to leverage high growth opportunities while recognizing and navigating tougher
environments to deliver our financial goals.”

The Company made further progress on its strategic goals and realized
continued improvement in cost of sales. As planned, the Company increased
global advertising spending versus the prior-year quarter to support its
biggest innovations and certain existing products.


Results by Product Category
               Three Months Ended December 31
(Unaudited;                                                     Operating            Percent
Dollars in        Net Sales               Percent Change      
millions)                                                       Income (Loss)        Change
                                          Reported   Local                           Reported
                  2013       2012                             2013       2012
                                          Basis      Currency                        Basis
                                                                                           
Skin Care         $ 1,261.3   $ 1,279.9   (1   )%    0    %     $  338.0   $ 356.7   (5    )%
Makeup            1,129.1     1,049.3     8          8          248.3      226.5     10
Fragrance         477.8       458.8       4          4          60.5       77.3      (22   )
Hair Care         135.1       131.9       2          3          7.7        10.1      (24   )
Other             15.3        13.2        16         17         (1.7     ) (2.9    ) 41
Subtotal          3,018.6     2,933.1     3          4          652.8      667.7     (2    )
Returns and
charges
associated
with
restructuring     0.1         (0.1      )                       3.5        (14.6   )
activities
Total             $ 3,018.7   $ 2,933.0   3    %     4    %     $ 656.3    $ 653.1   0     %
                                                                     
                                                                                           

The net overall change in net sales and operating income for the quarter was
unfavorably impacted by the shift last year in orders from certain retailers,
due to the Company’s implementation of SAP, as previously mentioned, in the
following product categories:

  *Net sales: Skin care, approximately $48 million; makeup, approximately $32
    million; fragrance, approximately $10 million; and hair care,
    approximately $4 million.
  *Operating income: Skin care, approximately $40 million; makeup,
    approximately $26 million; fragrance, approximately $9 million; and hair
    care, approximately $3 million.

Excluding the impact of the shift in orders:

  *Reported net sales in skin care, makeup, fragrance and hair care would
    have increased 2%, 11%, 7% and 5%, respectively.
  *Operating results in skin care, makeup, fragrance and hair care would have
    increased/(decreased) 7%, 24%, (12)% and 8%, respectively.

Skin Care

  *The skin care category is a strategic priority and the Company is well
    positioned to capitalize on its strong pipeline of innovative products.
    The Company gained share during the quarter in this category in certain
    countries where its products are sold.
  *Sales reflect the recent launches of the Company’s new Advanced Night
    Repair Synchronized Recovery Complex II from Estée Lauder and Dramatically
    Different Moisturizing Lotion + from Clinique. Combined, sales from these
    launches were offset by lower sales of existing products.
  *Continued strong growth from the Company’s luxury skin care brand, La Mer,
    was more than offset by lower sales of certain heritage brand products
    that were launched in the prior-year period.
  *Operating income declined, including the shift, because of increased
    investment spending behind recent major product launches.

Makeup

  *Higher makeup sales primarily reflected strong growth from the Company’s
    makeup artist brands, certain product offerings from Estée Lauder and the
    recent launch of All About Shadow from Clinique.
  *Increased sales from Smashbox and the Tom Ford line of cosmetics
    contributed to the category’s growth.
  *The increase in makeup operating income primarily reflected improved
    performance from the Company’s makeup brands.

Fragrance

  *In fragrance, sales increases were generated from the recent launches of
    Estée Lauder Modern Muse and the Michael Kors Fragrance Collection. Higher
    fragrance sales were also generated from luxury brands Jo Malone,
    including its new Peony and Blush Suede fragrance, and Tom Ford.
  *Fragrance operating income decreased, as higher holiday marketing
    investments behind new launches were partially offset by the success and
    profitable progress of certain luxury brands.

Hair Care

  *Hair care net sales growth was driven by Aveda, reflecting gains in the
    salon channel and the continued success of its Invati line of products, as
    well as products in its Dry Remedy and Damage Remedy franchises.
  *The category growth also benefited from expanded global distribution, in
    particular to specialty-multi retailers for Bumble and bumble and to
    salons for Aveda.
  *Sales declined at Bumble and bumble, primarily due to lower salon sales.
    Ojon sales decreased, primarily due to its exit from the direct response
    television channel.
  *Hair care operating income decreased, including the shift, due, in part,
    to additional investments related to expanded distribution and an increase
    in advertising expenses.


Results by Geographic Region
                Three Months Ended December 31
(Unaudited;                                                     Operating             Percent
Dollars in        Net Sales               Percent Change      
millions)                                                       Income (Loss)         Change
                                          Reported   Local                            Reported
                  2013       2012                             2013      2012
                                          Basis      Currency                         Basis
                                                                                            
The Americas      $ 1,194.6   $ 1,140.2   5    %     6    %     $  152.2   $  132.1   15    %
Europe, the
Middle East &     1,181.0     1,105.3     7          6          332.4      324.6      2
Africa.
Asia/Pacific      643.0       687.6       (6   )     (3   )     168.2      211.0      (20   )
Subtotal          3,018.6     2,933.1     3          4          652.8      667.7      (2    )
Returns and
charges
associated
with
restructuring     0.1         (0.1      )                       3.5        (14.6    )
activities
Total             $ 3,018.7   $ 2,933.0   3    %     4    %     $ 656.3    $ 653.1    0     %



In the quarter, the net overall change in net sales and operating income in
the Company’s geographic regions was unfavorably impacted by the shift last
year in orders from certain retailers as previously mentioned, as follows:

  *Net sales: the Americas, approximately $29 million; Europe, the Middle
    East & Africa, approximately $15 million; and Asia/Pacific, approximately
    $50 million.
  *Operating income: the Americas, approximately $23 million; Europe, the
    Middle East & Africa, approximately $12 million; and Asia/Pacific,
    approximately $43 million.

Excluding the impact of the shift in orders:

  *Reported net sales in the Americas, Europe, the Middle East & Africa and
    Asia/Pacific would have increased 8%, 8% and 1%, respectively.
  *Operating income in the Americas, Europe, the Middle East & Africa and
    Asia/Pacific would have increased 40%, 6% and 0%, respectively.

The Americas

  *Net sales in the United States increased, reflecting growth from certain
    of the Company’s makeup artist and luxury brands, partially offset by
    declines at certain heritage brands. Sales of the Company’s online
    business grew double digits.
  *Double-digit sales growth was recorded in Latin America, due, in part, to
    price increases in Venezuela as a result of rising inflation. Net sales in
    Canada declined.
  *Operating income in the Americas rose, reflecting the increased sales and
    a more measured approach to spending. Partially offsetting these higher
    results were an increase in investment spending and an adjustment made in
    the prior-year period related to the overstatement of accounts payable
    balances.

Europe, the Middle East & Africa

  *In constant currency, net sales increased in each product category and in
    the majority of countries in the region. The Company estimates that it
    continued to outperform prestige beauty in many markets.
  *The net sales increase was led by double-digit growth in a number of
    areas, including the Company’s travel retail business, Russia, South
    Africa, Turkey and Israel, and high-single-digit growth in the United
    Kingdom.
  *Sales were lower in certain European countries where the retail
    environment continues to be challenging. Lower net sales in Switzerland,
    the Nordic countries and France were due, in part, to the accelerated
    retailer orders, as previously discussed.
  *The Company’s net sales growth in travel retail primarily reflected a
    stronger retail environment for the Company’s products, particularly
    luxury brands, an increase in global airline passenger traffic and
    expanded distribution.
  *Operating income increased, as higher results from the United Kingdom,
    Russia, the Company’s travel retail business, Israel and Iberia were
    partially offset by lower operating results in Switzerland and Italy.

Asia/Pacific

  *Net sales decreased in the region, primarily reflecting lower local
    currency sales in China, Taiwan and Korea. The sales decline in China and
    Taiwan reflect the accelerated retailer orders, as previously discussed.
  *The Company’s strongest local currency growth was generated in Australia,
    Japan, Hong Kong and the Philippines.
  *Net sales in China included sales to new consumers in expanded
    distribution in tier three cities and new skin care product launches.
  *The lower sales in Korea reflected continuing difficult economic
    conditions and competitive pressures. The Company expects to see continued
    weakness in prestige beauty in Korea, albeit at a more moderate pace.
  *The Company estimates that it gained share in certain countries, including
    China, within its points of distribution during the quarter.
  *In Asia/Pacific, operating income declined, with China, Hong Kong and
    Taiwan reporting double-digit decreases, primarily reflecting the impact
    from the accelerated retailer orders. Lower operating results were also
    posted in Japan and Thailand, partially offset by higher results in Korea
    and Australia.

Six-Month Results

  *For the six months ended December 31, 2013, the Company reported net sales
    of $5.69 billion, a 4% increase from $5.48 billion in the comparable
    prior-year period. Excluding the impact of foreign currency translation,
    net sales increased 5%. In local currency, net sales grew in each of the
    Company’s geographic regions and major product categories.
  *The Company reported net earnings of $733.2 million for the six months
    ended December 31, 2013, compared with $747.0 million in the same period
    last year. Diluted net earnings per common share for the six months ended
    December 31, 2013 was $1.86 compared with $1.89 reported in the prior-year
    period.
  *The fiscal 2014 six-month results comparison was unfavorably impacted by
    the acceleration of sales orders from certain retailers, as previously
    discussed.
  *The fiscal 2014 six-month results included net adjustments associated with
    restructuring activities of $(2.3) million ($(1.4) million after tax).
  *The fiscal 2013 six-month results included returns and charges associated
    with restructuring activities of $15.0 million ($9.9 million after tax),
    equal to $.03 per diluted common share. Additionally, during the six
    months ended December 31, 2012, 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 of $19.1 million ($12.2 million after
    tax), for the extinguishment of debt, equal to $.03 per diluted common
    share.
  *Excluding these returns and charges, net earnings for the six months ended
    December 31, 2013 were $731.8 million and diluted net earnings per common
    share were $1.85, versus a comparable $1.95 in the prior-year period.

  *Excluding the impact of the shift and restructuring activities, net sales
    in local currency and operating income for the six months ended December
    31, 2013 would have increased 7% and 3%, respectively.

Cash Flows

  *For the six months ended December 31, 2013, net cash flows provided by
    operating activities increased 19% to $782.4 million, compared with $655.1
    million in the prior-year period.
  *The increase primarily reflected a net increase in cash from certain
    working capital components.

Outlook for Fiscal 2014 Third Quarter and Full Year

The Company expects global prestige beauty to rise approximately 3% to 4%,
tempered by continued weakness in certain European countries and Korea, as
well as a slowing of the near-term growth trend in China and Hong Kong. The
Company continues to expect prestige beauty growth in the U.S., but at a
slower pace than in fiscal 2013. Additionally, the Company is monitoring the
ongoing macroeconomic uncertainties in Venezuela and the potential devaluation
of the bolivar fuerte, as well as unfavorable currencies in certain emerging
countries. The Company expects to further improve its gross and operating
margins by leveraging its strong sales growth and successful advertising
strategy, while continuing to reduce non-value-added costs.

The Company expects its strong sales growth trend to continue throughout the
remainder of the fiscal year. The Company’s third quarter estimates reflect
the cadence of innovation and related marketing spending, and the market
softness mentioned above.

Third Quarter Fiscal 2014

  *Net sales are forecasted to grow between 10% and 11% in constant currency.
  *Foreign currency translation is expected to negatively impact sales by
    approximately 1% to 2% versus the prior-year period.
  *The Company expects to increase advertising spending in the quarter to
    support major new product launch activity, which is expected to continue
    to build sales momentum in the coming quarters.
  *Diluted net earnings per share are projected to be between $.52 and $.55.
  *Comparisons with the current fiscal year third quarter will be favorably
    affected by the accelerated sales orders shifted into the Company’s fiscal
    2013 second quarter from its third quarter in advance of the Company’s
    January 2013 implementation of SAP. This amounted to approximately $94
    million in sales and about $78 million in operating income, equal to
    approximately $.13 per diluted common share. Adjusting for the shift,
    sales growth for the fiscal 2014 third quarter is expected to be between
    6% and 7% in local currency.

Full Year Fiscal 2014

  *Net sales are forecasted to grow between 6% and 7% in constant currency.
  *Foreign currency translation is expected to negatively impact sales by 1%
    to 2% versus the prior-year period.
  *Diluted net earnings per share continue to be projected between $2.80 to
    $2.87. The 1% to 2% negative currency impact on the sales growth equates
    to about $.05 of earnings per share.
  *A potential devaluation of the Venezuelan bolivar is not included in the
    Company’s full year forecast. A hypothetical 45% devaluation to a rate of
    approximately 11 bolivars to the U.S. dollar could result in a
    remeasurement loss to the Company of approximately $20 million to $27
    million, after tax, depending on both the timing and level of the
    occurrence.

The Company expects to roll out the last major wave of SMI in July 2014 in
certain of its locations. As a result, some retailers may accelerate sales
orders that the Company believes would normally occur in its fiscal 2015 first
quarter into the fiscal 2014 fourth quarter, in advance of this implementation
to provide adequate safety stock to mitigate any potential short-term business
interruption associated with the SMI rollout. The Company’s fiscal 2014 full
year outlook does not include the impact of this potential shift. The Company
will provide an estimate of the sales and operating income impact of the shift
when it reports its fiscal third quarter results.

Conference Call

The Estée Lauder Companies will host a conference call at 9:30 a.m. (ET)
today, February 5, 2014 to discuss its results. The dial-in number for the
call is 888-294-4716 in the U.S. or 706-902-0101 internationally (conference
ID number: 31881764). 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 2014 Third Quarter and Full Year” section involve
risks and uncertainties. Factors that could cause actual results to differ
materially from those forward-looking statements include the following:

       increased competitive activity from companies in the skin care, makeup,
(1)   fragrance and hair care businesses, some of which have greater
       resources than the Company does;
       the Company’s ability to develop, produce and market new products on
(2)    which future operating results may depend and to successfully address
       challenges in the Company’s business;
       consolidations, restructurings, bankruptcies and reorganizations in the
       retail industry causing a decrease in the number of stores that sell
(3)    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;
       the success, or changes in timing or scope, of new product launches and
(5)    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;
       social, political and economic risks to the Company’s foreign or
(7)    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;
       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
(8)    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;
       foreign currency fluctuations affecting the Company’s results of
       operations and the value of its foreign assets, the relative prices at
(9)    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;
       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
(10)   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;
       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
(11)   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;
       real estate rates and availability, which may affect the Company’s
(12)   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;
       the Company’s ability to acquire, develop or implement new information
       and distribution technologies and initiatives on a timely basis and
(14)   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;
       the Company’s ability to capitalize on opportunities for improved
(15)   efficiency, such as publicly-announced strategies and restructuring and
       cost-savings initiatives, and to integrate acquired businesses and
       realize value therefrom;
       consequences attributable to local or international conflicts around
(16)   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
       additional factors as described in the Company’s filings with the
(18)   Securities and Exchange Commission, including its Annual Report on Form
       10-K for the fiscal year ended June 30, 2013.

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, Marni and Tory Burch.

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            Percent     Six Months Ended              Percent

                   December 31                   Change      December 31                   Change
                     2013         2012                        2013         2012
                                                                                               
Net Sales (A)      $ 3,018.7     $ 2,933.0       3   %       $ 5,693.7     $ 5,482.5       4   %
Cost of Sales       581.6        568.0                      1,125.7      1,107.2
Gross Profit        2,437.1      2,365.0       3   %        4,568.0      4,375.3       4   %
                                                                                               
Gross Margin         80.7    %     80.6    %                   80.2    %     79.8    %
                                                                                               
Operating
expenses:
Selling,
general and          1,784.2       1,698.6                     3,464.4       3,226.5
administrative
Restructuring
and other           (3.4    )    13.3                       (2.2    )    13.7
charges (A)
                    1,780.8      1,711.9       4   %        3,462.2      3,240.2       7   %
                                                                                               
Operating            59.0    %     58.3    %                   60.8    %     59.1    %
Expense Margin
                                                                                               
Operating            656.3         653.1         0   %         1,105.8       1,135.1       (3  )%
Income
                                                                                               
Operating            21.7    %     22.3    %                   19.4    %     20.7    %
Income Margin
                                                                                               
Interest             12.4          13.4                        25.9          29.2
expense, net
Interest
expense on
debt                 —             —                           —             19.1
extinguishment
(B)
Other income        —            21.3                       —            23.1
(C)
Earnings
before Income        643.9         661.0         (3  )%        1,079.9       1,109.9       (3  )%
Taxes
                                                                                               
Provision for       208.7        211.6                      342.9        360.9
income taxes
Net Earnings         435.2         449.4         (3  )%        737.0         749.0         (2  )%
                                                                                               
Net earnings
attributable
to                  (2.7    )    (1.9    )                  (3.8    )    (2.0    )
noncontrolling
interests
Net Earnings
Attributable
to The Estée
Lauder
Companies Inc.     $ 432.5       $ 447.5         (3  )%      $ 733.2       $ 747.0         (2  )%
                                                                                               
                                                                                               
Net earnings
attributable
to The Estée
Lauder
Companies
Inc. per
common share:
Basic              $ 1.11        $ 1.16          (4  )%      $ 1.89        $ 1.93          (2  )%
Diluted              1.09          1.13          (4  )%        1.86          1.89          (2  )%
                                                                                               
Weighted
average common
shares
outstanding:
Basic                388.3         387.4                       388.1         387.6
Diluted              395.4         394.7                       395.1         395.1

(A) During the second quarter of fiscal 2013, the Company closed its
multi-faceted cost savings program implemented in February 2009 (the
“Program”) and will continue to execute all remaining initiatives through
fiscal 2014. 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) 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 of $19.1 million.

(C) 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 amended
agreement, the Company recognized $21.3 million, equal to $.04 per diluted
common share, as other income in the consolidated statement of earnings for
the three months ended December 31, 2012.


THE ESTÉE LAUDER COMPANIES INC.

SUMMARY OF CONSOLIDATED RESULTS

(Unaudited; Dollars in millions)

                Six Months Ended December 31
                                                                  Operating                   Percent
                  Net Sales                Percent Change                                 
                                                                  Income (Loss)               Change
                                            Reported   Local                                  Reported
                  2013       2012                               2013         2012
                                            Basis      Currency                               Basis
Results by
Geographic
Region
The Americas      $ 2,397.0   $ 2,322.3     3    %     4    %     $   308.2     $   304.4     1     %
Europe, the
Middle East &     2,072.2     1,930.2       7          6          513.2         521.5         (2    )
Africa.
Asia/Pacific      1,224.4     1,230.1       0          3          282.1         324.2         (13   )
Subtotal          5,693.6     5,482.6       4          5          1,103.5       1,150.1       (4    )
Returns and
charges
associated
with
restructuring     0.1         (0.1      )                         2.3           (15.0     )
activities
Total             $ 5,693.7   $ 5,482.5     4    %     5    %     $ 1,105.8     $ 1,135.1     (3    )%
                                                                                                    
Results by
Product
Category
Skin Care         $ 2,432.3   $ 2,393.4     2    %     3    %     $   579.6     $   615.7     (6    )%
Makeup            2,130.1     2,009.7       6          7          414.6         387.8         7
Fragrance         845.2       806.4         5          5          97.4          130.7         (25   )
Hair Care         259.9       245.8         6          7          16.1          20.8          (23   )
Other             26.1        27.3          (4   )     (4   )     (4.2      )   (4.9      )   14
Subtotal          5,693.6     5,482.6       4          5          1,103.5       1,150.1       (4    )
Returns and
charges
associated
with
restructuring     0.1         (0.1      )                         2.3           (15.0     )
activities
Total             $ 5,693.7   $ 5,482.5     4    %     5    %     $ 1,105.8     $ 1,135.1     (3    )%
                                                                                                    

                       THE ESTÉE LAUDER COMPANIES INC.

This earnings release includes some non-GAAP financial measures relating to
charges associated with restructuring activities, the extinguishment of debt
and the accelerated orders associated with the Company’s SMI rollout. The
following are reconciliations between the non-GAAP financial measures and the
most directly comparable GAAP measure for certain consolidated statements of
earnings accounts before and after the charges associated with restructuring
activities, the extinguishment of debt and the accelerated orders. The Company
uses these non-GAAP financial measures, among other things, to evaluate its
operating performance and the measures represent 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                     Three Months Ended
                                                  
             December 31, 2013                      December 31, 2012
                                                                                        % Change
                                       Before                               Before
                            Returns/                As           Returns/               versus Prior
             As Reported             Returns/     Reported              Returns/
                            Charges                              Charges                Year Before
                                       Charges                              Charges
                                                                                        Returns/Charges
Net Sales     $3,018.7      $    )   $3,018.6     $2,933.0     $ 0.1      $2,933.1    3       %
                              (0.1
Cost of        581.6          0.0      581.6        568.0        (1.2   )   566.8
sales
                                                                                                
Gross Profit   2,437.1        (0.1 )   2,437.0      2,365.0      1.3        2,366.3     3       %
Gross Margin   80.7     %              80.7     %   80.6     %              80.7     %
                                                                                                
Operating      1,780.8        3.4      1,784.2      1,711.9      (13.3  )   1,698.6     5       %
expenses
Operating
Expense        59.0     %              59.1     %   58.3     %              57.9     %
Margin
                                                                                                
Operating      656.3          (3.5 )   652.8        653.1        14.6       667.7       (2      )%
Income
Operating
Income         21.7     %              21.6     %   22.3     %              22.8     %
Margin
                                                                                                
Provision
for income     208.7          (1.2 )   207.5        211.6        5.1        216.7
taxes
Net Earnings
Attributable
to
The Estée
Lauder         432.5          (2.3 )   430.2        447.5        9.5        457.0       (6      )%
Companies
Inc.
                                                                                                
Diluted net
earnings
attributable
to The Estée
Lauder
Companies
Inc. per       1.09           (.01 )   1.09         1.13         .02        1.16        (6      )%
common share
                                                                                                


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)
                                                      
                   Six Months Ended                       Six Months Ended

                   December 31, 2013                      December 31, 2012
                                                                                              % Change
                                             Before                               Before
                                  Returns/                As           Returns/               versus Prior
                   As Reported             Returns/     Reported              Returns/
                                  Charges                              Charges                Year Before
                                             Charges                              Charges
                                                                                              Returns/Charges
Net Sales           $5,693.7      $    )   $5,693.6     $5,482.5     $ 0.1      $5,482.6    4       %
                                    (0.1
Cost of sales        1,125.7        0.0      1,125.7      1,107.2      (1.2   )   1,106.0
                                                                                                      
Gross Profit         4,568.0        (0.1 )   4,567.9      4,375.3      1.3        4,376.6     4       %
Gross Margin         80.2     %              80.2     %   79.8     %              79.8     %
                                                                                                      
Operating            3,462.2        2.2      3,464.4      3,240.2      (13.7  )   3,226.5     7       %
expenses
Operating            60.8     %              60.8     %   59.1     %              58.9     %
Expense Margin
                                                                                                      
Operating            1,105.8        (2.3 )   1,103.5      1,135.1      15.0       1,150.1     (4      )%
Income
Operating            19.4     %              19.4     %   20.7     %              20.9     %
Income Margin
                                                                                                      
Interest
expense on
debt
extinguishment       —              —        —            19.1         (19.1  )  —
                                                                                                      
Provision for        342.9          (0.9 )   342.0        360.9        12.0       372.9
income taxes
Net Earnings
Attributable
to
The Estée
Lauder               733.2          (1.4 )   731.8        747.0        22.1       769.1       (5      )%
Companies Inc.
                                                                                                      
Diluted net
earnings
attributable
to The Estée
Lauder
Companies
Inc. per             1.86           (.00 )   1.85         1.89         .06        1.95        (5      )%
common share
                                                                                                      

                       THE ESTÉE LAUDER COMPANIES INC.

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
calendar 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.

This action created a difficult comparison between the fiscal 2014 and fiscal
2013 second quarters of approximately $94 million in net sales and
approximately $78 million in operating income, equal to $.13 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, the charges associated with
restructuring activities and the extinguishment of debt, net sales and
operating income for the three months ended December 31, 2013 would have
increased 6% and 11%, respectively. For the six months ended December 31,
2013, net sales and operating income would have increased 6% and 3%,
respectively.


Reconciliation of Certain Consolidated Statements of Earnings Accounts Before and After Returns and Charges and
Accelerated Orders Associated with the Company’s Implementation of SAP

(Unaudited; In millions, except per share data and percentages)

               Three Months Ended                           Three Months Ended
                                                         
               December 31, 2013                            December 31, 2012
                                                                                                       % Change
                                     SAP       Before                             SAP       Before
               As         Returns/                          As         Returns/                        versus
                                    Adjust-  Charges                            Adjust-   Charges    Prior
               Reported   Charges                           Reported   Charges
                                     ments     /SAP                               ments     /SAP       Year Before

                                                                                                       Charges/SAP
                                                            $2,933.0
Net Sales      $3,018.7   $ (0.1   ) $ —       $3,018.6                $ 0.1      $ (94.3 ) $2,838.8   6      %
                                                            
Cost of        581.6      0.0        —         581.6        568.0      (1.2     ) (16.2   ) 550.6
sales
                                                                                                       
Gross Profit   2,437.1    (0.1     ) —         2,437.0      2,365.0    1.3        (78.1   ) 2,288.2    7      %
Gross Margin   80.7     %                      80.7     %   80.6     %                      80.6     % 
                                                                                                       
Operating      1,780.8    3.4        —         1,784.2      1,711.9    (13.3    ) —         1,698.6    5      %
expenses
Operating
Expense        59.0     %                      59.1     %   58.3     %                      59.8     % 
Margin
                                                                                                       
Operating      656.3      (3.5     ) —         652.8        653.1      14.6       (78.1   ) 589.6      11     %
Income
Operating
Income         21.7     %                      21.6     %   22.3     %                      20.8     % 
Margin
                                                                                                       
Provision
for income     208.7      (1.2     ) —         207.5        211.6      5.1        (25.0   ) 191.7
taxes
Net Earnings
Attributable
to
The Estée
Lauder
Companies      432.5      (2.3     ) —         430.2        447.5      9.5        (53.1   ) 403.9      7      %
Inc.
                                                                                                       
Diluted net
earnings
attributable
to The Estée
Lauder
Companies
Inc. per
common share   1.09       (.01     ) —         1.09         1.13       .02        (.13    ) 1.02       6      %
                                                                                                       

                                                                                                                                  
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 SAP

(Unaudited; In millions, except per share data and percentages)
                                                                                                                  
                 Six Months Ended                                 Six Months Ended

                 December 31, 2013                                December 31, 2012
                                                                                                                      % Change
                                          SAP       Before                                  SAP         Before
                 As            Returns/                           As            Returns/                              versus
                                        Adjust-  Charges                               Adjust-    Charges       Prior
                 Reported      Charges                            Reported      Charges
                                          ments     /SAP                                    ments       /SAP          Year Before

                                                                                                                      Charges/SAP
Net Sales        $ 5,693.7     $ (0.1 )   $   —     $ 5,693.6     $ 5,482.5     $ 0.1       $ (94.3 )   $ 5,388.3     6     %
Cost of sales     1,125.7      0.0         —      1,125.7      1,107.2     (1.2  )    (16.2 )    1,089.8
                                                                                                                                  
Gross Profit       4,568.0       (0.1 )       —       4,567.9       4,375.3       1.3         (78.1 )     4,298.5     6     %
Gross Margin       80.2    %                          80.2    %     79.8    %                             79.8    %
                                                                                                                                  
Operating         3,462.2      2.2         —      3,464.4      3,240.2      (13.7 )    —          3,226.5     7     %
expenses
Operating          60.8    %                          60.8    %     59.1    %                             59.9    %
Expense Margin
                                                                                                                                  
Operating          1,105.8       (2.3 )       —       1,103.5       1,135.1       15.0        (78.1 )     1,072.0     3     %
Income
Operating          19.4    %                          19.4    %     20.7    %                             19.9    %
Income Margin
                                                                                                                                  
Interest
expense on         —             —            —       —             19.1          (19.1 )     —          —
debt
extinguishment
                                                                                                                                  
Provision for      342.9         (0.9 )       —       342.0         360.9         12.0        (25.0 )     347.9
income taxes
Net Earnings
Attributable
to
The Estée
Lauder
Companies Inc.     733.2         (1.4 )       —       731.8         747.0         22.1        (53.1 )     716.0       2     %
                                                                                                                                  
Diluted net
earnings
attributable
to The Estée
Lauder
Companies Inc.
per
common share       1.86          (.00 )       —       1.85          1.89         .06         (.13  )     1.81        2     %
                                                                                                                                  

The impact of accelerated orders from certain retailers associated with the
Company’s implementation of SAP on net sales and operating results by product
category and geographic region is as follows:

                                     Three Months Ended
(Unaudited; In millions)          
                                     December 31, 2012
                                                   Operating
                                    Net Sales  
                                                   Results
Product Category:
Skin Care                            $    48       $    40
Makeup                                    32            26
Fragrance                                 10            9
Hair Care                                 4             3
Other                                    —            —
Total                                $    94       $    78
                                                        
Region:
The Americas                         $    29       $    23
Europe, the Middle East & Africa          15            12
Asia/Pacific                             50           43
Total                                $    94       $    78
                                                        


THE ESTÉE LAUDER COMPANIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; In millions)
                                                            
                                     December 31     June 30       December 31

                                     2013            2013          2012
ASSETS
Current Assets
Cash and cash equivalents            $  1,748.0      $ 1,495.7     $  1,323.6
Accounts receivable, net             1,501.0         1,171.7       1,531.7
Inventory and promotional            1,145.9         1,113.9       994.1
merchandise, net
Prepaid expenses and other           530.7           515.9         491.6
current assets
Total Current Assets                 4,925.6         4,297.2       4,341.0
                                                                   
Property, Plant and Equipment,       1,395.4         1,350.7       1,301.6
net
Other Assets                         1,520.2         1,497.3       1,527.5
Total Assets                         $  7,841.2      $ 7,145.2     $  7,170.1
                                                                   
LIABILITIES AND EQUITY
Current Liabilities
Current debt                         $  15.9         $ 18.3        $  26.0
Accounts payable                     493.3           481.7         345.7
Other current liabilities            1,529.9         1,434.6       1,680.5
Total Current Liabilities            2,039.1         1,934.6       2,052.2
                                                                   
Noncurrent Liabilities
Long-term debt                       1,322.9         1,326.0       1,330.1
Other noncurrent liabilities         596.1           582.7         664.7
Total Noncurrent Liabilities         1,919.0         1,908.7       1,994.8
                                                                   
Total Equity                         3,883.1         3,301.9       3,123.1
Total Liabilities and Equity         $  7,841.2      $ 7,145.2     $  7,170.1




SELECT CASH FLOW DATA

(Unaudited; In millions)

                                                     Six Months Ended
                                                   
                                                     December 31
                                                     2013         2012
Cash Flows from Operating Activities
Net earnings                                         $ 737.0        $ 749.0
Depreciation and amortization                          184.4          156.8
Deferred income taxes                                  (18.3  )       (22.3  )
Other items                                            97.5           69.9
Changes in operating assets and liabilities:
Increase in accounts receivable, net                   (318.4 )       (444.9 )
Decrease (increase) in inventory and promotional       (12.9  )       11.7
merchandise, net
Increase in other assets, net                          (44.8  )       (31.5  )
Increase in accounts payable and other liabilities    157.9         166.4
Net cash flows provided by operating activities      $ 782.4        $ 655.1
                                                                             
Capital expenditures                                 $ 216.9        $ 205.4
Payments to acquire treasury stock                     204.9          326.5
Dividends paid                                         148.4          279.5

Contact:

The Estée Lauder Companies Inc.
Investor Relations:
Dennis D’Andrea, 212-572-4384
or
Media Relations:
Alexandra Trower, 212-572-4430
 
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