The Estée Lauder Companies Third-Quarter Sales Climb 11%

  The Estée Lauder Companies Third-Quarter Sales Climb 11%           – Earnings Per Share Increases 42% to $.64 before Charges –                    – Company Raises Full-Year EPS Estimates –  Business Wire  NEW YORK -- May 2, 2014  The Estée Lauder Companies Inc. (NYSE:EL) today reported net sales for its third quarter ended March 31, 2014 of $2.55 billion, an 11% increase compared with $2.29 billion in the prior-year quarter. Excluding the impact of foreign currency translation, net sales increased 12%. The Company reported a 270 basis-point increase in operating margin, and net earnings for the quarter rose 19% to $213.2 million, compared with $178.8 million last year. Diluted net earnings per common share rose 20% to $.54, compared with $.45 reported in the prior year.  Fabrizio Freda, President and Chief Executive Officer, said, “Our excellent results this quarter reflect our multiple engines of growth across product categories, countries and channels, enabling us to achieve strong local currency sales growth in every geographic region. Sales came in higher than our expectations and we again exceeded our earnings per share forecast. These results were driven by the broad global demand for our diverse prestige beauty brands, the strength of our emerging markets, accelerated growth in certain developed markets and solid progress in skin care.”  During the quarter, the Venezuelan government enacted changes to its foreign currency exchange rate regulations, which expanded the use of its existing exchange rate mechanisms and created another mechanism, SICAD II. Based on these changes, the Company evaluated all rate mechanisms made available by the Venezuelan government to determine the most appropriate rate to use. As a result, the Company changed the exchange rate used to remeasure its Venezuelan net monetary assets to a newly enacted SICAD II rate. Accordingly, the Company recorded a remeasurement charge of $38.3 million, both before and after tax, equal to approximately $.10 per diluted share.  Excluding charges, principally related to the Venezuela remeasurement, net earnings for the three months ended March 31, 2014 were $251.7 million, and diluted net earnings per common share were $.64, versus $.45 in the prior-year period.  Additionally, comparisons between the current and prior year third quarters were affected by the acceleration of $94 million in sales shifted into the Company’s fiscal 2013 second quarter in advance of the January 2013 implementation of SAP as part of its Strategic Modernization Initiative (SMI). This amounted to approximately $78 million in operating income, equal to approximately $.13 per diluted common share.  Excluding the impact of the shift, the Venezuela remeasurement charge and restructuring activities, net sales in local currency and operating income for the three months ended March 31, 2014 would have increased 8% and 18%, respectively. A reconciliation between GAAP and non-GAAP financial measures is included in this release.  “Our outlook for the balance of the year remains positive and we expect to achieve our financial objectives,” Mr. Freda said. “We continue to forecast local currency sales growth of 6% to 7%, and we are raising our earnings per share guidance to $2.86 to $2.90, before charges and the effect of potential accelerated sales orders relating to our SMI go-live in July 2014. Driving this performance will be new and recent product offerings across categories, particularly in skin care and makeup. For the remainder of the fiscal year we also expect our growth will continue to be fueled by our success in high-growth channels and emerging markets, while enhancing our local relevance. Importantly, our mid-size brands continue to grow faster than the average, increasing their contribution to the Company’s sales and profitability, while strengthening our portfolio. We are flexible in our investment spending, targeting opportunities that provide the highest returns, promote demand for our brands and foster global growth. At the same time, we are improving operating leverage and eliminating non-value added costs to further improve operating margins and profitability.”   Results by Product Category                  Three Months Ended March 31 (Unaudited;                                                     Operating             Percent Dollars in        Net Sales              Percent Change       Income (Loss)         Change millions)                   2014       2013        Reported  Local      2014       2013       Reported                                           Basis      Currency                         Basis                                                                                              Skin Care         $ 1,132.1   $ 1,015.0   12   %     13   %     $  179.0   $  134.4   33    % Makeup            1,015.7     919.2       10         11         149.9      107.3      40 Fragrance         270.5       233.2       16         16         (1.9     ) (0.2     ) (100  )+ Hair Care         120.8       116.2       4          5          13.2       5.1        100   + Other             10.7        8.2         30         32         1.6        (3.2     ) 100   + Subtotal          2,549.8     2,291.8     11         12         341.8      243.4      40 Returns and charges associated with restructuring     —           —                                 (0.2     ) 1.7 activities Total             $ 2,549.8   $ 2,291.8   11   %     12   %     $ 341.6    $ 245.1    39    %   The change in net sales and operating income for the quarter was favorably impacted by the prior year shift 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 7%, 7%, 11% and 1%, respectively.   *Operating results in skin care, makeup, fragrance and hair care would have     increased/(decreased) 3%, 12%, (100)+% and 63%, respectively.  The current-year period remeasurement of net monetary assets in Venezuela, as previously mentioned, primarily impacted the operating income of the skin care, makeup and fragrance product categories by $12 million, $16 million and $10 million, 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 and Micro Essence Skin Activating     Treatment Lotion from Estée Lauder and Dramatically Different Moisturizing     Lotion + and Even Better Essence Lotion from Clinique.   *Sales from the reformulated Repairwear Laser Focus by Clinique and     continued strong growth from the Company’s luxury skin care brand, La Mer,     also contributed to growth.   *Operating income increased sharply, including the shift, primarily     reflecting higher-margin product launches from certain of the Company’s     heritage brands, as well as increased results from higher-end prestige     skin care products.  Makeup    *Higher makeup sales primarily reflected strong growth from the Company’s     makeup artist brands and from recent launches, such as Pure Color Envy     Sculpting Lipstick from Estée Lauder and All About Shadow from Clinique.   *Sales from makeup artist brands benefited from new product offerings, as     well as expanded distribution in line with the Company’s retail store     strategy.   *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 artist brands due to the higher     sales, and certain heritage brands.  Fragrance    *In fragrance, strong sales growth came from luxury brands Tom Ford and Jo     Malone. Sales gains were also generated from the recent launches of Estée     Lauder Modern Muse, Tory Burch and the Michael Kors Fragrance Collection.   *Fragrance operating loss increased, due to the Venezuela remeasurement     charge. Operating results also reflected higher net sales from recent     launches, partially offset by higher investment spending.  Hair Care    *Hair care net sales growth was primarily driven by Aveda, reflecting gains     in the salon channel and the continued success of its Dry Remedy and     Damage Remedy franchises.   *Sales increased at Bumble and bumble, primarily due to higher sales to     specialty-multi brand retailers. Ojon sales decreased, primarily due to     its exit from the direct response television channel.   *The category growth also benefited from expanded global distribution, in     particular to specialty-multi brand retailers for Bumble and bumble and to     salons and travel retail for Aveda.   *Hair care operating income increased more than 100%, primarily reflecting     higher net sales driven by expanded global distribution and new product     launches, as well as lower investment spending.   Results by Geographic Region                  Three Months Ended March 31 (Unaudited;                                                     Operating            Percent Dollars in        Net Sales              Percent Change       Income (Loss)       Change millions)                   2014       2013        Reported  Local      2014       2013      Reported                                           Basis      Currency                        Basis                                                                                             The Americas      $ 1,072.0   $ 988.1     8    %     10   %     $  111.5   $  68.0   64    % Europe, the Middle East &     959.4       847.9       13         12         160.2      137.5     17 Africa. Asia/Pacific      518.4       455.8       14         18         70.1       37.9      85 Subtotal          2,549.8     2,291.8     11         12         341.8      243.4     40 Returns and charges associated with restructuring     —           —                                 (0.2     ) 1.7 activities Total             $ 2,549.8   $ 2,291.8   11   %     12   %     $ 341.6    $ 245.1   39    %   In the quarter, the change in net sales and operating income in the Company’s geographic regions was favorably impacted by the prior year shift 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 5%, 11% and 2%, respectively.   *Operating income in the Americas, Europe, the Middle East & Africa and     Asia/Pacific would have increased/(decreased) 22%, 7% and (13)%,     respectively.  The Americas    *Net sales in the United States increased, reflecting growth from the     Company’s makeup artist and luxury brands and certain heritage brands.     Sales also increased in Latin America and Canada.   *Sales of the Company’s online business grew double digits.   *Operating income in the Americas rose, reflecting the increased sales and     a more measured approach to spending. Additionally, operating income in     the region reflects the charge of $38.3 million in the current-year period     to remeasure net monetary assets in Venezuela.  Europe, the Middle East & Africa    *In constant currency, net sales increased in each major product category     and in virtually all 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 United Kingdom, Germany, Switzerland, Turkey, France     and Russia. Net sales growth in Switzerland and France were due, in part,     to the accelerated retailer orders, as previously discussed. Certain     European countries continued to experience soft retail environments.   *In travel retail, sales increased high-single digits, primarily reflecting     higher sales from the Company’s luxury brands, an increase in global     airline passenger traffic and expanded distribution.   *Operating income increased, as higher results from the United Kingdom,     Switzerland, France and Russia were partially offset by lower operating     results in Spain and certain Eastern European countries.  Asia/Pacific    *Constant currency net sales increased in the majority of countries in the     region. The strongest growth was generated in China, Japan, Hong Kong,     Taiwan and Australia. The sales increase in China, Hong Kong and Taiwan     reflect the shift in retailer orders, as previously discussed.   *Sales were lower in Thailand, Korea and the Philippines.   *The Company estimates that it gained share in certain countries within its     points of distribution during the quarter.   *In Asia/Pacific, operating income increased, led by China, Japan, Korea     and Taiwan. Results in China and Taiwan primarily reflect the impact from     the accelerated retailer orders. Lower operating results were posted in     Hong Kong and the Philippines.  Nine-Month Results    *For the nine months ended March 31, 2014, the Company reported net sales     of $8.24 billion, a 6% increase from $7.77 billion in the comparable     prior-year period. Excluding the impact of foreign currency translation,     net sales increased 7%. Net sales grew in each of the Company’s geographic     regions and product categories.   *The Company reported net earnings of $946.4 million for the nine months     ended March 31, 2014, a 2% increase compared with $925.8 million in the     same period last year. Diluted net earnings per common share for the nine     months ended March 31, 2014 increased 2% to $2.40, compared with $2.35     reported in the prior-year period.   *The fiscal 2014 nine-month results included the remeasurement charge of     $38.3 million related to Venezuela, as previously mentioned.   *The fiscal 2013 nine-month results included 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 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 charges, net earnings for the nine months ended March 31,     2014 rose 4% to $983.5 million and diluted net earnings per common share     increased 4% to $2.50, versus a comparable $2.40 in the prior-year period.  Cash Flows    *For the nine months ended March 31, 2014, net cash flows provided by     operating activities increased 25% to $1,169.4 million, compared with     $934.2 million in the prior-year period.   *The increase primarily reflected the higher net earnings and a net     increase in cash from certain working capital components.  Outlook for Fiscal 2014 Full Year  The Company expects global prestige beauty to grow approximately 3% to 4%, tempered by continued softness in certain European countries and Korea, and slower near-term growth in China and the United States. The Company expects to further improve its gross and operating margins by leveraging its strong sales growth and continuing to reduce non-value-added costs.    *Net sales are forecasted to grow between 6% and 7% in constant currency.   *Foreign currency translation is expected to negatively impact sales by     approximately 1% versus the prior-year period.   *Diluted net earnings per common share, including the charge related to the     Venezuela remeasurement and the effect of potential accelerated retailer     orders, are projected between $2.90 to $2.97.   *As mentioned previously in this press release, the impact of the Venezuela     remeasurement is equal to $.10 per diluted common share.   *Diluted net earnings per share, before the charge related to the Venezuela     remeasurement and the effect of potential accelerated retailer orders, are     projected between $2.86 to $2.90. The approximately 1% negative currency     impact on the sales growth equates to about $.02 of earnings per share.   *July 2014 SMI Implementation:     The Company expects to roll out the last major wave of SMI in July 2014 in     certain of its locations. In advance of this implementation, the Company     expects some retailers will accelerate sales orders that would normally     occur in its fiscal 2015 first quarter into the fiscal 2014 fourth quarter     to provide adequate safety stock to mitigate any potential short-term     business interruption associated with the SMI rollout. Those additional     orders are estimated to amount to between $125 million and $150 million of     sales, equal to $.14 to $.17 per diluted common share.   Reconciliation between GAAP and non-GAAP           Net Sales Growth           estimates                                Reported        Constant     Diluted (Unaudited)                    Basis          Currency     Earnings                                                             Per Share Full-year forecast including the Venezuela charge and fiscal 2015 accelerated retailer orders                6% – 7%  ^(1)   7% – 8%      $2.90 – $2.97 ^(1) Non-GAAP Venezuela charge               —               —            .10                                                                            Full-year forecast excluding the                  6% – 7%         7% – 8%      3.00 – 3.07  Venezuela charge                                                                            Impact of fiscal 2015          ~(1)%           ~(1)%        (.14 – .17    ) accelerated orders                                                                            Full-year forecast excluding the Venezuela        5% – 6%         6% – 7%      $2.86 – $2.90 charge and accelerated retailer orders ^(1) Represents GAAP estimates.   Conference Call  The Estée Lauder Companies will host a conference call at 9:30 a.m. (ET) today, May 2, 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: 30824577). 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 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  Nine Months Ended           Percent                      March 31                      Change    March 31                      Change                        2014         2013                      2014         2013                                                                                                 Net Sales            $ 2,549.8     $ 2,291.8       11   %    $ 8,243.5     $ 7,774.3       6   % Cost of Sales         498.7        443.1                    1,624.4      1,550.3 Gross Profit          2,051.1      1,848.7       11   %     6,619.1      6,224.0       6   %                                                                                                 Gross Margin           80.4    %     80.7    %                 80.3    %     80.1    %                                                                                                 Operating expenses: Selling, general and            1,709.5       1,605.3                   5,173.9       4,831.8 administrative (A) Restructuring and other             —            (1.7    )                (2.2    )    12.0 charges (B)                       1,709.5      1,603.6       7    %     5,171.7      4,843.8       7   %                                                                                                 Operating              67.0    %     70.0    %                 62.7    %     62.3    % Expense Margin                                                                                                 Operating              341.6         245.1         39   %      1,447.4       1,380.2       5   % Income                                                                                                 Operating              13.4    %     10.7    %                 17.6    %     17.8    % Income Margin                                                                                                 Interest               12.3          12.6                      38.2          41.8 expense, net Interest expense on debt                   —             —                         —             19.1 extinguishment (C) Other income          —            —                        —            23.1 (D) Earnings before Income          329.3         232.5         42   %      1,409.2       1,342.4       5   % Taxes                                                                                                 Provision for         115.6        53.6                     458.5        414.5 income taxes Net Earnings           213.7         178.9         19   %      950.7         927.9         2   %                                                                                                 Net earnings attributable to                    (0.5    )    (0.1    )                (4.3    )    (2.1    ) noncontrolling interests Net Earnings Attributable to The Estée Lauder Companies Inc.       $ 213.2       $ 178.8         19   %    $ 946.4       $ 925.8         2   %                                                                                                                                                                                                 Net earnings attributable to The Estée Lauder Companies Inc. per common share: Basic                $ .55         $ .46           20   %    $ 2.44        $ 2.39          2   % Diluted                .54           .45           20   %      2.40          2.35          2   %                                                                                                 Weighted average common shares outstanding: Basic                  385.8         387.2                     387.3         387.5 Diluted                392.1         394.0                     394.1         394.7             During the quarter, based on recent changes to Venezuela’s foreign       currency exchange rate regulations, the Company changed the exchange (A)   rate used to remeasure its Venezuelan net monetary assets to a newly       enacted SICAD II rate. Accordingly, the Company recorded a remeasurement       charge of $38.3 million, both before and after tax, equal to       approximately $.10 per diluted common share.              During the second quarter of fiscal 2013, the Company closed its       multi-faceted cost savings program implemented in February 2009 (the (B)   “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.              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 (C)   result, the Company recorded a pre-tax charge of $19.1 million ($12.2       million after tax), for the impact of the extinguishment of debt, equal       to $.03 per diluted common share.              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 (D)   future contingent consideration and other rights. As a result of the       amended agreement, the Company recognized $23.1 million, equal to $.04       per diluted common share as other income in the consolidated statement       of earnings for the nine months ended March 31, 2013.          THE ESTÉE LAUDER COMPANIES INC. SUMMARY OF CONSOLIDATED RESULTS (Unaudited; Dollars in millions)                     Nine Months Ended March 31                   Net Sales                 Percent Change           Operating               Percent                                                                         Income (Loss)           Change                     2014         2013        Reported    Local        2014        2013        Reported                                               Basis        Currency                             Basis Results by Geographic                                                                                            Region                                                                                                        The Americas        $ 3,469.0     $ 3,310.4   5        %   6        %   $ 419.7     $ 372.4     13    % Europe, the Middle East &       3,031.6       2,778.1     9            8            673.4       659.0       2 Africa Asia/Pacific        1,742.8       1,685.9     3            7            352.2       362.1       (3    ) Subtotal            $8,243.4      $7,774.4    6            7            $1,445.3    $1,393.5    4 Returns and charges associated with restructuring       0.1           (0.1      )                           2.1         (13.3     ) activities Total               $ 8,243.5     $ 7,774.3   6        %   7        %   $ 1,447.4   $ 1,380.2   5     %                                                                                                        Results by Product Category                                                                                                        Skin Care            $ 3,564.4   $ 3,408.4   5        %   6        %   $   758.6   $   750.1   1     % Makeup                3,145.8     2,928.9     7            8            564.5       495.1       14 Fragrance             1,115.7     1,039.6     7            8            95.5        130.5       (27   ) Hair Care             380.7       362.0       5            6            29.3        25.9        13 Other                 36.8        35.5        4            5            (2.6      ) (8.1      ) 68 Subtotal              8,243.4     7,774.4     6            7            1,445.3     1,393.5     4 Returns and charges associated with restructuring         0.1         (0.1      )                           2.1         (13.3     ) activities Total                 $ 8,243.5   $ 7,774.3   6        %   7        %   $ 1,447.4   $ 1,380.2   5     % ______________  This earnings release includes some non-GAAP financial measures relating to charges associated with restructuring activities, the Venezuela remeasurement, 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 measures for certain consolidated statements of earnings accounts before and after the charges associated with restructuring activities, the Venezuela remeasurement, 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 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, they are 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                                      March 31, 2014                            March 31, 2013                                               Before                                 Before        % Change                    As Reported   Returns/   Returns/       As          Returns/  Returns/      versus Prior                                   Charges     Charges        Reported     Charges    Charges       Year Before                                                                                                    Returns/Charges Net Sales           $2,549.8      $ 0.0     $2,549.8       $2,291.8     $ 0.0      $2,291.8      11       % Cost of              498.7          (0.2  )   498.5          443.1        0.0        443.1 sales                                                                                                              Gross Profit         2,051.1        0.2       2,051.3        1,848.7      0.0        1,848.7       11       % Gross Margin         80.4     %               80.4     %     80.7     %              80.7     %                                                                                                              Operating            1,709.5        (38.3 )   1,671.2        1,603.6      1.7        1,605.3       4        % expenses Operating Expense              67.0     %               65.5     %     70.0     %              70.1     % Margin                                                                                                              Operating            341.6          38.5      380.1          245.1        (1.7   )   243.4         56       % Income Operating Income               13.4     %               14.9     %     10.7     %              10.6     % Margin                                                                                                              Provision for income           115.6          0.0       115.6          53.6         (0.7   )   52.9 taxes Net Earnings Attributable to The Estée Lauder               213.2          38.5      251.7          178.8        (1.0   )   177.8         42       % Companies Inc.                                                                                                              Diluted net earnings attributable to The Estée Lauder Companies Inc. per             .54            .10       .64            .45          .00        .45           42       % common share                     Nine Months Ended                       Nine Months Ended                                         March 31, 2014                            March 31, 2013                                                 Before                                 Before        % Change                      As Reported   Returns/   Returns/       As          Returns/  Returns/      versus Prior                                     Charges     Charges        Reported     Charges    Charges       Year Before                                                                                                      Returns/Charges Net Sales             $8,243.5      $     )   $8,243.4       $7,774.3     $ 0.1      $7,774.4      6       %                                       (0.1 Cost of sales          1,624.4        (0.2  )   1,624.2        1,550.3      (1.2   )   1,549.1                                                                                                               Gross Profit           6,619.1        0.1       6,619.2        6,224.0      1.3        6,225.3       6       % Gross Margin           80.3     %               80.3     %     80.1     %              80.1     %                                                                                                               Operating              5,171.7        (36.1 )   5,135.6        4,843.8      (12.0  )   4,831.8       6       % expenses Operating              62.7     %               62.3     %     62.3     %              62.2     % Expense Margin                                                                                                               Operating              1,447.4        36.2      1,483.6        1,380.2      13.3       1,393.5       6       % Income Operating              17.6     %               18.0     %     17.8     %              17.9     % Income Margin                                                                                                               Interest expense on debt extinguishment         —              —         —              19.1         (19.1  )   —                                                                                                               Provision for          458.5          (0.9)     457.6          414.5        11.3       425.8 income taxes Net Earnings Attributable to The Estée Lauder                 946.4          37.1      983.5          925.8        21.1       946.9         4       % Companies Inc.                                                                                                               Diluted net earnings attributable to The Estée Lauder Companies Inc. per               2.40           .09       2.50           2.35         .05        2.40          4       % 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 favorable comparison between the fiscal 2014 and fiscal 2013 third 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.   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                                                                                                                                  March 31, 2014                      March 31, 2013                                                                                                              % Change                    As         Returns/   SAP       Before       As         Returns/   SAP       Before       versus                    Reported   Charges    Adjust-  Charges      Reported   Charges    Adjust-  Charges      Prior                                          ments     /SAP                               ments     /SAP         Year Before                                                                                                              Charges/SAP Net Sales          $2,549.8   $ 0.0        $ —    $2,549.8     $2,291.8   $ 0.0      $ 94.3    $2,386.1         7% Cost of            498.7      (0.2     )   —      498.5        443.1      0.0        16.2      459.3 sales                                                                                                                    Gross Profit       2,051.1    0.2           —      2,051.3      1,848.7    0.0        78.1      1,926.8           6% Gross Margin       80.4     %                      80.4     %   80.7     %                      80.8       %                                                                                                                     Operating          1,709.5    (38.3    )   —      1,671.2      1,603.6    1.7        —         1,605.3           4% expenses Operating Expense            67.0     %                      65.5     %   70.0     %                      67.3       %  Margin                                                                                                                    Operating          341.6      38.5          —      380.1        245.1      (1.7     ) 78.1      321.5             18% Income Operating Income             13.4     %                      14.9     %   10.7     %                      13.5       %  Margin                                                                                                                    Provision for income         115.6      0.0           —      115.6        53.6       (0.7     ) 25.0      77.9 taxes Net Earnings Attributable to The Estée Lauder Companies          213.2      38.5          —      251.7        178.8      (1.0     ) 53.1      230.9             9% Inc.                                                                                                                    Diluted net earnings attributable to The Estée Lauder Companies Inc. per common share       .54        .10           —      .64          .45        .00        .13       .59               10%                                                                                                                                            THE ESTÉE LAUDER COMPANIES INC.  Excluding the impact of the prior-year period shift in orders associated with the Company’s implementation of SMI, the returns and charges associated with restructuring activities and the Venezuela remeasurement charge, net sales and operating results for the three months ended March 31, 2014 would have increased/(decreased) as follows:   (Unaudited)                         Net Sales As Adjusted                                             Reported      Local          Operating                                       Basis       Currency       Results As                                                                     Adjusted Product Category:                                                  Skin Care                                 7   %          7    %        9    % Makeup                                    7              7             25 Fragrance                                 11             11            5 Hair Care                                 1              2             62 Other                                     26             27            100  + Total                                     7   %          8    %        18   %                                                                              Region: The Americas                              5   %          7    %        64   % Europe, the Middle East & Africa          11             10            7 Asia/Pacific                              2              6             (13  ) Total                                     7   %          8    %        18   %                                                                                THE ESTÉE LAUDER COMPANIES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited; In millions)                                    March 31     June 30       March 31                                      2014          2013            2013 ASSETS                                                            Current Assets Cash and cash equivalents              $ 1,530.2     $ 1,495.7       $ 1,438.6 Accounts receivable, net               1,399.0       1,171.7         1,361.9 Inventory and promotional              1,215.4       1,113.9         989.3 merchandise, net Prepaid expenses and other             547.2         515.9           496.4 current assets Total Current Assets                   4,691.8       4,297.2         4,286.2                                                                       Property, Plant and Equipment,         1,434.9       1,350.7         1,296.0 net Other Assets                           1,519.3       1,497.3         1,512.9 Total Assets                           $ 7,646.0     $ 7,145.2       $ 7,095.1                                                                       LIABILITIES AND EQUITY Current Liabilities Current debt                           $ 18.4        $ 18.3          $ 20.0 Accounts payable                       512.5         481.7           388.2 Other current liabilities              1,508.4       1,434.6         1,507.7 Total Current Liabilities              2,039.3       1,934.6         1,915.9                                                                       Noncurrent Liabilities Long-term debt                         1,327.7       1,326.0         1,329.2 Other noncurrent liabilities           596.6         582.7           643.2 Total Noncurrent Liabilities           1,924.3       1,908.7         1,972.4                                                                       Total Equity                           3,682.4       3,301.9         3,206.8 Total Liabilities and Equity           $ 7,646.0     $ 7,145.2       $ 7,095.1    SELECT CASH FLOW DATA (Unaudited; In millions)                                                      Nine Months Ended                                                      March 31                                                      2014          2013 Cash Flows from Operating Activities                              Net earnings                                         $ 950.7        $ 927.9 Depreciation and amortization                          280.0          247.2 Deferred income taxes                                  (33.7   )      (43.3  ) Loss on Venezuela remeasurement                        38.3           2.8 Other items                                            130.3          96.8 Changes in operating assets and liabilities: Increase in accounts receivable, net                   (226.7  )      (297.0 ) Increase in inventory and promotional merchandise,     (87.4   )      (4.2   ) net Increase in other assets, net                          (65.1   )      (24.0  ) Increase in accounts payable and other liabilities    183.0         28.0 Net cash flows provided by operating activities      $ 1,169.4      $ 934.2                                                                               Capital expenditures                                 $ 342.8        $ 305.5 Payments to acquire treasury stock                     600.3          363.2 Dividends paid                                         225.2          349.3   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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