Estee Lauder Companies INC 10-Q Filing

Ticker: EL · Form: 10-Q · Filed: Feb 4, 2025 · CIK: 1001250

Estee Lauder Companies INC 10-Q Filing Summary
FieldDetail
CompanyEstee Lauder Companies INC (EL)
Form Type10-Q
Filed DateFeb 4, 2025
Pages15
Reading Time19 min
Sentimentneutral

Sentiment: neutral

FAQ

What type of filing is this?

This is a 10-Q filing submitted by Estee Lauder Companies INC (ticker: EL) to the SEC on Feb 4, 2025.

How long is this filing?

Estee Lauder Companies INC's 10-Q filing is 15 pages with approximately 4,628 words. Estimated reading time is 19 minutes.

Where can I view the full 10-Q filing?

The complete filing is available on SEC EDGAR. You can also read the AI-decoded analysis with risk assessment and key highlights on ReadTheFiling.

Filing Stats: 4,628 words · 19 min read · ~15 pages · Grade level 14.8 · Accepted 2025-02-04 12:47:06

Filing Documents

Financial Information

Part I. Financial Information

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) Consolidated Statements of Earnings (Loss) — Three and Six Months Ended December 31, 2024 and 2023 2 Consolidated Statements of Comprehensive Incom e (Loss) — Three and Six Months Ended December 31, 2024 and 2023 3 Consolidated Balance Sheets — December 31, 2024 and June 30, 2024 4 Consolidated Statements of Cash Flows — Six Months Ended December 31, 2024 and 2023 5

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 6

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 37

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 69

Controls and Procedures

Item 4. Controls and Procedures 69

Other Information

Part II. Other Information

Legal Proceedings

Item 1. Legal Proceedings 69

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 69

Other Information

Item 5. Other Information 70

Exhibits

Item 6. Exhibits 70

Signatures

Signatures 71 Table of Contents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. THE ESTE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (Unaudited) Three Months Ended December 31, Six Months Ended December 31, (In millions, except per share data) 2024 2023 2024 2023 Net sales $ 4,004 $ 4,279 $ 7,365 $ 7,797 Cost of sales 957 1,154 1,885 2,224 Gross profit 3,047 3,125 5,480 5,573 Operating expenses Selling, general and administrative 2,585 2,544 4,883 4,893 Restructuring and other charges 181 7 278 8 Impairment of goodwill and other intangible assets 861 — 861 — Talcum litigation settlement agreements — — 159 — Total operating expenses 3,627 2,551 6,181 4,901 Operating income (loss) ( 580 ) 574 ( 701 ) 672 Interest expense 90 98 182 193 Interest income and investment income, net 23 40 58 81 Other components of net periodic benefit cost 3 ( 3 ) 5 ( 5 ) Earnings (loss) before income taxes ( 650 ) 519 ( 830 ) 565 Provision (benefit) for income taxes ( 60 ) 195 ( 84 ) 205 Net earnings (loss) ( 590 ) 324 ( 746 ) 360 Net earnings attributable to redeemable noncontrolling interest — ( 11 ) — ( 16 ) Net earnings (loss) attributable to The Este Lauder Companies Inc. $ ( 590 ) $ 313 $ ( 746 ) $ 344 Net earnings (loss) attributable to The Este Lauder Companies Inc. per common share Basic $ ( 1.64 ) $ .87 $ ( 2.07 ) $ .96 Diluted $ ( 1.64 ) $ .87 $ ( 2.07 ) $ .95 Weighted average common shares outstanding Basic 360.0 358.7 359.8 358.6 Diluted 360.0 360.0 359.8 360.3 See notes to consolidated financial statements. 2 Table of Contents THE ESTE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) Three Months Ended December 31, Six Months Ended December 31, (In millions) 2024 2023 2024 2023 Net earnings (loss) $ ( 590 ) $ 324 $ ( 746 ) $ 360 Other comprehensive income (loss): Net cash flow hedge gain (loss) 55 ( 47 ) ( 2 ) ( 28 ) Cross-currency swap contract - fair value hedge gain (loss) ( 5 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements include the accounts of The Este Lauder Companies Inc. and its subsidiaries (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated. The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Certain prior year amounts in the notes to the consolidated financial statements have been reclassified to conform to current year presentation. Management Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company's significant accounting policies are disc

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Concentration of Credit Risk The Company is a worldwide manufacturer, marketer and seller of skin care, makeup, fragrance and hair care products. The Company's sales subject to credit risk are made primarily to retailers in its travel retail business, department stores, specialty multi-brand retailers and perfumeries. The Company grants credit to qualified customers. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor its customers' abilities, individually and collectively, to make timely payments. The Company's largest customer as of December 31, 2024 sells products primarily in China travel retail. This customer accounted for $ 163 million, or 10 %, and $ 206 million, or 12 %, of the Company's accounts receivable at December 31, 2024 and June 30, 2024, respectively. Inventory and Promotional Merchandise Inventory and promotional merchandise consists of the following: (In millions) December 31, 2024 June 30, 2024 Raw materials $ 625 $ 696 Work in process 246 308 Finished goods 877 903 Promotional merchandise 254 268 Total inventory and promotional merchandise $ 2,002 $ 2,175 Property, Plant and Equipment Property, plant and equipment consists of the following: (In millions) December 31, 2024 June 30, 2024 Assets (Useful Life) Land and improvements (1) $ 70 $ 68 Buildings and improvements ( 10 to 40 years) 979 929 Machinery and equipment ( 3 to 20 years) 1,316 1,253 Computer hardware and software ( 4 to 10 years) 1,934 1,861 Furniture and fixtures ( 5 to 10 years) 136 137 Leasehold improvements 2,493 2,418 Construction in progress 401 500 Total property, plant and equipment, gross 7,329 7,166 Less accumulated depreciation and amortization ( 4,280 ) ( 4,030 ) Total property, plant and equipment, net $ 3,049 $ 3,136 (1) Land improvements are depreciated over a 10 year useful life. Depre

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income Taxes Three Months Ended December 31, Six Months Ended December 31, 2024 2023 2024 2023 Effective rate for income taxes 9.2 % 37.6 % 10.1 % 36.3 % Basis-point change from the prior-year period ( 2,840 ) ( 2,620 ) For the three months ended December 31, 2024, the decrease in the effective tax rate was primarily attributable to the impact of the discrete treatment of charges associated with restructuring and other activities, the impairment of goodwill and other intangible assets, as well as an unfavorable impact associated with previously issued stock-based compensation. For the six months ended December 31, 2024, the decrease in the effective tax rate was primarily attributable to the impact of the discrete treatment of charges associated with restructuring and other activities, the impairment of goodwill and other intangible assets, the charge associated with the talcum litigation settlement agreements (See Note 8 - Commitments and Contingencies for further discussion) and an unfavorable impact associated with previously issued stock-based compensation. On August 16, 2022, the U.S. federal government enacted the Inflation Reduction Act, including a tax provision implementing a 15% corporate alternative minimum tax based on global adjusted financial statement income. The corporate alternative minimum tax did not have an impact on the Company's consolidated financial statements for the three and six months ended December 31, 2024 and 2023. On August 26, 2024, the U.S. Tax Court issued a decision in Varian Medical Systems, Inc. v. Commissioner. The decision related to the Tax Cuts and Jobs Act deduction for certain deemed foreign dividends otherwise subject to the Transition Tax on unrepatriated earnings of applicable foreign subsidiaries. Based on the Company's evaluation of the technical merits of this decision, the Company intends to timely file a protective refund claim with the U.S. Internal Rev

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During the fiscal 2025 second quarter, the Company received notification of the formal conclusion of the compliance process with respect to its fiscal 2023 income tax return under the U.S. Internal Revenue Service ("IRS") Compliance Assurance Program ("CAP"), which had no impact on the Company's consolidated financial statements for the three and six months ended December 31, 2024. At December 31, 2024 and June 30, 2024, total Other assets of $ 1,693 million and $ 1,460 million included $ 1,250 million and $ 1,018 million of deferred tax assets, respectively. Supplier Finance Programs Under the Company's supplier finance programs, the Company agrees to pay the banks the stated amount of confirmed invoices from its designated suppliers on the due dates of the invoices. The Company may terminate the agreements upon written notice (with notice periods ranging from 30 to 60 days) or immediately upon a breach. The supplier invoices that have been confirmed as valid under the programs require payment in full within 90 days of the invoice date. Outstanding obligations confirmed as valid totaling $ 70 million and $ 58 million as of December 31, 2024 and June 30, 2024, respectively, are included in Accounts payable in the accompanying consolidated balance sheets. Other Accrued Liabilities Other accrued liabilities consist of the following: (In millions) December 31, 2024 June 30, 2024 Advertising, merchandising and sampling $ 335 $ 276 Employee compensation 448 576 Accrued sales incentives 334 426 Deferred revenue 338 327 Payroll and other non-income taxes 367 333 Accrued income taxes 205 335 Sales return accrual 265 248 Other 1,205 883 Total other accrued liabilities $ 3,497 $ 3,404 Recently Adopted Accounting Standards FASB ASU No. 2022-04 – Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations In September 2022, the FASB issued authoritative guida

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Recently Issued Accounting Standards FASB ASU No. 2024-03 and 2025-01 – Disaggregation of Income Statement Expenses (Subtopic 220-40) In November 2024 and January 2025, the FASB issued authoritative guidance requiring disclosures, in a tabular format in the notes to the consolidated financial statements, on the disaggregation of relevant expense captions that are included on the face of the consolidated statement of earnings within continuing operations. The relevant expense captions are required to be disaggregated into natural expense categories including purchases of inventory, employee compensation, depreciation and intangible asset amortization. The guidance also requires certain expenses, gains or losses that require disclosure under existing U.S. GAAP, and that are recorded in a relevant expense caption on the face of the consolidated statement of earnings, to be presented in the same tabular disclosure. Qualitative disclosures about any remaining amounts in relevant expense line items are required as well. In addition, companies are required to disclose the total amount of selling expenses and, on an annual basis, how it defines selling expenses. Effective for the Company : The guidance is effective for the Company's fiscal year ending June 30, 2028 Form 10-K and then in interim periods beginning in the Company's first quarter of fiscal 2029. Early adoption is permitted. The guidance should be applied on a prospective basis; however, retrospective application is permitted. Impact on the consolidated financial statements : The Company is currently evaluating the impact that this guidance will have on its consolidated financial statement disclosures. FASB ASU No. 2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the FASB issued authoritative guidance to improve reportable segment disclosure requirements. Companies are required to disclose significant

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