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The Estée Lauder Companies Reports Solid Fiscal 2013 Second-Quarter Results

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

December 31, 2012
Three Months Ended

December 31, 2011

 

As Reported
   

 

Returns/

Charges
     

Before

Returns/

Charges

As Reported
     

Returns/

Charges
     

Before

Returns/

Charges

% Change

versus Prior

Year Before

Returns/Charges
Net Sales $ 2,933.0 $ 0.1 $ 2,933.1 $ 2,737.5 $ 0.1 $ 2,737.6 7 %
Cost of sales   568.0   (1.2 )   566.8   551.0   0.1   551.1
 
Gross Profit 2,365.0 1.3 2,366.3 2,186.5 0.0 2,186.5 8 %
Gross Margin 80.6 % 80.7 % 79.9 % 79.9 %
 
Operating expenses   1,711.9   (13.3 )   1,698.6   1,589.5   (6.1 )   1,583.4 7 %
Operating Expense Margin 58.3 % 57.9 % 58.1 % 57.9 %
 
Operating Income 653.1 14.6 667.7 597.0 6.1 603.1 11 %
Operating Income Margin 22.3 % 22.8 % 21.8 % 22.0 %
 
Provision for income taxes 211.6 5.1 216.7 192.5 1.7 194.2
Net Earnings Attributable to
 

The Estée Lauder CompaniesInc.
447.5 9.5 457.0 396.7 4.4 401.1 14 %
 

Diluted net earnings attributable

to The Estée Lauder CompaniesInc. per common share

 
1.13 .02 1.16 1.00 .01 1.01 14 %
 
 
                       

Six Months Ended

December 31, 2012
Six Months Ended

December 31, 2011

As Reported
   

 

Returns/

Charges
     

Before

Returns/

Charges

As Reported
     

Returns/

Charges
     

Before

Returns/

Charges

% Change

versus Prior

Year Before

Returns/Charges
Net Sales $ 5,482.5 $ 0.1 $ 5,482.6 $ 5,214.2 $ (0.6 ) $ 5,213.6 5 %
Cost of sales   1,107.2   (1.2 )   1,106.0   1,085.3     1,085.3
 
Gross Profit 4,375.3 1.3 4,376.6 4,128.9 (0.6 ) 4,128.3 6 %
Gross Margin 79.8 % 79.8 % 79.2 % 79.2 %
 
Operating expenses   3,240.2   (13.7 )   3,226.5   3,101.9   (10.8 )   3,091.1 4 %
Operating Expense Margin 59.1 % 58.9 % 59.5 % 59.3 %
 
Operating Income 1,135.1 15.0 1,150.1 1,027.0 10.2 1,037.2 11 %
Operating Income Margin 20.7 % 20.9 % 19.7 % 19.9 %
 
Interest expense on debt extinguishment 19.1 (19.1 )
 
Provision for income taxes 360.9 12.0 372.9 327.9 2.9 330.8

Net Earnings Attributable to

The Estée Lauder Companies Inc.
747.0 22.1 769.1 675.3 7.3 682.6 13 %
 
 

Diluted net earnings attributable

to The Estée Lauder Companies
Inc. per common share 1.89 .06 1.95 1.70 .02 1.72 13 %
 
 
                       
 

THE ESTÉE LAUDER COMPANIES INC.

SUMMARY OF CONSOLIDATED RESULTS

(Unaudited; Dollars in millions)
 
Three Months

Ended December 31
Percent Change

 

Six Months

Ended December 31

 

Percent Change

2012
     

2011

Reported Basis
     

Local Currency

 

2012
   

 

2011

 

Reported Basis
     

Local Currency
NET SALES    
By Region:
The Americas $ 1,140.2 $ 1,071.3 6 % 6 % $ 2,322.3 $ 2,176.7 7 % 7 %
Europe, the Middle East & Africa. 1,105.3 1,046.3 6 7 1,930.2 1,904.5 1 5
Asia/Pacific 687.6 620.0 11 9 1,230.1 1,132.4 9 8
Subtotal 2,933.1 2,737.6 7 7 5,482.6 5,213.6 5 6

Returns associated with

restructuring activities
(0.1 ) (0.1 ) (0.1 ) 0.6
Total $ 2,933.0 $ 2,737.5 7 % 7 % $ 5,482.5 $ 5,214.2 5 % 6 %
 
By Product Category:
Skin Care $ 1,279.9 $ 1,165.9 10 % 10 % $ 2,393.4 $ 2,238.8 7 % 8 %
Makeup 1,049.3 983.6 7 7 2,009.7 1,912.4 5 6
Fragrance 458.8 441.1 4 5 806.4 797.9 1 3
Hair Care 131.9 121.4 9 9 245.8 225.2 9 10
Other 13.2 25.6 (48 ) (49 ) 27.3 39.3 (31 ) (31 )
Subtotal 2,933.1 2,737.6 7 7 5,482.6 5,213.6 5 6

Returns associated with

restructuring activities
(0.1 ) (0.1 ) (0.1 ) 0.6
Total $ 2,933.0 $ 2,737.5 7 % 7 % $ 5,482.5 $ 5,214.2 5 % 6 %
 
 
OPERATING INCOME (LOSS)
By Region:
The Americas $ 132.1 $ 112.4 18 % $ 304.4 $ 261.6 16 %
Europe, the Middle East & Africa. 324.6 310.1 5 521.5 497.8 5
Asia/Pacific 211.0 180.6 17 324.2 277.8 17

Subtotal
667.7 603.1 11 1,150.1 1,037.2 11

Charges associated with

restructuring activities
(14.6 ) (6.1 ) (15.0 ) (10.2 )
Total $ 653.1 $ 597.0 9 % $ 1,135.1 $ 1,027.0 11 %
 
By Product Category:
Skin Care $ 356.7 $ 312.2 14 % $ 615.7 $ 535.9 15 %
Makeup 226.5 208.5 9 387.8 368.1 5
Fragrance 77.3 73.2 6 130.7 121.5 8
Hair Care 10.1 12.5 (19 ) 20.8 17.6 18
Other (2.9 ) (3.3 ) 12 (4.9 ) (5.9 ) 17
Subtotal 667.7 603.1 11 1,150.1 1,037.2 11

Charges associated with

restructuring activities
(14.6 ) (6.1 ) (15.0 ) (10.2 )
Total $ 653.1 $ 597.0 9 % $ 1,135.1 $ 1,027.0 11 %
 
 

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 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 SAP 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. In addition, approximately $30 million of accelerated orders were recorded as net sales in the fiscal 2012 second quarter that would have occurred in the fiscal 2012 third quarter.

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