| Estée Lauder Companies Reports Fiscal Year 2006 Results; Provides Outlook for First Quarter and Fiscal Year 2007 |
NEW YORK--(BUSINESS WIRE)--Aug. 16, 2006--The Estée Lauder Companies Inc. (NYSE: EL) today reported $6.46 billion in net sales for its fiscal year ended June 30, 2006, a 3% increase over the $6.28 billion reported in the prior year. Excluding the impact of foreign currency translation, net sales rose 4%. William P. Lauder, President and Chief Executive Officer said, "Fiscal 2006 was a year in which we were tested. We weathered unprecedented challenges from retailer consolidations, natural disasters, and a more demanding marketplace. However, I'm pleased to report that our Company responded exceptionally well by basically doing what we do best: creating excitement for our brands and products and giving value to our consumers. As a result, we not only turned in respectable financial results, we also made substantial progress in our strategic growth drivers and protected the bottom line through accelerated cost reductions." "Looking at the strength of our Company, our long-range plan is paying off. Our international business continues to become a larger mix of our sales and profits. In this new fiscal year we plan to further build a foothold and exploit opportunities in strategic emerging markets and distribution channels, while continuing to pursue share gains in more developed markets, including the U.S. Robust new product activity, effective advertising and ongoing cost savings give us confidence that our fiscal 2007 financial objectives of $2.00 to $2.10 earnings per share on 5% to 7% sales growth are achievable." The Company reported net earnings from continuing operations, including special charges, for the year ended June 30, 2006 of $324.5 million, compared with $409.9 million last year. Diluted earnings per common share from continuing operations for the year was $1.49 compared with $1.80 reported in the prior year. Net earnings and diluted earnings per share for the year, including the special charges and discontinued operations decreased 40% and 37%, respectively, compared with the prior year. The Company's fiscal year 2006 results included $93.0 million, after-tax, or $.43 per diluted share in special charges for the Company's previously announced cost savings initiative and tax-related matters. Included in the charges was an operating expense charge of $92.1 million, equal to $.27 per diluted common share related to the cost savings initiative, which is expected to realize approximately $76 million in annual savings in future years. Fiscal year 2006 results also included a special tax charge, recorded in the fourth quarter, related to the previously announced settlement with the Internal Revenue Service regarding its examination of the Company's consolidated Federal income tax returns for fiscal years 1998 through 2001, and represents the aggregate earnings impact of the settlement through fiscal 2006. The impact of this agreement was partially offset by the completion and final computations related to the repatriation of intercompany dividends under the provisions of the American Jobs Creation Act of 2004 (the "AJCA"). On a combined basis, these tax-related matters amounted to a net charge of $35.0 million and negatively impacted diluted earnings per common share for the full fiscal year 2006 by $.16. Excluding the above-mentioned special charges in fiscal year 2006, net earnings from continuing operations for fiscal year 2006 was $417.5 million and diluted earnings per share was $1.92. A reconciliation between GAAP and non-GAAP financial measures can be found on page 10 of this press release. Fourth Quarter Results For the three months ended June 30, 2006, the Company reported net sales of $1.60 billion, a 5% increase from $1.53 billion in the fourth quarter of fiscal 2005. Excluding the impact of foreign currency translation, net sales also rose 5% in the fourth quarter. On a reported basis, as well as in constant currency, net sales increased in each product category and geographic region. The Company reported net earnings from continuing operations for the fourth quarter of fiscal year 2006 of $49.1 million, including special charges, versus $66.9 million in the same prior-year period. Diluted earnings per common share from continuing operations for the three months ended June 30, 2006, was $.23 compared with $.30 reported in the same prior-year period. Net earnings and diluted earnings per share, including the special charges and discontinued operations, for the fourth quarter decreased 33% and 30%, respectively, compared with the prior-year period. During the three months ended June 30, 2006, the Company recorded special charges of $59.7 million, after-tax, equal to $.28 per diluted share, consisting of (a) an operating expense charge of $38.9 million, or $.12 per diluted share, related to the implementation of the cost savings initiative, and (b) tax-related matters of $35.0 million, equal to $.16 per diluted share. The prior year fourth quarter included a special tax charge related to the AJCA of $.12 per diluted share. Excluding the special charges in the three months ended June 30, 2006 and 2005, net earnings from continuing operations rose 15% to $108.8 million and diluted earnings per share from continuing operations increased 21% to $.51. See reconciliation on page 10.
Full-Year Results by Product Category
-------------------------------------
Year Ended June 30
------------------
(Unaudited; Dollars in millions)
--------------------------------
Percent Change
Net Sales --------------
--------- Reported Local
2006 2005 Basis Currency
---- ---- ----- --------
Skin Care $ 2,400.8 $2,352.1 2.1% 3.4%
Makeup 2,504.2 2,366.8 5.8 6.6
Fragrance 1,213.3 1,260.6 (3.8) (2.3)
Hair Care 318.7 273.9 16.4 16.5
Other 26.8 26.6 0.8 1.1
--------- --------
Subtotal 6,463.8 6,280.0 2.9 4.0
Special charges related to
cost savings initiative - -
--------- --------
Total $ 6,463.8 $6,280.0 2.9% 4.0%
========= ========
Full-Year Results by Product Category
-------------------------------------
Year Ended June 30
------------------
(Unaudited; Dollars in millions)
Operating Income Percent
---------------- Change
Reported
2006 2005 Basis
---- ---- --------
Skin Care $ 346.4 $365.8 (5.3)%
Makeup 329.4 301.1 9.4
Fragrance 7.7 35.8 (78.5)
Hair Care 26.5 22.8 16.2
Other 1.7 1.3 30.8
---------- --------
Subtotal 711.7 726.8 (2.1)
Special charges related to
cost savings initiative (92.1) -
---------- --------
Total $ 619.6 $726.8 (14.7)%
========== ========
Skin Care
-- Net sales of skin care products benefited from the fiscal 2006
launches of Resilience Lift Extreme Ultra Firming Cremes by
Estée Lauder and Turnaround Concentrate Visible Skin Renewer
from Clinique.
-- Higher sales of Perfectionist (CP+) and Re-Nutriv Ultimate
Lifting Serum by Estée Lauder, and the 3-Step Skin Care System
from Clinique also contributed to growth.
-- Lower sales of certain existing products, particularly in
certain of the Company's core brands and declines in
BeautyBank brands, which completed their initial rollout in
fiscal 2005, partially offset the increases.
-- Operating income declined reflecting lower than anticipated
sales in some of our core brands.
Makeup
-- Makeup sales for the year increased, primarily reflecting
solid growth from the Company's makeup artist brands, M--A--C
and Bobbi Brown.
-- Challenges in certain core brands, lower sales of some
existing products, as well as declines in BeautyBank brands,
partially offset these positive results.
-- Makeup operating results increased, primarily reflecting
improvements in the Company's makeup artist brands.
Fragrance
-- Fragrance sales decreased compared to the prior year as the
fragrance category continues to be challenging, particularly
in the United States, reflecting lower sales of Estée Lauder
Beyond Paradise and various Clinique and Tommy Hilfiger
fragrances.
-- The current year launches of Unforgivable by Sean John and
True Star Men from Tommy Hilfiger contributed positively to
the category's sales.
-- Solid sales growth was generated from Estée Lauder pleasures,
as well as the strong international success of DKNY Be
Delicious.
-- Operating results in the fragrance product category declined,
reflecting lower net sales, and, to a lesser extent, expenses
incurred related to the development of new products and
brands.
Hair Care
-- Sales of hair care products and services increased, primarily
due to higher sales at Aveda and Bumble and bumble.
-- Higher sales at Bumble and bumble were primarily due to new
points of distribution, strong like door growth, as well as
the launch of hair Shine and Powder products.
-- Aveda net sales growth was due to the recent launch of Damage
Remedy hair care products, continued strong demand for
professional color products, and from the recent acquisition
of a distributor.
-- Hair care operating income increased due to the strong global
sales growth.
Full-Year Results by Geographic Region
--------------------------------------
Year Ended June 30
------------------
(Unaudited; Dollars in millions)
--------------------------------
Percent Change
Net Sales --------------
--------- Reported Local
2006 2005 Basis Currency
---- ---- --------- ---------
The Americas $ 3,446.4 $3,351.1 2.8% 2.4%
Europe, the Middle East &
Africa 2,147.7 2,109.1 1.8 5.4
Asia/Pacific 869.7 819.8 6.1 7.0
---------- --------
Subtotal 6,463.8 6,280.0 2.9 4.0
Special charges related to
cost savings initiative - -
---------- --------
Total $ 6,463.8 $6,280.0 2.9% 4.0%
========== ========
Full-Year Results by Geographic Region
--------------------------------------
Year Ended June 30
------------------
(Unaudited; Dollars in millions)
--------------------------------
Percent
Operating Income Change
---------------- Reported
2006 2005 Basis
---- ---- -------
The Americas $ 344.1 $366.2 (6.0)%
Europe, the Middle East
& Africa 297.5 305.3 (2.6)
Asia/Pacific 70.1 55.3 26.8
-------- --------
Subtotal 711.7 726.8 (2.1)
Special charges related to cost
savings initiative (92.1) -
-------- --------
Total $ 619.6 $726.8 (14.7)%
======== ========
The Americas
-- Net sales for the year increased, led by growth in the hair
care and makeup product categories. Virtually all developing
brands posted increases, as well as overall growth in the
Company's online business, Canada and Mexico.
-- Sales in the region were tempered by decreases in certain core
brands, which continue to be challenged by competitive
pressures and retailer consolidations, principally the merger
of Federated Department Stores, Inc. (Federated) and May
Department Stores Company (May).
-- Net sales were lower at the Company's BeautyBank brands, which
completed their initial rollout in the prior year.
-- Primarily as a result of the challenges and the incremental
expenses related to new accounting rules for stock-based
compensation, operating income in the Americas declined from
the prior year. Partially offsetting these decreases were
higher operating results from various businesses including the
Company's makeup artist brands and online.
Europe, the Middle East & Africa
-- In constant currency, higher sales were led by the Company's
travel retail and distributor businesses, the United Kingdom,
Russia and South Africa. Higher sales were aided by the
continued success of DKNY Be Delicious and strong sales of
M--A--C products.
-- Lower sales were experienced primarily in Spain due to changes
in the Company's distribution policy and a challenging retail
environment in that country.
-- Operating profitability declined compared to the prior year
primarily due to lower results in Spain, Benelux and Italy,
partially offset by improved results in France, the Company's
travel retail business and Central Europe.
Asia/Pacific
-- Virtually all countries in the region reported local currency
sales increases, with strong double-digit growth in China and
Hong Kong, solid growth in Korea and low single-digit gains in
Japan.
-- Operating profit in the region increased, led by double-digit
gains in Korea and Japan and improved results in China. Lower
results were reported in Taiwan.
Full-Year Cash Flows
-- For the twelve months ended June 30, 2006, the Company
generated $727.3 million in cash flow provided by operating
activities from continuing operations, a 52% increase compared
with $479.2 million in the prior-year period.
-- The increase primarily reflects improvements in certain
working capital components, particularly due to better
inventory management, a decrease in accounts receivable,
reflecting higher domestic collections, and increases in other
accrued liabilities. These favorable changes were partially
offset by lower net earnings from continuing operations.
-- Operating cash flow was utilized primarily for the repurchase
of shares of the Company's Class A Common Stock, capital
investments, the repayment of long-term debt and dividend
payments.
Estimate of Fiscal 2007 First Quarter and Full Year
-- Recent events related to the suspected terrorist activities in
the United Kingdom and subsequent restrictions on products
that can be carried in flight have created uncertainty in the
Company's outlook for its travel retail business in fiscal
2007. Based on current information, we do not believe these
events will have a material adverse effect on the Company's
results of operations for its fiscal 2007 first quarter or
full year. In fiscal 2006, the Company's travel retail
business comprised approximately 7% of total Company sales,
and accounted for approximately 20% of operating income.
First Quarter
-- Net sales are expected to grow between 5 and 7% in constant
currency and on a reported basis.
-- The Company's fiscal first quarter will be negatively impacted
by stores that closed last year resulting from the merger of
Federated and May.
-- Significant planned increases in investment spending in
certain core, fast growing and developing brands are also
expected to temper the Company's first quarter results.
-- Diluted earnings per share from continuing operations is
projected to be between $.15 and $.20.
Full Year
-- Net sales are expected to grow between 5 and 7% in constant
currency.
-- Foreign currency translation impact is expected to be minimal
versus fiscal 2006
-- Diluted earnings per share from continuing operations is
projected to be between $2.00 and $2.10, including $.08 per
share impact related to the Federated store closures.
-- On a product category basis, in constant currency, sales in
hair care and makeup are expected to be the leading sales
growth categories, followed by skin care. Fragrance is
expected to post a slight increase.
-- Geographic region net sales growth in constant currency is
expected to be led by Asia/Pacific and Europe, the Middle East
& Africa, followed by the Americas.
-- The Company continues to expect to deliver approximately $37
million in incremental savings in the current fiscal year
ending June 30, 2007, under its cost savings initiative
implemented in fiscal 2006.
-- Full fiscal year 2007 estimate includes $50 million of net
sales and six cents diluted earnings per share related to our
business in the Lord & Taylor retail chain, which was recently
sold by Federated. If as a result of the sale, store closures
within this chain take place during our fiscal year, such
closures will reduce our fiscal 2007 results.
Forward-Looking Statements
The forward-looking statements in this press release, including those containing words like "expect," "believe," "planned," "may," "could," "should," "anticipate," "estimate," "projected," those in Mr. Lauder's remarks and those in the "Estimate of Fiscal 2007 First 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: (1) increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses, some of which have greater resources than the Company does; (2) the Company's ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in core brands, including gift with purchase, and in the Company's fragrance business; (3) consolidations, restructurings, bankruptcies and reorganizations in the retail industry causing a decrease in the number of stores that sell the Company's products and destocking, an increase in the ownership concentration within the retail industry, ownership of retailers by the Company's competitors and ownership of competitors by the Company's customers that are retailers; (4) destocking by retailers: (5) the success, or changes in timing or scope, of new product launches and the success, or changes in the timing or scope, of advertising, sampling and merchandising programs; (6) shifts in the preferences of consumers as to where and how they shop for the types of products and services the Company sells; (7) social, political and economic risks to the Company's foreign or domestic manufacturing, distribution and retail operations, including changes in foreign investment and trade policies and regulations of the host countries and of the United States; (8) changes in the laws, regulations and policies (including the interpretation and enforcement thereof) that affect, or will affect, the Company's business, including those relating to its products, changes in accounting standards, tax laws and regulations, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action the Company may take as a result; (9) foreign currency fluctuations affecting the Company's results of operations and the value of its foreign assets, the relative prices at which the Company and its foreign competitors sell products in the same markets and the Company's operating and manufacturing costs outside of the United States; (10) changes in global or local conditions, including those due to natural or man-made disasters, real or perceived epidemics, or energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase the Company's products while traveling, the financial strength of the Company's customers or suppliers, the Company's operations, the cost and availability of capital which the Company may need for new equipment, facilities or acquisitions, the cost and availability of raw materials and the assumptions underlying the Company's critical accounting estimates; (11) shipment delays, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture nearly all of the Company's supply of a particular type of product (i.e., focus factories) or at the Company's distribution and inventory centers; (12) real estate rates and availability, which may affect the Company's ability to increase the number of retail locations at which the Company sells its products and the costs associated with the Company's other facilities; (13) changes in product mix to products which are less profitable; (14) the Company's ability to acquire, develop or implement new information and distribution technologies, on a timely basis and within the Company's cost estimates; (15) the Company's ability to capitalize on opportunities for improved efficiency, such as publicly-announced cost-savings initiatives and the success of Stila under new ownership, and to integrate acquired businesses and realize value therefrom; (16) consequences attributable to the events that are currently taking place in the Middle East, including terrorist attacks, retaliation and the threat of further attacks or retaliation; (17) the timing and impact of acquisitions and divestitures, which depend on willing sellers and buyers, respectively; and (18) additional factors as described in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2005. 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 130 countries and territories under well-recognized brand names, including Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, M--A--C, Bobbi Brown, Tommy Hilfiger, La Mer, Donna Karan, Aveda, Jo Malone, Bumble and bumble, Darphin, Michael Kors, Rodan + Fields, American Beauty, Flirt!, Good Skin(TM), Donald Trump The Fragrance, Grassroots, Sean John, Missoni and Daisy Fuentes. An electronic version of this release can be found at the Company's website, www.elcompanies.com.
THE ESTEE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; Dollars in millions, except per share data)
Three Months Ended
June 30
------------------ Percent
2006 2005 Change
---- ---- ------
Net Sales $1,604.6 $1,528.1 5.0%
Cost of sales 397.1 367.5
--------- --------
Gross Profit 1,207.5 1,160.6 4.0%
--------- --------
Gross Margin 75.3% 75.9%
Operating expenses:
Selling, general and
administrative 1,021.1 1,001.6
Special charges related
to cost savings initiative(A) 38.9 -
--------- --------
1,060.0 1,001.6 5.8%
--------- --------
Operating Expense Margin 66.1% 65.5%
Operating Income 147.5 159.0 (7.2)%
Operating Income Margin 9.2% 10.4%
Interest expense, net 4.7 3.2
--------- --------
Earnings before Income Taxes, Minority
Interest
and Discontinued Operations 142.8 155.8 (8.3)%
Provision for income taxes (B) 90.3 85.4
Minority interest, net of tax (3.4) (3.5)
-------- ---------
Net Earnings from Continuing
Operations 49.1 66.9 (26.6)%
Discontinued operations,
net of tax(C) (4.6) (0.3)
--------- ---------
Net Earnings $ 44.5 $66.6 (33.2)%
========= =========
Basic net earnings per common share:
Net earnings from continuing
operations $ .23 $.30 (22.7)%
Discontinued operations,
net of tax (.02) (.00)
--------- ---------
Net earnings $ .21 $.30 (29.8)%
========= =========
Diluted net earnings per common share:
Net earnings from continuing
operations $ .23 $.30 (22.9)%
Discontinued operations,
net of tax (.02) (.00)
--------- ---------
Net earnings $ .21 $.30 (30.1)%
========= =========
Weighted average common shares
outstanding:
Basic 212.0 223.1
Diluted 214.7 225.3
THE ESTEE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; Dollars in millions, except per share data)
Year Ended
June 30
-----------
2006 2005 Percent
---- ---- Change
------
Net Sales $ 6,463.8 $6,280.0 2.9%
Cost of sales 1,686.6 1,602.8
----------- --------
Gross Profit 4,777.2 4,677.2 2.1%
----------- --------
Gross Margin 73.9% 74.5%
Operating expenses:
Selling, general and
administrative 4,065.5 3,950.4
Special charges related
to cost savings
initiative (A) 92.1 -
----------- --------
4,157.6 3,950.4 5.2%
----------- --------
Operating Expense Margin 64.3% 62.9%
Operating Income 619.6 726.8 (14.7)%
Operating Income Margin 9.6% 11.6%
Interest expense, net 23.8 13.9
----------- --------
Earnings before Income Taxes,
Minority Interest
and Discontinued Operations 595.8 712.9 (16.4)%
Provision for income taxes(B) 259.7 293.7
Minority interest, net of tax (11.6) (9.3)
----------- --------
Net Earnings from Continuing
Operations 324.5 409.9 (20.8)%
Discontinued operations,
net of tax(C) (80.3) (3.8)
----------- --------
Net Earnings $ 244.2 $406.1 (39.9)%
=========== ========
Basic net earnings per
common share:
Net earnings from continuing
operations $ 1.51 $1.82 (17.0)%
Discontinued operations,
net of tax (.37) (.02)
----------- ---------
Net earnings $ 1.14 $1.80 (37.0)%
=========== =========
Diluted net earnings per common share:
Net earnings from
continuing operations $ 1.49 $1.80 (16.8)%
Discontinued operations,
net of tax (.37) (.02)
------------ --------
Net earnings $ 1.12 $1.78 (36.8)%
============ ========
Weighted average common shares outstanding:
Basic 215.0 225.3
Diluted 217.4 228.6
(A) As part of an initiative to reduce expenses, the Company
commenced streamlined process and organizational changes. The
principal component of the initiative in fiscal 2006 was a voluntary
separation program offered to employees. During the three and twelve
months ended June 30, 2006, the Company recorded charges of $38.9
million and $92.1 million, respectively, related to the implementation
of this cost savings initiative. The provision for income taxes
related to these charges was $14.2 million and $34.1 million, for the
three and twelve months ended June 30, 2006, respectively.
(B) In July 2006, the Company reached a settlement with the
Internal Revenue Service (IRS) regarding its examination of the
Company's consolidated Federal income tax returns for the fiscal years
ended June 30, 1998 through June 30, 2001. The settlement resolved
previously disclosed issues raised during the IRS's examination,
including transfer pricing and foreign tax credit computations. While
the settlement concludes the audit for fiscal years 1998 through 2001,
the statement of earnings impact related to these issues also has been
computed for all subsequent periods and the aggregate impact was
recorded in the fourth quarter of fiscal year ended June 30, 2006. The
settlement resulted in an increase to the Company's fiscal 2006 income
tax provision and a corresponding decrease in fiscal 2006 net earnings
of approximately $46 million, or approximately $.21 per diluted common
share.
THE ESTEE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
During the fourth quarter of fiscal 2006, the Company completed
the repatriation of foreign earnings through intercompany dividends
under the provisions of the American Jobs Creation Act of 2004 (the
"AJCA"). In connection with the repatriation, the Company finalized
computations of the related aggregate tax impact, resulting in a
favorable adjustment of approximately $11 million, or approximately
$.05 per diluted common share, to the Company's initial tax charge of
$35 million recorded in fiscal 2005.
The tax settlement, combined with the favorable adjustment to the
fiscal 2005 AJCA-related tax charge, resulted in a net increase to the
Company's fiscal 2006 income tax provision and a corresponding
decrease in fiscal 2006 net earnings of approximately $35 million, or
approximately $.16 per diluted common share.
In fiscal 2005, the Company planned to repatriate approximately
$690 million of foreign earnings in fiscal year 2006, which included
$500 million of extraordinary intercompany dividends under the
provisions of the AJCA. That plan resulted in an aggregate tax charge
of approximately $35 million in the Company's fiscal year ended June
30, 2005, which included an incremental tax charge of $27.5 million,
equal to $.12 per diluted common share.
(C) On April 10, 2006, the Company completed the sale of certain
assets and operations of the reporting unit that marketed and sold
Stila brand products. The Company recorded charges of $4.6 million
(net of $2.6 million tax benefit) and $80.3 million (net of $43.3
million tax benefit) to discontinued operations for the three and
twelve months ended June 30, 2006, respectively. The charges reflect
the loss on the disposition of the business of $3.6 million and $69.9
million, net of tax, for the three and twelve months ended June 30,
2006, respectively, which represent adjustments to the fair value of
assets sold, the costs to dispose of those assets not acquired by the
purchaser and other costs in connection with the sale. The charges
also include the operating losses of $1.0 million and $10.4 million,
net of tax, for the three and twelve months ended June 30, 2006,
respectively. Net sales associated with the discontinued operations
were $6.8 million and $45.1 million for the three and twelve months
ended June 30, 2006, respectively. All statements of earnings
information for the prior periods have been restated for comparative
purposes, including the restatement of the makeup product category and
each of the geographic regions.
This earnings release includes some non-GAAP financial measures
relating to these charges. The following is a reconciliation between
the non-GAAP financial measures and the most directly comparable GAAP
measure for certain statement of earnings accounts before and after
the special charges. The Company uses the non-GAAP financial measure,
among other things, to evaluate its operating performance and the
measure represents the manner in which the Company conducts and views
its business. Management believes that excluding these items that are
special in nature or that are not comparable from period to period
helps investors and others compare operating performance between two
periods. While the Company considers the non-GAAP measures useful in
analyzing our 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 ESTEE LAUDER COMPANIES INC.
RECONCILIATION OF CERTAIN STATEMENT OF EARNINGS ACCOUNTS
BEFORE AND AFTER SPECIAL CHARGES
(Unaudited; Dollars in millions, except per share data)
Three Months Ended June 30, 2006
-------------------------------
Before
Special Special
As Reported Charges Charges
----------- ------- -------
Operating Expenses $1,060.0 $38.9 $1,021.1
Operating Expense Margin 66.1% 63.7%
Operating Income 147.5 38.9 186.4
Operating Income Margin 9.2% 11.6%
Provision for income taxes 90.3 20.8 69.5
Net Earnings from Continuing
Operations 49.1 59.7 108.8
Net Earnings 44.5 59.7 104.2
Diluted net earnings per common share:
Net earnings from continuing operations .23 .28 .51
Net earnings .21 .28 .49
Three Months Ended June 30, 2005
--------------------------------
%Change
Before versus
Special Special Prior Year
As Reported Charges Charges Before
Charges
----------- ------- ------- ---------
Operating Expenses $ 1,001.6 $- $1,001.6 1.9%
Operating Expense
Margin 65.5% 65.5%
Operating Income 159.0 - 159.0 17.2%
Operating Income Margin 10.4% 10.4%
Provision for income
taxes 85.4 27.5 57.9
Net Earnings from
Continuing Operations 66.9 27.5 94.4 15.3%
Net Earnings 66.6 27.5 94.1 10.7%
Diluted net earnings per common share:
Net earnings from
continuing operations .30 .12 .42 21.0%
Net earnings .30 .12 .42 16.0%
Year Ended June 30, 2006
------------------------
Before
Special Special
As Reported Charges Charges
----------- ------- -------
Operating Expenses $4,157.6 $92.1 $4,065.5
Operating Expense Margin 64.3% 62.9%
Operating Income 619.6 92.1 711.7
Operating Income Margin 9.6% 11.0%
Provision for income taxes 259.7 0.9 258.8
Net Earnings from Continuing
Operations 324.5 93.0 417.5
Net Earnings 244.2 93.0 337.2
Diluted net earnings per common share:
Net earnings from continuing
operations 1.49 .43 1.92
Net earnings 1.12 .43 1.55
Year Ended June 30, 2005
------------------------
%Change
Before versus
Special Special Prior Year
As Reported Charges Charges Before Charges
----------- ------- ------- ----------
Operating Expenses $3,950.4 $ - $3,950.4 2.9%
Operating Expense
Margin 62.9% 62.9%
Operating Income 726.8 - 726.8 (2.1)%
Operating Income
Margin 11.6% 11.6%
Provision for income
taxes 293.7 27.5 266.2
Net Earnings from Continuing
Operations 409.9 27.5 437.4 (4.5)%
Net Earnings 406.1 27.5 433.6 (22.2)%
Diluted net earnings per common share:
Net earnings from continuing
operations 1.80 .12 1.92 0.4%
Net earnings 1.78 .12 1.90 (18.2)%
THE ESTEE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; Dollars in millions)
Three Months Ended Percent Change
June 30 --------------
------------------ Reported Local
2006 2005 Basis Currency
---- ---- -------- ---------
NET SALES
By Region:
The Americas $ 816.5 $ 762.4 7.1% 6.5%
Europe, the Middle
East & Africa 569.8 567.3 0.4 1.3
Asia/Pacific 218.3 198.4 10.0 11.4
--------- ---------
Total $1,604.6 $1,528.1 5.0% 5.2%
========= =========
By Product Category:
Skin Care $ 622.2 $ 602.2 3.3% 3.8%
Makeup 622.1 587.4 5.9 5.9
Fragrance 265.9 261.6 1.6 1.7
Hair Care 88.8 71.9 23.5 23.4
Other 5.6 5.0 12.0 12.0
--------- ---------
Total $1,604.6 $1,528.1 5.0% 5.2%
========= =========
OPERATING INCOME (LOSS)
By Region:
The Americas $ 84.9 $ 55.8 52.2%
Europe, the Middle
East & Africa 88.2 93.5 (5.7)
Asia/Pacific 13.3 9.7 37.1
--------- ---------
Subtotal 186.4 159.0 17.2
Special charges related to cost
savings initiative (38.9) -
--------- ---------
Total $ 147.5 $ 159.0 (7.2)%
========= =========
By Product Category:
Skin Care $ 94.0 $ 90.8 3.5%
Makeup 83.9 68.2 23.0
Fragrance 2.5 (4.5) 100.0+
Hair Care 6.8 5.1 33.3
Other (0.8) (0.6) (33.3)
--------- ---------
Subtotal 186.4 159.0 17.2
Special charges related to cost
savings initiative (38.9) -
--------- ---------
Total $ 147.5 $ 159.0 (7.2)%
========= =========
THE ESTEE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; Dollars in millions)
Year Ended
June 30 Percent Change
--------- --------------
Reported Local
2006 2005 Basis Currency
---- ---- ----- --------
NET SALES
By Region:
The Americas $3,446.4 $3,351.1 2.8% 2.4%
Europe, the Middle 2,147.7 2,109.1 1.8 5.4
East & Africa
Asia/Pacific 869.7 819.8 6.1 7.0
-------- --------
Total $6,463.8 $6,280.0 2.9% 4.0%
======== ========
By Product Category:
Skin Care $2,400.8 $2,352.1 2.1% 3.4%
Makeup 2,504.2 2,366.8 5.8 6.6
Fragrance 1,213.3 1,260.6 (3.8) (2.3)
Hair Care 318.7 273.9 16.4 16.5
Other 26.8 26.6 0.8 1.1
-------- --------
Total $6,463.8 $6,280.0 2.9% 4.0%
======== ========
OPERATING INCOME (LOSS)
By Region:
The Americas $ 344.1 $ 366.2 (6.0)%
Europe, the Middle
East & Africa 297.5 305.3 (2.6)
Asia/Pacific 70.1 55.3 26.8
-------- ---------
Subtotal 711.7 726.8 (2.1)
Special charges related to cost
savings initiative (92.1) -
-------- ---------
Total $ 619.6 $ 726.8 (14.7)%
======== =========
By Product Category:
Skin Care $ 346.4 $ 365.8 (5.3)%
Makeup 329.4 301.1 9.4
Fragrance 7.7 35.8 (78.5)
Hair Care 26.5 22.8 16.2
Other 1.7 1.3 30.8
-------- ---------
Subtotal 711.7 726.8 (2.1)
Special charges related to cost
savings initiative (92.1) -
-------- ---------
Total $ 619.6 $ 726.8 (14.7)%
======== =========
THE ESTEE LAUDER COMPANIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; In millions)
June 30 June 30
2006 2005
---- ----
ASSETS
Current Assets
Cash and cash equivalents $ 368.6 $ 553.3
Accounts receivable, net 771.2 776.6
Inventory and promotional
merchandise, net 766.3 768.3
Prepaid expenses and other
current assets 270.8 204.4
--------- ---------
Total Current Assets 2,176.9 2,302.6
--------- ---------
Property, Plant and Equipment, net 758.0 694.2
Other Assets 849.2 889.0
--------- ---------
Total Assets $ 3,784.1 $3,885.8
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 89.7 $ 263.6
Accounts payable 264.5 249.4
Other current liabilities 1,084.0 984.7
--------- ---------
Total Current Liabilities 1,438.2 1,497.7
--------- ---------
Noncurrent Liabilities
Long-term debt 431.8 451.1
Other noncurrent liabilities
and minority interest 291.8 244.2
Total Stockholders' Equity 1,622.3 1,692.8
--------- --------
Total Liabilities and
Stockholders' Equity $ 3,784.1 $3,885.8
========= ========
SELECTED CASH FLOW DATA
(Unaudited; In millions)
Year Ended
June 30
-------
2006 2005
---- ----
Cash Flows from Operating Activities
Net earnings $244.2 $406.1
Depreciation and amortization 198.4 196.7
Deferred income taxes (74.3) 104.9
Discontinued operations 80.3 -
Other items 54.8 19.0
Changes in operating assets and liabilities:
Decrease (increase) in
accounts receivable, net 14.6 (106.6)
Decrease (increase) in inventory
and promotional merchandise, net 1.9 (105.1)
Increase (decrease) in accounts
payable and other accrued
liabilities 138.8 (50.4)
Other operating assets and
liabilities, net 68.6 14.6
------- -------
Net cash flows provided by
operating activities from
continuing operations $727.3 $479.2
======= =======
Capital expenditures 260.6 229.6
Repayments and redemptions of
long-term debt 97.8 2.5
Payments to acquire treasury stock 400.5 438.6
Dividends paid 85.4 90.1
CONTACT: Estée Lauder Investor Relations: Dennis D'Andrea, 212-572-4384 or Media Relations: Sally Susman, 212-572-4430 SOURCE: The Estée Lauder Companies Inc. |
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