United States
The Estée Lauder Companies Achieves Outstanding Fiscal 2018 First Quarter Results
Press Release, Nov 1, 2017
– Diluted EPS Increases 44% on 14% Sales Gain –
– Company Raises Full-Year Sales and Earnings Forecast –
Fabrizio Freda, President and Chief Executive Officer, said, “We
delivered an outstanding financial performance in our fiscal 2018 first
quarter, demonstrating the power of our diverse brand portfolio to
leverage our multiple engines of growth. Building on the global momentum
of the last fiscal year, we benefitted from a continued acceleration in
“Our online and travel retail channels and most luxury and mid-sized
brands posted double-digit sales gains. In addition, we saw encouraging
signs of improvement in some
“For the full fiscal year, our forecast reflects strong programs supported by focused advertising and marketing spending and sustained investments to further build capabilities for the long term. With this strong start to fiscal 2018 and our confidence in the potential for our business, we are raising our full-year constant currency sales growth forecast to between 8% and 9% and increasing our constant currency earnings per share growth estimate, before restructuring charges, to 12% to 14%.”
Excluding the impact of foreign currency translation, adjusted net sales
increased 13%. For the quarter, the positive impact of foreign currency
translation on diluted net earnings per common share was
During the fiscal 2018 first quarter, the Company recorded restructuring
and other charges of
Additionally, in the fiscal 2018 and 2017 first quarter, the Company recorded adjustments to reflect changes in the fair value of its contingent consideration related to its fiscal 2015 and 2016 acquisitions. See tables below and on page 11.
Adjusting for the restructuring and other charges and changes in
contingent consideration, diluted net earnings per common share for the
three months ended September 30, 2017 was
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Reconciliation between GAAP and non-GAAP | Three Months Ended September 30, 2017 | Three Months | ||||||||||||||||||||||||||
Net Sales Growth | Diluted EPS Growth | Diluted Earnings Per Share | ||||||||||||||||||||||||||
(Unaudited) | Reported Basis | Constant Currency | Reported Basis | Constant Currency | 2017 | 2016 | ||||||||||||||||||||||
Results including restructuring and other | 14 | %(1) | 14 | % | 44 | %(1) | 43 | % | (1) | (1) | ||||||||||||||||||
Non-GAAP | ||||||||||||||||||||||||||||
Restructuring and other charges | .07 | .05 | ||||||||||||||||||||||||||
Contingent consideration | .00 | .01 | ||||||||||||||||||||||||||
Adjusted results | 14 | % | 13 | % | 42 | % | 41 | % | 1.21 | |||||||||||||||||||
Impact of foreign currency on earnings
per share | (.02 | ) | ||||||||||||||||||||||||||
Constant currency earnings per share | ||||||||||||||||||||||||||||
_______________________________ | ||||||||||||||||||||||||||||
(1) Represents GAAP. |
Results by Product Category | |||||||||||||||||||||||||||||||||||||
Three Months Ended September 30 | |||||||||||||||||||||||||||||||||||||
(Unaudited; Dollars in millions) | Net Sales | Percent Change | Operating Income (Loss) | Percent Change | |||||||||||||||||||||||||||||||||
2017 | 2016 | Reported Basis | Constant Currency | 2017 | 2016 | Reported Basis | |||||||||||||||||||||||||||||||
Skin Care | $ | 1,275 | $ | 1,102 | 16 | % | 15 | % | $ | 326 | $ | 212 | 54 | % | |||||||||||||||||||||||
Makeup | 1,372 | 1,166 | 18 | 17 | 176 | 149 | 18 | ||||||||||||||||||||||||||||||
Fragrance | 476 | 442 | 8 | 7 | 87 | 72 | 21 | ||||||||||||||||||||||||||||||
Hair Care | 136 | 136 | 0 | 0 | 15 | 13 | 15 | ||||||||||||||||||||||||||||||
Other | 15 | 21 | (29 | ) | (29 | ) | 2 | 3 | (33 | ) | |||||||||||||||||||||||||||
Subtotal | 3,274 | 2,867 | 14 | 13 | 606 | 449 | 35 | ||||||||||||||||||||||||||||||
Returns and charges associated | — | (2 | ) | (38 | ) | (31 | ) | ||||||||||||||||||||||||||||||
Total | $ | 3,274 | $ | 2,865 | 14 | % | 14 | % | $ | 568 | $ | 418 | 36 | % | |||||||||||||||||||||||
Net sales and operating income in most of the Company’s product
categories were favorably impacted by a weaker
Skin Care
- Net sales increased sharply, with exceptional double-digit gains from Estée Lauder, La Mer, GLAMGLOW and Origins.
-
The Estée Lauder brand grew globally, particularly in
China and travel retail, due largely to the launch of Advanced Night Repair Eye Concentrate Matrix and gains in other Advanced Night Repair products. La Mer was driven by the success of new products in its Genaissance franchise, the launch of The Moisturizing Matte Lotion, gains from existing products, and targeted expanded consumer reach. -
Outstanding double-digit sales growth from GLAMGLOW reflected
additional product assortments and targeted expanded consumer reach.
Sales growth in Origins was generated in
Asia and travel retail due to the continued success of several product lines in the facial mask and moisturizer sub-categories. - These increases were partially offset by lower skin care sales from Clinique and Aveda.
- Operating income increased sharply, primarily from Estée Lauder and La Mer, reflecting higher sales.
Makeup
- Strong sales growth in makeup was primarily driven by incremental sales from the Company’s fiscal 2017 second quarter acquisitions of Too Faced and BECCA, exceptionally strong double-digit increases from Tom Ford in every region, and double-digit gains from Estée Lauder. Higher makeup sales were also generated from M•A•C.
- Sales from Tom Ford more than doubled, driven primarily by its lip color franchises, including the Tom Ford Lips & Boys and Soleil Color Collections, as well as strength in the eyeshadow and foundation sub-categories. At Estée Lauder, higher sales were fueled by the Double Wear and Pure Color Lip product lines.
-
The higher sales from M•A•C were due to strong growth in the
Asia/Pacific region, particularlyChina andHong Kong , and in travel retail. -
These increases were partially offset by lower makeup sales in
the United States , primarily from Clinique and Bobbi Brown, reflecting a soft retail environment due, in part, to slow foot traffic in someU.S. brick-and-mortar stores. - Makeup operating income increased. Strong growth from Tom Ford and Estée Lauder, primarily due to higher sales, and incremental operating income from Too Faced, was partially offset by declines from Smashbox, Clinique and Bobbi Brown.
Fragrance
- Net sales increased, primarily due to strong double-digit gains from luxury brands Jo Malone London, Tom Ford and Le Labo.
-
Jo
Malone delivered outstanding double-digit sales increases in every region, reflecting strong growth from existing fragrances, targeted expanded consumer reach and the recent launch of the English Oak fragrances. - Increased sales from Tom Ford reflect, in part, the continued success of the Signature and Private Blend lines of fragrances, including new product launches and growth from existing fragrances.
- Le Labo benefitted from growth in existing products and new launches and targeted expanded consumer reach.
- Partially offsetting these increases were lower sales of certain designer and Estée Lauder fragrances.
- Fragrance operating income increased sharply, reflecting higher sales from Jo Malone and Tom Ford, as well as disciplined expense management.
Hair Care
- Hair care sales were unchanged, with moderate growth from Aveda and Bumble and bumble offset by lower hair care sales from Origins.
- The growth from Bumble and bumble reflected initial shipments in advance of the brand’s launch in Ulta Beauty, partially offset by softness in the salon channel. At Aveda, online sales grew, while sales in freestanding stores were lower.
- Hair care operating income increased, reflecting disciplined expense management.
Results by Geographic Region | |||||||||||||||||||||||||
Three Months Ended September 30 | |||||||||||||||||||||||||
(Unaudited; Dollars in millions) | Net Sales | Percent Change | Operating Income (Loss) | Percent Change | |||||||||||||||||||||
2017 | 2016 | Reported Basis | Constant Currency | 2017 | 2016 | Reported Basis | |||||||||||||||||||
The | $ | 1,329 | $ | 1,233 | 8 | % | 7 | % | $ | 100 | $ | 63 | 59 | % | |||||||||||
1,258 | 1,044 | 20 | 18 | 346 | 256 | 35 | |||||||||||||||||||
687 | 590 | 16 | 17 | 160 | 130 | 23 | |||||||||||||||||||
Subtotal | 3,274 | 2,867 | 14 | 13 | 606 | 449 | 35 | ||||||||||||||||||
Returns and charges associated | — | (2 | ) | (38 | ) | (31 | ) | ||||||||||||||||||
Total | $ | 3,274 | $ | 2,865 | 14 | % | 14 | % | $ | 568 | $ | 418 | 36 | % | |||||||||||
Net sales and operating income in most of the Company’s geographic
regions were favorably impacted by a weaker
The
-
Sales in
North America benefitted from incremental sales from the recent acquisitions of Too Faced and BECCA. -
Several of the Company’s brands generated sales growth, led by
double-digit gains from Tom Ford and La Mer, and strong gains from Jo
Malone . -
The Estée Lauder brand grew slightly in
North America with gains in skin care, partially offset by lower fragrance sales. - Sales in the Company’s online and specialty-multi channels grew strong double digits.
-
Sales decreases, primarily attributable to the decline in retail
traffic in some
U.S. brick-and-mortar stores, were recorded principally for M•A•C, Clinique and certain designer fragrances. -
Additionally, the severe weather conditions during the quarter in
certain areas of
the United States tempered our sales growth. -
On a reported basis, sales in
Canada increased low-single digits, andLatin America declined slightly. In constant currency, sales inCanada andLatin America each decreased moderately. -
Operating income in the
Americas increased, primarily reflecting incremental operating results from Too Faced and BECCA, as well as disciplined expense management. Partially offsetting the higher results were lower results from M•A•C and Clinique, due to a decrease in sales.
-
The Company generated strong sales growth in the region both on a
reported basis and in constant currency, primarily due to strong
double-digit sales gains in travel retail. Foreign currency
translation increased reported sales by 2%, with the largest impact
from
Italy andRussia . -
Most markets recorded sales growth, with the largest increases in
Italy , the Balkans andIndia . - In travel retail, double-digit sales growth was generated across most brands, led by Estée Lauder, Tom Ford, Jo Malone and La Mer. Growth in global airline passenger traffic, particularly by Chinese travelers, solid new launch initiatives, and targeted expanded consumer reach each contributed to the sales gains.
-
Lower sales were posted in the
Middle East , driven by retailer inventory rebalancing, reflecting the impact of the macro-environment on consumer purchases. -
Operating income increased, primarily due to strong double-digit
operating results in travel retail. Certain developed and emerging
markets also contributed to the higher profits. The gains were
partially offset by lower results in
Switzerland and theMiddle East .
-
On a reported basis and in constant currency, sales increased sharply,
led by strong double-digit growth in
China andHong Kong . -
The higher sales in
China reflected strong double-digit gains in every brand except designer fragrances. Estée Lauder, M•A•C, La Mer, Tom Ford and Jo Malone led the sales growth. Sales benefitted, in part, from continued demand for makeup products, an acceleration in skin care and targeted expanded consumer reach. The Company generated double-digit sales growth in virtually every channel. -
The sales increase in
Hong Kong reflected solid domestic growth and a rise in tourism. Growth was primarily driven by Estée Lauder, La Mer and M•A•C and contributions from Tom Ford and Jo Malone. -
In
Asia/Pacific , operating income increased, primarily due to improved results inChina andHong Kong driven by higher sales. Operating results were lower inJapan .
Cash Flows from Operating Activities
-
For the three months ended September 30, 2017, net cash flows provided
by operating activities were
$93 million , compared with net cash flows used for operating activities of$150 million in the prior year. - The improvement primarily resulted from an increase in net earnings and favorable changes in other accrued and noncurrent liabilities.
Outlook for Fiscal 2018 Second Quarter and Full Year
Global prestige beauty remains vibrant and is estimated to grow approximately 4% to 5% during the year. The Company’s annual growth has consistently outpaced global prestige beauty and is expected to grow approximately four percentage points ahead of the industry for fiscal 2018. The Company expects sales growth to benefit from high-quality products, strong innovation, outreach to new target consumers and growth from recent acquisitions, while continuing to emphasize a digital-first marketing approach and a strong focus on fast-growing markets and channels as consumer preferences evolve.
We are mindful of risks related to social and political issues,
geopolitical tensions, terrorism, currency volatility and economic
challenges affecting consumer spending in certain countries and
traveling flows. The Company is also cautious of the decline in retail
traffic, primarily related to some brick-and-mortar stores in
The first quarter benefit (
Full Year Fiscal 2018
- Net sales are forecasted to increase between 10% and 11% versus the prior-year period.
- Foreign currency translation is expected to positively impact sales by approximately 2% versus the prior-year period.
- Net sales are forecasted to grow between 8% and 9% in constant currency. The Company’s fiscal 2017 acquisitions of Too Faced and BECCA are forecasted to contribute approximately 2 percentage points of incremental sales to the Company’s overall sales growth.
-
Reported diluted net earnings per share are projected to be between
$3.77 and$3.88 . -
The Company expects to take charges associated with previously
approved restructuring and other activities in fiscal 2018 of
approximately
$135 million to$155 million , equal to$.24 to$.27 per diluted common share. -
Diluted net earnings per share before charges associated with
restructuring and other activities are projected to be between
$4.04 and$4.12 . -
The positive currency impact on the sales growth equates to about
$.16 of earnings per share. On a constant currency basis, before charges associated with restructuring and other activities, diluted earnings per share are expected to increase between 12% and 14%.
Second Quarter Fiscal 2018
- Net sales are forecasted to increase between 13% and 15% versus the prior-year period.
- Foreign currency translation is expected to positively impact sales by approximately 3% to 4% versus the prior-year period.
- Net sales are forecasted to grow between 10% and 11% in constant currency. The Company’s fiscal 2017 acquisitions of Too Faced and BECCA are forecasted to contribute approximately 3 percentage points of incremental sales to the Company’s overall sales growth.
-
Reported diluted net earnings per share are projected to be between
$1.28 and$1.32 . -
The Company expects to take charges associated with previously
approved restructuring and other activities in its fiscal 2018 second
quarter of approximately
$50 million to$55 million , equal to$.09 to$.10 per diluted common share. -
Diluted net earnings per share before charges associated with
restructuring and other activities are projected to be between
$1.38 and$1.41 . -
The positive currency impact on the sales growth equates to about
$.07 of earnings per share. On a constant currency basis, before charges associated with restructuring and other activities, diluted earnings per share are expected to increase between 8% and 10%.
| ||||||||||||||||||||
Reconciliation between GAAP and non-GAAP | Three Months Ending December 31, 2017 (F) | Three Months December 31 | ||||||||||||||||||
Net Sales Growth | Diluted EPS Growth | Diluted Earnings Per Share | ||||||||||||||||||
(Unaudited) | Reported Basis | Constant Currency | Reported Basis | Constant Currency | 2017 (F) | 2016 | ||||||||||||||
Forecast / actual results including | 13-15 | %(1) | 10-11 | % | 11-15 | %(1) | 5-9 | % | (1) | (1) | ||||||||||
Non-GAAP | ||||||||||||||||||||
Restructuring and other charges | .09 -.10 | .07 | ||||||||||||||||||
Forecast / actual results excluding charges | 13-15 | % | 10-11 | % | 13-15 | % | 8-10 | % | 1.38 – 1.41 | |||||||||||
Impact of foreign currency on earnings | (.07 | ) | ||||||||||||||||||
Forecasted constant currency earnings | ||||||||||||||||||||
| ||||||||||||||||||||
Reconciliation between GAAP and non-GAAP | Year Ending June 30, 2018 (F) | Twelve Months June 30 | ||||||||||||||||||
Net Sales Growth | Diluted EPS Growth | Diluted Earnings Per Share | ||||||||||||||||||
(Unaudited) | Reported Basis | Constant Currency | Reported Basis | Constant Currency | 2018 (F) | 2017 | ||||||||||||||
Forecast / actual results including | 10-11 | %(1) | 8-9 | % | 13-16 | %(1) | 8-11 | % | (1) | (1) | ||||||||||
Non-GAAP | ||||||||||||||||||||
Restructuring and other charges | .24 -.27 | .38 | ||||||||||||||||||
Contingent consideration | (.12 | ) | ||||||||||||||||||
Intangible asset impairments | .06 | |||||||||||||||||||
| (.20 | ) | ||||||||||||||||||
Forecast / actual results adjusted | 10-11 | % | 8-9 | % | 16-19 | % | 12-14 | % | 4.04 - 4.12 | |||||||||||
Impact of foreign currency on earnings per share | (.16 | ) | ||||||||||||||||||
Forecasted constant currency earnings per share | ||||||||||||||||||||
_______________________________ | ||||||||||||||||||||
(1) Represents GAAP. (F) Represents forecast. | ||||||||||||||||||||
Conference Call
The Estée Lauder Companies will host a conference call at 9:30 a.m. (ET)
today, November 1, 2017 to discuss its results. The dial-in number for
the call is 888-294-4716 in the
Cautionary Note Regarding 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 2018 Second 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; | ||||
(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 the Company’s business; | ||||
(3) | consolidations, restructurings, bankruptcies and reorganizations in the retail industry, and other factors causing a decrease in the number of stores that sell 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; | ||||
(5) | the success, or changes in timing or scope, of new product launches and 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; | ||||
(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 | ||||
(8) | 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 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; | ||||
(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 | ||||
(10) | 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 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; | ||||
(11) | 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 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 information technology initiatives or by restructurings; | ||||
(12) | real estate rates and availability, which may affect the Company’s 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; | ||||
(14) | the Company’s ability to acquire, develop or implement new information and distribution technologies and initiatives on a timely basis and 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; | ||||
(15) | the Company’s ability to capitalize on opportunities for improved efficiency, such as publicly-announced strategies and restructuring and cost-savings initiatives, and to integrate acquired businesses and realize value therefrom; | ||||
(16) | consequences attributable to local or international conflicts around the world, as well as from any terrorist attack, retaliation or similar threats; | ||||
(17) | the timing and impact of acquisitions, investments and divestitures; 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, 2017. | ||||
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 brand names including: Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, Tommy Hilfiger, M•A•C, Kiton, La Mer, Bobbi Brown, Donna Karan New York, DKNY, Aveda, Jo Malone London, Bumble and bumble, Michael Kors, Darphin, Tom Ford, Smashbox, Ermenegildo Zegna, AERIN, Tory Burch, RODIN olio lusso, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, By Kilian, BECCA and Too Faced.
ELC-F
ELC-E
THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited; In millions, except per share data and percentages) | ||||||||||||
Three Months Ended September 30 | Percent Change | |||||||||||
2017 | 2016 | |||||||||||
Net Sales (A) | $ | 3,274 | $ | 2,865 | 14 | % | ||||||
Cost of sales (A) | 711 | 596 | ||||||||||
Gross Profit | 2,563 | 2,269 | 13 | % | ||||||||
Gross Margin | 78.3 | % | 79.2 | % | ||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative (B) | 1,961 | 1,825 | ||||||||||
Restructuring and other charges (A) | 34 | 26 | ||||||||||
1,995 | 1,851 | 8 | % | |||||||||
Operating Expense Margin | 60.9 | % | 64.6 | % | ||||||||
Operating Income | 568 | 418 | 36 | % | ||||||||
Operating Income Margin | 17.3 | % | 14.6 | % | ||||||||
Interest expense | 31 | 21 | ||||||||||
Interest income and investment income, net | 12 | 6 | ||||||||||
Earnings before Income Taxes | 549 | 403 | 36 | % | ||||||||
Provision for income taxes (C) | 119 | 107 | ||||||||||
Net Earnings | 430 | 296 | 45 | % | ||||||||
Net earnings attributable to noncontrolling interests | (3 | ) | (2 | ) | ||||||||
Net Earnings Attributable to The Estée Lauder | $ | 427 | $ | 294 | 45 | % | ||||||
Net earnings attributable to The Estée Lauder Companies | ||||||||||||
Basic | $ | 1.16 | $ | .80 | 45 | % | ||||||
Diluted | 1.14 | .79 | 44 | % | ||||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 368.4 | 366.4 | ||||||||||
Diluted | 375.4 | 373.3 |
(A) In May 2016, the Company announced a multi-year initiative
(Leading Beauty Forward) to build on its strengths and better
leverage its cost structure to free resources for investment to
continue its growth momentum. Leading Beauty Forward is designed to
enhance the Company’s go-to-market capabilities, reinforce its
leadership in global prestige beauty and continue creating
sustainable value. During the fiscal 2018 first quarter, the Company
continued to approve specific initiatives under Leading Beauty
Forward. The Company plans to approve additional initiatives through
fiscal 2019 and expects to complete those initiatives through fiscal
2021. The Company expects Leading Beauty Forward will result in
related restructuring and other charges totaling between |
THE ESTÉE LAUDER COMPANIES INC. |
(B) The Company recorded |
(C) During the first quarter of fiscal 2018, the Company adopted a
new accounting standard for share-based compensation that requires
excess tax benefits and tax deficiencies related to stock-based
compensation awards be recorded as income tax benefit or expense in
the income statement. As a result of the adoption of this new
standard, the Company recognized |
_______________________________ |
Total returns and charges associated with restructuring and other activities and changes in the fair value of contingent consideration included in net earnings for the three months ended September 30, 2017 and 2016 were: |
Sales Returns | Cost of Sales | Operating Expenses | Total | After Tax | Diluted Earnings Per Share | |||||||||||||||||||
Restructuring Charges | Other Charges/ Adjust- ments | |||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
(In millions, except per share data) | ||||||||||||||||||||||||
Three Months Ended September 30, 2017 | ||||||||||||||||||||||||
Leading Beauty Forward | $ | — | $ | 4 | $ | 14 | $ | 20 | $ | 38 | $ | 26 | $ | .07 | ||||||||||
Contingent consideration | — | — | — | 1 | 1 | 1 | — | |||||||||||||||||
Total | $ | — | $ | 4 | $ | 14 | $ | 21 | $ | 39 | $ | 27 | $ | .07 | ||||||||||
Three Months Ended September 30, 2016 | ||||||||||||||||||||||||
Leading Beauty Forward | $ | 2 | $ | 3 | $ | 8 | $ | 18 | $ | 31 | $ | 20 | $ | .05 | ||||||||||
Contingent consideration | — | — | — | 4 | 4 | 3 | .01 | |||||||||||||||||
Total | $ | 2 | $ | 3 | $ | 8 | $ | 22 | $ | 35 | $ | 23 | $ | .06 |
THE ESTÉE LAUDER COMPANIES INC. |
This earnings release includes some non-GAAP financial measures relating to charges associated with restructuring and other activities and the changes in the fair value of contingent consideration. The following is a reconciliation between the non-GAAP financial measures and the most directly comparable GAAP measures for certain consolidated statements of earnings accounts before and after these items. The Company uses certain non-GAAP financial measures, among other financial measures, to evaluate its operating performance, which represent the manner in which the Company conducts and views its business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company’s underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze operating performance from period to period. In the future, the Company expects to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. 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 |
Reconciliation of Certain Consolidated Statements of Earnings Accounts Before and After Returns, Charges and Other Adjustments (Unaudited; In millions, except per share data and percentages) | |||||||||||||||||||||||||||||
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | ||||||||||||||||||||||||||||
As Reported | Returns/ Charges/ Adjust- ments | Adjusted | Impact of foreign currency translation | Constant Currency | As Reported | Returns/ | Adjusted | % Change versus Prior Year Before Charges | % Change Constant Currency | ||||||||||||||||||||
Net Sales | $— | $(22 | ) | 14% | 13% | ||||||||||||||||||||||||
Cost of sales | 711 | (4 | ) | 707 | 596 | (3 | ) | 593 | |||||||||||||||||||||
Gross Profit | 2,563 | 4 | 2,567 | 2,269 | 5 | 2,274 | 13% | ||||||||||||||||||||||
Gross Margin | 78.3 | % | 78.4 | % | 79.2 | % | 79.3 | % | |||||||||||||||||||||
Operating expenses | 1,995 | (35 | ) | 1,960 | 1,851 | (30 | ) | 1,821 | 8% | ||||||||||||||||||||
Operating Expense Margin | 60.9 | % | 59.9 | % | 64.6 | % | 63.5 | % | |||||||||||||||||||||
Operating Income | 568 | 39 | 607 | 418 | 35 | 453 | 34% | ||||||||||||||||||||||
Operating Income Margin | 17.3 | % | 18.5 | % | 14.6 | % | 15.8 | % | |||||||||||||||||||||
Provision for income taxes | 119 | 12 | 131 | 107 | 12 | 119 | |||||||||||||||||||||||
Net Earnings Attributable to The | 427 | 27 | 454 | 294 | 23 | 317 | 43% | ||||||||||||||||||||||
Diluted net earnings attributable
to The Estée Lauder Companies | 1.14 | .07 | 1.21 | (.02 | ) | 1.19 | .79 | .06 | .85 | 42% | 41% | ||||||||||||||||||
Amounts may not sum due to rounding. |
THE ESTÉE LAUDER COMPANIES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited; In millions) | |||||||||||
September 30 2017 | June 30 2017 | September 30 2016 | |||||||||
ASSETS | |||||||||||
Current Assets | |||||||||||
Cash and cash equivalents | $ | 1,444 | $ | 1,136 | $ | 664 | |||||
Short-term investments | 381 | 605 | 525 | ||||||||
Accounts receivable, net | 1,799 | 1,395 | 1,624 | ||||||||
Inventory and promotional merchandise, net | 1,518 | 1,479 | 1,296 | ||||||||
Prepaid expenses and other current assets | 365 | 349 | 292 | ||||||||
Total Current Assets | 5,507 | 4,964 | 4,401 | ||||||||
Property, Plant and Equipment, net | 1,695 | 1,671 | 1,569 | ||||||||
Other Assets | 5,000 | 4,933 | 3,378 | ||||||||
Total Assets | $ | 12,202 | $ | 11,568 | $ | 9,348 | |||||
LIABILITIES AND EQUITY | |||||||||||
Current Liabilities | |||||||||||
Current debt | $ | 552 | $ | 189 | $ | 592 | |||||
Accounts payable | 679 | 835 | 546 | ||||||||
Other accrued liabilities | 1,911 | 1,799 | 1,574 | ||||||||
Total Current Liabilities | 3,142 | 2,823 | 2,712 | ||||||||
Noncurrent Liabilities | |||||||||||
Long-term debt | 3,383 | 3,383 | 1,908 | ||||||||
Other noncurrent liabilities | 924 | 960 | 1,053 | ||||||||
Total Noncurrent Liabilities | 4,307 | 4,343 | 2,961 | ||||||||
Total Equity | 4,753 | 4,402 | 3,675 | ||||||||
Total Liabilities and Equity | $ | 12,202 | $ | 11,568 | $ | 9,348 |
SELECT CASH FLOW DATA (Unaudited; In millions) | |||||||||||
Three Months Ended September 30 | |||||||||||
2017 | 2016 | ||||||||||
Cash Flows from Operating Activities | |||||||||||
Net earnings | $ | 430 | $ | 296 | |||||||
Depreciation and amortization | 127 | 106 | |||||||||
Deferred income taxes | (3 | ) | (32 | ) | |||||||
Other items | 68 | 88 | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Increase in accounts receivable, net | (390 | ) | (365 | ) | |||||||
Increase in inventory and promotional merchandise, net | (16 | ) | (31 | ) | |||||||
Decrease in other assets, net | 13 | 4 | |||||||||
Decrease in accounts payable and other liabilities | (136 | ) | (216 | ) | |||||||
Net cash flows provided by (used for) operating activities | $ | 93 | $ | (150 | ) | ||||||
Capital expenditures | $ | 116 | $ | 85 | |||||||
Acquisition of businesses | 11 | 10 | |||||||||
Proceeds of investments, net | 163 | 17 | |||||||||
Payments to acquire treasury stock | 111 | 222 | |||||||||
Dividends paid | 126 | 111 | |||||||||
Increase in short-term debt, net | 362 | 263 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20171101005540/en/
The Estée Lauder Companies
Investor Relations:
Dennis
D’Andrea, 212-572-4384
or
Media Relations:
Alexandra
Trower, 212-572-4430
Source: The Estée Lauder Companies Inc.