Estee Lauder 2010 Annual Report Download - page 87

86 THE EST{E LAUDER COMPANIES INC.
Companies Inc., and net earnings attributable to The Estée
Lauder Companies Inc. per diluted common share would
be an increase or decrease of approximately $5.7 million,
$7.0 million and $.03, respectively.
RESULTS OF OPERATIONS
We manufacture, market and sell beauty products includ-
ing those in the skin care, makeup, fragrance and hair care
categories which are distributed in over 150 countries
and territories. The following table is a comparative sum-
mary of operating results from continuing operations for
fiscal 2010, 2009 and 2008 and reflects the basis of pre-
sentation described in “Note 2 — Summary of Significant
Accounting Policies” and “Note 20 — Segment Data and
Related Information” of Notes to Consolidated Financial
Statements for all periods presented. Products and
services that do not meet our definition of skin care,
makeup, fragrance and hair care have been included in
the “other” category.
variability of cash flows to be received or paid related to a
recognized asset or liability (“foreign currency cash-flow”
hedge), or (iii) not designated as a hedging instrument.
Changes in the fair value of a derivative that is designated
and qualifies as a fair-value hedge that is highly effective
are recorded in current-period earnings, along with the
loss or gain on the hedged asset or liability that is attribut-
able to the hedged risk (including losses or gains on
unrecognized firm commitments). Changes in the fair
value of a derivative that is designated and qualifies as a
foreign currency cash-flow hedge of a foreign-currency-
denominated forecasted transaction that is highly effec-
tive are recorded in other comprehensive income (loss)
(“OCI”). Gains and losses deferred in OCI are then recog-
nized in current-period earnings when earnings are
affected by the variability of cash flows of the hedged
foreign-currency-denominated forecasted transaction
(e.g., when periodic settlements on a variable-rate asset or
liability are recorded in earnings). Changes in the fair
value of derivative instruments not designated as hedging
instruments are reported in current-period earnings.
For a discussion on the quantitative impact of market
risks related to our derivative financial instruments, see
“Management’s Discussion and Analysis of Financial Condi-
tion and Results of Operations — Liquidity and Capital
Resources — Market Risk.”
QUANTITATIVE ANALYSIS
During the three-year period ended June 30, 2010 there
have not been material changes in the assumptions under-
lying these critical accounting policies, nor to the related
significant estimates. The results of our business underly-
ing these assumptions have not differed significantly from
our expectations.
While we believe that the estimates that we have made
are proper and the related results of operations for the
period are presented fairly in all material respects, other
assumptions could reasonably be justified that would
change the amount of reported net sales, cost of sales,
operating expenses or our provision for income taxes as
they relate to the provisions for anticipated sales returns,
allowance for doubtful accounts, inventory obsolescence
reserve and income taxes. For fiscal 2010, had these esti-
mates been changed simultaneously by 2.5% in either
direction, our reported gross profit would have increased
or decreased by approximately $4.8 million, operating
expenses would have changed by approximately $0.9 mil-
lion and the provision for income taxes would have
increased or decreased by approximately $1.3 million.
The collective impact of these changes on operating
income, net earnings attributable to The Estée Lauder