Estee Lauder 2013 Annual Report Download - page 132

130 THE EST{E LAUDER COMPANIES INC.
returns and charges associated with restructuring activi-
ties of $44.1 million, after tax, or $.11 per diluted common
share. The results in fiscal 2011 include the impact of total
returns and charges associated with restructuring
activities of $41.7 million, after tax, or $.10 per diluted
common share.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal sources of funds historically have been cash
flows from operations, borrowings pursuant to our com-
mercial paper program, borrowings from the issuance of
long-term debt and committed and uncommitted credit
lines provided by banks and other lenders in the United
States and abroad. At June 30, 2013, we had cash and
cash equivalents of $1,495.7 million compared with
$1,347.7 million at June 30, 2012. Our cash and cash
equivalents are maintained at a number of financial insti-
tutions. As of June 30, 2013, less than 1% of the total bal-
ance was insured by governmental agencies, reflecting
the expiration of temporary unlimited deposit insurance
provided in the United States. To mitigate the risk of unin-
sured balances, we select financial institutions based on
their credit ratings and financial strength and perform
ongoing evaluations of these institutions to limit our
concentration risk exposure.
Our business is seasonal in nature and, accordingly,
our working capital needs vary. From time to time, we
may enter into investing and financing transactions that
require additional funding. To the extent that these needs
exceed cash from operations, we could, subject to market
conditions, issue commercial paper, issue long-term debt
securities or borrow under our revolving credit facilities.
Based on past performance and current expectations,
we believe that cash on hand, cash generated from opera-
tions, available credit lines and access to credit markets
will be adequate to support currently planned business
operations, information systems enhancements, capital
expenditures, potential stock repurchases, commitments
and other contractual obligations on both a near-term and
long-term basis. Our cash and cash equivalents balance at
June 30, 2013 includes approximately $871 million of
cash in offshore jurisdictions associated with our perma-
nent reinvestment strategy. We do not believe that the
indefinite reinvestment of these funds offshore impairs
our ability to meet our domestic debt or working capital
obligations. If these indefinitely reinvested earnings were
repatriated into the United States as dividends, we would
be subject to additional taxes.
totaled approximately $109 million, combined. Partially
offsetting these improvements were lower results in Rus-
sia and France of approximately $28 million, combined.
The lower results in Russia primarily reflected strategic
investment spending to support this emerging market,
coupled with a decrease in sales as a result of destocking
associated with ongoing challenges with a certain cus-
tomer. The lower results in France primarily reflected stra-
tegic investment spending.
In Asia/Pacific, operating income increased 35%, or
$88.2 million, to $340.2 million. Most countries in the
region reported higher operating results, led by approxi-
mately $70 million in Hong Kong, China, Japan and
Korea, combined.
INTEREST EXPENSE, NET
Net interest expense was $61.1 million as compared with
$63.9 million in fiscal 2011. Interest expense decreased
due to the replacement of our 6.00% Senior Notes in
January 2012 with commercial paper.
PROVISION FOR INCOME TAXES
The provision for income taxes represents U.S. federal,
foreign, state and local income taxes. The effective rate
differs from the federal statutory rate primarily due to the
effect of state and local income taxes, the taxation of for-
eign income and income tax reserve adjustments, which
represent changes in our net liability for unrecognized tax
benefits including tax settlements and lapses of the appli-
cable statutes of limitations. Our effective tax rate will
change from year to year based on recurring and non-
recurring factors including, but not limited to, the geo-
graphical mix of earnings, enacted tax legislation, state
and local income taxes, tax reserve adjustments, the ulti-
mate disposition of deferred tax assets relating to stock-
based compensation and the interaction of various global
tax strategies.
The effective income tax rate for fiscal 2012 was 31.8%
as compared with 31.4% in fiscal 2011. The increase in the
effective income tax rate of 40 basis points was principally
due to a decrease in favorable tax reserve adjustments as
compared with fiscal 2011 partially offset by a lower
effective tax rate related to our foreign operations.
NET EARNINGS ATTRIBUTABLE TO
THE EST{E LAUDER COMPANIES INC.
Net earnings attributable to The Estée Lauder Companies
Inc. as compared with fiscal 2011 increased 22%, or
$156.1 million, to $856.9 million and diluted net earnings
per common share increased 24% from $1.74 to $2.16.
The results in fiscal 2012 include the impact of total