Estee Lauder 2013 Annual Report Download - page 154

made changes to turn around others. This included
the exit from the global wholesale distribution of its
Prescriptives brand, the reformulation of Ojon brand
products and the exit from the global distribution of
Sean John products. In connection with these activities,
the Company incurred charges for product returns,
inventory write-offs, reduction of workforce and termina-
tion of contracts. As of June 30, 2013, the Company
identified approximately $21 million of previously-
approved returns and other costs related to these activi-
ties that will not be incurred, primarily as a result of
better-than-expected sales of products prior to the exit
of the operations, as well as lower employee-related and
store closure costs than originally estimated.
€ Outsourcing— In order to balance the growing need
for information technology support with the Company’s
efforts to provide the most efficient and cost effective
solutions, it continued the outsourcing of certain infor-
mation technology processes. The Company incurred
costs to transition services to outsource providers and
employee-related termination costs. As of June 30, 2013,
the Company identified approximately $26 million of
previously-approved outsourcing initiatives for informa-
tion technology services stemming from the decision
not to implement certain aspects of these initiatives,
as well as lower costs than originally anticipated to
transition services on initiatives that were implemented.
152 THE EST{E LAUDER COMPANIES INC.
The Program focused on a redesign of the Company’s
organizational structure in order to integrate it in a more
cohesive way and operate more globally across brands
and functions. The principal aspect of the Program was
the reduction of the workforce by approximately 2,000
employees. Specific actions taken since the Program
inception included:
€ Resize and Reorganize the Organization— The Company
continued the realignment and optimization of its
organization to better leverage scale, improve produc-
tivity, reduce complexity and achieve cost savings in
each region and across various functions. This included
reduction of the workforce which occurred through the
consolidation of certain functions, which it achieved
through a combination of normal attrition and job elimi-
nations, and the closure and consolidation of certain
distribution and office facilities. As of June 30, 2013, the
Company identified approximately $14 million of previ-
ously-approved restructuring costs that will not be
incurred related to these activities, primarily as a result of
certain employees relocating to other available positions
within the Company.
€ T urnaround or Exit Unprofitable Operations—To improve
the profitability in certain of the Company’s brands and
regions, the Company has selectively exited certain
channels of distribution, categories and markets, and has
The following is a reconciliation of cumulative approved charges under the Program as compared with the revised
estimated charges related to initiatives under the Program and total cumulative charges incurred through June 30, 2013:
Restructuring Charges
Total
Contract Restructuring
Employee- Terminations Charges and
Related Asset and Other Total Inventory Other Other Costs
(In millions) Costs Write-offs Exit Costs Restructuring Returns Write-offs Charges
to Implement
Approved charges from
inception through
December 31, 2012 $205.5 $23.5 $43.5 $272.5 $43.0 $20.0 $50.0 $385.5
Adjustments of estimated
costs over (under) (35.0) (2.0) (4.0) (41.0) (11.0) 4.0 (13.0) (61.0)
Revised estimated charges
as of June 30, 2013 $170.5 $21.5 $39.5 $231.5 $32.0 $24.0 $37.0 $324.5
Cumulative charges
incurred through
June 30, 2013 $169.6 $21.4 $37.4 $228.4 $32.0 $23.2 $36.8 $320.4