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CAPTURING
OPPORTUNITY
THE EST{E LAUDER COMPANIES INC.
2014 ANNUAL REPORT

Table of contents

  • Page 1
    THE EST{E LAUDER COMPANIES INC. CAPTURING OPPORTUNITY 2014 ANNUAL REPORT

  • Page 2

  • Page 3
    ...Fragrance Pampering World Travelers Our Digital Success Our Many Levers of Growth Our Latest Innovations Our People Make It Happen Outlook Board of Directors Executive Officers Financial Section Management's Report on Internal Control Over Financial Reporting Report of Independent Registered Public...

  • Page 4
    2

  • Page 5
    ... 2014, we achieved another record-breaking year. With the valued partnership and strategic leadership of President and Chief Executive Officer Fabrizio Freda, our Executive Leadership Team, and the guidance and support of our Board of Directors, our Company executed its strategy with excellence...

  • Page 6
    ...share with others. To foster a teaching environment where innovation and creativity thrive, we are committed to providing educational and developmental opportunities to our employees worldwide - at all career levels - to help them deliver premium service to our consumers, gain skills that help drive...

  • Page 7
    ... later this year we will launch a new report and refreshed Corporate Responsibility website to share our goals and accomplishments. In all we do, our goal is to anticipate, meet and exceed our consumer's desires for exceptional prestige beauty products and High-Touch services - to provide her with...

  • Page 8
    6

  • Page 9
    ... saw a record year-end stock price and market capitalization of over $28 billion. *As a result of the Company's July 2014 implementation of its Strategic Modernization Initiative, approximately $178 million of accelerated orders were recorded as net sales, $127 million as operating income and $82...

  • Page 10
    ... and retailer sites. Our launch of nearly 50 new m-commerce sites enhanced our reach in emerging markets where mobile is the dominant platform for online shopping. Travel Retail continues to be one of our highest growth channels. Within Travel Retail, we are the global leader in skin care and makeup...

  • Page 11
    ..., Mexico and South Africa, also grew double-digits combined, with total sales exceeding the size of our China business in fiscal 2014. We also achieved strong sales growth in important established markets like Japan and Canada, fueled by locally relevant innovation and enhancements to in-store...

  • Page 12
    ... SKIN CARE MAKEUP $10.97 BILLION COUNTRIES & TERRITORIES 13% 4 3% 38% FRAGRANCE 39% 53% HAIR CARE OTHER Net Sales Operating Income GEOGRAPHIC REGIONS THE AMERICAS 19% 30% % 34 82 % 3 8% 42 % 51% MORE THAN 20% 20% 150 DISTRIBUTION CHANNELS International Department Stores 2 6% EUROPE, THE...

  • Page 13
    PORTFOLIO OF BRANDS 11

  • Page 14
    12

  • Page 15
    ... the world. By following our long-term strategy and allocating capital and human resources to higher-potential products, brands, channels and markets, we have gained share globally. In fiscal 2014, we achieved record sales of $10.97 billion, an increase of 8 percent over the prior year, outpacing...

  • Page 16

  • Page 17
    ..., products and distribution channels. Makeup and luxury fragrances were especially strong. Emerging markets, such as China and Brazil, also contributed, as did important heritage markets, like the United States and the United Kingdom. We had strong growth in e-commerce, m-commerce and Travel Retail...

  • Page 18

  • Page 19
    ... shadows. At the same time, M·A·C dramatically increased its reach and global awareness in fiscal 2014 by opening more than 200 new doors, including nearly 60 freestanding stores, particularly in international markets where M·A·C can fully express its edgy, makeup-artist brand DNA. This record...

  • Page 20
    ... opened nine new freestanding stores in Europe and continued to expand in emerging markets. The launch of Bobbi Brown Smokey Eye Mascara and the re-launch of the brand's iconic Skin Foundation Stick also drove sales across markets. Bobbi Brown launched its "I love makeup" YouTube channel, leveraging...

  • Page 21
    19

  • Page 22
    20

  • Page 23
    ... launches, thoughtful distribution strategies, productive retailer partnerships, and highly creative online and social initiatives. The performance of our luxury fragrances, in particular, was outstanding, and we achieved strong growth from new launches of designer fragrance lines by Michael Kors...

  • Page 24
    ... market where it launched. It was similarly lauded by the industry, earning several distinguished awards, including the Fragrance Foundation's Fragrance of the Year in the Women's Prestige category, Women's Wear Daily's Prestige Fragrance of the Year and Allure's Best New Fragrance. With Modern Muse...

  • Page 25
    23

  • Page 26

  • Page 27
    ... annually according to industry projections. As the global leader in prestige makeup and skin care in Travel Retail, we are expanding into new airports, increasing the number of brands and products we offer to travelers and converting more travelers into buyers. We are particularly focused on travel...

  • Page 28

  • Page 29
    ... States to other markets around the globe. In China, digital sales are reshaping the retail landscape, with our online beauty sales doubling this year. Clinique launched a ï¬,agship brand store on Tmall in China, a Chinese-language shopping platform, and attracted more than 100,000 new consumers to...

  • Page 30
    28

  • Page 31
    While online sales are expected to continue to grow, we believe m-commerce is the biggest game changer. In emerging markets like India, South Africa and Nigeria, smartphones have replaced personal computers as a priority for many consumers, and mobile sites and applications represent a key channel ...

  • Page 32
    30

  • Page 33
    ... markets, and our outstanding creativity, insights and innovation to appeal to local preferences. For example, understanding that consumers in India are focused on lip color, Bobbi Brown added a lip bar in stores that emphasizes the brand's This award-winning Michael Kors Collection campaign...

  • Page 34
    ...we are engaging them through products and channels, and in Latin American travel corridors. We also use insights to tap into the diverse demographics in United States markets like New York City. For example, our product and service offerings at three department stores located within 12 miles of each...

  • Page 35
    33

  • Page 36
    34

  • Page 37
    ... franchises with the latest cutting-edge technology, as we did with the introductions of Clinique's Dramatically Different Moisturizing Lotion+ and Estée Lauder's new Advanced Night Repair Synchronized Recovery Complex II. We are driving further growth by bringing our brands into large, existing...

  • Page 38
    36

  • Page 39
    ... our teams' digital and online skills and experience in emerging markets. We are focused on allocating our resources for long-term sustainability, building and developing our incredible talent pool to capture not only today's opportunities, but tomorrow's, as well. Bobbi Brown applying makeup to...

  • Page 40
    ... origins.com Origins Natural Resources Inc. 2014 New 1. æ·¡åŒ-é»'眼圈 蕴含独特é»'ç³-蜜及 乌æ¢...é...æ-¹ã€ 显è'-æ·¡ åŒ-ç"±æ-¥æ™'、 敏感、... å¢žåŠ çœ¼éƒ¨è,Œè,¤å¼¹æ€§ã€ å......盈眼部凹陷、 双 眼重现活力ã€, NEW for eyes 3. 抵御å¤-界刺激 高原刺梨蕴含丰 富维ä»-å'½C、 ...

  • Page 41
    ... investments in research and development and technology to bring the most creative and innovative products, services and experiences to our global consumers. As always, skin care and makeup will be priorities, and we are focused on expanding profitably in fragrance and hair care. We see a number of...

  • Page 42
    ..., CBE Retail and Marketing Consultant JANE LAUDER Global Brand President, Clinique PAUL J. FRIBOURG Chairman, Chief Executive Officer, Continental Grain Company FABRIZIO FREDA President and Chief Executive Officer, The Estée Lauder Companies Inc. BARRY S. STERNLICHT Chairman, Chief Executive Of...

  • Page 43
    ... LAUDER Executive Chairman, The Estée Lauder Companies Inc. LYNN FORESTER DE ROTHSCHILD Chief Executive Officer, E.L. Rothschild LLC WEI SUN CHRISTIANSON Managing Director and Co-CEO of Asia Pacific and CEO of China, Morgan Stanley LEONARD A. LAUDER Chairman Emeritus, The Estée Lauder Companies...

  • Page 44
    ..., Global Research and Development, Corporate Product Innovation, Package Development LEONARD A. LAUDER Chairman Emeritus RONALD S. LAUDER Chairman, Clinique Laboratories, LLC WILLIAM P. LAUDER Executive Chairman SARA E. MOSS Executive Vice President and General Counsel MICHAEL O'HARE Executive Vice...

  • Page 45
    FINANCIAL SECTION THE EST{E LAUDER COMPANIES INC. 43

  • Page 46
    ... Financial Statements Management's Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Stockholder Information 112 113 44 THE EST{E LAUDER...

  • Page 47
    ... and the notes thereto beginning on page 70 of this report. YEAR ENDED OR AT JUNE 30 (In millions, except per share data) 2014(a) 2013(a) 2012(a) 2011(a) 2010(a) STATEMENT OF EARNINGS DATA: Net sales (b) Gross profit Operating income (b) (c) Interest expense, net Interest expense on debt...

  • Page 48
    ... the customer's receipt. In certain circumstances, transfer of title takes place at the point of sale, for example, at our retail stores. Revenues are reported on a net sales basis, which is computed by deducting from gross sales the amount of actual product returns received, discounts, incentive...

  • Page 49
    ..., an increase or decrease in the assumptions or economic events outside our control could have a direct impact on reported net earnings. The discount rate for each plan used for determining future net periodic benefit cost is based on a review of highly rated long-term bonds. For fiscal 2014, we...

  • Page 50
    ...on internal forecasts, terminal value, the weighted-average cost of capital used to discount future cash ï¬,ows and comparable market multiples. The fiscal 2014 compound annual growth rate of sales for the first eight years of our projections, as considered appropriate for the individual reporting...

  • Page 51
    ... product growth. The weighted-average cost of capital used to discount future cash ï¬,ows ranged from 9% to 17% in fiscal 2014 as compared with 8% to 15% in fiscal 2013. The range of market multiples used in our fiscal 2014 impairment testing was from 1.2 to 3.5 times trailing-twelvemonth sales...

  • Page 52
    ... 2 - Summary of Significant Accounting Policies and Note 19 - 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...

  • Page 53
    ...) 2014 2013 2012 NET SALES By Region: The Americas Europe, the Middle East & Africa Asia/Pacific Returns associated with restructuring activities Net Sales By Product Category: Skin Care Makeup Fragrance Hair Care Other Returns associated with restructuring activities Net Sales OPERATING INCOME...

  • Page 54
    ... to be a strategic priority for our innovation and investment spending, particularly in the Asia/Pacific region and with product launches such as Advanced Night Repair Synchronized Recovery Complex II from Estée Lauder and Dramatically Different Moisturizing Lotion + from Clinique. We are also...

  • Page 55
    ... are digital capabilities, research and development, product innovation, consumer insight, information technology improvements and operational excellence. We rolled out the last major wave of SMI in July 2014 in certain of our remaining locations. As a result, some THE EST{E LAUDER COMPANIES INC...

  • Page 56
    ... the possibility of foreign exchange in a theoretically open market without restricted uses and in our opinion is the only mechanism legally available at this time for our highest priority transactions, which are the import of goods. We have submitted applications to access U.S. dollars through...

  • Page 57
    ...million. Skin Care Net sales of skin care products increased 7%, or $304.5 million, to $4,769.8 million. The recent launches of Advanced Night Repair Synchronized Recovery Complex II and Micro Essence Skin Activating Treatment Lotion from Estée Lauder, and Dramatically Different Moisturizing Lotion...

  • Page 58
    ... have increased 7%. Fragrance Net sales of fragrance products increased 9%, or $114.2 million, to $1,425.0 million, primarily reï¬,ecting the recent launches of Estée Lauder Modern Muse, the Michael Kors Collection, Jo Malone Peony & Blush Suede and Tory Burch, as well as higher sales of Tom Ford...

  • Page 59
    ... net sales increased 9%. Adjusting for the impact of the accelerated orders, reported net sales in Asia/Pacific would have increased 4%. We strategically stagger our new product launches by geographic market, which may account for differences in regional sales growth. COST OF SALES Cost of sales as...

  • Page 60
    ... product launches from Estée Lauder and Clinique and higher sales of luxury skin care products. Makeup operating income increased 23%, or $135.5 million, to $715.9 million, primarily reflecting improved results from our makeup artist brands and certain of our heritage brands, attributable to growth...

  • Page 61
    ... Returns (adjustments) associated with restructuring activities Net Sales, as adjusted $10,968.8 (178.3) (0.1) $10,790.4 Year Ended June 30 2014 ($ in millions) 2013 $1,526.0 - - 17.8 $1,543.8 Variance $ 301.6 (127.2) 38.3 (20.7) $ 192.0 % Change 20% Operating Income, as reported Accelerated...

  • Page 62
    ...business. Product Categories Skin Care Net sales of skin care products increased 6%, or $240.1 million, to $4,465.3 million. The fiscal 2013 launches of Perfectionist CP+R, Advanced Time Zone, Advanced Night Repair Eye Serum Infusion and the Optimizer line of products from Estée Lauder contributed...

  • Page 63
    ...sales in Europe, the Middle East & Africa increased 6%. Net sales in Asia/Pacific increased 5%, or $110.2 million, to $2,121.6 million, primarily reï¬,ecting growth in our sales of skin care products, in line with our strategy. We increased sales by approximately $160 million in China and Hong Kong...

  • Page 64
    ... activities of $17.8 million, or 0.2% of net sales, in fiscal 2013 and $63.2 million, or 0.7% of net sales, in fiscal 2012. We believe the following analysis of operating results better reï¬,ects the manner in which we conduct and view our business. Product Categories Skin care operating income...

  • Page 65
    ... Lauder Companies Inc. as compared with fiscal 2012 increased 19%, or $162.9 million, to $1,019.8 million and diluted net earnings per common share increased 20% from $2.16 to $2.58. The results in fiscal 2013 include the impact of total returns and charges associated with restructuring activities...

  • Page 66
    ... by operating activities increased in fiscal 2013 as compared with fiscal 2012 primarily driven by an increase in net earnings, a decrease in pension and post-retirement benefit contributions and a favorable change in accounts receivable due to the timing of shipments and collections. These...

  • Page 67
    ... million in fiscal 2014, 2013 and 2012, respectively. The increase in cash ï¬,ows used for investing activities as compared with fiscal 2013 primarily reï¬,ected higher capital expenditure activity in the current year related to leasehold improvements and counters. The increase in cash flows used...

  • Page 68
    ... pursuant to executive compensation arrangements, obligations related to our cost savings initiatives and acquisitions. Future earn-out payments and future royalty and advertising commitments were estimated based on planned future sales for the term that was in effect at June 30, 2014, without...

  • Page 69
    ... transaction will no longer occur, then any gains or losses in accumulated other comprehensive income (loss) are THE EST{E LAUDER COMPANIES INC. reclassified to current-period earnings. As of June 30, 2014, these foreign currency cash-ï¬,ow hedges were highly effective in all material respects. At...

  • Page 70
    ...: (1) increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses, some of which have greater resources than we do; (2) our ability to develop, produce and market new products on which future operating results may depend and to successfully address...

  • Page 71
    ...to increase or maintain the number of retail locations at which we sell our products and the costs associated with our other facilities; (13) changes in product mix to products which are less profitable; (14) our ability to acquire, develop or implement new information and distribution technologies...

  • Page 72
    ... Net Earnings Attributable to The Estée Lauder Companies Inc. Net earnings attributable to The Estée Lauder Companies Inc. per common share Basic Diluted Weighted-average common shares outstanding Basic Diluted Cash dividends declared per common share $ $ 3.12 3.06 386.2 393.1 $ $ 2.63 2.58...

  • Page 73
    ...TAT E M E N T S O F CO M PR E H E N S IV E INCOME (LOS S ) YEAR ENDED JUNE 30 (In millions) 2014 $1,209.1 0.9 (29.7) (13.0) 87.2 12.5 57.9 1,267.0 (5.0) (0.7) (5.7) $1,261.3 2013 $1,023.8 0.4 1.2 125.9 (20.1) (51.1) 56.3 1,080.1 (4.0) (0.9) (4.9) $1,075.2 2012 $ 860.5 0.1 28.2 (155.9) (151.6) 46...

  • Page 74
    ...082 at June 30, 2013 Paid-in capital Retained earnings Accumulated other comprehensive income (loss) Less: Treasury stock, at cost; 178,434,483 Class A shares at June 30, 2014 and 168,972,698 Class A shares at June 30, 2013 Total stockholders' equity - The Estée Lauder Companies Inc. Noncontrolling...

  • Page 75
    ...based compensation Purchase of noncontrolling interest Paid-in capital, end of year Retained earnings, beginning of year Common stock dividends Stock-based compensation Net earnings attributable to The Estée Lauder Companies Inc. Retained earnings, end of year Accumulated other comprehensive income...

  • Page 76
    ... YEAR ENDED JUNE 30 (In millions) 2014 2013 2012 Cash Flows from Operating Activities Net earnings Adjustments to reconcile net earnings to net cash ï¬,ows from operating activities: Depreciation and amortization Deferred income taxes Non-cash stock-based compensation Excess tax benefits from...

  • Page 77
    ...The Estée Lauder Companies Inc. manufactures, markets and sells skin care, makeup, fragrance and hair care products around the world. Products are marketed under various brand names including: Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, M.A.C, Bobbi Brown, La Mer, Aveda, Jo...

  • Page 78
    ... that extend an asset's useful life or productive capabilities, are carried at cost less accumulated depreciation and amortization. Costs incurred for computer software developed or obtained for internal use are capitalized during the application development stage and expensed as incurred during the...

  • Page 79
    ... is determined by discounting future cash ï¬,ows. Concentration of Credit Risk The Company is a worldwide manufacturer, marketer and distributor of skin care, makeup, fragrance and hair care products. Domestic and international sales are made primarily to department stores, perfumeries, specialty...

  • Page 80
    ...million and $2,614.5 million in fiscal 2014, 2013 and 2012, respectively, and are expensed as incurred. Excluding the impact of purchase with purchase and gift with purchase promotions, costs for advertising, merchandising, sampling, promotion and product development included in Selling, general and...

  • Page 81
    ... activities. Royalty expenses are accrued in the period in which net sales are recognized while advertising and promotional expenses are accrued at the time these costs are incurred. Stock-Based Compensation The Company records stock-based compensation, measured at the fair value of the awards...

  • Page 82
    ... services to customers in an amount that reï¬,ects the consideration to which the entity expects to be entitled in exchange for those goods or services. It provides companies with a single comprehensive five-step principles-based model to use in accounting for revenue and supersedes current revenue...

  • Page 83
    ... AND PROMOTIONAL MERCHANDISE JUNE 30 (In millions) 2014 2013 Inventory and promotional merchandise, net consists of: Raw materials Work in process Finished goods Promotional merchandise $ 317.5 192.4 599.5 184.6 $1,294.0 $ 274.2 116.8 510.9 212.0 $1,113.9 THE EST{E LAUDER COMPANIES INC...

  • Page 84
    ... of a reporting unit to the product category in which that reporting unit predominantly operates at the time of acquisition. The following table presents goodwill by product category and the related change in the carrying amount: Skin Care (In millions) Makeup Fragrance Hair Care Total Balance...

  • Page 85
    ... were reï¬,ected in the skin care product category and in the Europe, the Middle East & Africa region. NOTE 6 - RETURNS AND CHARGES ASSOCIATED WITH RESTRUCTURING ACTIVITIES During the second quarter of fiscal 2013, the Company closed its multi-faceted cost savings program implemented in February...

  • Page 86
    ...the Program were primarily related to consulting and other professional services. NOTE 7 - INCOME TAXES The provision for income taxes is comprised of the following: YEAR ENDED JUNE 30 (In millions) 2014 2013 2012 Current: Federal Foreign State and local Deferred: Federal Foreign State and local...

  • Page 87
    ... including tax settlements and lapses of the applicable statutes of limitations. Federal income and foreign withholding taxes have not been provided on approximately $2,403 million of undistributed earnings of foreign subsidiaries at June 30, 2014. The Company intends to reinvest these earnings...

  • Page 88
    ... 2011, awaited the court's decision. During the first quarter of fiscal 2012, the National Appellate Court notified the Company that the appeal was denied. The Company had been assessed corporate income tax and interest of $3.8 million, net of tax, at current exchange rates. 86 THE EST{E LAUDER...

  • Page 89
    ... China France Germany Hong Kong Japan Korea Russia Spain Switzerland United Kingdom United States State of California State of New York Open Fiscal Years 2010-2014 2007-2014 2010-2014 2012-2014 2004-2014 2008-2014 2012-2014 2014 2013-2014 2012-2014 2011-2014 2013-2014 2013-2014 2009-2014 2013-2014...

  • Page 90
    ...was classified as an asset, had a fair value of $47.4 million at the date of cash settlement. Hedge accounting treatment was discontinued prospectively and the fair value adjustment to the carrying amount of the related debt is being amortized against interest expense over the remaining life of the...

  • Page 91
    ...Commitments and Contingencies for the Company's projected debt service payments, as of June 30, 2014, over the next five fiscal years. NOTE 10 - DERIVATIVE FINANCIAL INSTRUMENTS The Company addresses certain financial exposures through a controlled program of risk management that includes the use...

  • Page 92
    ... portion of the hedging relationships was $0.5 million and $0.2 million for fiscal 2014 and 2013, respectively. The amounts of the gains and losses related to the Company's derivative financial instruments not designated as hedging instruments are presented as follows: Location of Gain or (Loss...

  • Page 93
    ...dollar ($111.3 million), Japanese yen ($108.0 million) and Hong Kong dollar ($103.0 million). At June 30, 2013, the Company had foreign currency forward contracts in the amount of $1,579.6 million. The THE EST{E LAUDER COMPANIES INC. foreign currencies included in foreign currency forward contracts...

  • Page 94
    ... assets, net (trademark) Total $ 9.6 8.1 $17.7 To determine the fair value of the Darphin reporting unit at April 1, 2013, the Company used the income approach. Under the income approach, the Company determines fair value using a discounted cash ï¬,ow method, projecting future cash ï¬,ows of the...

  • Page 95
    ... benefits based primarily on years of service and employees' earnings. In certain instances, the Company adjusts benefits in connection with international employee transfers. Retirement Growth Account Plan (U.S.) The Retirement Growth Account Plan is a trust-based, noncontributory qualified de...

  • Page 96
    ... (In millions) Other than Pension Plans International Post-retirement 2014 2013 2013 2014 2013 Change in benefit obligation: Benefit obligation at beginning of year Service cost Interest cost Plan participant contributions Actuarial loss (gain) Foreign currency exchange rate impact Benefits...

  • Page 97
    ... Plans International Post-retirement 2012 2014 2013 2012 2013 2012 2014 2013 Components of net periodic benefit cost: Service cost, net Interest cost Expected return on assets Amortization of: Actuarial loss (gain) Prior service cost Transition (asset) obligation Settlements Curtailments...

  • Page 98
    ... and fair value of plan assets for the Company's pension plans at June 30 are as follows: Pension Plans Retirement Growth Account 2014 (In millions) Restoration 2014 $111.7 $ 97.0 $ - 2013 $110.3 $ 86.1 $ - International 2014 $598.7 $531.4 $513.7 2013 $508.6 $445.5 $438.6 2013 $565.7 $505.4 $659...

  • Page 99
    ...ows for the Company's pension and post-retirement plans are as follows: Pension Plans U.S. (In millions) Other than Pension Plans International Post-retirement Expected employer contributions for year ending June 30, 2015 Expected benefit payments for year ending June 30, 2015 2016 2017 2018 2019...

  • Page 100
    ... of June 30, 2013 Actual return on plan assets: Relating to assets still held at the reporting date Relating to assets sold during the year Transfers in (out) Purchases, sales, issuances and settlements, net Foreign exchange impact Balance as of June 30, 2014 $36.6 (1.4) (0.3) - (4.4) 4.0 $34.5 98...

  • Page 101
    ...U.S. employees who have completed the hours and service requirements, as defined by the plan document. Regular full-time employees are eligible to participate in the Savings Plan thirty days following their date of hire. The Savings Plan is subject to the applicable provisions of ERISA. The Company...

  • Page 102
    ... of the appeal. Such amount is less than the Paris Commercial Court's award. Other Income During the fiscal 2013 second quarter, the Company amended the agreement related to the August 2007 sale of Rodan + Fields (a brand then owned by the Company) to receive a fixed amount in lieu of future...

  • Page 103
    ... As of June 30, 2014, the Company has two active equity compensation plans which include the Amended and Restated Fiscal 2002 Share Incentive Plan (the "Fiscal 2002 Plan") and the Non-Employee Director Share Incentive Plan (collectively, the "Plans"). These Plans currently provide for the issuance...

  • Page 104
    ... 259,700 PSUs that vested as of June 30, 2014. In September 2013, approximately 548,800 shares of the Company's Class A Common Stock were issued and related accrued dividends were paid, relative to the target goals set at the time of issuance, in settlement of 365,900 PSUs which vested as of June 30...

  • Page 105
    ..., and related dividends to be paid, based upon the average closing stock price per share of the Company's Class A Common Stock on the New York Stock Exchange during the last 20 trading days ending on June 30, 2014. Share Units The Company grants share units to certain non-employee directors under...

  • Page 106
    ... dilution from stock-based awards. A reconciliation between the numerators and denominators of the basic and diluted EPS computations is as follows: YEAR ENDED JUNE 30 (In millions, except per share data) 2014 2013 2012 Numerator: Net earnings attributable to The Estée Lauder Companies Inc...

  • Page 107
    ... (3) For the year ended June 30, 2014, $2.6 million was recorded in Provision for income taxes in the accompanying consolidated statement of earnings. (4) See Note 12 - Pension, Deferred Compensation and Post-Retirement Benefit Plans for additional information. THE EST{E LAUDER COMPANIES INC. 105

  • Page 108
    ... Executive reviews data segmented on a basis that facilitates comparison to industry statistics. Accordingly, net sales, depreciation and amortization, and operating income are available with respect to the manufacture and distribution of skin care, makeup, fragrance, hair care and other products...

  • Page 109
    YEAR ENDED JUNE 30 (In millions) 2014 2013 2012 PRODUCT CATEGORY DATA Net Sales: Skin Care Makeup Fragrance Hair Care Other Returns associated with restructuring activities $ 4,769.8 4,210.2 1,425.0 515.6 48.1 10,968.7 0.1 $10,968.8 $ 4,465.3 3,876.9 1,310.8 488.9 41.3 10,183.2 (1.5) $10,181.7...

  • Page 110
    ... segment based on the location of the customer. The net sales from the Company's travel retail business are included in the Europe, the Middle East & Africa region. The Company is domiciled in the United States. Net sales in the United States in fiscal 2014, 2013 and 2012 were $3,999.5 million...

  • Page 111
    ... results of the Company for fiscal 2014 and 2013: Quarter Ended September 30 (In millions, except per share data) (1) December 31(2) March 31(3) June 30(4) Total Year Fiscal 2014 Net Sales (5) Gross Profit Operating Income (5) Net Earnings Attributable to The Estée Lauder Companies Inc. Net...

  • Page 112
    ... the heading "Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting." Fabrizio Freda President and Chief Executive Officer August 20, 2014 Tracey T. Travis Executive Vice President and Chief Financial Officer 110 THE EST{E LAUDER COMPANIES INC.

  • Page 113
    ... for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reï¬,ect the transactions...

  • Page 114
    ... Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated August 20, 2014 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. New York, New York August 20, 2014 112 THE EST{E LAUDER COMPANIES INC.

  • Page 115
    ...Securities and Exchange Commission website at www.sec.gov. Common Stock Information The Class A Common Stock of The Estée Lauder Companies Inc. is listed on the New York Stock Exchange with the symbol EL. Quarterly Per Share Market Prices and Cash Dividends on Common Stock Fiscal 2014 Quarter Ended...

  • Page 116
    ... the cumulative five-year total stockholder return (stock price appreciation plus dividends) on the Company's Class A Common Stock with the cumulative total return of the S&P 500 Index and a market weighted index of a publicly traded peer group. The returns are calculated by assuming an investment...

  • Page 117
    ...Night Repair, Advanced Time Zone, Aramis, Aveda, Bb., Bb. Prêt-á-Powder, Be Curly Curl Controller, Bobbi Brown, Bumble and bumble, Cheek Pop, Chubby Stick, Clinique, Crème Soyeuse De La Mer, Darphin, Dramatically Different Moisturizing Lotion+, Dry Remedy, Doublewear, Estée Lauder, Estée Lauder...

  • Page 118
    THE EST{E L AUDER COMPANIES INC. 767 Fifth Avenue, New York, New York 10153