Estee Lauder 2014 Annual Report Download - page 61

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THE EST{E LAUDER COMPANIES INC. 59
NET EARNINGS ATTRIBUTABLE TO
THE EST{E LAUDER COMPANIES INC.
Net earnings attributable to The Estée Lauder Companies
Inc. as compared with the prior year increased 18%, or
$184.3 million, to $1,204.1 million and diluted net earnings
per common share increased 19% from $2.58 to $3.06.
NON-GAAP FINANCIAL MEASURES
We use certain non-GAAP financial measures, among
other financial measures, to evaluate our operating per-
formance, which represent the manner in which we con-
duct and view our business. Management believes that
excluding these items that are not comparable from
period to period helps investors and others compare
operating performance between two periods. While we
consider the non-GAAP measures useful in analyzing our
results, they are not intended to replace, or act as a substi-
tute for, any presentation included in the consolidated
financial statements prepared in conformity with U.S.
GAAP. The following tables present Net Sales, Operating
Income and Diluted net earnings per common share
adjusted to exclude the impact of accelerated orders
associated with the July 2014 SMI rollout, the Venezuela
fiscal 2014 remeasurement charge, returns and charges
(adjustments) associated with restructuring activities and
the fiscal 2013 interest expense on debt extinguishment.
The tables provide reconciliations between these non-
GAAP financial measures and the most directly compara-
ble U.S. GAAP measures.
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-re-
curring factors including, but not limited to, the geograph-
ical mix of earnings, enacted tax legislation, state and
local income taxes, tax reserve adjustments, the ultimate
disposition of deferred tax assets relating to stock-based
compensation and the interaction of various global tax
strategies. In addition, changes in judgment from the eval-
uation of new information resulting in the recognition,
derecognition or remeasurement of a tax position taken
in a prior annual period are recognized separately in the
period of change.
The effective rate for income taxes was 32.0% and
30.6% for fiscal 2014 and 2013, respectively. The increase
in the rate of 140 basis points was principally attributable
to a higher effective tax rate related to the Company’s for-
eign operations, which included the impact of the Vene-
zuela remeasurement charge for which no tax benefit has
been provided, as well as slightly higher favorable income
tax reserve adjustments recorded in the prior year.
Year Ended June 30 % Change
in Constant
2014 2013 Variance % Change Currency
($ in millions)
Net Sales, as reported $10,968.8 $10,181.7 $ 787.1 8% 8%
Accelerated orders associated with SMI rollout (178.3) — (178.3)
Returns (adjustments) associated with
restructuring activities (0.1) 1.5 (1.6)
Net Sales, as adjusted $10,790.4 $10,183.2 $ 607.2 6% 7%
20142014
$10,968.8$10,968.8
(178.3)(178.3)
(0.1)(0.1)
$10,790.4$10,790.4
Year Ended June 30
2014 2013 Variance % Change
($ in millions)
Operating Income, as reported $1,827.6 $1,526.0 $ 301.6 20%
Accelerated orders associated with SMI rollout (127.2) — (127.2)
Venezuela fiscal 2014 remeasurement charge 38.3 — 38.3
Total charges (adjustments) associated with
restructuring activities (2.9) 17.8 (20.7)
Operating Income, as adjusted $1,735.8 $1,543.8 $ 192.0 12%
20142014
$1,827.6$1,827.6
(127.2)(127.2)
38.338.3
(2.9)(2.9)
$1,735.8$1,735.8