Item 2.05 Costs Associated with Exit or Disposal Activities.
On May 3, 2016, The Estée Lauder Companies Inc. (the Company) filed a Current Report on Form 8-K (the May 3, 2016 Form 8-K) regarding a multi-year initiative (Leading Beauty Forward). At that time, the Company disclosed that (i) Leading Beauty Forward is expected to include a number of initiatives, (ii) restructuring and other charges to implement those initiatives through fiscal 2021 are expected to total between $600 million and $700 million (before tax) and (iii) the Company was unable to determine the estimated amount or range of amounts to be incurred by major cost type or the future cash expenditures pursuant to Leading Beauty Forward. The Company has since disclosed information about specific initiatives approved under Leading Beauty Forward, including in the Companys Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 filed on November 1, 2017, which provided information about specific initiatives approved cumulatively through September 30, 2017. The Company is filing this Form 8-K/A to provide details about specific initiatives approved since September 30, 2017.
Between October 1, 2017 and November 20, 2017, the Company approved certain initiatives under Leading Beauty Forward to optimize both select corporate functions and corporate and region market support structures. These actions will result in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities. In addition, the Company approved consulting, other professional services and temporary labor backfill related to the implementation and integration of new processes and technologies and, to a lesser extent, costs for training and recruitment related to new capabilities. The Company also continued to approve consulting fees and implementation costs for an initiative related to supply chain planning activities.
Once the relevant accounting criteria have been met, the Company expects to record restructuring and other charges of approximately $78 million (before tax) in connection with these initiatives, which are expected to result in future cash expenditures.
Of the $600 million to $700 million restructuring and other charges expected to be incurred in connection with Leading Beauty Forward, total cumulative charges approved by the Company through November 20, 2017, some of which were recorded during fiscal 2018, 2017 and 2016, were:
|
|
Sales
Returns
|
|
|
|
Operating Expenses
|
|
|
|
(In millions)
|
|
(included in
Net Sales)
|
|
Cost of Sales
|
|
Restructuring
Charges
|
|
Other
Charges
|
|
Total
|
|
Approval Period
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016
|
|
$
|
4
|
|
$
|
28
|
|
$
|
87
|
|
$
|
71
|
|
$
|
190
|
|
Fiscal 2017
|
|
11
|
|
10
|
|
132
|
|
118
|
|
271
|
|
Three months ended September 30, 2017
|
|
|
|
|
|
28
|
|
9
|
|
37
|
|
October 1, 2017 November 20, 2017
|
|
|
|
4
|
|
47
|
|
27
|
|
78
|
|
Cumulative through November 20, 2017
|
|
$
|
15
|
|
$
|
42
|
|
$
|
294
|
|
$
|
225
|
|
$
|
576
|
|
Included in the above table, cumulative restructuring initiatives approved by the Company through November 20, 2017 by major cost type were:
(In millions)
|
|
Employee-
Related
Costs
|
|
Asset-
Related
Costs
|
|
Contract
Terminations
|
|
Other Exit
Costs
|
|
Total
|
|
Approval Period
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016
|
|
$
|
75
|
|
$
|
3
|
|
$
|
5
|
|
$
|
4
|
|
$
|
87
|
|
Fiscal 2017
|
|
126
|
|
1
|
|
|
|
5
|
|
132
|
|
Three months ended September 30, 2017
|
|
28
|
|
|
|
|
|
|
|
28
|
|
October 1, 2017 November 20, 2017
|
|
46
|
|
|
|
|
|
1
|
|
47
|
|
Cumulative through November 20, 2017
|
|
$
|
275
|
|
$
|
4
|
|
$
|
5
|
|
$
|
10
|
|
$
|
294
|
|
2
The Company will continue to file additional disclosures in connection with initiatives associated with Leading Beauty Forward that individually or collectively are determined to be significant. Such disclosures would be filed after the Company is able to make good faith determinations of the estimated amount or range of amounts by each major type of cost and future cash expenditures relating to such initiatives.
The forward-looking statements contained herein, including those relating to our expectations regarding charges, involve risks and uncertainties. Factors that could cause actual results to differ materially from those forward-looking statements include current economic and other conditions in the global marketplace, actions by retailers and consumers, competition, the Companys ability to successfully implement its long-term strategic plan and those factors described in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2017.
3