- Strong Broad-Based Topline Growth Drives
Double-Digit EPS Increase -
- Underlying Sales and Earnings Outlook
Remains Strong -
- Company Increases Long-Term Operating
Margin Goal -
The Estée Lauder Companies Inc. (NYSE:EL) today reported a
strong financial performance for its fourth quarter and fiscal year
ended June 30, 2014. For the year, the Company achieved record net
sales of $10.97 billion, an 8% increase compared with $10.18
billion in the prior year. Excluding the impact of foreign currency
translation, net sales also increased 8%. The Company reported a
170 basis-point increase in operating margin, and net earnings for
the year rose 18% to $1.20 billion, compared with $1.02 billion
last year. Diluted net earnings per common share rose 19% to $3.06,
compared with $2.58 reported in the prior year.
Fabrizio Freda, President and Chief Executive Officer, said,
“Fiscal 2014 was another outstanding year for our Company. We
achieved record results across many metrics, including sales,
operating margin, earnings per share and operating cash flow. Our
topline growth was nearly double that of prestige beauty and was
broad-based across regions, product categories and channels,
despite slower industry growth in some key countries. Our emerging
markets, makeup and luxury brands, and our online, freestanding
store and travel retail channels led our growth. At the same time,
we made careful investment choices to support the fastest areas of
growth, while continuing to eliminate non-value-added costs. This
excellent performance further demonstrates the resilience and
consistency of our strategic business model and strengthened our
leadership in global prestige beauty.”
During fiscal 2014, the Company remeasured its Venezuelan net
monetary assets to the recently enacted foreign currency exchange
rate mechanism, SICAD II, and recorded a remeasurement charge of
$38.3 million, both before and after tax, equal to approximately
$.10 per diluted share. Fiscal 2014 and 2013 included returns,
charges and adjustments associated with restructuring activities
and, in fiscal 2013, a charge for the extinguishment of debt.
Excluding these charges in fiscal 2014 and 2013, net earnings
for the year ended June 30, 2014 were $1.24 billion, and diluted
net earnings per common share were $3.16, versus $2.64 in the
prior-year period.
Additionally, the fiscal 2014 fourth quarter and full year
results included the acceleration of sales orders by some retailers
of approximately $178 million in advance of the Company’s July 2014
implementation of its Strategic Modernization Initiative (SMI) in
certain of its largest remaining locations. These orders would
normally have been expected to occur in the Company’s fiscal 2015
first quarter. This amounted to approximately $127 million in
operating income, equal to approximately $.21 per diluted common
share.
Excluding the impact of the accelerated orders and the Venezuela
remeasurement charge, net sales in constant currency for the three
and twelve months ended June 30, 2014 would have increased 5% and
7%, respectively, and diluted earnings per share for the three and
twelve months ended June 30, 2014 would have increased 83% and 12%,
respectively.
Reconciliation between GAAP and
non-GAAP
Three Months Ended June 30, 2014
Year Ended June 30, 2014 Net Sales Growth
Diluted
Earnings
Per Share
Net Sales Growth
Diluted
Earnings
Per Share
(Unaudited)
Reported
Basis
Constant
Currency
Reported
Basis
Constant
Currency
Results including the Venezuela chargeand
fiscal 2015 accelerated retailerorders
13
%(1)
13 % $.66
(1)
8
%(1)
8 % $3.06
(1)
Non-GAAP
Venezuela charge — — — — — .10 Results excluding the Venezuela
charge 13 % 13 % .66 8 % 8 % 3.16 Impact of fiscal 2015 accelerated
orders (7 )% (8 )% (.21 ) (2 )% (2 )% (.21 )
Results excluding the Venezuela chargeand
accelerated retailer orders
6 % 5 % $.45 6 % 7 % $2.95
_____________________________
(1) Represents GAAP
Amounts may not sum due to rounding.
Additional information about GAAP and non-GAAP financial
measures, including reconciliation information, is included in this
release.
“Fiscal 2014 marks the fifth consecutive year that we achieved
outstanding results for our Company and stockholders and is a
testament to our ability to execute our winning strategy,” Mr.
Freda said. “The cornerstone of our success is powerful brands, a
robust innovation pipeline and a sharp focus on fast-growth areas
prioritized in our strategy. We are a growth company well
positioned to identify, create and capture the best global
opportunities in the growing prestige beauty industry. Increased
efficiency and effectiveness, along with benefits from the recent
substantial completion of our Strategic Modernization Initiative,
should allow us to reinvest for future growth, increase our
profitability and continue to generate value for our
stockholders.
“We believe our strong momentum will continue in fiscal 2015.
Our full fiscal year outlook in constant currency reflects net
sales growth of 6% to 7% and double-digit earnings per share
growth, after adjusting for the accelerated sales orders we
reported in fiscal 2014. We remain confident in our growth
potential and are raising our long-term operating margin target to
17.5% in fiscal 2017.”
Full Year Results
by Product Category
Year Ended June 30 (Unaudited; Dollars in
millions) Net Sales Percent Change
Operating
Income (Loss)
Percent
Change
2014 2013
Reported Basis
Constant
Currency
2014 2013
Reported Basis
Skin Care $ 4,769.8 $ 4,465.3 7 % 8 % $ 975.8 $ 830.1 18 %
Makeup 4,210.2 3,876.9 9 9 715.9 580.4 23 Fragrance 1,425.0 1,310.8
9 9 104.1 120.3 (13 ) Hair Care 515.6 488.9 5 6 33.7 26.7 26 Other
48.1 41.3 16 17 (4.8 ) (13.7 ) 65 Subtotal 10,968.7 10,183.2 8 8
1,824.7 1,543.8 18
Returns and charges
associated with restructuring activities
0.1 (1.5 ) 2.9 (17.8 ) Total $ 10,968.8 $ 10,181.7 8 % 8 % $
1,827.6 $ 1,526.0 20 %
The change in net sales and operating income in the Company’s
product categories was favorably impacted by the shift in orders
from certain retailers due to the Company’s implementation of SMI.
Operating income was unfavorably impacted by the current year
remeasurement of net monetary assets in Venezuela, as previously
mentioned. See tables on page 15 for additional information on
these impacts.
Skin Care
- The skin care category is a strategic
priority and the Company is well-positioned to capitalize on its
strong pipeline of innovative products. The Company gained share
during the year in this category in certain countries where its
products are sold.
- Sales gains reflect the recent launches
of the Company’s new Advanced Night Repair Synchronized Recovery
Complex II and Micro Essence Skin Activating Treatment Lotion from
Estée Lauder, as well as higher sales from its Nutritious line of
products.
- Recent product launches from Clinique,
such as Dramatically Different Moisturizing Lotion+ and Even Better
Essence Lotion, along with the reformulated Repairwear Laser Focus
and initial shipments of Clinique Smart Custom-Repair Serum,
contributed to sales growth.
- Higher sales from the Company’s luxury
skin care brand, La Mer, also contributed strong growth.
- Operating income increased, primarily
reflecting recent product launches from certain of the Company’s
heritage brands, as well as increased results from luxury skin care
products.
Makeup
- Higher makeup sales primarily reflected
double-digit growth from the Company’s makeup artist brands and
from recent launches, such as Pure Color Envy Sculpting Lipstick
from Estée Lauder and All About Shadow from Clinique.
- Sales from makeup artist brands
benefited from new product offerings, as well as expanded
distribution in line with the Company’s retail store strategy.
- Double-digit sales increases from
Smashbox and the Tom Ford line of cosmetics contributed to the
category’s growth.
- The increase in makeup operating income
primarily reflected improved performance from the Company’s makeup
artist brands due to the higher sales, and from certain heritage
brands.
Fragrance
- In fragrance, strong double-digit sales
growth came from luxury brands Tom Ford and Jo Malone. Sales gains
were also generated from the recent launches of Estée Lauder Modern
Muse, the Michael Kors Collection and Tory Burch.
- Fragrance operating income declined,
primarily reflecting higher investment spending behind recent major
launches, partially offset by higher results from the Company’s
luxury brands.
Hair Care
- Hair care net sales growth was
primarily driven by Aveda, reflecting solid gains in the salon
channel and the continued success of its Invati line of products
and the Dry Remedy and Damage Remedy franchises.
- Sales increased at Bumble and bumble,
primarily due to higher sales to specialty-multi brand retailers.
Ojon sales decreased, primarily reflecting its exit from the direct
response television channel.
- The category’s growth also benefited
from expanded global distribution, in particular to salons and
travel retail for Aveda and to specialty-multi brand retailers for
Bumble and bumble.
- Hair care operating income increased,
primarily reflecting higher net sales driven by expanded global
distribution and new product launches, as well as strategically
lower investment spending.
Full Year Results
by Geographic Region
Year Ended June 30 (Unaudited; Dollars in
millions) Net Sales Percent Change
Operating
Income (Loss)
Percent
Change
2014 2013
Reported
Basis
Constant
Currency
2014 2013
Reported
Basis
The Americas $ 4,572.3 $ 4,302.9 6 % 7 % $ 537.3 $ 423.2 27
% Europe, the Middle East & Africa. 4,163.7 3,758.7 11 9 938.3
813.4 15 Asia/Pacific 2,232.7 2,121.6 5 9 349.1 307.2 14 Subtotal
10,968.7 10,183.2 8 8 1,824.7 1,543.8 18
Returns and charges
associated with restructuring activities
0.1 (1.5 ) 2.9 (17.8 ) Total $ 10,968.8 $ 10,181.7 8 % 8 % $
1,827.6 $ 1,526.0 20 %
The change in net sales and operating income in the Company’s
geographic regions was favorably impacted by the shift in orders
from certain retailers due to the Company’s implementation of SMI.
Operating income in The Americas was unfavorably impacted by the
current year remeasurement of net monetary assets in Venezuela, as
previously mentioned. See tables on page 15 for additional
information on these impacts.
The Americas
- Net sales in the United States
increased, due to growth from the Company’s makeup artist and
luxury brands and certain heritage and designer fragrance brands,
reflecting new product introductions.
- The increased sales also reflect the
continued expansion of Smashbox at specialty multi-brand retailers
and department stores and expansion into new retail channels by
certain of the Company’s hair care brands.
- Sales of the Company’s online business
grew double digits.
- Sales also increased in Latin America
and Canada.
- Operating income in the Americas rose,
reflecting the increased sales and lower spending. The results also
reflect the $38.3 million charge in the current year to remeasure
net monetary assets in Venezuela.
Europe, the Middle East &
Africa
- In constant currency, net sales
increased in each product category and in most countries in the
region. The Company estimates that it continued to outperform
prestige beauty in many markets.
- The net sales increase was led by
double-digit growth in a number of areas, including the United
Kingdom and several emerging markets, including Turkey and Central
Europe, while solid sales gains were generated in Germany and
France. Certain European countries continued to experience soft
retail environments.
- In travel retail, sales increased
double digits, primarily reflecting higher sales from the Company’s
new launch initiatives, an increase in global airline passenger
traffic and expanded distribution, as well as the impact of the
accelerated retailer orders, as previously discussed. Excluding the
accelerated retailer orders, travel retail sales increased
high-single digits.
- Operating income increased, as higher
results, primarily from travel retail and the United Kingdom, were
partially offset by lower operating results in France and the
Middle East.
Asia/Pacific
- Constant currency net sales increased
in every country in the region, except Korea. The strongest
double-digit growth was generated in China, Japan, Hong Kong and
Singapore, while Australia achieved high-single digit gains. The
sales increase in Japan reflects the accelerated retailer orders,
as previously discussed.
- The Company estimates that it gained
share in certain countries within its points of distribution during
the quarter.
- In Asia/Pacific, operating income
increased, led by Korea, Japan and Hong Kong, reflecting, in part,
lower investment spending. The higher results in Japan primarily
reflect the impact from the accelerated retailer orders. Lower
operating results were posted in China, primarily due to an
increase in investment spending behind new product introductions
and increased distribution. Thailand and Malaysia also reported
lower operating income.
Full-Year Cash Flows
- For the 12 months ended June 30, 2014,
net cash flows provided by operating activities increased 25% to
$1.54 billion, compared with $1.23 billion in the prior year.
- The increase primarily reflected the
higher net earnings, and an increase in accounts payable.
- Days of inventory at June 30, 2014 were
15 days higher compared to a year ago. This increase primarily
reflects the building of inventory to support expected near-term
sales growth, as well as for safety stock related to the Company’s
implementation of SMI at certain locations in July 2014.
Fourth Quarter Results
- For the three months ended June 30,
2014, the Company reported net sales of $2.73 billion, a 13%
increase from $2.41 billion in the comparable prior-year period.
Excluding the impact of foreign currency translation, net sales
also increased 13%.
- As mentioned previously in this press
release, the fiscal 2014 fourth quarter includes the effect of the
accelerated retailer orders.
- The Company’s fourth quarter sales
benefited from innovative new products and growth in emerging and
developed markets.
- On a reported basis, as well as in
constant currency, net sales grew in each of the Company’s
geographic regions and product categories. Sales also increased in
each product category within each region.
- The Company’s fourth quarter sales
growth reflects double-digit gains in the U.S. and travel retail,
as well as double-digit local currency increases in many European
emerging markets. In Asia/Pacific, local currency growth was led by
strong increases in Japan, China and Hong Kong. Sales gains in the
U.S., travel retail and Japan include the effect of the accelerated
retailer orders.
- The Company reported net earnings of
$257.7 million, compared with $94.0 million last year. Diluted net
earnings per common share were $.66, compared with $.24 reported in
the same prior-year period.
- The fiscal 2014 and 2013 fourth-quarter
results included returns, charges and adjustments associated with
restructuring activities.
- Excluding the impact of the accelerated
orders and restructuring activities, net sales in constant currency
and diluted earnings per share for the three months ended June 30,
2014 would have increased 5% and 83%, respectively.
Outlook for Fiscal 2015 First Quarter
and Full Year
In fiscal 2015, the Company estimates global prestige beauty
will grow approximately 3% to 4%. The Company expects to grow ahead
of the industry by bringing highly innovative products to market
and focusing on the fastest growing countries, product categories
and channels. The Company also expects to leverage its strong sales
growth and continue to reduce non-value-added costs to further
improve its operating margin in fiscal 2015.
As previously mentioned, some retailers accelerated their sales
orders in connection with the Company’s rollout of its last major
wave of SMI in July 2014 in certain of its locations. While these
additional orders benefited fiscal 2014 results, the Company
expects there to be a corresponding adverse effect on its first
quarter and full year fiscal 2015 results. The Company’s fiscal
2015 first quarter and full year outlook includes the impact of
this shift.
First Quarter Fiscal
2015
- Net sales are forecasted to decrease
between 1% and 2% in constant currency.
- Foreign currency translation is
expected to negatively impact sales by approximately 1% versus the
prior-year period.
- The impact of the accelerated retailer
orders is expected to reduce the fiscal 2015 first quarter sales by
approximately 7%.
- Net sales excluding the effect of the
accelerated retailer orders are forecasted to grow between 5% and
6% in constant currency.
- Diluted net earnings per share,
including the effect of the accelerated retailer orders, are
projected to be between $.51 and $.55.
- Diluted net earnings per share,
excluding the effect of the accelerated retailer orders, are
projected to be between $.72 to $.76.
Full Year Fiscal 2015
- Net sales are forecasted to grow
between 3% and 4% in constant currency.
- Foreign currency translation is
expected to negatively impact sales by approximately 2% versus the
prior-year period.
- The impact of the accelerated retailer
orders is expected to reduce the fiscal 2015 full year sales by
approximately 3%.
- Net sales excluding the effect of the
accelerated retailer orders are forecasted to grow between 6% and
7% in constant currency.
- Diluted net earnings per share,
including the effect of the accelerated retailer orders, are
projected to be between $2.89 to $2.99.
- Diluted net earnings per share,
excluding the effect of the accelerated retailer orders, are
projected to be between $3.10 to $3.20.
- The approximate 2% negative currency
impact on the sales growth equates to about $.09 of earnings per
share. On a constant currency basis and before the effect of the
accelerated retailer orders, earnings per share is expected to grow
between 8% to 12%.
Reconciliation between GAAP and
non-GAAP
Three Months Ending
September 30, 2014
Year Ending June 30, 2015 Net Sales
Growth
Diluted
Earnings Per
Share
Net Sales Growth
Diluted
Earnings Per
Share
(Unaudited)
Reported
Basis
Constant
Currency
Reported
Basis
Constant
Currency
Forecast including the impact of the
fiscal 2015 accelerated retailer
orders
(3)% - (2)
%(1)
(2)% - (1) % $.51 - $.55
(1)
1% - 2
%(1)
3% - 4 % $2.89 - $2.99
(1)
Non-GAAP
Impact of fiscal 2015 accelerated orders ~7 % ~7 % .21 ~3 % ~3 %
.21
Forecast excluding the impact of
theaccelerated retailer orders
4% - 5 % 5% - 6 % $.72 - $.76 4% - 5 % 6% - 7 % $3.10 - $3.20
_____________________________
(1) Represents GAAP estimates.
Conference Call
The Estée Lauder Companies will host a conference call at 9:30
a.m. (ET) today, August 15, 2014 to discuss its results. The
dial-in number for the call is 888-294-4716 in the U.S. or
706-902-0101 internationally (conference ID number: 82074353). The
call will also be webcast live at
http://investors.elcompanies.com.
Forward-Looking
Statements
The forward-looking statements in this press release, including
those containing words like “expect,” “plans,” “may,” “could,”
“anticipate,” “estimate,” “projected,” “forecasted,” those in Mr.
Freda’s remarks and those in the “Outlook for Fiscal 2015 First
Quarter and Full Year” section involve risks and uncertainties.
Factors that could cause actual results to differ materially from
those forward-looking statements include the following:
(1) increased competitive activity from
companies in the skin care, makeup, fragrance and hair care
businesses, some of which have greater resources than the Company
does; (2) the Company’s ability to develop, produce and market new
products on which future operating results may depend and to
successfully address challenges in the Company’s business; (3)
consolidations, restructurings, bankruptcies and reorganizations in
the retail industry causing a decrease in the number of stores that
sell the Company’s products, an increase in the ownership
concentration within the retail industry, ownership of retailers by
the Company’s competitors or ownership of competitors by the
Company’s customers that are retailers and our inability to collect
receivables; (4) destocking and tighter working capital management
by retailers; (5) the success, or changes in timing or scope, of
new product launches and the success, or changes in the timing or
the scope, of advertising, sampling and merchandising programs; (6)
shifts in the preferences of consumers as to where and how they
shop for the types of products and services the Company sells; (7)
social, political and economic risks to the Company’s foreign or
domestic manufacturing, distribution and retail operations,
including changes in foreign investment and trade policies and
regulations of the host countries and of the United States; (8)
changes in the laws, regulations and policies (including the
interpretations and enforcement thereof) that affect, or will
affect, the Company’s business, including those relating to its
products or distribution networks, changes in accounting standards,
tax laws and regulations, environmental or climate change laws,
regulations or accords, trade rules and customs regulations, and
the outcome and expense of legal or regulatory proceedings, and any
action the Company may take as a result; (9) foreign currency
fluctuations affecting the Company’s results of operations and the
value of its foreign assets, the relative prices at which the
Company and its foreign competitors sell products in the same
markets and the Company’s operating and manufacturing costs outside
of the United States; (10) changes in global or local conditions,
including those due to the volatility in the global credit and
equity markets, natural or man-made disasters, real or perceived
epidemics, or energy costs, that could affect consumer purchasing,
the willingness or ability of consumers to travel and/or purchase
the Company’s products while traveling, the financial strength of
the Company’s customers, suppliers or other contract
counterparties, the Company’s operations, the cost and availability
of capital which the Company may need for new equipment, facilities
or acquisitions, the returns that the Company is able to generate
on its pension assets and the resulting impact on its funding
obligations, the cost and availability of raw materials and the
assumptions underlying the Company’s critical accounting estimates;
(11) shipment delays, commodity pricing, depletion of inventory and
increased production costs resulting from disruptions of operations
at any of the facilities that manufacture nearly all of the
Company’s supply of a particular type of product (i.e., focus
factories) or at the Company’s distribution or inventory centers,
including disruptions that may be caused by the implementation of
SAP as part of the Company’s Strategic Modernization Initiative,
other information technology initiatives or by restructurings; (12)
real estate rates and availability, which may affect the Company’s
ability to increase or maintain the number of retail locations at
which the Company sells its products and the costs associated with
the Company’s other facilities; (13) changes in product mix to
products which are less profitable; (14) the Company’s ability to
acquire, develop or implement new information and distribution
technologies and initiatives on a timely basis and within the
Company’s cost estimates and the Company’s ability to maintain
continuous operations of such systems and the security of data and
other information that may be stored in such systems or other
systems or media; (15) the Company’s ability to capitalize on
opportunities for improved efficiency, such as publicly-announced
strategies and restructuring and cost-savings initiatives, and to
integrate acquired businesses and realize value therefrom; (16)
consequences attributable to local or international conflicts
around the world, as well as from any terrorist action, retaliation
and the threat of further action or retaliation; (17) the timing
and impact of acquisitions, investments and divestitures; and (18)
additional factors as described in the Company’s filings with the
Securities and Exchange Commission, including its Annual Report on
Form 10-K for the fiscal year ended June 30, 2013.
The Company assumes no responsibility to
update forward-looking statements made herein or otherwise.
The Estée Lauder Companies Inc. is one of the world’s leading
manufacturers and marketers of quality skin care, makeup, fragrance
and hair care products. The Company’s products are sold in over 150
countries and territories under the following brand names: Estée
Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins,
M•A•C, Bobbi Brown, Tommy Hilfiger, Kiton, La Mer, Donna Karan,
Aveda, Jo Malone, Bumble and bumble, Darphin, Michael Kors, Flirt!,
GoodSkin Labs, Tom Ford, Coach, Ojon, Smashbox, Ermenegildo Zegna,
Aerin Beauty, Osiao, Marni and Tory Burch.
An electronic version of this release can be found at the
Company’s website, www.elcompanies.com.
THE ESTÉE LAUDER COMPANIES INC.
CONSOLIDATED STATEMENTS OF
EARNINGS
(Unaudited; In millions, except per
share data and percentages)
Three Months Ended
June 30
Percent
Change
Year Ended June 30
Percent
Change
2014
2013
2014
2013
Net Sales (A) $
2,725.3
$ 2,407.4 13 % $ 10,968.8 $ 10,181.7 8 % Cost of Sales 533.8
475.6 2,158.2 2,025.9
Gross Profit
2,191.5 1,931.8 13 % 8,810.6 8,155.8 8
%
Gross Margin 80.4 % 80.2 % 80.3 % 80.1 %
Operating expenses: Selling, general and administrative (B) 1,812.0
1,765.2 6,985.9 6,597.0 Restructuring and other charges (A) (0.7 )
3.1 (2.9 ) 15.1 Goodwill impairment (C) — 9.6 — 9.6 Impairment of
other intangible assets (D) — 8.1 — 8.1
1,811.3 1,786.0 1 % 6,983.0 6,629.8 5 %
Operating Expense Margin 66.4 % 74.2 % 63.6 % 65.1 %
Operating Income 380.2 145.8 100 +% 1,827.6 1,526.0
20 %
Operating Income Margin 14.0 % 6.0 % 16.7 % 15.0
% Interest expense, net 12.6 13.0 50.8 54.8 Interest expense
on debt extinguishment (E) — — — 19.1 Other income (F) —
— — 23.1
Earnings before Income Taxes
367.6 132.8 100 +% 1,776.8 1,475.2 20 % Provision for income
taxes 109.2 36.9 567.7 451.4
Net
Earnings 258.4 95.9 100 +% 1,209.1 1,023.8 18 % Net
earnings attributable to noncontrolling interests (0.7 )
(1.9 ) (5.0 ) (4.0 )
Net Earnings Attributable to The Estée
Lauder Companies Inc.
$ 257.7 $ 94.0
100
+% $ 1,204.1 $ 1,019.8 18 %
Net earnings attributable to The Estée
Lauder Companies Inc. per common share:
Basic $ .67 $ .24 100 +% $ 3.12 $ 2.63 19 % Diluted .66 .24 100 +%
3.06 2.58 19 % Weighted average common shares outstanding:
Basic 383.0 388.2 386.2 387.6 Diluted 389.8 395.5 393.1 394.9
(A) During the second quarter of fiscal 2013, the Company
closed its multi-faceted cost savings program implemented in
February 2009 (the “Program”) and has executed substantially all
remaining initiatives as of June 30, 2014. The impact of returns,
charges and adjustments related to the Program for each fiscal
period are set forth in tables that follow these notes. (B)
During the third quarter of fiscal 2014, based on then changes to
Venezuela’s foreign currency exchange rate regulations, the Company
changed the exchange rate used to remeasure its Venezuelan net
monetary assets to a newly enacted SICAD II rate. Accordingly, the
Company recorded a remeasurement charge of $38.3 million, both
before and after tax, equal to approximately $.10 per diluted
common share. (C) During the fourth quarter of fiscal 2013,
the Company recorded a goodwill impairment charge related to the
Darphin reporting unit of $9.6 million. (D) During the
fourth quarter of fiscal 2013, the Company recognized an impairment
charge related to the Darphin reporting unit of $8.1 million for
its trademark.
THE ESTÉE LAUDER COMPANIES INC.
(E) In the first quarter of fiscal 2013, the Company
redeemed $230.1 million principal amount of its 7.75% Senior Notes
due November 1, 2013. As a result, the Company recorded a pre-tax
charge of $19.1 million. (F) In December 2012, the Company
amended the agreement related to the August 2007 sale of Rodan +
Fields to receive a fixed amount in lieu of future contingent
consideration and other rights. As a result of the amended
agreement, the Company recognized $23.1 million as other income in
the consolidated statement of earnings during the year ended June
30, 2013.
SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; Dollars in
millions)
Three Months Ended June 30 Net Sales
Percent Change
Operating
Income (Loss)
Percent
Change
2014 2013
Reported
Basis
Constant
Currency
2014 2013
Reported
Basis
Results by
Geographic Region
The Americas $ 1,103.3 $ 992.5 11 % 13 % $ 117.6 $ 50.8 100 +%
Europe, the Middle East & Africa. 1,132.1 980.6 15 13 264.9
154.4 72 Asia/Pacific 489.9 435.7 12 15 (3.1 ) (54.9 ) 94 Subtotal
2,725.3 2,408.8 13 13 379.4 150.3 100 +
Returns and charges
associated with restructuring activities
— (1.4 ) 0.8 (4.5 ) Total $ 2,725.3 $ 2,407.4 13 % 13 % $ 380.2 $
145.8 100 +%
Results by
Product Category
Skin Care $ 1,205.4 $ 1,056.9 14 % 14 % $ 217.2 $ 80.0 100 +%
Makeup 1,064.4 948.0 12 12 151.4 85.3 77 Fragrance 309.3 271.2 14
13 8.6 (10.2 ) 100 + Hair Care 134.9 126.9 6 7 4.4 0.8 100 + Other
11.3 5.8 95 97 (2.2 ) (5.6 ) 61 Subtotal 2,725.3 2,408.8 13 13
379.4 150.3 100 +
Returns and charges
associated with restructuring activities
— (1.4 ) 0.8 (4.5 ) Total $ 2,725.3 $ 2,407.4 13 % 13 % $ 380.2 $
145.8 100 +%
THE ESTÉE LAUDER COMPANIES INC.
This earnings release includes some non-GAAP financial
measures relating to charges (adjustments) associated with
restructuring activities, the Venezuela remeasurement, the
extinguishment of debt and the accelerated orders associated with
the Company’s SMI rollout. The following are reconciliations
between the non-GAAP financial measures and the most directly
comparable GAAP measures for certain consolidated statements of
earnings accounts before and after these items. The Company uses
these non-GAAP financial measures, among other financial measures,
to evaluate its operating performance, and the measures represent
the manner in which the Company conducts and views its 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 the Company
considers the non-GAAP measures useful in analyzing its results,
they are not intended to replace, or act as a substitute for, any
presentation included in the consolidated financial statements
prepared in conformity with GAAP. The Company operates on a
global basis, with the majority of its net sales generated outside
the United States. Accordingly, fluctuations in foreign currency
exchange rates can affect the Company’s results of operations.
Therefore, the Company presents certain net sales information
excluding the effect of foreign currency rate fluctuations to
provide a framework for assessing the performance of its underlying
business outside the United States. Constant currency information
compares results between periods as if exchange rates had remained
constant period-over-period. The Company calculates constant
currency information by translating current-period results using
prior-year period weighted average foreign currency exchange rates.
Reconciliation of Certain Consolidated
Statements of Earnings Accounts Before and After Returns and
Charges
(Unaudited; In millions, except per
share data and percentages)
Three Months Ended June 30,
2014 Three Months Ended June 30, 2013 As
Reported Returns/
Charges
Before
Returns/
Charges
As Reported Returns/
Charges
Before
Returns/
Charges
% Change
versus Prior
Year Before
Returns/Charges
Net Sales $2,725.3 $0.0 $2,725.3 $2,407.4 $ 1.4 $2,408.8 13 % Cost
of sales 533.8 0.1 533.9 475.6 — 475.6 Gross Profit 2,191.5 (0.1 )
2,191.4 1,931.8 1.4 1,933.2 13 % Gross Margin 80.4 % 80.4 % 80.2 %
80.3 % Operating expenses 1,811.3 0.7 1,812.0 1,786.0 (3.1 )
1,782.9 2 % Operating Expense Margin 66.4 % 66.5 % 74.2 % 74.0 %
Operating Income 380.2 (0.8 ) 379.4 145.8 4.5 150.3 100 +%
Operating Income Margin 14.0 % 13.9 % 6.0 % 6.3 % Provision
for income taxes 109.2 (0.2 ) 109.0 36.9 1.7 38.6
Net Earnings Attributable
to The Estée Lauder Companies Inc.
257.7 (0.6 ) 257.1 94.0 2.8 96.8 100 +%
Diluted net earnings
attributable to The Estée Lauder
Companies Inc. per common share
.66 .00 .66 .24 .01 .24 100 +%
THE ESTÉE LAUDER COMPANIES INC.
Reconciliation of Certain Consolidated
Statements of Earnings Accounts Before and After Returns and
Charges
(Unaudited; In millions, except per
share data and percentages)
Year Ended June 30, 2014
Year Ended June 30, 2013 As Reported
Returns/
Charges
Before
Returns/
Charges
As Reported
Returns/
Charges
Before
Returns/
Charges
% Change
versus Prior
Year Before
Returns/Charges
Net Sales $10,968.8 $(0.1 ) $10,968.7 $10,181.7 $ 1.5 $10,183.2 8 %
Cost of sales 2,158.2 (0.1 ) 2,158.1 2,025.9 (1.2 ) 2,024.7 Gross
Profit 8,810.6 0.0 8,810.6 8,155.8 2.7 8,158.5 8 % Gross Margin
80.3 % 80.3 % 80.1 % 80.2 % Operating expenses 6,983.0 (35.4
) 6,947.6 6,629.8 (15.1 ) 6,614.7 5 % Operating Expense Margin 63.6
% 63.3 % 65.1 % 65.0 % Operating Income 1,827.6 35.4 1,863.0
1,526.0 17.8 1,543.8 21 % Operating Income Margin 16.7 % 17.0 %
15.0 % 15.2 % Interest expense on debt extinguishment — — —
19.1 (19.1 ) — Provision for income taxes 567.7 (1.1 ) 566.6
451.4 13.0 464.4
Net Earnings Attributable
to The Estée Lauder Companies Inc.
1,204.1 36.5 1,240.6 1,019.8 23.9 1,043.7 19 %
Diluted net earnings
attributable to The Estée Lauder
Companies Inc. per common share
3.06 .09 3.16 2.58 .06 2.64 19 %
_________________
As part of the Company’s Strategic Modernization Initiative
(SMI), the Company implemented the last major wave of SAP-based
technologies in July 2014. As a result, and consistent with prior
waves, the Company experienced a shift in its sales and operating
results from accelerated orders from certain of its retailers to
provide adequate safety stock and to mitigate any potential
short-term business interruption associated with the July 2014 SMI
rollout. In particular, approximately $178 million of accelerated
orders were recorded as net sales in the fiscal 2014 fourth quarter
that would normally have been expected to occur in the fiscal 2015
first quarter.
This action created a favorable comparison between the fiscal
2014 and fiscal 2013 fourth quarters and full years of
approximately $178 million in net sales and approximately $127
million in operating income, equal to $.21 per diluted common share
and impacted the Company’s operating margin comparisons. The
Company believes the presentation of certain comparative
information in the discussions in this release that exclude the
impact of the timing of these orders is useful in analyzing the net
sales performance and operating results of its business.
THE ESTÉE LAUDER COMPANIES INC.
Reconciliation of Certain Consolidated
Statements of Earnings Accounts Before and After
Returns and Charges and Accelerated
Orders Associated with the Company’s Implementation of SAP
(Unaudited; In millions, except per
share data and percentages)
Three Months Ended June 30,
2014
Three Months Ended June 30, 2013
As
Reported
Returns/
Charges
SAP
Adjust-
ments
Before
Charges
/SAP
As
Reported
Returns/
Charges
SAP
Adjust-
ments
Before
Charges
/SAP
% Change
versus Prior
Year Before
Charges/SAP
Net Sales $2,725.3 $0.0 $(178.3 ) $2,547.0 $2,407.4 $ 1.4 $ —
$2,408.8 6 % Cost of sales 533.8 0.1 (35.1 ) 498.8 475.6 — — 475.6
Gross Profit 2,191.5 (0.1 ) (143.2 ) 2,048.2 1,931.8 1.4 — 1,933.2
6 % Gross Margin 80.4 % 80.4 % 80.2 % 80.3 % Operating
expenses 1,811.3 0.7 (16.0 ) 1,796.0 1,786.0 (3.1 ) — 1,782.9 1 %
Operating Expense Margin 66.4 % 70.5 % 74.2 % 74.0 %
Operating Income 380.2 (0.8 ) (127.2 ) 252.2 145.8 4.5 — 150.3 68 %
Operating Income Margin 14.0 % 9.9 % 6.0 % 6.3 % Provision
for income taxes 109.2 (0.2 ) (45.3 ) 63.7 36.9 1.7 — 38.6
Net Earnings Attributable
to The Estée Lauder Companies Inc.
257.7 (0.6 ) (81.9 ) 175.2 94.0 2.8 — 96.8 81 %
Diluted net
earnings attributable to The Estée Lauder
Companies Inc. per common share
.66 .00 (.21 ) .45 .24 .01 — .24 83 %
______________________________________________________________________________________________________
Year Ended June 30, 2014 Year
Ended June 30, 2013
As
Reported
Returns/
Charges
SAP
Adjust-
ments
Before
Charges
/SAP
As
Reported
Returns/
Charges
SAP
Adjust-
ments
Before
Charges
/SAP
% Change
versus Prior
Year Before
Charges/SAP
Net Sales $10,968.8 $(0.1 ) $(178.3 ) $10,790.4 $10,181.7 $ 1.5 $ —
$10,183.2 6 % Cost of sales 2,158.2 (0.1 ) (35.1 ) 2,123.0 2,025.9
(1.2 ) — 2,024.7 Gross Profit 8,810.6 0.0 (143.2 ) 8,667.4 8,155.8
2.7 — 8,158.5 6 % Gross Margin 80.3 % 80.3 % 80.1 % 80.2 %
Operating expenses 6,983.0 (35.4 ) (16.0 ) 6,931.6 6,629.8 (15.1 )
— 6,614.7 5 % Operating Expense Margin 63.6 % 64.2 % 65.1 % 65.0 %
Operating Income 1,827.6 35.4 (127.2 ) 1,735.8 1,526.0 17.8
— 1,543.8 12 % Operating Income Margin 16.7 % 16.1 % 15.0 % 15.2 %
Interest expense on debtextinguishment
— — — — 19.1 (19.1 ) — — Provision for income taxes 567.7
(1.1 ) (45.3 ) 521.3 451.4 13.0 — 464.4
Net Earnings Attributable
to The Estée Lauder Companies Inc.
1,204.1 36.5 (81.9 ) 1,158.7 1,019.8 23.9 — 1,043.7 11 %
Diluted net
earnings attributable to The Estée Lauder
Companies Inc. per common share
3.06 .09 (.21 ) 2.95 2.58 .06 — 2.64 12 %
THE ESTÉE LAUDER COMPANIES INC.
The impact on net sales and operating results of accelerated
orders from certain retailers associated with the Company’s
implementation of SMI, as well as the impact of the Venezuela
remeasurement charge by product category and geographic region is
as follows:
Accelerated Sales Orders
Venezuela
Remeasurement Charge
Three Months and Year Ended
June 30, 2014
Year Ended
June 30, 2014
(Unaudited; In millions)
Net Sales Operating
Results Operating Results Product Category: Skin
Care $ 91 $ 72 $ 12 Makeup 65 41 16 Fragrance 21 14 10 Hair Care 1
— — Other — — — Total $ 178 $ 127 $ 38
Geographic Region: The Americas $ 84 $ 53 $ 38 Europe, the
Middle East & Africa 68 53 — Asia/Pacific 26 21
— Total $ 178 $ 127 $ 38 Excluding the impact of the
current-year period shift in orders associated with the Company’s
implementation of SMI, the returns and charges (adjustments)
associated with restructuring activities and, for the full fiscal
year, the Venezuela remeasurement charge, net sales and operating
results for the three months and year ended June 30, 2014 would
have increased/(decreased) as follows:
Three Months Ended June 30, 2014 Year Ended June 30,
2014 (Unaudited)
Net Sales As Adjusted
Operating
Results As
Adjusted
Net Sales As Adjusted
Operating
Results As
Adjusted
Reported
Basis
Constant
Currency
Reported
Basis
Constant
Currency
Product
Category:
Skin Care 5 % 5 % 82 % 5 % 6 % 10 % Makeup 5 5 29 7 7 19 Fragrance
6 5 49 7 7 (17 ) Hair Care 6 7 100 + 5 6 26 Other 93 97
61 16 17 66 Total 6 % 5 % 68 % 6
% 7 % 12 %
Geographic
Region:
The Americas 3 % 4 % 28 % 4 % 5 % 24 % Europe, the Middle East
& Africa 9 6 37 9 7 9 Asia/Pacific 6 7 56
4 7 7 Total 6 % 5 % 68 % 6 % 7 % 12 %
THE ESTÉE LAUDER COMPANIES INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited; In millions)
June 30
2014
June 30
2013
ASSETS Current Assets Cash and cash equivalents $
1,629.1 $ 1,495.7 Accounts receivable, net 1,379.3 1,171.7
Inventory and promotional merchandise, net 1,294.0 1,113.9
Prepaid expenses and other current
assets
522.8 515.9
Total Current Assets
4,825.2 4,297.2
Property, Plant and Equipment,
net
1,502.6 1,350.7
Other Assets 1,541.0 1,497.3
Total Assets $ 7,868.8 $ 7,145.2
LIABILITIES AND EQUITY Current Liabilities Current
debt $ 18.4 $ 18.3 Accounts payable 524.5 481.7 Other accrued
liabilities 1,513.8 1,434.6
Total Current
Liabilities 2,056.7 1,934.6
Noncurrent Liabilities Long-term debt 1,324.7 1,326.0 Other
noncurrent liabilities 618.0 582.7
Total
Noncurrent Liabilities 1,942.7 1,908.7
Total
Equity 3,869.4 3,301.9
Total
Liabilities and Equity $ 7,868.8 $ 7,145.2
SELECT CASH FLOW DATA
(Unaudited; In millions)
Year Ended June 30 2014 2013 Cash
Flows from Operating Activities Net earnings $ 1,209.1 $
1,023.8 Depreciation and amortization 384.6 336.9 Deferred income
taxes (56.4 ) (76.1 ) Loss on Venezuela remeasurement 38.3 2.8
Goodwill and other intangible asset impairments — 17.7 Other items
154.9 129.5 Changes in operating assets and liabilities: Increase
in accounts receivable, net (196.2 ) (113.0 ) Increase in inventory
and promotional merchandise, net (156.8 ) (134.5 ) Increase in
other assets, net (45.2 ) (3.2 ) Increase in accounts payable and
other liabilities 202.9 42.4
Net cash flows
provided by operating activities $ 1,535.2 $ 1,226.3
Capital expenditures $ 510.2 $ 461.0 Repayments and
redemption of long-term debt 11.8 241.5 Payments to acquire
treasury stock 667.2 387.7 Dividends paid 301.8 419.2
The Estée Lauder Companies Inc.Investor
Relations:Dennis D’Andrea212-572-4384orMedia
Relations:Alexandra Trower212-572-4430
Entergy Louisiana (NYSE:ELC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Entergy Louisiana (NYSE:ELC)
Historical Stock Chart
From Jul 2023 to Jul 2024