UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. - PDF document

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 FORM 10-Q (Mark One)- x x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2017 OR o o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number: 1-14064 The Estée Lauder Companies Inc. (Exact name of registrant as specified in its charter) Delaware 11-2408943 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 767 Fifth Avenue, New York, New York 10153 (Address of principal executive offices) (Zip Code) 212-572-4200 (Registrant’s telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o Emerging growth company o (Do not check if a smaller reporting company) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x At April 26, 2017, 223,870,597 shares of the registrant’s Class A Common Stock, $.01 par value, and 143,961,737 shares of the registrant’s Class B Common Stock, $.01 par value, were outstanding.

Table of Contents THE ESTÉE LAUDER COMPANIES INC. INDEX Page Part I. Financial Information Item 1. Financial Statements (Unaudited) Consolidated Statements of Earnings — Three and Nine Months Ended March 31, 2017 and 2016 2 Consolidated Statements of Comprehensive Income (Loss) — Three and Nine Months Ended March 31, 2017 and 2016 3 Consolidated Balance Sheets — March 31, 2017 and June 30, 2016 (Audited) 4 Consolidated Statements of Cash Flows — Nine Months Ended March 31, 2017 and 2016 5 Notes to Consolidated Financial Statements 6 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 3. Quantitative and Qualitative Disclosures About Market Risk 52 Item 4. Controls and Procedures 52 Part II. Other Information Item 1. Legal Proceedings 53 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 53 Item 6. Exhibits 54 Signatures 55

Table of Contents PART I. FINANCIAL INFORMATION Item 1. Financial Statements. THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Three Months Ended Nine Months Ended March 31 March 31 2017 2016 2017 2016 (In millions, except per share data) Net Sales $ 2,857 $ 2,657 $ 8,930 $ 8,616 Cost of Sales 591 504 1,824 1,670 Gross Profit 2,266 2,153 7,106 6,946 Operating Expenses Selling, general and administrative 1,780 1,754 5,522 5,445 Restructuring and other charges 59 15 122 34 Total operating expenses 1,839 1,769 5,644 5,479 Operating Income 427 384 1,462 1,467 Interest expense 28 18 71 52 Interest income and investment income, net 8 4 19 10 Earnings before Income Taxes 407 370 1,410 1,425 Provision for income taxes 107 104 384 399 Net Earnings 300 266 1,026 1,026 Net earnings attributable to noncontrolling interests (2) (1) (6) (5) Net Earnings Attributable to The Estée Lauder Companies $ 298 $ 265 $ 1,020 $ 1,021 Inc. Net earnings attributable to The Estée Lauder Companies Inc. per common share Basic $ .81 $ .72 $ 2.78 $ 2.76 Diluted $ .80 $ .71 $ 2.74 $ 2.71 Weighted-average common shares outstanding Basic 367.0 369.1 366.8 370.4 Diluted 372.3 375.6 372.7 376.9 Cash dividends declared per common share $ .34 $ .30 $ .98 $ .84 See notes to consolidated financial statements. 2

Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) Three Months Ended Nine Months Ended March 31 March 31 2017 2016 2017 2016 (In millions) Net earnings $ 300 $ 266 $ 1,026 $ 1,026 Other comprehensive income (loss): Net unrealized investment gain (loss) 2 7 (9) 3 Net derivative instrument gain (loss) (51) (36) (17) (32) Amounts included in net periodic benefit cost 7 6 23 19 Translation adjustments 64 71 (49) (52) Benefit (provision) for deferred income taxes on components of other comprehensive income 17 11 (2) 4 Total other comprehensive income (loss) 39 59 (54) (58) Comprehensive income (loss) 339 325 972 968 Comprehensive (income) loss attributable to noncontrolling interests: Net earnings (2) (1) (6) (5) Translation adjustments 1 (1) — — (1) (2) (6) (5) Comprehensive income (loss) attributable to The Estée Lauder $ 338 $ 323 $ 966 $ 963 Companies Inc. See notes to consolidated financial statements. 3

Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED BALANCE SHEETS March 31 June 30 2017 2016 (Unaudited) ($ in millions) ASSETS Current Assets Cash and cash equivalents $ 1,139 $ 914 Short-term investments 701 469 Accounts receivable, net 1,528 1,258 Inventory and promotional merchandise, net 1,310 1,264 Prepaid expenses and other current assets 294 320 Total current assets 4,972 4,225 Property, Plant and Equipment, net 1,576 1,583 Other Assets Long-term investments 993 1,108 Goodwill 1,942 1,228 Other intangible assets, net 1,337 344 Other assets 625 735 Total other assets 4,897 3,415 Total assets $ 11,445 $ 9,223 LIABILITIES AND EQUITY Current Liabilities Current debt $ 519 $ 332 Accounts payable 597 717 Other accrued liabilities 1,744 1,632 Total current liabilities 2,860 2,681 Noncurrent Liabilities Long-term debt 3,377 1,910 Other noncurrent liabilities 1,073 1,045 Total noncurrent liabilities 4,450 2,955 Contingencies (Note 10) Equity Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at March 31, 2017 and June 30, 2016; shares issued: 428,868,500 at March 31, 2017 and 424,109,008 at June 30, 2016; Class B shares authorized: 304,000,000 at March 31, 2017 and June 30, 2016; shares issued and outstanding: 143,961,737 at March 31, 2017 and 144,770,237 at June 30, 2016 6 6 Paid-in capital 3,462 3,161 Retained earnings 8,350 7,693 Accumulated other comprehensive loss (599) (545) 11,219 10,315 Less: Treasury stock, at cost; 205,125,233 Class A shares at March 31, 2017 and 201,119,435 Class A shares at June 30, 2016 (7,100) (6,743) Total stockholders’ equity — The Estée Lauder Companies Inc. 4,119 3,572 Noncontrolling interests 16 15 Total equity 4,135 3,587 Total liabilities and equity $ 11,445 $ 9,223 See notes to consolidated financial statements. 4