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, 2016 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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o (Do not check if a smaller reporting company) 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, 2016, 222,579,072 shares of the registrant’s Class A Common Stock, $.01 par value, and 146,658,737 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, 2016 and 2015 2 Consolidated Statements of Comprehensive Income (Loss) — Three and Nine Months Ended March 31, 2016 and 2015 3 Consolidated Balance Sheets — March 31, 2016 and June 30, 2015 (Audited) 4 Consolidated Statements of Cash Flows — Nine Months Ended March 31, 2016 and 2015 5 Notes to Consolidated Financial Statements 6 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Item 3. Quantitative and Qualitative Disclosures About Market Risk 48 Item 4. Controls and Procedures 48 Part II. Other Information Item 1. Legal Proceedings 48 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 49 Item 6. Exhibits 50 Signatures 51

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 2016 2015 2016 2015 (In millions, except per share data) Net Sales $ 2,656.5 $ 2,580.5 $ 8,616.0 $ 8,256.0 Cost of Sales 504.2 502.9 1,670.4 1,612.6 Gross Profit 2,152.3 2,077.6 6,945.6 6,643.4 Operating Expenses Selling, general and administrative 1,753.1 1,680.4 5,445.3 5,265.4 Restructuring and other charges 15.2 — 33.7 — Total operating expenses 1,768.3 1,680.4 5,479.0 5,265.4 Operating Income 384.0 397.2 1,466.6 1,378.0 Interest expense 18.0 15.2 52.1 45.0 Interest income and investment income, net 4.2 3.1 10.4 8.5 Earnings before Income Taxes 370.2 385.1 1,424.9 1,341.5 Provision for income taxes 103.6 112.4 399.1 401.9 Net Earnings 266.6 272.7 1,025.8 939.6 Net earnings attributable to noncontrolling interests (1.0) (0.6) (4.7) (3.7) Net Earnings Attributable to The Estée Lauder Companies Inc. $ 265.6 $ 272.1 $ 1,021.1 $ 935.9 Net earnings attributable to The Estée Lauder Companies Inc. per common share Basic $ 0.72 $ 0.72 $ 2.76 $ 2.46 Diluted $ 0.71 $ 0.71 $ 2.71 $ 2.42 Weighted-average common shares outstanding Basic 369.1 378.5 370.4 380.1 Diluted 375.6 384.7 376.9 386.3 Cash dividends declared per common share $ .30 $ .24 $ .84 $ .68 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 2016 2015 2016 2015 (In millions) Net earnings $ 266.6 $ 272.7 $ 1,025.8 $ 939.6 Other comprehensive income (loss): Net unrealized investment gain (loss) 6.6 2.1 3.2 (0.7) Net derivative instrument gain (loss) (36.2) 25.0 (32.0) 80.3 Amounts included in net periodic benefit cost 6.3 10.1 19.1 23.0 Translation adjustments 71.1 (139.5) (51.6) (374.1) Benefit (provision) for deferred income taxes on components of other comprehensive income 11.1 (13.4) 3.6 (39.7) Total other comprehensive income (loss) 58.9 (115.7) (57.7) (311.2) Comprehensive income (loss) 325.5 157.0 968.1 628.4 Comprehensive (income) loss attributable to noncontrolling interests: Net earnings (1.0) (0.6) (4.7) (3.7) Translation adjustments (1.0) 2.1 (0.1) 2.6 (2.0) 1.5 (4.8) (1.1) Comprehensive income attributable to The Estée Lauder Companies Inc. $ 323.5 $ 158.5 $ 963.3 $ 627.3 See notes to consolidated financial statements. 3

Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED BALANCE SHEETS March 31 June 30 2016 2015 (Unaudited) ($ in millions) ASSETS Current Assets Cash and cash equivalents $ 556.3 $ 1,021.4 Short-term investments 517.5 503.7 Accounts receivable, net 1,416.6 1,174.5 Inventory and promotional merchandise, net 1,150.5 1,215.8 Prepaid expenses and other current assets 611.4 553.1 Total current assets 4,252.3 4,468.5 Property, Plant and Equipment, net 1,510.5 1,490.2 Other Assets Long-term investments 1,075.3 420.3 Goodwill 1,225.3 1,144.8 Other intangible assets, net 352.3 326.6 Other assets 400.6 388.8 Total other assets 3,053.5 2,280.5 Total assets $ 8,816.3 $ 8,239.2 LIABILITIES AND EQUITY Current Liabilities Current debt $ 312.8 $ 29.8 Accounts payable 572.5 635.4 Other accrued liabilities 1,548.4 1,470.4 Total current liabilities 2,433.7 2,135.6 Noncurrent Liabilities Long-term debt 1,612.5 1,607.5 Other noncurrent liabilities 947.7 841.8 Total noncurrent liabilities 2,560.2 2,449.3 Contingencies (Note 8) Equity Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at March 31, 2016 and June 30, 2015; shares issued: 421,624,266 at March 31, 2016 and 418,530,857 at June 30, 2015; Class B shares authorized: 304,000,000 at March 31, 2016 and June 30, 2015; shares issued and outstanding: 146,658,737 at March 31, 2016 and 147,046,137 at June 30, 2015 5.7 5.7 Paid-in capital 3,090.4 2,871.6 Retained earnings 7,711.6 7,004.1 Accumulated other comprehensive loss (439.3) (381.5) 10,368.4 9,499.9 Less: Treasury stock, at cost; 199,110,967 Class A shares at March 31, 2016 and 190,694,630 Class A shares at June 30, 2015 (6,556.6) (5,856.7) Total stockholders’ equity — The Estée Lauder Companies Inc. 3,811.8 3,643.2 Noncontrolling interests 10.6 11.1 Total equity 3,822.4 3,654.3 Total liabilities and equity $ 8,816.3 $ 8,239.2 See notes to consolidated financial statements. 4