SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
----------------------
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-14064
The Estee Lauder Companies Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-2408943
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
767 Fifth Avenue, New York, New York 10153
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-572-4200
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 [ ]
At April 20, 2000, 124,077,411 shares of the registrant's Class A Common
Stock, $.01 par value, and 113,679,334 shares of the registrant's Class B Common
Stock, $.01 par value, were outstanding.
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
INDEX
<TABLE>
<CAPTION>
Page
Part I. Financial Information
<S> <C>
Consolidated Statements of Earnings --
Three Months and Nine Months Ended March 31, 2000 and 1999............................... 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations............................................ 3
Consolidated Balance Sheets --
March 31, 2000 and June 30, 1999......................................................... 12
Consolidated Statements of Cash Flows --
Nine Months Ended March 31, 2000 and 1999................................................ 13
Notes to Consolidated Financial Statements.................................................... 14
Part II. Other Information............................................................................. 18
</TABLE>
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<PAGE>
THE ESTEE LAUDER COMPANIES INC.
PART I. FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
--------------------- ----------------------
2000 1999 2000 1999
---- ---- ---- ----
(In millions, except per share data)
<S> <C> <C> <C> <C>
Net Sales........................................................ $ 1,039.1 $ 964.8 $3,367.9 $3,052.8
Cost of sales.................................................... 230.7 216.1 765.6 695.5
--------- --------- --------- --------
Gross Profit..................................................... 808.4 748.7 2,602.3 2,357.3
--------- --------- --------- --------
Operating expenses:
Selling, general and administrative........................... 701.3 650.5 2,155.4 1,959.0
Related party royalties....................................... 7.7 7.9 24.9 24.6
--------- --------- --------- --------
709.0 658.4 2,180.3 1,983.6
--------- --------- --------- --------
Operating Income................................................. 99.4 90.3 422.0 373.7
Interest expense, net............................................ 3.3 3.4 13.9 14.3
--------- --------- --------- --------
Earnings before Income Taxes..................................... 96.1 86.9 408.1 359.4
Provision for income taxes....................................... 35.7 33.3 151.2 136.9
--------- --------- --------- --------
Net Earnings..................................................... 60.4 53.6 256.9 222.5
Preferred stock dividends........................................ 5.9 5.9 17.6 17.6
--------- --------- --------- --------
Net Earnings Attributable to Common Stock........................ $ 54.5 $ 47.7 $ 239.3 $ 204.9
========= ========= ========= ========
Net earnings per common share:
Basic........................................................ $ .23 $ .20 $ 1.01 $ .87
Diluted...................................................... $ .22 $ .20 $ .99 $ .85
Weighted average common shares outstanding:
Basic........................................................ 238.0 237.0 237.7 236.8
Diluted...................................................... 242.8 241.8 242.5 240.7
Cash dividends declared per common share......................... $ .05 $ .0425 $ .15 $ .1275
</TABLE>
See notes to consolidated financial statements.
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<PAGE>
THE ESTEE LAUDER COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
We manufacture skin care, makeup, fragrance and hair care products which are
distributed in over 110 countries and territories. The following is a
comparative summary of operating results for the three and nine month periods
ended March 31, 2000 and 1999. Sales of products and services that do not meet
our definition of skin care, makeup, fragrance and hair care have been included
in the "Other" category. Prior-year information has been restated to reflect the
results of operations related to those products and services.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
-------------------- ----------------------
2000 1999 2000 1999
---- ---- ---- ----
(In millions)
<S> <C> <C> <C> <C>
NET SALES
By Region:
The Americas............................................... $ 659.4 $ 603.9 $ 2,091.7 $ 1,883.2
Europe, the Middle East & Africa........................... 247.1 242.5 854.5 815.5
Asia/Pacific............................................... 132.6 118.4 421.7 354.1
--------- --------- --------- ---------
$ 1,039.1 $ 964.8 $ 3,367.9 $ 3,052.8
========= ========= ========= =========
By Product Category:
Skin Care.................................................. $ 404.5 $ 374.9 $ 1,147.7 $ 1,020.8
Makeup..................................................... 420.1 381.8 1,197.2 1,104.2
Fragrance.................................................. 180.8 183.0 921.9 848.3
Hair Care.................................................. 28.6 21.0 81.5 63.9
Other...................................................... 5.1 4.1 19.6 15.6
--------- --------- --------- ---------
$ 1,039.1 $ 964.8 $ 3,367.9 $ 3,052.8
========= ========= ========= =========
OPERATING INCOME
By Region:
The Americas............................................... $ 56.2 $ 49.2 $ 256.1 $ 232.3
Europe, the Middle East & Africa........................... 34.5 33.1 121.9 108.6
Asia/Pacific............................................... 8.7 8.0 44.0 32.8
--------- --------- --------- ---------
$ 99.4 $ 90.3 $ 422.0 $ 373.7
========= ========= ========= =========
By Product Category:
Skin Care.................................................. $ 49.6 $ 45.0 $ 177.5 $ 152.3
Makeup..................................................... 47.5 40.0 142.7 127.4
Fragrance.................................................. 0.4 0.9 93.4 84.0
Hair Care.................................................. 2.0 3.2 8.8 8.7
Other...................................................... (0.1) 1.2 (0.4) 1.3
--------- --------- --------- ---------
$ 99.4 $ 90.3 $ 422.0 $ 373.7
========= ========= ========= =========
</TABLE>
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<PAGE>
THE ESTEE LAUDER COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain consolidated earnings data as a
percentage of net sales:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
---------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales........................................................ 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................................... 22.2 22.4 22.7 22.8
----- ----- ----- -----
Gross profit..................................................... 77.8 77.6 77.3 77.2
----- ----- ----- -----
Operating expenses before depreciation and amortization:
Selling, general and administrative........................... 63.9 64.3 60.8 61.3
Related party royalties....................................... 0.7 0.8 0.8 0.8
----- ----- ----- -----
64.6 65.1 61.6 62.1
----- ----- ----- -----
Earnings before interest, taxes, depreciation and amortization
("EBITDA")..................................................... 13.2 12.5 15.7 15.1
Depreciation and amortization.................................... 3.6 3.1 3.2 2.9
----- ----- ----- -----
Operating income................................................. 9.6 9.4 12.5 12.2
Interest expense, net............................................ 0.3 0.4 0.4 0.4
----- ----- ----- -----
Earnings before income taxes..................................... 9.3 9.0 12.1 11.8
Provision for income taxes....................................... 3.5 3.4 4.5 4.5
----- ----- ----- -----
Net earnings ................................................... 5.8% 5.6% 7.6% 7.3%
===== ===== ===== =====
</TABLE>
Third Quarter Fiscal 2000 compared with Third Quarter Fiscal 1999
NET SALES
Net sales increased 8% or $74.3 million to $1,039.1 million as compared with the
same prior-year quarter reflecting continued success in our skin care business
and strong makeup sales. As reported in our second quarter filing, pursuant to
our Year 2000 contingency plans we shipped $30 million of merchandise in
December that would normally have been shipped in January. Net sales increased
11% before considering the impact of this shift in sales. The Americas continued
its strong growth with a 9% or $55.5 million improvement demonstrating the
strength of our core brands and the contribution of newer brands in our
portfolio. On a constant exchange rate basis net sales for the quarter increased
9% reflecting a strong U.S. dollar against certain European currencies,
partially offset by strengthening of the Japanese Yen.
Product Categories
Skin Care
Net sales of skin care products increased 8% or $29.6 million to $404.5 million
as compared to the prior-year quarter. New for this quarter was Resilience Lift
Eye Creme, following up on the continued success of Resilience Lift, as well as
Body Clinique. Spotlight Skin Tone Perfector was launched earlier this year and
continues to be well received. Also contributing to the sales improvement was
our line of ginger based products marketed under our Origins brand, led by
Ginger Souffle and Ginger Body Wash. As a result of its domestic and
international launch in the comparable prior-year quarter, sales of Stop Signs
were lower.
Makeup
Net sales of makeup products increased 10% or $38.3 million to $420.1 million.
The increase is attributable to a number of new products, including those in our
Tommy color line and *magic by Prescriptives, as well as the recently introduced
Liquid Lipstick, Longstemmed Lashes and HyperReal Foundation. Existing products
such as Futurist improved over the comparable period, while Sheer Powder Blusher
decreased versus its launch in the same prior-year quarter. Current sales
increases also reflect the inclusion of Stila, acquired in August 1999.
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<PAGE>
THE ESTEE LAUDER COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Fragrance
Net sales of fragrance products decreased 1% or $2.2 million to $180.8 million
and increased 1% excluding the impact of foreign currency translation. In
addition, the Y2K related shift of sales from the third quarter to the second
quarter impacted fragrance more than our other product categories. Excluding
this shift of sales, third quarter fragrance sales increased 8%. On a reported
basis, lower sales of "tommy girl", "tommy" and Hilfiger Athletics were more
than offset by the recent introduction of Freedom for him and Freedom for her.
Additionally, sales of Pleasures for Men and Dazzling were lower, partially
offset by the recent introduction of DKNY. Fourth quarter results are expected
to be lower than the prior year due to difficult comparisons with the
international rollout of Hilfiger Athletics and Dazzling, and the initial
shipment of Freedom, as well as softer sales of previously launched Tommy
Hilfiger products.
Hair Care
Net sales in the hair care category increased 36% or $7.6 million to $28.6
million as a result of business acquisitions within the distribution channel,
expansion of the number of company-owned retail stores, and the successful
introduction of new Aveda products.
The introduction of new products may have some cannibalization effect on sales
of existing products, which we take into account in our business planning.
Geographic Regions
Net sales in the Americas increased 9% or $55.5 million to $659.4 million. Sales
increases were achieved from the strength of new and existing products as well
as contributions from acquired businesses. In Europe, the Middle East & Africa,
net sales increased 2% or $4.6 million to $247.1 million. Excluding the impact
of foreign currency translation, net sales increased 10%, reflecting a stronger
U.S. dollar. The increase was primarily the result of higher net sales in the
United Kingdom and Spain, partially offset by lower sales in Germany. Also
contributing to growth in this region was the inclusion of Jo Malone since the
date of acquisition in October 1999. Net sales in Asia/Pacific increased 12% or
$14.2 million to $132.6 million as compared with the same prior-year quarter.
Sales increased through most of the region with the strongest growth in Korea,
Japan, Taiwan and Hong Kong. Excluding the impact of foreign currency
translation, Asia/Pacific net sales increased 6%, as compared to the same
prior-year quarter.
We strategically stagger new product launches by geographic markets, which may
account for differences in regional sales growth.
COST OF SALES
The reduction in cost of sales reflects changes in product distribution, as well
as the impact of our production and sourcing initiatives. The changes in product
distribution, including the rollout of retail stores, acquisition of retail
outlets of distributors and growth of our Internet business, favorably impacted
cost of sales as these distribution channels have gross margins higher than the
corporate average. In addition, our cost of sales reduction program had a
favorable impact on gross margins of products offered by our newer acquisitions.
OPERATING EXPENSES
Operating expenses were 68.2% of net sales in both the current and prior-year
quarter. Although new and modified distribution channels contribute to improved
gross margins, they have higher operating expenses than our existing
distribution. In spite of this impact, operating expenses before depreciation
and amortization improved from 65.1% of net sales to 64.6%. Quarterly operating
expenses are subject to the timing and type of advertising and promotional
spending due to product launches and rollouts, as well as incremental
advertising in select markets.
OPERATING INCOME
Operating income increased 10% or $9.1 million to $99.4 million as compared to
the same prior-year quarter, which resulted in an operating margin of 9.6% in
the current quarter versus 9.4% in the prior-year quarter. The increase in
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<PAGE>
THE ESTEE LAUDER COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
operating income primarily related to higher net sales and production
efficiencies, while margin increased primarily due to improved gross profits and
operating expense efficiencies, partially offset by increased depreciation and
amortization.
Product Categories
Operating income increased 10% and 19% in skin care and makeup, respectively,
due primarily to strong new product offerings driving increases in net sales.
The operating income related to fragrance products decreased from $0.9 million
to $0.4 million primarily as a result of lower sales. We have discussed seasonal
spending in the past, the effects of which are most closely related to our
fragrance business. In a period of lower sales we will continue to spend on
advertising and promotion for fragrance products, both to support new and
existing products and to drive traffic to our counters in support of our other
product categories. Although we had higher sales of hair care products,
operating income decreased as we invested in our distribution channel, via
acquisition of distributors and retail expansion, and increased spending to
support new product introductions.
Geographic Regions
Operating income in the Americas increased 14% or $7.0 million to $56.2 million
due to higher sales in the region, improved gross margins and operating expense
efficiencies. In Europe, the Middle East & Africa, operating income increased 4%
or $1.4 million to $34.5 million. Improved operating results in the United
Kingdom and Spain were partially offset by lower results in France. Operating
income from Jo Malone is also additive to the region. In Asia/Pacific, operating
income increased 9% to $8.7 million as compared to $8.0 million. Higher net
sales and operating expense efficiencies resulted in operating income
improvements in Taiwan, Korea and Hong Kong.
Quarterly operating results are subject to seasonal net sales fluctuations in
addition to the level, scope and timing of expenditures related to product
promotions and/or introductions.
EBITDA
Earnings before interest, taxes, depreciation and amortization is an additional
measure of operating performance used by management. While the components of
EBITDA may vary from company to company, we exclude all depreciation charges
related to property, plant and equipment and all amortization charges including:
amortization of goodwill; purchased royalty rights; leasehold improvements; and
other intangible assets. We consider EBITDA useful in analyzing our results;
however, it is not intended to replace, or substitute for, any presentation
included in the consolidated financial statements prepared in conformity with
generally accepted accounting principles.
EBITDA increased 14% to $136.9 million or 13.2% of net sales as compared to
$120.3 million or 12.5% of net sales in the same prior-year quarter. The
improvement in EBITDA is primarily attributable to sales growth and margin
improvements.
INTEREST EXPENSE, NET
Net interest expense was $3.3 million for the three months ended March 31, 2000,
as compared with $3.4 million in the same prior-year quarter. Our debt and cash
positions are mostly unchanged; however, some cost savings have been achieved
through our management of working capital and interest rates.
PROVISION FOR INCOME TAXES
The provision for income taxes represents federal, foreign, state and local
income taxes. The effective rate for income taxes for the three months ended
March 31, 2000 was 37% compared with 38% in the same prior-year quarter. These
rates reflect the effect of state and local taxes, tax rates in certain foreign
jurisdictions and certain nondeductible expenses. The decrease in the effective
income tax rate as compared to the same prior-year quarter was principally
attributable to implementing tax planning initiatives.
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<PAGE>
THE ESTEE LAUDER COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Nine Months Fiscal 2000 compared with Nine Months Fiscal 1999
NET SALES
Net sales increased 10% or $315.1 million to $3,367.9 million for the nine
months ended March 31, 2000 as compared with the same prior-year period. Sales
growth is primarily due to increased sales of skin care products and the
domestic strength of fragrance product sales. Excluding the impact of foreign
currency exchange rate changes, net sales increased 11%, mainly due to the
strength of the U.S. dollar against certain European currencies.
Product Categories
Skin Care
Net sales of skin care products increased 12% or $126.9 million to $1,147.7
million. The international rollout of Resilience Lift and the worldwide
introduction of Resilience Lift Eye Cream have contributed to net sales
increases in the current year. Other new products such as Body Clinique and the
Clinique Acne Solutions line are also being well received. The La Mer brand has
more than doubled its sales this year in all regions on the strength of its
original products as well as a newly added eye cream.
Makeup
Makeup product sales increased 8% or $93.0 million to $1,197.2 million supported
by new and existing products, the addition of Stila and increased sales by MAC.
During this fiscal year we introduced City Stick, Longstemmed Lashes and *magic
by Prescriptives, as well as a variety of products in the Tommy Hilfiger line of
color cosmetics. Successful existing products include ReNutriv All Day Lipstick.
MAC has experienced great success through expansion of both traditional and
retail distribution. These improvements are partially offset by lower sales of
Indelible Lipstick and Smudgesicles, among others.
Fragrance
Net sales of fragrance products increased 9% or $73.6 million to $921.9 million.
The increase is primarily attributable to the worldwide introduction of Freedom
for him and Freedom for her, which were introduced this year. Donna Karan
Cashmere Mist and DKNY Women have both contributed to sales improvements. These
increases were partially offset by lower sales of previously launched Tommy
Hilfiger products.
Hair Care
Sales of hair care products increased 28% or $17.6 million to $81.5 million due
to growth of the Aveda hair care product line and refinements in the
distribution channel. Improvements in distribution include a greater degree of
selectivity with regard to salons that carry Aveda products and an increase in
the number of company-owned retail stores.
Geographic Regions
Sales in the Americas increased 11% or $208.5 million to $2,091.7 million. This
increase was driven by sales of new and existing products across all categories
and growth in our newer brands. In Europe, the Middle East & Africa, net sales
increased 5% or $39.0 million to $854.5 million. The increase was primarily the
result of higher net sales in Italy, Spain, and the distributor and travel
retail businesses. Excluding the impact of foreign currency translation, sales
in Europe, the Middle East & Africa increased 12%. Net sales in Asia/Pacific
increased 19% or $67.6 million to $421.7 million, reflecting increases in all
regions, particularly Japan, Korea, Australia and Taiwan. Excluding the impact
of foreign currency translation, Asia/Pacific sales grew 9% over the prior-year
period.
COST OF SALES
Cost of sales for the nine months ended March 31, 2000 were 22.7% of net sales
compared with 22.8% of net sales in the prior-year period. Cost of sales has
been relatively consistent throughout the year reflecting production
efficiencies, offset by growth in newer brands with higher product cost
structures relative to our core brands. In the most recent quarter we have
experienced improvements related to growth and change in our channels of
distribution as well as the rollout of our production and sourcing initiative.
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<PAGE>
THE ESTEE LAUDER COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING EXPENSES
Total operating expenses decreased to 64.8% of net sales for the nine months
ended March 31, 2000, compared with 65.0% of net sales in the same prior-year
period. This improvement primarily relates to operating expense efficiencies
achieved and the growth of acquired companies, which have lower operating cost
structures, partially offset by increased costs related to new/modified
distribution channels, which are higher than traditional channels, as well as
higher depreciation and amortization. Operating expenses are subject to the
timing of advertising and promotional spending due to product launches and
rollouts as well as incremental advertising in select markets.
OPERATING INCOME
Operating income increased 13% or $48.3 million to $422.0 million for the nine
months ended March 31, 2000 as compared with the same prior-year period.
Operating margins were 12.5% of net sales in the current period as compared to
12.2% in the same prior-year period. The increase in operating income and
margins was due to higher net sales coupled with production and operational
efficiencies achieved and the planned timing and execution of advertising and
promotional spending.
Product Categories
Operating income increased in the skin care, makeup and fragrance categories by
17%, 12% and 11%, respectively, primarily due to sales growth. Hair care
operating income is relatively flat as a result of increased spending,
particularly in the most recent quarter, related to retail expansion, changes in
distribution and support of new product introductions.
Geographic Regions
Operating income in the Americas increased 10% or $23.8 million to $256.1
million for the nine months ended March 31, 2000, primarily due to increases in
skin care product sales, as well as the inclusion of operating results from
recent acquisitions. In Europe, the Middle East & Africa, operating income
increased 12% or $13.3 million to $121.9 million reflecting improved operating
results in South Africa and the distributor and travel retail businesses.
Improvements in these regions were partially offset by lower income in France.
In Asia/Pacific, operating income increased 34% or $11.2 million to $44.0
million due to higher results in Japan, Taiwan, Australia and Korea.
EBITDA
EBITDA increased 15% to $529.8 million or 15.7% of net sales as compared to
$462.4 million or 15.1% of net sales in the same prior-year period. The
improvement in EBITDA is primarily attributable to sales growth as well as
production and operating expense efficiencies achieved.
INTEREST EXPENSE, NET
Net interest expense was $13.9 million and $14.3 million for the nine months
ended March 31, 2000 and 1999, respectively. Interest expense decreased as a
result of our management of interest rates, partially offset by lower average
invested cash balances.
PROVISION FOR INCOME TAXES
The provision for income taxes represents federal, foreign, state and local
income taxes. The effective rate for income taxes for the nine months ended
March 31, 2000 was 37% compared with 38% in the same prior-year period. These
rates reflect the effect of state and local taxes, tax rates in certain foreign
jurisdictions and certain nondeductible expenses. The decrease in the effective
income tax rate is principally attributable to tax planning initiatives.
-8-
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of funds are cash flow from operations, issuance of
commercial paper, long-term borrowings and borrowings under committed credit
lines provided by banks in the United States and abroad. We believe that these
sources of funds will be adequate to support currently planned business
operations, acquisitions and capital expenditures on both a near-term and
long-term basis. At March 31, 2000, we had cash and cash equivalents of $367.6
million as compared to $347.5 million at June 30, 1999.
The classification of commercial paper as long-term debt in our balance sheet is
based upon our intent and ability to refinance maturing commercial paper on a
long-term basis. As of March 31, 2000 we had committed credit facilities in the
amount of $750.0 million, of which none was used. We also had uncommitted credit
facilities in the amount of $61.2 million, of which none was used. Total debt as
a percentage of total capitalization (including short-term debt) was 22% at
March 31, 2000 and 25% at June 30, 1999.
We currently have an effective shelf registration statement covering the
potential issuance of up to $400.0 million in debt securities.
Net cash provided by operating activities was $344.6 million in the nine months
ended March 31, 2000 as compared to $311.6 million in the same prior-year
period. This favorable change in net cash provided by operating activities
primarily reflects increased profitability. Net cash used for investing
activities of $248.9 million during the nine months ended March 31, 2000
reflects capital expenditures, the acquisitions of Stila and Jo Malone, and the
ongoing acquisition of certain Aveda distributors in the United States and the
United Kingdom as well as certain Aveda retail stores. Net cash used for
financing activities of $68.6 million principally reflects dividends and
payments to acquire treasury stock.
In April 2000, the Company announced its intention to acquire the business of
Gloss.com, Inc., an Internet beauty site, for cash.
Derivative Financial Instruments
We conduct business in many foreign currencies. As a result, we are subject to
foreign currency exchange rate risk due to the effects that foreign exchange
rate movements of these currencies have on our costs and cash flows which we
receive from our foreign subsidiaries. We address our risks through a controlled
program of risk management, the principal objective of which is to minimize the
risks and/or costs associated with financial and global operating activities. We
use derivative financial instruments for the purpose of managing our exposure to
adverse fluctuations in foreign currency exchange rates and interest rates. We
do not utilize derivative financial instruments for trading or other speculative
purposes.
Foreign Exchange Risk Management
We enter into forward exchange contracts to hedge purchases, receivables and
payables denominated in foreign currencies for periods consistent with our
identified exposures. Gains and losses related to qualifying hedges of these
exposures are deferred and recognized in operating income when the underlying
hedged transaction occurs. We also enter into purchased foreign currency options
to hedge anticipated transactions where there is a high probability that
anticipated exposures will materialize. Any gains realized on such options that
qualify as hedges are deferred and recognized in operating income when the
underlying hedged transaction occurs. Premiums on foreign currency options are
amortized over the period being hedged. Foreign currency transactions, which do
not qualify as hedges, are marked to market on a current basis with gains and
losses recognized through income and reflected in operating expenses. In
addition, any previously deferred gains and losses on hedges, which are
terminated prior to the transaction date, are recognized in current income when
the hedge is terminated. The contracts have varying maturities with none
exceeding 24 months.
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<PAGE>
THE ESTEE LAUDER COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As a matter of policy, we only enter into contracts with counterparties that
have at least an "A" (or equivalent) credit rating. The counterparties to these
contracts are major financial institutions. We do not have significant exposure
to any one counterparty. Our exposure to credit loss in the event of
nonperformance by any of the counterparties is limited to only the recognized,
but not realized gains attributable to the contracts. Management believes risk
of loss is remote and in any event would not be material. Costs associated with
entering into these contracts have not been material to our financial results.
At March 31, 2000, we had contracts to exchange foreign currencies in the form
of purchased currency options and forward exchange contracts in the amount of
$24.3 million and $212.9 million, respectively. Foreign currencies exchanged
under these contracts are principally the Euro, Japanese yen, Swiss franc and
British pound.
Interest Rate Risk Management
We have entered into interest rate swaps to exchange floating rate for fixed
rate interest payments periodically over the life of the agreements. Amounts
currently due to or from interest rate swap counterparties are recorded in
interest expense in the period in which they accrue. At December 31, 1999, we
had interest rate swap agreements outstanding with a notional principal amount
of $200.0 million. On February 2, 2000 we terminated $66.0 million of our $200.0
million interest rate swap at a gain. In order to maintain interest rate
protection, we used a portion of the proceeds to purchase an interest rate cap
set at the same rate as the previously terminated interest rate swap.
Market Risk
There have been no significant changes in market risk since June 30, 1999 that
would have a material effect on our calculated value-at-risk exposure, as
disclosed in the annual report on Form 10-K for the year ended June 30, 1999.
INTERNET
Our strategic goals for the Internet are to enhance our brand equities, to reach
new consumers, to forge deeper relationships with existing consumers and to
strengthen our business through our traditional retailers. The strategy includes
a planned launch of a multi-brand website offering products from our portfolio,
specially designed sites which will be available through the e-commerce sites of
retailers who meet specific requirements and individual sites for our brands.
Certain of these sites are under development and we currently have seven
websites that educate and inform consumers about specific brands. Three of the
existing sites - clinique.com, origins.com and bobbibrown.com - have e-commerce
capabilities, either directly or through one of our retail customers. Our
planned acquisition of Gloss.com, Inc. will allow us to accelerate the
implementation of this strategy. Our Internet sales are currently limited to
consumers in the United States and, during the three and nine months ended March
31, 2000, such sales have not been significant. The initial impact of our
overall Internet strategy on earnings is expected to be immaterially dilutive
and accretive thereafter.
-10-
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Information
We and our representatives from time to time make written or oral
forward-looking statements, including statements contained in this and other
filings with the Securities and Exchange Commission and in our reports to
stockholders. The words and phrases "will likely result," "expects," "believes,"
"will continue," "is anticipated," "estimates," "projects" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements include, without limitation, our expectations regarding sales,
earnings or other future financial performance and liquidity, product
introductions, entry into new geographic regions, new methods of sale and future
operations or operating results. Although we believe that our expectations are
based on reasonable assumptions within the bounds of our knowledge of our
business and operations, we cannot assure that actual results will not differ
materially from our expectations. Factors that could cause actual results to
differ from expectations include, without limitation:
(i) increased competitive activity from companies in the skin care,
makeup, fragrance and hair care businesses, some of which have
greater resources than we do;
(ii) our ability to develop, produce and market new products on which
future operating results may depend;
(iii) consolidations and restructurings in the retail industry
causing a decrease in the number of stores that sell our products, an
increase in the ownership concentration within the retail industry or
ownership of retailers by our competitors or ownership of competitors
by our customers that are retailers;
(iv) shifts in the preferences of consumers as to where and how they
shop for beauty and related products;
(v) social, political and economic risks to our foreign
manufacturing, distribution and retail operations, including changes
in foreign investment and trade policies and regulations of the host
countries and of the United States;
(vi) changes in the laws, regulations and policies, including changes
in accounting standards, that affect, or will affect, us in the
United States and abroad;
(vii) foreign currency fluctuations affecting our results of
operations and the value of our foreign assets, the relative prices
at which we sell our products and our foreign competitors sell their
products in the same market and our operating and manufacturing costs
outside of the United States;
(viii) changes in global economic conditions that could affect the
cost and availability of capital to the Company, which may be needed
for new equipment, facilities or acquisitions;
(ix) shipment delays, depletion of inventory and increased production
costs resulting from disruptions of operations at any of the
facilities which, due to consolidations in our manufacturing
operations, now manufacture nearly all of our supply of a particular
type of product (i.e., focus factories);
(x) real estate rates and availability, which may affect our ability
to increase the number of retail locations at which we sell our
products;
(xi) changes in product mix to products which are less profitable;
and,
(xii) our ability to integrate acquired businesses and realize value
therefrom.
We assume no responsibility to update forward-looking statements made herein or
otherwise.
-11-
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 June 30
2000 1999
---- ----
(Unaudited)
(In millions)
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents............................................................... $ 367.6 $ 347.5
Accounts receivable, net................................................................ 606.9 533.7
Inventory and promotional merchandise, net.............................................. 444.9 513.0
Prepaid expenses and other current assets............................................... 188.8 176.0
-------- --------
Total current assets............................................................... 1,608.2 1,570.2
-------- --------
Property, Plant and Equipment, net...................................................... 438.1 383.6
-------- --------
Other Assets
Investments, at cost or market value.................................................... 56.6 35.5
Deferred taxes.......................................................................... 59.9 63.6
Goodwill, net .......................................................................... 664.2 557.9
Other intangible assets, net............................................................ 36.1 50.6
Other assets, net....................................................................... 93.6 85.3
-------- --------
Total other assets................................................................. 910.4 792.9
-------- --------
Total assets.............................................................. $2,956.7 $2,746.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt......................................................................... $ 7.0 $ 6.6
Accounts payable........................................................................ 189.0 223.1
Accrued income taxes.................................................................... 98.2 87.6
Other accrued liabilities............................................................... 559.0 544.9
-------- --------
Total current liabilities.......................................................... 853.2 862.2
-------- --------
Noncurrent Liabilities
Long-term debt.......................................................................... 421.5 422.5
Other noncurrent liabilities............................................................ 198.0 177.5
-------- --------
Total noncurrent liabilities....................................................... 619.5 600.0
-------- --------
$6.50 Cumulative Redeemable Preferred Stock, at redemption value........................ 360.0 360.0
-------- --------
Stockholders' Equity
Common stock, $.01 par value; 650,000,000 shares Class A authorized, shares
issued 124,894,668 at March 31, 2000 and 123,936,464 at June 30, 1999;
240,000,000 shares Class B authorized, shares issued and outstanding 113,679,334..... 2.4 2.4
Paid-in capital......................................................................... 232.9 211.6
Retained earnings....................................................................... 969.1 766.2
Accumulated other comprehensive income.................................................. (49.7) (44.3)
-------- --------
1,154.7 935.9
Less: Treasury stock, at cost; 876,980 Class A shares at March 31, 2000
and 455,306 at June 30, 1999......................................................... (30.7) (11.4)
-------- --------
Total stockholders' equity......................................................... 1,124.0 924.5
-------- --------
Total liabilities and stockholders' equity................................ $2,956.7 $2,746.7
======== ========
</TABLE>
See notes to consolidated financial statements.
-12-
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
--------------------
2000 1999
---- ----
(In millions)
<S>
Cash Flows from Operating Activities <C> <C>
Net earnings............................................................................... $ 256.9 $ 222.5
Adjustments to reconcile net earnings to net cash
flows provided by operating activities:
Depreciation and amortization.......................................................... 94.5 75.4
Amortization of purchased royalty rights............................................... 13.3 13.3
Deferred income taxes.................................................................. (9.0) 0.1
Non-cash stock compensation............................................................ 1.4 -
Changes in operating assets and liabilities:
Increase in accounts receivable, net................................................... (82.4) (107.9)
Decrease in inventory and promotional merchandise...................................... 68.1 102.8
Increase in other assets............................................................... (32.0) (17.6)
Decrease in accounts payable........................................................... (34.4) (54.7)
Increase in accrued income taxes....................................................... 22.8 22.5
Increase in other accrued liabilities.................................................. 24.0 45.5
Increase in other noncurrent liabilities............................................... 21.4 9.7
--------- --------
Net cash flows provided by operating activities...................................... 344.6 311.6
--------- --------
Cash Flows from Investing Activities
Acquisition of businesses, net of cash acquired............................................ (125.7) (75.0)
Capital expenditures....................................................................... (121.3) (82.6)
Purchase of long-term investments.......................................................... (4.9) (5.8)
Proceeds from the disposition of long-term investments..................................... 3.0 -
--------- --------
Net cash flows used for investing activities......................................... (248.9) (163.4)
--------- --------
Cash Flows from Financing Activities
Decrease in short-term debt................................................................ (0.4) (6.5)
Repayments of long-term debt............................................................... (3.5) (3.0)
Net proceeds from employee stock transactions.............................................. 12.0 12.8
Payments to acquire treasury stock......................................................... (23.6) (12.7)
Dividends paid............................................................................. (53.1) (47.7)
--------- --------
Net cash flows used for financing activities......................................... (68.6) (57.1)
--------- --------
Effect of Exchange Rate Changes on Cash and Cash Equivalents.................................. (7.0) 1.5
--------- --------
Net Increase in Cash and Cash Equivalents.................................................. 20.1 92.6
Cash and Cash Equivalents at Beginning of Period........................................... 347.5 277.5
--------- --------
Cash and Cash Equivalents at End of Period................................................. $ 367.6 $ 370.1
========= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest .............................................................................. $ 21.4 $ 21.9
========= ========
Income taxes........................................................................... $ 126.6 $ 103.4
========= ========
Non-cash items:
Tax benefit from exercise of stock options............................................. $ 11.4 $ 11.2
========= ========
</TABLE>
See notes to consolidated financial statements.
-13-
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of The
Estee Lauder Companies Inc. and its subsidiaries (collectively, the "Company").
All significant intercompany balances and transactions have been eliminated in
consolidation.
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
results of operations of any interim period are not necessarily indicative of
the results of operations to be expected for the fiscal year. For further
information, refer to the consolidated financial statements and accompanying
footnotes included in the Company's annual report on Form 10-K for the year
ended June 30, 1999.
Net Earnings Per Common Share
For the three and nine month periods ended March 31, 2000 net earnings per
common share amounts ("basic EPS") were computed by dividing net earnings, after
deducting preferred stock dividends on the Company's $6.50 Cumulative Redeemable
Preferred Stock, by the weighted average number of common shares outstanding and
contingently issuable shares (which satisfy certain conditions) and excluded any
potential dilution. Net earnings per common share amounts assuming dilution
("diluted EPS") were computed by reflecting potential dilution from the exercise
of stock options.
A reconciliation between the numerators and denominators of the basic and
diluted EPS computations is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
---------------------- ---------------------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited)
(In millions, except per share data)
<S> <C> <C> <C> <C>
Numerator:
Net earnings.................................................. $ 60.4 $ 53.6 $ 256.9 $ 222.5
Preferred stock dividends..................................... 5.9 5.9 17.6 17.6
------- ------ ------- -------
Net earnings attributable to common stock..................... $ 54.5 $ 47.7 $ 239.3 $ 204.9
======= ====== ======= =======
Denominator:
Weighted average common shares outstanding - Basic............ 238.0 237.0 237.7 236.8
Effect of dilutive securities: Stock options.................. 4.8 4.8 4.8 3.9
------- ------ ------- -------
Weighted average common shares outstanding - Diluted.......... 242.8 241.8 242.5 240.7
======= ====== ======= =======
Net earnings per common share:
Basic EPS..................................................... $ .23 $ .20 $ 1.01 $ .87
======= ====== ======= =======
Diluted EPS................................................... $ .22 $ .20 $ .99 $ .85
======= ====== ======= =======
</TABLE>
As of March 31, 2000 options to purchase 6.9 million shares of common stock were
not included in the computation of diluted EPS because the exercise price of
those options were greater than the average market price of the common stock.
The options were still outstanding at the end of the period.
-14-
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounts Receivable
Accounts receivable is stated net of allowances for doubtful accounts and retail
customer deductions of $35.4 million and $36.0 million as of March 31, 2000 and
June 30, 1999, respectively.
Inventory and Promotional Merchandise
Inventory and promotional merchandise only include inventory considered saleable
or usable in future periods, and are stated at the lower of cost or market, with
cost being determined on the first-in, first-out method. Promotional merchandise
is charged to expense at the time the merchandise is shipped to the Company's
customers.
<TABLE>
<CAPTION>
March 31 June 30
2000 1999
---- ----
(Unaudited)
(In millions)
<S> <C> <C>
Inventory and promotional merchandise consists of:
Raw materials......................................... $ 98.6 $ 128.3
Work in process....................................... 18.6 22.6
Finished goods........................................ 255.7 238.7
Promotional merchandise............................... 72.0 123.4
-------- -------
$ 444.9 $ 513.0
======== =======
</TABLE>
Property, Plant and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation.
For financial statement purposes, depreciation is provided principally on the
straight-line method over the estimated useful lives of the assets ranging from
3 to 40 years. Leasehold improvements are amortized on a straight-line basis
over the shorter of the life of the respective lease or the expected useful life
of the improvement.
<TABLE>
<CAPTION>
March 31 June 30
2000 1999
---- ----
(Unaudited)
(In millions)
<S> <C> <C>
Land ................................................. $ 13.0 $ 13.0
Buildings and improvements.............................. 129.9 129.9
Machinery and equipment................................. 467.1 432.0
Furniture and fixtures.................................. 85.7 71.7
Leasehold improvements.................................. 214.0 153.2
-------- -------
909.7 799.8
Less accumulated depreciation and amortization.......... (471.6) (416.2)
-------- -------
$ 438.1 $ 383.6
======== =======
</TABLE>
-15-
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses
reported in those financial statements. Actual results could differ from those
estimates and assumptions.
NOTE 2 - COMPREHENSIVE INCOME
The components of accumulated other comprehensive income included in the
accompanying consolidated balance sheets consist of net unrealized investment
gains and cumulative translation adjustments as of the end of each period.
Comprehensive income and its components, net of tax, are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
------------------------ ---------------------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited)
(In millions)
<S> <C> <C> <C> <C>
Net earnings.............................................. $ 60.4 $ 53.6 $ 256.9 $222.5
------ ------ ------- ------
Other comprehensive income:
Net unrealized investment gains (losses)............. 5.2 0.2 11.5 (0.1)
Translation adjustments.............................. (15.8) (19.3) (16.9) 6.8
------ ------ ------ ------
Other comprehensive income........................... (10.6) (19.1) (5.4) 6.7
------ ------ ------ ------
Comprehensive income...................................... $ 49.8 $ 34.5 $ 251.5 $229.2
====== ====== ======= ======
</TABLE>
NOTE 3 - ACQUISITION OF BUSINESSES
In October 1999, the Company acquired Jo Malone Limited, a London-based marketer
of prestige skin care and fragrance products, for cash.
At various times during fiscal 2000 the Company acquired businesses engaged in
the distribution and retail sale of Aveda products in the United States and the
United Kingdom.
In August 1999, the Company acquired the business of Stila Cosmetics, Inc., a
manufacturer and marketer of prestige makeup products, for cash.
The aggregate purchase price for these transactions, which includes acquisition
costs, was approximately $126.1 million and each transaction has been accounted
for using the purchase method of accounting. Accordingly, the results of
operations of these acquired businesses are included in the accompanying
consolidated financial statements since their respective dates of acquisition.
Pro-forma results of operations as if these acquisitions had been completed as
of July 1, 1999 have not been presented as the impact on the Company's results
of operations would not have been material.
In April 2000, the Company announced its intention to acquire the business of
Gloss.com, Inc., an Internet beauty site, for cash.
-16-
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - SEGMENT DATA AND RELATED INFORMATION
Reportable operating segments include components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. The Company evaluates segment performance based upon net
sales and operating income. Operating income represents earnings before income
taxes and net interest expense. The accounting policies for each of the
reportable segments are substantially the same as those for the consolidated
financial statements, as described in the summary of significant accounting
policies footnote, included in the June 30, 1999 annual report on Form 10-K.
There has been no significant variance in the total or long-lived asset values
associated with each segment since June 30, 1999.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
--------------------- -----------------------
2000 1999 2000 1999
---- ---- ---- ----
(Unaudited)
(In millions)
<S> <C> <C> <C> <C>
SEGMENT DATA
Net Sales:
Skin Care........................................................ $ 404.5 $ 374.9 $ 1,147.7 $1,020.8
Makeup........................................................... 420.1 381.8 1,197.2 1,104.2
Fragrance........................................................ 180.8 183.0 921.9 848.3
Hair Care........................................................ 28.6 21.0 81.5 63.9
Other............................................................ 5.1 4.1 19.6 15.6
--------- -------- --------- --------
$ 1,039.1 $ 964.8 $ 3,367.9 $3,052.8
========= ======== ========= ========
Operating Income:
Skin Care........................................................ $ 49.6 $ 45.0 $ 177.5 $ 152.3
Makeup........................................................... 47.5 40.0 142.7 127.4
Fragrance........................................................ 0.4 0.9 93.4 84.0
Hair Care........................................................ 2.0 3.2 8.8 8.7
Other............................................................ (0.1) 1.2 (0.4) 1.3
--------- -------- --------- --------
99.4 90.3 422.0 373.7
Reconciliation:
Interest expense, net......................................... 3.3 3.4 13.9 14.3
--------- -------- --------- --------
Earnings before income taxes..................................... $ 96.1 $ 86.9 $ 408.1 $ 359.4
========= ======== ========= ========
REGIONAL DATA
Net Sales:
The Americas..................................................... $ 659.4 $ 603.9 $ 2,091.7 $1,883.2
Europe, the Middle East & Africa................................. 247.1 242.5 854.5 815.5
Asia/Pacific..................................................... 132.6 118.4 421.7 354.1
--------- -------- --------- --------
$ 1,039.1 $ 964.8 $ 3,367.9 $3,052.8
========= ======== ========= ========
Operating Income:
The Americas..................................................... $ 56.2 $ 49.2 $ 256.1 $ 232.3
Europe, the Middle East & Africa................................. 34.5 33.1 121.9 108.6
Asia/Pacific..................................................... 8.7 8.0 44.0 32.8
--------- -------- --------- --------
$ 99.4 $ 90.3 $ 422.0 $ 373.7
========= ======== ========= ========
</TABLE>
-17-
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in various routine legal proceedings incident to the ordinary
course of our business. In management's opinion the outcome of pending legal
proceedings, separately or in the aggregate, will not have a material adverse
effect on our business or financial condition.
In February 2000, the Company and eight other manufacturers of cosmetics (the
"Manufacturer Defendants") were named as defendants in a consolidated class
action lawsuit that had been pending in the Superior Court of the State of
California in Marin County. The plaintiffs purport to represent a class of all
California residents who purchased prestige cosmetic products at retail for
personal use from a number of department stores that sold such products in
California (the "Department Store Defendants"). Plaintiffs filed their initial
actions against the Department Store Defendants in May 1998. In April 2000, the
plaintiffs' counsel notified the Company of their intention to amend the
complaint to allege that the Department Store Defendants and the Manufacturer
Defendants conspired to fix and maintain retail prices and to limit the supply
of prestige cosmetic products sold by the Department Store Defendants in
violation of California state law. The plaintiffs are seeking, among other
things, treble damages, equitable relief, attorneys' fees, interest and costs.
At this time, the amended complaint has not been filed, and no discovery against
the Company has been commenced. However, the Company intends to vigorously
defend itself. While no assurance can be given as to the ultimate outcome of
this lawsuit, based on preliminary investigation, management believes that the
case will not have a material adverse effect on the Company's financial
position.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits--
27.1 Financial Data Schedule
(b) Reports on Form 8-K -- There were no reports on Form 8-K for the
three months ended March 31, 2000.
-18-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE ESTEE LAUDER COMPANIES INC.
Date: April 25, 2000 by:/s/Robert J. Bigler
---------------------------
Robert J. Bigler
Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
-19-
<PAGE>
THE ESTEE LAUDER COMPANIES INC.
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
27.1 Financial Data Schedule
-20-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Estee
Lauder Companies Inc. Form 10-Q and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Jun-30-2000
<PERIOD-END> Mar-31-2000
<CASH> 367,600
<SECURITIES> 0
<RECEIVABLES> 642,300
<ALLOWANCES> 35,400
<INVENTORY> 444,900
<CURRENT-ASSETS> 1,608,200
<PP&E> 909,700
<DEPRECIATION> 471,600
<TOTAL-ASSETS> 2,956,700
<CURRENT-LIABILITIES> 853,200
<BONDS> 421,500
360,000
0
<COMMON> 2,400
<OTHER-SE> 1,121,600
<TOTAL-LIABILITY-AND-EQUITY> 2,956,700
<SALES> 3,367,900
<TOTAL-REVENUES> 3,367,900
<CGS> 765,600
<TOTAL-COSTS> 765,600
<OTHER-EXPENSES> 2,180,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 408,100
<INCOME-TAX> 151,200
<INCOME-CONTINUING> 256,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 256,900
<EPS-BASIC> 1.01
<EPS-DILUTED> .99
</TABLE>