THE NEWS
ESTEE Contact:
LAUDER INVESTOR RELATIONS:
COMPANIES INC. DENNIS D'ANDREA
(212) 572-4384
767 Fifth Avenue
New York, NY 10153
MEDIA RELATIONS:
SALLY SUSMAN
(212) 572-4430
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FOR IMMEDIATE RELEASE:
ESTEE LAUDER COMPANIES REPORTS STRONG RESULTS;
CONSTANT CURRENCY NET SALES FOR QUARTER UP 8%, FULL YEAR RISES 9%;
EARNINGS PER SHARE INCREASE 7% FOR THE QUARTER, 12% FOR YEAR;
RESULTS ARE BEFORE ACCOUNTING CHANGE AND ONE-TIME CHARGES
NEW YORK, NY, AUGUST 16, 2001 - The Estee Lauder Companies Inc. (NYSE: EL) today
announced net sales before one-time charges for the fiscal year ended June 30,
2001 of $4.62 billion, a 6% increase from $4.37 billion in the prior year.
Excluding the negative impact of foreign currency translation, net sales
increased 9%, in line with the Company's expectations.
The Company achieved net earnings of $347.7 million before the cumulative effect
of a change in accounting principle and before restructuring and other one-time
charges for the 2001 fiscal year, up 11% from $314.1 million in the same period
last year. Diluted earnings per common share before the cumulative effect of a
change in accounting principle and before restructuring and other one-time
charges for fiscal 2001 increased 12% to $1.34 from $1.20 in the prior year.
For the fourth quarter ended June 30, 2001, the Company's net sales increased 5%
to $1.05 billion, compared with $998.9 million in the fourth quarter of fiscal
2000. Excluding the negative impact of foreign currency translation, net sales
increased 8% in the quarter. Net sales increased on a constant currency basis in
all major product categories, led by double-digit gains in hair care and in
fragrance, which compares favorably to a soft prior-year fourth quarter. Net
sales increased in each geographic region in constant currency, paced by
double-digit growth in Europe, the Middle East & Africa and a solid increase in
the Americas. Net earnings before restructuring and other one-time charges for
the fourth quarter rose 6% to $60.7 million from $57.2 million in the
corresponding prior-year period. Diluted earnings per common share before
restructuring and other one-time charges for the quarter rose 7% to $.23 from
$.21 in the same period a year ago.
Including the one-time items, net earnings and diluted earnings per share for
the three and twelve months ended June 30, 2001, were $20.4 million and $305.2
million, or $.06 and $1.16, respectively.
Fred H. Langhammer, President and Chief Executive Officer, said, "I am pleased
with the results we achieved this fiscal year. We delivered the financial goals
we set for ourselves, and our performance clearly shows the strength and success
of our brands, even in a tough retail environment."
Mr. Langhammer added, "This past year we took further action to build on our
strengths, including the creation of a global brand structure. We will continue
to be proactive in the coming year, and we are determined, ready and able to
meet new economic and competitive challenges head on. I'm confident that our
underlying fundamentals and strategies provide a solid foundation for future
growth. This foundation supports our strong commitment of managing our Company
to create value for our stockholders."
CHANGE IN ACCOUNTING PRINCIPLE, RESTRUCTURING AND OTHER ONE-TIME CHARGES
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During the fiscal 2001 first quarter, the Company adopted Statement of Financial
Accounting Standards Number 133, "Accounting for Derivative Instruments and
Hedging Activities." In compliance with the new rule, the Company recorded a
one-time after-tax charge of $2.2 million, or $.01 per diluted share, to reflect
the cumulative effect of the change in accounting principle.
In connection with the Company's previously announced restructuring, in the
fiscal 2001 fourth quarter, the Company recorded one-time charges for
restructuring and repositioning certain businesses. The pre-tax charges totaled
$63.0 million, or $40.3 million after-tax, equal to $.17 per diluted share.
RESULTS BY PRODUCT CATEGORY
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Net sales of makeup products for the year rose 11% before the impact of foreign
currency translation and increased 8% to $1.70 billion on a reported basis. The
higher sales reflect the launch of Moisture Surge Lipstick, High Impact Eye
Shadow and Lash-Doubling Mascara from Clinique along with Equalizer Smart Makeup
by Estee Lauder and Luxe Makeup by Prescriptives. Existing Estee Lauder products
such as Automatic Pencil Duo and, in international markets, Pure Color Lipstick
also contributed to the net sales increase, as did strong double-digit growth
from M.A.C and new and existing products from our other brands.
Skin care sales for the year rose 10% before foreign currency translation.
Reported sales increased 6% to $1.64 billion, fueled by the launches of
Anti-Gravity Firming Lift Cream and Anti-Gravity Firming Eye Lift Cream by
Clinique, as well as Idealist Skin Refinisher by Estee Lauder and M.A.C
Pro-Preferred Skincare. Skin care sales also benefited from the initial
shipments of LightSource Transforming Moisture Cream and Lotion from Estee
Lauder, the strong performance of Origins' Ginger Bath and Body Collection and,
in international markets, the launch of Re-Nutriv Intensive Lift Serum and
continued success of WhiteLight Brightening System by Estee Lauder.
Fragrance sales increased 1% over the prior year excluding the impact of foreign
currency translation and decreased 3% on a reported basis from the prior year to
$1.06 billion. The current year benefited from several launches, including
Intuition by Estee Lauder, DKNY for men, DKNY for women in international markets
and Ginger Essence by Origins. These positive contributions were offset by the
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continued weakness of Tommy Hilfiger fragrances and lower sales of Estee Lauder
pleasures, Dazzling Gold and Dazzling Silver. Fragrance sales also faced a
difficult comparison with the prior year due to the domestic rollout of DKNY for
women and the worldwide rollout of Clinique Happy for Men last year. The decline
in fragrance sales occurred primarily in the United States, while fragrance
sales increased in Europe due to the success of Intuition.
Sales of hair care products for the year increased 59% to $180.7 million. The
increase is attributable to double-digit growth at Aveda, the current fiscal
year introduction of Clinique's Simple Hair Care System, and the inclusion of a
full year of sales from Bumble and bumble, a majority of which was acquired in
June 2000.
For the fiscal year, operating income in skin care, makeup and hair care
increased, driven by sales growth in each of these categories. Fragrance
operating income decreased reflecting lower reported sales and continued support
spending.
RESULTS BY GEOGRAPHIC REGION
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In the Americas region, net sales for the year increased 6% to $2.82 billion,
coming off of 11% growth last year. Higher sales were achieved on the strength
of new products, continued solid performance from existing products, strong
growth from most newer brands, particularly M.A.C, Origins and Aveda, and
increased contributions from Bumble and bumble. A generally soft retail
environment continued to have a negative impact in this region. Operating income
in the region increased reflecting higher net sales, partially offset by
increased spending to support the Company's position in the marketplace and in
newer distribution channels.
In Europe, the Middle East & Africa, net sales increased 17% over last year,
excluding the impact of foreign currency translation. Every market in the region
generated sales growth, with virtually all markets posting double-digit
increases. The increased sales were led by strong double-digit results in the
United Kingdom, Spain, Italy and France and solid growth in the travel retail
and distributor businesses. The Company posted a 7% increase in reported net
sales over the prior year to $1.21 billion, reflecting the impact of the strong
U.S. dollar against most European currencies. Operating profitability increased,
particularly in the United Kingdom, Spain and the travel retail and distributor
businesses, principally due to sales growth.
On a local currency basis, Asia/Pacific net sales increased 10% versus the prior
year. Every market generated higher sales with virtually all markets posting
double-digit sales increases, the strongest performances coming from Korea,
Thailand, and Hong Kong. Sales in Japan grew modestly and it remained a
difficult market. Net sales in the region on a reported basis increased 2% to
$590.6 million, primarily reflecting the continued weakness of the Japanese yen
and Australian dollar. Operating profit in the region decreased as higher
results in Korea, Hong Kong and Malaysia were offset by lower operating results
in Australia and Japan.
ESTIMATES OF FISCAL 2002 FULL-YEAR AND FIRST-QUARTER RESULTS
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Based on its strategies in place, current business plans, current information
about its business prospects and forecasted economic conditions, the Company
believes it can achieve the following results for its fiscal 2002 full year and
first quarter.
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Looking towards the Company's fiscal 2002 full-year results, net sales are
expected to grow between 7% and 9% on a constant currency basis versus the prior
fiscal year. Despite expectations of a difficult retail environment, the Company
is confident in its strategies to grow its business through product innovation,
distribution enhancements and focused program execution. The Company anticipates
that its business performance will accelerate during the fiscal year with
stronger growth in the second half than in the first half. Geographic region net
sales growth in constant currency is anticipated to be led by Asia/Pacific and
Europe, the Middle East & Africa, followed by the Americas. On a product
category basis, in constant currency, hair care sales, with a smaller base, are
expected to be the leading growth category, followed by makeup, skin care and
fragrance. The adverse effect of exchange rates in Europe and Asia could temper
reported sales growth for the full fiscal year by approximately one percentage
point.
Net sales for the first fiscal quarter, as anticipated, are expected to grow
between 4% and 5% on a constant currency basis versus last fiscal year's first
quarter growth of 10%. Coupled with the cautious retail outlook, the fiscal 2002
first quarter will be facing a very difficult comparison with the same
prior-year quarter when the Company reported strong local currency growth in
each region and most product categories. Geographic region net sales growth in
constant currency is expected to be led by Asia/Pacific and Europe, the Middle
East & Africa, while the Americas is expected to increase moderately. On a
product category basis, in constant currency, hair care sales, with a smaller
base, are expected to be the leading growth category, followed by makeup and
skin care, while fragrance is expected to be relatively unchanged versus the
prior-year. The adverse effect of exchange rates in Europe and Asia could temper
reported sales growth for the fiscal first quarter by approximately one to two
percentage points.
In the fiscal 2002 first quarter, the Company will adopt a new accounting rule
that eliminates amortization of goodwill. The positive effect of the new rule
will increase earnings per share over the fiscal year. The Company expects to
achieve diluted earnings per share of between $1.56 and $1.59 for the fiscal
2002 full year and between $.40 and $.42 for the first quarter. The full-year
and first-quarter diluted earnings per share estimates include approximately
$.06 and $.015, respectively, related to the new accounting rule.
FORWARD-LOOKING STATEMENTS
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The forward-looking statements in this press release, including those containing
words like "will," "expect," "anticipate," and "estimate" and those in the
"Estimates" section of this release involve risks and uncertainties. Factors
that could cause actual results to differ materially from those forward-looking
statements include the following:
(i) 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;
(ii) the Company's 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 the Company's
products, an increase in the ownership concentration within the
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retail industry, ownership of retailers by the Company's
competitors and ownership of competitors by the Company's customers
that are retailers;
(iv) shifts in the preferences of consumers as to where and how
they shop for the types of products and services the Company sells;
(v) social, political and economic risks to the Company's 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, and legal or regulatory
proceedings, that affect, or will affect, the Company in the United
States and abroad;
(vii) foreign currency fluctuations affecting the Company's results
of operations and the value of its foreign assets, the relative
prices at which the Company sells its products and its foreign
competitors sell products in the same markets and the Company's
operating and manufacturing costs outside of the United States;
(viii) changes in global or local economic conditions that could
affect consumer purchasing and 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 the Company's
manufacturing operations, now manufacture nearly all of the
Company's supply of a particular type of product (i.e., focus
factories);
(x) real estate rates and availability, which may affect the
Company's ability to increase the number of retail locations at
which the Company's products are sold;
(xi) changes in product mix to products which are less profitable;
(xii) the Company's ability to develop e-commerce capabilities, and
other new information and distribution technologies, on a timely
basis and within the Company's cost estimates; and
(xiii) the Company's ability to integrate acquired businesses and
realize value therefrom.
The Estee 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 120 countries and territories under
well-recognized brand names, including Estee Lauder, Clinique, Aramis,
Prescriptives, Origins, M.A.C, Bobbi Brown, Tommy Hilfiger, La Mer, jane, Donna
Karan, Aveda, Stila, Jo Malone and Bumble and bumble.
An electronic version of this release can be found at the Company's Website,
www.elcompanies.com.
- Tables Follow -
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THE ESTEE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30 JUNE 30
------------------------ PERCENT ---------------------- PERCENT
2001 2000 CHANGE 2001 2000 CHANGE
---- ---- ------ ---- ---- ------
NET SALES (A)........................................ $ 1,037.1 $ 998.9 3.8% $ 4,608.1 $ 4,366.8 5.5%
Cost of sales (A).................................... 204.9 206.5 972.3 972.1
---------- ---------- ---------- ----------
GROSS PROFIT......................................... 832.2 792.4 5.0% 3,635.8 3,394.7 7.1%
---------- ---------- ---------- ----------
GROSS MARGIN................................. 80.2% 79.3% 78.9% 77.7%
Operating expenses:
Selling, general and administrative............... 741.1 690.3 3,063.7 2,845.7
Restructuring (A)................................. 37.6 - 37.6 -
Other non-recurring expenses (A).................. 16.3 - 16.3 -
Related party royalties........................... 3.7 8.3 22.6 33.2
---------- ---------- ---------- ----------
798.7 698.6 14.3% 3,140.2 2,878.9 9.1%
---------- ---------- ---------- ----------
OPERATING EXPENSE MARGIN..................... 77.0% 69.9% 68.1% 65.9%
OPERATING INCOME..................................... 33.5 93.8 (64.3)% 495.6 515.8 (3.9)%
OPERATING INCOME MARGIN...................... 3.2% 9.4% 10.8% 11.8%
Interest expense, net................................ 0.9 3.2 12.3 17.1
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES AND MINORITY INTEREST... 32.6 90.6 (64.0)% 483.3 498.7 (3.1)%
Provision for income taxes........................... 11.7 33.4 174.0 184.6
Minority interest, net of tax........................ (0.5) - (1.9) -
---------- ---------- ---------- ----------
NET EARNINGS BEFORE ACCOUNTING CHANGE................ 20.4 57.2 (64.3)% 307.4 314.1 (2.1)%
Cumulative effect of a change in accounting
principle, net of tax............................. - - (2.2) -
---------- ---------- ---------- ----------
NET EARNINGS (A)..................................... 20.4 57.2 305.2 314.1
Preferred stock dividends............................ 5.8 5.8 23.4 23.4
---------- ---------- ---------- ----------
NET EARNINGS ATTRIBUTABLE TO COMMON STOCK............ $ 14.6 $ 51.4 $ 281.8 $ 290.7
========== ========== ========== ==========
Basic net earnings per common share:
Net earnings attributable to common stock before
accounting change.............................. $ .06 $ .22 (71.7)% $ 1.19 $ 1.22 (2.6)%
Cumulative effect of a change in accounting
principle, net of tax.......................... - - (.01) -
---------- ---------- ---------- ----------
Net earnings attributable to common stock......... $ .06 $ .22 (71.7)% $ 1.18 $ 1.22 (3.3)%
========== ========== ========== ==========
Diluted net earnings per common share:
Net earnings attributable to common stock before
accounting change.............................. $ .06 $ .21 (71.6)% $ 1.17 $ 1.20 (2.2)%
Cumulative effect of a change in accounting
principle, net of tax.......................... - - (.01) -
---------- ---------- ---------- ----------
Net earnings attributable to common stock......... $ .06 $ .21 (71.6)% $ 1.16 $ 1.20 (2.9)%
========== ========== ========== ==========
Weighted average common shares outstanding:
Basic............................................. 238.7 238.0 238.4 237.7
Diluted........................................... 242.3 242.5 242.2 242.5
Earnings before interest, taxes, depreciation and
amortization (EBITDA):
Operating income.................................. $ 33.5 $ 93.8 $ 495.6 $ 515.8
Depreciation and amortization..................... 43.3 39.0 162.9 146.8
---------- ---------- ---------- ----------
EBITDA............................................ $ 76.8 $ 132.8 (42.2)% $ 658.5 $ 662.6 (0.6)%
========== ========== ========== ==========
EBITDA MARGIN................................ 7.4% 13.3% 14.3% 15.2%
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THE ESTEE LAUDER COMPANIES INC.
(A) The current fiscal year periods include pre-tax restructuring and other
one-time charges of $63.0 million, or $40.3 million after-tax, equal to $.17 per
diluted share, in connection with the modification of fixtures for the jane
brand, the closure of unprofitable tommy's shops, the elimination of impaired
systems and other assets, and the reorganization of the Company's global brand
structure. The following sets forth a reconciliation of certain statement of
earnings accounts before and after one-time items:
THREE MONTHS ENDED JUNE 30, 2001
--------------------------------
% CHANGE
BEFORE CHARGES
ONE-TIME BEFORE ONE- VERSUS
AS REPORTED CHARGES TIME CHARGES PRIOR YEAR
----------- ------- ------------ ----------
NET SALES................................................. $1,037.1 $8.0 $1,045.1 4.6%
Cost of sales............................................. 204.9 1.1 203.8
-------- ---- ---------
GROSS PROFIT.............................................. 832.2 9.1 841.3 6.2%
-------- ---- ---------
GROSS MARGIN...................................... 80.2% 80.5%
Operating Expenses........................................ 798.7 53.9 744.8 6.6%
-------- ---- ---------
OPERATING EXPENSE MARGIN.......................... 77.0% 71.3%
OPERATING INCOME.......................................... 33.5 63.0 96.5 2.9%
OPERATING INCOME MARGIN........................... 3.2% 9.2%
Provision (benefit) for income taxes...................... 11.7 (22.7) 34.4
NET EARNINGS ............................................. $ 20.4 $ 40.3 $ 60.7 6.1%
Diluted net earnings per share............................ $ .06 $ .17 $ .23 6.9%
EBITDA.................................................... $ 76.8 $ 63.0 $ 139.8 5.3%
EBITDA MARGIN..................................... 7.4% 13.4%
YEAR ENDED JUNE 30, 2001
------------------------
% CHANGE
BEFORE CHARGES
ONE-TIME BEFORE ONE- VERSUS
AS REPORTED CHARGES TIME CHARGES PRIOR YEAR
----------- ------- ------------ ----------
NET SALES................................................. $4,608.1 $8.0 $4,616.1 5.7%
Cost of sales............................................. 972.3 1.1 971.2
-------- ---- ---------
GROSS PROFIT.............................................. 3,635.8 9.1 3,644.9 7.4%
-------- ---- ---------
GROSS MARGIN...................................... 78.9% 79.0%
Operating Expenses........................................ 3,140.2 53.9 3,086.3 7.2%
-------- ---- ---------
OPERATING EXPENSE MARGIN.......................... 68.1% 66.9%
OPERATING INCOME.......................................... 495.6 63.0 558.6 8.3%
OPERATING INCOME MARGIN........................... 10.8% 12.1%
Provision (benefit) for income taxes...................... 174.0 (22.7) 196.7
NET EARNINGS BEFORE ACCOUNTING CHANGE..................... $ 307.4 $ 40.3 $ 347.7 10.7%
Diluted net earnings per share before accounting change... $ 1.17 $ .17 $ 1.34 11.7%
EBITDA.................................................... $ 658.5 $ 63.0 $ 721.5 8.9%
EBITDA MARGIN..................................... 14.3% 15.6%
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