01—Abstract
Summary
Summary of the 10-K filed August 17, 2012. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported net sales of $9,713.6 milliona for fiscal 2012 (year ended June 30, 2012), up from $8,810.0 million in fiscal 2011, with operating income of $1,311.7 million versus $1,089.4 million and net earnings attributable to the Company of $856.9 million, or $2.16 per diluted share, compared with $700.8 million, or $1.74, in the prior year.
Growth was reported across all major product categories and geographic regions, led by skin care net sales of $4,225.2 millionb and a travel retail business the filing describes as a continuing source of sales growth and profitability. The filing also notes continued weakness in certain Western European countries, Korea and Australia, and cautions that macroeconomic factors may temper growth in China. The Company is controlled by the Lauder family, which holds 86.9% of the outstanding voting power, and the Company is a "controlled company" exempt from certain NYSE governance requirements.
Management reports a long-term cost savings Program with charges recorded through June 30, 2012 of $302.6 millionc against expected savings of approximately $760 million to $785 million. Cash and cash equivalents were $1,347.7 million at June 30, 2012, and total debt was $1,288.1 million. In August 2012 the Company issued $250.0 million of 2.35% notes due 2022 and $250.0 million of 3.70% notes due 2042, and it plans to use about $250 million of proceeds to redeem its 2013 Senior Notes.
Richard W. Kunes is retiring as Chief Financial Officer, with Tracey T.
Travis succeeding him on August 20, 2012. The Company faces a pending appeal in a Paris commercial dispute over the former owner of the Darphin brand, who was awarded €22.9 million ($28.8 milliond) by the Paris Commercial Court; the Company has paid €25.3 million under the judgment and maintains an accrual it believes reflects the probable outcome of the appeal.
02—Key points
Key Highlights
- Net sales rose 10% to $9,713.6 million, with growth in all major product categories and geographic regions.
- Operating income increased 20% to $1,311.7 million, and operating margin rose to 13.5% of net sales from 12.4%.
- Net earnings attributable to The Estée Lauder Companies Inc. increased 22% to $856.9 million; diluted EPS rose to $2.16 from $1.74.
- Skin care, the most profitable category, grew 14% to $4,225.2 million in net sales, while hair care operating results improved to $12.2 million.
- Cash flow from operations was $1,126.7 million, and cash and cash equivalents were $1,347.7 million at June 30, 2012.
- The Company repurchased 11.2 million shares for $555.2 million in fiscal 2012 and paid dividends of $.525 per share, up from $.375.
- The Lauder family controls 86.9% of voting power, and the Company relies on NYSE controlled-company exemptions from certain governance requirements.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Estée Lauder Companies kept $0.09.
- Revenue$9.71B100.0%
- Cost of revenue−$2.00B20.5%
- Gross profit$7.72B79.5%
- Operating costs−$6.41B65.9%
- Operating income$1.31B13.5%
- Interest, other & tax−$454.8M4.7%
- Net income$856.9M8.8%
Where FY2012 revenue went
$9.71B- SG&A: $6.32B, 65% of revenue
- Cost of revenue: $2.00B, 21% of revenue
- Net income: $856.9M, 8.8% of revenue
- R&D: $137.8M, 1.4% of revenue
- Interest, other & tax: $454.8M, 4.7% of revenue
Kept 8.8% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed August 17, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $9.71B$8.81B | +10.3% |
| Cost of Revenue | $2.00B$1.94B | +3.0% |
| Gross Profit | $7.72B$6.87B | +12.3% |
| R&D Expenses | $137.80M$85.70M | +60.8% |
| SG&A Expenses | $6.32B$5.70B | +11.0% |
| Operating Expenses | $6.41B$5.78B | +10.8% |
| Operating Income | $1.31B$1.09B | +20.4% |
| Net Income | $856.90M$700.80M | +22.3% |
| EPS (Basic) | $2.20$1.78 | +23.6% |
| EPS (Diluted) | $2.16$1.74 | +24.1% |
| Shares Outstanding (Basic) | 388.70M394.00M | −1.3% |
| Shares Outstanding (Diluted) | 397.00M402.40M | −1.3% |
05—Questions
Frequently Asked Questions
How did The Estée Lauder Companies perform in fiscal 2012?
Net sales increased 10% to $9,713.6 million and operating income increased 20% to $1,311.7 million. Net earnings attributable to the Company rose 22% to $856.9 million, and diluted EPS increased to $2.16 from $1.74.
Which product categories and regions drove growth?
Skin care net sales rose 14% to $4,225.2 million and makeup rose 10% to $3,696.8 million. By region, the Americas grew 8%, Europe, the Middle East & Africa grew 11% led by travel retail, and Asia/Pacific grew 14%.
What risks does the filing highlight?
The filing cites intense competition, dependence on a few large retailers (Macy's Inc. accounted for 11% of net sales), economic weakness in parts of Western Europe, Korea and Australia, possible slowing in China, foreign currency exposure, and control by the Lauder family, which holds 86.9% of voting power.
How is the Company managing its capital and debt?
Total debt was $1,288.1 million at June 30, 2012. In August 2012 the Company issued $500.0 million of new senior notes and called its 2013 Senior Notes, planning to use about $250 million of proceeds for the redemption. The Company also repurchased $555.2 million of stock in fiscal 2012.
Are there leadership changes or legal matters to note?
Richard W. Kunes is retiring as Chief Financial Officer, and Tracey T. Travis joins as Executive Vice President and CFO on August 20, 2012. The Company is appealing a Paris Commercial Court judgment in a Darphin-related dispute, and it has accrued an amount it believes reflects the probable outcome of the appeal.
06—Continue