01—Abstract
Summary
Summary of the 10-K filed August 23, 2013. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported fiscal 2013 (year ended June 30, 2013) net sales of $10.18 billiona, up from $9.71 billion in fiscal 2012, and operating income of $1.53 billion versus $1.31 billion.
Net earnings attributable to the Company were $1.02 billionb, or $2.58 per diluted share, compared with $856.9 million and $2.16 per diluted share a year earlier. The filing states that skin care, the most profitable category, contributed $4.47 billion in net sales, with makeup at $3.88 billion, fragrance at $1.31 billion and hair care at $488.9 million. Growth was broad, with all major product categories and geographic regions increasing, and the Company noted continued weakness in certain Southern European countries and Korea, plus caution about a slowing U.S. retail environment and China's growth trend.
The Company ended the year with cash and cash equivalents of $1.50 billionc and total debt of $1.34 billion, with no commercial paper outstanding. In August 2012 it issued $500 million of senior notes and used proceeds to redeem its 7.75% 2013 Senior Notes. The Company transitioned to a quarterly dividend, with cash dividends declared of $1.08 per share in fiscal 2013 versus $0.525 in fiscal 2012.
It also closed its multi-year cost savings Program in the second quarter of fiscal 2013, now expecting total cumulative charges of $320 million to $330 milliond. Governance remains concentrated: members of the Lauder family control 86% of the voting power, and the Company is a controlled company under New York Stock Exchange rules. The Company also disclosed that Macy's Inc. accounted for 11% of consolidated net sales in fiscal 2013, and that the Darphin-related litigation in Paris is under appeal, with the Company having paid €25.3 million into escrow pending the outcome.
02—Key points
Key Highlights
- Net sales rose to $10,181.7 million in fiscal 2013 from $9,713.6 million in fiscal 2012, with growth in all major product categories and regions.
- Operating income increased to $1,526.0 million from $1,311.7 million, and operating margin reached 15.0% of net sales versus 13.5% in the prior year.
- Diluted net earnings per share were $2.58, up from $2.16, and net earnings attributable to the Company were $1,019.8 million.
- Skin care, the most profitable category, generated $4,465.3 million in net sales and $830.1 million in operating income.
- Cash and cash equivalents were $1,495.7 million at June 30, 2013, and total debt was $1,344.3 million with no commercial paper outstanding.
- The Company shifted to quarterly dividends, declaring $1.08 per share for fiscal 2013 versus $0.525 in fiscal 2012.
- The Lauder family holds 86% 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 FY2013, Estée Lauder Companies kept $0.10.
- Revenue$10.18B100.0%
- Cost of revenue−$2.03B19.9%
- Gross profit$8.16B80.1%
- Operating costs−$6.63B65.1%
- Operating income$1.53B15.0%
- Interest, other & tax−$506.2M5.0%
- Net income$1.02B10.0%
Where FY2013 revenue went
$10.18B- SG&A: $6.60B, 65% of revenue
- Cost of revenue: $2.03B, 20% of revenue
- Net income: $1.02B, 10% of revenue
- R&D: $146.8M, 1.4% of revenue
- Interest, other & tax: $506.2M, 5.0% of revenue
Kept 10% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed August 23, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $10.18B$9.71B | +4.8% |
| Cost of Revenue | $2.03B$2.00B | +1.5% |
| Gross Profit | $8.16B$7.72B | +5.7% |
| R&D Expenses | $146.80M$137.80M | +6.5% |
| SG&A Expenses | $6.60B$6.32B | +4.3% |
| Operating Expenses | $6.63B$6.41B | +3.5% |
| Operating Income | $1.53B$1.31B | +16.3% |
| Interest Expense | $63.10M— | — |
| Net Income | $1.02B$856.90M | +19.0% |
| EPS (Basic) | $2.63$2.20 | +19.5% |
| EPS (Diluted) | $2.58$2.16 | +19.4% |
| Shares Outstanding (Basic) | 387.60M388.70M | −0.3% |
| Shares Outstanding (Diluted) | 394.90M397.00M | −0.5% |
05—Questions
Frequently Asked Questions
How did The Estée Lauder Companies perform financially in fiscal 2013?
Net sales grew to $10,181.7 million from $9,713.6 million, operating income rose to $1,526.0 million from $1,311.7 million, and diluted earnings per share increased to $2.58 from $2.16. The filing attributes growth to all major product categories and geographic regions.
Which product categories and regions drove results?
Skin care net sales increased to $4,465.3 million, makeup to $3,876.9 million, and fragrance to $1,310.8 million. In regions, Europe, the Middle East & Africa reached $3,758.7 million, with strength in travel retail and the United Kingdom, while Asia/Pacific rose to $2,121.6 million, led by China and Hong Kong. The filing also noted weakness in Southern Europe and Korea.
What risks does the filing highlight for investors?
The filing cites intense competition, dependence on key retailers (Macy's Inc. was 11% of consolidated net sales), foreign currency and economic exposure, weakness in certain Southern European countries and Korea, and a slowing U.S. retail environment and Chinese growth trend. It also highlights controlled-company status and the Lauder family's control of 86% of voting power.
How is the Company funding itself and returning capital to shareholders?
The Company issued $250.0 million of 2.35% Senior Notes due 2022 and $250.0 million of 3.70% Senior Notes due 2042 in August 2012 and used proceeds to redeem $230.1 million of 7.75% notes. It has a $1.0 billion revolving credit facility undrawn at year end, and paid cash dividends and repurchased about 6.0 million shares for $342.6 million during fiscal 2013.
What is the outlook for the cost savings program and related charges?
The Company closed its restructuring Program in the second quarter of fiscal 2013 and now expects total cumulative restructuring charges and other costs to implement initiatives of between $320 million and $330 million, substantially recorded through fiscal 2013. It estimates the Program and related efforts produced savings of approximately $780 million through the end of fiscal 2013.
06—Continue