01—Abstract
Summary
Summary of the 10-K filed August 20, 2014. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported net sales of $10,968.8 milliona for fiscal 2014 (year ended June 30, 2014), up from $10,181.7 million in fiscal 2013, with growth across all product categories and geographic regions.
Operating income rose to $1,827.6 millionb from $1,526.0 million, and net earnings attributable to the company increased to $1,204.1 million, or $3.06 per diluted share, from $2.58. The filing notes that approximately $178 million of sales and $127 million of operating income were pulled forward from the fiscal 2015 first quarter into the fourth quarter of fiscal 2014 ahead of the July 2014 SMI rollout, which management expects to adversely affect first-quarter and full-year fiscal 2015 results. Other items affecting the year included a $38.3 million Venezuela remeasurement charge and restructuring-related adjustments.
The company's cash flow from operations was $1,535.2 millionc, up from $1,226.3 million, and cash and cash equivalents ended the year at $1,629.1 million. Total debt was $1,343.1 million, and total debt as a percent of total capitalization decreased to 26% from 29%. The Board declared a $.20 quarterly dividend on August 14, 2014, and the company repurchased about 8.9 million shares for $617.1 million during fiscal 2014.
The Lauder family holds 86.7% of voting power, which makes the company a controlled company under NYSE rules. The filing highlights continued softness in certain Southern European countries and Korea, a cautious view of the U.S. retail environment, and the effect of Chinese government actions on travel retail spending. Management identifies skin care, the company's most profitable category, as a strategic priority, and reports skin care net sales of $4,769.8 milliond, makeup of $4,210.2 million, and fragrance of $1,425.0 million.
02—Key points
Key Highlights
- Net sales rose to $10,968.8 million in fiscal 2014 from $10,181.7 million, with growth in all product categories and all three geographic regions.
- Operating income increased to $1,827.6 million (16.7% of net sales) from $1,526.0 million (15.0% of net sales).
- Net earnings attributable to The Estée Lauder Companies Inc. were $1,204.1 million, or $3.06 per diluted share, compared with $2.58 in fiscal 2013.
- About $178 million of accelerated retailer orders ahead of the July 2014 SMI rollout were recorded in fiscal 2014 and are expected to weaken fiscal 2015 first-quarter and full-year net sales and operating results.
- Net cash flows provided by operating activities were $1,535.2 million, up from $1,226.3 million, and cash and cash equivalents reached $1,629.1 million.
- The company repurchased approximately 8.9 million Class A shares for $617.1 million during fiscal 2014 and declared a $.20 dividend on August 14, 2014.
- A $38.3 million remeasurement charge for net monetary assets in Venezuela reduced operating results in the third quarter of fiscal 2014.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Estée Lauder Companies kept $0.11.
- Revenue$10.97B100.0%
- Cost of revenue−$2.16B19.7%
- Gross profit$8.81B80.3%
- Operating costs−$6.98B63.7%
- Operating income$1.83B16.7%
- Interest, other & tax−$623.5M5.7%
- Net income$1.20B11.0%
Where FY2014 revenue went
$10.97B- SG&A: $6.99B, 64% of revenue
- Cost of revenue: $2.16B, 20% of revenue
- Net income: $1.20B, 11% of revenue
- R&D: $157.9M, 1.4% of revenue
- Interest, other & tax: $623.5M, 5.7% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed August 20, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $10.97B$10.18B | +7.7% |
| Cost of Revenue | $2.16B$2.03B | +6.5% |
| Gross Profit | $8.81B$8.16B | +8.0% |
| R&D Expenses | $157.90M$146.80M | +7.6% |
| SG&A Expenses | $6.99B$6.60B | +5.9% |
| Operating Expenses | $6.98B$6.63B | +5.3% |
| Operating Income | $1.83B$1.53B | +19.8% |
| Interest Expense | $59.40M$63.10M | −5.9% |
| Net Income | $1.20B$1.02B | +18.1% |
| EPS (Basic) | $3.12$2.63 | +18.6% |
| EPS (Diluted) | $3.06$2.58 | +18.6% |
| Shares Outstanding (Basic) | 386.20M387.60M | −0.4% |
| Shares Outstanding (Diluted) | 393.10M394.90M | −0.5% |
05—Questions
Frequently Asked Questions
How did sales and profits perform in fiscal 2014?
Net sales increased 8%, or $787.1 million, to $10,968.8 million. Operating income rose 20% to $1,827.6 million, and diluted earnings per share increased 19% to $3.06. The filing says the accelerated orders of approximately $178 million benefited these comparisons, and that excluding them, net sales would have increased 6%.
Will the accelerated orders hurt fiscal 2015?
The filing states that because about $178 million of orders were recorded in the fiscal 2014 fourth quarter instead of the fiscal 2015 first quarter, the company expects a corresponding adverse effect on its first-quarter and full-year fiscal 2015 net sales and operating results.
How strong is the balance sheet and how is cash being used?
Cash and cash equivalents were $1,629.1 million at June 30, 2014, and total debt was $1,343.1 million. Total debt as a percent of total capitalization fell to 26% from 29%. Cash was used for $617.1 million of share repurchases, $301.8 million of dividends paid, and $510.2 million of capital expenditures. The company had no commercial paper outstanding and an undrawn $1.0 billion revolving credit facility, which was replaced in July 2014.
What are the main risks flagged in the filing?
The filing cites vigorous competition, dependence on key retailers, changing consumer preferences, and foreign operations risks, including currency fluctuations. It also flags softness in certain Southern European countries and Korea, an uncertain U.S. retail environment, and the impact of Chinese government actions on travel retail. It notes that the Lauder family controls 86.7% of voting power and that the company is a controlled company under NYSE rules.
06—Continue