SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 25, 2001
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)
212-572-4200
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS.
On October 25, 2001, The Estee Lauder Companies Inc. issued a press release
reporting its first-quarter results and estimates for its fiscal 2002
second-quarter and full-year results. A copy of the press release is attached
hereto as Exhibit 99.1 and is incorporated herein by reference.
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, hereunto duly authorized.
THE ESTEE LAUDER COMPANIES INC.
Date: October 25, 2001 By: /s/Richard W. Kunes
-------------------------
Richard W. Kunes
Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
THE ESTEE LAUDER COMPANIES INC.
EXHIBIT INDEX
Exhibit No. Description
99.1 Press release dated October 25, 2001 of the Estee Lauder Companies Inc.
Exhibit 99.1
THE News
ESTEE Contact:
LAUDER Investor Relations:
COMPANIES INC. Dennis D'Andrea
(212) 572-4384
Media Relations:
767 Fifth Avenue Sally Susman
New York, NY 10153 (212) 572-4430
FOR IMMEDIATE RELEASE:
ESTEE LAUDER COMPANIES REPORTS FIRST QUARTER RESULTS
New York, NY, October 25, 2001 - The Estee Lauder Companies Inc. (NYSE: EL)
today reported net sales for the fiscal first quarter ended September 30, 2001
of $1.19 billion, a 1% increase from $1.18 billion in the prior-year period.
Excluding the negative impact of foreign currency translation, net sales
increased 3%.
The Company achieved net earnings of $97.1 million for the quarter, up 3% from
$94.6 million in the same period last year. Diluted earnings per common share
increased 3% to $.38 from $.37 reported in the prior year. The prior year net
earnings and diluted earnings per share are before the cumulative effect of a
change in accounting principle, related to derivative instruments and hedging
activities.
During the current quarter the Company adopted Statement of Financial Accounting
Standards Number 142, "Goodwill and Other Intangible Assets," that eliminates
amortization of goodwill. The positive effect of the new rule increased diluted
earnings per share for the quarter by approximately $.01.
Fred H. Langhammer, President and Chief Executive Officer, said, "Despite the
very difficult economic environment, we grew our Company this quarter. As we
work through the immediate challenges and look beyond the near-term, we are
focusing resources on the greatest opportunities for growth and supporting the
internal flow of ideas to garner innovation and efficiencies. These actions will
strengthen our leadership position and enable us to continue to grow our Company
and drive stockholder value."
Results by Product Category
Net sales of makeup products for the quarter rose 5% before the impact of
foreign currency translation and increased 4% to $447.5 million on a reported
basis. The higher sales reflect the launch of Gentle Light Makeup and Powder and
High Impact Eye Shadow Duo from Clinique along with Sumptuous Lipstick by Estee
Lauder. Recently launched products such as Moisture Surge Lipstick and
Lash-Doubling Mascara by Clinique and Equalizer Smart Makeup from Estee Lauder
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 quarter rose 2% before foreign currency translation and
reported sales decreased slightly to $393.5 million. During the quarter, the
Company launched LightSource Transforming Moisture Cream and Lotion by Estee
Lauder, Total Turnaround Visible Skin Renewer from Clinique and A Perfect World
White Tea Skin Guardian by Origins. Lower sales of certain existing products
offset these positive results.
Fragrance sales decreased 2% over the prior-year quarter excluding the impact of
foreign currency translation and declined 3% on a reported basis to $291.3
million. The current quarter benefited from the initial shipments of the
Company's newest men's fragrance, T by Tommy Hilfiger, and continued success of
the recent domestic launch of Intuition by Estee Lauder. These positive
contributions were offset by lower sales of DKNY for women, Beautiful by Estee
Lauder and Clinique Happy.
Sales of hair care products for the quarter increased 10% to $50.0 million. The
increase is primarily attributable to growth at Aveda and Bumble and bumble,
partially offset by the anniversary of the prior-year launch of Clinique's
Simple Hair Care System.
Operating income in hair care increased and was up slightly in makeup, driven by
sales growth in each of these categories. Fragrance operating income decreased
and skin care declined slightly reflecting lower reported sales.
Results by Geographic Region
In the Americas region, net sales for the first quarter decreased 2% to $765.4
million, coming off of 9% growth in last year's first quarter. The decrease is
due to the continued soft retail environment in this region, reflecting lower
consumer confidence and spending, and inventory contraction by U.S. retailers.
These challenges were partially offset by the success of new and existing
products and growth from most newer brands. Operating income in the region
decreased reflecting lower net sales and increased investment in advertising,
promotion and newer distribution channels.
In Europe, the Middle East & Africa, net sales increased 8% over last year's
first quarter, excluding the impact of foreign currency translation. The
increased sales were led by solid results in the United Kingdom, Italy and our
distributor businesses, and the start of the Company's majority-owned joint
venture in Greece, partially offset by lower sales in travel retail. The Company
posted a 7% increase in reported net sales over the prior-year period to $272.3
million. Operating profitability increased, particularly in Italy and Greece.
On a local currency basis, Asia/Pacific net sales increased 18% versus the
prior-year quarter. Most markets generated double-digit sales increases with
strong performances coming from Korea, Thailand, and Australia. Sales in Japan
grew modestly and it remained a difficult market. Lower sales in Taiwan were
attributable to severe typhoon and flooding conditions there. Net sales in the
region on a reported basis increased 8% to $150.0 million, primarily reflecting
the continued weakness of the Japanese yen and Australian dollar. Operating
profit in the region increased primarily due to higher sales.
Estimates of Fiscal 2002 Second-Quarter and Full-Year Results
The Company recognizes that the high degree of global instability and economic
uncertainty makes definitive forecasting difficult. Net sales for the second
fiscal quarter, are expected to grow between 2% and 3% on a constant currency
basis versus last fiscal year's second quarter
growth of 10%. The Company expects to achieve diluted earnings per share for the
second quarter of between $.49 and $.52. Coupled with the cautious retail
outlook, the fiscal 2002 second quarter will be facing a very difficult
comparison with the same prior-year quarter when the Company reported solid
growth in all regions and most product categories. Geographic region net sales
growth in constant currency is expected to be led by Asia/Pacific and the
Americas, while Europe, the Middle East & Africa is expected to decrease as a
result of a projected shortfall in the Company's travel retail business, which
is reported in this region. 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
decline versus the prior-year. The effect of exchange rates could reduce
reported sales growth for the fiscal second quarter by approximately one
percentage point.
For the full fiscal year, the Company said it remains comfortable with its
previously announced expectations to grow sales and achieve diluted earnings per
share in line with the Street consensus estimate of $1.45.
Forward-looking Statements
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
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 or
domestic 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 trade rules, 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, the financial strength of our customers
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;
(xiii) the Company's ability to integrate acquired businesses and
realize value therefrom; and
(xiv) consequences attributable to the events that took place in New
York City and Washington, D.C. on September 11, 2001, including
further attacks, retaliation and the threat of further attacks or
retaliation.
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.
- Table Follows -
THE ESTEE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(In millions, except per share data)
Three Months Ended
September 30 Percent
2001 2000 Change
Net Sales................................................. $1,187.7 $1,177.7 0.8%
Cost of sales............................................. 254.5 263.3
--------- ---------
Gross Profit.............................................. 933.2 914.4 2.1%
--------- ---------
Gross Margin....................................... 78.6% 77.6%
Operating expenses:
Selling, general and administrative.................... 776.3 752.9
Related party royalties................................ 4.0 8.2
--------- ---------
780.3 761.1 2.5%
--------- ---------
Operating Expense Margin........................... 65.7% 64.6%
Operating Income.......................................... 152.9 153.3 (0.3)%
Operating Income Margin............................ 12.9% 13.0%
Interest expense, net..................................... 3.8 5.1
--------- ---------
Earnings before Income Taxes, Minority Interest
and Accounting Change.................................... 149.1 148.2 0.6%
Provision for income taxes................................ 51.4 53.4
Minority interest, net of tax............................. (0.6) (0.2)
--------- ---------
Net Earnings before Accounting Change..................... 97.1 94.6 2.6%
Cumulative effect of a change in accounting
principle, net of tax (a).............................. - (2.2)
--------- ---------
Net Earnings ............................................. 97.1 92.4
Preferred stock dividends................................. 5.9 5.9
--------- ---------
Net Earnings Attributable to Common Stock................. $ 91.2 $ 86.5
========= =========
Basic net earnings per common share:
Net earnings attributable to common stock before
accounting change.................................... $ .38 $ .37 2.5%
Cumulative effect of a change in accounting principle,
net of tax........................................... - (.01)
-------- --------
Net earnings attributable to common stock.............. $ .38 $ .36 5.1%
======== ========
Diluted net earnings per common share:
Net earnings attributable to common stock before
accounting change.................................... $ .38 $ .37 2.8%
Cumulative effect of a change in accounting principle,
net of tax........................................... - (.01)
-------- --------
Net earnings attributable to common stock.............. $ .38 $ .36 5.4%
======== ========
Weighted average common shares outstanding:
Basic.................................................. 238.9 238.1
Diluted................................................ 242.3 242.2
(a) The quarter ended September 30, 2000 included a one-time charge of $2.2
million, after tax, or $.01 per common share, attributable to the
cumulative effect of adopting Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities."