Estee Lauder Earnings 2020-12-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

el-20201231

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-14064

The Estée Lauder Companies Inc.

(Exact name of registrant as specified in its charter)

Delaware

11-2408943

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

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, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $.01 par value	EL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At January 29, 2021, 229,736,467 shares of the registrant’s Class A Common Stock, $.01 par value, and 133,023,029 shares of the registrant’s Class B Common Stock, $.01 par value, were outstanding.

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THE ESTÉE LAUDER COMPANIES INC.

INDEX


			Page

Part I. Financial Information

Item 1. Financial Statements (Unaudited)

Consolidated Statements of Earnings — Three and Six Months Ended December 31, 2020 and 2019			2

Consolidated Statements of Comprehensive Incom e — Three and Six Months Ended December 31, 2020 and 2019			3

Consolidated Balance Sheets — December 31, 2020 and June 30, 2020 (Audited)			4

Consolidated Statements of Cash Flows — Six Months Ended December 31, 2020 and 2019			5

Notes to Consolidated Financial Statements			6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			36

Item 3. Quantitative and Qualitative Disclosures About Market Risk			65

Item 4. Controls and Procedures			65

Part II. Other Information

Item 1. Legal Proceedings			66

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			66

Item 6. Exhibits			66

Signatures			67

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)


	Three Months Ended December 31				Six Months Ended December 31
(In millions, except per share data)	2020		2019		2020		2019

Net sales	$	4,853	$	4,624	$	8,415	$	8,519
Cost of sales	1,084		1,041		1,909		1,949

Gross profit	3,769		3,583		6,506		6,570

Operating expenses
Selling, general and administrative	2,590		2,538		4,616		4,723
Restructuring and other charges	35		7		41		30
Goodwill impairment	54		511		54		511
Impairment of other intangible assets	27		266		27		266
Total operating expenses	2,706		3,322		4,738		5,530

Operating income	1,063		261		1,768		1,040

Interest expense	43		38		88		70
Interest income and investment income, net	17		13		31		27
Other components of net periodic benefit cost	7		1		10		2
Other income	—		576		—		576
Earnings before income taxes	1,030		811		1,701		1,571

Provision for income taxes	153		250		299		412
Net earnings	877		561		1,402		1,159

Net earnings attributable to noncontrolling interests	(4)		(4)		(6)		(7)
Net earnings attributable to The Estée Lauder Companies Inc.	$	873	$	557	$	1,396	$	1,152

Net earnings attributable to The Estée Lauder Companies Inc. per common share
Basic	$	2.40	$	1.55	$	3.84	$	3.19
Diluted	$	2.37	$	1.52	$	3.79	$	3.13

Weighted-average common shares outstanding
Basic	363.0		360.2		363.4		360.8
Diluted	368.0		366.7		368.5		367.7

See notes to consolidated financial statements.

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THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019

Net earnings	$	877	$	561	$	1,402	$	1,159

Other comprehensive income (loss):

Net cash flow hedge loss	(26)		(22)		(57)		(24)
Retirement plan and other retiree benefit adjustments	6		5		12		10
Translation adjustments	213		64		291		(6)
Benefit for deferred income taxes on components of other comprehensive income	20		10		38		13
Total other comprehensive income (loss), net of tax	213		57		284		(7)
Comprehensive income	1,090		618		1,686		1,152

Comprehensive income attributable to noncontrolling interests:
Net earnings	(4)		(4)		(6)		(7)
Translation adjustments	(2)		1		(2)		1
	(6)		(3)		(8)		(6)
Comprehensive income attributable to The Estée Lauder Companies Inc.	$	1,084	$	615	$	1,678	$	1,146

See notes to consolidated financial statements.

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THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED BALANCE SHEETS


(In millions, except share data)	December 31 2020		June 30 2020
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	5,545	$	5,022
Accounts receivable, net	1,972		1,194
Inventory and promotional merchandise	2,116		2,062
Prepaid expenses and other current assets	658		614
Total current assets	10,291		8,892

Property, plant and equipment, net	2,142		2,055

Other assets
Operating lease right-of-use assets	2,325		2,282
Goodwill	1,401		1,401
Other intangible assets, net	2,424		2,338
Other assets	1,012		813
Total other assets	7,162		6,834
Total assets	$	19,595	$	17,781

LIABILITIES AND EQUITY
Current liabilities
Current debt	$	470	$	1,222
Accounts payable	1,299		1,177
Operating lease liabilities	387		375
Other accrued liabilities	3,264		2,405
Total current liabilities	5,420		5,179

Noncurrent liabilities
Long-term debt	4,913		4,914
Long-term operating lease liabilities	2,314		2,278
Other noncurrent liabilities	1,492		1,448
Total noncurrent liabilities	8,719		8,640

Contingencies

Equity
Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at December 31, 2020 and June 30, 2020; shares issued: 456,618,145 at December 31, 2020 and 451,927,441 at June 30, 2020; Class B shares authorized: 304,000,000 at December 31, 2020 and June 30, 2020; shares issued and outstanding: 133,023,029 at December 31, 2020 and 135,235,429 at June 30, 2020	6		6
Paid-in capital	5,068		4,790
Retained earnings	11,159		10,134
Accumulated other comprehensive loss	(383)		(665)
	15,850		14,265
Less: Treasury stock, at cost; 227,008,228 Class A shares at December 31, 2020 and 226,637,238 Class A shares at June 30, 2020	(10,429)		(10,330)
Total stockholders’ equity – The Estée Lauder Companies Inc.	5,421		3,935
Noncontrolling interests	35		27
Total equity	5,456		3,962
Total liabilities and equity	$	19,595	$	17,781

See notes to consolidated financial statements.

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THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended December 31
(In millions)	2020		2019

Cash flows from operating activities
Net earnings	$	1,402	$	1,159
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization	316		287
Deferred income taxes	(49)		7
Non-cash stock-based compensation	169		139
Net loss on disposal of property, plant and equipment	13		5
Non-cash restructuring and other charges	1		—
Pension and post-retirement benefit expense	52		41
Pension and post-retirement benefit contributions	(25)		(33)
Goodwill and other intangible asset impairments	81		777
Changes in fair value of contingent consideration	(2)		(7)

Gain on previously held equity method investment	—		(553)
Other non-cash items	(23)		(10)
Changes in operating assets and liabilities:
Increase in accounts receivable, net	(720)		(347)
Decrease in inventory and promotional merchandise	67		31
Increase in other assets, net	(110)		(120)
Increase (decrease) in accounts payable	63		(375)
Increase in other accrued and noncurrent liabilities	750		252
Increase (decrease) in operating lease assets and liabilities, net	(7)		2
Net cash flows provided by operating activities	1,978		1,255

Cash flows from investing activities
Capital expenditures	(250)		(291)
Proceeds from purchase price refund	32		—
Payments for acquired businesses, net of cash acquired	(6)		(1,040)

Purchases of investments	(40)		(5)
Settlement of net investment hedges	(133)		(14)
Net cash flows used for investing activities	(397)		(1,350)

Cash flows from financing activities
Proceeds (repayments) of current debt, net	(747)		8
Proceeds from issuance of long-term debt, net	—		1,783
Debt issuance costs	—		(14)
Repayments and redemptions of long-term debt	(4)		(8)
Net proceeds from stock-based compensation transactions	104		71
Payments to acquire treasury stock	(102)		(813)
Payments of contingent consideration	—		(3)
Dividends paid to stockholders	(368)		(330)
Payments to noncontrolling interest holders for dividends	(2)		(7)
Net cash flows provided by (used for) financing activities	(1,119)		687

Effect of exchange rate changes on Cash and cash equivalents	61		17
Net increase in Cash and cash equivalents	523		609
Cash and cash equivalents at beginning of period	5,022		2,987
Cash and cash equivalents at end of period	$	5,545	$	3,596

See notes to consolidated financial statements.

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THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated.

The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Certain amounts in the consolidated financial statements of prior years have been reclassified to conform to current year presentation.

Management Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.

Currency Translation and Transactions

All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains, net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $227 million and $75 million, net of tax, during the three months ended December 31, 2020 and 2019, respectively, and $318 million and $3 million, net of tax, during the six months ended December 31, 2020 and 2019, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity.

The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 5 – Derivative Financial Instruments for further discussion. The Company categorizes these instruments as entered into for purposes other than trading.

The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $27 million during the three months ended December 31, 2019, and $(2) million and $24 million during the six months ended December 31, 2020 and 2019, respectively. The net exchange loss on foreign currency transactions during the three months ended December 31, 2020 was not material.

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THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit Risk

The Company is a worldwide manufacturer, marketer and distributor of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to department stores, perfumeries, specialty multi-brand retailers and retailers in its travel retail business. The Company grants credit to qualified customers. As a result of the COVID-19 pandemic, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of the COVID-19 pandemic on its customers' abilities, individually and collectively, to make timely payments.

The Company’s largest customer during the three and six months ended December 31, 2020 sells products primarily in China travel retail. This customer accounted for $654 million or 13%, and $296 million or 6% for the three months ended December 31, 2020 and 2019, respectively, and $1,208 million or 14% and $465 million or 5% for the six months ended December 31, 2020 and 2019, respectively, of the Company's consolidated net sales. This customer accounted for $404 million, or 20%, and $297 million, or 24%, of the Company's accounts receivable at December 31, 2020 and June 30, 2020, respectively.

Inventory and Promotional Merchandise

Inventory and promotional merchandise consists of the following:


(In millions)	December 31 2020		June 30 2020
Raw materials	$	550	$	542
Work in process	258		305
Finished goods	1,072		995
Promotional merchandise	236		220
	$	2,116	$	2,062

Property, Plant and Equipment

Property, plant and equipment consists of the following:


(In millions)	December 31 2020		June 30 2020
Assets (Useful Life)
Land	$	57	$	33
Buildings and improvements (10 to 40 years)	457		400
Machinery and equipment (3 to 10 years)	969		865
Computer hardware and software (4 to 10 years)	1,417		1,335
Furniture and fixtures (5 to 10 years)	126		120
Leasehold improvements	2,471		2,381
	5,497		5,134
Less accumulated depreciation and amortization	(3,355)		(3,079)
	$	2,142	$	2,055

The cost of assets related to projects in progress of $601 million and $501 million as of December 31, 2020 and June 30, 2020, respectively, is included in their respective asset categories above. Depreciation and amortization of property, plant and equipment was $126 million and $127 million during the three months ended December 31, 2020 and 2019, respectively, and $251 million and $252 million during the six months ended December 31, 2020 and 2019, respectively. Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings.

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THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income Taxes

The effective rate for income taxes for the three and six months ended December 31, 2020 and 2019 are as follows:


	Three Months Ended December 31				Six Months Ended December 31
	2020		2019		2020		2019
Effective rate for income taxes	14.9	%	30.8	%	17.6	%	26.2	%
Basis-point change from the prior-year period	(1,590)				(860)

For the three and six months ended December 31, 2020, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on the Company's foreign operations and the impact of nondeductible goodwill charges recognized in the second quarter of fiscal 2020.

The effective tax rate for the three and six months ended December 31, 2020 included the impact of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the Tax Cuts and Jobs Act that provide for a high-tax exception to the GILTI tax. These regulations are retroactive to the original enactment of the GILTI tax provision, which includes the Company's 2019 and 2020 fiscal years. The Company has elected to apply the GILTI high-tax exception to fiscal 2021, 2020 and 2019. The election for fiscal 2021 resulted in reductions of 160 basis points and 150 basis points to the effective tax rates for the three and six months ended December 31, 2020, respectively. The impact of the elections with respect to fiscal 2020 and 2019 was recognized as a discrete item in the provision for income taxes in the second quarter of fiscal 2021 and resulted in reductions of 470 basis points and 280 basis points to the effective tax rates for the three and six months ended December 31, 2020, respectively.

As of December 31, 2020 and June 30, 2020, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $70 million. The total amount of unrecognized tax benefits at December 31, 2020 that, if recognized, would affect the effective tax rate was $55 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and six months ended December 31, 2020 in the accompanying consolidated statements of earnings were not material. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at December 31, 2020 and June 30, 2020, was $14 million and $13 million, respectively. On the basis of the information available as of December 31, 2020, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

Other Accrued Liabilities

Other accrued liabilities consist of the following:


(In millions)	December 31 2020		June 30 2020
Advertising, merchandising and sampling	$	353	$	256
Employee compensation	494		424
Deferred revenue	365		222
Payroll and other taxes	392		250
Accrued income taxes	319		208
Sales return accrual	285		212
Accrued general and administrative expenses	295		233
Other	761		600
	$	3,264	$	2,405

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THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt

In August 2020, the Company repaid the remaining $750 million borrowed under its $1,500 million revolving credit facility that was outstanding as of June 30, 2020.

Recently Adopted Accounting Standards

Measurement of Credit Losses on Financial Instruments (ASC Topic 326 – Financial Instruments – Credit Losses) (“ASC 326”)

In June 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires companies to utilize an impairment model for most financial assets measured at amortized cost and certain other financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses. In addition, this guidance changes the recognition method for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk, and requires additional disclosures. In general, modified retrospective adoption will be required for all outstanding instruments that fall under this guidance.

In November 2019, the FASB issued authoritative guidance (ASU 2019-11 – Codification Improvements to Topic 326, Financial Instruments – Credit Losses) that amends ASC Topic 326 to clarify, improve and amend certain aspects of this guidance, such as disclosures related to accrued interest receivables and the estimation of credit losses associated with financial assets secured by collateral.

In February 2020, the FASB issued authoritative guidance (ASU 2020-02 – Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842)) that amends and clarifies Topic 326 and Topic 842. For Topic 326, the codification was updated to include the Securities and Exchange Commission staff interpretations associated with registrants engaged in lending activities.

Effective for the Company – Fiscal 2021 first quarter.

Impact on consolidated financial statements – On July 1, 2020, the Company adopted ASC 326. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. See Note 7 – Revenue Recognition for further discussion.

Goodwill and Other – Internal-Use Software (ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract)

In August 2018, the FASB issued authoritative guidance that permits companies to capitalize the costs incurred for setting up business systems that operate on cloud technology. The new guidance aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance does not affect the accounting for the service element of a hosting arrangement that is a service contract. Capitalized costs associated with a hosting arrangement that is a service contract must be amortized over the term of the hosting arrangement to the same line item in the income statement as the expense for fees for the hosting arrangement.

Effective for the Company – Fiscal 2021 first quarter, with early adoption permitted in any interim period. This guidance can be adopted either retrospectively, or prospectively to all implementation costs incurred after the date of adoption.

Impact on consolidated financial statements – On July 1, 2020, the Company adopted this guidance prospectively to all implementation costs incurred after the date of adoption. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Standards

Reference Rate Reform (ASC Topic 848)

In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”), which is expected to be phased out at the end of calendar 2021, and applies to lease contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that have LIBOR as the benchmark rate.

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THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clarify that all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC Topic 848.

Effective for the Company – This guidance can be applied for a limited time through December 31, 2022. The guidance will no longer be available to apply after December 31, 2022.

Impact on consolidated financial statements – The Company is currently assessing the impact of applying this guidance on its existing derivative contracts, leases and other arrangements, as well as when to adopt this guidance.

Income Taxes (ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes)

In December 2019, the FASB issued authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas.

Effective for the Company – Fiscal 2022 first quarter, with early adoption permitted in any interim period. If adopted early, the Company must adopt all the amendments in the same period. The amendments have differing adoption methods including retrospectively, prospectively and/or modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, depending on the specific change.

Impact on consolidated financial statements – The Company is currently evaluating the impact of applying this guidance and believes that it has transactions that may fall under the scope.

No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

NOTE 2 – ACQUISITION OF BUSINESS

On December 18, 2019, the Company acquired the remaining 66.66% equity interest in Have&Be Co. Ltd. (“Have & Be”), the global skin care company behind Dr. Jart+ and men’s grooming brand Do The Right Thing, for $1,268 million in cash. Based on the final purchase price and working capital adjustments, the Company estimated a refund receivable of $32 million that was outstanding as of June 30, 2020 and was received in the first quarter of fiscal 2021. The Company originally acquired a minority interest in Have & Be in December 2015, and that investment structure included a formula-based call option for the remaining equity interest. The original minority interest was accounted for as an equity method investment, which had a carrying value of $133 million at the acquisition date. The acquisition of the remaining equity interest in Have & Be was considered a step acquisition, whereby the Company remeasured the previously held equity method investment to its fair value of $682 million, resulting in the recognition of a gain of $549 million. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of $4 million, which was reclassified from accumulated OCI. The total gain on the Company’s previously held equity method investment of $553 million is included in Other income in the accompanying consolidated statements of earnings for the three and six months ended December 31, 2019. The fair value of the previously held equity method investment was determined based upon a valuation of the acquired business, as of the date of acquisition, using an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies. The accounting for the Have & Be business combination was finalized as of June 30, 2020.

The amount paid at closing was funded by cash on hand including the proceeds from the issuance of debt. In anticipation of the closing, the Company transferred cash to a foreign subsidiary for purposes of making the closing payment. As a result, the Company recognized a foreign currency gain of $23 million, which is also included in Other income in the accompanying consolidated statements of earnings for the three and six months ended December 31, 2019.

Further information is included in the notes to consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

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THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – GOODWILL AND OTHER INTANGIBLE ASSETS

The following table presents goodwill by product category and the related change in the carrying amount:


(In millions)	Skin Care		Makeup		Fragrance		Hair Care		Total
Balance as of June 30, 2020
Goodwill	$	519	$	1,210	$	254	$	389	$	2,372
Accumulated impairments	(95)		(817)		(26)		(33)		(971)
	424		393		228		356		1,401

Goodwill acquired during the period	—		6		—		4		10
Impairment charges	(54)		—		—		—		(54)
Translation adjustments, goodwill	36		—		9		3		48
Translation adjustments, accumulated impairments	(2)		—		—		(2)		(4)
	(20)		6		9		5		—

Balance as of December 31, 2020
Goodwill	555		1,216		263		396		2,430
Accumulated impairments	(151)		(817)		(26)		(35)		(1,029)
	$	404	$

Price	196.33	EPS	5
Shares	369	P/E	38
MCap	72,367	P/FCF	67
Net Debt	636	EBIT	2,577
TEV	73,003	TEV/EBIT	28
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-12-31	Filed 2021-02-05
10-Q	2020-09-30	Filed 2020-11-02
10-K	2020-06-30	Filed 2020-08-28
10-Q	2020-03-31	Filed 2020-05-01
10-Q	2019-12-31	Filed 2020-02-06
10-Q	2019-09-30	Filed 2019-10-31
10-K	2019-06-30	Filed 2019-08-23
10-Q	2019-03-31	Filed 2019-05-01
10-Q	2018-12-31	Filed 2019-02-05
10-Q	2018-09-30	Filed 2018-10-31
10-K	2018-06-30	Filed 2018-08-24
10-Q	2018-03-31	Filed 2018-05-02
10-Q	2017-12-31	Filed 2018-02-02
10-Q	2017-09-30	Filed 2017-11-01
10-K	2017-06-30	Filed 2017-08-25
10-Q	2017-03-31	Filed 2017-05-03
10-Q	2016-12-31	Filed 2017-02-02
10-Q	2016-09-30	Filed 2016-11-02
10-K	2016-06-30	Filed 2016-08-24
10-Q	2016-03-31	Filed 2016-05-03
10-Q	2015-12-31	Filed 2016-02-05
10-Q	2015-09-30	Filed 2015-11-02
10-K	2015-06-30	Filed 2015-08-20
10-Q	2015-03-31	Filed 2015-05-05
10-Q	2014-12-31	Filed 2015-02-05
10-Q	2014-09-30	Filed 2014-11-04
10-K	2014-06-30	Filed 2014-08-20
10-Q	2014-03-31	Filed 2014-05-02
10-Q	2013-12-31	Filed 2014-02-05
10-Q	2013-09-30	Filed 2013-11-01
10-K	2013-06-30	Filed 2013-08-23
10-Q	2013-03-31	Filed 2013-05-03
10-Q	2012-12-31	Filed 2013-02-06
10-Q	2012-09-30	Filed 2012-11-02
10-K	2012-06-30	Filed 2012-08-17
10-Q	2012-03-31	Filed 2012-05-07
10-Q	2011-12-31	Filed 2012-02-06
10-Q	2011-09-30	Filed 2011-11-04
10-K	2011-06-30	Filed 2011-08-22
10-Q	2011-03-31	Filed 2011-05-06
10-Q	2010-12-31	Filed 2011-02-04
10-Q	2010-09-30	Filed 2010-11-01
10-K	2010-06-30	Filed 2010-08-20
10-Q	2010-03-31	Filed 2010-04-27
10-Q	2009-12-31	Filed 2010-01-28

8-K	2021-02-23	Other Events, Exhibits
8-K	2021-02-04	Earnings, Other Events, Exhibits
8-K	2020-11-10
8-K	2020-10-30
8-K	2020-08-18
8-K	2020-05-01
8-K	2020-04-13
8-K	2020-04-07
8-K	2020-04-07
8-K	2020-03-18
8-K	2020-02-21
8-K	2020-02-05
8-K	2019-11-19
8-K	2019-11-18
8-K	2019-11-15
8-K	2019-10-30
8-K	2019-08-16
8-K	2019-04-30
8-K	2019-03-06
8-K	2019-02-14
8-K	2019-02-04
8-K	2018-11-13
8-K	2018-10-30
8-K	2018-10-26
8-K	2018-08-17
8-K	2018-07-19
8-K	2018-05-01
8-K	2018-04-16
8-K	2018-02-14
8-K	2018-02-01

EX-31.1	el-q2fy2021xex311.htm
EX-31.2	el-q2fy2021xex312.htm
EX-32.1	el-q2fy2021xex321.htm
EX-32.2	el-q2fy2021xex322.htm

EL 10Q Quarterly Report

Estee Lauder Earnings 2020-12-31