ESTEE LAUDER COMPANIES INC 10-K

Item 9A. Controls and Procedures. Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures, including impacts of COVID-19, as of June 30, 2020 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date. As part of our review of internal control over financial reporting, we make changes to systems and processes to improve such controls and increase efficiencies, while ensuring that we maintain an effective internal control environment. There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fourth quarter of fiscal 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Management’s report on internal control over financial reporting and the report of independent registered public accounting firm on our internal control over financial reporting are incorporated herein from pages F-2 and F-3, respectively. Item 9B. Other Information. None. 54 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance. The information required by this Item, not already provided herein under Item 1. Business – Information about our Executive Officers, will be included in our Proxy Statement for the 2020 Annual Meeting of Stockholders (the “2020 Proxy Statement”). The 2020 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2020 and such information is incorporated herein by reference. Item 11. Executive Compensation . The information required by this Item will be included in the 2020 Proxy Statement. The 2020 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2020 and such information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item, not already provided under Equity Compensation Plan Information as set forth below, will be included in the 2020 Proxy Statement. The 2020 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2020 and such information is incorporated herein by reference. Equity Compensation Plan Information The following table summarizes the equity compensation plans under which our securities may be issued as of June 30, 2020 and does not include grants made or cancelled and options exercised after such date. The securities that may be issued consist solely of shares of our Class A Common Stock and all plans were approved by stockholders of the Company. Equity Compensation Plan Information as of June 30, 2020 Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights (2) Weighted-average exercise price of outstanding options, warrants and rights (3) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) (4) Equity compensation plans approved by security holders (1) 13,763,705 $108.30 14,991,674 (1) Includes the Amended and Restated Fiscal 2002 Share Incentive Plan (the “2002 Plan”) and the Amended and Restated Non-Employee Director Share Incentive Plan (the “Director Plan”). (2) Consists of 8,644,974 shares issuable upon exercise of outstanding options, 1,948,329 shares issuable upon conversion of outstanding Restricted Stock Units, 2,449,778 shares issuable upon conversion of outstanding Performance Share Units (“PSUs”) (assuming maximum payout for unvested PSUs and PSUs vested as of June 30, 2020 pending approval by the Stock Plan Subcommittee of our Board of Directors), 136,836 shares issuable upon conversion of Share Units and 583,788 shares issuable upon conversion of Long-term PSUs. (3) Calculated based upon outstanding options in respect of 8,644,974 shares of our Class A Common Stock. (4) The 2002 Plan authorizes the grant of shares and benefits other than stock options. As of June 30, 2020, there were 14,505,951 shares of Class A Common Stock available for issuance under the 2002 Plan (subject to the approval by the Stock Plan Subcommittee of expected payouts for PSUs vested as of June 30, 2020). Shares underlying grants cancelled or forfeited under prior plans or agreements may be used for grants under the 2002 Plan. The Director Plan currently provides for an annual grant of options and stock units to non-employee directors. As of June 30, 2020, there were 485,723 shares available for issuance under the Director Plan. If all of the outstanding options, warrants, rights, stock units and share units, as well as the securities available for future issuance, included in the first and third columns in the table above were converted to shares of Class A Common Stock as of June 30, 2020, the total shares of Common Stock outstanding (i.e. Class A plus Class B) would increase 8% to 389,281,011. Of the outstanding options to purchase 8,644,974 shares of Class A Common Stock, options to purchase 7,355,467 shares have an exercise price less than $188.68, the closing price on June 30, 2020. Assuming the exercise of only in-the-money options, the total shares outstanding would increase by 2% to 367,881,099. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item will be included in the 2020 Proxy Statement. The 2020 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2020 and such information is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information required by this Item will be included in the 2020 Proxy Statement. The 2020 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2020 and such information is incorporated herein by reference. 55 Table of Contents PART IV Item 15. Exhibits, Financial Statement Schedules. (a) 1 and 2. Financial Statements and Schedules - See index on Page F-1. 3. Exhibits: Exhibit Number Description 3.1 Restated Certificate of Incorporation, dated November 16, 1995 (filed as Exhibit 3.1 to our Annual Report on Form 10-K filed on September 15, 2003) (SEC File No. 1-14064).* 3.1a Certificate of Amendment of the Restated Certificate of Incorporation of The Estée Lauder Companies Inc. (filed as Exhibit 3.1 to our Current Report on Form 8-K filed on November 13, 2012) (SEC File No. 1-14064).* 3.2 Certificate of Retirement of $6.50 Cumulative Redeemable Preferred Stock (filed as Exhibit 3.2 to our Current Report on Form 8-K filed on July 19, 2012) (SEC File No.1-14064).* 3.3 Amended and Restated Bylaws (filed as Exhibit 3.1 to our Current Report on Form 8-K filed on May 23, 2012) (SEC File No. 1-14064).* 4.1 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. 4.2 Indenture, dated November 5, 1999, between the Company and State Street Bank and Trust Company, N.A. (filed as Exhibit 4 to Amendment No. 1 to our Registration Statement on Form S-3 (No. 333-85947) filed on November 5, 1999) (SEC File No. 1-14064).* 4.3 Officers’ Certificate, dated September 29, 2003, defining certain terms of the 5.75% Senior Notes due 2033 (filed as Exhibit 4.2 to our Current Report on Form 8-K filed on September 29, 2003) (SEC File No. 1-14064).* 4.4 Global Note for 5.75% Senior Notes due 2033 (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on September 29, 2003) (SEC File No. 1-14064).* 4.5 Officers’ Certificate, dated May 1, 2007, defining certain terms of the 6.000% Senior Notes due 2037 (filed as Exhibit 4.2 to our Current Report on Form 8-K filed on May 1, 2007) (SEC File No. 1-14064).* 4.6 Global Note for 6.000% Senior Notes due 2037 (filed as Exhibit 4.4 to our Current Report on Form 8-K filed on May 1, 2007) (SEC File No. 1-14064).* 4.7 Officers’ Certificate, dated August 2, 2012, defining certain terms of the 2.350% Senior Notes due 2022 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on August 2, 2012) (SEC File No. 1-14064).* 4.8 Global Note for the 2.350% Senior Notes due 2022 (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on August 2, 2012) (SEC File No. 1-14064).* 4.9 Officers’ Certificate, dated August 2, 2012, defining certain terms of the 3.700% Senior Notes due 2042 (filed as Exhibit 4.2 to our Current Report on Form 8-K filed on August 2, 2012) (SEC File No. 1-14064).* 4.10 Global Note for the 3.700% Senior Notes due 2042 (filed as Exhibit 4.4 to our Current Report on Form 8-K filed on August 2, 2012) (SEC File No. 1-14064).* 4.11 Officers’ Certificate, dated June 4, 2015, defining certain terms of the 4.375% Senior Notes due 2045 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on June 4, 2015) (SEC File No. 1-14064).* 4.12 Global Note for the 4.375% Senior Notes due 2045 (filed as Exhibit 4.2 to our Current Report on Form 8-K filed on June 4, 2015) (SEC File No. 1-14064).* 4.13 Officers’ Certificate, dated May 10, 2016, defining certain terms of the 1.700% Senior Notes due 2021 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on May 10, 2016) (SEC File No. 1-14064).* 4.14 Global Note for the 1.700% Senior Notes due 2021 (filed as Exhibit A in Exhibit 4.1 to our Current Report on Form 8-K filed on May 10, 2016) (SEC File No. 1-14064).* 4.15 Officers’ Certificate, dated May 10, 2016, defining certain terms of the 4.375% Senior Notes due 2045 (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on May 10, 2016) (SEC File No. 1-14064).* 4.16 Global Note for the 4.375% Senior Notes due 2045 (filed as Exhibit B in Exhibit 4.3 to our Current Report on Form 8-K filed on May 10, 2016) (SEC File No. 1-14064).* 4.17 Officers’ Certificate, dated February 9, 2017, defining certain terms of the 1.800% Senior Notes due 2020 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 4.18 Form of Global Note for the 1.800% Senior Notes due 2020 (included as Exhibit A in Exhibit 4.1 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 56 Table of Contents Exhibit Number Description 4.19 Officers’ Certificate, dated February 9, 2017, defining certain terms of the 3.150% Senior Notes due 2027 (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 4.20 Form of Global Note for the 3.150% Senior Notes due 2027 (included as Exhibit A in Exhibit 4.3 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 4.21 Officers’ Certificate, dated February 9, 2017, defining certain terms of the 4.150% Senior Notes due 2047 (filed as Exhibit 4.5 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 4.22 Form of Global Note for the 4.150% Senior Notes due 2047 (included as Exhibit A in Exhibit 4.5 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 4.23 Officers’ Certificate, dated November 21, 2019, defining certain terms of the 2.000% Senior Notes due 2024 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.24 Form of Global Note for the 2.000% Senior Notes due 2024 (included as Exhibit A in Exhibit 4.1 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.25 Officers’ Certificate, dated November 21, 2019, defining certain terms of the 2.375% Senior Notes due 2029 (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.26 Form of Global Note for the 2.375% Senior Notes due 2029 (included as Exhibit A in Exhibit 4.3 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.27 Officers’ Certificate, dated November 21, 2019, defining certain terms of the 3.125% Senior Notes due 2049 (filed as Exhibit 4.5 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.28 Form of Global Note for the 3.125% Senior Notes due 2049 (included as Exhibit A in Exhibit 4.5 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.29 Officers’ Certificate, dated April 13, 2020, defining certain terms of the 2.600% Senior Notes due 2030 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on April 13, 2020) (SEC File No. 1-14064).* 4.30 Form of Global Note for the 2.600% Senior Notes due 2030 (included as Exhibit A in Exhibit 4.1 to our Current Report on Form 8-K filed on April 13, 2020) (SEC File No. 1-14064).* 10.1 Stockholders’ Agreement, dated November 22, 1995 (filed as Exhibit 10.1 to our Annual Report on Form 10-K filed on September 15, 2003) (SEC File No. 1-14064).* 10.1a Amendment No. 1 to Stockholders’ Agreement (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on October 30, 1996) (SEC File No. 1-14064).* 10.1b Amendment No. 2 to Stockholders’ Agreement (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on January 28, 1997) (SEC File No. 1-14064).* 10.1c Amendment No. 3 to Stockholders’ Agreement (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on April 29, 1997) (SEC File No. 1-14064).* 10.1d Amendment No. 4 to Stockholders’ Agreement (filed as Exhibit 10.1d to our Annual Report on Form 10-K filed on September 18, 2000) (SEC File No. 1-14064).* 10.1e Amendment No. 5 to Stockholders’ Agreement (filed as Exhibit 10.1e to our Annual Report on Form 10-K filed on September 17, 2002) (SEC File No. 1-14064).* 10.1f Amendment No. 6 to Stockholders’ Agreement (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on January 27, 2005) (SEC File No. 1-14064).* 10.1g Amendment No. 7 to Stockholders’ Agreement (filed as Exhibit 10.7 to our Quarterly Report on Form 10-Q filed on October 30, 2009) (SEC File No. 1-14064).* 10.2 Registration Rights Agreement, dated November 22, 1995 (filed as Exhibit 10.2 to our Annual Report on Form 10-K filed on September 15, 2003) (SEC File No. 1-14064).* 10.2a First Amendment to Registration Rights Agreement (originally filed as Exhibit 10.3 to our Annual Report on Form 10-K filed on September 10, 1996) (re-filed as Exhibit 10.2a to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* 10.2b Second Amendment to Registration Rights Agreement (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on April 29, 1997) (SEC File No. 1-14064).* 57 Table of Contents Exhibit Number Description 10.2c Third Amendment to Registration Rights Agreement (filed as Exhibit 10.2c to our Annual Report on Form 10-K filed on September 17, 2001) (SEC File No. 1-14064).* 10.2d Fourth Amendment to Registration Rights Agreement (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on January 29, 2004) (SEC File No. 1-14064).* 10.3 The Estee Lauder Companies Retirement Growth Account Plan, as amended and restated, effective as of January 1, 2017, further amended effective as of July 1, 2017 (filed as Exhibit 10.3 to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.4 The Estee Lauder Inc. Retirement Benefits Restoration Plan (filed as Exhibit 10.5 to our Annual Report on Form 10-K filed on August 20, 2010) (SEC File No. 1-14064).* † 10.5 Executive Annual Incentive Plan (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on November 14, 2013) (SEC File No. 1-14064).* † 10.6 Employment Agreement with Tracey T. Travis (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on July 20, 2012) (SEC File No. 1-14064).* † 10.7 Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.8 to our Annual Report on Form 10-K filed on September 17, 2001) (SEC File No. 1-14064).* † 10.7a Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.8a to our Annual Report on Form 10-K filed on September 17, 2002) (SEC File No. 1-14064).* † 10.7b Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on November 17, 2005) (SEC File No. 1-14064).* † 10.7c Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on February 5, 2009) (SEC File No. 1-14064).* † 10.7d Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.8 to our Quarterly Report on Form 10-Q filed on October 30, 2009) (SEC File No. 1-14064).* † 10.7e Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.6 to our Quarterly Report on Form 10-Q filed on November 1, 2010) (SEC File No. 1-14064).* † 10.7f Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.7f to our Annual Report on Form 10-K filed on August 20, 2015) (SEC File No. 1-14064).* † 10.7g Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on May 1, 2020) (SEC File No. 1-14064). * † 10.8 Employment Agreement with William P. Lauder (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 17, 2010) (SEC File No. 1-14064).* † 10.8a Amendment to Employment Agreement with William P. Lauder (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 27, 2013) (SEC File No. 1-14064).* † 10.9 Employment Agreement with Fabrizio Freda (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 11, 2011) (SEC File No. 1-14064).* † 10.9a Amendment to Employment Agreement with Fabrizio Freda and Stock Option Agreements (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on February 27, 2013) (SEC File No. 1-14064).* † 10.10 Employment Agreement with John Demsey (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 24, 2010) (SEC File No. 1-14064).* † 10.10a Amendment to Employment Agreement with John Demsey (filed as Exhibit 10.3 to our Current Report on Form 8-K filed on February 27, 2013) (SEC File No. 1-14064).* † 10.11 Employment Agreement with Cedric Prouvé (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 20, 2011) (SEC File No. 1-14064).* † 10.11a Amendment to Employment Agreement with Cedric Prouvé (filed as Exhibit 10.4 to our Current Report on Form 8-K filed on February 27, 2013) (SEC File No. 1-14064).* † 10.12 Employment Agreement with Deirdre Stanley (SEC File No. 1-14064).† 10.12a Amendment to Employment Agreement with Deirdre Stanley (SEC File No. 1-14064).† 58 Table of Contents Exhibit Number Description 10.13 Form of Deferred Compensation Agreement (interest-based) with Outside Directors (filed as Exhibit 10.14 to our Annual Report on Form 10-K filed on September 17, 2001) (SEC File No. 1-14064).* † 10.13a Form of Deferred Compensation Agreement (interest-based) with Outside Directors (including Election Form) (filed as Exhibit 10.12a to our Annual Report on Form 10-K filed on August 24, 2018) (SEC File No. 1-14064).* † 10.14 Form of Deferred Compensation Agreement (stock-based) with Outside Directors (filed as Exhibit 10.15 to our Annual Report on Form 10-K filed on September 17, 2001) (SEC File No. 1-14064).* † 10.14a Form of Deferred Compensation Agreement (stock-based) with Outside Directors (including Election Form) (filed as Exhibit 10.13a to our Annual Report on Form 10-K filed on August 24, 2018) (SEC File No. 1-14064).* † 10.15 The Estee Lauder Companies Inc. Non-Employee Director Share Incentive Plan (as amended and restated on November 9, 2007) (filed as Exhibit 99.1 to our Registration Statement on Form S-8 filed on November 9, 2007) (SEC File No. 1-14064).* † 10.15a The Estee Lauder Companies Inc. Non-Employee Director Share Incentive Plan (as amended on July 14, 2011) (filed as exhibit 10.15a to our Annual Report on Form 10-K filed on August 22, 2011) (SEC File No. 1-14064).* † 10.15b The Estée Lauder Companies Inc. Amended and Restated Non-Employee Director Share Incentive Plan (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on November 16, 2015) (SEC File No. 1-14064).* † 10.15c The Estée Lauder Companies Inc. Amended and Restated Non-Employee Director Share Incentive Plan (as of November 1, 2017) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 1, 2017) (SEC File No. 1-14064).* † 10.15d The Estée Lauder Companies Inc. Amended and Restated Non-Employee Director Share Incentive Plan (as of August 22, 2019) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on October 31, 2019) (SEC File No. 1-14064).* † 10.16 Summary of Compensation For Non-Employee Directors of the Company (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on November 1, 2013) (SEC File No. 1-14064).* † 10.16a Summary of Compensation For Non-Employee Directors of the Company (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on November 1, 2017) (SEC File No. 1-14064).* † 10.17 Form of Stock Option Agreement for Annual Stock Option Grants under Non-Employee Director Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 99.2 to our Registration Statement on Form S-8 filed on November 9, 2007) (SEC File No. 1-14064).* † 10.17a Form of Stock Option Agreement for Elective Stock Option Grants under Non-Employee Director Share Incentive Plan (filed as Exhibit 99.3 to our Registration Statement on Form S-8 filed on November 9, 2007) (SEC File No. 1-14064).* † 10.17b Form of Stock Option Agreement for Annual Stock Option Grants under the Amended and Restated Non-Employee Director Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on October 31, 2019) (SEC File No. 1-14064).* † 10.18 The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (filed as Exhibit 10.17 to our Annual Report on Form 10-K filed on August 17, 2012) (SEC File No. 1-14064).* † 10.18a The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on November 16, 2015) (SEC File No. 1-14064).* † 10.18b The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (filed as Exhibit 10.16b to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.18c The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on November 19, 2019) (SEC File No. 1-14064).* † 10.18d Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on October 30, 2009) (SEC File No. 1-14064).* † 59 Table of Contents Exhibit Number Description 10.18e Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 1, 2010) (SEC File No. 1-14064).* † 10.18f Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 4, 2011) (SEC File No. 1-14064).* † 10.18g Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 2, 2012) (SEC File No. 1-14064).* † 10.18h Form of Stock Option Agreement with Fabrizio Freda under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.6 to our Quarterly Report on Form 10-Q filed on November 2, 2012) (SEC File No. 1-14064).* † 10.18i Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16y to our Annual Report on Form 10-K filed on August 20, 2014) (SEC File No. 1-14064).* † 10.18j Form of Stock Option Agreement with Fabrizio Freda under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16z to our Annual Report on Form 10-K filed on August 20, 2014) (SEC File No. 1-14064).* † 10.18k Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16m to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064) .* † 10.18l Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17l to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No. 1-14064).* † 10.18m Performance Share Unit Award Agreement with Fabrizio Freda under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Notice of Grant) (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 11, 2015) (SEC File No. 1-14064).* † 10.18n Performance Share Unit Award Agreement with John Demsey under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Notice of Grant) (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 1, 2016) (SEC File No. 1-14064).* † 10.18o Form of Performance Share Unit Award Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on February 1, 2016) (SEC File No. 1-14064).* † 10.18p Form of Performance Share Unit Award Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16v to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.18q Performance Share Unit Award Agreement with Fabrizio Freda (2018) under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Notice of Grant) (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 15, 2018) (SEC File No. 1-14064).* † 10.18r Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17u to our Annual Report on Form 10-K filed on August 24, 2018) (SEC File No. 1-14064).* † 10.18s Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17t to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No. 1-14064).* † 10.18t Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No. 1-14064).† 60 Table of Contents Exhibit Number Description 10.18u Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16bb to our Annual Report on Form 10-K filed on August 20, 2014) (SEC File No. 1-14064).* † 10.18v Form of Restricted Stock Unit Award Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16aa to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.18w Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16bb to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.18x Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16cc to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.18y Form of Restricted Stock Unit Award Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17y to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No. 1-14064).* † 10.18z Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17z to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No. 1-14064).* † 10.18aa Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17aa to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No. 1-14064).* † 10.18bb Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No. 1-14064).† 10.18cc Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No. 1-14064).† 10.18dd Form of Non-annual Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No. 1-14064).† 10.19 $1.5 Billion Credit Agreement, dated as of October 26, 2018, among The Estée Lauder Companies Inc., the Eligible Subsidiaries of the Company, as defined therein, the lenders listed therein, and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on October 29, 2018) (SEC File No. 1-14064).* 10.20 Services Agreement, dated January 1, 2003, among Estee Lauder Inc., Melville Management Corp., Leonard A. Lauder, and William P. Lauder (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC File No. 1-14064).* 10.21 Services Agreement, dated November 22, 1995, between Estee Lauder Inc. and RSL Investment Corp. (filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC File No. 1-14064).* 10.22 Agreement of Sublease and Guarantee of Sublease, dated April 1, 2005, among Aramis Inc., RSL Management Corp., and Ronald S. Lauder (filed as Exhibit 10.4 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC File No. 1-14064).* 10.22a First Amendment to Sublease, dated February 28, 2007, between Aramis Inc. and RSL Management Corp. (filed as Exhibit 10.5 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC File No. 1-14064).* 10.22b Second Amendment to Sublease, dated January 27, 2010, between Aramis Inc. and RSL Management Corp. (filed as Exhibit 10.6 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC File No. 1-14064).* 10.22c Third Amendment to Sublease, dated November 3, 2010, between Aramis Inc., and RSL Management Corp. (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on February 4, 2011) (SEC File No. 1-14064).* 61 Table of Contents Exhibit Number Description 10.22d Fourth Amendment to Sublease, dated March 4, 2020, between Aramis Inc. and RSL Management Corp. (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on May 1, 2020) (SEC File No. 1-14064).* 10.23 Form of Art Loan Agreement between Lender and Estee Lauder Inc. (filed as Exhibit 10.7 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC file No. 1-14064).* 10.24 Creative Consultant Agreement, dated April 6, 2011, between Estee Lauder Inc. and Aerin Lauder Zinterhofer (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on April 8, 2011) (SEC File No. 1-14064).* † 10.24a First Amendment to Creative Consultant Agreement between Estee Lauder Inc. and Aerin Lauder Zinterhofer dated October 28, 2014 (filed as Exhibit 10.23a to our Annual Report on Form 10-K filed on August 20, 2015) (SEC File No. 1-14064).* † 10.24b Second Amendment to Creative Consultant Agreement between Estee Lauder Inc. and Aerin Lauder Zinterhofer effective July 1, 2016 (filed as Exhibit 10.23b to our Annual Report on Form 10-K filed on August 24, 2016) (SEC File No. 1-14064).* † 10.25 License Agreement, dated April 6, 2011, by and among Aerin LLC, Aerin Lauder Zinterhofer and Estee Lauder Inc. (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on April 8, 2011) (SEC File No. 1-14064).* 10.25a First Amendment to the April 6, 2011 License Agreement, dated January 22, 2019, by and among Aerin LLC, Aerin Lauder Zinterhofer and Estee Lauder Inc. (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on May 1, 2019) (SEC File No. 1-14064).* 10.25b Second Amendment to the April 6, 2011 License Agreement, dated February 22, 2019, by and among Aerin LLC, Aerin Lauder Zinterhofer and Estee Lauder Inc. (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on May 1, 2019) (SEC File No. 1-14064).* 21.1 List of significant subsidiaries. 23.1 Consent of KPMG LLP. 24.1 Power of Attorney. 31.1 Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO). 31.2 Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO). 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO). (furnished) 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO). (furnished) 101.1 The following materials from The Estée Lauder Companies Inc.’s Annual Report on Form 10-K for the year ended June 30, 2020 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements 104 The cover page from The Estée Lauder Companies Inc.’s Annual Report on Form 10-K for the year ended June 30, 2020 is formatted in iXBRL ____________________ * Incorporated herein by reference. † Exhibit is a management contract or compensatory plan or arrangement. Item 16. Form 10-K Summary. None. 62 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE ESTÉE LAUDER COMPANIES INC. By /s/ TRACEY T. TRAVIS Tracey T. Travis Executive Vice President and Chief Financial Officer Date: August 28, 2020 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Title (s) Date FABRIZIO FREDA* President, Chief Executive Officer and a Director (Principal Executive Officer) August 28, 2020 Fabrizio Freda WILLIAM P. LAUDER* Executive Chairman and a Director August 28, 2020 William P. Lauder LEONARD A. LAUDER* Director August 28, 2020 Leonard A. Lauder CHARLENE BARSHEFSKY* Director August 28, 2020 Charlene Barshefsky ROSE MARIE BRAVO* Director August 28, 2020 Rose Marie Bravo WEI SUN CHRISTIANSON* Director August 28, 2020 Wei Sun Christianson PAUL J. FRIBOURG* Director August 28, 2020 Paul J. Fribourg IRVINE O. HOCKADAY, JR.* Director August 28, 2020 Irvine O. Hockaday, Jr. JENNIFER HYMAN* Director August 28, 2020 Jennifer Hyman JANE LAUDER* Director August 28, 2020 Jane Lauder RONALD S. LAUDER* Director August 28, 2020 Ronald S. Lauder RICHARD D. PARSONS* Director August 28, 2020 Richard D. Parsons LYNN FORESTER DE ROTHSCHILD* Director August 28, 2020 Lynn Forester de Rothschild BARRY S. STERNLICHT* Director August 28, 2020 Barry S. Sternlicht JENNIFER TEJADA* Director August 28, 2020 Jennifer Tejada RICHARD F. ZANNINO* Director August 28, 2020 Richard F. Zannino /s/ TRACEY T. TRAVIS Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) August 28, 2020 Tracey T. Travis ___________________________________________ * By signing her name hereto, Tracey T. Travis signs this document in the capacities indicated above and on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed herewith. By /s/ TRACEY T. TRAVIS Tracey T. Travis (Attorney-in-Fact) 63 Table of Contents THE ESTÉE LAUDER COMPANIES INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Financial Statements: Management’s Report on Internal Control Over Financial Reporting F- 2 Report of Independent Registered Public Accounting Firm F- 3 Report of Independent Registered Public Accounting Firm F- 4 Consolidated Statements of Earnings F- 8 Consolidated Statements of Comprehensive Income F- 9 Consolidated Balance Sheets F- 10 Consolidated Statements of Equity F- 11 Consolidated Statements of Cash Flows F- 12 Notes to Consolidated Financial Statements F- 13 Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts S- 1 All other schedules are omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto. F-1 Table of Contents Management’s Report on Internal Control over Financial Reporting Management of The Estée Lauder Companies Inc. (including its subsidiaries) (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) of the Securities Exchange Act of 1934, as amended). A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. On December 18, 2019, the Company acquired Have&Be Co. Ltd. (“Have & Be”). As of and for the year ended June 30, 2020, Have & Be represented approximately 12% and 1% of the Company's consolidated total assets and net sales, respectively. The Company elected to exclude the internal controls relating to Have & Be from its fiscal 2020 annual evaluation of the effectiveness of internal control over financial reporting. Under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, the Company’s management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework and criteria established in Internal Control – Integrated Framework (2013) , issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the Company’s management has concluded that, as of June 30, 2020, the Company’s internal control over financial reporting was effective. The effectiveness of the Company’s internal control over financial reporting as of June 30, 2020 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears under the heading “Report of Independent Registered Public Accounting Firm.” /s/ Fabrizio Freda /s/ Tracey T. Travis Fabrizio Freda Tracey T. Travis President and Chief Executive Officer Executive Vice President and Chief Financial Officer August 28, 2020 F-2 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors The Estée Lauder Companies Inc.: Opinion on Internal Control Over Financial Reporting We have audited The Estée Lauder Companies Inc. and subsidiaries’ (“the Company”) internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of June 30, 2020 and 2019, the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the years in the three‑year period ended June 30, 2020 and the related notes and financial statement schedule (collectively, the consolidated financial statements), and our report dated August 28, 2020 expressed an unqualified opinion on those consolidated financial statements. The Company acquired Have&Be Co. Ltd. on December 18, 2019, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2020, Have&Be Co. Ltd.’s internal control over financial reporting associated with 12% of total assets and 1% of total revenues included in the consolidated financial statements of the Company as of and for the year ended June 30, 2020. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Have&Be Co. Ltd. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP New York, New York August 28, 2020 F-3 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors The Estée Lauder Companies Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of The Estée Lauder Companies Inc. and subsidiaries (“the Company”) as of June 30, 2020 and 2019, the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the years in the three‑year period ended June 30, 2020 and the related notes and financial statement schedule (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended June 30, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated August 28, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Change in Accounting Principle As discussed in Note 7 to the consolidated financial statements, the Company has changed its method of accounting for leases effective July 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases . As discussed in Note 14 to the consolidated financial statements, the Company has changed its method of accounting for revenue and related costs effective July 1, 2018 due to the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. F-4 Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Recoverability of the carrying value of goodwill and indefinite‑lived intangible assets As discussed in Note 6 to the consolidated financial statements, goodwill and indefinite‑lived intangible assets as of June 30, 2020 were $1,401 million and $2,338 million, respectively. Annually, or whenever events or changes in circumstances indicate a potential impairment has occurred, the Company evaluates the recoverability of the carrying value of goodwill and indefinite‑lived intangible assets. As a result of recoverability tests performed during the year ended June 30, 2020, the Company recognized goodwill and indefinite‑lived intangible asset impairment charges of $812 million and $614 million, respectively. The Company used a combination of the market and income approaches to determine the estimated fair values of such assets. We identified the evaluation of the recoverability of the carrying values of goodwill and trademark indefinite‑lived intangible assets related to the Too Faced, BECCA, and GLAMGLOW reporting units to be a critical audit matter. A high degree of judgment was required of management to estimate the fair value of these reporting units and trademarks. Subjective and challenging auditor judgment was required to evaluate the comparable publicly traded companies used to derive the market multiples and the projected cash flows, including the revenue growth rate, royalty rate, and discount rate assumptions. Additional uncertainty existed in the projected cash flows due to the COVID‑19 pandemic impact on the economic environment. Specialized skills and knowledge were also required to assess the royalty rate and discount rate assumptions. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill and indefinite‑lived intangible assets impairment process. This included controls over the determination of the assumptions listed above used to estimate the fair value of the reporting units and trademark indefinite‑lived intangible assets. To assess the Company’s ability to project cash flows, including revenue growth rates, we compared the Company’s historical cash flow projections for Too Faced, BECCA, and GLAMGLOW to actual results. We evaluated the Company’s revenue growth rate assumptions by comparing the projections to the underlying business strategies and growth plans. To assess the impact of changes to the assumptions, we performed a sensitivity analysis related to select inputs to the projected cash flows, including revenue growth rates. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in: • Developing an estimate of market valuation of the reporting units using an evaluation of comparable publicly traded companies and market multiples based on publicly available information, and comparing the result to the Company’s fair value estimate, • Developing an estimate of fair value of the reporting units using the Company’s projected cash flows, including revenue growth rates, and a discount rate based on publicly available information, and comparing the result to the Company’s fair value estimate, and • Evaluating the assumed royalty rate for the trademark intangible asset valuation by comparing it to royalty rates for similar companies. F-5 Table of Contents Accounting for income taxes As discussed in Note 2 to the consolidated financial statements, the Company is subject to income tax in each tax jurisdiction in which it operates. The Company maintains offices in over 50 countries and has key operational facilities located inside and outside the United States that manufacture, warehouse, or distribute goods for sale in approximately 150 countries and territories. We identified the evaluation of the accounting for income taxes as a critical audit matter. The Company’s global structure required complex auditor judgment to evaluate the Company’s interpretation and application of tax laws in relevant jurisdictions and the income tax impact of the legal entity ownership structure. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s income tax process. This included controls over the identification of changes to tax laws in the various jurisdictions in which it operates. We obtained an understanding of the Company’s overall legal entity structure by reading and evaluating the Company’s organizational charts and associated documentation, including legal documents. We, with the assistance of tax professionals with specialized skills and knowledge, evaluated the effect on the Company’s tax provision of changes in its legal entity structure and tax laws by reviewing and evaluating management’s tax calculations and assessing the Company’s compliance with tax laws. Acquisition‑date fair values of a certain trademark, a certain customer relationship intangible asset, and the previously held equity interest in Have & Be Co. Ltd. As discussed in Note 5 to the consolidated financial statements, on December 18, 2019, the Company acquired the remaining 66.66% equity interest in Have&Be Co. Ltd. As a result of the transaction, the Company acquired certain identifiable intangible assets, including trademarks associated with the skincare brands acquired and customer relationships for the acquired company’s existing customers. The acquisition‑date fair values for the trademarks and customer relationship intangible assets were approximately $722 million and $937 million, respectively. The Company also re‑measured its previously held equity interest to its acquisition‑date fair value of $660 million and recognized a gain of $534 million, which is included in other income, net in the consolidated statement of earnings. The Company used a combination of the market and income approaches to determine the estimated fair values of such assets and previously held equity interest. We identified the evaluation of the acquisition‑date fair values of a certain trademark, a certain customer relationship intangible asset, and the previously held equity interest in Have&Be Co. Ltd. as a critical audit matter. A high degree of judgment was required of management to estimate of the fair value of these assets. Subjective and complex auditor judgment was required to evaluate the comparable publicly traded companies used to derive the market multiples and the projected cash flows, including the revenue growth rates, royalty rate, and discount rate assumptions, used in estimating the acquisition‑date fair values. Additionally, specialized skills and knowledge were required to assess the royalty rate and discount rate assumptions. F-6 Table of Contents The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s acquisition‑date valuation process. This included controls over the determination of the above listed assumptions used to estimate the acquisition‑date fair values. We evaluated the projected cash flows, including the revenue growth rates, used by the Company by comparing projected cash flows to publicly available information for comparable companies and to historical revenues achieved. To assess the impact of changes to the assumptions, we performed a sensitivity analysis related to select inputs to the projected cash flows, including the revenue growth rates. We involved valuation professionals with specialized skills and knowledge, who assisted in: • Developing an estimate of fair value of the previously held equity interest based on the total enterprise fair value using publicly available market data, the Company’s projected cash flows, and a discount rate based on publicly available market data, and comparing the results to the Company’s fair value estimate, • Developing an estimate of fair value of a certain trademark acquired using the Company’s projected cash flows and a royalty rate and discount rate based on publicly available information, and comparing the result to the Company’s fair value estimate, and • Developing an estimate of fair value of a certain customer relationship acquired using the Company’s projected cash flows and a discount rate based on publicly available information, and comparing the result to the Company’s fair value estimate. /s/ KPMG LLP We have served as the Company’s auditor since 2002. New York, New York August 28, 2020 F-7 Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF EARNINGS Year Ended June 30 (In millions, except per share data) 2020 2019 2018 Net sales $ 14,294 $ 14,863 $ 13,683 Cost of sales 3,552 3,387 2,844 Gross profit 10,742 11,476 10,839 Operating expenses Selling, general and administrative 8,637 8,857 8,553 Restructuring and other charges 73 216 231 Goodwill impairment 812 68 — Impairments of other intangible and long-lived assets 614 22 — Total operating expenses 10,136 9,163 8,784 Operating income 606 2,313 2,055 Interest expense 161 133 128 Interest income and investment income, net 48 58 56 Other components of net periodic benefit cost 4 2 3 Other income, net 557 71 — Earnings before income taxes 1,046 2,307 1,980 Provision for income taxes 350 513 863 Net earnings 696 1,794 1,117 Net earnings attributable to noncontrolling interests ( 12 ) ( 9 ) ( 9 ) Net earnings attributable to The Estée Lauder Companies Inc. $ 684 $ 1,785 $ 1,108 Net earnings attributable to The Estée Lauder Companies Inc. per common share Basic $ 1.90 $ 4.91 $ 3.01 Diluted $ 1.86 $ 4.82 $ 2.95 Weighted-average common shares outstanding Basic 360.6 363.5 368.0 Diluted 366.9 370.4 375.7 See notes to consolidated financial statements. F-8 Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended June 30 (In millions) 2020 2019 2018 Net earnings $ 696 $ 1,794 $ 1,117 Other comprehensive income (loss): Net unrealized investment gain (loss) — 14 ( 13 ) Net cash flow hedge gain (loss) ( 9 ) ( 24 ) 57 Amounts included in net periodic benefit cost 12 ( 102 ) 92 Translation adjustments ( 108 ) ( 57 ) ( 20 ) Benefit (provision) for deferred income taxes on components of other comprehensive income 3 40 ( 34 ) Total other comprehensive income (loss) ( 102 ) ( 129 ) 82 Comprehensive income 594 1,665 1,199 Comprehensive income attributable to noncontrolling interests: Net earnings ( 12 ) ( 9 ) ( 9 ) Comprehensive income attributable to The Estée Lauder Companies Inc. $ 582 $ 1,656 $ 1,190 See notes to consolidated financial statements. F-9 Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED BALANCE SHEETS June 30 (In millions, except share data) 2020 2019 ASSETS Current assets Cash and cash equivalents $ 5,022 $ 2,987 Accounts receivable, net 1,194 1,831 Inventory and promotional merchandise 2,062 2,006 Prepaid expenses and other current assets 614 388 Total current assets 8,892 7,212 Property, plant and equipment, net 2,055 2,068 Other assets Operating lease right-of-use assets 2,282 — Goodwill 1,401 1,868 Other intangible assets, net 2,338 1,203 Other assets 813 805 Total other assets 6,834 3,876 Total assets $ 17,781 $ 13,156 LIABILITIES AND EQUITY Current liabilities Current debt $ 1,222 $ 516 Accounts payable 1,177 1,490 Operating lease liabilities 375 — Other accrued liabilities 2,405 2,599 Total current liabilities 5,179 4,605 Noncurrent liabilities Long-term debt 4,914 2,896 Long-term operating lease liabilities 2,278 — Other noncurrent liabilities 1,448 1,244 Total noncurrent liabilities 8,640 4,140 Commitments and contingencies Equity Common stock, $ .01 par value; Class A shares authorized: 1,300,000,000 at June 30, 2020 and June 30, 2019; shares issued: 451,927,441 at June 30, 2020 and 443,685,124 at June 30, 2019; Class B shares authorized: 304,000,000 at June 30, 2020 and June 30, 2019; shares issued and outstanding: 135,235,429 at June 30, 2020 and 139,537,814 at June 30, 2019 6 6 Paid-in capital 4,790 4,403 Retained earnings 10,134 9,984 Accumulated other comprehensive loss ( 665 ) ( 563 ) 14,265 13,830 Less: Treasury stock, at cost; 226,637,238 Class A shares at June 30, 2020 and 222,120,630 Class A shares at June 30, 2019 ( 10,330 ) ( 9,444 ) Total stockholders’ equity – The Estée Lauder Companies Inc. 3,935 4,386 Noncontrolling interests 27 25 Total equity 3,962 4,411 Total liabilities and equity $ 17,781 $ 13,156 See notes to consolidated financial statements. F-10 Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF EQUITY Year Ended June 30 (In millions) 2020 2019 2018 Common stock, beginning of year $ 6 $ 6 $ 6 Stock-based compensation — — — Common stock, end of year 6 6 6 Paid-in capital, beginning of year 4,403 3,972 3,559 Common stock dividends 3 — — Stock-based compensation 384 431 413 Paid-in capital, end of year 4,790 4,403 3,972 Retained earnings, beginning of year 9,984 9,040 8,452 Common stock dividends ( 505 ) ( 612 ) ( 552 ) Net earnings attributable to The Estée Lauder Companies Inc. 684 1,785 1,108 Reclassification from accumulated other comprehensive loss as a result of the adoption of a new accounting standard — — 32 Cumulative effect of adoption of new accounting standards ( 29 ) ( 229 ) — Retained earnings, end of year 10,134 9,984 9,040 Accumulated other comprehensive loss, beginning of year ( 563 ) ( 434 ) ( 484 ) Reclassification to retained earnings as a result of the adoption of a new accounting standard — — ( 32 ) Other comprehensive income (loss) ( 102 ) ( 129 ) 82 Accumulated other comprehensive loss, end of year ( 665 ) ( 563 ) ( 434 ) Treasury stock, beginning of year ( 9,444 ) ( 7,896 ) ( 7,149 ) Acquisition of treasury stock ( 768 ) ( 1,458 ) ( 688 ) Stock-based compensation ( 118 ) ( 90 ) ( 59 ) Treasury stock, end of year ( 10,330 ) ( 9,444 ) ( 7,896 ) Total stockholders’ equity – The Estée Lauder Companies Inc. 3,935 4,386 4,688 Noncontrolling interests, beginning of year 25 22 18 Net earnings attributable to noncontrolling interests 12 9 9 Distributions to noncontrolling interest holders ( 10 ) ( 6 ) ( 5 ) Noncontrolling interests, end of year 27 25 22 Total equity $ 3,962 $ 4,411 $ 4,710 Cash dividends declared per common share $ 1.39 $ 1.67 $ 1.48 See notes to consolidated financial statements. F-11 Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended June 30 (In millions) 2020 2019 2018 Cash flows from operating activities Net earnings $ 696 $ 1,794 $ 1,117 Adjustments to reconcile net earnings to net cash flows from operating activities: Depreciation and amortization 611 557 531 Deferred income taxes ( 143 ) ( 66 ) 175 Non-cash stock-based compensation 213 243 236 Net loss on disposal of property, plant and equipment 20 17 15 Non-cash restructuring and other charges 20 — 1 Pension and post-retirement benefit expense 82 72 73 Pension and post-retirement benefit contributions ( 73 ) ( 53 ) ( 85 ) Goodwill, other intangible and long-lived asset impairments 1,426 90 — Changes in fair value of contingent consideration ( 17 ) ( 37 ) ( 43 ) Gain on liquidation of an investment in a foreign subsidiary, net — ( 71 ) — Gain on previously held equity method investment ( 534 ) — — Other non-cash items ( 10 ) ( 27 ) ( 22 ) Changes in operating assets and liabilities: Decrease (increase) in accounts receivable, net 625 ( 169 ) ( 105 ) Increase in inventory and promotional merchandise ( 3 ) ( 375 ) ( 147 ) Decrease (increase) in other assets, net ( 212 ) ( 62 ) 1 Increase (decrease) in accounts payable ( 308 ) 319 349 Increase (decrease) in other accrued and noncurrent liabilities ( 169 ) 285 466 Increase in operating lease assets and liabilities, net 56 — — Net cash flows provided by operating activities 2,280 2,517 2,562 Cash flows from investing activities Capital expenditures ( 623 ) ( 744 ) ( 629 ) Payments for acquired businesses, net of cash acquired ( 1,047 ) — — Proceeds from the disposition of investments — 1,229 749 Purchases of investments ( 5 ) ( 14 ) ( 478 ) Proceeds from sale of property, plant and equipment — 2 — Settlement of net investment hedges ( 23 ) — — Net cash flows provided by (used for) investing activities ( 1,698 ) 473 ( 358 ) Cash flows from financing activities Proceeds (repayments) of current debt, net 755 ( 171 ) ( 8 ) Proceeds from issuance of long-term debt, net 2,481 — — Debt issuance costs ( 18 ) — — Repayments and redemptions of long-term debt ( 513 ) ( 1 ) ( 2 ) Net proceeds from stock-based compensation transactions 180 192 182 Payments to acquire treasury stock ( 893 ) ( 1,555 ) ( 759 ) Dividends paid to stockholders ( 503 ) ( 609 ) ( 546 ) Payments to noncontrolling interest holders for dividends ( 10 ) ( 6 ) ( 4 ) Payments of contingent consideration ( 18 ) ( 23 ) ( 35 ) Net cash flows provided by (used for) financing activities 1,461 ( 2,173 ) ( 1,172 ) Effect of exchange rate changes on Cash and cash equivalents ( 8 ) ( 11 ) 13 Net increase in Cash and cash equivalents 2,035 806 1,045 Cash and cash equivalents at beginning of year 2,987 2,181 1,136 Cash and cash equivalents at end of year $ 5,022 $ 2,987 $ 2,181 See notes to consolidated financial statements. F-12 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF BUSINESS The Estée Lauder Companies Inc. manufactures, markets and sells skin care, makeup, fragrance and hair care products around the world. Products are marketed under brand names, including: Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, M·A·C, Bobbi Brown , La Mer , Aveda, Jo Malone London, Bumble and bumble, Darphin, Smashbox, RODIN olio lusso, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, By Kilian, BECCA, Too Faced and Dr. Jart+. Certain subsidiaries of The Estée Lauder Companies Inc. are also the global licensee of the Tommy Hilfiger, Kiton, Donna Karan New York, DKNY, Michael Kors, Tom Ford, Ermenegildo Zegna and AERIN brand names for fragrances and/or cosmetics. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation 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. 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. generally accepted accounting principles (“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. Certain significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, inventory, pension and other post-retirement benefit costs, business combinations, goodwill, other intangible assets and long-lived assets, and income taxes. 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 year-end rates of exchange, while revenue and expenses are translated at weighted-average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as cumulative translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $( 106 ) million, $ 30 million and $( 17 ) million, net of tax, in fiscal 2020, 2019 and 2018, 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 in fiscal 2020, 2019 and 2018. In fiscal 2019, the Company had an investment in a foreign subsidiary that owned the Company’s available-for-sale securities, and the Company sold its available-for-sale securities, which liquidated this investment in the foreign subsidiary. As a result, the Company recorded a realized foreign currency gain on liquidation of $ 77 million and a gross loss on the sale of available-for-sale securities of $ 6 million, both of which were reclassified from accumulated OCI (“AOCI”) to Other income, net in the accompanying consolidated statement of earnings. 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. In fiscal 2020, the Company entered 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 12 – Derivative Financial Instruments for further discussion . The Company categorizes these instruments as entered into for purposes other than trading. F-13 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $ 51 million, $ 46 million and $( 95 ) million in fiscal 2020, 2019 and 2018, respectively. Cash and Cash Equivalents Cash and cash equivalents include $ 775 million and $ 1,566 million of short-term time deposits at June 30, 2020 and 2019, respectively. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Investments Investments in the common stock of privately-held companies in which the Company has significant influence, but less than a controlling financial interest, are accounted for under the equity method of accounting. The Company accounts for its cost method investments at cost, less impairment, plus/minus subsequent observable price changes, and performs an assessment each quarter to determine whether or not a triggering event has occurred that results in changes in fair value. These investments were not material to the Company’s consolidated financial statements as of June 30, 2020 and 2019 and are included in Long-term investments in the accompanying consolidated balance sheets. Accounts Receivable Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions. The allowance for doubtful accounts is based upon the evaluation of accounts receivable aging, specific exposures and historical trends. Payment terms are short-term in nature and are generally less than one year. In addition, if the good/service is transferred and payment is received within one year, the Company does not determine significant financing components. See Note 14 – Revenue Recognition for additional information. Inventory and Promotional Merchandise Inventory and promotional merchandise only includes inventory considered saleable or usable in future periods, and is stated at the lower of cost or net realizable value, with cost being based on standard cost and production variances, which approximate actual cost on the first-in, first-out method. Cost components include raw materials, componentry, direct labor and overhead (e.g., indirect labor, utilities, depreciation, purchasing, receiving, inspection and warehousing) as well as inbound freight. Manufacturing overhead is allocated to the cost of inventory based on the normal production capacity. Unallocated overhead during periods of abnormally low production levels are recognized as cost of sales in the period in which they are incurred. Promotional merchandise is charged to expense at the time the merchandise is shipped to the Company’s customers. Included in inventory and promotional merchandise is an inventory obsolescence reserve, which represents the difference between the cost of the inventory and its estimated realizable value. This reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age and historical results. In addition, and as necessary, specific reserves for future known or anticipated events may be established. Derivative Financial Instruments The Company’s derivative financial instruments are recorded as either assets or liabilities on the balance sheet and measured at fair value. All derivatives are (i) designated as a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value” hedge), (ii) designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge), or (iii) not designated as a hedging instrument. Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge are recorded in current-period earnings, along with the loss or gain on the hedged asset or liability that is attributable to the hedged risk (including losses or gains on unrecognized firm commitments). Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge of a forecasted transaction are recorded in OCI. Gains and losses deferred in OCI are then recognized in current-period earnings when earnings are affected by the variability of cash flows of the hedged forecasted transaction (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). Changes in the fair value of derivative instruments not designated as hedging instruments are reported in current-period earnings. All derivative gains and losses relating to cash flow hedges and fair value hedges are recognized in the same income statement line as the hedged items. In fiscal 2020, the Company entered 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 12 – Derivative Financial Instruments for further discussion. F-14 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property, Plant and Equipment Property, plant and equipment, including leasehold and other improvements that extend an asset’s useful life or productive capabilities, are carried at cost less accumulated depreciation and amortization. Costs incurred for computer software developed or obtained for internal use are capitalized during the application development stage and expensed as incurred during the preliminary project and post-implementation stages. For financial statement purposes, depreciation is provided principally on the straight-line method over the estimated useful lives of the assets ranging from 3 to 40 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lives of the respective leases or the expected useful lives of those improvements. Business Combinations The Company uses the acquisition method of accounting for acquired businesses. Under the acquisition method, the Company's consolidated financial statements reflect the operations of an acquired business starting from the closing date of the acquisition. The Company allocates the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. Any residual purchase price is recorded as goodwill. See Note 5 – Acquisition of Business for further information. Goodwill and Other Indefinite-lived Intangible Assets Goodwill is calculated as the excess of the cost of purchased businesses over the fair value of their underlying net assets. Other indefinite-lived intangible assets principally consist of trademarks. Goodwill and other indefinite-lived intangible assets are not amortized. The Company assesses goodwill and other indefinite-lived intangible assets at least annually for impairment as of the beginning of the fiscal fourth quarter or more frequently if certain events or circumstances exist. The Company tests goodwill for impairment at the reporting unit level, which is one level below the Company’s operating segments. The Company identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available and management of each operating segment regularly reviews the operating results of those components. The Company makes certain judgments and assumptions in allocating assets and liabilities to determine carrying values for its reporting units. When testing goodwill for impairment, the Company has the option of first performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. The Company uses a single quantitative step when determining the subsequent measurement of goodwill by comparing the fair value of a reporting unit with its carrying amount and recording an impairment charge for the amount that the carrying amount exceeds the fair value, up to the total amount of goodwill allocated to that reporting unit. When testing other indefinite-lived intangible assets for impairment, the Company also has the option of first performing a qualitative assessment to determine whether it is more-likely-than-not that the indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform a quantitative test. The quantitative impairment test for indefinite-lived intangible assets encompasses calculating the fair value of an indefinite-lived intangible asset and comparing the fair value to its carrying value. If the carrying value exceeds the fair value, an impairment charge is recorded. For fiscal 2020 and 2019, the Company elected to perform the qualitative assessment for certain of its reporting units and indefinite-lived intangible assets. This qualitative assessment included the review of certain macroeconomic factors and entity-specific qualitative factors to determine if it was more-likely-than-not that the fair values of its reporting units were below carrying value. The Company considered macroeconomic factors including the global economic growth, general macroeconomic trends for the markets in which the reporting units operate and the intangible assets are employed, and the growth of the global prestige beauty industry. In addition to these macroeconomic factors, among other things, the Company considered the reporting units’ current results and forecasts, any changes in the nature of the business, any significant legal, regulatory, contractual, political or other business climate factors, changes in the industry/competitive environment, changes in the composition or carrying amount of net assets and its intention to sell or dispose of a reporting unit or cease the use of a trademark. F-15 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Company’s other reporting units and other indefinite-lived intangible assets, a quantitative assessment was performed. The Company engaged third-party valuation specialists and used industry accepted valuation models and criteria that were reviewed and approved by various levels of management. To determine the fair value of the reporting units, the Company used an equal weighting of the income and market approaches. Under the income approach, we determined fair value using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflected the relative risk of the cash flows. Under the market approach, we utilized market multiples from publicly traded companies with similar operating and investment characteristics as the reporting unit. The key estimates and factors used in these two approaches include revenue growth rates and profit margins based on internal forecasts, terminal value, the weighted-average cost of capital used to discount future cash flows and comparable market multiples. To determine the fair value of other indefinite-lived intangible assets, we use an income approach, specifically the relief-from-royalty method. This method assumes that, in lieu of ownership, a third-party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. See Note 6 – Goodwill and Other Intangible Assets for further information. Long-Lived Assets The Company reviews long-lived assets, primarily right-of-use assets and property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When such events or changes in circumstances occur, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be measured and recorded for the excess of the carrying value over the fair value. Specifically for right-of-use assets, fair value is based on discounting market rent using a real estate discount rate. Leases During the first quarter of fiscal 2020, the Company adopted the new lease accounting standard, Accounting Standards Codification ("ASC") Topic 842 – Leases (“ASC 842”). See Note 7 – Leases for discussion. 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 COVID-19, 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 COVID-19 on its customers' abilities, individually and collectively, to make timely payments. Revenue Recognition During fiscal 2019, the Company adopted the new revenue accounting standard, ASC 606, under the modified retrospective method to all contracts as of the date of adoption. Under this method, the consolidated financial statements for the fiscal period beginning July 1, 2018 are presented under the new revenue accounting standard, while the fiscal 2018 results reflect the revenue accounting standards in effect during that period. F-16 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Changes in Accounting Policies As a result of the fiscal 2019 adoption of ASC 606, the Company changed its accounting policies for revenue recognition as follows: • For products sold that qualify for customer loyalty program awards, the Company defers a portion of revenue related to the product sales. Previously, the Company recognized revenue in full for product sales and accrued for the expected amounts of loyalty awards to be provided under the incremental cost approach. • A portion of revenue is deferred for shipments of saleable products with separate performance obligations to provide gift with purchase and purchase with purchase promotional products, and is recognized as control is transferred to a customer. Previously, the Company recognized revenue for saleable products and purchase with purchase products based upon invoice prices charged to customers and included the cost of gift with purchase products and/or purchase with purchase products in Cost of sales when risks and rewards of ownership transferred to the Company’s customer (i.e. a third-party retailer). • The cost of certain promotional products, including samples and testers, are classified within Cost of sales. Such costs were previously accounted for as a component of Selling, general and administrative expenses. • In conjunction with the adoption of ASC 606, the Company reassessed its contracts under the variable consideration guidance, including the payments to customer guidance, and as a result certain reclassifications were made related to the timing and classification of certain net demonstration payments to and from customers. • For product returns, the Company established a sales return accrual and a corresponding asset for the right to recover goods in Other accrued liabilities and Inventory and promotional merchandise, net, respectively, while previously the net liability for product returns was recorded as a reduction of Accounts receivable, net. In addition, the Company adopted the policy election to exclude from the transaction price all amounts collected from customers for sales and other taxes. As a result of the change in accounting policies noted above, the Company recorded a cumulative adjustment of $ 229 million, net of tax, as a reduction to its fiscal 2019 opening balance of retained earnings. See Note 14 – Revenue Recognition for further discussion . For revenue disaggregated by product category and geographic region, see Note 22 – Segment Data and Related Information . Advertising and Promotion Global net advertising, merchandising, sampling, promotion and product development expenses of $ 3,398 million, $ 3,440 million and $ 3,287 million in fiscal 2020, 2019 and 2018, respectively, are recorded in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and are expensed as incurred. In fiscal 2020 and 2019, as a result of the fiscal 2019 adoption of ASC 606, the cost of certain promotional products, including samples and testers, are classified within Cost of sales. Such costs in fiscal 2018 were classified within Selling, general and administrative expenses. Research and Development Research and development costs of $ 228 million, $ 202 million and $ 181 million in fiscal 2020, 2019 and 2018, respectively, are recorded in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and are expensed as incurred. Shipping and Handling Shipping and handling expenses of $ 583 million, $ 570 million and $ 507 million in fiscal 2020, 2019 and 2018, respectively, are recorded in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and include distribution center costs, promotional shipping costs, third-party logistics costs and outbound freight. F-17 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS License Arrangements The Company’s license agreements provide the Company with worldwide rights to manufacture, market and sell beauty and beauty-related products (or particular categories thereof) using the licensors’ trademarks. The current licenses have an initial term of approximately 5 years to 10 years, and are renewable subject to the Company’s compliance with the license agreement provisions. Most of our license agreements have renewal terms in 5 year increments. As of June 30, 2020, the remaining terms considering available renewal periods range from 3 years to approximately 16 years. Under each license, the Company is required to pay royalties to the licensor, at least annually, based on net sales to third parties. Most of the Company’s licenses were entered into to create new business. In some cases, the Company acquired, or entered into, a license where the licensor or another licensee was operating a pre-existing beauty products business. In those cases, other intangible assets are capitalized and amortized over their useful lives. Certain license agreements may require minimum royalty payments, incremental royalties based on net sales levels and minimum spending on advertising and promotional activities. Royalty expenses are accrued in the period in which net sales are recognized while advertising and promotional expenses are accrued at the time these costs are incurred. Stock-Based Compensation The Company records stock-based compensation, measured at the fair value of the awards that are ultimately expected to vest, as an expense in the consolidated financial statements and accrues for estimated forfeitures each quarter. All excess tax benefits and tax deficiencies related to share-based compensation awards are recorded as income tax expense or benefit in the accompanying consolidated statements of earnings. Income Taxes The Company calculates and provides for income taxes in each tax jurisdiction in which it operates. As the application of various tax laws relevant to the Company’s global business is often uncertain, significant judgment is required in determining the Company’s annual tax expense and in evaluating the Company’s tax positions. The provision for income taxes includes the amounts payable or refundable for the current year, the effect of deferred taxes and impacts from uncertain tax positions. The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis, net operating losses, tax credit and other carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates when the assets and liabilities are expected to be realized or settled. The Company regularly reviews deferred tax assets for realizability and establishes valuation allowances based on available evidence including historical operating losses, projected future taxable income, expected timing of the reversals of existing temporary differences, and appropriate tax planning strategies. If the Company’s assessment of the realizability of a deferred tax asset changes, an increase to a valuation allowance will result in a reduction of net earnings at that time, while the reduction of a valuation allowance will result in an increase of net earnings at that time. The Company provides tax reserves for U.S. federal, state, local and foreign tax exposures relating to periods subject to audit. The development of reserves for these exposures requires judgments about tax issues, potential outcomes and timing, and is a subjective critical estimate. The Company assesses its tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon settlement with a tax authority that has full knowledge of all relevant information. For those tax positions where it is more-likely-than-not that a tax benefit will not be sustained, no tax benefit has been recognized in the consolidated financial statements. The Company classifies applicable interest and penalties as a component of the provision for income taxes. Although the outcome relating to these exposures is uncertain, in management’s opinion adequate provisions for income taxes have been made for estimable potential liabilities emanating from these exposures. If actual outcomes differ materially from these estimates, they could have a material impact on the Company’s consolidated net earnings. F-18 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Government Assistance The Company recognizes amounts received from government assistance programs as a reduction to cost of sales or operating expenses in the consolidated statements of earnings when there is reasonable assurance the Company will receive the amount and has met the conditions, if any, required by the government assistance program. During the second half of fiscal 2020, many governments in locations where the Company operates announced programs to assist employers whose businesses were impacted by the COVID-19 pandemic, including programs that provide rebates to incentivize employers to maintain employees on payroll who were unable to work for their usual number of hours. During the fourth quarter of fiscal 2020, the Company qualified for and recorded $ 99 million in government assistance, which reduced Selling, general and administrative expenses and Cost of sales by $ 87 million and $ 10 million, respectively. The remaining $ 2 million was deferred and will be recognized in fiscal 2021. Recently Adopted Accounting Standards Leases (ASC 842) In February 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires lessees to account for most leases on their balance sheets with the liability being equal to the present value of the lease payments. The right-of-use asset is based on the lease liability adjusted for certain costs such as initial direct costs, prepaid lease payments and lease incentives received. Lease expense is recognized similar to previous accounting guidance with operating leases resulting in a straight-line expense, and finance leases resulting in a front-loaded expense similar to the previous accounting for capital leases. In July 2018, the FASB amended this guidance to clarify certain narrow aspects of the new lease accounting standard that may have been incorrectly or inconsistently applied, and did not add new guidance. Also, in July 2018, the FASB issued authoritative guidance that allows companies to elect to adopt the new standard using a modified retrospective transition approach with a cumulative-effect adjustment to retained earnings in the period of adoption. Companies that elect the new adoption method were not required to restate the prior comparative periods in the financial statements. Effective for the Company – Fiscal 2020 first quarter. An entity is permitted to apply the foregoing guidance using either of the modified retrospective transition approaches described in the standard, with certain practical expedients. Impact on consolidated financial statements – On July 1, 2019, the Company adopted ASC 842, see Note 7 – Leases for further discussion . FASB Staff Question-and-Answer Document (Q&A): ASC Topic 842 and ASC Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic In April 2020, the FASB issued a Staff Q&A that focuses on the application of the lease guidance for lease concessions related solely to the effects of COVID-19. The FASB issued the guidelines to reduce the burden and complexity for companies to account for such lease concessions (e.g., rent abatements or other economic incentives) under current lease accounting rules due to COVID-19 by providing certain practical expedients that can be used. Effective for the Company – The Company can immediately apply the optional accounting for lease concessions related to the effects of COVID-19 as of April 2020. I mpact on consolidated financial statements – The Company adopted this guidance prospectively to lease concessions related to COVID-19 in the fiscal 2020 fourth quarter. The Company elected to treat all COVID-19 lease concessions as if the contract contained enforceable rights, recorded as variable rent expense, and elected to not remeasure the lease liability and right-of-use asset for COVID-19 lease concessions that provided for the deferral of payments. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. Recently Issued Accounting Standards Reference Rate Reform (ASC Topic 848) (Accounting Standards Update (“ASU”) 2020-04 - Facilitation of the Effects of Reference Rate Reform on Financial Reporting) In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as 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. F-19 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Effective for the Company – This guidance can be applied for a limited time, as of the beginning of the interim period that includes March 12, 2020 or any date thereafter, 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. Measurement of Credit Losses on Financial Instruments (ASC Topic 326 – Financial Instruments – Credit Losses) In June 2016, the 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 – The Company is in the process of finalizing its implementation of this standard, including the impacts to its accounting policy, business processes and internal controls over financial reporting relating to its accounts receivable allowance. The impact to accounts receivable and the resulting cumulative adjustment, which will be recorded as an adjustment to the opening balance of the Company's fiscal 2021 retained earnings, is not expected to be material to the Company's consolidated financial statements. 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 – The Company has determined that it will adopt this guidance on a prospective basis to implementation costs incurred after the effective date (July 1, 2020). The Company evaluated the impact of applying this guidance to its business systems that operate on cloud technology and concluded that the adoption of this standard is not expected to have a material impact on its consolidated financial statements. 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. F-20 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 3 – INVENTORY AND PROMOTIONAL MERCHANDISE June 30 (In millions) 2020 2019 Inventory and promotional merchandise consists of: Raw materials $ 542 $ 541 Work in process 305 268 Finished goods 995 981 Promotional merchandise 220 216 $ 2,062 $ 2,006 NOTE 4 – PROPERTY, PLANT AND EQUIPMENT June 30 (In millions) 2020 2019 Assets (Useful Life) Land $ 33 $ 29 Buildings and improvements ( 10 to 40 years) 400 337 Machinery and equipment ( 3 to 10 years) 865 811 Computer hardware and software ( 4 to 10 years) 1,335 1,264 Furniture and fixtures ( 5 to 10 years) 120 116 Leasehold improvements 2,381 2,274 5,134 4,831 Less accumulated depreciation and amortization ( 3,079 ) ( 2,763 ) $ 2,055 $ 2,068 The cost of assets related to projects in progress of $ 501 million and $ 474 million as of June 30, 2020 and 2019, respectively, is included in their respective asset categories above. Depreciation and amortization of property, plant and equipment was $ 514 million, $ 495 million and $ 469 million in fiscal 2020, 2019 and 2018, 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. See Note 7 – Leases for discussion of property, plant and equipment impairments. F-21 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 – 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 still outstanding as of June 30, 2020. This acquisition is expected to further strengthen the Company’s leadership position in skin care and expand its consumer reach in Asia/Pacific, North America, the United Kingdom and travel retail. 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. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain, which was reclassified from accumulated OCI. The total gain on the Company’s previously held equity method investment is included in Other income, net in the consolidated statements of earnings. 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, which is also included in Other income, net in the consolidated statements of earnings. A summary of the total purchase price and the total gain recognized in Other income, net in the consolidated statements of earnings is as follows: (In millions) December 18, 2019 Measurement Period Adjustments June 30, 2020 Purchase price Purchase price $ 1,268 $ ( 32 ) $ 1,236 Fair value of previously held equity method investment 682 ( 22 ) 660 Write-off of call option relating to previously held equity method investment 4 — 4 Total purchase price $ 1,954 $ ( 54 ) $ 1,900 For the Six Months Ended December 31, 2019 Measurement Period Adjustments For the Year Ended June 30, 2020 Gains recognized in the consolidated statement of earnings Gain on previously held equity method investment $ 549 $ ( 19 ) $ 530 Recognition of a previously unrealized foreign currency gain 4 — 4 Total gain on previously held equity method investment 553 ( 19 ) 534 Foreign currency gain on cash 23 — 23 Total Other income, net $ 576 $ ( 19 ) $ 557 F-22 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company has recorded an allocation of the total consideration transferred, which includes the cash paid at closing and the fair value of its previously held equity method investment, to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value at the acquisition date. The measurement period adjustments, which consist of changes in estimates from the preliminary purchase price allocation performed in December 2019, considered the final calculation of the purchase price, final opening balance sheet (working capital adjustments) and final valuation report. The excess of the total consideration transferred over the fair value of the net tangible and intangible assets acquired was recorded as goodwill. The rollforward of the final allocation of the total consideration transferred as of December 18, 2019 to allocation as of June 30, 2020 is as follows: (In millions, unaudited) December 18, 2019 Measurement Period Adjustments June 30, 2020 Cash $ 228 $ 1 $ 229 Accounts receivable 48 ( 35 ) 13 Inventory 83 5 88 Other current assets 5 ( 1 ) 4 Property, plant and equipment 3 — 3 Right-of-use assets 3 — 3 Intangible assets 1,427 232 1,659 Goodwill 556 ( 210 ) 346 Other long-term assets 3 1 4 Total assets acquired 2,356 ( 7 ) 2,349 Accounts payable 27 ( 13 ) 14 Other accrued liabilities 22 5 27 Deferred income taxes 352 55 407 Lease liability 1 — 1 Total liabilities assumed 402 47 449 Total consideration transferred $ 1,954 $ ( 54 ) $ 1,900 The results of operations of Have & Be are reported on a one-month lag to facilitate consolidated reporting. For the year ended June 30, 2020, the Company's consolidated statements of earnings included approximately $ 165 million of net sales and $ 40 million of net loss, net of tax, inclusive of acquisition-related costs, related to Have & Be. Acquisition-related costs, which primarily include financial advisory, accounting and legal fees, in the amount of $ 7 million are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings for the year ended June 30, 2020. Pro forma results of operations reflecting the acquisition of Have & Be are not presented, as the impact on the Company’s consolidated financial results would not have been material. NOTE 6 – GOODWILL AND OTHER INTANGIBLE ASSETS As previously discussed in Note 5 – Acquisition of Business , in December 2019, the Company acquired Have & Be, which included the addition of goodwill of $ 346 million, amortizable intangible assets (customer lists) of $ 937 million with amortization periods of 7.5 years to 17.5 years, and non-amortizable intangible assets (trademarks) of $ 722 million. Goodwill associated with the acquisition is primarily attributable to the future revenue growth opportunities associated with additional share in the skin care category, as well as the value associated with assembled workforce. As such, the goodwill has been allocated to the Company’s skin care product category. The goodwill recorded in connection with this acquisition is not expected to be deductible for tax purposes. The accounting for the Have & Be business combination was finalized as of June 30, 2020. During the year ended June 30, 2020 and 2019, the Company recognized $ 11 million and $ 13 million, respectively, of goodwill associated with the continuing earn-out obligations related to the acquisition of the Bobbi Brown brand. F-23 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The intangible assets acquired in connection with the acquisition of Have & Be are classified as level 3 in the fair value hierarchy. The estimate of the fair values of the acquired amortizable intangible assets were determined using a multi-period excess earnings income approach by discounting the incremental after-tax cash flows over multiple periods. Fair value was determined under this approach by estimating future cash flows over multiple periods, as well as a terminal value, and discounting such cash flows at a rate of return that reflects the relative risk of the cash flows. The estimate of the fair values of the acquired intangible assets not subject to amortization were determined using an income approach, specifically the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. Goodwill The Company assigns goodwill of a reporting unit to the product categories in which that reporting unit operates at the time of acquisition. 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, 2018 Goodwill $ 185 $ 1,186 $ 256 $ 391 $ 2,018 Accumulated impairments ( 36 ) — ( 22 ) ( 34 ) ( 92 ) 149 1,186 234 357 1,926 Goodwill acquired during the year — 13 — — 13 Impairment charges — ( 68 ) — — ( 68 ) Translation adjustments, goodwill — — ( 2 ) ( 1 ) ( 3 ) — ( 55 ) ( 2 ) ( 1 ) ( 58 ) Balance as of June 30, 2019 Goodwill 185 1,199 254 390 2,028 Accumulated impairments ( 36 ) ( 68 ) ( 22 ) ( 34 ) ( 160 ) 149 1,131 232 356 1,868 Goodwill acquired during the year 346 11 — — 357 Impairment charges ( 60 ) ( 749 ) ( 3 ) — ( 812 ) Translation adjustments, goodwill ( 12 ) — — ( 1 ) ( 13 ) Translation adjustments, accumulated impairments 1 — ( 1 ) 1 1 275 ( 738 ) ( 4 ) — ( 467 ) 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 F-24 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other Intangible Assets Other intangible assets include trademarks and patents, as well as license agreements and other intangible assets resulting from or related to businesses and assets purchased by the Company. Indefinite-lived intangible assets (e.g., trademarks) are not subject to amortization and are assessed at least annually for impairment during the fiscal fourth quarter or more frequently if certain events or circumstances exist. Other intangible assets (e.g., non-compete agreements, customer lists) are amortized on a straight-line basis over their expected period of benefit, approximately 5 years to 20 years. Intangible assets related to license agreements were amortized on a straight-line basis over their useful lives based on the terms of the respective agreements. The costs incurred and expensed by the Company to extend or renew the term of acquired intangible assets during fiscal 2020 and 2019 were not significant to the Company’s results of operations. Other intangible assets consist of the following: June 30, 2020 June 30, 2019 (In millions) Gross Carrying Value Accumulated Amortization Total Net Book Value Gross Carrying Value Accumulated Amortization Total Net Book Value Amortizable intangible assets: Customer lists and other $ 1,590 $ 475 $ 1,115 $ 684 $ 369 $ 315 License agreements 43 43 — 43 43 — $ 1,633 $ 518 1,115 $ 727 $ 412 315 Non-amortizable intangible assets: Trademarks and other 1,223 888 Total intangible assets $ 2,338 $ 1,203 The aggregate amortization expense related to amortizable intangible assets for fiscal 2020, 2019 and 2018 was $ 73 million, $ 51 million and $ 51 million, respectively. The estimated aggregate amortization expense for each of the next five fiscal years is as follows: Fiscal (In millions) 2021 2022 2023 2024 2025 Estimated aggregate amortization expense $ 105 $ 100 $ 100 $ 98 $ 97 Fiscal 2020 Impairment Testing The Company assesses goodwill and other indefinite-lived intangible assets at least annually for impairment or more frequently if certain events or circumstances exist. F-25 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During December 2019, given the continuing declines in prestige makeup, generally in North America, and the ongoing competitive activity, the Company’s Too Faced, BECCA and Smashbox reporting units made revisions to their internal forecasts concurrent with the Company’s brand strategy review process. During March 2020, given the actual and the estimate of the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the Company, the Company made additional revisions to the internal forecasts relating to its Too Faced, BECCA, Smashbox and GLAMGLOW reporting units. The Company concluded that the changes in circumstances in these reporting units triggered the need for an interim impairment review of their respective trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of their respective long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and recoverability tests for the long-lived assets as of December 31, 2019 and March 31, 2020. The Company concluded that the carrying amounts of the long-lived assets were recoverable. For December 31, 2019 and March 31, 2020, the Company also concluded that the carrying values of the trademarks exceeded their estimated fair values and recorded impairment charges. For December 31, 2019, the Company utilized the relief-from-royalty method to determine discounted projected future cash flows, and for March 31, 2020, the relief-from-royalty method was based on probability weighted cash flows. After adjusting the carrying values of the trademarks, the Company completed interim quantitative impairment tests for goodwill and recorded goodwill impairment charges for each of these reporting units. For December 31, 2019, the fair value of each reporting unit was based upon 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 that are applied to operating performance of the reporting unit. For March 31, 2020, the fair value of each reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows, based on probability weighted undiscounted 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 that are applied to operating performance of the reporting unit. Based on the Company’s annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2020, the Company determined that the carrying value of the Editions de Parfums Frédéric Malle reporting unit exceeded its fair value. This determination was made based on updated internal forecasts, finalized and approved in June 2020, that reflected lower net sales growth projections due to a softer than expected retail environment for the brand, as well as the impacts relating to the uncertainty of the duration and severity of COVID-19. These changes in circumstances were also an indicator that the carrying amounts of its respective long-lived assets, including customer lists, may not be recoverable. The Company concluded that the carrying value of the trademarks exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded impairment charges. The Company concluded that the carrying amounts of the long-lived assets were recoverable. After adjusting the carrying value of the trademarks, the Company completed the quantitative impairment test for goodwill and recorded a goodwill impairment charge for this reporting unit. The fair value of this reporting unit was based upon 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 that are applied to operating performance of the reporting unit. During June 2020, given the actual and the estimate of the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the Company, the Company made further revisions to the internal forecasts relating to its BECCA and GLAMGLOW reporting units. The Company concluded that the changes in circumstances in these reporting units triggered the need for an interim impairment review of their respective trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of their respective long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and recoverability tests for the long-lived assets as of June 30, 2020. The Company concluded that the carrying values of the trademarks for BECCA and GLAMGLOW exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded impairment charges. In addition, the Company concluded that the carrying value of the BECCA customer lists intangible asset exceeded its estimated fair value, which was determined utilizing the multi-period excess earnings income approach by discounting the incremental after-tax cash flows over multiple periods, and recorded an impairment charge. The Company concluded that the carrying amounts of the long-lived assets of GLAMGLOW were recoverable. After adjusting the carrying values of the trademarks and the BECCA customer lists, the Company completed interim quantitative impairment tests for goodwill and recorded goodwill impairment charges for each of these reporting units. The fair value of each reporting unit was based upon 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 that are applied to operating performance of the reporting unit. F-26 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of the impairment charges for the three and twelve months ended June 30, 2020 and the remaining trademark, customer lists and goodwill carrying values as of June 30, 2020, for each reporting unit, are as follows: Impairment Charge (In millions) Three Months Ended June 30, 2020 Twelve Months Ended June 30, 2020 Carrying Value Reporting Unit: Product Category Trademark Customer Lists Goodwill Trademark Customer Lists Goodwill Trademark Customer Lists Goodwill Too Faced Makeup $ — $ — $ — $ 253 $ — $ 592 $ 272 $ 217 $ 13 BECCA Makeup 24 35 15 71 35 85 27 7 13 Smashbox Makeup — — — 23 — 72 32 — — GLAMGLOW Skin care 5 — 8 6 — 60 57 6 54 Editions de Parfums Frédéric Malle Fragrance 11 — 3 11 — 3 21 2 3 Total $ 40 $ 35 $ 26 $ 364 $ 35 $ 812 $ 409 $ 232 $ 83 The impairment charges for the three and twelve months ended June 30, 2020 were reflected in the Americas region. Fiscal 2019 Impairment Testing During fiscal 2019, the Company’s Smashbox reporting unit made revisions to its internal forecasts reflecting the continued slowdown of its makeup business driven by ongoing competitive activity and lower than expected growth in key retail channels for the brand. The Company concluded that these changes in circumstances triggered the need for an interim impairment review of the Smashbox trademark and the Smashbox reporting unit goodwill. Accordingly, the Company performed interim impairment tests as of December 31, 2018 and March 31, 2019. The Company concluded that the carrying values of the Smashbox trademark exceeded their estimated fair values, which were determined utilizing a royalty rate to determine discounted projected future cash flows. As a result, the Company recognized impairment charges totaling $ 22 million for the trademark in fiscal 2019. After adjusting the carrying values of the trademark, the Company completed interim quantitative impairment tests for goodwill and recorded goodwill impairment charges related to the Smashbox reporting unit. The fair values of the reporting unit as of December 31, 2018 and March 31, 2019 were based upon 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 that are applied to operating performance of the reporting unit. In fiscal 2019, the Company recorded goodwill impairment charges related to the Smashbox reporting unit totaling $ 68 million. These impairment charges were reflected in the makeup product category and in the Americas region. NOTE 7 – LEASES During the first quarter of fiscal 2020, the Company adopted ASC 842 using the modified retrospective transition approach permitted under the new standard for leases that existed at July 1, 2019 and, accordingly, the prior comparative periods were not restated. Under this method, the Company was required to assess the remaining future payments of existing leases as of July 1, 2019. Additionally, as of the date of adoption, the Company elected the package of practical expedients that did not require the Company to assess whether expired or existing contracts contain leases as defined in ASC 842, did not require reassessment of the lease classification (i.e. operating lease vs. finance lease) for expired or existing leases, and did not require a change to the accounting for previously capitalized initial direct costs. The adoption of this standard impacted the Company’s consolidated balance sheet due to the recognition of right-of-use (“ROU”) assets and associated lease liabilities related to operating leases as compared to the previous accounting. The accounting for finance leases under ASC 842 is consistent with the prior accounting for capital leases. The impact of the adoption of this standard on the Company’s consolidated statements of earnings and consolidated statement of cash flows was not material. F-27 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Per the guidance of ASC 842, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset. The Company recognizes a lease liability and a related ROU asset at the commencement date for leases on its consolidated balance sheet, excluding short-term leases as noted below. The lease liability is equal to the present value of unpaid lease payments over the remaining lease term. The Company’s lease term at the commencement date may reflect options to extend or terminate the lease when it is reasonably certain that such options will be exercised. To determine the present value of the lease liability, the Company uses an incremental borrowing rate, which is defined as the rate of interest that the Company would have to pay to borrow (on a collateralized basis over a similar term) an amount equal to the lease payments in similar economic environments. The ROU asset is based on the corresponding lease liability adjusted for certain costs such as initial direct costs, prepaid lease payments and lease incentives received. Both operating and finance lease ROU assets are reviewed for impairment, consistent with other long-lived assets, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. After an ROU asset is impaired, any remaining balance of the ROU asset is amortized on a straight-line basis over the shorter of the remaining lease term or the estimated useful life. After the lease commencement date, the Company evaluates lease modifications, if any, that could result in a change in the accounting for leases. For a lease modification, an evaluation is performed to determine if it should be treated as either a separate lease or a change in the accounting of an existing lease. In addition, significant changes in events or circumstances within the Company’s control are assessed to determine whether a change in the accounting for leases is required. Certain of the Company’s leases provide for variable lease payments for the right to use an underlying asset that vary due to changes in facts and circumstances occurring after the commencement date, other than the passage of time. Variable lease payments that are dependent on an index or rate (e.g., Consumer Price Index) are included in the initial measurement of the lease liability, the initial measurement of the ROU asset, and the lease classification test based on the index or rate as of the commencement date. Any changes from the commencement date estimation of the index- and rate-based variable payments are expensed as incurred in the period of the change. Variable lease payments that are not known at the commencement date and are determinable based on the performance or use of the underlying asset , are not included in the initial measurement of the lease liability or the ROU asset, but instead are expensed as incurred. The Company’s variable lease payments primarily include rents based on a percentage of sales in excess of stipulated levels, common area maintenance based on the percentage of the total square footage leased by the Company, as well as costs relating to embedded leases, such as third-party manufacturing agreements. Upon the adoption of ASC 842, the Company made the following accounting policy elections: • Certain of the Company’s contracts contain lease components as well as non-lease components, such as an agreement to purchase services. Unless an accounting policy is elected to the contrary, the contract consideration must be allocated to the separate lease and non-lease components in accordance with ASC 842. For purposes of allocating contract consideration, the Company elected not to separate the lease components from non-lease components for all asset classes. This was applied to all existing leases as of July 1, 2019 and will be applied to new leases on an ongoing basis. • The Company elected not to apply the measurement and recognition requirements of ASC 842 to short-term leases (i.e. leases with a term of 12 months or less). Accordingly, short-term leases will not be recorded as ROU assets or lease liabilities on the Company’s consolidated balance sheets, and the related lease payments will be recognized in net earnings on a straight-line basis over the lease term. • For certain leases relating to automobiles, information technology equipment and office equipment, the Company elected to apply the guidance of ASC 842 utilizing a portfolio approach. Under this approach, the Company combined and accounted for leases (as a portfolio) with similar characteristics (e.g., lease term, discount rates, etc.) as a single lease, provided its application is not materially different when compared to the application at the individual lease level. As a result of the adoption of ASC 842, the Company recorded a cumulative adjustment of $ 29 million, net of tax, as a reduction to its fiscal 2020 opening balance of retained earnings, primarily to reflect the fair value of operating lease ROU assets that were impaired at, or prior to, the adoption date. In addition, the Company recognized operating lease ROU assets and liabilities of $ 2,598 million and $ 2,764 million, respectively, as of July 1, 2019. Finance lease ROU assets and liabilities are not material. F-28 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company has operating and finance leases primarily for real estate properties, including corporate offices, facilities to support the Company’s manufacturing, assembly, research and development and distribution operations and retail stores, as well as information technology equipment, automobiles and office equipment, with remaining terms of approximately 1 year to 59 years. Some of the Company’s lease contracts include options to extend the leases for up to 30 years, while others include options to terminate the leases within 23 years. A summary of total lease costs and other information for the periods relating to the Company’s finance and operating leases is as follows: (In millions) June 30, 2020 Total lease cost Finance lease cost: Amortization of right-of-use assets $ 11 Interest on lease liabilities 1 Operating lease cost 625 Short-term lease cost 24 Variable lease cost 158 Total $ 819 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 426 Financing cash flows from finance leases $ 12 Right-of-use assets obtained in exchange for new operating lease liabilities $ 266 Right-of-use assets obtained in exchange for new finance lease liabilities $ 1 Weighted-average remaining lease term – finance leases 2 years Weighted-average remaining lease term – operating leases 11 years Weighted-average discount rate – finance leases 2.7 % Weighted-average discount rate – operating leases 2.5 % The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating and finance leases for each of the next five fiscal years and thereafter is as follows: (In millions) Operating Leases Finance Leases Fiscal 2021 $ 436 $ 8 Fiscal 2022 377 4 Fiscal 2023 335 1 Fiscal 2024 301 — Fiscal 2025 259 — Thereafter 1,349 — Total future minimum lease payments 3,057 13 Less imputed interest ( 404 ) — Total $ 2,653 $ 13 F-29 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Operating lease and finance lease liabilities included in the consolidated balance sheet are as follows: June 30, 2020 (In millions) Operating Leases Finance Leases Total current liabilities $ 375 $ 8 Total noncurrent liabilities 2,278 5 Total $ 2,653 $ 13 The ROU assets and lease liabilities related to finance leases are included in Other assets and in Current debt and Long-term debt , respectively, in the accompanying consolidated balance sheet as of June 30, 2020. As a result of the challenging retail environment due to the COVID-19 pandemic, certain of the Company’s freestanding stores experienced lower net sales and lower expectations of future cash flows. These changes were an indicator that the carrying amounts may not be recoverable. Accordingly, the Company performed a recoverability test by comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. For those freestanding stores that failed step one of this test, the Company then compared the assets carrying values to their estimated fair values. Specifically, for the related ROU assets, the fair value was based on discounting market rent using a real estate discount rate. As a result, the Company recognized $ 215 million of long-lived asset impairments, included in Impairments of other intangible and long-lived assets, in the accompanying consolidated statements of earnings for the year ended June 30, 2020, related to operating lease ROU assets of $ 131 million, as well as the related property, plant and equipment and other long-lived assets in certain freestanding stores of $ 84 million, combined. A summary of the impairment charge for the year ended June 30, 2020 is as follows: (In millions) Product Category Impairment Charge Skin care $ 22 Makeup 160 Fragrance 18 Hair care 14 Other 1 Total $ 215 Region Impairment Charge The Americas $ 103 Europe, the Middle East & Africa 104 Asia/Pacific 8 Total $ 215 As of June 30, 2020, the Company has additional operating lease obligations, relating primarily to facilities to support the Company’s manufacturing operations, retail stores, and corporate offices, that have not yet commenced of $ 103 million. In addition, the Company has additional finance lease obligations, relating to facilities to support the Company’s manufacturing operations, that have not yet commenced of $ 1 million. These leases will commence between fiscal 2021 and fiscal 2025 with lease terms of 1 year to 20 years. F-30 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES During fiscal 2020, 2019 and 2018, the Company incurred charges associated with restructuring and other activities in connection with its Leading Beauty Forward initiative as follows: Operating Expenses (In millions) Sales Returns (included in Net Sales) Cost of Sales Restructuring Charges Other Charges Total Fiscal 2020 $ — $ 10 $ 34 $ 39 $ 83 Fiscal 2019 $ 3 $ 22 $ 133 $ 83 $ 241 Fiscal 2018 $ 8 $ 18 $ 127 $ 104 $ 257 The types of activities included in restructuring and other charges, and the related accounting criteria, are described below. Background In May 2016, the Company announced a multi-year initiative (“Leading Beauty Forward,” “LBF” or the “LBF Program”) to build on its strengths and better leverage its cost structure to free resources for investment to continue its growth momentum. LBF is designed to enhance the Company’s go-to-market capabilities, reinforce its leadership in global prestige beauty and continue creating sustainable value. Restructuring actions to be taken over the duration of LBF involve the redesigning, resizing and reorganization of select corporate functions and go-to-market structures to improve effectiveness and create cost efficiencies in support of increased investment in growth drivers. As the Company continues to grow, it is important to more efficiently support its diverse portfolio of brands, channels and geographies in the rapidly evolving prestige beauty environment. The Company also believes that decision-making in key areas of innovation, marketing and digital communications should be moved closer to the consumer to increase speed and local relevance. As of June 30, 2019, the Company concluded the approvals of all major initiatives under LBF related to the optimization of select corporate functions, supply chain activities, and corporate and regional market support structures, as well as the exit of underperforming businesses, and expects to substantially complete those initiatives through fiscal 2021. The Company previously estimated a net reduction over the duration of LBF in the range of approximately 1,800 to 2,000 positions globally. The Company revised these estimates based on the review of the LBF Program noted above. At this time, the Company estimates a net reduction over the duration of LBF in the range of 1,300 to 1,600 positions globally, excluding point-of-sale positions. This reduction takes into account the elimination of certain positions, inclusive of positions that are unfilled, as well as retraining and redeployment of certain employees and investment in new positions in key areas. LBF Program Approvals For the year ended June 30, 2020, the Company recognized $ 18 million of asset-related costs, approved under LBF, due to the impairment of operating lease ROU assets as a result of closed freestanding retail stores, whereby the ability to sublease the locations was negatively impacted by the COVID-19 pandemic. These charges were initially approved under LBF prior to fiscal 2020 as contract terminations related to continuing lease payments to landlords after exiting the location. F-31 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The approved restructuring and other charges expected to be incurred were: Sales Returns Operating Expenses (In millions) (included in Net Sales) Cost of Sales Restructuring Charges Other Charges Total Total Charges Approved Cumulative through June 30, 2019 $ 14 $ 88 $ 507 $ 358 $ 967 Fiscal 2020 ( 1 ) ( 3 ) 4 — — Cumulative through June 30, 2020 $ 13 $ 85 $ 511 $ 358 $ 967 (In millions) Employee- Related Costs Asset-Related Costs Contract Terminations Other Exit Costs Total Restructuring Charges Approved Cumulative through June 30, 2019 $ 461 $ 7 $ 25 $ 14 $ 507 Fiscal 2020 ( 1 ) 21 ( 18 ) 2 4 Cumulative through June 30, 2020 $ 460 $ 28 $ 7 $ 16 $ 511 Specific actions approved under the LBF Program include: • Optimize Select Corporate Functions – The Company approved initiatives to realign and optimize its organization to better leverage scale, improve productivity, reduce complexity and achieve cost savings across various functions, including finance, information technology, research and development, and human resources. Such approvals included consulting and other professional services for the design, project management, implementation and integration of new processes and technologies and, to a lesser extent, costs for temporary labor backfill, training and recruiting related to new capabilities, as well as similar expenses for certain other corporate functions. These actions are resulting in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities. The Company also approved other charges to support the LBF Project Management Office (“PMO”), primarily consisting of internal and external resources that are intended to further drive project integration, organizational design capabilities and change management throughout the organization. The design of certain corporate functions included the creation of a shared-services structure, either using Company resources or through external service providers. As part of the service delivery model, the Company approved the organizational design of the management and governance platform of a shared-services structure using Company resources, as well as the transition of select transactional activities to an external service provider, which is resulting in other charges for implementation, project and consulting costs. • Optimize Supply Chain –The Company approved certain activities related to initiatives to centralize the Company’s supply chain management, redesign certain supply chain planning and transportation management activities, improve the organizational design of manufacturing and engineering processes related to certain product lines, and enable distribution capabilities and generate efficiencies through an external service provider. Collectively, these actions are resulting in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities, as well as consulting fees, implementation costs and temporary labor backfill. • Optimize Corporate and Region Market Support Structures – The Company approved initiatives to enhance its go-to-market support structures and achieve synergies across certain geographic regions, brands and channels. These initiatives are primarily intended to shift certain areas of focus from traditional to social and digital marketing strategies to provide enhanced consumer experience, as well as to support expanded omnichannel opportunities. These actions are resulting in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities. The Company also approved consulting and other professional services related to the design of future structures, processes and technologies and, to a lesser extent, other costs for recruitment and training related to new capabilities. In addition, the Company approved initiatives to enhance consumer engagement strategies across certain channels in Europe, which resulted in product returns. F-32 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS • Exit Underperforming Businesses – To further improve profitability in certain areas of the Company’s brands and regions, the Company approved initiatives to exit certain businesses in select markets and channels of distribution. The Company has also decided to close a number of underperforming freestanding retail stores and exit mid-tier department stores for certain brands in the United States to redirect resources to other retail locations and channels with potential for greater profitability. These activities resulted in product returns, inventory write-offs, reduction of workforce, accelerated depreciation and termination of contracts. As initiatives under LBF progress through implementation, the Company has identified certain costs that were initially approved but will not be incurred, as well as other changes to the prior estimates. These adjustments are included in their respective period presented above, and were primarily related to estimated employee-related costs for certain employees who either resigned or transferred to other existing positions within the Company. LBF Program-to-Date Restructuring and Other Charges Restructuring charges are comprised of the following: Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable. Employee-related costs are expensed when specific employees have been identified and when payment is probable and estimable, which generally occurs upon approval of the related initiative by management with authority delegated from the Company’s Board of Directors. Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative. The accelerated portion of depreciation expense will be expensed on a straight-line basis and be classified as restructuring charges, while the portion relating to the previous existing useful life will continue to be reported in Selling, general and administrative expenses. Contract Terminations – Costs related to contract terminations include continuing payments to a third party after the Company has ceased benefiting from the rights conveyed in the contract, or a payment made to terminate a contract prior to its expiration. These may include continuing operating lease payments (less estimated sublease payments) to a landlord after exiting a location prior to the lease-end date as a direct result of an approved restructuring initiative. Contract terminations also include minimum payments or fees related to the early termination of license or other personal service contracts. Costs related to contract terminations are expensed upon the cease-use date of a leased property or upon the notification date to the third party in the event of a license or personal service contract termination. Other Exit Costs – Other exit costs related to restructuring activities generally include costs to relocate facilities or employees, recruiting to fill positions as a result of relocation of operations, and employee outplacement for separated employees. Other exit costs are charged to expense as incurred. Other charges associated with restructuring activities are comprised of the following: Sales Returns and Cost of Sales – Product returns (offset by the related cost of sales) and inventory write-offs or write-downs as a direct result of an approved restructuring initiative to exit certain businesses or locations will be recorded as a component of Net sales and/or Cost of sales when estimable and reasonably assured. Consulting, other professional services and temporary labor backfill, primarily related to the design and implementation of supply chain activities, are expensed in Cost of sales as incurred. Other Charges – The Company approved other charges related to the design and implementation of approved initiatives, which are charged to Operating Expenses as incurred and primarily include the following: • Consulting and other professional services for organizational design of the future structures, processes and technologies, and implementation thereof, • Temporary labor backfill, F-33 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS • Costs to establish and maintain a PMO for the duration of Leading Beauty Forward, including internal costs for employees dedicated solely to project management activities, and other PMO-related expenses incremental to the Company’s ongoing operations (e.g., rent and utilities), and • Recruitment and training costs for new and reskilled employees to acquire and apply the capabilities needed to perform responsibilities as a direct result of an approved restructuring initiative. The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for LBF were: Sales Returns Operating Expenses (In millions) (included in Net Sales) Cost of Sales Restructuring Charges Other Charges Total Cumulative through June 30, 2017 $ 3 $ 15 $ 197 $ 78 $ 293 Fiscal 2018 8 18 127 104 257 Fiscal 2019 3 22 133 83 241 Fiscal 2020 — 10 34 39 83 Cumulative through June 30, 2020 $ 14 $ 65 $ 491 $ 304 $ 874 The major cost types related to the cumulative restructuring charges set forth above were: (In millions) Employee- Related Costs Asset- Related Costs Contract Terminations Other Exit Costs Total Cumulative through June 30, 2017 $ 190 $ 3 $ 2 $ 2 $ 197 Fiscal 2018 124 1 1 1 127 Fiscal 2019 131 — — 2 133 Fiscal 2020 6 23 3 2 34 Cumulative through June 30, 2020 $ 451 $ 27 $ 6 $ 7 $ 491 F-34 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accrued restructuring charges from the LBF Program inception through June 30, 2020 were: (In millions) Employee- Related Costs Asset- Related Costs Contract Terminations Other Exit Costs Total Charges $ 74 $ 1 $ — $ — $ 75 Noncash asset write-offs — ( 1 ) — — ( 1 ) Translation adjustments ( 1 ) — — — ( 1 ) Balance at June 30, 2016 73 — — — 73 Charges 116 2 2 2 122 Cash payments ( 39 ) — ( 2 ) ( 2 ) ( 43 ) Noncash asset write-offs — ( 2 ) — — ( 2 ) Balance at June 30, 2017 150 — — — 150 Charges 124 1 1 1 127 Cash payments ( 92 ) — — ( 1 ) ( 93 ) Noncash asset write-offs — ( 1 ) — — ( 1 ) Translation adjustments ( 2 ) — — — ( 2 ) Balance at June 30, 2018 180 — 1 — 181 Charges 131 — — 2 133 Cash payments ( 107 ) — ( 1 ) ( 1 ) ( 109 ) Translation and other adjustments ( 2 ) — — — ( 2 ) Balance at June 30, 2019 202 — — 1 203 Charges 6 23 3 2 34 Cash payments ( 94 ) — ( 3 ) ( 3 ) ( 100 ) Translation adjustment ( 2 ) — — — ( 2 ) Non-cash write-offs — ( 23 ) — — ( 23 ) Balance at June 30, 2020 $ 112 $ — $ — $ — $ 112 Restructuring charges for employee-related costs are net of adjustments to the accrual estimate for certain employees who either resigned or transferred to other existing positions within the Company. These adjustments were not material for all periods presented. Accrued restructuring charges at June 30, 2020 are expected to result in cash expenditures funded from cash provided by operations of approximately $ 78 million, $ 29 million and $ 5 million for each of fiscal 2021, 2022, and 2023, respectively. See Note 24 – Subsequent Events for information relating to the new restructuring program announced subsequent to June 30, 2020. F-35 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 – INCOME TAXES The provision for income taxes is comprised of the following: Year Ended June 30 (In millions) 2020 2019 2018 Current: Federal $ 128 $ 180 $ 334 Foreign 368 383 357 State and local ( 3 ) 16 ( 3 ) 493 579 688 Deferred: Federal ( 93 ) ( 95 ) 135 Foreign ( 49 ) 27 35 State and local ( 1 ) 2 5 ( 143 ) ( 66 ) 175 $ 350 $ 513 $ 863 Earnings before income taxes include amounts contributed by the Company’s foreign operations of approximately $ 2,277 million, $ 2,021 million and $ 2,004 million for fiscal 2020, 2019 and 2018, respectively. A portion of these earnings is taxed in the United States. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”). The TCJA included broad and complex changes to the U.S. tax code that impacted the Company’s accounting and reporting for income taxes. Pursuant to Staff Accounting Bulletin No. 118 ("SAB 118"), in fiscal 2018, the Company recorded a provisional net charge of $ 450 million related to the enactment of the TCJA, and, in fiscal 2019, the Company recorded a charge of $ 5 million as an adjustment to the provisional net charge recorded in fiscal 2018. Although the accounting related to the income tax effects of the TCJA was completed pursuant to SAB 118, certain technical aspects of the TCJA remain subject to varying degrees of uncertainty as additional technical guidance and clarification from the U.S. government is being issued over an extended period. The issuance of additional guidance and clarification from the U.S. government may result in material changes to the provision for income taxes. On July 20, 2020, the U.S. government released final and proposed regulations under the global intangible low-taxed income (“GILTI”) provisions of the TCJA. The Company is currently evaluating the impact of the GILTI regulations. The potential impact of applying the GILTI regulations, along with any impact of other guidance that may be issued by the U.S. government, would be recognized in the provision for income taxes in the period that the Company’s evaluation of such guidance is completed. F-36 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation of the U.S. federal statutory income tax rate to the Company’s actual effective tax rate on earnings before income taxes is as follows: Year Ended June 30 2020 2019 2018 Provision for income taxes at statutory rate 21.0 % 21.0 % 28.1 % Increase (decrease) due to: State and local income taxes, net of federal tax benefit ( 0.1 ) 0.6 0.5 TCJA net income tax impact (1) — 0.2 22.8 Stock-based compensation arrangements – excess tax benefits ( 7.5 ) ( 2.7 ) ( 2.5 ) Taxation of foreign operations 11.0 1.9 ( 4.7 ) Income tax reserve adjustments 0.4 0.5 ( 0.5 ) Nondeductible goodwill impairment charges 8.0 0.6 — Other, net 0.7 0.1 ( 0.1 ) Effective tax rate (2) 33.5 % 22.2 % 43.6 % (1) Includes the mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries (the “Transition Tax”), the remeasurement of U.S. net deferred tax assets resulting from the statutory tax rate reduction, including the enactment date remeasurement, and the net deferred tax liability related to foreign withholding taxes on certain foreign earnings resulting from the TCJA. (2) The reconciling items between the Company's U.S. federal statutory income tax rate and the Company's actual effective tax rate were materially impacted by the decrease in earnings before income taxes from fiscal 2019 to fiscal 2020. Income tax reserve adjustments represent changes in the Company’s net liability for unrecognized tax benefits related to prior-year tax positions including the impact of tax settlements and lapses of the applicable statutes of limitations. In fiscal 2018, the Company adopted a new accounting standard that changes the way companies account for certain aspects of share-based payments to employees. This standard requires that all excess tax benefits and tax deficiencies related to share-based compensation awards be recorded as income tax expense or benefit in the income statement. As a result of the adoption of this new standard, the Company recognized $ 78 million, $ 63 million and $ 50 million of excess tax benefits as a reduction to the provision for income taxes in fiscal 2020, 2019 and 2018, respectively. The Company has approximately $ 5,259 million of undistributed earnings of foreign subsidiaries at June 30, 2020. Included in this amount is approximately $ 3,156 million of earnings considered permanently reinvested. There may be foreign tax ramifications associated with the distribution of such permanently reinvested earnings, which the Company is currently evaluating. Since the application of the relevant foreign tax laws to such distribution is largely uncertain at this time, it is not practicable to determine the amount of associated tax. Any state income taxes associated with the distribution of such earnings is not expected to be material. F-37 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Significant components of the Company’s deferred income tax assets and liabilities were as follows: June 30 (In millions) 2020 2019 Deferred tax assets: Compensation-related expenses $ 142 $ 179 Inventory obsolescence and other inventory related reserves 75 64 Retirement benefit obligations 71 71 Various accruals not currently deductible 212 206 Net operating loss, credit and other carryforwards 98 41 Unrecognized state tax benefits and accrued interest 12 12 Lease liabilities 585 — Other differences between tax and financial statement values 217 125 1,412 698 Valuation allowance for deferred tax assets ( 107 ) ( 48 ) Total deferred tax assets 1,305 650 Deferred tax liabilities: Depreciation and amortization (1) ( 563 ) ( 286 ) ROU assets ( 504 ) — Other differences between tax and financial statement values (2) ( 194 ) ( 69 ) Total deferred tax liabilities ( 1,261 ) ( 355 ) Total net deferred tax assets $ 44 $ 295 (1) Includes deferred tax liabilities associated with book-to-tax basis differences related to the Company's non-taxable acquisitions. (2) Includes the deferred tax liability of $ 117 million associated with the gain on a previously held equity method investment. As of June 30, 2020 and 2019, the Company had net deferred tax assets of $ 44 million and $ 295 million, respectively, substantially all of which are included in Other assets in the accompanying consolidated balance sheets. As of June 30, 2020 and 2019, certain subsidiaries had net operating loss and other carryforwards for tax purposes of approximately $ 352 million and $ 162 million, respectively. With the exception of approximately $ 303 million of net operating loss and other carryforwards with an indefinite carryforward period as of June 30, 2020, these carryforwards expire at various dates through fiscal 2032. Deferred tax assets, net of valuation allowances, in the amount of $ 14 million and $ 3 million as of June 30, 2020 and 2019, respectively, have been recorded to reflect the tax benefits of the carryforwards not utilized to date. A full valuation allowance has been provided for those deferred tax assets for which, in the opinion of management, it is more-likely-than-not that the deferred tax assets will not be realized. As of June 30, 2020 and 2019, the Company had gross unrecognized tax benefits of $ 70 million and $ 67 million, respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $ 56 million. F-38 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company classifies applicable interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. The total gross accrued interest and penalty expense recorded during fiscal 2020 and fiscal 2019 in the accompanying consolidated statement of earnings was $ 3 million and $ 4 million, respectively . The total gross accrued interest and penalties in the accompanying consolidated balance sheets at June 30, 2020 and 2019 were $ 13 million and $ 12 million, respectively. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows: June 30 (In millions) 2020 2019 Beginning of the year balance of gross unrecognized tax benefits $ 67 $ 60 Gross amounts of increases as a result of tax positions taken during a prior period 11 12 Gross amounts of decreases as a result of tax positions taken during a prior period ( 9 ) ( 6 ) Gross amounts of increases as a result of tax positions taken during the current period 7 9 Amounts of decreases in unrecognized tax benefits relating to settlements with taxing authorities ( 4 ) ( 7 ) Reductions to unrecognized tax benefits as a result of a lapse of the applicable statutes of limitations ( 2 ) ( 1 ) End of year balance of gross unrecognized tax benefits $ 70 $ 67 Earnings from the Company’s global operations are subject to tax in various jurisdictions both within and outside the United States. The Company participates in the U.S. Internal Revenue Service (the “IRS”) Compliance Assurance Program (“CAP”). The objective of CAP is to reduce taxpayer burden and uncertainty while assuring the IRS of the accuracy of income tax returns prior to filing, thereby reducing or eliminating the need for post-filing examinations. Subsequent to June 30, 2020, the Company formally concluded the compliance process with respect to fiscal 2019 under the IRS CAP, which did not impact the Company’s consolidated financial statements. As of June 30, 2020, the compliance process was ongoing with respect to fiscal 2020. The Company is currently undergoing income tax examinations and controversies in several state, local and foreign jurisdictions. These matters are in various stages of completion and involve complex multi-jurisdictional issues common among multinational enterprises, including transfer pricing, which may require an extended period of time for resolution. During fiscal 2020, the Company concluded various state, local and foreign income tax audits and examinations while several other matters, including those noted above, were initiated or remained pending. On the basis of the information available in this regard as of June 30, 2020 it is reasonably possible that the total amount of unrecognized tax benefits could decrease in a range of $ 5 million to $ 10 million within 12 months as a result of projected resolutions of global tax examinations and controversies and a potential lapse of the applicable statutes of limitations. F-39 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The tax years subject to examination vary depending on the tax jurisdiction. As of June 30, 2020, the following tax years remain subject to examination by the major tax jurisdictions indicated: Major Jurisdiction Open Fiscal Years Belgium 2018 – 2020 Canada 2015 – 2020 China 2016 – 2020 France 2016 – 2020 Germany 2013 – 2020 Hong Kong 2014 – 2020 Italy 2016 – 2020 Japan 2020 Korea 2019 - 2020 Russia 2017 – 2020 Spain 2016 – 2020 Switzerland 2018 – 2020 United Kingdom 2019 – 2020 United States 2019 – 2020 State of California 2013 – 2020 State and City of New York 2015 – 2020 The Company is also subject to income tax examinations in numerous other state, local and foreign jurisdictions. The Company believes that its tax reserves are adequate for all years subject to examination. NOTE 10 – OTHER ACCRUED LIABILITIES Other accrued liabilities consist of the following: June 30 (In millions) 2020 2019 Advertising, merchandising and sampling $ 256 $ 352 Employee compensation 424 574 Deferred revenue 222 314 Other 1,503 1,359 $ 2,405 $ 2,599 F-40 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 – DEBT The Company’s current and long-term debt and available financing consist of the following: Debt at June 30 Available financing at June 30, 2020 (In millions) 2020 2019 Committed Uncommitted 3.125 % Senior Notes, due December 1, 2049 (“2049 Senior Notes”) $ 635 $ — $ — $ — 4.15 % Senior Notes, due March 15, 2047 (“2047 Senior Notes”) 494 494 — — 4.375 % Senior Notes, due June 15, 2045 (“2045 Senior Notes”) 456 455 — — 3.70 % Senior Notes, due August 15, 2042 (“2042 Senior Notes”) 247 247 — — 6.00 % Senior Notes, due May 15, 2037 (“2037 Senior Notes”) 294 294 — — 5.75 % Senior Notes, due October 15, 2033 (“2033 Senior Notes”) 197 197 — — 2.600 % Senior Notes, due April 15, 2030 ("2030 Senior Notes") 694 — — — 2.375 % Senior Notes, due December 1, 2029 (“2029 Senior Notes”) 640 — — — 3.15 % Senior Notes, due March 15, 2027 (“2027 Senior Notes”) 498 498 — — 2.00 % Senior Notes, due December 1, 2024 (“2024 Senior Notes”) 495 — — — 2.35 % Senior Notes, due August 15, 2022 (“2022 Senior Notes”) 259 252 — — 1.70 % Senior Notes, due May 10, 2021 (“2021 Senior Notes”) 455 447 — — 1.80 % Senior Notes, due February 7, 2020 (“2020 Senior Notes”) — 499 — — Commercial paper — — — 1,500 Other long-term borrowings 5 12 — — Other current borrowings 17 17 — 178 Revolving credit facility (1) 750 — 750 — 6,136 3,412 $ 750 $ 1,678 Less current debt including current maturities ( 1,222 ) ( 516 ) $ 4,914 $ 2,896 (1) See Note 24 – Subsequent Events for information relating to the repayment of the $ 750 million outstanding under the revolving credit facility made subsequent to June 30, 2020. F-41 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of June 30, 2020, the Company’s long-term debt consisted of the following: Notes Issue Date Price Yield Principal Unamortized Debt (Discount) Premium Interest rate swap adjustments Debt Issuance Costs Semi-annual interest payments ($ in millions) 2049 Senior Notes (9) November 2019 98.769 % 3.189 % $ 650 $ ( 8 ) $ — $ ( 7 ) June 1/December 1 2047 Senior Notes (1),(9) February 2017 99.739 4.165 500 ( 1 ) — ( 5 ) March 15/September 15 2045 Senior Notes (2),(9) June 2015 97.999 4.497 300 ( 5 ) — ( 3 ) June 15/December 15 2045 Senior Notes (2),(9) May 2016 110.847 3.753 150 15 — ( 1 ) June 15/December 15 2042 Senior Notes (9) August 2012 99.567 3.724 250 ( 1 ) — ( 2 ) February 15/August 15 2037 Senior Notes (3),(9) May 2007 98.722 6.093 300 ( 3 ) — ( 3 ) May 15/November 15 2033 Senior Notes (4) September 2003 98.645 5.846 200 ( 2 ) — ( 1 ) April 15/October 15 2030 Senior Notes (9) April 2020 99.816 2.621 700 ( 1 ) — ( 5 ) April 15/October 15 2029 Senior Notes (8),(9) November 2019 99.046 2.483 650 ( 6 ) — ( 4 ) June 1/December 1 2027 Senior Notes (5),(9) February 2017 99.963 3.154 500 — — ( 2 ) March 15/September 15 2024 Senior Notes (9) November 2019 99.421 2.122 500 ( 3 ) — ( 2 ) June 1/December 1 2022 Senior Notes (6),(9) August 2012 99.911 2.360 250 — 10 ( 1 ) February 15/August 15 2021 Senior Notes (6),(7),(9) May 2016 99.976 1.705 450 — 5 — May 10/November 10 (1) In November 2016, in anticipation of the issuance of the 2047 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $ 350 million at a weighted-average all-in rate of 3.01 %. The treasury lock agreements were settled upon the issuance of the new debt, and the Company recognized a gain in OCI of $ 3 million that is being amortized against interest expense over the life of the 2047 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2047 Senior Notes will be 4.17 % over the life of the debt. (2) In April and May 2015, in anticipation of the issuance of the 2045 Senior Notes in June 2015, the Company entered into a series of forward-starting interest rate swap agreements on a notional amount totaling $ 300 million at a weighted-average all-in rate of 2.38 %. The forward-starting interest rate swap agreements were settled upon the issuance of the new debt and the Company recognized a gain in OCI of $ 18 million that will be amortized against interest expense over the life of the 2045 Senior Notes. As a result of the forward-starting interest rate swap agreements, the debt discount and debt issuance costs, the effective interest rate on the 2045 Senior Notes will be 4.216 % over the life of the debt. In May 2016, the Company reopened this offering with the same terms and issued an additional $ 150 million for an aggregate amount outstanding of $ 450 million of 2045 Senior Notes. (3) In April 2007, in anticipation of the issuance of the 2037 Senior Notes, the Company entered into a series of forward-starting interest rate swap agreements on a notional amount totaling $ 210 million at a weighted-average all-in rate of 5.45 %. The forward-starting interest rate swap agreements were settled upon the issuance of the new debt and the Company recognized a loss in OCI of $ 1 million that is being amortized to interest expense over the life of the 2037 Senior Notes. As a result of the forward-starting interest rate swap agreements, the debt discount and debt issuance costs, the effective interest rate on the 2037 Senior Notes will be 6.181 % over the life of the debt. (4) In May 2003, in anticipation of the issuance of the 2033 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $ 195 million at a weighted-average all-in rate of 4.53 %. The treasury lock agreements were settled upon the issuance of the new debt and the Company received a payment of $ 15 million that is being amortized against interest expense over the life of the 2033 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2033 Senior Notes will be 5.395 % over the life of the debt. (5) In November 2016, in anticipation of the issuance of the 2027 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $ 450 million at a weighted-average all-in rate of 2.37 %. The treasury lock agreements were settled upon the issuance of the new debt, and the Company recognized a gain in OCI of $ 2 million that is being amortized against interest expense over the life of the 2027 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2027 Senior Notes will be 3.18 % over the life of the debt. (6) The Company entered into interest rate swap agreements with a notional amount totaling $ 450 million and $ 250 million to effectively convert the fixed rate interest on its outstanding 2021 Senior Notes and 2022 Senior Notes, respectively, to variable interest rates based on three months LIBOR plus a margin. (7) In April 2016, in anticipation of the issuance of the 2021 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $ 400 million at a weighted-average all-in rate of 1.27 %. The treasury lock agreements were settled upon the issuance of the new debt and the Company made a payment of $ 1 million that is being amortized to interest expense over the life of the 2021 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2021 Senior Notes will be 1.844 % over the life of the debt. (8) In April and May 2019, in anticipation of the issuance of the 2029 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $ 500 million at a weighted-average all-in rate of 2.50 %. The treasury lock agreements were settled upon the issuance of the new debt, and the Company recognized a loss in OCI of $ 33 million that is being amortized to interest expense over the life of the 2029 Senior Notes. As a result of the treasury lock agreements, as well as the debt discount and debt issuance costs, the effective interest rate on the 2029 Senior Notes will be 3.15 % over the life of the debt. (9) The Senior Notes contain certain customary incurrence-based covenants, including limitations on indebtedness secured by liens. F-42 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In October 2018, the Company replaced its undrawn $ 1,500 million senior unsecured revolving credit facility that was set to expire in October 2021 with a new $ 1,500 million senior unsecured revolving credit facility (the “New Facility”). The New Facility expires on October 26, 2023 unless extended for up to two additional years in accordance with the terms set forth in the agreement. Up to the equivalent of $ 500 million of the New Facility is available for multi-currency loans. Interest rates on borrowings under the New Facility will be based on prevailing market interest rates in accordance with the agreement. The costs incurred to establish the New Facility were not material. The New Facility has an annual fee of approximately $ 1 million, payable quarterly, based on the Company’s current credit ratings. The New Facility contains a cross-default provision whereby a failure to pay other material financial obligations in excess of $ 175 million (after grace periods and absent a waiver from the lenders) would result in an event of default and the acceleration of the maturity of any outstanding debt under this facility. At June 30, 2020, $ 750 million was outstanding under the New Facility. See Note 24 – Subsequent Events for information relating to the repayment of the $ 750 million outstanding under the revolving credit facility made subsequent to June 30, 2020. In November 2019, the Company completed a public offering of $ 500 million aggregate principal amount of its 2024 Senior Notes, $ 650 million aggregate principal amount of its 2029 Senior Notes and $ 650 million aggregate principal amount of its 2049 Senior Notes. The Company used proceeds from this offering for general corporate purposes, including to fund the acquisition of Have & Be and refinance its $ 500 million aggregate principal amount of 1.80 % Senior Notes that became due February 7, 2020. In April 2020, the Company completed a public offering of $ 700 million aggregate principal amount of its 2030 Senior Notes. The Company used the proceeds from this offering for general corporate purposes, which included operating expenses, working capital, capital expenditures and redemption and repayment of short-term or long-term borrowings, including outstanding commercial paper as it matured. The Company has a $ 1,500 million commercial paper program under which it may issue commercial paper in the United States. As of June 30, 2020, no amounts were outstanding. The Company maintains uncommitted credit facilities in various regions throughout the world. Interest rate terms for these facilities vary by region and reflect prevailing market rates for companies with strong credit ratings. During fiscal 2020 and 2019, the monthly average amount outstanding was approximately $ 12 million and $ 7 million, respectively, and the annualized monthly weighted-average interest rate incurred was approximately 10.3 % and 13.9 %, respectively. Refer to Note 16 – Commitments and Contingencies for the Company’s projected debt service payments, as of June 30, 2020, over the next five fiscal years. NOTE 12 – DERIVATIVE FINANCIAL INSTRUMENTS The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. The Company enters into foreign currency forward contracts, and may enter into option contracts, to reduce the effects of fluctuating foreign currency exchange rates. In addition, the Company enters into interest rate derivatives to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances. During fiscal 2020, the Company entered into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. The Company entered into the net investment hedges to offset the risk of changes in the U.S. dollar value of the Company’s investment in these foreign operations due to fluctuating foreign exchange rates. Time value is excluded from the effectiveness assessment and is recognized under a systematic and rational method over the life of the hedging instrument in Selling, general and administrative expenses. The net gain or loss on net investment hedges is recorded within translation adjustments, as a component of AOCI on the Company’s consolidated balance sheets, until the sale or substantially complete liquidation of the underlying assets of the Company’s investment. The Company also enters into foreign currency forward contracts, and may use option contracts, not designated as hedging instruments, to mitigate the change in fair value of specific assets and liabilities on the consolidated balance sheets. At June 30, 2020, the notional amount of derivatives not designated as hedging instruments was $ 3,638 million. The Company does not utilize derivative financial instruments for trading or speculative purposes. Costs associated with entering into derivative financial instruments have not been material to the Company’s consolidated financial results. F-43 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For each derivative contract entered into, where the Company looks to obtain hedge accounting treatment, the Company formally and contemporaneously documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction, the nature of the risk being hedged, and how the hedging instruments’ effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. At inception, the Company evaluates the effectiveness of hedge relationships quantitatively, and has elected to perform, after initial evaluation, qualitative effectiveness assessments of certain hedge relationships to support an ongoing expectation of high effectiveness, if effectiveness testing is required. If based on the qualitative assessment, it is determined that a derivative has ceased to be a highly effective hedge, the Company will perform a quantitative assessment to determine whether to discontinue hedge accounting with respect to that derivative prospectively. The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows: Asset Derivatives Liability Derivatives Fair Value (1) Fair Value (1) June 30 June 30 (In millions) Balance Sheet Location 2020 2019 Balance Sheet Location 2020 2019 Derivatives Designated as Hedging Instruments: Foreign currency cash flow hedges Prepaid expenses and other current assets $ 26 $ 23 Other accrued liabilities $ 3 $ 4 Net investment hedges Prepaid expenses and other current assets 21 — Other accrued liabilities 62 — Interest rate-related derivatives Prepaid expenses and other current assets 15 3 Other accrued liabilities 3 26 Total Derivatives Designated as Hedging Instruments 62 26 68 30 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Prepaid expenses and other current assets 40 4 Other accrued liabilities 15 2 Total derivatives $ 102 $ 30 $ 83 $ 32 (1) See Note 13 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined. F-44 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows: Amount of Gain or (Loss) Recognized in OCI on Derivatives Location of Gain or (Loss) Reclassified Amount of Gain or (Loss) Reclassified from AOCI into Earnings (1) June 30 from AOCI into June 30 (In millions) 2020 2019 Earnings 2020 2019 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ 38 $ 29 Net sales $ 35 $ 28 Interest rate-related derivatives ( 12 ) ( 24 ) Interest expense — 1 Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) ( 68 ) — — — Total derivatives $ ( 42 ) $ 5 $ 35 $ 29 (1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material. (2) During fiscal 2020 the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 43 million. (3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets. Amount of Gain or (Loss) Recognized in Earnings on Derivatives (1) Location of Gain or (Loss) June 30 (In millions) Recognized in Earnings on Derivatives 2020 2019 Derivatives in Fair Value Hedging Relationships: Interest rate swap contracts Interest expense $ 14 $ 27 (1) Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt. Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows: (In millions) Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included Carrying Amount of the Hedged Liabilities Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability June 30, 2020 June 30, 2020 Current debt $ 455 $ 5 Long-term debt 259 10 Total debt $ 714 $ 15 F-45 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows: June 30, 2020 June 30, 2019 (In millions) Net Sales Interest Expense Net Sales Interest Expense Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded $ 14,294 $ 161 $ 14,863 $ 133 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable ( 14 ) Not applicable ( 27 ) Derivatives designated as hedging instruments Not applicable 14 Not applicable 27 Gain (loss) on cash flow hedge relationships – interest rate contracts: Amount of gain reclassified from AOCI into earnings Not applicable — Not applicable 1 Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: Amount of gain reclassified from AOCI into earnings 35 Not applicable 28 Not applicable The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows: Amount of Gain or (Loss) Recognized in Earnings on Derivatives Location of Gain or (Loss) June 30 (In millions) Recognized in Earnings on Derivatives 2020 2019 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Selling, general and administrative $ 56 $ 6 Cash Flow Hedges The Company enters into foreign currency forward contracts, and may enter into foreign currency option contracts, to hedge anticipated transactions and receivables and payables denominated in foreign currencies, for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the cash flows that the Company receives from foreign subsidiaries. The foreign currency forward contracts entered into to hedge anticipated transactions have been designated as cash flow hedges and have varying maturities through the end of March 2022. Hedge effectiveness of the foreign currency forward contracts is based on the forward method, which includes time value in the effectiveness assessment. At June 30, 2020, the Company had cash flow hedges outstanding with a notional amount totaling $ 1,297 million. The Company may enter into interest rate forward contracts to hedge anticipated issuance of debt for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of interest rate movements on the cost of debt issuance. F-46 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued and gains and losses in AOCI are reclassified to sales when the underlying forecasted transaction occurs. If it is probable that the forecasted transaction will no longer occur, then any gains or losses in AOCI are reclassified to current-period sales. As of June 30, 2020, the Company’s foreign currency cash flow hedges were highly effective. The estimated net gain on the Company’s derivative instruments designated as cash flow hedges as of June 30, 2020 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $ 14 million. The accumulated net gain on derivative instruments in AOCI was $ 20 million and $ 29 million as of June 30, 2020 and 2019, respectively. Fair Value Hedges The Company enters into interest rate derivative contracts to manage the exposure to interest rate fluctuations on its funded indebtedness. The Company has interest rate swap agreements, with notional amounts totaling $ 450 million and $ 250 million to effectively convert the fixed rate interest on its 2021 Senior Notes and 2022 Senior Notes, respectively, to variable interest rates based on three-month LIBOR plus a margin. These interest rate swap agreements are designated as fair value hedges of the related long-term debt, and the changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt. Net Investment Hedges The Company enters into foreign currency forward contracts, designated as net investment hedges, to hedge a portion of its net investment in certain foreign operations. The net gain or loss on these contracts is recorded within translation adjustments, as a component of AOCI on the Company’s consolidated balance sheets. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the Company’s net investment in these foreign operations. The net investment hedge contracts have varying maturities through the end of July 2020. Hedge effectiveness of the net investment hedge contracts is based on the spot method. At June 30, 2020, the Company had net investment hedges outstanding with a notional amount totaling $ 1,747 million. Credit Risk As a matter of policy, the Company enters into derivative contracts only with counterparties that have a long-term credit rating of at least A- or higher by at least two nationally recognized rating agencies. The counterparties to these contracts are major financial institutions. Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $ 102 million at June 30, 2020. To manage this risk, the Company has strict counterparty credit guidelines that are continually monitored. Accordingly, management believes risk of loss under these hedging contracts is remote. F-47 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13 – FAIR VALUE MEASUREMENTS The Company records certain of its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The accounting for fair value measurements must be applied to nonfinancial assets and nonfinancial liabilities that require initial measurement or remeasurement at fair value, which principally consist of assets and liabilities acquired through business combinations and goodwill, indefinite-lived intangible assets and long-lived assets for the purposes of calculating potential impairment. The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows: Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date. Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation. The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2020: (In millions) Level 1 Level 2 Level 3 Total Assets: Foreign currency forward contracts $ — $ 87 $ — $ 87 Interest rate-related derivatives — 15 — 15 Total $ — $ 102 $ — $ 102 Liabilities: Foreign currency forward contracts $ — $ 80 $ — $ 80 Interest rate-related derivatives — 3 — 3 Contingent consideration — — 4 4 Total $ — $ 83 $ 4 $ 87 The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2019: (In millions) Level 1 Level 2 Level 3 Total Assets: Foreign currency forward contracts $ — $ 27 $ — $ 27 Interest rate-related derivatives — 3 — 3 Total $ — $ 30 $ — $ 30 Liabilities: Foreign currency forward contracts $ — $ 6 $ — $ 6 Interest rate-related derivatives — 26 — 26 Contingent consideration — — 36 36 Total $ — $ 32 $ 36 $ 68 F-48 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The estimated fair values of the Company’s financial instruments are as follows: June 30 2020 2019 (In millions) Carrying Amount Fair Value Carrying Amount Fair Value Nonderivatives Cash and cash equivalents $ 5,022 $ 5,022 $ 2,987 $ 2,987 Current and long-term debt 6,136 6,902 3,412 3,706 Additional purchase price payable — — 3 3 Contingent consideration 4 4 36 36 Derivatives Foreign currency forward contracts – asset (liability), net 7 7 21 21 Interest rate-related derivatives – asset (liability), net 12 12 ( 23 ) ( 23 ) The following table presents the Company’s impairment charges for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, during fiscal 2020 and 2019: Fiscal 2020 (In millions) Impairment Charges Date of Fair Value Measurement Fair Value (1) Goodwill Too Faced $ 592 March 31, 2020 $ 13 Smashbox 72 March 31, 2020 — Editions de Parfums Frédéric Malle 3 April 1, 2020 3 BECCA 85 June 30, 2020 13 GLAMGLOW 60 June 30, 2020 54 Total 812 83 Other intangible assets, net (trademark) Too Faced 253 March 31, 2020 272 Smashbox 23 March 31, 2020 32 Editions de Parfums Frédéric Malle 11 April 1, 2020 21 BECCA 71 June 30, 2020 27 GLAMGLOW 6 June 30, 2020 57 Total 364 409 Other intangible assets, net (customer lists) BECCA 35 June 30, 2020 7 Long-lived assets 215 June 30, 2020 200 Total impairments $ 1,426 $ 699 (1) See Note 6 – Goodwill and Other Intangible Assets and Note 7 – Leases for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs. F-49 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fiscal 2019 (In millions) Impairment Charges Date of Fair Value Measurement Fair Value (1) Smashbox Goodwill $ 68 March 31, 2019 $ 72 Other intangible assets, net (trademarks) 22 March 31, 2019 55 Total $ 90 $ 127 (1) See Note 6 – Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs. The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments for which it is practicable to estimate that value: Cash and cash equivalents – Cash and all highly-liquid securities with original maturities of three months or less are classified as cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds (classified within Level 1 of the valuation hierarchy). The carrying amount approximates fair value, primarily due to the short maturity of cash equivalent instruments. Foreign currency forward contracts – The fair values of the Company’s foreign currency forward contracts were determined using an industry-standard valuation model, which is based on an income approach. The significant observable inputs to the model, such as swap yield curves and currency spot and forward rates, were obtained from an independent pricing service. To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using LIBOR for contracts with maturities up to 12 months, and swap yield curves for contracts with maturities greater than 12 months. Interest rate contracts – The fair values of the Company’s interest rate contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as treasury yield curves, swap yield curves and LIBOR forward rates, were obtained from independent pricing services. Current and long-term debt – The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities. To a lesser extent, debt also includes finance lease obligations for which the carrying amount approximates the fair value. The Company’s debt is classified within Level 2 of the valuation hierarchy. Additional purchase price payable – The Company’s additional purchase price payable represents fixed minimum additional purchase price that was discounted using the Company’s incremental borrowing rate, which was approximately 1 %. The additional purchase price payable is classified within Level 2 of the valuation hierarchy. Contingent consideration – Contingent consideration obligations consist of potential obligations related to the Company’s acquisitions in previous years. The amounts to be paid under these obligations are contingent upon the achievement of stipulated financial targets by the business subsequent to acquisition. At June 30, 2020, the fair values of the contingent consideration related to certain acquisition earn-outs were based on the Company’s estimate of the applicable financial targets as per the terms of the agreements. Significant changes in the projected future operating results would result in a significantly higher or lower fair value measurement. As these are unobservable inputs, the Company’s contingent consideration is classified within Level 3 of the valuation hierarchy. F-50 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Changes in the fair value of the contingent consideration obligations for the year ended June 30, 2020 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows: (In millions) Fair Value Contingent consideration at June 30, 2019 $ 36 Payments ( 15 ) Changes in fair value ( 17 ) Contingent consideration at June 30, 2020 $ 4 NOTE 14 – REVENUE RECOGNITION For further information on the Company's policies relating to revenue recognition see Note 2 – Summary of Significant Accounting Policies. Performance Obligations The Company recognizes revenue at a point in time when it satisfies a performance obligation by transferring control over a product and other promised goods and services to a customer. The Company sells wholesale to customers in distribution channels that include department stores, travel retail, specialty-multi retailers, perfumeries, salons/spas and through various online sites operated by authorized retailers. The primary performance obligation related to these channels of distribution is product sales where revenue is recognized as control of the product transfers to the customer. In the Americas region, revenue is generally recognized at the time the product is made available and provided to the customer’s carrier at the Company’s location, and in the Europe, the Middle East & Africa and Asia/Pacific regions, revenue is generally recognized based upon the customer’s receipt. The Company also sells direct to consumers at Company-operated freestanding stores and online through Company-owned and operated e-commerce and m-commerce sites and through third-party online malls. At Company-operated freestanding stores, revenue is recognized when control of the product is transferred at the point of sale. Revenue from online sales is recognized when control of the product is transferred, generally based upon the consumer’s receipt. In connection with the sale of product, the Company may provide other promised goods and services that are deemed to be performance obligations. These are comprised of customer loyalty program obligations, gift with purchase and purchase with purchase promotions, gift cards and other promotional goods including samples and testers. The Company offers a number of different loyalty programs to its customers across regions, brands and distribution channels including points-based programs, tier-based programs and other programs. Revenue is allocated between the saleable product revenue and the material right loyalty obligations based on relative standalone selling prices when the consumer purchases the products that are earning them the right to the future benefits. Deferred revenue related to the Company’s loyalty programs is estimated based on the standalone selling price and is adjusted for an estimated breakage factor. Standalone selling price is determined primarily using the observable market price of the good or service benefit if it is sold by the Company or a cost plus margin approach for goods/services not directly sold by the Company. Breakage rates consider historical patterns of redemption and/or expiration. Revenue is recognized when the benefits are redeemed or expire. The Company provides gift with purchase promotional products to certain customers generally without additional charge and also provides purchase with purchase promotional products to certain customers at a discount in relation to prices charged for saleable product. Revenue is allocated between saleable product, gift with purchase product and purchase with purchase product based on the estimated relative standalone selling prices. Revenue is deferred and ultimately recognized based on the timing differences, if any, between when control of promotional goods and control of the related saleable products transfer to the Company’s customer (e.g., a third-party retailer), which is calculated based on the weighted-average number of days between promotional periods. The estimated standalone selling price allocated to promotional goods is based on a cost plus margin approach. F-51 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In situations where promotional products are provided by the Company to its customers at the same time as the related saleable product, such as shipments of samples and testers, the cost of these promotional products are recognized as a cost of sales at the same time as the related revenue is recognized and no deferral of revenue is required. The Company also offers gift cards through Company-operated freestanding stores and Company-owned websites. The related deferred revenue is estimated based on expected breakage that considers historical patterns of redemption taking into consideration escheatment laws as applicable. Product Returns, Sales Incentives and Other Forms of Variable Consideration In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration. Such elements of variable consideration include product returns and sales incentives, such as volume rebates and discounts, markdowns, margin adjustments and early-payment discounts. We also enter into arrangements containing other forms of variable consideration, including certain demonstration arrangements, for which the Company does not receive a distinct good or service or for which the Company cannot reasonably estimate the fair value of the good or service. For these types of arrangements, the adjustments to revenue are recorded at the later of when (i) the Company recognizes revenue for the transfer of the related goods or services to the customer, or (ii) the Company pays, or promises to pay, the consideration. For the sale of goods with a right of return, the Company only recognizes revenue for the consideration it expects to be entitled to (considering the products to be returned) and records a sales return accrual within Other accrued liabilities for the amount it expects to credit back its customers. In addition, the Company recognizes an asset included in Inventory and promotional merchandise and a corresponding adjustment to Cost of sales for the right to recover goods from customers associated with the estimated returns. The sales return accrual and corresponding asset include estimates that directly impact reported net sales. These estimates are calculated based on a history of actual returns, estimated future returns and information provided by retailers regarding their inventory levels. Consideration of these factors results in an estimate for anticipated sales returns that reflects increases or decreases related to seasonal fluctuations. In addition, as necessary, sales return accruals and the related assets may be established for significant future known or anticipated events. The types of known or anticipated events that are considered, and will continue to be considered, include the financial condition of the Company’s customers, store closings by retailers, changes in the retail environment and the Company’s decision to continue to support new and existing products. The Company estimates sales incentives and other variable consideration using the most likely amount method and records accruals within Other accrued liabilities when control of the related product is transferred to the customer. Under this method, certain forms of variable consideration are based on expected sell-through results, which requires subjective estimates. These estimates are supported by historical results as well as specific facts and circumstances related to the current period The Company also enters into transactions and makes payments to certain of its customers related to demonstration, advertising and counter construction, some of which involve cooperative relationships with customers. These activities may be arranged either with unrelated third parties or in conjunction with the customer. To the extent the Company receives a distinct good or service in exchange for consideration and the fair value of the benefit can be reasonably estimated, the Company’s share of the counter depreciation and the other costs of these transactions (regardless of to whom they were paid) are reflected in Selling, general and administrative expenses in the accompanying consolidated statements of earnings. Accounts Receivable Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $ 63 million and $ 32 million as of June 30, 2020 and June 30, 2019, respectively. The allowance for doubtful accounts is based upon the evaluation of accounts receivable aging, specific exposures and historical trends. Payment terms are short-term in nature and are generally less than one year. In addition, if the good/service is transferred and payment is received within one year, the Company does not determine significant financing components. F-52 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Deferred Revenue Significant changes in deferred revenue during the period are as follows: (In millions) June 30, 2020 Balance at June 30, 2019 $ 361 Revenue recognized that was included in the deferred revenue balance at the beginning of the period ( 271 ) Revenue deferred during the period 189 Balance at June 30, 2020 $ 279 Transaction Price Allocated to the Remaining Performance Obligations At June 30, 2020, the combined estimated revenue expected to be recognized in the next twelve months related to performance obligations for customer loyalty programs, gift with purchase promotions, purchase with purchase promotions and gift card liabilities that are unsatisfied (or partially unsatisfied) is $ 222 million. F-53 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following tables summarize impacts of the adoption of ASC 606 on the Company's fiscal 2019 consolidated financial statements: Consolidated Statement of Earnings June 30, 2019 (In millions, except per share data) As Reported Impact Prior to the adoption of ASC 606 Net sales $ 14,863 $ 49 $ 14,912 Cost of sales 3,387 ( 300 ) 3,087 Gross profit 11,476 349 11,825 Selling, general and administrative 8,857 370 9,227 Operating income 2,313 ( 21 ) 2,292 Provision for income taxes 513 ( 5 ) 508 Net earnings attributable to The Estée Lauder Companies Inc. 1,785 ( 16 ) 1,769 Net earnings attributable to The Estée Lauder Companies Inc. per common share Basic $ 4.91 $ ( .04 ) $ 4.87 Diluted $ 4.82 $ ( .04 ) $ 4.78 Consolidated Balance Sheet June 30, 2019 (In millions) As Reported Impact Prior to the adoption of ASC 606 Accounts receivable, net $ 1,831 $ ( 202 ) $ 1,629 Inventory and promotional merchandise, net 2,006 ( 21 ) 1,985 Other assets 805 ( 65 ) 740 Total assets 13,156 ( 288 ) 12,868 Other accrued liabilities 2,599 ( 452 ) 2,147 Other noncurrent liabilities 1,244 ( 47 ) 1,197 Total liabilities 8,745 ( 499 ) 8,246 Retained earnings 9,984 213 10,197 Accumulated other comprehensive loss ( 563 ) ( 2 ) ( 565 ) Total stockholders' equity - The Estée Lauder Companies Inc. 4,386 211 4,597 Consolidated Statement of Cash Flows June 30, 2019 (In millions) As Reported Impact Prior to the adoption of ASC 606 Net earnings $ 1,794 $ ( 16 ) $ 1,778 Changes in operating assets and liabilities Increase in accounts receivable, net ( 169 ) 5 ( 164 ) Increase in inventory and promotional merchandise, net ( 375 ) ( 6 ) ( 381 ) Increase in other assets, net ( 62 ) ( 5 ) ( 67 ) Increase in other accrued and noncurrent liabilities 285 22 307 Net cash flows provided by operating activities 2,517 — 2,517 F-54 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15 – PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS The Company maintains pension plans covering substantially all of its full-time employees for its U.S. operations and a majority of its international operations. Several plans provide pension benefits based primarily on years of service and employees’ earnings. In certain instances, the Company adjusts benefits in connection with international employee transfers. Retirement Growth Account Plan (U.S.) The Retirement Growth Account Plan is a trust-based, noncontributory qualified defined benefit pension plan. The Company seeks to maintain appropriate funded percentages. For contributions, the Company would seek to contribute an amount or amounts that would not be less than the minimum required by the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, and subsequent pension legislation, and would not be more than the maximum amount deductible for income tax purposes. Restoration Plan (U.S.) The Company also has an unfunded, non-qualified domestic noncontributory pension Restoration Plan to provide benefits in excess of Internal Revenue Code limitations. International Pension Plans The Company maintains international pension plans, the most significant of which are defined benefit pension plans. The Company’s funding policies for these plans are determined by local laws and regulations. The Company’s most significant defined benefit pension obligations are included in the plan summaries below. Post-retirement Benefit Plans The Company maintains a domestic post-retirement benefit plan which provides certain medical and dental benefits to eligible employees. Employees hired after January 1, 2002 are not eligible for retiree medical benefits when they retire. Certain retired employees who are receiving monthly pension benefits are eligible for participation in the plan. Contributions required and benefits received by retirees and eligible family members are dependent on the age of the retiree. It is the Company’s practice to fund a portion of these benefits as incurred and may provide discretionary funding for future liabilities up to the maximum amount deductible for income tax purposes. Certain of the Company’s international subsidiaries and affiliates have post-retirement plans, although most participants are covered by government-sponsored or administered programs. F-55 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Plan Summaries The significant components of the above mentioned plans as of and for the years ended June 30 are summarized as follows: Pension Plans Other than Pension Plans U.S. International Post-retirement (In millions) 2020 2019 2020 2019 2020 2019 Change in benefit obligation: Benefit obligation at beginning of year $ 966 $ 896 $ 631 $ 588 $ 183 $ 170 Service cost 39 38 36 30 3 3 Interest cost 35 37 11 13 6 7 Plan participant contributions — — 6 5 — 1 Actuarial loss (gain) 101 68 ( 12 ) 51 6 10 Foreign currency exchange rate impact — — ( 1 ) ( 18 ) ( 1 ) ( 1 ) Benefits, expenses, taxes and premiums paid ( 59 ) ( 73 ) ( 32 ) ( 31 ) ( 7 ) ( 7 ) Settlements — — ( 3 ) ( 7 ) — — Benefit obligation at end of year $ 1,082 $ 966 $ 636 $ 631 $ 190 $ 183 Change in plan assets: Fair value of plan assets at beginning of year $ 832 $ 838 $ 577 $ 561 $ 31 $ 34 Actual return on plan assets 109 48 43 32 3 2 Foreign currency exchange rate impact — — ( 4 ) ( 16 ) — — Employer contributions 48 19 25 33 — 1 Plan participant contributions — — 6 5 — 1 Settlements — — ( 4 ) ( 7 ) — — Benefits, expenses, taxes and premiums paid from plan assets ( 59 ) ( 73 ) ( 32 ) ( 31 ) ( 7 ) ( 7 ) Fair value of plan assets at end of year $ 930 $ 832 $ 611 $ 577 $ 27 $ 31 Funded status $ ( 152 ) $ ( 134 ) $ ( 25 ) $ ( 54 ) $ ( 163 ) $ ( 152 ) Amounts recognized in the Balance Sheet consist of: Other assets $ — $ 2 $ 127 $ 103 $ — $ — Other accrued liabilities ( 23 ) ( 24 ) ( 4 ) ( 3 ) — — Other noncurrent liabilities ( 129 ) ( 112 ) ( 148 ) ( 154 ) ( 163 ) ( 152 ) Funded status ( 152 ) ( 134 ) ( 25 ) ( 54 ) ( 163 ) ( 152 ) Accumulated other comprehensive loss 283 253 24 68 17 13 Net amount recognized $ 131 $ 119 $ ( 1 ) $ 14 $ ( 146 ) $ ( 139 ) F-56 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Pension Plans Other than Pension Plans U.S. International Post-retirement ($ in millions) 2020 2019 2018 2020 2019 2018 2020 2019 2018 Components of net periodic benefit cost: Service cost $ 39 $ 38 $ 37 $ 36 $ 30 $ 30 $ 3 $ 3 $ 3 Interest cost 35 37 33 11 13 13 6 7 7 Expected return on assets ( 53 ) ( 55 ) ( 53 ) ( 14 ) ( 14 ) ( 15 ) ( 2 ) ( 2 ) ( 3 ) Amortization of: Actuarial loss 15 11 14 6 3 5 — — — Prior service cost — 1 — — ( 1 ) — — — 1 Settlements — — — — 1 — — — — Special termination benefits — — — — — 1 — — — Net periodic benefit cost $ 36 $ 32 $ 31 $ 39 $ 32 $ 34 $ 7 $ 8 $ 8 Weighted-average assumptions used to determine benefit obligations at June 30: Discount rate 2.50 – 3.00 % 3.40 – 3.80 % 4.10 – 4.30 % 0.50 – 7.00 % 0.25 – 8.50 % .50 – 7.50 2.70 – 9.00 % 3.25 – 9.75 % 3.75 – 9.75 % Rate of compensation increase 2.50 – 8.00 % 2.50 – 8.00 % 2.50 – 8.00 % 1.00 – 5.50 % 1.00 – 5.50 % 1.00 – 5.50 N/A N/A N/A Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: Discount rate 3.40 – 3.80 % 4.10 – 4.30 % 3.40 – 3.90 % .25 – 8.50 % .50 – 7.50 % .50 – 6.75 % 3.25 – 9.75 % 3.75 – 9.75 % 3.70 – 9.75 % Expected return on assets 6.75 % 6.75 % 7.00 % 1.50 – 8.50 % 1.50 – 7.50 % 1.75 – 6.75 % 6.75 % 6.75 % 7.00 % Rate of compensation increase 2.50 – 8.00 % 2.50 – 8.00 % 3.00 – 7.00 % 1.00 – 5.50 % 1.00 – 5.50 % 1.00 – 5.50 % N/A N/A N/A The discount rate for each plan used for determining future net periodic benefit cost is based on a review of highly rated long-term bonds. The discount rate for the Company’s Domestic Plans is based on a bond portfolio that includes only long-term bonds with an Aa rating, or equivalent, from a major rating agency. The Company used an above-mean yield curve which represents an estimate of the effective settlement rate of the obligation, and the timing and amount of cash flows related to the bonds included in this portfolio are expected to match the estimated defined benefit payment streams of the Company’s Domestic Plans. For the Company’s international plans, the discount rate in a particular country was principally determined based on a yield curve constructed from high quality corporate bonds in each country, with the resulting portfolio having a duration matching that particular plan. In determining the long-term rate of return for a plan, the Company considers the historical rates of return, the nature of the plan’s investments and an expectation for the plan’s investment strategies. F-57 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. The assumed weighted-average health care cost trend rate for the coming year is 5.78 % while the weighted-average ultimate trend rate of 4.40 % is expected to be reached in approximately 18 years. A 100 basis-point change in assumed health care cost trend rates for fiscal 2020 would have had the following effects: (In millions) 100 Basis-Point Increase 100 Basis-Point Decrease Effect on total service and interest costs $ 1 $ ( 1 ) Effect on post-retirement benefit obligations $ 13 $ ( 11 ) Amounts recognized in AOCI (before tax) as of June 30, 2020 are as follows: Pension Plans Other than Pension Plans (In millions) U.S. International Post-retirement Total Net actuarial losses, beginning of year $ 252 $ 74 $ 13 $ 339 Actuarial losses recognized 45 ( 40 ) 4 9 Amortization and settlements included in net periodic benefit cost ( 15 ) ( 6 ) — ( 21 ) Translation adjustments — 2 — 2 Net actuarial losses, end of year 282 30 17 329 Net prior service cost, beginning of year 1 ( 6 ) — ( 5 ) Amortization included in net periodic benefit cost — — — — Net prior service cost, end of year 1 ( 6 ) — ( 5 ) Total amounts recognized in AOCI $ 283 $ 24 $ 17 $ 324 Amounts in AOCI expected to be amortized as components of net periodic benefit cost during fiscal 2021 are as follows: Pension Plans Other than Pension Plans (In millions) U.S. International Post-retirement Net prior service cost (credit) $ — $ ( 1 ) $ — Net actuarial losses $ 20 $ 4 $ — The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the Company’s pension plans at June 30 are as follows: Pension Plans Retirement Growth Account Restoration International (In millions) 2020 2019 2020 2019 2020 2019 Projected benefit obligation $ 940 $ 830 $ 142 $ 136 $ 636 $ 631 Accumulated benefit obligation $ 887 $ 784 $ 124 $ 120 $ 576 $ 569 Fair value of plan assets $ 930 $ 832 $ — $ — $ 611 $ 577 International pension plans with projected benefit obligations in excess of the plans’ assets had aggregate projected benefit obligations of $ 330 million and $ 319 million and aggregate fair value of plan assets of $ 178 million and $ 162 million at June 30, 2020 and 2019, respectively. International pension plans with accumulated benefit obligations in excess of the plans’ assets had aggregate accumulated benefit obligations of $ 246 million and $ 241 million and aggregate fair value of plan assets of $ 128 million and $ 116 million at June 30, 2020 and 2019, respectively. F-58 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The expected cash flows for the Company’s pension and post-retirement plans are as follows: Pension Plans Other than Pension Plans (In millions) U.S. International Post-retirement Expected employer contributions for year ending June 30, 2021 $ — $ 31 — Expected benefit payments for year ending June 30, 2021 67 25 8 2022 54 26 8 2023 52 28 9 2024 52 27 9 2025 53 29 10 Years 2026 – 2030 287 145 57 Plan Assets The Company’s investment strategy for its pension and post-retirement plan assets is to maintain a diversified portfolio of asset classes with the primary goal of meeting long-term cash requirements as they become due. Assets are primarily invested in diversified funds that hold equity or debt securities to maintain the security of the funds while maximizing the returns within each plan’s investment policy. The investment policy for each plan specifies the type of investment vehicles appropriate for the plan, asset allocation guidelines, criteria for selection of investment managers and procedures to monitor overall investment performance, as well as investment manager performance. The Company’s target asset allocation at June 30, 2020 is as follows: Pension Plans Other than Pension Plans U.S. International Post-retirement Equity 42 % 12 % 42 % Debt securities 47 % 65 % 47 % Other 11 % 23 % 11 % 100 % 100 % 100 % The following is a description of the valuation methodologies used for plan assets measured at fair value: Cash and Cash Equivalents – Cash and all highly-liquid securities with original maturities of three months or less are classified as cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds. These assets are classified within Level 1 of the valuation hierarchy. Short-term investment funds – The fair values are determined using the Net Asset Value (“NAV”) provided by the administrator of the fund when the Company has the ability to redeem the assets at the measurement date. These assets are classified within Level 2 of the valuation hierarchy. For some assets the Company is utilizing the NAV as a practical expedient and those investments are not included in the valuation hierarchy. Government and agency securities – The fair values are determined using third-party pricing services using market prices or prices derived from observable market inputs such as benchmark curves, broker/dealer quotes, and other industry and economic factors. These investments are classified within Level 2 of the valuation hierarchy. Debt instruments – The fair values are determined using third-party pricing services using market prices or prices derived from observable market inputs such as credit spreads, broker/dealer quotes, benchmark curves and other industry and economic factors. These investments are classified within Level 2 of the valuation hierarchy. F-59 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Commingled funds – The fair values of publicly traded funds are based upon market quotes and are classified within Level 1 of the valuation hierarchy. The fair values for non-publicly traded funds are determined using the NAV provided by the administrator of the fund when the Company has the ability to redeem the assets at the measurement date. These assets are classified within Level 2 of the valuation hierarchy. When the Company is utilizing the NAV as a practical expedient those investments are not included in the valuation hierarchy. These investments have monthly redemption frequencies with redemption notice periods ranging from 10 to 30 days. There are no unfunded commitments related to these investments. Insurance contracts – The fair values are based on negotiated value and the underlying investments held in separate account portfolios, as well as the consideration of the creditworthiness of the issuer. The underlying investments are primarily government, asset-backed and fixed income securities. Insurance contracts are generally classified as Level 3 as there are no quoted prices or other observable inputs for pricing. Interests in limited partnerships and hedge fund investments – The fair values are determined using the NAV provided by the administrator as a practical expedient, and therefore these investments are not included in the valuation hierarchy. These investments have monthly and quarterly redemption frequencies with redemption notice periods ranging from 30 to 90 days. Unfunded commitments related to these investments are de minimis. The following table presents the fair values of the Company’s pension and post-retirement plan assets by asset category as of June 30, 2020: (In millions) Level 1 Level 2 Level 3 Assets Measured at NAV Total Cash and cash equivalents $ 2 $ — $ — $ — $ 2 Short term investment funds — 7 — 6 13 Government and agency securities — 152 — — 152 Commingled funds 386 666 — 207 1,259 Insurance contracts — — 49 — 49 Limited partnerships and hedge fund investments — — — 93 93 Total $ 388 $ 825 $ 49 $ 306 $ 1,568 The following table presents the fair values of the Company’s pension and post-retirement plan assets by asset category as of June 30, 2019: (In millions) Level 1 Level 2 Level 3 Assets Measured at NAV Total Cash and cash equivalents $ 6 $ — $ — $ — $ 6 Short term investment funds — 19 — 5 24 Government and agency securities — 112 — — 112 Commingled funds 347 590 — 212 1,149 Insurance contracts — — 49 — 49 Limited partnerships and hedge fund investments — — — 100 100 Total $ 353 $ 721 $ 49 $ 317 $ 1,440 F-60 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the changes in Level 3 plan assets for fiscal 2020: (In millions) Insurance Contracts Balance as of June 30, 2019 $ 49 Actual return on plan assets: Relating to assets still held at the reporting date 2 Purchases, sales, issuances and settlements, net ( 2 ) Foreign exchange impact — Balance as of June 30, 2020 $ 49 401(k) Savings Plan (U.S.) The Company’s 401(k) Savings Plan (“Savings Plan”) is a contributory defined contribution plan covering substantially all regular U.S. employees who have completed the hours and service requirements, as defined by the plan document. Regular full-time employees are eligible to participate in the Savings Plan thirty days following their date of hire. The Savings Plan is subject to the applicable provisions of ERISA. The Company matches a portion of the participant’s contributions after one year of service under a predetermined formula based on the participant’s contribution level. The Company’s contributions were $ 37 million, $ 44 million and $ 41 million for fiscal 2020, 2019 and 2018, respectively. Shares of the Company’s Class A Common Stock are not an investment option in the Savings Plan and the Company does not use such shares to match participants’ contributions. Deferred Compensation The Company has agreements with certain employees and outside directors who defer compensation. The Company accrues for such compensation, and either interest thereon or for the change in the value of cash units. The amounts included in the accompanying consolidated balance sheets under these plans were $ 85 million and $ 93 million as of June 30, 2020 and 2019, respectively. The expense for fiscal 2020, 2019 and 2018 was $ 5 million, $ 8 million and $ 16 million, respectively. F-61 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16 – COMMITMENTS AND CONTINGENCIES Contractual Obligations The following table summarizes scheduled maturities of the Company’s contractual obligations for which cash flows are fixed and determinable as of June 30, 2020: Payments Due in Fiscal (In millions) Total 2021 2022 2023 2024 2025 Thereafter Debt service (1) $ 8,992 $ 1,386 $ 165 $ 412 $ 159 $ 654 $ 6,216 Unconditional purchase obligations (2) 3,768 1,403 522 557 459 494 333 Gross unrecognized tax benefits and interest – current (3) 3 3 — — — — — Transition Tax payable (4) 279 17 27 27 51 69 88 Total contractual obligations (5) $ 13,042 $ 2,809 $ 714 $ 996 $ 669 $ 1,217 $ 6,637 (1) Includes long-term and current debt and the related projected interest costs. Refer to Note 7 – Leases for information regarding future minimum lease payments relating to the Company’s finance leases. Interest costs on long-term and current debt in fiscal 2021, 2022, 2023, 2024, 2025 and thereafter are projected to be $ 177 million, $ 165 million, $ 162 million, $ 159 million, $ 154 million and $ 2,016 million, respectively. Projected interest costs on variable rate instruments were calculated using market rates at June 30, 2020. (2) Unconditional purchase obligations primarily include: royalty payments pursuant to license agreements, inventory commitments, third-party distribution commitments and advertising commitments. Future royalty and advertising commitments were estimated based on planned future sales for the term that was in effect at June 30, 2020, without consideration for potential renewal periods. (3) Refer to Note 9 – Income Taxes for information regarding unrecognized tax benefits. As of June 30, 2020, the noncurrent portion of the Company’s unrecognized tax benefits, including related accrued interest and penalties was $ 76 million. At this time, the settlement period for the noncurrent portion of the unrecognized tax benefits, including related accrued interest and penalties, cannot be determined and therefore was not included. (4) The Transition Tax may be paid over an eight-year period and this amount represents the remaining liability as of June 30, 2020. (5) Refer to Note 7 – Leases for information regarding future minimum lease payments relating to the Company’s operating leases. Legal Proceedings The Company is involved, from time to time, in litigation and other legal proceedings incidental to its business, including employment, intellectual property, real estate, environmental, regulatory, advertising, trade relations, tax, privacy, and product liability matters (including asbestos-related claims). Management believes that the outcome of current litigation and legal proceedings will not have a material adverse effect upon the Company’s business, results of operations, financial condition or cash flows. However, management’s assessment of the Company’s current litigation and other legal proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against the Company not presently known to the Company or determinations by judges, juries or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or proceedings. Reasonably possible losses in addition to the amounts accrued for such litigation and legal proceedings are not material to the Company’s consolidated financial statements. Contingencies As previously disclosed, during the fiscal 2018 third quarter, the Company learned that some of its testing related to certain product advertising claims did not meet the Company’s standards, necessitating further validation. This review is substantially completed, and modifications are being made to certain advertising claims. This was not a product safety issue and did not relate to the quality of the ingredients or the manufacturing of the Company’s products. The Company has determined that this matter is not material to the Company, and no accrual has been recorded. NOTE 17 – COMMON STOCK As of June 30, 2020, the Company’s authorized common stock consists of 1,300 million shares of Class A Common Stock, par value $ .01 per share, and 304 million shares of Class B Common Stock, par value $ .01 per share. Class B Common Stock is convertible into Class A Common Stock, in whole or in part, at any time and from time to time at the option of the holder, on the basis of one share of Class A Common Stock for each share of Class B Common Stock converted. Holders of the Company’s Class A Common Stock are entitled to one vote per share and holders of the Company’s Class B Common Stock are entitled to ten votes per share. F-62 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Information about the Company’s common stock outstanding is as follows: (Shares in thousands) Class A Class B Balance at June 30, 2017 224,341.2 143,762.3 Acquisition of treasury stock ( 6,045.4 ) — Conversion of Class B to Class A 710.6 ( 710.6 ) Stock-based compensation 5,087.4 — Balance at June 30, 2018 224,093.8 143,051.7 Acquisition of treasury stock ( 10,986.7 ) — Conversion of Class B to Class A 3,513.9 ( 3,513.9 ) Stock-based compensation 4,943.5 — Balance at June 30, 2019 221,564.5 139,537.8 Acquisition of treasury stock ( 4,665.0 ) — Conversion of Class B to Class A 4,302.4 ( 4,302.4 ) Stock-based compensation 4,088.3 — Balance at June 30, 2020 225,290.2 135,235.4 The Company is authorized by the Board of Directors to repurchase Class A Common Stock in the open market or in privately negotiated transactions, depending on market conditions and other factors. As of June 30, 2020, the remaining authorized share repurchase balance was 34.7 million shares. The following is a summary of cash dividends declared per share on the Company’s Class A and Class B Common Stock during the year ended June 30, 2020: Date Declared Record Date Payable Date Amount per Share August 16, 2019 August 30, 2019 September 16, 2019 $ .43 October 30, 2019 November 29, 2019 December 16, 2019 $ .48 February 5, 2020 February 28, 2020 March 16, 2020 $ .48 As part of the cost saving actions and cash conservation measures taken in response to the COVID-19 pandemic, the Company did not declare quarterly cash dividends that would have been paid in June 2020. On August 19, 2020, a dividend was declared in the amount of $ .48 per share on our Class A and Class B Common Stock. The dividend is payable in cash on September 15, 2020 to stockholders of record at the close of business on August 31, 2020 NOTE 18 – STOCK PROGRAMS As of June 30, 2020, the Company has two active equity compensation plans which include the Amended and Restated Fiscal 2002 Share Incentive Plan (the “Fiscal 2002 Plan”) and the Amended and Restated Non-Employee Director Share Incentive Plan (collectively, the “Plans”). These Plans currently provide for the issuance of approximately 88.8 million shares of Class A Common Stock, which consist of shares originally provided for and shares transferred to the Fiscal 2002 Plan from other inactive plans and employment agreements, to be granted in the form of stock-based awards to key employees, consultants and non-employee directors of the Company. As of June 30, 2020, approximately 15.0 million shares of Class A Common Stock were reserved and available to be granted pursuant to these Plans. The Company may satisfy the obligation of its stock-based compensation awards with either new or treasury shares. The Company’s equity compensation awards include stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs and share units. F-63 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, RSUs, PSUs, long-term PSUs and share units. Compensation expense attributable to net stock-based compensation is as follows: Year Ended June 30 (In millions) 2020 2019 2018 Compensation expense $ 213 $ 243 $ 236 Income tax benefit $ 41 $ 47 $ 49 As of June 30, 2020, the total unrecognized compensation cost related to unvested stock-based awards was $ 151 million and the related weighted-average period over which it is expected to be recognized is approximately two years . Stock Options The following is a summary of the Company’s stock option programs as of June 30, 2020 and changes during the fiscal year then ended: (Shares in thousands) Shares Weighted- Average Exercise Price Per Share Aggregate Intrinsic Value (1) (in millions) Weighted-Average Contractual Life Remaining in Years Outstanding at June 30, 2019 9,848.0 $ 87.68 Granted at fair value 1,332.2 199.24 Exercised ( 2,454.5 ) 73.68 Expired ( 13.8 ) 99.14 Forfeited ( 66.9 ) 155.66 Outstanding at June 30, 2020 8,645.0 108.30 $ 709 6.0 Vested and expected to vest at June 30, 2020 8,595.9 107.86 $ 708 6.0 Exercisable at June 30, 2020 5,780.6 82.85 $ 612 4.9 (1) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The exercise period for all stock options generally may not exceed ten years from the date of grant. Stock option grants to individuals generally become exercisable in three substantively equal tranches over a service period of up to four years . The Company attributes the value of option awards on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. The following is a summary of the per-share weighted-average grant date fair value of stock options granted and total intrinsic value of stock options exercised: Year Ended June 30 (In millions, except per share data) 2020 2019 2018 Per-share weighted-average grant date fair value of stock options granted $ 51.46 $ 38.62 $ 27.76 Intrinsic value of stock options exercised $ 309 $ 283 $ 246 F-64 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: Year Ended June 30 2020 2019 2018 Weighted-average expected stock-price volatility 25.1 % 24.5 % 25.6 % Weighted-average expected option life 7 years 7 years 7 years Average risk-free interest rate 1.5 % 2.8 % 2.0 % Average dividend yield 1.0 % 1.1 % 1.5 % The Company uses a weighted-average expected stock-price volatility assumption that is a combination of both current and historical implied volatilities of the underlying stock. The implied volatilities were obtained from publicly available data sources. For the weighted-average expected option life assumption, the Company considers the exercise behavior for past grants and models the pattern of aggregate exercises. The average risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the options and the average dividend yield is based on historical experience. Restricted Stock Units The Company granted RSUs in respect of approximately 0.8 million shares of Class A Common Stock during fiscal 2020 which, at the time of grant, were scheduled to vest as follows: 0.3 million in fiscal 2021, 0.3 million in fiscal 2022 and 0.2 million in fiscal 2023. Vesting of RSUs granted is generally subject to the continued employment or the retirement of the grantees. The RSUs are accompanied by dividend equivalent rights, payable upon settlement of the RSUs either in cash or shares (based on the terms of the particular award) and, as such, were valued at the closing market price of the Company’s Class A Common Stock on the date of grant. The following is a summary of the status of the Company’s RSUs as of June 30, 2020 and activity during the fiscal year then ended: (Shares in thousands) Shares Weighted-Average Grant Date Fair Value Per Share Nonvested at June 30, 2019 2,441.9 $ 119.62 Granted 834.5 199.25 Dividend equivalents 13.7 178.63 Vested ( 1,233.3 ) 111.44 Forfeited ( 108.5 ) 145.42 Nonvested at June 30, 2020 1,948.3 157.89 Performance Share Units During fiscal 2020, the Company granted PSUs with a target payout of approximately 0.1 million shares of Class A Common Stock with a grant date fair value per share of $ 199.18 , which will be settled in stock subject to the achievement of the Company’s net sales, diluted net earnings per common share and return on invested capital goals for the three fiscal years ending June 30, 2022, all subject to continued employment or the retirement of the grantees. In January 2020 and March 2020, the Company granted PSUs with a target payout of approximately 0.1 million shares with a weighted-average grant date fair value per share of $ 162.16 , which will be settled in stock subject to the achievement of certain net sales and net operating profit goals of certain subsidiaries of the Company for the calendar year ending 2022. F-65 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Settlement of all PSUs will be made pursuant to a range of opportunities relative to the target goals and, as such, the compensation cost of the PSU is subject to adjustment based upon the attainability of these target goals. No settlement will occur for results below the applicable minimum threshold of a target and additional shares shall be issued if performance exceeds the targeted performance goals. PSUs are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSUs and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant. These awards are subject to the provisions of the agreement under which the PSUs are granted. The PSUs generally vest at the end of the performance period. Approximately 0.2 million shares of Class A Common Stock are anticipated to be issued, relative to the target goals set at the time of issuance, in settlement of the 0.5 million PSUs that vested as of June 30, 2020. In September 2018 and September 2019, approximately 0.4 million shares of the Company’s Class A Common Stock were issued, and related accrued dividends were paid, relative to the target goals set at the time of issuance, in settlement of 0.3 million PSUs which vested as of June 30, 2018 and June 30, 2019, respectively. The following is a summary of the status of the Company’s PSUs as of June 30, 2020 and activity during the fiscal year then ended: (Shares in thousands) Shares Weighted-Average Grant Date Fair Value Per Share Nonvested at June 30, 2019 1,009.8 105.92 Granted 198.5 187.10 Vested ( 512.1 ) 92.19 Forfeited ( 1.1 ) 132.73 Nonvested at June 30, 2020 695.1 139.17 Long-term Performance Share Units During September 2015, the Company granted PSUs to an executive of the Company with an aggregate target payout of 387,848 shares (in three tranches of approximately 129,283 each) of the Company’s Class A Common Stock, generally subject to continued employment through the end of relative performance periods, which end June 30, 2018, 2019, and 2020. Since the Company achieved positive Net Earnings, as defined in the PSU award agreement, for the fiscal year ended June 30, 2016, performance and vesting of each tranche will be based on the Company achieving positive Cumulative Operating Income, as defined in the PSU award agreement, during the relative performance period. Payment with respect to a tranche will be made on the third anniversary of the last day of the respective performance period. The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as the payment of shares of Class A Common Stock. The grant date fair value of these PSUs of $ 30 million was estimated using the closing stock price of the Company’s Class A Common Stock as of September 4, 2015, the date of grant. Through June 30, 2020, 387,848 shares are anticipated to be issued, and the related dividends to be paid, in accordance with the terms of the grant, related to the performance periods ended June 30, 2018, 2019, and 2020. During January 2016, the Company granted PSUs to an executive of the Company with an aggregate target payout of 71,694 shares (in three tranches of 23,898 each) of the Company’s Class A Common Stock. Since the Company achieved positive Net Earnings, as defined in the PSU award agreement, for the fiscal year ended June 30, 2017, the vesting of each tranche will generally be subject to continued employment through the end of relative service periods that end on January 29, 2018, 2019 and 2020. Payment with respect to a tranche will be made within 30 business days of the date on which the PSUs vest. The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as the payment of shares of the Company’s Class A Common Stock. The grant date fair value of these PSUs of $ 6 million was estimated using the closing stock price of the Company’s Class A Common Stock as of January 28, 2016, the date of grant. In January 2020, 23,898 shares of the Company’s Class A Common Stock were issued, and the related dividends were paid, in accordance with the terms of the grant related to the performance period of the award that ended January 29, 2020. Through June 30, 2020, 71,694 shares of the Company’s Class A Common Stock were issued, and the related dividends were paid, in accordance with the terms of the grant, related to the performance periods ended January 29, 2018, 2019 and 2020. F-66 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In February 2018, the Company granted to an executive of the Company PSUs with an aggregate payout of 195,940 shares (in two tranches of 97,970 shares each) of the Company’s Class A Common Stock, generally subject to continued employment through the end of the respective performance periods ending June 30, 2021 and 2022. No portion of the award will generally vest unless the Company has achieved positive Cumulative Operating Income, as defined in the performance share unit award agreement, during the relevant performance period. Settlement, if any, with respect to both tranches will be made on September 3, 2024. The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as any payment of shares of Class A Common Stock. The grant date fair value of these PSUs of $ 27 million was estimated using the closing stock price of the Company’s Class A Common Stock as of the date of grant. Share Units The Company grants share units to certain non-employee directors under the Amended and Restated Non-Employee Director Share Incentive Plan. The share units are convertible into shares of the Company’s Class A Common Stock as provided for in that plan. Share units are accompanied by dividend equivalent rights that are converted to additional share units when such dividends are declared. The following is a summary of the status of the Company’s share units as of June 30, 2020 and activity during the fiscal year then ended: (Shares in thousands) Shares Weighted-Average Grant Date Fair Value Per Share Outstanding at June 30, 2019 131.2 $ 57.22 Granted 4.6 190.99 Dividend equivalents 1.0 177.86 Outstanding at June 30, 2020 136.8 62.46 Cash Units Certain non-employee directors defer cash compensation in the form of cash payout share units, which are not subject to the Plans. These share units are classified as liabilities and, as such, their fair value is adjusted to reflect the current market value of the Company’s Class A Common Stock. The Company recorded $ 2 million, $ 9 million and $ 12 million as compensation expense to reflect additional deferrals and the change in the market value for fiscal 2020, 2019 and 2018, respectively. NOTE 19 – NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC. PER COMMON SHARE Net earnings attributable to The Estée Lauder Companies Inc. per common share (“basic EPS”) is computed by dividing net earnings attributable to The Estée Lauder Companies Inc. by the weighted-average number of common shares outstanding and contingently issuable shares (which satisfy certain conditions). Net earnings attributable to The Estée Lauder Companies Inc. per common share assuming dilution (“diluted EPS”) is computed by reflecting potential dilution from stock-based awards. F-67 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows: Year Ended June 30 (In millions, except per share data) 2020 2019 2018 Numerator: Net earnings attributable to The Estée Lauder Companies Inc. $ 684 $ 1,785 $ 1,108 Denominator: Weighted-average common shares outstanding – Basic 360.6 363.5 368.0 Effect of dilutive stock options 4.4 4.7 5.2 Effect of PSUs 0.3 0.5 0.4 Effect of RSUs 1.6 1.7 2.1 Weighted-average common shares outstanding – Diluted 366.9 370.4 375.7 Net earnings attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.90 $ 4.91 $ 3.01 Diluted $ 1.86 $ 4.82 $ 2.95 As of June 30, 2020, the number of shares of Class A Common Stock underlying options that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive was 1.3 million. As of June 30, 2019 and 2018, there were no anti-dilutive shares of Class A Common Stock underlying options to be excluded in the computation of diluted EPS. As of June 30, 2020, 2019 and 2018, 1.2 million shares, 1.3 million shares and 1.0 million shares at target, respectively, of Class A Common Stock underlying PSUs have been excluded from the calculation of diluted EPS because the number of shares ultimately issued is contingent on the achievement of certain performance targets of the Company, as discussed in Note 18 – Stock Programs . F-68 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 20 – ACCUMULATED OTHER COMPREHENSIVE LOSS The components of AOCI included in the accompanying consolidated balance sheets consist of the following: Year Ended June 30 (In millions) 2020 2019 2018 Net unrealized investment losses, beginning of year $ — $ ( 14 ) $ ( 1 ) Unrealized investment gains (losses) — 14 ( 13 ) Net unrealized investment losses, end of year — — ( 14 ) Net derivative instruments, beginning of year 21 39 ( 3 ) Gain on derivative instruments 26 5 12 Provision for deferred income taxes ( 7 ) ( 2 ) ( 2 ) Reclassification to earnings during the year: Foreign currency forward contracts (1) ( 35 ) ( 28 ) 46 Interest rate-related derivatives (2) — ( 1 ) ( 1 ) Benefit (provision) for deferred income taxes on reclassification (3) 9 8 ( 15 ) Reclassification to retained earnings — — 2 Net derivative instruments, end of year 14 21 39 Net pension and post-retirement adjustments, beginning of year ( 253 ) ( 175 ) ( 213 ) Changes in plan assets and benefit obligations: Net actuarial gains (losses) recognized ( 9 ) ( 117 ) 67 Prior service credit recognized — — 5 Translation adjustments ( 2 ) 2 ( 1 ) Benefit (provision) for deferred income taxes 4 25 ( 15 ) Amortization and settlements included in net periodic benefit cost (4) : Net actuarial losses 21 15 19 Net prior service cost — — 1 Provision for deferred income taxes on reclassification (3) ( 5 ) ( 3 ) ( 4 ) Reclassification to retained earnings — — ( 34 ) Net pension and post-retirement adjustments, end of year ( 244 ) ( 253 ) ( 175 ) Cumulative translation adjustments, beginning of year ( 331 ) ( 284 ) ( 267 ) Reclassification to earnings during the year 2 ( 77 ) — Translation adjustments ( 108 ) 18 ( 19 ) Benefit for deferred income taxes 2 12 2 Cumulative translation adjustments, end of year ( 435 ) ( 331 ) ( 284 ) Accumulated other comprehensive loss $ ( 665 ) $ ( 563 ) $ ( 434 ) (1) For the year ended June 30, 2020 and 2019, $( 35 ) million and $( 28 ) million, respectively, was recorded in Net sales in the accompanying consolidated statements of earnings. For the year ended June 30, 2018, $ 22 million and $ 24 million were recorded in Cost of sales and Selling, general and administrative expenses, respectively, in the accompanying consolidated statements of earnings. (2) Amounts recorded in Interest expense in the accompanying consolidated statements of earnings. (3) Amounts recorded in Provision for income taxes in the accompanying consolidated statements of earnings. (4) See Note 15 – Pension, Deferred Compensation and Post-Retirement Benefit Plans for additional information . F-69 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 21 – STATEMENT OF CASH FLOWS Supplemental cash flow information is as follows: Year Ended June 30 (In millions) 2020 2019 2018 Cash: Cash paid during the year for interest $ 153 $ 131 $ 128 Cash paid during the year for income taxes $ 537 $ 588 $ 351 Non-cash investing and financing activities: Purchase price refund receivable $ 32 $ — $ — Capital lease, capitalized interest and asset retirement obligations incurred $ 2 $ 15 $ 9 Non-cash purchases of short- and long-term investments, net $ — $ — $ 14 Property, plant and equipment accrued but unpaid $ 39 $ 52 $ 43 NOTE 22 – SEGMENT DATA AND RELATED INFORMATION Reportable operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “Chief Executive”) in deciding how to allocate resources and in assessing performance. As a result of the similarities in the manufacturing, marketing and distribution processes for all of the Company’s products, much of the information provided in the consolidated financial statements is similar to, or the same as, that reviewed on a regular basis by the Chief Executive. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis. While the Company’s results of operations are also reviewed on a consolidated basis, the Chief Executive reviews data segmented on a basis that facilitates comparison to industry statistics. Accordingly, net sales, depreciation and amortization, and operating income are available with respect to the manufacture and distribution of skin care, makeup, fragrance, hair care and other products. These product categories meet the definition of operating segments and, accordingly, additional financial data are provided below. The “other” segment includes the sales and related results of ancillary products and services that do not fit the definition of skin care, makeup, fragrance and hair care. Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and earnings before income taxes, other components of net periodic benefit cost, interest expense, interest income and investment income, net, other income, net and charges associated with restructuring and other activities. Returns and charges associated with restructuring and other activities are not allocated to the product categories because they result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select corporate functions and go-to-market structures. During fiscal 2020, changes were made to reflect certain Leading Beauty Forward enhancements made to the capabilities and cost structure of the Company’s travel retail business, which are primarily centralized in The Americas region, and resulted in a change to the royalty structure of the travel retail business to reflect the value created in The Americas region. Accordingly, the fiscal 2019 and 2018 operating income of The Americas was increased, with a corresponding decrease in Europe, the Middle East & Africa, by $ 866 million and $ 661 million, respectively, to conform with the current year methodology and presentation. The accounting policies for the Company’s reportable segments are substantially the same as those described in the summary of significant accounting policies, except for depreciation and amortization charges, which are allocated, primarily, based upon net sales. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced for the Chief Executive or included herein. F-70 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended June 30 (In millions) 2020 2019 2018 PRODUCT CATEGORY DATA Net sales: Skin Care $ 7,382 $ 6,551 $ 5,595 Makeup 4,794 5,860 5,633 Fragrance 1,563 1,802 1,826 Hair Care 515 584 570 Other 40 69 67 14,294 14,866 13,691 Returns associated with restructuring and other activities — ( 3 ) ( 8 ) Net sales $ 14,294 $ 14,863 $ 13,683 Depreciation and amortization: Skin Care $ 268 $ 202 $ 185 Makeup 242 257 255 Fragrance 71 69 64 Hair Care 28 26 24 Other 2 3 3 $ 611 $ 557 $ 531 Operating income (loss) before charges associated with restructuring and other activities: Skin Care $ 2,125 $ 1,925 $ 1,514 Makeup ( 1,438 ) 438 549 Fragrance 17 140 176 Hair Care ( 19 ) 39 64 Other 4 12 9 689 2,554 2,312 Reconciliation: Charges associated with restructuring and other activities ( 83 ) ( 241 ) ( 257 ) Interest expense ( 161 ) ( 133 ) ( 128 ) Interest income and investment income, net 48 58 56 Other components of net periodic benefit cost ( 4 ) ( 2 ) ( 3 ) Other income, net 557 71 — Earnings before income taxes $ 1,046 $ 2,307 $ 1,980 F-71 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended June 30 (In millions) 2020 2019 2018 GEOGRAPHIC DATA (1) Net sales: The Americas $ 3,794 $ 4,741 $ 5,015 Europe, the Middle East & Africa 6,262 6,452 5,634 Asia/Pacific 4,238 3,673 3,042 14,294 14,866 13,691 Returns associated with restructuring and other activities — ( 3 ) ( 8 ) Net sales $ 14,294 $ 14,863 $ 13,683 Operating income (loss): The Americas $ ( 1,044 ) $ 672 $ 872 Europe, the Middle East & Africa 997 1,153 865 Asia/Pacific 736 729 575 689 2,554 2,312 Charges associated with restructuring and other activities ( 83 ) ( 241 ) ( 257 ) Operating income $ 606 $ 2,313 $ 2,055 Total assets: The Americas $ 9,189 $ 7,661 $ 7,558 Europe, the Middle East & Africa 4,319 3,862 3,855 Asia/Pacific 4,273 1,633 1,154 $ 17,781 $ 13,156 $ 12,567 Long-lived assets (2) : The Americas $ 2,512 $ 1,230 $ 1,138 Europe, the Middle East & Africa 1,306 647 525 Asia/Pacific 519 191 160 $ 4,337 $ 2,068 $ 1,823 (1) The net sales and operating income from the Company's travel retail business are included in the Europe, the Middle East & Africa region, with the exception of the net sales of Dr. Jart+ products in the travel retail channel that are reflected in Korea in the Asia/Pacific region. (2) Includes property, plant and equipment, net . Fiscal 2020 also includes operating lease ROU assets, recognized as a result of the adoption of ASC 842. Refer to Note 7 – Leases for information. Net sales are predominantly attributed to a country within a geographic region based on the location of the customer. The Company is domiciled in the United States. Net sales in the United States, including net sales from travel retail locations, in fiscal 2020, 2019 and 2018 were $ 3,449 million, $ 4,295 million and $ 4,531 million, respectively. Net sales in mainland China, including net sales from travel retail locations, in fiscal 2020, 2019 and 2018 were approximately 24 %, 17 % and 13 % of consolidated net sales, respectively, and no other country represented greater than 10% of the Company’s consolidated net sales. The Company’s long-lived assets in the United States at June 30, 2020, 2019 and 2018 were $ 2,192 million, $ 953 million and $ 912 million, respectively. F-72 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 23 – UNAUDITED QUARTERLY FINANCIAL DATA The following summarizes the unaudited quarterly operating results of the Company for fiscal 2020 and 2019: Quarter Ended (In millions, except per share data) September 30 (1) December 31 (2) March 31 (3) June 30 (4) Total Year Fiscal 2020 Net sales $ 3,895 $ 4,624 $ 3,345 $ 2,430 $ 14,294 Gross profit 2,987 3,583 2,509 1,663 10,742 Operating income (loss) 779 261 109 ( 543 ) 606 Net earnings (loss) attributable to The Estée Lauder Companies Inc. 595 557 ( 6 ) ( 462 ) 684 Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.65 $ 1.55 $ ( .02 ) $ ( 1.28 ) $ 1.90 Diluted $ 1.61 $ 1.52 $ ( .02 ) $ ( 1.28 ) $ 1.86 Fiscal 2019 Net sales $ 3,524 $ 4,005 $ 3,744 $ 3,590 $ 14,863 Gross profit 2,701 3,095 2,925 2,755 11,476 Operating income 652 771 674 216 2,313 Net earnings attributable to The Estée Lauder Companies Inc. 500 573 555 157 1,785 Net earnings attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.36 $ 1.58 $ 1.53 $ .43 $ 4.91 Diluted $ 1.34 $ 1.55 $ 1.51 $ .43 $ 4.82 (1) Fiscal 2020 first quarter results include charges associated with restructuring and other activities of $( 25 ) million ($( 21 ) million after tax, or $( .06 ) per diluted common share). Fiscal 2019 first quarter results include charges associated with restructuring and other activities of $( 47 ) million ($( 37 ) million after tax, or $( .10 ) per diluted common share) and the changes in fair value of contingent consideration of $ 11 million ($ 9 million after tax, or $ .02 per diluted common share). The fiscal 2019 first quarter results also include a net credit resulting from the TCJA of $ 1 million, or $( .01 ) per diluted common share, relating to the Transition Tax and the net deferred tax liability related to foreign withholding taxes on certain foreign earnings. (2) Fiscal 2020 second quarter results include goodwill and other intangible asset impairments of $( 777 ) million ($( 663 ) million after tax, or $( 1.81 ) per diluted common share), charges associated with restructuring and other activities of $( 13 ) million ($( 10 ) million after tax, or $( .03 ) per diluted common share) and the changes in fair value of contingent consideration of $ 7 million ($ 6 million after tax, or $ .02 per diluted common share). The fiscal 2020 second quarter results also include gains relating to the Company's previously held equity method investment in Have&Be of $ 576 million ($ 450 million after tax, or $ 1.23 per diluted common share). Fiscal 2019 second quarter results include goodwill and other intangible asset impairments of $( 38 ) million ($( 34 ) million after tax, or $( .09 ) per diluted common share), charges associated with restructuring and other activities of $( 35 ) million ($( 31 ) million after tax, or $( .08 ) per diluted common share) and the changes in fair value of contingent consideration of $( 2 ) million ($( 1 ) million after tax, which did not have an impact on diluted earnings per share). The fiscal 2019 second quarter results also include a net charge resulting from the TCJA of $( 6 ) million, or $( .02 ) per diluted common share, relating to the remeasurement of U.S. net deferred tax assets and the Transition Tax. (3) Fiscal 2020 third quarter results include goodwill, other intangible and long-lived asset impairments of $( 346 ) million ($( 298 ) million after tax, or $( .83 ) per diluted common share), charges associated with restructuring and other activities of $( 25 ) million ($( 20 ) million after tax, or $( .05 ) per diluted common share) and the changes in fair value of contingent consideration of $ 2 million ($ 2 million after tax, or $ .01 per diluted common share). Fiscal 2019 third quarter results include a gain on liquidation of an investment in a foreign subsidiary, net of $ 71 million ($ 57 million after tax, or $ .15 per diluted common share). The fiscal 2019 third quarter results also include goodwill and other intangible asset impairments of $( 52 ) million (before and after tax, or $( .14 ) per diluted common share), charges associated with restructuring and other activities of $( 35 ) million ($( 27 ) million after tax, or $( .07 ) per diluted common share) and the changes in fair value of contingent consideration of $ 9 million ($ 7 million after tax, or $ .02 per diluted common share). (4) Fiscal 2020 fourth quarter results include goodwill, other intangible and long-lived asset impairments of $( 303 ) million ($( 254 ) million after tax, or $( .70 ) per diluted common share), charges associated with restructuring and other activities of $( 20 ) million ($( 17 ) million after tax, or $( .05 ) per diluted common share) and the changes in fair value of contingent consideration of $ 8 million ($ 8 million after tax, or $ .02 per diluted common share). The fiscal 2020 fourth quarter results also include Other income, net, primarily relating to the Company's previously held equity method investment in Have&Be, of $( 19 ) million ($( 9 ) million after tax, or $( .02 ) per diluted common share). Fiscal 2019 fourth quarter results include charges associated with restructuring and other activities of $( 124 ) million ($( 95 ) million after tax, or $( .25 ) per diluted common share) and the changes in fair value of contingent consideration of $ 19 million ($ 16 million after tax, or $ .04 per diluted common share). F-73 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 24 – SUBSEQUENT EVENTS Debt In August 2020, the Company repaid the remaining $ 750 million borrowed under its $ 1,500 million revolving credit facility that was outstanding at June 30, 2020. Charges Associated with Restructuring and Other Activities On August 20, 2020 , the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “Restructuring Program”), designed to resize the Company's business against the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The Restructuring Program will help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. It will further strengthen the Company by building upon the foundational capabilities in which the Company has invested. The Restructuring Program’s main areas of focus include accelerating the shift to online with the realignment of the Company's distribution network reflecting freestanding store and certain department store closures, with a focus on North America and Europe, the Middle East & Africa; the reduction in brick-and-mortar point of sale employees and related support staff; and the redesign of the Company's regional branded marketing organizations, plus select opportunities in global brands and functions. The Company committed to this course of action on August 18, 2020 . This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility. The Company plans to approve specific initiatives under the Restructuring Program through fiscal 2022 and expects to complete those initiatives through fiscal 2023. The Company expects that the Restructuring Program will result in related restructuring and other charges totaling between $ 400 million and $ 500 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs to implement these initiatives. F-74 Table of Contents THE ESTÉE LAUDER COMPANIES INC. SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS Three Years Ended June 30, 2020 (In millions) Additions Description Balance at Beginning of Period (1) Charged to Costs and Expenses (2) Charged to Other Accounts Deductions Balance at End of Period Reserves deducted in the balance sheet from the assets to which they apply: Allowance for doubtful accounts and customer deductions: Year ended June 30, 2020 $ 32 $ 45 $ — $ 14 (a) $ 63 Year ended June 30, 2019 $ 29 $ 27 $ — $ 24 (a) $ 32 Year ended June 30, 2018 $ 30 $ 23 $ — $ 24 (a) $ 29 Sales return accrual: Year ended June 30, 2020 $ 108 $ 520 $ — $ 514 (b) $ 114 Year ended June 30, 2019 $ 105 $ 488 $ — $ 485 (b) $ 108 Year ended June 30, 2018 $ 109 $ 493 $ — $ 497 (b) $ 105 Deferred tax valuation allowance: Year ended June 30, 2020 $ 49 $ 32 $ 28 $ 2 $ 107 Year ended June 30, 2019 $ 45 $ 11 $ — $ 7 $ 49 Year ended June 30, 2018 $ 42 $ 6 $ — $ 3 $ 45 Accrued restructuring initiatives: Year ended June 30, 2020 $ 204 $ 34 $ — $ 125 $ 113 Year ended June 30, 2019 $ 182 $ 133 $ — $ 111 $ 204 Year ended June 30, 2018 $ 151 $ 127 $ — $ 96 $ 182 (a) Includes amounts written-off, net of recoveries. (b) Represents actual returns. S-1 Table of Contents THE ESTÉE LAUDER COMPANIES INC. INDEX TO EXHIBITS Exhibit Number Description 3.1 Restated Certificate of Incorporation, dated November 16, 1995 (filed as Exhibit 3.1 to our Annual Report on Form 10-K filed on September 15, 2003) (SEC File No. 1-14064).* 3.1a Certificate of Amendment of the Restated Certificate of Incorporation of The Estée Lauder Companies Inc. (filed as Exhibit 3.1 to our Current Report on Form 8-K filed on November 1 3 , 2012) (SEC File No. 1-14064).* 3.2 Certificate of Retirement of $6.50 Cumulative Redeemable Preferred Stock (filed as Exhibit 3.2 to our Current Report on Form 8-K filed on July 19, 2012) (SEC File No.1-14064).* 3.3 Amended and Restated Bylaws (filed as Exhibit 3.1 to our Current Report on Form 8-K filed on May 23, 2012) (SEC File No. 1-14064).* 4.1 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. 4.2 Indenture, dated November 5, 1999, between the Company and State Street Bank and Trust Company, N.A. (filed as Exhibit 4 to Amendment No. 1 to our Registration Statement on Form S-3 (No. 333-85947) filed on November 5, 1999) (SEC File No. 1-14064).* 4.3 Officers’ Certificate, dated September 29, 2003, defining certain terms of the 5.75% Senior Notes due 2033 (filed as Exhibit 4.2 to our Current Report on Form 8-K filed on September 29, 2003) (SEC File No. 1-14064).* 4.4 Global Note for 5.75% Senior Notes due 2033 (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on September 29, 2003) (SEC File No. 1-14064).* 4.5 Officers’ Certificate, dated May 1, 2007, defining certain terms of the 6.000% Senior Notes due 2037 (filed as Exhibit 4.2 to our Current Report on Form 8-K filed on May 1, 2007) (SEC File No. 1-14064).* 4.6 Global Note for 6.000% Senior Notes due 2037 (filed as Exhibit 4.4 to our Current Report on Form 8-K filed on May 1, 2007) (SEC File No. 1-14064).* 4.7 Officers’ Certificate, dated August 2, 2012, defining certain terms of the 2.350% Senior Notes due 2022 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on August 2, 2012) (SEC File No. 1-14064).* 4.8 Global Note for the 2.350% Senior Notes due 2022 (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on August 2, 2012) (SEC File No. 1-14064).* 4.9 Officers’ Certificate, dated August 2, 2012, defining certain terms of the 3.700% Senior Notes due 2042 (filed as Exhibit 4.2 to our Current Report on Form 8-K filed on August 2, 2012) (SEC File No. 1-14064).* 4.10 Global Note for the 3.700% Senior Notes due 2042 (filed as Exhibit 4.4 to our Current Report on Form 8-K filed on August 2, 2012) (SEC File No. 1-14064).* 4.11 Officers’ Certificate, dated June 4, 2015, defining certain terms of the 4.375% Senior Notes due 2045 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on June 4, 2015) (SEC File No. 1-14064).* 4.12 Global Note for the 4.375% Senior Notes due 2045 (filed as Exhibit 4.2 to our Current Report on Form 8-K filed on June 4, 2015) (SEC File No. 1-14064).* 4.13 Officers’ Certificate, dated May 10, 2016, defining certain terms of the 1.700% Senior Notes due 2021 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on May 10, 2016) (SEC File No. 1-14064).* 4.14 Global Note for the 1.700% Senior Notes due 2021 (filed as Exhibit A in Exhibit 4.1 to our Current Report on Form 8-K filed on May 10, 2016) (SEC File No. 1-14064).* 4.15 Officers’ Certificate, dated May 10, 2016, defining certain terms of the 4.375% Senior Notes due 2045 (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on May 10, 2016) (SEC File No. 1-14064).* 4.16 Global Note for the 4.375% Senior Notes due 2045 (filed as Exhibit B in Exhibit 4.3 to our Current Report on Form 8-K filed on May 10, 2016) (SEC File No. 1-14064).* 4.17 Officers’ Certificate, dated February 9, 2017, defining certain terms of the 1.800% Senior Notes due 2020 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 4.18 Form of Global Note for the 1.800% Senior Notes due 2020 (included as Exhibit A in Exhibit 4.1 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* Table of Contents Exhibit Number Description 4.19 Officers’ Certificate, dated February 9, 2017, defining certain terms of the 3.150% Senior Notes due 2027 (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 4.20 Form of Global Note for the 3.150% Senior Notes due 2027 (included as Exhibit A in Exhibit 4.3 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 4.21 Officers’ Certificate, dated February 9, 2017, defining certain terms of the 4.150% Senior Notes due 2047 (filed as Exhibit 4.5 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 4.22 Form of Global Note for the 4.150% Senior Notes due 2047 (included as Exhibit A in Exhibit 4.5 to our Current Report on Form 8-K filed on February 9, 2017) (SEC File No. 1-14064).* 4.23 Officers’ Certificate, dated November 21, 2019, defining certain terms of the 2.000% Senior Notes due 2024 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.24 Form of Global Note for the 2.000% Senior Notes due 2024 (included as Exhibit A in Exhibit 4.1 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.25 Officers’ Certificate, dated November 21, 2019, defining certain terms of the 2.375% Senior Notes due 2029 (filed as Exhibit 4.3 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.26 Form of Global Note for the 2.375% Senior Notes due 2029 (included as Exhibit A in Exhibit 4.3 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.27 Officers’ Certificate, dated November 21, 2019, defining certain terms of the 3.125% Senior Notes due 2049 (filed as Exhibit 4.5 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.28 Form of Global Note for the 3.125% Senior Notes due 2049 (included as Exhibit A in Exhibit 4.5 to our Current Report on Form 8-K filed on November 21, 2019) (SEC File No. 1-14064).* 4.29 Officers’ Certificate, dated April 13, 2020, defining certain terms of the 2.600% Senior Notes due 2030 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on April 13, 2020) (SEC File No. 1-14064).* 4.30 Form of Global Note for the 2.600% Senior Notes due 2030 (included as Exhibit A in Exhibit 4.1 to our Current Report on Form 8-K filed on April 13, 2020) (SEC File No. 1-14064).* 10.1 Stockholders’ Agreement, dated November 22, 1995 (filed as Exhibit 10.1 to our Annual Report on Form 10-K filed on September 15, 2003) (SEC File No. 1-14064).* 10.1a Amendment No. 1 to Stockholders’ Agreement (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on October 30, 1996) (SEC File No. 1-14064).* 10.1b Amendment No. 2 to Stockholders’ Agreement (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on January 28, 1997) (SEC File No. 1-14064).* 10.1c Amendment No. 3 to Stockholders’ Agreement (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on April 29, 1997) (SEC File No. 1-14064).* 10.1d Amendment No. 4 to Stockholders’ Agreement (filed as Exhibit 10.1d to our Annual Report on Form 10-K filed on September 18, 2000) (SEC File No. 1-14064).* 10.1e Amendment No. 5 to Stockholders’ Agreement (filed as Exhibit 10.1e to our Annual Report on Form 10-K filed on September 17, 2002) (SEC File No. 1-14064).* 10.1f Amendment No. 6 to Stockholders’ Agreement (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on January 27, 2005) (SEC File No. 1-14064).* 10.1g Amendment No. 7 to Stockholders’ Agreement (filed as Exhibit 10.7 to our Quarterly Report on Form 10-Q filed on October 30, 2009) (SEC File No. 1-14064).* 10.2 Registration Rights Agreement, dated November 22, 1995 (filed as Exhibit 10.2 to our Annual Report on Form 10-K filed on September 15, 2003) (SEC File No. 1-14064).* 10.2a First Amendment to Registration Rights Agreement (originally filed as Exhibit 10.3 to our Annual Report on Form 10-K filed on September 10, 1996) (re-filed as Exhibit 10.2a to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* 10.2b Second Amendment to Registration Rights Agreement (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on April 29, 1997) (SEC File No. 1-14064).* Table of Contents Exhibit Number Description 10.2c Third Amendment to Registration Rights Agreement (filed as Exhibit 10.2c to our Annual Report on Form 10-K filed on September 17, 2001) (SEC File No. 1-14064).* 10.2d Fourth Amendment to Registration Rights Agreement (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on January 29, 2004) (SEC File No. 1-14064).* 10.3 The Estee Lauder Companies Retirement Growth Account Plan, as amended and restated, effective as of January 1, 2017, further amended effective as of July 1, 2017 (filed as Exhibit 10.3 to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.4 The Estee Lauder Inc. Retirement Benefits Restoration Plan (filed as Exhibit 10.5 to our Annual Report on Form 10-K filed on August 20, 2010) (SEC File No. 1-14064).* † 10.5 Executive Annual Incentive Plan (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on November 14, 2013) (SEC File No. 1-14064).* † 10.6 Employment Agreement with Tracey T. Travis (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on July 20, 2012) (SEC File No. 1-14064).* † 10.7 Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.8 to our Annual Report on Form 10-K filed on September 17, 2001) (SEC File No. 1-14064).* † 10.7a Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.8a to our Annual Report on Form 10-K filed on September 17, 2002) (SEC File No. 1-14064).* † 10.7b Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on November 17, 2005) (SEC File No. 1-14064).* † 10.7c Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on February 5, 2009) (SEC File No. 1-14064).* † 10.7d Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.8 to our Quarterly Report on Form 10-Q filed on October 30, 2009) (SEC File No. 1-14064).* † 10.7e Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.6 to our Quarterly Report on Form 10-Q filed on November 1, 2010) (SEC File No. 1-14064).* † 10.7f Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.7f to our Annual Report on Form 10-K filed on August 20, 2015) (SEC File No. 1-14064).* † 10.7g Amendment to Employment Agreement with Leonard A. Lauder (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on May 1, 2020) (SEC File No. 1-14064). * † 10.8 Employment Agreement with William P. Lauder (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 17, 2010) (SEC File No. 1-14064).* † 10.8a Amendment to Employment Agreement with William P. Lauder (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 2 7 , 2013) (SEC File No. 1-14064).* † 10.9 Employment Agreement with Fabrizio Freda (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 11, 2011) (SEC File No. 1-14064).* † 10.9a Amendment to Employment Agreement with Fabrizio Freda and Stock Option Agreements (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on February 2 7 , 2013) (SEC File No. 1-14064).* † 10.10 Employment Agreement with John Demsey (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 24, 2010) (SEC File No. 1-14064).* † 10.10a Amendment to Employment Agreement with John Demsey (filed as Exhibit 10.3 to our Current Report on Form 8-K filed on February 2 7 , 2013) (SEC File No. 1-14064).* † 10.11 Employment Agreement with Cedric Prouvé (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 20, 2011) (SEC File No. 1-14064).* † 10.11a Amendment to Employment Agreement with Cedric Prouvé (filed as Exhibit 10.4 to our Current Report on Form 8-K filed on February 2 7 , 2013) (SEC File No. 1-14064).* † 10.12 Employment Agreement with Deirdre Stanley (SEC File No. 1-14064). † 10.12a Amendment to Employment Agreement with Deirdre Stanley (SEC File No. 1-14064). † Table of Contents Exhibit Number Description 10.13 Form of Deferred Compensation Agreement (interest-based) with Outside Directors (filed as Exhibit 10.14 to our Annual Report on Form 10-K filed on September 17, 2001) (SEC File No. 1-14064).* † 10.13a Form of Deferred Compensation Agreement (interest-based) with Outside Directors (including Election Form) (filed as Exhibit 10.12a to our Annual Report on Form 10-K filed on August 24, 2018) (SEC File No. 1-14064).* † 10.14 Form of Deferred Compensation Agreement (stock-based) with Outside Directors (filed as Exhibit 10.15 to our Annual Report on Form 10-K filed on September 17, 2001) (SEC File No. 1-14064).* † 10.14a Form of Deferred Compensation Agreement (stock-based) with Outside Directors (including Election Form) (filed as Exhibit 10.13a to our Annual Report on Form 10-K filed on August 24, 2018) (SEC File No. 1-14064).* † 10.15 The Estee Lauder Companies Inc. Non-Employee Director Share Incentive Plan (as amended and restated on November 9, 2007) (filed as Exhibit 99.1 to our Registration Statement on Form S-8 filed on November 9, 2007) (SEC File No. 1-14064).* † 10.15a The Estee Lauder Companies Inc. Non-Employee Director Share Incentive Plan (as amended on July 14, 2011) (filed as exhibit 10.15a to our Annual Report on Form 10-K filed on August 22, 2011) (SEC File No. 1-14064).* † 10.15b The Estée Lauder Companies Inc. Amended and Restated Non-Employee Director Share Incentive Plan (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on November 16, 2015) (SEC File No. 1-14064).* † 10.15c The Estée Lauder Companies Inc. Amended and Restated Non-Employee Director Share Incentive Plan (as of November 1, 2017) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 1, 2017) (SEC File No. 1-14064).* † 10.15d The Estée Lauder Companies Inc. Amended and Restated Non-Employee Director Share Incentive Plan (as of August 22, 2019) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on October 31, 2019) (SEC File No. 1-14064).* † 10.16 Summary of Compensation For Non-Employee Directors of the Company (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on November 1, 2013) (SEC File No. 1-14064).* † 10.16a Summary of Compensation For Non-Employee Directors of the Company (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on November 1, 2017) (SEC File No. 1-14064).* † 10.17 Form of Stock Option Agreement for Annual Stock Option Grants under Non-Employee Director Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 99.2 to our Registration Statement on Form S-8 filed on November 9, 2007) (SEC File No. 1-14064).* † 10.17a Form of Stock Option Agreement for Elective Stock Option Grants under Non-Employee Director Share Incentive Plan (filed as Exhibit 99.3 to our Registration Statement on Form S-8 filed on November 9, 2007) (SEC File No. 1-14064).* † 10.17b Form of Stock Option Agreement for Annual Stock Option Grants under the Amended and Restated Non-Employee Director Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on October 31, 2019) (SEC File No. 1-14064).* † 10.18 The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (filed as Exhibit 10.17 to our Annual Report on Form 10-K filed on August 17, 2012) (SEC File No. 1-14064).* † 10.18a The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on November 16, 2015) (SEC File No. 1-14064).* † 10.18b The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (filed as Exhibit 10.16b to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.18c The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on November 19, 2019) (SEC File No. 1-14064).* † 10.18d Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on October 30, 2009) (SEC File No. 1-14064).* † 10.18e Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 1, 2010) (SEC File No. 1-14064).* † Table of Contents Exhibit Number Description 10.18f Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 4, 2011) (SEC File No. 1-14064).* † 10.18g Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on November 2, 2012) (SEC File No. 1-14064).* † 10.18h Form of Stock Option Agreement with Fabrizio Freda under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.6 to our Quarterly Report on Form 10-Q filed on November 2, 2012) (SEC File No. 1-14064).* † 10.18i Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16y to our Annual Report on Form 10-K filed on August 20, 2014) (SEC File No. 1-14064).* † 10.18j Form of Stock Option Agreement with Fabrizio Freda under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16z to our Annual Report on Form 10-K filed on August 20, 2014) (SEC File No. 1-14064).* † 10.18k Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16m to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064) .* † 10.18l Form of Stock Option Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17l to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No. 1-14064).* † 10.18m Performance Share Unit Award Agreement with Fabrizio Freda under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Notice of Grant) (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 11, 2015) (SEC File No. 1-14064).* † 10.18n Performance Share Unit Award Agreement with John Demsey under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Notice of Grant) (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 1, 2016) (SEC File No. 1-14064).* † 10.18o Form of Performance Share Unit Award Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on February 1, 2016) (SEC File No. 1-14064).* † 10.18p Form of Performance Share Unit Award Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16v to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.18q Performance Share Unit Award Agreement with Fabrizio Freda (2018) under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Notice of Grant) (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 15, 2018) (SEC File No. 1-14064).* † 10.18r Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17u to our Annual Report on Form 10-K filed on August 24, 2018) (SEC File No. 1-14064).* † 10.18s Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17t to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No. 1-14064).* † 10.18t Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No. 1-14064) .† 10.18u Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16bb to our Annual Report on Form 10-K filed on August 20, 2014) (SEC File No. 1-14064).* † Table of Contents Exhibit Number Description 10.18v Form of Restricted Stock Unit Award Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16aa to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.18w Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16bb to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.18x Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.16cc to our Annual Report on Form 10-K filed on August 25, 2017) (SEC File No. 1-14064).* † 10.18y Form of Restricted Stock Unit Award Agreement under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17y to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No. 1-14064).* † 10.18z Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17z to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No. 1-14064).* † 10.18aa Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.17aa to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No. 1-14064).* † 10.18bb Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No. 1-14064) . † 10.18cc Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No. 1-14064).† 10.18dd Form of Non-annual Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc. Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No. 1-14064).† 10.19 $1.5 Billion Credit Agreement, dated as of October 26, 2018, among The Estée Lauder Companies Inc., the Eligible Subsidiaries of the Company, as defined therein, the lenders listed therein, and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on October 29, 2018) (SEC File No. 1-14064).* 10.20 Services Agreement, dated January 1, 2003, among Estee Lauder Inc., Melville Management Corp., Leonard A. Lauder, and William P. Lauder (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC File No. 1-14064).* 10.21 Services Agreement, dated November 22, 1995, between Estee Lauder Inc. and RSL Investment Corp. (filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC File No. 1-14064).* 10.22 Agreement of Sublease and Guarantee of Sublease, dated April 1, 2005, among Aramis Inc., RSL Management Corp., and Ronald S. Lauder (filed as Exhibit 10.4 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC File No. 1-14064).* 10.22a First Amendment to Sublease, dated February 28, 2007, between Aramis Inc. and RSL Management Corp. (filed as Exhibit 10.5 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC File No. 1-14064).* 10.22b Second Amendment to Sublease, dated January 27, 2010, between Aramis Inc. and RSL Management Corp. (filed as Exhibit 10.6 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC File No. 1-14064).* 10.22c Third Amendment to Sublease, dated November 3, 2010, between Aramis Inc., and RSL Management Corp. (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on February 4, 2011) (SEC File No. 1-14064).* 10.22d Fourth Amendment to Sublease, dated March 4, 2020, between Aramis Inc. and RSL Management Corp. (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on May 1, 2020) (SEC File No. 1-14064).* Table of Contents Exhibit Number Description 10.23 Form of Art Loan Agreement between Lender and Estee Lauder Inc. (filed as Exhibit 10.7 to our Quarterly Report on Form 10-Q filed on January 28, 2010) (SEC file No. 1-14064).* 10.24 Creative Consultant Agreement, dated April 6, 2011, between Estee Lauder Inc. and Aerin Lauder Zinterhofer (filed as Exhibit 10.1 to our Current Report on Form 8-K filed on April 8, 2011) (SEC File No. 1-14064).* † 10.24a First Amendment to Creative Consultant Agreement between Estee Lauder Inc. and Aerin Lauder Zinterhofer dated October 28, 2014 (filed as Exhibit 10.23a to our Annual Report on Form 10-K filed on August 20, 2015) (SEC File No. 1-14064).* † 10.24b Second Amendment to Creative Consultant Agreement between Estee Lauder Inc. and Aerin Lauder Zinterhofer effective July 1, 2016 (filed as Exhibit 10.23b to our Annual Report on Form 10-K filed on August 24, 2016) (SEC File No. 1-14064).* † 10.25 License Agreement, dated April 6, 2011, by and among Aerin LLC, Aerin Lauder Zinterhofer and Estee Lauder Inc. (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on April 8, 2011) (SEC File No. 1-14064).* 10.25a First Amendment to the April 6, 2011 License Agreement, dated January 22, 2019, by and among Aerin LLC, Aerin Lauder Zinterhofer and Estee Lauder Inc. (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on May 1, 2019) (SEC File No. 1-14064).* 10.25b Second Amendment to the April 6, 2011 License Agreement, dated February 22, 2019, by and among Aerin LLC, Aerin Lauder Zinterhofer and Estee Lauder Inc. (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on May 1, 2019) (SEC File No. 1-14064).* 21.1 List of significant subsidiaries. 23.1 Consent of KPMG LLP. 24.1 Power of Attorney. 31.1 Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO). 31.2 Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO). 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO). (furnished) 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO). (furnished) 101.1 The following materials from The Estée Lauder Companies Inc.’s Annual Report on Form 10-K for the year ended June 30, 2020 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements 104 The cover page from The Estée Lauder Companies Inc.’s Annual Report on Form 10-K for the year ended June 30, 2020 is formatted in iXBRL * Incorporated herein by reference. † Exhibit is a management contract or compensatory plan or arrangement.