1 unchanged sentence
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.
−Removed: 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.
+Added: The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have evaluated the effectiveness of our disclosure controls and procedures, including impacts of COVID-19, and, based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of June 30, 2021.
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.
23 unchanged sentences
(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”).
−Removed: (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.
+Added: (2) Consists of 7,615,191 shares issuable upon exercise of outstanding options, 1,857,165 shares issuable upon conversion of outstanding Restricted Stock Units, 1,536,083 shares issuable upon conversion of outstanding Performance Share Units (“PSUs”) (assuming maximum payout for unvested PSUs and PSUs vested as of June 30, 2021 pending approval by the Stock Plan Subcommittee of our Board of Directors), 141,555 shares issuable upon conversion of Share Units and 609,011 shares issuable upon conversion of Long-term PSUs, including P rice-vested units (“PVUs”) .
(3) Calculated based upon outstanding options in respect of 7,615,191 shares of our Class A Common Stock.
6 unchanged sentences
Class A plus Class B) would increase 7% to 386,700,472.
−Removed: 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.
+Added: All outstanding options to purchase shares of Class A Common Stock, have an exercise price less than $318.08, the closing price on June 30, 2021.
Assuming the exercise of only in-the-money options, the total shares outstanding would increase by 2% to 369,374,589.
37 unchanged sentences
4.20 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.
−Removed: 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.
−Removed: 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.
4.21 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.
6 unchanged sentences
4.28 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.
+Added: 4.29 Officers’ Certificate, dated March 4, 2021, defining certain terms of the 1.950% Senior Notes due 2031 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on March 4, 2021) (SEC File No.
+Added: 4.30 Form of Global Note for the 1.950% Senior Notes due 2031 (included as Exhibit A in Exhibit 4.1 to our Current Report on Form 8-K filed on March 4, 2021) (SEC File No.
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.
51 unchanged sentences
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.
−Removed: 10.12 Employment Agreement with Deirdre Stanley (SEC File No.
−Removed: 10.12a Amendment to Employment Agreement with Deirdre Stanley (SEC File No.
+Added: 10.12 Employment Agreement with Deirdre Stanley filed as Exhibit 10.12 to our Annual Report on Form 10-K filed on August 28, 2020) (SEC File No.
Number Description
+Added: 10.12a Amendment to Employment Agreement with Deirdre Stanley filed as Exhibit 10.12a to our Annual Report on Form 10-K filed on August 28, 2020) (SEC File No.
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.
12 unchanged sentences
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.
+Added: 10.15e The Estée Lauder Companies Inc.
+Added: Amended and Restated Non-Employee Director Share Incentive Plan (as of July 13, 2021) (SEC File No.
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.
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.
+Added: 10.16b Summary of Compensation For Non-Employee Directors of the Company (SEC File No.
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.
−Removed: 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.
−Removed: 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.
+Added: 10.17a 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.
10.18 The Estée Lauder Companies Inc.
7 unchanged sentences
10.18d Form of Stock Option Agreement under The Estée Lauder Companies Inc.
−Removed: 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.
+Added: 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.
Number Description
3 unchanged sentences
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.
−Removed: 10.18g Form of Stock Option Agreement under The Estée Lauder Companies Inc.
−Removed: 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.
−Removed: 10.18h Form of Stock Option Agreement with Fabrizio Freda under The Estée Lauder Companies Inc.
+Added: 10.18g 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.
−Removed: 10.18i Form of Stock Option Agreement under The Estée Lauder Companies Inc.
+Added: 10.18h 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.
−Removed: 10.18j Form of Stock Option Agreement with Fabrizio Freda under The Estée Lauder Companies Inc.
+Added: 10.18i 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.
−Removed: 10.18k Form of Stock Option Agreement under The Estée Lauder Companies Inc.
+Added: 10.18j 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.
−Removed: 1-14064) .* †
−Removed: 10.18l Form of Stock Option Agreement under The Estée Lauder Companies Inc.
+Added: 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 10.17l to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No.
−Removed: 10.18m Performance Share Unit Award Agreement with Fabrizio Freda under The Estée Lauder Companies Inc.
+Added: 10.18l 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.
−Removed: 10.18n Performance Share Unit Award Agreement with John Demsey under The Estée Lauder Companies Inc.
−Removed: 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.
−Removed: 10.18o Form of Performance Share Unit Award Agreement under The Estée Lauder Companies Inc.
−Removed: 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.
−Removed: 10.18p Form of Performance Share Unit Award Agreement under The Estée Lauder Companies Inc.
−Removed: 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.
−Removed: 10.18q Performance Share Unit Award Agreement with Fabrizio Freda (2018) under The Estée Lauder Companies Inc.
+Added: 10.18m 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.
−Removed: 10.18r Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18n 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.
−Removed: 10.18s Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18o 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.
+Added: 10.18p Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc.
+Added: 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, 2020) (SEC File No.
+Added: 10.18q Price-Vested Unit Award Agreement with Fabrizio Freda under The Estée Lauder Companies Inc.
+Added: 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 March 16, 2021) (SEC File No.
+Added: 10.18r Performance Share Unit Award Agreement with Fabrizio Freda under The Estée Lauder Companies Inc.
+Added: Amended and Restated Fiscal 2002 Share Incentive Plan (including Notice of Grant) (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on March 16, 2021) (SEC File No.
+Added: 10.18s Form of Non-annual Performance Share Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
+Added: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No.
10.18t Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc.
1 unchanged sentence
Number Description
−Removed: 10.18u Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
−Removed: 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.
−Removed: 10.18v Form of Restricted Stock Unit Award Agreement under The Estée Lauder Companies Inc.
+Added: 10.18u 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.
−Removed: 10.18w Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18v 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.
−Removed: 10.18x Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18w 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.
−Removed: 10.18y Form of Restricted Stock Unit Award Agreement under The Estée Lauder Companies Inc.
+Added: 10.18x 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.
−Removed: 10.18z Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18y 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.
−Removed: 10.18aa Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18z 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.
−Removed: 10.18bb Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
−Removed: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No.
−Removed: 10.18cc Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc.
−Removed: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No.
−Removed: 10.18dd Form of Non-annual Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
−Removed: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No.
+Added: 10.18aa Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
+Added: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.18bb to our Annual Report on Form 10-K filed on August 28, 2020) (SEC File No.
+Added: 10.18bb Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc.
+Added: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.18cc to our Annual Report on Form 10-K filed on August 28, 2020) (SEC File No.
+Added: 10.18cc Form of Non-annual Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
+Added: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (filed as Exhibit 10.18dd to our Annual Report on Form 10-K filed on August 28, 2020) (SEC File No.
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.
27 unchanged sentences
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.
+Added: 10.24c Third Amendment to Creative Consultant Agreement between Estee Lauder Inc.
+Added: and Aerin Lauder Zinterhofer effective July 1, 2021 (SEC File No.
10.25 License Agreement, dated April 6, 2011, by and among Aerin LLC, Aerin Lauder Zinterhofer and Estee Lauder Inc.
5 unchanged sentences
21.1 List of significant subsidiaries.
+Added: 23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of KPMG LLP.
62 unchanged sentences
Management’s Report on Internal Control Over Financial Reporting
−Removed: Report of Independent Registered Public Accounting Firm
−Removed: Report of Independent Registered Public Accounting Firm
+Added: Reports of Independent Registered Public Accounting Firms
Consolidated Statements of Earnings
1 unchanged sentence
Consolidated Balance Sheets
−Removed: Consolidated Statements of Equity
+Added: Consolidated Statements of Equity and Redeemable Noncontrolling Interest
Consolidated Statements of Cash Flows
5 unchanged sentences
Management of The Estée Lauder Companies Inc.
−Removed: (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).
−Removed: 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.
−Removed: generally accepted accounting principles.
+Added: (including its subsidiaries) (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934, as amended).
+Added: 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;
4 unchanged sentences
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.
−Removed: On December 18, 2019, the Company acquired Have&Be Co.
−Removed: (“Have & Be”).
−Removed: 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.
−Removed: 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.
+Added: Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2021.
+Added: SEC guidance permits companies to exclude certain acquisitions from the assessment of internal control over financial reporting during the first year following the acquisition.
+Added: Accordingly, management excluded the internal controls relating to Deciem Beauty Group Inc.
+Added: (“DECIEM”) from its fiscal 2021 annual assessment of the effectiveness of internal control over financial reporting.
+Added: On May 18, 2021, the Company increased its ownership interest in DECIEM from approximately 29% to approximately 76%.
+Added: For the fiscal year ended June 30, 2021, DECIEM's financial results constitute approximately 0.4% of total net sales and 2% of total assets of the consolidated financial statement amounts.
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, 2021, the Company’s internal control over financial reporting was effective.
−Removed: 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.”
+Added: The effectiveness of the Company’s internal control over financial reporting as of June 30, 2021 has been audited by PricewaterhouseCoopers 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.
3 unchanged sentences
Report of Independent Registered Public Accounting Firm
−Removed: To the Stockholders and Board of Directors
−Removed: The Estée Lauder Companies Inc.:
−Removed: Opinion on Internal Control Over Financial Reporting
−Removed: We have audited The Estée Lauder Companies Inc.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The Company acquired Have&Be Co.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Basis for Opinion
−Removed: 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.
−Removed: Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
−Removed: 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.
+Added: To the Stockholders and Board of Directors of The Estée Lauder Companies Inc.
+Added: Opinions on the Financial Statements and Internal Control over Financial Reporting
+Added: We have audited the accompanying consolidated balance sheet of The Estée Lauder Companies Inc.
+Added: and its subsidiaries (the “Company”) as of June 30, 2021, and the related consolidated statements of earnings, of comprehensive income, of equity and redeemable noncontrolling interest, and of cash flows for the year then ended, including the related notes and schedule of valuation and qualifying accounts for the year ended June 30, 2021 appearing on page S-1 (collectively referred to as the “consolidated financial statements”).
+Added: We also have audited the Company's internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
+Added: In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2021, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
+Added: Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
+Added: Basis for Opinions
+Added: The Company's management is responsible for these consolidated financial statements, 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.
+Added: Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audit.
+Added: We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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.
−Removed: 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.
+Added: 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, and whether effective internal control over financial reporting was maintained in all material respects.
+Added: Our audit of the consolidated financial statements 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.
+Added: Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
+Added: Our audit 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.
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.
−Removed: We believe that our audit provides a reasonable basis for our opinion.
+Added: We believe that our audit provides a reasonable basis for our opinions.
+Added: As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Deciem Beauty Group Inc.
+Added: (“DECIEM”) from its assessment of internal control over financial reporting as of June 30, 2021.
+Added: The Company increased its ownership interest in DECIEM from approximately 29% to approximately 76% in May 2021, resulting in the entity becoming a consolidated subsidiary.
+Added: We have also excluded DECIEM from our audit of internal control over financial reporting.
+Added: DECIEM’s total assets and total net sales excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 2% and 0.4%, respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2021.
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.
−Removed: 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;
−Removed: (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;
−Removed: 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.
+Added: A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
+Added: (ii) 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;
+Added: and (iii) 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.
+Added: Critical Audit Matters
+Added: 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 (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
+Added: 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.
+Added: Indefinite-Lived Impairment Assessment - Dr.
+Added: Jart+ Trademark
+Added: As described in Notes 2 and 6 to the consolidated financial statements, the Company’s consolidated net indefinite-lived intangible assets balance was $2,366 million as of June 30, 2021, of which a portion relates to the Dr.
+Added: Jart+ trademark.
+Added: Management assesses 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.
+Added: 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.
+Added: If the carrying value exceeds the fair value, an impairment charge is recorded.
+Added: To determine the estimated fair value of indefinite-lived intangible assets, management uses an income approach, specifically the relief-from-royalty method.
+Added: The significant assumptions used in this approach include revenue growth rates, terminal value, weighted-average cost of capital used to discount future cash flows, and royalty rate.
+Added: The principal considerations for our determination that performing procedures relating to the Dr.
+Added: Jart+ trademark impairment assessment is a critical audit matter are (i) the significant judgment by management when determining the fair value estimate of the trademark;
+Added: (ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, terminal value, weighted-average cost of capital used to discount future cash flows, and royalty rate;
+Added: and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
+Added: Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
+Added: These procedures included testing the effectiveness of controls relating to management’s indefinite-lived intangible assets impairment assessment, including controls over the valuation of the Dr.
+Added: Jart+ trademark.
+Added: These procedures also included, among others, (i) testing management’s process for determining the fair value estimate;
+Added: (ii) evaluating the appropriateness of the relief-from-royalty method;
+Added: (iii) testing the completeness and accuracy of the underlying data used in the fair value estimate;
+Added: and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, terminal value, weighted-average cost of capital used to discount future cash flows, and royalty rate .
+Added: Evaluating management’s assumptions related to revenue growth rates involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the Dr.
+Added: (ii) the consistency with external market and industry data;
+Added: and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
+Added: Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the relief-from-royalty method and (ii) the reasonableness of the terminal value, weighted-average cost of capital used to discount future cash flows, and royalty rate assumptions .
+Added: Acquisition of DECIEM - Valuation of Intangible Assets and net Put (Call) Option
+Added: As described in Notes 2 and 5 to the consolidated financial statements, in 2021, the Company acquired additional shares in Deciem Beauty Group Inc.
+Added: (“DECIEM”) for $1,092 million in cash, including proceeds from the issuance of debt, which resulted in recording $1,917 million of customer relationships and trademark intangible assets.
+Added: The Company was granted the right to purchase (“Call Option”), and granted the remaining investors a right to sell to the Company (“Put Option”), the remaining interests, with a purchase price based on the future performance of DECIEM (the “net Put (Call) Option”).
+Added: As a result of this redemption feature, management recorded redeemable noncontrolling interest, at its acquisition-date fair value, that is classified as mezzanine equity in the consolidated balance sheet.
+Added: The acquisition-date fair value of the redeemable noncontrolling interest includes the acquisition-date fair value of the net Put (Call) Option of $234 million.
+Added: To determine the acquisition-date estimated fair value of intangible assets acquired, management applied the income approach, specifically the multi-period excess earnings method for customer relationships and the relief-from-royalty method for trademarks.
+Added: The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted-average cost of capital used to discount future cash flows, and a customer attrition rate for customer relationships, and royalty rates for trademarks.
+Added: The acquisition-date fair value of the net Put (Call) Option is based on the M onte Carlo method.
+Added: The significan t assumptions used include starting equity value, revenue growth rates and EBITDA, risk free rate, term, operating leverage adjustment, net sales discount rate , EBITDA discount rate, EBITDA volatility, and net sales volatility.
+Added: The principal considerations for our determination that performing procedures relating to the valuation of acquired intangible assets and the net Put (Call) Option relating to the acquisition of DECIEM is a critical audit matter are (i) the significant judgment by management when determining the fair value estimates of the acquired intangible assets and the net Put (Call) Option;
+Added: (ii) the high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates and weighted-average cost of capital used to discount future cash flows for customer relationships, and revenue growth rates, terminal values, weighted-average cost of capital used to discount future cash flows, and royalty rates for trademarks, and starting equity value, revenue growth rates and EBITDA, risk free rate, term, operating leverage adjustment, net sales discount rate , EBITDA discount rate, EBITDA volatility, and net sales volatility for the net Put (Call) Option;
+Added: and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
+Added: Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
+Added: These procedures included testing the effectiveness of controls relating to the accounting for business combinations, including controls over management’s valuation of the intangible assets and net Put (Call) Option.
+Added: These procedures also included, among others, (i) reading the purchase agreement;
+Added: (ii) testing management’s process for determining the fair value estimates of the intangible assets and net Put (Call) option;
+Added: (iii) evaluating the appropriateness of the multi-period excess earnings method for customer relationships, the relief-from-royalty method for trademarks, and the Monte Carlo method for the net Put (Call) Option;
+Added: (iv) testing the completeness and accuracy of the underlying data used in the fair value estimates;
+Added: and (v) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates and weighted-average cost of capital used to discount future cash flows for customer relationships, and revenue growth rates, terminal values, weighted-average cost of capital used to discount future cash flows, and royalty rate s for trademarks .
+Added: Evaluating management’s assumptions related to revenue growth rates for customer relationships, and revenue growth rates and terminal values for trademarks involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of DECIEM;
+Added: (ii) the consistency with external market and industry data;
+Added: and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
+Added: Evaluating the appropriateness of the Monte Carlo method and management’s assumptions related to the net Put (Call Option) involved professionals with specialized skill and knowledge to assist in developing an independent value for each option and comparing to management’s estimate to evaluate the reasonableness of management’s estimate.
+Added: Developing an independent value for each option involved developing an independent Monte Carlo simulation model, testing the completeness and accuracy of the contractual information used by management to calculate the agreed-upon price to acquire the remaining equity interests in DECIEM, and evaluating the reasonableness of the assumptions used by management to estimate DECIEM’s equity value.
+Added: Professionals with specialized skill and knowledge were also used to assist in (i) evaluating the appropriateness of the Company’s multi-period excess earnings method for customer relationships and relief-from-royalty method for trademarks;
+Added: and (ii) evaluating the appropriateness of the weighted-average cost of capital used to discount future cash flows and royalty rates assumptions.
+Added: /s/ PricewaterhouseCoopers LLP
New York, New York
August 27, 2021
+Added: We have served as the Company’s auditor since 2020.
Report of Independent Registered Public Accounting Firm
2 unchanged sentences
Opinion on the Consolidated Financial Statements
−Removed: We have audited the accompanying consolidated balance sheets of The Estée Lauder Companies Inc.
−Removed: 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).
−Removed: 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.
+Added: We have audited the accompanying consolidated balance sheet of The Estée Lauder Companies Inc.
+Added: and subsidiaries (the Company) as of June 30, 2020, the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the years in the two‑year period ended June 30, 2020, and the related notes and financial statement schedule (collectively, the consolidated financial statements).
+Added: 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 the results of its operations and its cash flows for each of the years in the two‑year period ended June 30, 2020, in conformity with U.S.
generally accepted accounting principles.
−Removed: 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.
−Removed: 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
1 unchanged sentence
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
−Removed: 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.
+Added: We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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.
3 unchanged sentences
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
−Removed: 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.
+Added: Our audit 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.
−Removed: Critical Audit Matters
−Removed: 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:
−Removed: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
−Removed: 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.
−Removed: Recoverability of the carrying value of goodwill and indefinite‑lived intangible assets
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The Company used a combination of the market and income approaches to determine the estimated fair values of such assets.
−Removed: 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.
−Removed: A high degree of judgment was required of management to estimate the fair value of these reporting units and trademarks.
−Removed: 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.
−Removed: Additional uncertainty existed in the projected cash flows due to the COVID‑19 pandemic impact on the economic environment.
−Removed: Specialized skills and knowledge were also required to assess the royalty rate and discount rate assumptions.
−Removed: The following are the primary procedures we performed to address this critical audit matter.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: We evaluated the Company’s revenue growth rate assumptions by comparing the projections to the underlying business strategies and growth plans.
−Removed: 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.
−Removed: In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:
−Removed: • 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,
−Removed: • 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
−Removed: • Evaluating the assumed royalty rate for the trademark intangible asset valuation by comparing it to royalty rates for similar companies.
−Removed: Accounting for income taxes
−Removed: 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.
−Removed: 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.
−Removed: We identified the evaluation of the accounting for income taxes as a critical audit matter.
−Removed: 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.
−Removed: The following are the primary procedures we performed to address this critical audit matter.
−Removed: We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s income tax process.
−Removed: This included controls over the identification of changes to tax laws in the various jurisdictions in which it operates.
−Removed: 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.
−Removed: 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.
−Removed: Acquisition‑date fair values of a certain trademark, a certain customer relationship intangible asset, and the previously held equity interest in Have & Be Co.
−Removed: 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.
−Removed: 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.
−Removed: The acquisition‑date fair values for the trademarks and customer relationship intangible assets were approximately $722 million and $937 million, respectively.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: as a critical audit matter.
−Removed: A high degree of judgment was required of management to estimate of the fair value of these assets.
−Removed: 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.
−Removed: Additionally, specialized skills and knowledge were required to assess the royalty rate and discount rate assumptions.
−Removed: The following are the primary procedures we performed to address this critical audit matter.
−Removed: We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s acquisition‑date valuation process.
−Removed: This included controls over the determination of the above listed assumptions used to estimate the acquisition‑date fair values.
−Removed: 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.
−Removed: 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.
−Removed: We involved valuation professionals with specialized skills and knowledge, who assisted in:
−Removed: • 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,
−Removed: • 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
−Removed: • 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.
−Removed: We have served as the Company’s auditor since 2002.
+Added: We served as the Company’s auditor from 2002 to 2020.
New York, New York
22 unchanged sentences
Net earnings attributable to noncontrolling interests ( 12 ) ( 12 ) ( 9 )
+Added: Net loss attributable to redeemable noncontrolling interest 7 — —
Net earnings attributable to The Estée Lauder Companies Inc.
14 unchanged sentences
Other comprehensive income (loss):
−Removed: Net unrealized investment gain (loss) — 14 ( 13 )
−Removed: Net cash flow hedge gain (loss) ( 9 ) ( 24 ) 57
−Removed: Amounts included in net periodic benefit cost 12 ( 102 ) 92
+Added: Net unrealized investment gain — — 14
+Added: Net cash flow hedge loss ( 21 ) ( 9 ) ( 24 )
+Added: Retirement plan and other retiree benefit adjustments 82 12 ( 102 )
Translation adjustments 128 ( 108 ) ( 57 )
−Removed: Benefit (provision) for deferred income taxes on components of other comprehensive income 3 40 ( 34 )
−Removed: Total other comprehensive income (loss) ( 102 ) ( 129 ) 82
+Added: Benefit (provision) for income taxes on components of other comprehensive income ( 10 ) 3 40
+Added: Total other comprehensive income (loss), net of tax 179 ( 102 ) ( 129 )
Comprehensive income 3,054 594 1,665
1 unchanged sentence
Net earnings ( 12 ) ( 12 ) ( 9 )
+Added: Translation adjustments ( 1 ) — —
+Added: Total comprehensive income attributable to noncontrolling interests ( 13 ) ( 12 ) ( 9 )
+Added: Comprehensive loss attributable to redeemable noncontrolling interest:
+Added: Net loss 7 — —
+Added: Translation adjustments 17 — —
+Added: Total comprehensive loss attributable to redeemable noncontrolling interest 24 — —
Comprehensive income attributable to The Estée Lauder Companies Inc.
30 unchanged sentences
Commitments and contingencies
+Added: Redeemable Noncontrolling Interest 857 —
Common stock, $ .01 par value;
17 unchanged sentences
Total equity 6,091 3,962
−Removed: Total liabilities and equity $ 17,781 $ 13,156
+Added: Total liabilities, redeemable noncontrolling interest and equity $ 21,971 $ 17,781
See notes to consolidated financial statements.
THE ESTÉE LAUDER COMPANIES INC.
−Removed: CONSOLIDATED STATEMENTS OF EQUITY
+Added: CONSOLIDATED STATEMENTS OF EQUITY AND REDEEMABLE NONCONTROLLING INTEREST
Year Ended June 30
11 unchanged sentences
2,870 684 1,785
−Removed: Reclassification from accumulated other comprehensive loss as a result of the adoption of a new accounting standard
Cumulative effect of adoption of new accounting standards ( 3 ) ( 29 ) ( 229 )
1 unchanged sentence
Accumulated other comprehensive loss, beginning of year ( 665 ) ( 563 ) ( 434 )
−Removed: Reclassification to retained earnings as a result of the adoption of a new accounting standard
Other comprehensive income (loss) 195 ( 102 ) ( 129 )
9 unchanged sentences
Distributions to noncontrolling interest holders ( 6 ) ( 10 ) ( 6 )
+Added: Translation adjustments, net 1 — —
Noncontrolling interests, end of year 34 27 25
Total equity $ 6,091 $ 3,962 $ 4,411
+Added: Redeemable noncontrolling interest, beginning of year $ — $ — $ —
+Added: Acquired redeemable noncontrolling interest 881 — —
+Added: Net loss attributable to redeemable noncontrolling interest ( 7 ) — —
+Added: Translation adjustments ( 17 ) — —
+Added: Redeemable noncontrolling interest, end of year $ 857 $ — $ —
Cash dividends declared per common share $ 2.07 $ 1.39 $ 1.67
25 unchanged sentences
Increase (decrease) in other accrued and noncurrent liabilities 695 ( 169 ) 285
−Removed: Increase in operating lease assets and liabilities, net 56 — —
+Added: Increase (decrease) in operating lease assets and liabilities, net ( 56 ) 56 —
Net cash flows provided by operating activities 3,631 2,280 2,517
1 unchanged sentence
Capital expenditures ( 637 ) ( 623 ) ( 744 )
+Added: Proceeds from purchase price refund 32 — —
Payments for acquired businesses, net of cash acquired ( 1,065 ) ( 1,047 ) —
16 unchanged sentences
Effect of exchange rate changes on Cash and cash equivalents 61 ( 8 ) ( 11 )
−Removed: Net increase in Cash and cash equivalents 2,035 806 1,045
+Added: Net increase (decrease) in Cash and cash equivalents ( 64 ) 2,035 806
Cash and cash equivalents at beginning of year 5,022 2,987 2,181
7 unchanged sentences
Products are marketed under brand names, including:
−Removed: 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.
+Added: Estée Lauder, Aramis, Clinique, Lab Series, Origins, M·A·C, Bobbi Brown , La Mer , Aveda, Jo Malone London, Bumble and bumble, Darphin, Smashbox, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, Kilian Paris, Too Faced, Dr.
+Added: Jart+, DECIEM and The Ordinary.
Certain subsidiaries of The Estée Lauder Companies Inc.
−Removed: 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.
+Added: are also the global licensee of the Tommy Hilfiger, 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
8 unchanged sentences
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.
−Removed: 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.
+Added: 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, income taxes, redeemable noncontrolling interest and Deciem Beauty Group Inc.
+Added: (“DECIEM”) stock options.
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.
2 unchanged sentences
Currency Translation and Transactions
−Removed: 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.
−Removed: 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.
+Added: All assets and liabilities of foreign subsidiaries and affiliates are translated at year-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period.
+Added: Unrealized translation gains (losses), net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc.
were $ 147 million, $( 106 ) million and $ 30 million, net of tax, in fiscal 2021, 2020 and 2019, respectively.
6 unchanged sentences
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.
−Removed: 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.
−Removed: See Note 12 – Derivative Financial Instruments for further discussion .
−Removed: The Company categorizes these instruments as entered into for purposes other than trading.
+Added: The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges.
THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: See Note 12 – Derivative Financial Instruments for further discussion .
+Added: The Company categorizes these instruments as entered into for purposes other than trading.
The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $( 12 ) million, $ 51 million and $ 46 million in fiscal 2021, 2020 and 2019, respectively.
2 unchanged sentences
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
−Removed: 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.
−Removed: 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.
+Added: Investments in the common stock of privately-held companies in which the Company has the ability to exercise significant influence, but less than a controlling financial interest, are accounted for under the equity method of accounting.
+Added: The Company accounts for its equity securities without readily determinable fair values 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, 2021 and 2020 and are included in Long-term investments in the accompanying consolidated balance sheets.
1 unchanged sentence
Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions.
−Removed: 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.
−Removed: In addition, if the good/service is transferred and payment is received within one year, the Company does not determine significant financing components.
+Added: During fiscal 2021, the Company adopted Accounting Standards Codification (“ASC”) Topic 326 – Financial Instruments – Credit Losses (“ASC 326”) using the modified retrospective transition approach and, accordingly, the prior comparative period was not restated.
+Added: Under this new standard, the Company is required to measure credit losses based on the Company’s estimate of expected losses rather than incurred losses, which generally results in earlier recognition of allowances for credit losses.
+Added: In accordance with ASC 326, the Company evaluated certain criteria, including aging and historical write-offs, current economic condition of specific customers and future economic conditions of countries utilizing a consumption index to determine the appropriate allowance for credit losses.
+Added: The Company writes-off receivables once it is determined that the receivables are no longer collectible and as allowed by local laws.
+Added: As a result of the adoption of ASC 326, the Company recorded a cumulative adjustment of approximately $ 3 million, net of tax, as a reduction to its fiscal 2021 opening balance of retained earnings relating to its trade receivables.
See Note 14 – Revenue Recognition for additional information.
8 unchanged sentences
In addition, and as necessary, specific reserves for future known or anticipated events may be established.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Derivative Financial Instruments
6 unchanged sentences
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.
−Removed: 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.
+Added: The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges.
See Note 12 – Derivative Financial Instruments for further discussion.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, Plant and Equipment
8 unchanged sentences
Any residual purchase price is recorded as goodwill.
−Removed: See Note 5 – Acquisition of Business for further information.
+Added: The determination of fair value, as well as the expected useful lives of certain assets acquired, requires management to make judgments and may involve the use of significant estimates, including assumptions with respect to estimated future cash flows, discount rates and valuation multiples from comparable publicly traded companies, among other things.
+Added: See Note 5 – Acquisition of Businesses for further information.
Goodwill and Other Indefinite-lived Intangible Assets
2 unchanged sentences
Goodwill and other indefinite-lived intangible assets are not amortized.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
7 unchanged sentences
If the carrying value exceeds the fair value, an impairment charge is recorded.
−Removed: For fiscal 2020 and 2019, the Company elected to perform the qualitative assessment for certain of its reporting units and indefinite-lived intangible assets.
+Added: For fiscal 2021 and 2020, the Company elected to perform the qualitative assessment for the goodwill in 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.
1 unchanged sentence
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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: 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.
−Removed: To determine the fair value of the reporting units, the Company used an equal weighting of the income and market approaches.
+Added: To determine the estimated 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.
−Removed: 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.
−Removed: To determine the fair value of other indefinite-lived intangible assets, we use an income approach, specifically the relief-from-royalty method.
+Added: The significant assumptions used in these two approaches include revenue growth rates and profit margins, terminal value, the weighted-average cost of capital used to discount future cash flows and comparable market multiples.
+Added: To determine the estimated 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.
+Added: The significant assumptions used in this approach include revenue growth rates, terminal value, the weighted-average cost of capital used to discount future cash flows and royalty rate.
See Note 6 – Goodwill and Other Intangible Assets for further information.
Long-Lived Assets
−Removed: 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.
+Added: The Company reviews long-lived assets, primarily intangible assets subject to amortization, 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.
−Removed: Specifically for right-of-use assets, fair value is based on discounting market rent using a real estate discount rate.
−Removed: During the first quarter of fiscal 2020, the Company adopted the new lease accounting standard, Accounting Standards Codification ("ASC") Topic 842 – Leases (“ASC 842”).
−Removed: See Note 7 – Leases for discussion.
+Added: Specifically for right-of-use assets, estimated fair value is based on discounting market rent using a real estate discount rate.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: During fiscal 2020, the Company adopted the lease accounting standard, ASC Topic 842 – Leases (“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.
+Added: The Company recognizes a lease liability and a related right-of-use (“ROU”) asset at the commencement date for leases on its consolidated balance sheet, excluding short-term leases as noted below.
+Added: The lease liability is equal to the present value of unpaid lease payments over the remaining lease term.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: After the lease commencement date, the Company evaluates lease modifications, if any, that could result in a change in the accounting for leases.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: Upon the adoption of ASC 842, the Company made the following accounting policy elections:
+Added: • Certain of the Company’s contracts contain lease components as well as non-lease components, such as an agreement to purchase services.
+Added: 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.
+Added: For purposes of allocating contract consideration, the Company elected not to separate the lease components from non-lease components for all asset classes.
+Added: This was applied to all existing leases as of July 1, 2019 and will be applied to new leases on an ongoing basis.
+Added: • The Company elected not to apply the measurement and recognition requirements of ASC 842 to short-term leases (i.e.
+Added: leases with a term of 12 months or less).
+Added: 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.
+Added: • 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: See Note 7 – Leases for further information.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentration of Credit Risk
−Removed: The Company is a worldwide manufacturer, marketer and distributor of skin care, makeup, fragrance and hair care products.
+Added: The Company is a worldwide manufacturer, marketer and seller 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.
−Removed: 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.
−Removed: 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.
+Added: As a result of the COVID-19 pandemic, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance.
+Added: While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of the COVID-19 pandemic on its customers' abilities, individually and collectively, to make timely payments.
+Added: The Company’s largest customer for the year ended June 30, 2021 sells products primarily in China travel retail.
+Added: This customer accounted for $ 2,278 million or 14 %, $ 1,031 million or 7 % and $ 694 million or 5 % of the Company's consolidated net sales for the year ended June 30, 2021, 2020 and 2019, respectively.
+Added: This customer accounted for $ 179 million, or 10 %, and $ 297 million, or 24 %, of the Company's accounts receivable at June 30, 2021 and 2020, respectively.
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.
−Removed: 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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Under this method, the consolidated financial statements for the fiscal period beginning July 1, 2018 are presented under the new revenue accounting standard.
Changes in Accounting Policies
13 unchanged sentences
For revenue disaggregated by product category and geographic region, see Note 22 – Segment Data and Related Information .
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Advertising and Promotion
Global net advertising, merchandising, sampling, promotion and product development expenses of $ 3,710 million, $ 3,398 million and $ 3,440 million in fiscal 2021, 2020 and 2019, respectively, are recorded in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and are expensed as incurred.
−Removed: 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.
−Removed: Such costs in fiscal 2018 were classified within Selling, general and administrative expenses.
+Added: The cost of certain promotional products, including samples and testers, are classified within Cost of sales.
Research and Development
2 unchanged sentences
Shipping and handling expenses of $ 680 million, $ 583 million and $ 570 million in fiscal 2021, 2020 and 2019, 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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
License Arrangements
4 unchanged sentences
Under each license, the Company is required to pay royalties to the licensor, at least annually, based on net sales to third parties.
−Removed: Most of the Company’s licenses were entered into to create new business.
−Removed: 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.
−Removed: In those cases, other intangible assets are capitalized and amortized over their useful lives.
+Added: Some of the Company’s licenses were entered into to create a new business, while other licenses were acquired, or entered into, where the licensor or another licensee was operating a pre-existing beauty products business, in which case, 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.
6 unchanged sentences
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.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
2 unchanged sentences
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.
−Removed: The Company provides tax reserves for U.S.
+Added: The Company provides tax reserves for applicable U.S.
federal, state, local and foreign tax exposures relating to periods subject to audit.
6 unchanged sentences
If actual outcomes differ materially from these estimates, they could have a material impact on the Company’s consolidated net earnings.
+Added: Redeemable Noncontrolling Interest
+Added: On May 18, 2021, the Company acquired additional shares in Deciem Beauty Group Inc.
+Added: ( “DECIEM” ), a Toronto-based skin care company.
+Added: The Company originally acquired a minority interest in DECIEM in June 2017.
+Added: The acquisition of additional shares increased the Company's equity interest and was considered a step acquisition.
+Added: As part of the increase in the Company's investment, the Company was granted the right to purchase (“Call Option”), and granted the remaining investors a right to sell to the Company (“Put Option”), the remaining interests after a three-year period, with a purchase price based on the future performance of DECIEM (the “net Put (Call) Option”).
+Added: As a result of this redemption feature, the Company recorded redeemable noncontrolling interest, at its acquisition‑date fair value, that is classified as mezzanine equity in the accompanying consolidated balance sheets at June 30, 2021.
+Added: The noncontrolling interest is adjusted each reporting period for income (loss) attributable to the noncontrolling interest.
+Added: Each reporting period, a measurement period adjustment, if any, is then recorded to adjust the noncontrolling interest to the higher of either the redemption value, assuming it was redeemable at the reporting date, or its carrying value.
+Added: These adjustments are recorded in Paid-in capital and are not reflected in Net earnings or Net earnings attributable to The Estée Lauder Companies Inc.
+Added: In addition, based on the Company's policy election, if the redemption value exceeds the fair value of the noncontrolling interest on a cumulative basis, a measurement period adjustment is recorded in Retained earnings and the Company will adjust Net earnings attributable to The Estée Lauder Companies Inc.
+Added: as it uses the two-class method when calculating earnings per common share.
+Added: The fair value of the noncontrolling interest is estimated using an equal weighting of the income and market approaches.
+Added: Under the income approach, the Company determines fair value using a discounted cash flow method, projecting future cash flows of the 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.
+Added: Under the market approach, the Company utilizes market multiples from publicly traded companies with similar operating and investment characteristics as the reporting unit.
+Added: The significant assumptions used in these two approaches include revenue growth rates and profit margins, terminal value, the weighted-average cost of capital used to discount future cash flows and comparable market multiples.
+Added: See Note 5 – Acquisition of Businesses for additional information regarding the redeemable noncontrolling interest.
THE ESTÉE LAUDER COMPANIES INC.
2 unchanged sentences
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.
−Removed: 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.
−Removed: 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.
−Removed: The remaining $ 2 million was deferred and will be recognized in fiscal 2021.
+Added: Beginning in 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.
+Added: During fiscal 2021 and 2020, the Company qualified for and recorded $ 84 million and $ 99 million, respectively, in government assistance, which reduced Selling, general and administrative expenses by $ 78 million and $ 87 million, respectively, and Cost of sales by $ 6 million and $ 10 million, respectively.
+Added: The remaining $ 2 million recorded in fiscal 2020 was deferred and recognized in fiscal 2021 as a reduction to Cost of sales.
Recently Adopted Accounting Standards
−Removed: Leases (ASC 842)
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Companies that elect the new adoption method were not required to restate the prior comparative periods in the financial statements.
−Removed: Effective for the Company – Fiscal 2020 first quarter.
−Removed: 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.
−Removed: Impact on consolidated financial statements – On July 1, 2019, the Company adopted ASC 842, see Note 7 – Leases for further discussion .
−Removed: FASB Staff Question-and-Answer Document (Q&A):
−Removed: ASC Topic 842 and ASC Topic 840:
−Removed: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.
−Removed: Recently Issued Accounting Standards
−Removed: Reference Rate Reform (ASC Topic 848) (Accounting Standards Update (“ASU”) 2020-04 - Facilitation of the Effects of Reference Rate Reform on Financial Reporting)
−Removed: 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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: 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.
−Removed: The guidance will no longer be available to apply after December 31, 2022.
−Removed: 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.
−Removed: Measurement of Credit Losses on Financial Instruments (ASC Topic 326 – Financial Instruments – Credit Losses)
−Removed: 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.
+Added: Measurement of Credit Losses on Financial Instruments (ASC Topic 326 – Financial Instruments – Credit Losses) (“ASC 326”)
+Added: In June 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires companies to utilize an impairment model for most financial assets measured at amortized cost and certain other financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses.
In addition, this guidance changes the recognition method for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk, and requires additional disclosures.
4 unchanged sentences
Effective for the Company – Fiscal 2021 first quarter.
−Removed: 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.
−Removed: 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.
+Added: Impact on consolidated financial statements – On July 1, 2020, the Company adopted ASC 326.
+Added: The adoption of this standard did not have a material impact on the Company's consolidated financial statements.
+Added: See Note 14 - Revenue Recognition for further discussion.
Goodwill and Other – Internal-Use Software (ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40):
6 unchanged sentences
This guidance can be adopted either retrospectively, or prospectively to all implementation costs incurred after the date of adoption.
−Removed: 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).
−Removed: 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.
+Added: Impact on consolidated financial statements – On July 1, 2020, the Company adopted this guidance prospectively to all implementation costs incurred after the date of adoption.
+Added: The adoption of this standard did not have a material impact on the Company's consolidated financial statements.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Recently Issued Accounting Standards
+Added: Reference Rate Reform (ASC Topic 848)
+Added: In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”), which is expected to be phased out at the end of calendar 2021, and applies to lease contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that have LIBOR as the benchmark rate.
+Added: In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform.
+Added: The amendments clarify that for all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC Topic 848.
+Added: Effective for the Company – This guidance can be applied for a limited time through December 31, 2022.
+Added: The guidance will no longer be available to apply after December 31, 2022.
+Added: Impact on consolidated financial statements – The Company currently has an implementation team in place that is performing a comprehensive evaluation and assessing the impact of applying this guidance on its existing derivative contracts, leases and other arrangements, as well as when to adopt this guidance.
Income Taxes (ASU 2019-12 – Income Taxes (Topic 740):
1 unchanged sentence
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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Effective for the Company – Fiscal 2022 first quarter, with early adoption permitted in any interim period.
−Removed: If adopted early, the Company must adopt all the amendments in the same period.
+Added: Effective for the Company – Fiscal 2022 first quarter.
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.
−Removed: 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.
+Added: Impact on consolidated financial statements – The Company is in the process of finalizing its evaluation and currently expects to record a cumulative adjustment of approximately $ 120 million as an increase to its fiscal 2022 opening retained earnings balance for deferred taxes related to a previously held equity method investment that became a foreign subsidiary.
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
+Added: Inventory and promotional merchandise consists of the following:
(In millions) 2021 2020
−Removed: Inventory and promotional merchandise consists of:
Raw materials $ 674 $ 542
3 unchanged sentences
$ 2,505 $ 2,062
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT
+Added: Property, plant and equipment consists of the following:
(In millions) 2021 2020
12 unchanged sentences
See Note 7 – Leases for discussion of property, plant and equipment impairments.
+Added: NOTE 5 – ACQUISITION OF BUSINESSES
+Added: On May 18, 2021, the Company acquired additional shares in DECIEM, a Toronto-based skin care company, for $ 1,092 million in cash, including proceeds from the issuance of debt.
+Added: DECIEM is a multi-brand beauty company with a brand portfolio that includes The Ordinary and NIOD.
+Added: This acquisition is expected to further strengthen the Company’s leadership position in prestige skin care, expand its global consumer reach and complement its business in the online and specialty-multi channels.
+Added: The Company originally acquired a minority interest in DECIEM in June 2017.
+Added: The minority interest was accounted for as an equity method investment, which had a carrying value of $ 65 million at the acquisition date.
+Added: The acquisition of additional shares increased the Company's fully diluted equity interest from approximately 29 % to approximately 76 % and was considered a step acquisition.
+Added: On a fully diluted basis, the DECIEM stock options, discussed below, approximated 4 % of the total capital structure.
+Added: Accordingly, for purposes of determining the consideration transferred, the Company excluded the DECIEM stock options, which resulted in an increase in the Company’s post-acquisition undiluted equity interest from approximately 30 % to approximately 78 % and the post-acquisition undiluted equity interest of the remaining noncontrolling interest holders of approximately 22 %.
+Added: The Company remeasured the previously held equity method investment to its fair value of $ 912 million, resulting in the recognition of a gain of $ 847 million.
+Added: The gain on the Company’s previously held equity method investment is included in Other income, net in the accompanying consolidated statements of earnings for the year ended June 30, 2021.
+Added: As part of the increase in the Company's investment, the Company was granted the right to purchase (“Call Option”), and granted the remaining investors a right to sell to the Company (“Put Option”), the remaining interests after a three-year period, with a purchase price based on the future performance of DECIEM (the “net Put (Call) Option”).
+Added: As a result of this redemption feature, the Company recorded redeemable noncontrolling interest, at its acquisition‑date fair value, that is classified as mezzanine equity in the accompanying consolidated balance sheets at June 30, 2021.
+Added: As of June 30, 2021, the accounting for the DECIEM business combination is provisional pending the calculation of the final purchase price, finalization of the opening balance sheet, the final valuation report, and allocation of the total consideration transferred.
THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: NOTE 5 – ACQUISITION OF BUSINESS
−Removed: On December 18, 2019, the Company acquired the remaining 66.66 % equity interest in Have&Be Co.
−Removed: (“Have & Be”), the global skin care company behind Dr.
−Removed: Jart+ and men’s grooming brand Do The Right Thing, for $ 1,268 million in cash.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The original minority interest was accounted for as an equity method investment, which had a carrying value of $ 133 million at the acquisition date.
−Removed: 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.
−Removed: 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.
−Removed: The total gain on the Company’s previously held equity method investment is included in Other income, net in the consolidated statements of earnings.
−Removed: 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.
−Removed: The accounting for the Have & Be business combination was finalized as of June 30, 2020.
−Removed: The amount paid at closing was funded by cash on hand including the proceeds from the issuance of debt.
−Removed: In anticipation of the closing, the Company transferred cash to a foreign subsidiary for purposes of making the closing payment.
−Removed: As a result, the Company recognized a foreign currency gain, which is also included in Other income, net in the consolidated statements of earnings.
−Removed: 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:
−Removed: (In millions) December 18, 2019 Measurement Period Adjustments June 30, 2020
−Removed: Purchase price
−Removed: Purchase price $ 1,268 $ ( 32 ) $ 1,236
−Removed: Fair value of previously held equity method investment 682 ( 22 ) 660
−Removed: Write-off of call option relating to previously held equity method investment 4 — 4
−Removed: Total purchase price $ 1,954 $ ( 54 ) $ 1,900
−Removed: For the Six Months Ended December 31, 2019 Measurement Period Adjustments For the Year Ended June 30, 2020
−Removed: Gains recognized in the consolidated statement of earnings
−Removed: Gain on previously held equity method investment $ 549 $ ( 19 ) $ 530
−Removed: Recognition of a previously unrealized foreign currency gain 4 — 4
−Removed: Total gain on previously held equity method investment 553 ( 19 ) 534
−Removed: Foreign currency gain on cash 23 — 23
−Removed: Total Other income, net $ 576 $ ( 19 ) $ 557
+Added: A summary of the total consideration transferred is as follows:
+Added: (In millions) May 18, 2021
+Added: Cash paid $ 1,092
+Added: Fair value of DECIEM stock options liability 103
+Added: Fair value of net Put (Call) Option 234
+Added: Total consideration for the acquired ownership interest (approximately 47.9 %)
+Added: Fair value of previously held equity method investment (approximately 30.5 %)
+Added: Fair value of redeemable noncontrolling interest (approximately 21.6 %)
+Added: Total consideration transferred ( 100 %)
+Added: As part of the acquisition of additional shares, DECIEM stock options were issued in replacement of and exchange for certain vested and unvested stock options previously issued by DECIEM.
+Added: The total fair value of the DECIEM stock options of $ 294 million was recorded as part of the total consideration transferred, comprising of $ 191 million of Cash paid for vested options settled as of the acquisition date and $ 103 million reported as a stock options liability on the Company's consolidated balance sheet as it is not an assumed liability of DECIEM and is expected to be settled in cash upon completion of the exercise of the Put (Call).
+Added: The acquisition-date fair value of the DECIEM stock options liability was calculated by multiplying the acquisition-date fair value by the number of DECIEM stock options replaced the day after the acquisition date.
+Added: The stock options replaced consist of vested and partially vested stock options.
+Added: See Note 18 – Stock Programs for information relating to the DECIEM stock options.
+Added: The acquisition-date fair value of the previously held equity method investment was calculated by multiplying the gross-up of the total consideration for the acquired ownership interest of $ 2,988 million by the related effective previously held equity interest of approximately 30.5 %.
+Added: The acquisition-date fair value of the redeemable noncontrolling interest includes the acquisition-date fair value of the net Put (Call) Option of $ 234 million.
+Added: The remaining acquisition-date fair value of the redeemable noncontrolling interest of $ 647 million was calculated by multiplying the gross-up of the total consideration for the acquired ownership interest of $ 2,988 million by the related noncontrolling interest of approximately 21.6 %.
+Added: The acquisition-date fair values of the DECIEM stock options and the net Put (Call) Option were calculated by incorporating significant assumptions including the starting equity value, revenue growth rates and EBITDA and the following key assumptions into the Monte Carlo Method:
+Added: Risk-free rate 0.50 %
+Added: Term to mid of last twelve-month period 2.54 years
+Added: Operating leverage adjustment 0.45
+Added: Net sales discount rate 3.30 %
+Added: EBITDA discount rate 6.80 %
+Added: EBITDA volatility 38.30 %
+Added: Net sales volatility 17.20 %
THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: 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.
−Removed: 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.
+Added: The Company recorded a preliminary allocation of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value at the acquisition date.
+Added: The total consideration transferred includes the cash paid at closing, the fair value of its previously held equity method investment, the fair value of the redeemable noncontrolling interest, including the fair value of the net Put (Call) Option, and the fair value of the DECIEM stock options liability.
The excess of the total consideration transferred over the fair value of the net tangible and intangible assets acquired was recorded as goodwill.
−Removed: 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:
−Removed: (In millions, unaudited) December 18, 2019 Measurement Period Adjustments June 30, 2020
−Removed: $ 228 $ 1 $ 229
+Added: To determine the acquisition date estimated fair value of intangible assets acquired, the Company applied the income approach, specifically the multi-period excess earnings method for customer relationships and the relief-from-royalty method for trademarks.
+Added: The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted-average cost of capital used to discount future cash flows, and a customer attrition rate for customer relationships and royalty rates for trademarks.
+Added: The preliminary allocation of the total consideration transferred has been recorded as follows:
+Added: (In millions) May 18, 2021
Accounts receivable 64
+Added: Inventory 203
Other current assets 30
Property, plant and equipment 40
−Removed: Right-of-use assets
+Added: Operating lease right-of-use assets 40
Intangible assets 1,917
−Removed: 1,427 232 1,659
−Removed: 556 ( 210 ) 346
−Removed: Other long-term assets
+Added: Goodwill 1,283
Total assets acquired 3,612
−Removed: 2,356 ( 7 ) 2,349
Accounts payable 21
+Added: Operating lease liabilities 8
Other accrued liabilities 67
Deferred income taxes 483
−Removed: Lease liability
+Added: Long-term operating lease liabilities 45
Total liabilities assumed 624
Total consideration transferred $ 2,988
−Removed: $ 1,954 $ ( 54 ) $ 1,900
−Removed: The results of operations of Have & Be are reported on a one-month lag to facilitate consolidated reporting.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: The results of operations for DECIEM for the six-week period ended June 30, 2021 were not material to the Company's consolidated statements of earnings for the twelve months ended June 30, 2021.
+Added: Acquisition-related costs of $ 21 million, which primarily include financial advisory, accounting and legal fees, are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings for the year ended June 30, 2021.
+Added: Pro forma results of operations reflecting the acquisition of DECIEM are not presented, as the impact on the Company’s consolidated financial results would not have been material.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: On December 18, 2019, the Company acquired the remaining 66.66 % equity interest in Have&Be Co.
+Added: (“Have & Be”), the global skin care company behind Dr.
+Added: Jart+ and men’s grooming brand Do The Right Thing, for $ 1,268 million in cash.
+Added: Based on the final purchase price and working capital adjustments, the Company estimated a refund receivable of $ 32 million that was outstanding as of June 30, 2020 and was received in fiscal 2021.
+Added: 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.
+Added: The original minority interest was accounted for as an equity method investment, which had a carrying value of $ 133 million at the acquisition date.
+Added: The acquisition of the remaining equity interest in Have & Be was considered a step acquisition, whereby the Company remeasured the previously held equity method investment to its fair value of $ 660 million, resulting in the recognition of a gain of $ 530 million.
+Added: The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of $ 4 million, which was reclassified from accumulated OCI.
+Added: The total gain on the Company’s previously held equity method investment of $ 534 million is included in Other income, net in the accompanying consolidated statements of earnings for fiscal 2020.
+Added: 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.
+Added: The accounting for the Have & Be business combination was finalized as of June 30, 2020.
+Added: The amount paid at closing was funded by cash on hand including the proceeds from the issuance of debt.
+Added: In anticipation of the closing, the Company transferred cash to a foreign subsidiary for purposes of making the closing payment.
+Added: As a result, the Company recognized a foreign currency gain of $ 23 million, which is also included in Other income, net in the accompanying consolidated statements of earnings for the year ended June 30, 2020.
NOTE 6 – GOODWILL AND OTHER INTANGIBLE ASSETS
−Removed: 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.
−Removed: 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.
+Added: As previously discussed in Note 5 – Acquisition of Businesses , in May 2021 the Company increased its investment in DECIEM, which resulted in the inclusion of additional goodwill of $ 1,283 million, amortizable intangible assets (customer lists) of $ 701 million with amortization periods of 7 years to 14 years, and non-amortizable intangible assets (trademarks) of $ 1,216 million.
+Added: Goodwill associated with the acquisition is primarily attributable to the future revenue growth opportunities associated with sales growth in the skin care category, as well as the value associated with DECIEM's assembled workforce.
As such, the goodwill has been allocated to the Company’s skin care product category.
−Removed: The goodwill recorded in connection with this acquisition is not expected to be deductible for tax purposes.
−Removed: The accounting for the Have & Be business combination was finalized as of June 30, 2020.
+Added: The goodwill recorded in connection with this acquisition will not be deductible for tax purposes.
+Added: These amounts are provisional pending the final purchase price, finalization of the opening balance sheet, the final valuation report, and allocation of the total consideration transferred.
+Added: During the year ended June 30, 2020, 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.
During the year ended June 30, 2021 and 2020, the Company recognized $ 6 million and $ 11 million, respectively, of goodwill associated with the continuing earn-out obligations related to the acquisition of the Bobbi Brown brand.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The intangible assets acquired in connection with the acquisition of Have & Be are classified as level 3 in the fair value hierarchy.
+Added: The earn-out obligations ceased in fiscal 2021.
+Added: The intangible assets acquired in connection with the acquisitions of DECIEM and 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.
2 unchanged sentences
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.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company assigns goodwill of a reporting unit to the product categories in which that reporting unit operates at the time of acquisition.
8 unchanged sentences
Translation adjustments, goodwill ( 12 ) — — ( 1 ) ( 13 )
+Added: Translation adjustments, accumulated impairments 1 — ( 1 ) 1 1
275 ( 738 ) ( 4 ) — ( 467 )
5 unchanged sentences
Impairment charges (1)
−Removed: Translation adjustments, goodwill ( 12 ) — — ( 1 ) ( 13 )
−Removed: Translation adjustments, accumulated impairments 1 — ( 1 ) 1 1
( 54 ) ( 13 ) ( 4 ) — ( 71 )
+Added: Translation adjustments and write-offs, goodwill ( 16 ) ( 2 ) 8 ( 38 ) ( 48 )
+Added: Translation adjustments and write-offs, accumulated impairments 8 — — 33 41
+Added: 1,221 ( 9 ) 4 ( 1 ) 1,215
Balance as of June 30, 2021
2 unchanged sentences
$ 1,645 $ 384 $ 232 $ 355 $ 2,616
+Added: (1) Goodwill impairment charges of $ 13 million, recorded in connection with the exit of the global distribution of BECCA products, and $ 4 million, other, are included in Restructuring and other charges in the accompanying consolidated statements of earnings for the year ended June 30, 2021.
+Added: See Note 8 – Charges Associated with Restructuring and Other Activities for further information relating to the Post-COVID Business Acceleration Program.
+Added: See “ Fiscal 2021 Impairment Testing ” below for further information relating to fiscal 2021 impairment charges related to GLAMGLOW and Smashbox.
THE ESTÉE LAUDER COMPANIES INC.
3 unchanged sentences
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.
−Removed: 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.
+Added: Other intangible assets (e.g., 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.
19 unchanged sentences
Estimated aggregate amortization expense $ 160 $ 160 $ 159 $ 159 $ 159
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal 2021 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.
+Added: During November 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 and lower than expected results from geographic expansion, the Company made further revisions to the internal forecasts relating to its GLAMGLOW reporting unit.
+Added: The Company concluded that the changes in circumstances in this reporting unit triggered the need for an interim impairment review of its trademark and goodwill.
+Added: These changes in circumstances were also an indicator that the carrying amounts of GLAMGLOW's long-lived assets, including customer lists, may not be recoverable.
+Added: Accordingly, the Company performed an interim impairment test for the trademark and a recoverability test for the long-lived assets as of November 30, 2020.
+Added: The Company concluded that the carrying value of the trademark for GLAMGLOW exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge of $ 21 million.
+Added: In addition, the Company concluded that the carrying value of the GLAMGLOW customer lists intangible asset was fully impaired and recorded an impairment charge of $ 6 million.
+Added: The fair value of all other long-lived assets of GLAMGLOW exceeded their carrying values and were not impaired as of November 30, 2020.
+Added: After adjusting the carrying values of the trademark and customer lists intangible assets, the Company completed an interim quantitative impairment test for goodwill and recorded a goodwill impairment charge of $ 54 million, reducing the carrying value of goodwill for the GLAMGLOW reporting unit to zero .
+Added: The fair value of the GLAMGLOW 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.
+Added: Based on the Company’s annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2021, the Company determined that the carrying value of the GLAMGLOW and Smashbox trademarks exceeded their fair values.
+Added: This determination was made based on updated internal forecasts, finalized and approved in June 2021, that reflected lower net sales growth projections due to a softer than expected retail environment for these brands, as well as the continued impacts relating to the uncertainty of the duration and severity of the COVID-19 pandemic.
+Added: These changes in circumstances were also indicators that the carrying amounts of their respective long-lived assets may not be recoverable.
+Added: The Company concluded that the carrying values of the trademarks 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.
+Added: The Company concluded that the carrying amounts of the long-lived assets were recoverable.
+Added: The carrying values of the customer lists and goodwill relating to the GLAMGLOW and Smashbox reporting units were zero as of November 30, 2020 and June 30, 2020, respectively.
+Added: A summary of the impairment charges for the three and twelve months ended June 30, 2021 and the remaining trademark, customer lists and goodwill carrying values as of June 30, 2021, for each reporting unit, are as follows:
+Added: Impairment Charge
+Added: (In millions) Three Months Ended June 30, 2021 Twelve Months Ended June 30, 2021 Carrying Value as of June 30, 2021
+Added: Reporting Unit:
+Added: Product Category Trademark Customer Lists Goodwill Trademark Customer Lists Goodwill Trademark Customer Lists Goodwill
+Added: GLAMGLOW Skin care $ 25 $ — $ — $ 46 $ 6 $ 54 $ 11 $ — $ —
+Added: Smashbox Makeup 11 — — 11 — — 21 — —
+Added: Total $ 36 $ — $ — $ 57 $ 6 $ 54 $ 32 $ — $ —
+Added: The impairment charges for the three and twelve months ended June 30, 2021 were reflected in the Americas region.
THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Fiscal 2020 Impairment Testing
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.
16 unchanged sentences
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.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
7 unchanged sentences
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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: 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
−Removed: (In millions) Three Months Ended
−Removed: June 30, 2020 Twelve Months Ended
−Removed: June 30, 2020 Carrying Value
+Added: (In millions) Three Months Ended June 30, 2020 Twelve Months Ended June 30, 2020 Carrying Value as of June 30, 2020
Reporting Unit:
17 unchanged sentences
These impairment charges were reflected in the makeup product category and in the Americas region.
−Removed: NOTE 7 – LEASES
−Removed: 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.
−Removed: Under this method, the Company was required to assess the remaining future payments of existing leases as of July 1, 2019.
−Removed: 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.
−Removed: operating lease vs.
−Removed: finance lease) for expired or existing leases, and did not require a change to the accounting for previously capitalized initial direct costs.
−Removed: 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.
−Removed: The accounting for finance leases under ASC 842 is consistent with the prior accounting for capital leases.
−Removed: 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.
THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: 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.
−Removed: 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.
−Removed: The lease liability is equal to the present value of unpaid lease payments over the remaining lease term.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: After the lease commencement date, the Company evaluates lease modifications, if any, that could result in a change in the accounting for leases.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Upon the adoption of ASC 842, the Company made the following accounting policy elections:
−Removed: • Certain of the Company’s contracts contain lease components as well as non-lease components, such as an agreement to purchase services.
−Removed: 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.
−Removed: For purposes of allocating contract consideration, the Company elected not to separate the lease components from non-lease components for all asset classes.
−Removed: This was applied to all existing leases as of July 1, 2019 and will be applied to new leases on an ongoing basis.
−Removed: • The Company elected not to apply the measurement and recognition requirements of ASC 842 to short-term leases (i.e.
−Removed: leases with a term of 12 months or less).
−Removed: 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.
−Removed: • 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Finance lease ROU assets and liabilities are not material.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: NOTE 7 – LEASES
+Added: For further information on the Company's policies relating to leases see Note 2 – Summary of Significant Accounting Policies.
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 58 years.
1 unchanged sentence
A summary of total lease costs and other information for the periods relating to the Company’s finance and operating leases is as follows:
−Removed: (In millions) June 30, 2020
+Added: (In millions) 2021 2020
Total lease cost
12 unchanged sentences
Weighted-average remaining lease term – finance leases
+Added: 3 years 2 years
Weighted-average remaining lease term – operating leases
+Added: 10 years 11 years
Weighted-average discount rate – finance leases
14 unchanged sentences
Operating lease and finance lease liabilities included in the consolidated balance sheet are as follows:
−Removed: June 30, 2020
−Removed: (In millions) Operating Leases Finance Leases
+Added: (In millions) Operating Leases Finance Leases Operating Leases Finance Leases
Total current liabilities
+Added: $ 379 $ 18 $ 375 $ 8
Total noncurrent liabilities
−Removed: 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.
−Removed: 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.
+Added: 2,151 27 2,278 5
+Added: $ 2,530 $ 45 $ 2,653 $ 13
+Added: 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 sheets as of June 30, 2021 and 2020.
+Added: As a result of the continued 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.
2 unchanged sentences
Specifically, for the related ROU assets, the fair value was based on discounting market rent using a real estate discount rate.
−Removed: 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.
−Removed: A summary of the impairment charge for the year ended June 30, 2020 is as follows:
+Added: As a result, the Company recognized $ 71 million and $ 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, 2021 and 2020, respectively.
+Added: The fiscal 2021 impairments related to other assets (i.e.
+Added: rights associated with commercial operating leases) of $ 27 million, operating lease right-of-use assets of $ 25 million and the related property, plant and equipment in certain freestanding stores of $ 19 million.
+Added: The fiscal 2020 impairments 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.
+Added: A summary of impairment charges is as follows:
(In millions) 2021 2020
−Removed: Product Category Impairment Charge
+Added: Product Category Impairment Charge Impairment Charge
Skin care $ 1 $ 22
−Removed: Region Impairment Charge
+Added: Makeup 52 160
+Added: Fragrance 14 18
+Added: Hair care 4 14
+Added: Total $ 71 $ 215
The Americas $ 23 $ 103
1 unchanged sentence
Asia/Pacific — 8
+Added: Total $ 71 $ 215
As of June 30, 2021, 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 $ 37 million.
−Removed: 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 2022 and fiscal 2026 with lease terms of 1 year to 10 years.
2 unchanged sentences
NOTE 8 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES
+Added: During fiscal 2021, the Company incurred charges associated with restructuring activities as follows:
+Added: Net Sales) Cost of Sales Operating Expenses Total
+Added: (In millions) Restructuring
+Added: Charges Other
+Added: Leading Beauty Forward Program $ — $ 8 $ ( 15 ) $ 14 $ 7
+Added: Post-COVID Business Acceleration Program 14 2 201 4 221
+Added: Total $ 14 $ 10 $ 186 $ 18 $ 228
During fiscal 2020 and 2019, the Company incurred charges associated with restructuring and other activities in connection with its Leading Beauty Forward initiative as follows:
6 unchanged sentences
Fiscal 2019 $ 3 $ 22 $ 133 $ 83 $ 241
−Removed: 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.
−Removed: 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.
−Removed: LBF is designed to enhance the Company’s go-to-market capabilities, reinforce its leadership in global prestige beauty and continue creating sustainable value.
−Removed: 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.
+Added: Charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business.
+Added: Leading Beauty Forward Program
+Added: In May 2016, the Company announced a multi-year initiative (“Leading Beauty Forward” 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.
+Added: The LBF Program was designed to enhance the Company’s go-to-market capabilities, reinforce its leadership in global prestige beauty and continue creating sustainable value.
+Added: Restructuring actions taken over the duration of the LBF Program 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.
−Removed: 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.
−Removed: The Company previously estimated a net reduction over the duration of LBF in the range of approximately 1,800 to 2,000 positions globally.
−Removed: The Company revised these estimates based on the review of the LBF Program noted above.
−Removed: 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.
+Added: As of June 30, 2019, the Company concluded the approvals of all major initiatives under the LBF Program 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 has substantially completed those initiatives through fiscal 2021.
+Added: The Company estimated a net reduction over the duration of the LBF Program in the range of approximately 1,300 to 1,600 positions globally, excluding point-of-sale positions.
+Added: As of June 30, 2021 the net reduction over the duration of the LBF Program was approximately 1,300 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.
−Removed: LBF Program Approvals
−Removed: 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.
−Removed: 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.
THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The approved restructuring and other charges expected to be incurred were:
+Added: LBF Program Approvals
+Added: For the year ended 2020, the Company recognized $ 18 million of asset-related costs, approved under the LBF Program, 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.
+Added: These charges were initially approved under the LBF Program prior to fiscal 2020 as contract terminations related to continuing lease payments to landlords after exiting the location.
+Added: The LBF Program approved restructuring and other charges expected to be incurred were:
Sales Returns Operating Expenses
3 unchanged sentences
Charges Total
−Removed: Total Charges Approved
+Added: Total Charges (Adjustments) Approved
Cumulative through June 30, 2020 $ 13 $ 85 $ 511 $ 358 $ 967
1 unchanged sentence
Cumulative through June 30, 2021 $ 14 $ 73 $ 486 $ 339 $ 912
+Added: Included in the above table, cumulative LBF Program restructuring initiatives approved by the Company by major cost type were:
(In millions) Employee-
2 unchanged sentences
Terminations Other Exit
−Removed: Restructuring Charges Approved
+Added: Restructuring Charges (Adjustments) Approved
Cumulative through June 30, 2020 $ 460 $ 28 $ 7 $ 16 $ 511
4 unchanged sentences
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.
−Removed: 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.
−Removed: 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.
+Added: These actions resulted in a net reduction of the workforce, which included position eliminations, the re-leveling of certain positions and an investment in new capabilities.
+Added: The Company also approved other charges to support the LBF Project Management Office (“PMO”), which primarily consisted of internal and external resources that further drove 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.
−Removed: 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.
+Added: 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 resulted 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.
−Removed: 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.
+Added: Collectively, these actions resulted in a net reduction of the workforce, which included 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.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• 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.
−Removed: 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.
−Removed: 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.
+Added: These initiatives primarily shifted 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.
+Added: These actions resulted in a net reduction of the workforce, which included 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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: 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.
−Removed: 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.
+Added: The Company 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.
−Removed: 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.
+Added: As initiatives under the LBF Program progressed through implementation, the Company 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.
−Removed: LBF Program-to-Date Restructuring and Other Charges
+Added: LBF Program Restructuring and Other Charges
Restructuring charges are comprised of the following:
9 unchanged sentences
Other exit costs are charged to expense as incurred.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other charges associated with restructuring activities are comprised of the following:
4 unchanged sentences
• Temporary labor backfill,
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: 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
1 unchanged sentence
The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met.
−Removed: Total cumulative charges recorded associated with restructuring and other activities for LBF were:
+Added: Total cumulative charges recorded associated with restructuring and other activities for the LBF Program were:
Sales Returns Operating Expenses
3 unchanged sentences
Charges Total
+Added: Total Charges (Adjustments)
Cumulative through June 30, 2018 $ 11 $ 33 $ 324 $ 182 $ 550
7 unchanged sentences
Terminations Other Exit
+Added: Restructuring Charges (Adjustments)
Cumulative through June 30, 2018 $ 314 $ 4 $ 3 $ 3 $ 324
10 unchanged sentences
Charges $ 74 $ 1 $ — $ — $ 75
−Removed: Noncash asset write-offs — ( 1 ) — — ( 1 )
+Added: Non-cash asset write-offs — ( 1 ) — — ( 1 )
Translation adjustments ( 1 ) — — — ( 1 )
2 unchanged sentences
Cash payments ( 39 ) — ( 2 ) ( 2 ) ( 43 )
−Removed: Noncash asset write-offs — ( 2 ) — — ( 2 )
+Added: Non-cash asset write-offs — ( 2 ) — — ( 2 )
Balance at June 30, 2017 150 — — — 150
1 unchanged sentence
Cash payments ( 92 ) — — ( 1 ) ( 93 )
−Removed: Noncash asset write-offs — ( 1 ) — — ( 1 )
+Added: Non-cash asset write-offs — ( 1 ) — — ( 1 )
Translation adjustments ( 2 ) — — — ( 2 )
9 unchanged sentences
Balance at June 30, 2020 112 — — — 112
+Added: Charges (adjustments) ( 18 ) — 1 2 ( 15 )
+Added: Cash payments ( 65 ) — ( 1 ) ( 2 ) ( 68 )
+Added: Translation adjustment — — — 1 1
+Added: Balance at June 30, 2021 $ 29 $ — $ — $ 1 $ 30
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.
−Removed: 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.
−Removed: See Note 24 – Subsequent Events for information relating to the new restructuring program announced subsequent to June 30, 2020.
+Added: Accrued restructuring charges at June 30, 2021 relating to the LBF Program are expected to result in cash expenditures funded from cash provided by operations of approximately $ 23 million and $ 7 million in fiscal 2022 and 2023, respectively.
THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Post-COVID Business Acceleration Program
+Added: On August 20, 2020, the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “PCBA Program”), designed to realign the Company's business to address the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic.
+Added: The PCBA Program is designed to help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty.
+Added: It is expected to further strengthen the Company by building upon the foundational capabilities in which the Company has invested.
+Added: The PCBA 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;
+Added: the reduction in brick-and-mortar point of sale employees and related support staff;
+Added: and the redesign of the Company’s regional branded marketing organizations, plus select opportunities in global brands and functions.
+Added: This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility.
+Added: The Company previously estimated a net reduction over the duration of the PCBA Program in the range of approximately 1,500 to 2,000 positions globally, including temporary and part-time employees.
+Added: The Company has revised these estimates based on the review of the PCBA Program.
+Added: At this time, the Company estimates a net reduction over the duration of the PCBA Program in the range of 2,000 to 2,500 positions globally, including temporary and part-time employees.
+Added: This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees and investment in new positions in key areas.
+Added: The Company also estimates the closure over the duration of the PCBA Program of approximately 10 % to 15 % of its freestanding stores globally, primarily in Europe, the Middle East & Africa and in North America.
+Added: The Company plans to approve specific initiatives under the PCBA Program through fiscal 2022 and expects to complete those initiatives through fiscal 2023.
+Added: The Company expects that the PCBA Program will result in related restructuring and other charges totaling between $ 400 million and $ 500 million, before taxes.
+Added: PCBA Program Approvals
+Added: The PCBA Program cumulative charges (adjustments) approved by the Company through June 30, 2021 were:
+Added: Net Sales) Cost of Sales Operating Expenses Total
+Added: (In millions) Restructuring
+Added: Charges Other
+Added: Total Charges (Adjustments) Approved
+Added: Fiscal 2021 $ 42 $ ( 6 ) $ 257 $ 21 $ 314
+Added: Included in the above table, cumulative PCBA Program restructuring initiatives approved by the Company through June 30, 2021 by major cost type were:
+Added: (In millions) Employee-
+Added: Costs Contract
+Added: Terminations Other Exit
+Added: Restructuring Charges Approved
+Added: Fiscal 2021 $ 132 $ 108 $ 13 $ 4 $ 257
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Specific actions taken since the PCBA Program inception include:
+Added: • Optimize Distribution Network – To help restore profitability to pre-COVID-19 pandemic levels in certain areas of its distribution network and, as part of a broader initiative to be completed in phases, the Company has approved initiatives to close a number of underperforming freestanding stores, counters and other retail locations, mainly in certain affiliates across all geographic regions, including the Company's travel retail network.
+Added: These anticipated closures reflect changing consumer behaviors including higher demand for online and omnichannel capabilities.
+Added: These activities will result in a net reduction in workforce, inventory and other asset write-offs, product returns, and termination of contracts.
+Added: • Optimize Digital Organization and Other Go-To-Market Organizations – The Company approved initiatives to enhance its go-to-market capabilities and shift more resources to support online growth.
+Added: These actions will result in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities.
+Added: • Optimize Select Marketing, Brand and Global Functions – The Company has started to reduce its corporate office footprint and is moving toward the future of work in a post-COVID environment, by restructuring where and how its employees work and collaborate.
+Added: These actions will result primarily in lease termination fees.
+Added: • Exit of the Global Distribution of BECCA Products – In reviewing the Company's brand portfolio to improve efficiency and to ensure the sustainability of long-term investments, the decision was made to exit the global distribution of BECCA products due to its limited distribution, the ongoing decline in product demand and the challenging environment caused by the COVID-19 pandemic.
+Added: These activities resulted in charges for the impairment of goodwill and other intangible assets, product returns, termination of contracts, and employee severance.
+Added: The Company expects to substantially complete these initiatives during fiscal 2022.
+Added: PCBA Program Restructuring and Other Charges
+Added: Restructuring charges are comprised of the following:
+Added: 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.
+Added: Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets in certain freestanding stores (including rights associated with commercial operating leases and operating lease right-of-use assets) that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative.
+Added: These costs also include goodwill and other intangible asset impairment charges relating to the exit of the global distribution of BECCA products.
+Added: 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.
+Added: 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.
+Added: Other charges associated with restructuring activities are comprised of the following:
+Added: 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.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: 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:
+Added: • Consulting and other professional services for organizational design of the future structures and processes as well as the implementation thereof,
+Added: • Temporary labor backfill,
+Added: • Costs to establish and maintain a PMO for the duration of the PCBA Program, 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
+Added: • 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.
+Added: The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met.
+Added: Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were:
+Added: Net Sales) Cost of Sales Operating Expenses Total
+Added: (In millions) Restructuring
+Added: Charges Other
+Added: Total Charges
+Added: Fiscal 2021 $ 14 $ 2 $ 201 $ 4 $ 221
+Added: (In millions) Employee-
+Added: Terminations Other Exit
+Added: Restructuring Charges
+Added: Fiscal 2021 $ 119 $ 75 $ 6 $ 1 $ 201
+Added: (1) Asset-related costs include goodwill and other intangible asset impairment charges of $ 13 million and $ 34 million, respectively, relating to the exit of the global distribution of BECCA products.
+Added: Changes in accrued restructuring charges for the fiscal year ended June 30, 2021 relating to the PCBA Program were:
+Added: (In millions) Employee-
+Added: Costs Contract
+Added: Terminations Other Exit
+Added: Charges $ 119 $ 75 $ 6 $ 1 $ 201
+Added: Cash payments ( 18 ) — ( 6 ) ( 1 ) ( 25 )
+Added: Non-cash asset write-offs — ( 75 ) — — ( 75 )
+Added: Balance at June 30, 2021 $ 101 $ — $ — $ — $ 101
+Added: Accrued restructuring charges at June 30, 2021 relating to the PCBA Program are expected to result in cash expenditures funded from cash provided by operations of approximately $ 79 million, $ 20 million, and $ 2 million for each of fiscal 2022, 2023 and 2024, respectively.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – INCOME TAXES
12 unchanged sentences
A portion of these earnings is taxed in the United States.
−Removed: On December 22, 2017, the U.S.
−Removed: government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”).
−Removed: The TCJA included broad and complex changes to the U.S.
−Removed: tax code that impacted the Company’s accounting and reporting for income taxes.
−Removed: Pursuant to Staff Accounting Bulletin No.
−Removed: 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.
−Removed: 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.
−Removed: government is being issued over an extended period.
−Removed: The issuance of additional guidance and clarification from the U.S.
−Removed: government may result in material changes to the provision for income taxes.
On July 20, 2020, the U.S.
−Removed: government released final and proposed regulations under the global intangible low-taxed income (“GILTI”) provisions of the TCJA.
−Removed: The Company is currently evaluating the impact of the GILTI regulations.
−Removed: The potential impact of applying the GILTI regulations, along with any impact of other guidance that may be issued by the U.S.
−Removed: government, would be recognized in the provision for income taxes in the period that the Company’s evaluation of such guidance is completed.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: government released final and proposed regulations under the global intangible low-taxed income (“GILTI”) provisions of the TCJA that provide for a high-tax exception to the GILTI tax.
+Added: These regulations are retroactive to the original enactment of the GILTI tax provision, which includes the Company's 2020 and 2019 fiscal years.
+Added: The Company has elected to apply the GILTI high-tax exception to fiscal 2021, 2020 and 2019.
A reconciliation of the U.S.
6 unchanged sentences
TCJA net income tax impact — — 0.2
−Removed: Stock-based compensation arrangements – excess tax benefits ( 7.5 ) ( 2.7 ) ( 2.5 )
+Added: Stock-based compensation arrangements – excess tax benefits, net ( 3.0 ) ( 7.5 ) ( 2.7 )
+Added: Previously held equity method investment gain - DECIEM (1)
+Added: GILTI - High-Tax Exception election (adjustment for prior years) ( 1.4 ) — —
Taxation of foreign operations 1.8 11.0 1.9
4 unchanged sentences
13.7 % 33.5 % 22.2 %
−Removed: (1) Includes the mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries (the “Transition Tax”), the remeasurement of U.S.
−Removed: 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.
−Removed: (2) The reconciling items between the Company's U.S.
−Removed: 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.
+Added: (1) Included in Other income, net in the accompanying consolidated statements of earnings for the fiscal year ended June 30, 2021.
+Added: (2) For fiscal 2021 and 2020, the reconciling items between the Company's U.S.
+Added: federal statutory income tax rate and the Company's actual effective tax rate were materially impacted by the increase from fiscal 2020 to fiscal 2021 and the decrease from fiscal 2019 to fiscal 2020, respectively, in earnings before income taxes.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: All excess tax benefits and tax deficiencies related to share-based compensation awards are recorded as income tax expense or benefit in the consolidated statements of earnings.
+Added: The Company recognized $ 99 million, $ 78 million and $ 63 million of excess tax benefits, net as a reduction to the provision for income taxes in the accompanying consolidated statements of earnings for twelve months ended June 30, 2021, 2020 and 2019, respectively.
The Company has approximately $ 6,953 million of undistributed earnings of foreign subsidiaries at June 30, 2021.
3 unchanged sentences
Any state income taxes associated with the distribution of such earnings is not expected to be material.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Significant components of the Company’s deferred income tax assets and liabilities were as follows:
15 unchanged sentences
ROU assets ( 517 ) ( 504 )
+Added: Partnership interest in DECIEM ( 467 ) —
Other differences between tax and financial statement values (3)
1 unchanged sentence
Total deferred tax liabilities ( 1,646 ) ( 1,261 )
−Removed: Total net deferred tax assets $ 44 $ 295
−Removed: (1) Includes deferred tax liabilities associated with book-to-tax basis differences related to the Company's non-taxable acquisitions.
−Removed: (2) Includes the deferred tax liability of $ 117 million associated with the gain on a previously held equity method investment.
−Removed: 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.
+Added: Total net deferred tax assets (liabilities) $ ( 218 ) $ 44
+Added: (1) Includes accumulated deferred tax assets as of June 30, 2021 of $ 175 million associated with goodwill and other intangible asset impairment charges related to the Company's taxable acquisitions.
+Added: (2) Includes deferred tax liabilities associated with book-to-tax basis differences related to the Company's taxable and non-taxable acquisitions.
+Added: (3) Includes the deferred tax liability of $ 117 million associated with the fiscal 2020 gain on a previously held equity method investment.
+Added: As of June 30, 2021 and 2020, the Company had net deferred tax liabilities of $ 218 million, substantially all of which are included in Other noncurrent liabilities in the accompanying consolidated balance sheets, and net deferred tax assets of $ 44 million, substantially all of which are included in Other assets in the accompanying consolidated balance sheets, respectively.
As of June 30, 2021 and 2020, certain subsidiaries had net operating loss and other carryforwards for tax purposes of approximately $ 531 million and $ 352 million, respectively.
1 unchanged sentence
Deferred tax assets, net of valuation allowances, in the amount of $ 24 million and $ 14 million as of June 30, 2021 and 2020, respectively, have been recorded to reflect the tax benefits of the carryforwards not utilized to date.
−Removed: 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.
−Removed: As of June 30, 2020 and 2019, the Company had gross unrecognized tax benefits of $ 70 million and $ 67 million, respectively.
−Removed: The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $ 56 million.
THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: 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.
+Added: As of June 30, 2021, 2020 and 2019, the Company had gross unrecognized tax benefits of $ 62 million, $ 70 million, and $ 67 million, respectively.
+Added: At June 30, 2021, the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $ 53 million.
The Company classifies applicable interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.
−Removed: 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 .
+Added: The total gross accrued interest and penalty expense recorded during fiscal 2021, 2020 and 2019 in the accompanying consolidated statements of earnings was $ 2 million, $ 3 million and $ 4 million, respectively.
The total gross accrued interest and penalties in the accompanying consolidated balance sheets at June 30, 2021 and 2020 were $ 14 million and $ 13 million, respectively.
6 unchanged sentences
Amounts of decreases in unrecognized tax benefits relating to settlements with taxing authorities
+Added: ( 13 ) ( 4 ) ( 7 )
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statutes of limitations
+Added: ( 2 ) ( 2 ) ( 1 )
End of year balance of gross unrecognized tax benefits $ 62 $ 70 $ 67
3 unchanged sentences
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.
−Removed: 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.
+Added: Subsequent to June 30, 2021, the IRS completed its examination procedures with respect to fiscal 2020 under the IRS CAP.
+Added: There was no impact to the Company’s consolidated financial statements.
+Added: The Company expects to receive formal notification of the conclusion of the IRS CAP process for fiscal 2020 during fiscal 2022.
As of June 30, 2021, the compliance process was ongoing with respect to fiscal 2021.
2 unchanged sentences
During fiscal 2021, 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.
−Removed: 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.
+Added: On the basis of the information available in this regard as of June 30, 2021, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.
THE ESTÉE LAUDER COMPANIES INC.
10 unchanged sentences
Italy 2016 – 2021
+Added: Japan 2020 – 2021
Korea 2019 - 2021
8 unchanged sentences
The Company believes that its tax reserves are adequate for all years subject to examination.
−Removed: NOTE 10 – OTHER ACCRUED LIABILITIES
+Added: NOTE 10 – OTHER ACCRUED AND NONCURRENT LIABILITIES
Other accrued liabilities consist of the following:
2 unchanged sentences
Employee compensation 670 424
+Added: Payroll and other non-income taxes 359 250
Deferred revenue 322 222
+Added: Sales return accrual 369 212
Other 1,181 1,041
$ 3,195 $ 2,405
+Added: At June 30, 2021 and 2020, total Other noncurrent liabilities of $ 2,037 million and $ 1,448 million included $ 849 million and $ 399 million of deferred tax liabilities, respectively.
THE ESTÉE LAUDER COMPANIES INC.
12 unchanged sentences
5.75 % Senior Notes, due October 15, 2033 (“2033 Senior Notes”)
+Added: 1.950 % Senior Notes, due March 15, 2031 (“2031 Senior Notes”)
2.600 % Senior Notes, due April 15, 2030 ("2030 Senior Notes")
4 unchanged sentences
1.70 % Senior Notes, due May 10, 2021 (“2021 Senior Notes”)
−Removed: 1.80 % Senior Notes, due February 7, 2020 (“2020 Senior Notes”)
Commercial paper
5 unchanged sentences
$ 5,537 $ 4,914
−Removed: (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.
THE ESTÉE LAUDER COMPANIES INC.
22 unchanged sentences
2031 Senior Notes (5),(9)
+Added: March 2021 99.340 2.023 600 ( 4 ) 8 ( 4 ) March 15/September 15
+Added: 2030 Senior Notes (7),(9)
April 2020 99.816 2.621 700 ( 1 ) 2 ( 4 ) April 15/October 15
7 unchanged sentences
August 2012 99.911 2.360 250 — 5 — February 15/August 15
−Removed: 2021 Senior Notes (6),(7),(9)
−Removed: 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 %.
11 unchanged sentences
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.
+Added: (5) In March 2020, in anticipation of the issuance of the 2031 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $ 200 million at a weighted-average all-in rate of 0.84 %.
+Added: The treasury lock agreements were settled upon the issuance of the new debt, and the Company recognized a gain in OCI of $ 11 million that is being amortized to interest expense over the life of the 2031 Senior Notes.
+Added: As a result of the treasury lock agreements, as well as the debt discount and debt issuance costs, the effective interest rate on the 2031 Senior Notes will be 1.89 % over the life of the debt.
(6) 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 %.
1 unchanged sentence
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.
−Removed: (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.
−Removed: (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 %.
−Removed: 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.
−Removed: 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.
+Added: (7) The Company entered into interest rate swap agreements with a notional amount totaling $ 250 million and $ 700 million to effectively convert the fixed rate interest on its outstanding 2022 Senior Notes and 2030 Senior Notes to variable interest rates based on three months LIBOR plus a margin.
(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 %.
1 unchanged sentence
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.
−Removed: (9) The Senior Notes contain certain customary incurrence-based covenants, including limitations on indebtedness secured by liens.
+Added: (9) The Senior Notes contain certain customary covenants, including limitations on indebtedness secured by liens.
THE ESTÉE LAUDER COMPANIES INC.
7 unchanged sentences
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.
−Removed: At June 30, 2020, $ 750 million was outstanding under the New Facility.
−Removed: 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.
+Added: At June 30, 2021, no borrowings were outstanding under the New Facility.
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.
2 unchanged sentences
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.
+Added: In March 2021, the Company completed a public offering of $ 600 million aggregate principal amount of its 2031 Senior Notes.
+Added: The Company used some of the net proceeds from this offering for general corporate purposes, including to fund the acquisition of DECIEM, operating expenses, working capital and capital expenditures.
+Added: In April 2021, the Company repaid $ 450 million aggregate principal amount of its 1.700 % Senior Notes due May 10, 2021 in full, partially from the net proceeds of the 2031 Senior Notes issued and cash on hand, and the corresponding interest rate swaps were settled.
The Company has a $ 1,500 million commercial paper program under which it may issue commercial paper in the United States.
2 unchanged sentences
Interest rate terms for these facilities vary by region and reflect prevailing market rates for companies with strong credit ratings.
−Removed: 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.
+Added: During fiscal 2021 and 2020, the average amount outstanding was approximately $ 12 million and $ 12 million, respectively, and the annualized weighted-average interest rate incurred was approximately 13.0 % and 10.3 %, respectively.
Refer to Note 16 – Commitments and Contingencies for the Company’s projected debt service payments, as of June 30, 2021, over the next five fiscal years.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – DERIVATIVE FINANCIAL INSTRUMENTS
2 unchanged sentences
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.
−Removed: 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.
−Removed: The Company entered into the net investment hedges to offset the risk of changes in the U.S.
+Added: The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges.
+Added: The Company enters 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.
5 unchanged sentences
Costs associated with entering into derivative financial instruments have not been material to the Company’s consolidated financial results.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: 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.
22 unchanged sentences
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:
−Removed: Amount of Gain or (Loss)
−Removed: Recognized in OCI on Derivatives Location of Gain or
−Removed: (Loss) Reclassified Amount of Gain or (Loss)
+Added: Amount of Gain (Loss)
+Added: Recognized in OCI on Derivatives Location of Gain
+Added: (Loss) Reclassified Amount of Gain (Loss)
Reclassified from AOCI into
4 unchanged sentences
Interest rate-related derivatives 14 ( 12 ) Interest expense ( 2 ) —
+Added: ( 45 ) 26 ( 24 ) 35
Derivatives in Net Investment Hedging Relationships (2) :
Foreign currency forward contracts (3)
+Added: ( 73 ) ( 68 ) — —
Total derivatives $ ( 118 ) $ ( 42 ) $ ( 24 ) $ 35
(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.
−Removed: (2) During fiscal 2020 the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 43 million.
+Added: (2) During fiscal 2021 and 2020 the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 19 million and $ 43 million, respectively.
(3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.
−Removed: Amount of Gain or (Loss) Recognized in Earnings on Derivatives (1)
−Removed: Location of Gain or (Loss) June 30
+Added: Amount of Gain (Loss) Recognized in Earnings on Derivatives (1)
+Added: Location of Gain (Loss) June 30
(In millions) Recognized in Earnings on Derivatives 2021 2020
10 unchanged sentences
Included in the Carrying Amount of the Hedged
−Removed: June 30, 2020 June 30, 2020
+Added: June 30, 2021
Current debt $ — $ —
4 unchanged sentences
Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows:
−Removed: June 30, 2020 June 30, 2019
(In millions) Net Sales Interest Expense Net Sales Interest Expense
6 unchanged sentences
Gain (loss) on cash flow hedge relationships – interest rate contracts:
−Removed: Amount of gain reclassified from AOCI into earnings Not applicable — Not applicable 1
+Added: Amount of loss reclassified from AOCI into earnings Not applicable ( 2 ) Not applicable —
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings ( 22 ) Not applicable 35 Not applicable
−Removed: The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows:
−Removed: Amount of Gain or (Loss)
+Added: The amount of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows:
+Added: Amount of Gain (Loss)
Recognized in Earnings on Derivatives
−Removed: Location of Gain or (Loss) June 30
+Added: Location of Gain (Loss) June 30
(In millions) Recognized in Earnings on Derivatives 2021 2020
14 unchanged sentences
As of June 30, 2021, the Company’s foreign currency cash flow hedges were highly effective.
−Removed: 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.
−Removed: The accumulated net gain on derivative instruments in AOCI was $ 20 million and $ 29 million as of June 30, 2020 and 2019, respectively.
+Added: The estimated net loss on the Company’s derivative instruments designated as cash flow hedges as of June 30, 2021 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $ 10 million.
+Added: The accumulated net gain (loss) on derivative instruments in AOCI was $( 1 ) million and $ 20 million as of June 30, 2021 and 2020, respectively.
Fair Value Hedges
The Company enters into interest rate derivative contracts to manage the exposure to interest rate fluctuations on its funded indebtedness.
−Removed: 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.
+Added: The Company has interest rate swap agreements, with notional amounts totaling $ 250 million, $ 700 million and $ 300 million to effectively convert the fixed rate interest on its 2022 Senior Notes, 2030 Senior Notes and 2031 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.
3 unchanged sentences
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.
−Removed: The net investment hedge contracts have varying maturities through the end of July 2020.
+Added: The net investment hedge contracts have varying maturities through the end of September 2021.
Hedge effectiveness of the net investment hedge contracts is based on the spot method.
20 unchanged sentences
(In millions) Level 1 Level 2 Level 3 Total
+Added: Money market funds $ 2,079 $ — $ — $ 2,079
Foreign currency forward contracts — 52 — 52
2 unchanged sentences
Foreign currency forward contracts $ — $ 56 $ — $ 56
−Removed: Interest rate-related derivatives — 3 — 3
−Removed: Contingent consideration — — 4 4
+Added: DECIEM stock options — — 141 141
Total $ — $ 56 $ 141 $ 197
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
+Added: Money market funds $ 2,810 $ — $ — $ 2,810
Foreign currency forward contracts — 87 — 87
5 unchanged sentences
Total $ — $ 83 $ 4 $ 87
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The estimated fair values of the Company’s financial instruments are as follows:
4 unchanged sentences
Current and long-term debt 5,569 6,262 6,136 6,902
−Removed: Additional purchase price payable — — 3 3
Contingent consideration — — 4 4
+Added: DECIEM stock options 141 141 — —
Foreign currency forward contracts – asset (liability), net ( 4 ) ( 4 ) 7 7
−Removed: Interest rate-related derivatives – asset (liability), net 12 12 ( 23 ) ( 23 )
+Added: Interest rate-related derivatives – asset, net 15 15 12 12
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 2021, 2020 and 2019:
2 unchanged sentences
Measurement Fair Value (1)
+Added: GLAMGLOW $ 54 November 30, 2020 $ —
+Added: 13 February 28, 2021 —
+Added: Other 4 June 30, 2021 —
+Added: Other intangible assets, net (trademark and customer lists)
+Added: GLAMGLOW 52 November 30, 2020
+Added: April 1, 2021 11
+Added: 34 February 28, 2021 —
+Added: Smashbox 11 April 1, 2021 21
+Added: Long-lived assets 71 March 31, 2021
+Added: June 30, 2021 66
+Added: Total impairments $ 239 $ 98
+Added: (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.
+Added: (2) See Note 8 – Charges Associated with Restructuring and Other Activities for further information relating to goodwill and other intangible asset impairment charges recorded in connection with the exit of the global distribution of BECCA products.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: (In millions) Impairment
+Added: Charges Date of Fair Value
+Added: Measurement Fair Value (1)
Too Faced $ 592 March 31, 2020 $ 13
15 unchanged sentences
(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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions) Impairment
7 unchanged sentences
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).
−Removed: The carrying amount approximates fair value, primarily due to the short maturity of cash equivalent instruments.
+Added: Cash deposits in interest bearing accounts and time deposits are carried at cost, which approximates fair value, due to the short maturity of cash equivalent instruments.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
6 unchanged sentences
The Company’s debt is classified within Level 2 of the valuation hierarchy.
−Removed: 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 %.
−Removed: The additional purchase price payable is classified within Level 2 of the valuation hierarchy.
+Added: DECIEM stock options – The stock option liability represents the employee stock options issued by DECIEM in replacement and exchange for certain vested and unvested DECIEM employee stock options previously issued by DECIEM, in connection with the Company's acquisition of DECIEM.
+Added: The DECIEM stock options are subject to the terms and conditions of DECIEM's 2021 Stock Option Plan.
+Added: The initial fair value of the DECIEM stock option liability was calculated using the acquisition date fair value multiplied by the number of options replaced (consisting of vested and partially vested stock options) on the day following the acquisition date.
+Added: The acquisition date fair value was calculated using the Monte Carlo Method, which requires certain assumptions.
+Added: These inputs are categorized as Level 3 of the valuation hierarchy.
+Added: The DECIEM stock options will be remeasured to fair value at each reporting date through settlement, with the offsetting entry to compensation expense, through the period when the options are exercised or repurchased.
+Added: See Note 5 – Acquisition of Businesses and Note 18 – Stock Programs for discussion.
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.
−Removed: 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.
−Removed: Significant changes in the projected future operating results would result in a significantly higher or lower fair value measurement.
−Removed: As these are unobservable inputs, the Company’s contingent consideration is classified within Level 3 of the valuation hierarchy.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: At June 30, 2021, there was no contingent consideration outstanding.
Changes in the fair value of the contingent consideration obligations for the year ended June 30, 2021 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows:
8 unchanged sentences
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.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
16 unchanged sentences
The estimated standalone selling price allocated to promotional goods is based on a cost plus margin approach.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: 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.
6 unchanged sentences
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.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
12 unchanged sentences
Accounts Receivable
+Added: For further information on the Company's policies relating to accounts receivable see Note 2 – Summary of Significant Accounting Policies.
Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $ 40 million and $ 63 million as of June 30, 2021 and June 30, 2020, respectively.
−Removed: 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.
−Removed: In addition, if the good/service is transferred and payment is received within one year, the Company does not determine significant financing components.
+Added: Changes in the allowance for credit losses are as follows:
+Added: (In millions)
+Added: Balance at June 30, 2020 $ 36
+Added: ASC 326 cumulative effect adjustment (pre-tax) 4
+Added: Adjustment for expected credit losses ( 8 )
+Added: Write-offs, net & other ( 12 )
+Added: Balance at June 30, 2021 $ 20
+Added: As a result of the adoption of ASC 326, the Company recorded a cumulative adjustment of approximately $ 3 million, net of tax, as a reduction to its fiscal 2021 opening balance of retained earnings relating to its trade receivables.
+Added: The remaining balance of the allowance for doubtful accounts of $ 20 million, as of June 30, 2021, relates to non-credit losses, which are primarily due to customer deductions.
THE ESTÉE LAUDER COMPANIES INC.
1 unchanged sentence
Deferred Revenue
−Removed: Significant changes in deferred revenue during the period are as follows:
−Removed: (In millions) June 30, 2020
−Removed: Balance at June 30, 2019
+Added: Changes in deferred revenue are as follows:
+Added: (In millions) 2021 2020
+Added: Balance at the beginning of the year $ 279 $ 361
Revenue recognized that was included in the deferred revenue balance at the beginning of the period ( 201 ) ( 271 )
Revenue deferred during the period 294 189
−Removed: Balance at June 30, 2020
+Added: Other ( 1 ) —
+Added: Balance at the end of the year $ 371 $ 279
Transaction Price Allocated to the Remaining Performance Obligations
At June 30, 2021, 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 $ 322 million.
+Added: The remaining balance of deferred revenue at June 30, 2021 will be recognized beyond the next twelve months .
THE ESTÉE LAUDER COMPANIES INC.
80 unchanged sentences
Benefits, expenses, taxes and premiums paid ( 74 ) ( 59 ) ( 35 ) ( 32 ) ( 6 ) ( 7 )
−Removed: ( 59 ) ( 73 ) ( 32 ) ( 31 ) ( 7 ) ( 7 )
+Added: Plan amendments 1 — — — — —
Settlements — — ( 22 ) ( 3 ) — —
+Added: Special termination benefits — — 10 — — —
Benefit obligation at end of year $ 1,075 $ 1,082 $ 700 $ 636 $ 209 $ 190
7 unchanged sentences
Benefits, expenses, taxes and premiums paid from plan assets ( 74 ) ( 59 ) ( 35 ) ( 32 ) ( 6 ) ( 7 )
−Removed: ( 59 ) ( 73 ) ( 32 ) ( 31 ) ( 7 ) ( 7 )
Fair value of plan assets at end of year $ 981 $ 930 $ 681 $ 611 $ 24 $ 27
7 unchanged sentences
Net amount recognized $ 106 $ 131 $ ( 4 ) $ ( 1 ) $ ( 158 ) $ ( 146 )
+Added: For the twelve months ended June 30, 2021, the actuarial gains and losses affecting the benefit obligations were not material.
+Added: For the twelve months ended June 30, 2020, the $ 101 million actuarial loss relating to the U.S.
+Added: pension plans was primarily due to declines in the discount rates relating to the Retirement Growth Account Plan and the Restoration Plan from 3.8 % to 3.0 % and 3.4 % to 2.5 %, respectively.
+Added: The decline in the discount rates as of June 30, 2020 were a result of lower rates on highly rated long-term bonds.
THE ESTÉE LAUDER COMPANIES INC.
14 unchanged sentences
Net periodic benefit cost $ 43 $ 36 $ 32 $ 45 $ 39 $ 32 $ 7 $ 7 $ 8
−Removed: Weighted-average assumptions used to determine benefit obligations at June 30:
+Added: Assumptions used to determine benefit obligations at June 30 (1) :
Discount rate 2.50 – 3.00 %
11 unchanged sentences
1.00 – 5.50 %
−Removed: Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30:
+Added: 1.00 – 5.50 %
+Added: Assumptions used to determine net periodic benefit cost for the year ended June 30 (2) :
Discount rate 2.50 – 3.00 %
14 unchanged sentences
1.00 – 5.50 %
+Added: (1) The weighted-average assumptions used to determine benefit obligations at June 30, 2021 were as follows:
+Added: Discount rate - 2.94 % (U.S.), 1.59 % (International) and 2.92 % (Other than Pension Plans, Post-retirement)
+Added: Rate of compensation increase - 2.50 % - 8.00 %, graded (U.S.), 2.81 % (International) and N/A (Other than Pension Plans, Post-retirement)
+Added: (2) The weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30, 2021 were as follows:
+Added: Discount rate - 2.93 % (U.S.), 1.44 % (International) and 2.90 % (Other than Pension Plans, Post-retirement)
+Added: Expected return on assets - 6.25 % (U.S.
+Added: and Other than Pension Plans, Post-retirement) and 2.06 % (International)
+Added: Rate of compensation increase - 2.50 % - 8.00 %, graded (U.S.), 2.72 % (International) and N/A (Other than Pension Plans, Post-retirement)
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.
3 unchanged sentences
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.
+Added: The weighted-average interest crediting rate used to determine the benefit oblation and net periodic benefit cost relating to the Company’s U.S.
+Added: Retirement Growth Account Plan was 4.02 % as of and for the years ended June 30, 2021 and 2020.
THE ESTÉE LAUDER COMPANIES INC.
1 unchanged sentence
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans.
−Removed: 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.
−Removed: A 100 basis-point change in assumed health care cost trend rates for fiscal 2020 would have had the following effects:
−Removed: (In millions) 100 Basis-Point
−Removed: Increase 100 Basis-Point
−Removed: Effect on total service and interest costs $ 1 $ ( 1 )
−Removed: Effect on post-retirement benefit obligations $ 13 $ ( 11 )
+Added: 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 19 years to 25 years.
Amounts recognized in AOCI (before tax) as of June 30, 2021 are as follows:
4 unchanged sentences
Net actuarial losses, beginning of year $ 282 $ 30 $ 17 $ 329
−Removed: Actuarial losses recognized 45 ( 40 ) 4 9
+Added: Actuarial losses (gains) recognized ( 64 ) ( 6 ) 10 ( 60 )
Amortization and settlements included in net periodic benefit cost ( 20 ) ( 4 ) — ( 24 )
5 unchanged sentences
Total amounts recognized in AOCI $ 200 $ 15 $ 27 $ 242
−Removed: Amounts in AOCI expected to be amortized as components of net periodic benefit cost during fiscal 2021 are as follows:
−Removed: Pension Plans Other than
−Removed: Pension Plans
−Removed: (In millions) U.S.
−Removed: International Post-retirement
−Removed: Net prior service cost (credit) $ — $ ( 1 ) $ —
−Removed: 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:
−Removed: Pension Plans
+Added: Pension Plans Other than Pension Plans
Retirement Growth
−Removed: Account Restoration International
+Added: Account Restoration International Post-retirement
(In millions) 2021 2020 2021 2020 2021 2020 2021 2020
14 unchanged sentences
2024 51 35 10
+Added: 2025 52 36 11
+Added: 2026 52 36 11
Years 2027 – 2031 292 172 63
18 unchanged sentences
These investments are classified within Level 2 of the valuation hierarchy.
−Removed: 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.
−Removed: These investments are classified within Level 2 of the valuation hierarchy.
THE ESTÉE LAUDER COMPANIES INC.
32 unchanged sentences
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The following table presents the changes in Level 3 plan assets for fiscal 2020:
−Removed: (In millions) Insurance Contracts
−Removed: Balance as of June 30, 2019 $ 49
+Added: The following table presents the changes in Level 3 plan assets:
+Added: (In millions) 2021 2020
+Added: Insurance Contracts
+Added: Balance at beginning of year $ 49 $ 49
Actual return on plan assets:
2 unchanged sentences
Foreign exchange impact 5 —
−Removed: Balance as of June 30, 2020 $ 49
+Added: Balance at end of year $ 54 $ 49
401(k) Savings Plan (U.S.)
33 unchanged sentences
(2) Unconditional purchase obligations primarily include:
−Removed: royalty payments pursuant to license agreements, inventory commitments, third-party distribution commitments and advertising commitments.
+Added: royalty payments pursuant to license agreements, inventory commitments, capital expenditure commitments, information technology contract 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, 2021, without consideration for potential renewal periods.
9 unchanged sentences
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.
−Removed: Contingencies
−Removed: 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.
−Removed: This review is substantially completed, and modifications are being made to certain advertising claims.
−Removed: 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.
−Removed: The Company has determined that this matter is not material to the Company, and no accrual has been recorded.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 – COMMON STOCK
2 unchanged sentences
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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information about the Company’s common stock outstanding is as follows:
15 unchanged sentences
As of June 30, 2021, the remaining authorized share repurchase balance was 32.7 million shares.
+Added: Subsequent to June 30, 2021 and as of August 20, 2021, the Company purchased approximately 0.8 million additional shares of the Company's Class A Common Stock for $ 244 million pursuant to its share repurchase program.
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, 2021:
3 unchanged sentences
February 4, 2021 February 26, 2021 March 15, 2021 $ .53
−Removed: 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.
−Removed: On August 19, 2020, a dividend was declared in the amount of $ .48 per share on our Class A and Class B Common Stock.
+Added: April 30, 2021 May 28, 2021 June 15, 2021 $ .53
+Added: On August 18, 2021, a dividend was declared in the amount of $ .53 per share on the Company's Class A and Class B Common Stock.
The dividend is payable in cash on September 15, 2021 to stockholders of record at the close of business on August 31, 2021.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 – STOCK PROGRAMS
3 unchanged sentences
The Company may satisfy the obligation of its stock-based compensation awards with either new or treasury shares.
−Removed: The Company’s equity compensation awards include stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs and share units.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: The Company’s equity compensation awards include stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs, including long-term price-vested units (“PVUs”), and share units.
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.
3 unchanged sentences
Compensation expense (1)
+Added: $ 327 $ 213 $ 243
Income tax benefit $ 50 $ 41 $ 47
−Removed: 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 .
+Added: (1) Excludes compensation expense relating to liability-classified awards, including DECIEM stock options discussed below.
+Added: As of June 30, 2021, the total unrecognized compensation cost related to unvested stock-based awards was $ 230 million and the related weighted-average period over which it is expected to be recognized is approximately one year .
Stock Options
19 unchanged sentences
(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.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The exercise period for all stock options generally may not exceed ten years from the date of grant.
5 unchanged sentences
Per-share weighted-average grant date fair value of stock options granted $ 54.83 $ 51.46 $ 38.62
−Removed: $ 51.46 $ 38.62 $ 27.76
Intrinsic value of stock options exercised $ 407 $ 309 $ 283
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: 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:
+Added: The fair value of each of the Company's option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
Year Ended June 30
10 unchanged sentences
Restricted Stock Units
−Removed: 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:
+Added: The Company granted RSUs in respect of approximately 1.0 million shares of Class A Common Stock during fiscal 2021 with a weighted-average grant date fair value per share of $ 220.04 that, at the time of grant, are scheduled to vest as follows:
0.3 million in fiscal 2022, 0.4 million in fiscal 2023 and 0.3 million in fiscal 2024.
12 unchanged sentences
1,857.2 195.77
−Removed: Performance Share Units
−Removed: 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.
−Removed: 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.
THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: 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.
−Removed: 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.
+Added: Performance Share Units
+Added: During fiscal 2021, the Company granted PSUs with a target payout of approximately 0.2 million shares of Class A Common Stock with a weighted-average grant date fair value per share of $ 217.88 , which will be settled in stock subject to the achievement of the Company’s net sales and diluted net earnings per common share for the three fiscal years ending June 30, 2023, all subject to continued employment or the retirement of the grantees.
+Added: For PSUs granted, no settlement will occur for results below the applicable minimum threshold.
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.
−Removed: These awards are subject to the provisions of the agreement under which the PSUs are granted.
−Removed: The PSUs generally vest at the end of the performance period.
−Removed: 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.
−Removed: 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.
+Added: In September 2020, approximately 0.2 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 the issuance, in settlement of 0.5 million PSUs which vested as of June 30, 2020.
The following is a summary of the status of the Company’s PSUs as of June 30, 2021 and activity during the fiscal year then ended:
4 unchanged sentences
Granted 161.2 217.88
−Removed: Vested ( 512.1 ) 92.19
+Added: Vested and issued (1)
Forfeited ( 56.2 ) 92.18
Nonvested at June 30, 2021
+Added: (1) Approximately 0.2 million PSUs with a performance period ended June 30, 2021 to be issued in September 2021 are included in Nonvested at June 30, 2021.
Long-term Performance Share Units
4 unchanged sentences
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.
−Removed: 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.
+Added: Through June 30, 2021, 129,283 shares of the Company’s Class A Common Stock were 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.
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.
12 unchanged sentences
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.
+Added: Since the Company achieved positive Cumulative Operating Income, as defined in the PSU award agreement, for the fiscal year ended June 30, 2021, the end of the first performance period under the grant, 97,970 shares of the Company’s Class A Common Stock are anticipated to be issued, and the related dividends to be paid, in accordance with the terms of the grant.
+Added: In March 2021, the Company granted to the Company’s Chief Executive Officer (“CEO”) PSUs with an aggregate payout of 68,578 shares of the Company's Class A Common Stock, to incentivize him to continue serving through at least June 30, 2024.
+Added: Generally, no portion of this award will vest unless the Company has achieved positive Cumulative Operating Income, as defined in the performance share unit award agreement, during the relevant performance period, and delivery of shares of the Company’s Class A Common Stock, if any, will be made on September 2, 2025.
+Added: The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as any delivery of shares of the Company's Class A Common Stock.
+Added: The aggregate grant date fair value of the PSUs of approximately $ 20 million was estimated using the closing stock price of the Company's Class A Common Stock on the date of grant.
+Added: Long-term Price-Vested Units
+Added: In March 2021, the Company granted to the Company’s CEO PVUs with an aggregate payout of 85,927 shares, divided into three tranches, of the Company's Class A Common Stock, to incentivize him to continue serving through at least June 30, 2024.
+Added: Generally, no portion of this award will vest unless the Company has achieved positive Cumulative Operating Income, as defined in the price-vested unit award agreement, during the relevant performance period.
+Added: In addition, the vesting of each tranche is contingent upon the Company’s achievement of the respective stock price goal, which means that the average closing price per share of the Company’s Class A Common Stock traded on the New York Stock Exchange be at or above the applicable stock price goal (noted in the table below) for 20 consecutive trading days during the applicable performance period.
+Added: The number of shares subject to each tranche of the price-vested unit award, as well as the stock price goals, service periods, performance periods and share delivery dates for each tranche are as follows:
+Added: Tranche Stock Price Goal
+Added: (per Share) Service Period Performance Period for Stock Price Goal Performance Period for Cumulative Operating Income Goal Share Delivery Date
+Added: First tranche 27,457 $ 323.03 March 11, 2021 - June 30, 2024 March 11, 2021 - June 30, 2024 July 1, 2021 - June 30, 2025 September 2, 2025
+Added: Second tranche 28,598 $ 333.21 March 11, 2021 - June 30, 2024 March 11, 2021 - June 30, 2024 July 1, 2021 - June 30, 2025 September 2, 2025
+Added: Third tranche 29,872 $ 343.61 March 11, 2021 - June 30, 2024 March 11, 2021 - June 30, 2024 July 1, 2021 - June 30, 2025 September 2, 2025
+Added: Total shares 85,927
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: Generally, delivery of shares of the Company’s Class A Common Stock, if any, will be made on September 2, 2025.
+Added: The PVUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as any delivery of shares of the Company's Class A Common Stock.
+Added: The aggregate grant date fair value of the PVUs of approximately $ 20 million was estimated using the Monte Carlo Method, which requires certain assumptions.
+Added: The significant assumptions used for this award were as follows:
+Added: Expected volatility 31.8 %
+Added: Dividend yield 0.8 %
+Added: Risk-free interest rate 0.4 %
+Added: Expected term 3.3 years
The Company grants share units to certain non-employee directors under the Amended and Restated Non-Employee Director Share Incentive Plan.
11 unchanged sentences
The Company recorded $ 29 million, $ 2 million and $ 9 million as compensation expense to reflect additional deferrals and the change in the market value for fiscal 2021, 2020 and 2019, respectively.
+Added: DECIEM Stock Options
+Added: As a result of the fiscal 2021 acquisition of additional shares of DECIEM, the Company has a stock option plan relating to its majority-owned subsidiary DECIEM (“DECIEM Stock Option Plan”).
+Added: The DECIEM stock options were issued in replacement of and exchange for certain vested and unvested DECIEM employee stock options previously issued by DECIEM.
+Added: The DECIEM stock options are subject to the terms and conditions of the DECIEM 2021 Stock Option Plan.
+Added: At exchange or replacement date, post-combination vested options totaled 90,978 options and post-combination unvested options totaled 3,123 options of which 59 vested as of June 30, 2021.
+Added: The DECIEM stock options are liability-classified awards as they are expected to be settled in cash and will be remeasured to fair value at each reporting date through date of settlement.
+Added: Total stock-based compensation expense is attributable to the exchange or replacement of and the remaining requisite service period of stock options.
+Added: The total stock option expense from the date of acquisition to June 30, 2021 was $ 40 million, with no related income tax benefit.
+Added: As of June 30, 2021, the total unrecognized compensation cost related to unvested stock awards of the DECIEM Stock Option Plan was $ 4 million and the related weighted-average period over which it is expected to be recognized is approximately two years .
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
+Added: The following is a summary of the DECIEM stock option program as of June 30, 2021 and changes during the fiscal year then ended:
+Added: (Shares in thousands) Shares Weighted-
+Added: Price Per Share Aggregate
+Added: (in millions)
+Added: Weighted-Average
+Added: Contractual Life
+Added: Remaining in Years
+Added: Outstanding at June 30, 2020
+Added: Granted at fair value 94.1 52.76
+Added: Outstanding at June 30, 2021
+Added: 94.1 52.76 $ 145 2.9
+Added: Vested and expected to vest at June 30, 2021
+Added: 91.0 54.54 $ 140 2.9
+Added: Exercisable at June 30, 2021
+Added: (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.
+Added: Stock option grants to individuals under the DECIEM Stock Option Plan will vest between two to seven tranches over a service period of up to two years .
+Added: The Company attributes the value of option awards under the DECIEM Stock Option Plan on a graded vesting basis where awards vest at specified rates over a specified period.
+Added: 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:
+Added: Year Ended June 30
+Added: 2021 2020 2019
+Added: Per-share weighted-average grant date fair value of stock options granted $ 1,557 $ — $ —
+Added: Intrinsic value of stock options exercised $ — $ — $ —
+Added: The initial fair value of the DECIEM stock option liability was calculated using the acquisition date fair value multiplied by the number of options replaced (consisting of vested and partially vested stock options) on the day following the acquisition date.
+Added: As discussed in Note 5 – Acquisition of Businesses, DECIEM stock options, with total fair value of $ 294 million, were reported as part of the total consideration transferred.
+Added: The DECIEM stock options are reported as a stock option liability of $ 141 million in Other noncurrent liabilities in the accompanying consolidated balance sheets at June 30, 2021.
+Added: The fair value of the stock options were calculated using the following key assumptions into the Monte Carlo Method:
+Added: May 18, 2021 June 30, 2021
+Added: Risk-free rate 0.50 % 0.50 %
+Added: Term to mid of last twelve-month period 2.54 years 2.42 years
+Added: Operating leverage adjustment 0.45 0.45
+Added: Net sales discount rate 3.30 % 3.40 %
+Added: EBITDA discount rate 6.80 % 6.90 %
+Added: EBITDA volatility 38.30 % 37.70 %
+Added: Net sales volatility 17.20 % 17.00 %
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 – NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.
2 unchanged sentences
per common share (“basic EPS”) is computed by dividing Net earnings attributable to The Estée Lauder Companies Inc.
−Removed: by the weighted-average number of common shares outstanding and contingently issuable shares (which satisfy certain conditions).
+Added: by the weighted-average number of common shares outstanding and shares underlying PSUs and RSUs where the vesting conditions have been met.
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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows:
12 unchanged sentences
Diluted $ 7.79 $ 1.86 $ 4.82
−Removed: 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.
−Removed: 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.
+Added: The shares of Class A Common Stock underlying stock options, RSUs and PSUs that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive were as follows:
+Added: Year Ended June 30
+Added: (In millions) 2021 2020 2019
+Added: Stock options 0.7 1.3 —
+Added: RSUs and PSUs 0.1 — —
As of June 30, 2021, 2020 and 2019, 0.9 million shares, 1.2 million shares and 1.3 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 .
6 unchanged sentences
Net unrealized investment losses, beginning of year $ — $ — $ ( 14 )
−Removed: Unrealized investment gains (losses) — 14 ( 13 )
+Added: Unrealized investment gains — — 14
Net unrealized investment losses, end of year — — —
Net derivative instruments, beginning of year 14 21 39
−Removed: Gain on derivative instruments 26 5 12
−Removed: Provision for deferred income taxes ( 7 ) ( 2 ) ( 2 )
+Added: Gain (loss) on derivative instruments ( 45 ) 26 5
+Added: Benefit (provision) for deferred income taxes 10 ( 7 ) ( 2 )
Reclassification to earnings during the year:
2 unchanged sentences
Interest rate-related derivatives (2)
−Removed: — ( 1 ) ( 1 )
Benefit (provision) for deferred income taxes on reclassification (3)
−Removed: Reclassification to retained earnings — — 2
Net derivative instruments, end of year ( 2 ) 14 21
10 unchanged sentences
( 5 ) ( 5 ) ( 3 )
−Removed: Reclassification to retained earnings — — ( 34 )
Net pension and post-retirement adjustments, end of year ( 179 ) ( 244 ) ( 253 )
5 unchanged sentences
Accumulated other comprehensive loss $ ( 470 ) $ ( 665 ) $ ( 563 )
−Removed: (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.
−Removed: 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.
+Added: (1) Amounts recorded in Net sales in the accompanying consolidated statements of earnings.
(2) Amounts recorded in Interest expense in the accompanying consolidated statements of earnings.
12 unchanged sentences
Capital lease 1 , capitalized interest and asset retirement obligations incurred
−Removed: Non-cash purchases of short- and long-term investments, net $ — $ — $ 14
Property, plant and equipment accrued but unpaid $ 97 $ 39 $ 52
+Added: DECIEM stock option purchase price payable $ 103 $ — $ —
+Added: (1) Applicab1e for fiscal 2019 only.
NOTE 22 – SEGMENT DATA AND RELATED INFORMATION
7 unchanged sentences
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.
−Removed: 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.
+Added: Returns and charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business.
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.
−Removed: 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.
+Added: Accordingly, the fiscal 2019 operating income of The Americas was increased, with a corresponding decrease in Europe, the Middle East & Africa, by $ 866 million to conform with the fiscal 2021 and 2020 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.
25 unchanged sentences
Hair Care ( 19 ) ( 19 ) 39
+Added: Other ( 2 ) 4 12
2,846 689 2,554
34 unchanged sentences
$ 4,470 $ 4,337 $ 2,068
−Removed: (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.
−Removed: Jart+ products in the travel retail channel that are reflected in Korea in the Asia/Pacific region.
+Added: (1) The net sales 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.
+Added: Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region.
+Added: Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.
(2) Includes property, plant and equipment, net.
−Removed: Fiscal 2020 also includes operating lease ROU assets, recognized as a result of the adoption of ASC 842.
−Removed: Refer to Note 7 – Leases for information.
+Added: Fiscal 2021 and 2020 also includes operating lease ROU assets, recognized as a result of the adoption of ASC 842.
+Added: Refer to Note 2 – Summary of Significant Accounting Policies for information.
Net sales are predominantly attributed to a country within a geographic region based on the location of the customer.
4 unchanged sentences
THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: NOTE 23 – UNAUDITED QUARTERLY FINANCIAL DATA
−Removed: The following summarizes the unaudited quarterly operating results of the Company for fiscal 2020 and 2019:
−Removed: Quarter Ended
−Removed: (In millions, except per share data) September 30 (1)
−Removed: December 31 (2)
−Removed: Net sales $ 3,895 $ 4,624 $ 3,345 $ 2,430 $ 14,294
−Removed: Gross profit 2,987 3,583 2,509 1,663 10,742
−Removed: Operating income (loss) 779 261 109 ( 543 ) 606
−Removed: Net earnings (loss) attributable to The Estée Lauder Companies Inc.
−Removed: 595 557 ( 6 ) ( 462 ) 684
−Removed: Net earnings (loss) attributable to The Estée Lauder Companies Inc.
−Removed: per common share:
−Removed: Basic $ 1.65 $ 1.55 $ ( .02 ) $ ( 1.28 ) $ 1.90
−Removed: Diluted $ 1.61 $ 1.52 $ ( .02 ) $ ( 1.28 ) $ 1.86
−Removed: Net sales $ 3,524 $ 4,005 $ 3,744 $ 3,590 $ 14,863
−Removed: Gross profit 2,701 3,095 2,925 2,755 11,476
−Removed: Operating income 652 771 674 216 2,313
−Removed: Net earnings attributable to The Estée Lauder Companies Inc.
−Removed: 500 573 555 157 1,785
−Removed: Net earnings attributable to The Estée Lauder Companies Inc.
−Removed: per common share:
−Removed: Basic $ 1.36 $ 1.58 $ 1.53 $ .43 $ 4.91
−Removed: Diluted $ 1.34 $ 1.55 $ 1.51 $ .43 $ 4.82
−Removed: (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).
−Removed: 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).
−Removed: 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.
−Removed: (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).
−Removed: 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).
−Removed: 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).
−Removed: 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.
−Removed: net deferred tax assets and the Transition Tax.
−Removed: (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).
−Removed: 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).
−Removed: 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).
−Removed: (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).
−Removed: 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).
−Removed: 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).
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: NOTE 24 – SUBSEQUENT EVENTS
−Removed: 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.
−Removed: Charges Associated with Restructuring and Other Activities
−Removed: 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.
−Removed: The Restructuring Program will help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty.
−Removed: It will further strengthen the Company by building upon the foundational capabilities in which the Company has invested.
−Removed: 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;
−Removed: the reduction in brick-and-mortar point of sale employees and related support staff;
−Removed: and the redesign of the Company's regional branded marketing organizations, plus select opportunities in global brands and functions.
−Removed: The Company committed to this course of action on August 18, 2020 .
−Removed: This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility.
−Removed: The Company plans to approve specific initiatives under the Restructuring Program through fiscal 2022 and expects to complete those initiatives through fiscal 2023.
−Removed: 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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
3 unchanged sentences
of Period (1)
−Removed: Accounts Deductions Balance
+Added: Accounts (a) Deductions Balance
Reserves deducted in the balance sheet from the assets to which they apply:
Allowance for doubtful accounts and customer deductions:
−Removed: Year ended June 30, 2020 $ 32 $ 45 $ — $ 14 (a) $ 63
−Removed: Year ended June 30, 2019 $ 29 $ 27 $ — $ 24 (a) $ 32
−Removed: Year ended June 30, 2018 $ 30 $ 23 $ — $ 24 (a) $ 29
−Removed: Sales return accrual:
Year ended June 30, 2021 $ 63 $ ( 5 ) $ 4 $ 22 (b) $ 40
5 unchanged sentences
Year ended June 30, 2019 $ 45 $ 11 $ — $ 7 $ 49
−Removed: Accrued restructuring initiatives:
−Removed: Year ended June 30, 2020 $ 204 $ 34 $ — $ 125 $ 113
−Removed: Year ended June 30, 2019 $ 182 $ 133 $ — $ 111 $ 204
−Removed: Year ended June 30, 2018 $ 151 $ 127 $ — $ 96 $ 182
−Removed: (a) Includes amounts written-off, net of recoveries.
−Removed: (b) Represents actual returns.
+Added: (a) For the year-ended June 30, 2021, “Charged to Other Accounts” includes the impact of the fiscal 2021 adoption of ASC 326 of $ 4 million, pre-tax.
+Added: (b) Includes amounts written-off, net of recoveries.
THE ESTÉE LAUDER COMPANIES INC.
30 unchanged sentences
4.20 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.
−Removed: 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.
−Removed: 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.
4.21 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.
6 unchanged sentences
4.28 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.
+Added: 4.29 Officers’ Certificate, dated March 4, 2021, defining certain terms of the 1.950% Senior Notes due 2031 (filed as Exhibit 4.1 to our Current Report on Form 8-K filed on March 4, 2021) (SEC File No.
+Added: 4.30 Form of Global Note for the 1.950% Senior Notes due 2031 (included as Exhibit A in Exhibit 4.1 to our Current Report on Form 8-K filed on March 4, 2021) (SEC File No.
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.
51 unchanged sentences
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.
−Removed: 10.12 Employment Agreement with Deirdre Stanley (SEC File No.
−Removed: 10.12a Amendment to Employment Agreement with Deirdre Stanley (SEC File No.
+Added: 10.12 Employment Agreement with Deirdre Stanley filed as Exhibit 10.12 to our Annual Report on Form 10-K filed on August 28, 2020) (SEC File No.
Number Description
+Added: 10.12a Amendment to Employment Agreement with Deirdre Stanley filed as Exhibit 10.12a to our Annual Report on Form 10-K filed on August 28, 2020) (SEC File No.
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.
12 unchanged sentences
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.
+Added: 10.15e The Estée Lauder Companies Inc.
+Added: Amended and Restated Non-Employee Director Share Incentive Plan (as of July 13, 2021) (SEC File No.
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.
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.
+Added: 10.16b Summary of Compensation For Non-Employee Directors of the Company (SEC File No.
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.
−Removed: 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.
−Removed: 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.
+Added: 10.17a 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.
10.18 The Estée Lauder Companies Inc.
7 unchanged sentences
10.18d Form of Stock Option Agreement under The Estée Lauder Companies Inc.
−Removed: 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.
−Removed: 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.
Number Description
−Removed: 10.18f Form of Stock Option Agreement under The Estée Lauder Companies Inc.
+Added: 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 4, 2011) (SEC File No.
−Removed: 10.18g Form of Stock Option Agreement under The Estée Lauder Companies Inc.
+Added: 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 2, 2012) (SEC File No.
−Removed: 10.18h Form of Stock Option Agreement with Fabrizio Freda under The Estée Lauder Companies Inc.
+Added: 10.18g 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.
−Removed: 10.18i Form of Stock Option Agreement under The Estée Lauder Companies Inc.
+Added: 10.18h 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.
−Removed: 10.18j Form of Stock Option Agreement with Fabrizio Freda under The Estée Lauder Companies Inc.
+Added: 10.18i 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.
−Removed: 10.18k Form of Stock Option Agreement under The Estée Lauder Companies Inc.
+Added: 10.18j 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.
−Removed: 1-14064) .* †
−Removed: 10.18l Form of Stock Option Agreement under The Estée Lauder Companies Inc.
+Added: 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 10.17l to our Annual Report on Form 10-K filed on August 23, 2019) (SEC File No.
−Removed: 10.18m Performance Share Unit Award Agreement with Fabrizio Freda under The Estée Lauder Companies Inc.
+Added: 10.18l 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.
−Removed: 10.18n Performance Share Unit Award Agreement with John Demsey under The Estée Lauder Companies Inc.
−Removed: 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.
−Removed: 10.18o Form of Performance Share Unit Award Agreement under The Estée Lauder Companies Inc.
−Removed: 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.
−Removed: 10.18p Form of Performance Share Unit Award Agreement under The Estée Lauder Companies Inc.
−Removed: 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.
−Removed: 10.18q Performance Share Unit Award Agreement with Fabrizio Freda (2018) under The Estée Lauder Companies Inc.
+Added: 10.18m 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.
−Removed: 10.18r Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18n 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.
−Removed: 10.18s Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18o 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.
+Added: 10.18p Form of Performance Share Unit Award Agreement for Employees including Executive Officers under The Estée Lauder Companies Inc.
+Added: 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, 2020) (SEC File No.
+Added: 10.18q Price-Vested Unit Award Agreement with Fabrizio Freda under The Estée Lauder Companies Inc.
+Added: Amended and Restated Fiscal 2002 Share Incentive Plan (including Notice of Grant) (filed as Exhibit 10.1 to our current R eport on Form 8-K filed on March 16, 2021) (SEC File No.
+Added: 10.18r Performance Share Unit Award Agreement with Fabrizio Freda under The Estée Lauder Companies Inc.
+Added: A mended and Restated Fiscal 2002 Share Incentive Plan (including Notice of Grant) (filed as Exhibit 10.2 to our Current Report on Form 8-K filed on March 16, 2021) (SEC File No.
+Added: 10.18s Form of Non-annual Performance Share Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
+Added: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No.
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.
−Removed: 10.18u Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
−Removed: 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.
Number Description
−Removed: 10.18v Form of Restricted Stock Unit Award Agreement under The Estée Lauder Companies Inc.
+Added: 10.18u 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.
−Removed: 10.18w Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18v 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.
−Removed: 10.18x Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18w 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.
−Removed: 10.18y Form of Restricted Stock Unit Award Agreement under The Estée Lauder Companies Inc.
+Added: 10.18x 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.
−Removed: 10.18z Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18y 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.
−Removed: 10.18aa Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc.
+Added: 10.18z 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.
−Removed: 10.18bb Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
−Removed: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No.
−Removed: 10.18cc Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée Lauder Companies Inc.
−Removed: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No.
−Removed: 10.18dd Form of Non-annual Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
−Removed: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) (SEC File No.
+Added: 10.18aa Form of Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
+Added: A mended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) ( filed as Exhibit 10.18bb to our Annual Report on Form 10-K filed on August 28, 2020) (SEC File No.
+Added: 10.18bb Form of Restricted Stock Unit Award Agreement for Employees other than Executive Officers under The Estée L auder Companies Inc.
+Added: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of G rant) (filed as Exhibit 10.18cc to our Annual Report on Form 10-K filed on August 28, 2020) (SEC File No.
+Added: 10.18cc Form of Non-annual Restricted Stock Unit Award Agreement for Executive Officers under The Estée Lauder Companies Inc.
+Added: Amended and Restated Fiscal 2002 Share Incentive Plan (including Form of Notice of Grant) f iled as Exhibit 10.18dd to our Annual Report on Form 10-K filed on August 28, 2020) (SEC File No.
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.
15 unchanged sentences
(filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on February 4, 2011) (SEC File No.
+Added: Number Description
10.22d Fourth Amendment to Sublease, dated March 4, 2020, between Aramis Inc.
1 unchanged sentence
(filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on May 1, 2020) (SEC File No.
−Removed: Number Description
10.23 Form of Art Loan Agreement between Lender and Estee Lauder Inc.
6 unchanged sentences
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.
+Added: 10.24c Third Amendment to Creative Consultant Agreement between Estee Lauder Inc.
+Added: and Aerin Lauder Zinterhofer effective July 1, 2021 (SEC File No.
10.25 License Agreement, dated April 6, 2011, by and among Aerin LLC, Aerin Lauder Zinterhofer and Estee Lauder Inc.
5 unchanged sentences
21.1 List of significant subsidiaries.
+Added: 23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of KPMG LLP.
9 unchanged sentences
104 The cover page from The Estée Lauder Companies Inc.’s Annual Report on Form 10-K for the year ended June 30, 2021 is formatted in iXBRL
+Added: ____________________
* Incorporated herein by reference.
1 unchanged sentence
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.