What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-01 compared with 2023-05-03 · 188 added, 467 removed, 617 unchanged (51% of the section changed)

3 unchanged sentences

Three Months Ended

March 31 Nine Months Ended

(In millions, except per share data) 2023 2022

1 unchanged sentence

Cost of sales

1,159 994 3,401 3,274

2,592 3,251 8,900 10,902

Operating expenses

Selling, general and administrative

2,281 2,275 7,155 7,554

Restructuring and other charges

Impairment of other intangible assets — 216 207 216

Total operating expenses

2,295 2,513 7,386 7,811

Operating income 98 661

2 unchanged sentences

Other components of net periodic benefit cost ( 2 ) ( 3 )

Other income — — — 1

Earnings before income taxes 46 633

1 unchanged sentence

Net earnings 36 490

Net earnings attributable to noncontrolling interests — ( 3 ) — ( 8 )

Net loss (earnings) attributable to redeemable noncontrolling interest 1 ( 12 ) ( 3 ) ( 12 )

Net earnings attributable to redeemable noncontrolling interest

Net earnings attributable to The Estée Lauder Companies Inc.

$ 156 $ 558 $ 1,039 $ 2,338

Net earnings attributable to The Estée Lauder Companies Inc.

3 unchanged sentences

Weighted-average common shares outstanding

357.9 359.2 357.8 360.7

361.2 363.6 360.9 365.8

See notes to consolidated financial statements.

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended

March 31 Nine Months Ended

(In millions) 2023 2022

1 unchanged sentence

Other comprehensive income (loss):

Net cash flow hedge gain (loss) ( 43 ) 5 ( 50 ) 21

Cross-currency swap contract loss ( 11 ) — ( 11 ) —

Net cash flow hedge gain

Cross-currency swap contract gain

Retirement plan and other retiree benefit adjustments ( 1 ) —

Translation adjustments ( 120 ) ( 381 )

Benefit (provision) for income taxes on components of other comprehensive income 16 ( 4 ) 23 ( 22 )

Total other comprehensive income (loss), net of tax ( 45 ) 33 ( 139 ) ( 162 )

Comprehensive income 110 606 903 2,196

Comprehensive income attributable to noncontrolling interests:

Net earnings — ( 3 ) — ( 8 )

Translation adjustments — 1 — 3

Total comprehensive income attributable to noncontrolling interests — ( 2 ) — ( 5 )

Provision for income taxes on components of other comprehensive income

( 38 ) ( 19 )

Total other comprehensive loss, net of tax

( 140 ) ( 351 )

Comprehensive income (loss)

Comprehensive loss (income) attributable to redeemable noncontrolling interest:

Net loss (earnings) 1 ( 12 ) ( 3 ) ( 12 )

Translation adjustments 11 35

Total comprehensive loss (income) attributable to redeemable noncontrolling interest — ( 26 ) 23 ( 9 )

Comprehensive income attributable to The Estée Lauder Companies Inc.

Total comprehensive loss attributable to redeemable noncontrolling interest

Comprehensive income (loss) attributable to The Estée Lauder Companies Inc.

$ ( 98 ) $ 173

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In millions, except share data) March 31

(In millions, except share data) September 30

Current assets

10 unchanged sentences

10,962 11,097

$ 22,650 $ 23,415

LIABILITIES AND EQUITY

10 unchanged sentences

Total noncurrent liabilities

10,568 10,758

Commitments and contingencies

2 unchanged sentences

Class A shares authorized:

1,300,000,000 at March 31, 2023 and June 30, 2022;

1,300,000,000 at September 30, 2023 and June 30, 2023;

shares issued:

469,358,006 at March 31, 2023 and 467,949,351 at June 30, 2022;

469,905,435 at September 30, 2023 and 469,668,085 at June 30, 2023;

Class B shares authorized:

304,000,000 at March 31, 2023 and June 30, 2022;

304,000,000 at September 30, 2023 and June 30, 2023;

shares issued and outstanding:

125,542,029 at March 31, 2023 and 125,542,029 at June 30, 2022

125,542,029 at September 30, 2023 and 125,542,029 at June 30, 2023

Paid-in capital

4 unchanged sentences

Treasury stock, at cost;

237,532,271 Class A shares at March 31, 2023 and 236,435,830 Class A shares at June 30, 2022

237,604,494 Class A shares at September 30, 2023 and 237,590,199 Class A shares at June 30, 2023

( 13,634 ) ( 13,631 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

(In millions) 2023 2022

9 unchanged sentences

Pension and post-retirement benefit contributions ( 54 ) ( 5 )

Impairment of other intangible assets 207 216

Gain on previously held equity method investment — ( 1 )

Other non-cash items 7 ( 3 )

1 unchanged sentence

Increase in accounts receivable, net ( 477 ) ( 579 )

Increase in inventory and promotional merchandise ( 154 ) ( 398 )

Increase in other assets, net ( 69 ) ( 61 )

Decrease (increase) in inventory and promotional merchandise

Decrease (increase) in other assets, net

Decrease in accounts payable ( 255 ) ( 375 )

Decrease in other accrued and noncurrent liabilities ( 151 ) ( 132 )

Increase (decrease) in other accrued and noncurrent liabilities

Decrease in operating lease assets and liabilities, net ( 3 ) ( 19 )

Net cash flows provided by operating activities 1,017 1,969

Net cash flows used for operating activities

( 408 ) ( 650 )

Cash flows from investing activities

Capital expenditures ( 295 ) ( 152 )

Payment for acquired business — ( 3 )

Purchases of other intangible assets ( 8 ) —

Purchases of investments ( 5 ) ( 10 )

Settlement of net investment hedges — 138

2 unchanged sentences

Proceeds (repayments) of current debt, net

Debt issuance costs — ( 1 )

Repayments and redemptions of long-term debt ( 3 ) ( 254 )

1 unchanged sentence

Payments to acquire treasury stock ( 3 ) ( 110 )

Settlement of cross-currency swap 9 —

Dividends paid to stockholders ( 236 ) ( 215 )

Net cash flows provided by (used for) financing activities 1,090 ( 2,516 )

Net cash flows used for financing activities

( 219 ) ( 304 )

Effect of exchange rate changes on Cash and cash equivalents ( 17 ) ( 51 )

Net increase (decrease) in Cash and cash equivalents 1,574 ( 1,122 )

Net decrease in Cash and cash equivalents

( 939 ) ( 1,019 )

Cash and cash equivalents at beginning of period 4,029 3,957

23 unchanged sentences

As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions.

Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.

Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

Currency Translation and Transactions

All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period.

Unrealized translation gains (losses), net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc.

were $( 5 ) million and $ 13 million, net of tax, during the three months ended March 31, 2023 and 2022, respectively, and $( 66 ) million and $( 182 ) million, net of tax, during the nine months ended March 31, 2023 and 2022, respectively.

Unrealized translation losses, net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc.

were $ 143 million and $ 352 million, during the three months ended September 30, 2023 and 2022, respectively.

For the Company’s subsidiaries operating in highly inflationary economies, the U.S.

7 unchanged sentences

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 $ 25 million and $ 3 million during the three months ended March 31, 2023 and 2022, respectively, and $ 59 million and $( 15 ) million during the nine months ended March 31, 2023 and 2022, respectively.

The accompanying consolidated statements of earnings include net exchange gains on foreign currency transactions of $ 16 million and $ 14 million during the three months ended September 30, 2023 and 2022, respectively.

THE ESTÉE LAUDER COMPANIES INC.

5 unchanged sentences

While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor its customers' abilities, individually and collectively, to make timely payments.

The Company’s largest customer during the first quarter of fiscal 2024 sells products primarily within the United States and accounted for $ 194 million, or 10 %, and $ 93 million, or 6 %, of the Company's accounts receivable at September 30, 2023 and June 30, 2023, respectively.

Inventory and Promotional Merchandise

Inventory and promotional merchandise consists of the following:

(In millions) March 31, 2023 June 30, 2022

(In millions) September 30, 2023 June 30, 2023

Raw materials

5 unchanged sentences

Property, plant and equipment consists of the following:

(In millions) March 31, 2023 June 30, 2022

(In millions) September 30, 2023 June 30, 2023

Assets (Useful Life)

Land and improvements (1)

Buildings and improvements ( 10 to 40 years)

7 unchanged sentences

$ 3,103 $ 3,179

Depreciation and amortization of property, plant and equipment was $ 147 million and $ 140 million during the three months ended March 31, 2023 and 2022, respectively, and $ 421 million and $ 406 million during the nine months ended March 31, 2023 and 2022, respectively.

(1) Land improvements are depreciated over a 10 year useful life.

Depreciation and amortization of property, plant and equipment was $ 162 million and $ 136 million during the three months ended September 30, 2023 and 2022, respectively.

Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The effective rate for income taxes for the three and nine months ended March 31, 2023 and 2022 are as follows:

Three Months Ended

March 31 Nine Months Ended

2023 2022 2023 2022

Effective rate for income taxes 44.6 % 18.5 % 27.9 % 21.1 %

Basis-point change from the prior-year period 2,610 680

For the three months ended March 31, 2023, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company's foreign operations, due to the Company's geographical mix of earnings for fiscal 2023.

For the nine months ended March 31, 2023, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company's foreign operations, due to the Company's geographical mix of earnings for fiscal 2023, and a decrease in excess tax benefits associated with stock-based compensation arrangements.

The effective rate for income taxes was 21.7 % and 22.6 % for the three months ended September 30, 2023 and 2022, respectively.

The decrease in the effective tax rate of 90 basis points was primarily attributable to a decrease in income tax reserve adjustments and an increase in the impact of excess tax benefits associated with stock-based compensation arrangements, offset by a higher effective tax rate on the Company's foreign operations, due to the Company's geographical mix of earnings for fiscal 2024.

The lower amount of earnings before income taxes increased the impact of these tax adjustments in the first quarter of fiscal 2024.

On August 16, 2022, the U.S.

federal government enacted the Inflation Reduction Act, with tax provisions primarily focused on implementing a 1% excise tax on share repurchases and a 15% corporate alternative minimum tax based on global adjusted financial statement income.

The excise tax was effective beginning with the Company’s third quarter of fiscal 2023 and did not have an impact on the Company’s results of operations or financial position.

The corporate alternative minimum tax will be effective beginning with the Company's first quarter of fiscal 2024.

The Company continues to monitor developments and evaluate projected impacts, if any, of this provision to its consolidated financial statements.

As of March 31, 2023 and June 30, 2022, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $ 59 million and $ 61 million, respectively.

The total amount of unrecognized tax benefits at March 31, 2023 that, if recognized, would affect the effective tax rate was $ 50 million.

The total gross interest and penalties accrued related to unrecognized tax benefits during the three and nine months ended March 31, 2023 in the accompanying consolidated statements of earnings was $ 1 million and $ 2 million, respectively.

The total gross accrued interest and penalties in the accompanying consolidated balance sheets at each of March 31, 2023 and June 30, 2022, was $ 16 million and $ 14 million, respectively.

On the basis of the information available as of March 31, 2023, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

During the fiscal 2023 first quarter, the Company formally concluded the compliance process with respect to its fiscal 2021 income tax return under the U.S.

Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three and nine months ended March 31, 2023.

federal government enacted the Inflation Reduction Act, including a tax provision implementing a 15% corporate alternative minimum tax based on global adjusted financial statement income.

The corporate alternative minimum tax became effective beginning with the Company’s first quarter of fiscal 2024 and did not have an impact on the Company’s consolidated financial statements for the three months ended September 30, 2023.

As of September 30, 2023 and June 30, 2023, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $ 61 million and $ 63 million, respectively.

The total amount of unrecognized tax benefits at September 30, 2023 that, if recognized, would affect the effective tax rate was $ 51 million.

There was no gross interest or penalties accrued related to unrecognized tax benefits during the three months ended September 30, 2023 in the accompanying consolidated statements of earnings.

The total gross accrued interest and penalties in the accompanying consolidated balance sheets at each of September 30, 2023 and June 30, 2023, was $ 15 million.

On the basis of the information available as of September 30, 2023, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

Subsequent to September 30, 2023, the Company formally concluded the compliance process with respect to its fiscal 2022 income tax return under the U.S.

Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three months ended September 30, 2023.

Supplier Finance Programs

Under its supplier finance programs, the Company agrees to pay the banks the stated amount of confirmed invoices from its designated suppliers on the due dates of the invoices.

The Company may terminate the agreements upon written notice (with notice periods ranging from 30 to 60 days) or immediately upon a breach.

The supplier invoices that have been confirmed as valid under the programs require payment in full within 90 days of the invoice date.

Outstanding obligations confirmed as valid totaling $ 40 million and $ 52 million as of September 30, 2023 and June 30, 2023, respectively, are included in accounts payable in the accompanying consolidated balance sheets.

Other Accrued and Noncurrent Liabilities

Other accrued liabilities consist of the following:

(In millions) March 31, 2023 June 30, 2022

Advertising, merchandising and sampling $ 240 $ 250

(In millions) September 30, 2023 June 30, 2023

Employee compensation $ 472 $ 546

Accrued sales incentives 371 321

Deferred revenue 336 323

Payroll and other non-income taxes 307 297

Accrued income taxes 396 267

Sales return accrual 313 289

1 unchanged sentence

$ 3,300 $ 3,216

At March 31, 2023 and June 30, 2022, total Other noncurrent liabilities of $ 1,457 million and $ 1,651 million included $ 625 million and $ 692 million of deferred tax liabilities, respectively.

At September 30, 2023 and June 30, 2023, total Other noncurrent liabilities of $ 1,793 million and $ 1,943 million included $ 598 million and $ 620 million of deferred tax liabilities, respectively.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Standards

Recently Adopted Accounting Standards

2022-04 – Liabilities—Supplier Finance Programs (Subtopic 405-50):

4 unchanged sentences

The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations.

Effective for the Company – The guidance becomes effective for the Company’s first quarter fiscal 2024 and is applied on a retrospective basis, except for the requirement to disclose rollforward information annually which is effective prospectively for the Company beginning in fiscal 2025.

Early adoption is permitted.

Annual disclosures, excluding the rollforward information, need to be provided in interim periods within the initial year of adoption.

Impact on consolidated financial statements – The Company has a supplier financing arrangement and will apply the disclosure requirements as required by the amendments.

Effective for the Company – The guidance became effective for the Company’s first quarter fiscal 2024 and has been applied on a retrospective basis, except for the requirement to disclose rollforward information annually which is effective prospectively for the Company beginning in fiscal 2025.

Impact on consolidated financial statements – The Company has supplier financing arrangements and applied the disclosure requirements as required by the amendments.

Such information is included in Supplier Finance Programs above within Note 1 – Summary of Significant Accounting Policies.

Reference Rate Reform (ASC Topic 848 “ ASC 848 ” )

4 unchanged sentences

Effective for the Company – This guidance can only be applied for a limited time through December 31, 2024.

Impact on consolidated financial statements – The Company currently has an implementation team in place that has performed a comprehensive evaluation and is assessing the impact of applying this guidance, which includes assessing the impact to business processes and internal controls over financial reporting and the related disclosure requirements.

For treasury related arrangements, the Company references LIBOR in its interest rate swap agreements and LIBOR is also used for purposes of discounting certain foreign currency and interest rate forward contracts.

The Company is currently evaluating the potential impact of modifying treasury related arrangements and applying the relevant ASC 848 optional practical expedients, as needed.

For existing lease, debt arrangements and other contracts, the Company will not adopt any ASC 848 optional practical expedients as it relates to these arrangements.

The Company will continue to monitor new contracts that could potentially be eligible for contract modification relief through December 31, 2024.

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

Impact on consolidated financial statements – The Company completed its comprehensive evaluation of applying this guidance and adopted certain practical expedients for its interest rate swap agreements in the fiscal 2024 first quarter which did not have a significant impact on its consolidated financial statements.

The practical expedients that were adopted permit its hedging relationships to continue without de-designation upon changes due to reference rate reform.

Foreign currency forward contracts do not reference LIBOR and no practical expedients were elected but are now discounted using the Secured Overnight Financing Rate ("SOFR").

For existing lease, debt arrangements and other contracts, the Company did not adopt any ASC 848 practical expedients as it relates to these arrangements.

Recently Issued Accounting Standards

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

THE ESTÉE LAUDER COMPANIES INC.

8 unchanged sentences

1,525 384 224 353 2,486

Translation and other adjustments, goodwill ( 56 ) — 5 — ( 51 )

Translation and other adjustments, accumulated impairments ( 1 ) — ( 1 ) — ( 2 )

Translation adjustments, goodwill

( 30 ) — ( 3 ) — ( 33 )

Balance as of March 31, 2023

Translation adjustments, accumulated impairments

( 29 ) — ( 2 ) — ( 31 )

Balance as of September 30, 2023

1,634 1,116 251 353 3,354

Accumulated impairments

3 unchanged sentences

Other intangible assets consist of the following:

March 31, 2023 June 30, 2022

September 30, 2023 June 30, 2023

(In millions) Gross

4 unchanged sentences

Amortizable intangible assets:

Customer lists, license agreements and other $ 2,036 $ 734 $ 1,302 $ 2,064 $ 628 $ 1,436

Customer lists and other

$ 2,002 $ 796 $ 1,206 $ 2,030 $ 766 $ 1,264

Non-amortizable intangible assets:

2 unchanged sentences

$ 5,515 $ 5,602

The aggregate amortization expense related to amortizable intangible assets was $ 36 million and $ 38 million for the three months ended March 31, 2023 and 2022, respectively, and $ 109 million and $ 122 million for the nine months ended March 31, 2023 and 2022, respectively.

The aggregate amortization expense related to amortizable intangible assets was $ 36 million for the three months ended September 30, 2023 and 2022.

The estimated aggregate amortization expense for the remainder of fiscal 2024 and for each of the next four fiscal years is as follows:

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment Analysis During the Nine Months Ended March 31, 2023

During the fiscal 2023 second quarter, given the lower-than-expected results in the overall business, the Company made revisions to the internal forecasts relating to its Smashbox reporting unit.

The Company concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset.

The remaining carrying value of the trademark intangible asset was not recoverable and the Company recorded an impairment charge of $ 21 million reducing the carrying value to zero .

During the fiscal 2023 second quarter, the Dr.Jart+ reporting unit experienced lower-than-expected growth within key geographic regions and channels that continue to be impacted by the spread of COVID-19 variants, resurgence in cases, and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the reporting unit.

In addition, due to macro-economic factors, Dr.Jart+ has experienced lower-than-expected growth within key geographic regions.

The Too Faced reporting unit experienced lower-than-expected results in key geographic regions and channels coupled with delays in future international expansion to areas that continue to be impacted by COVID-19.

As a result, the Company made revisions to the internal forecasts relating to its Dr.Jart+ and Too Faced reporting units.

Additionally, there were increases in the weighted average cost of capital for both reporting units as compared to the prior year annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2022.

The Company concluded that the changes in circumstances in the reporting units, along with increases in the weighted average cost of capital, triggered the need for interim impairment reviews of their trademarks and goodwill.

These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable.

Accordingly, the Company performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of November 30, 2022.

The Company concluded that the carrying value of the trademark intangible assets exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows and recorded an impairment charge of $ 100 million for Dr.Jart+ and $ 86 million for Too Faced.

The Company concluded that the carrying amounts of the long-lived assets were recoverable.

After adjusting the carrying values of the trademarks, the Company completed interim quantitative impairment tests for goodwill.

As the estimated fair value of the Dr.Jart+ and Too Faced reporting units were in excess of their carrying values, the Company concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units.

The fair values of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units.

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 royalty rates for trademarks.

The most significant unobservable input used to estimate the fair values of the Dr.Jart+ and Too Faced trademark intangible assets was the weighted-average cost of capital, which was 11 % and 13 %, respectively.

A summary of the impairment charges for the three and nine months ended March 31, 2023 and the remaining trademark and goodwill carrying values as of March 31, 2023, for each reporting unit, are as follows:

Impairment Charges Carrying Value

(In millions) Three Months Ended

March 31, 2023 Nine Months Ended

March 31, 2023 As of March 31, 2023

Reporting Unit Geographic Region Trademarks Goodwill Trademarks Goodwill Trademarks Goodwill

Smashbox The Americas $ — $ — $ 21 $ — $ — $ —

Dr.Jart+ Asia/Pacific — — 100 — 330 310

Too Faced The Americas — — 86 — 186 13

Total $ — $ — $ 207 $ — $ 516 $ 323

The impairment charges for the nine months ended March 31, 2023 were reflected in the skin care product category for Dr.Jart+ and the makeup product category for Smashbox and Too Faced.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment Analysis During the Nine Months Ended March 31, 2022

During the fiscal 2022 third quarter, given the lower-than-expected results from international expansion to areas impacted by COVID-19, the Company made revisions to the internal forecasts relating to its GLAMGLOW reporting unit.

The Company concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset.

As of March 31, 2022, the remaining carrying value of the trademark intangible asset was not recoverable and the Company recorded an impairment charge of $ 11 million reducing the carrying value to zero .

During the fiscal 2022 third quarter, given the lower-than-expected growth within key geographic regions and channels for Dr.Jart+ impacted by the spread of COVID-19 variants and resurgence in cases and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the brand, the lower than expected growth in key retail channels for DECIEM, and the lower than expected results from international expansion to areas impacted by COVID-19 for Too Faced, the Company made revisions to the internal forecasts relating to its Dr.Jart+, DECIEM and Too Faced reporting units.

The Company concluded that the changes in circumstances in the reporting units triggered the need for interim impairment reviews of their trademarks and goodwill.

These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s, DECIEM’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable.

Accordingly, the Company performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of February 28, 2022.

The Company concluded that the carrying amounts of the long-lived assets were recoverable.

For the Dr.Jart+ reporting unit, the Company also concluded that the carrying value of the trademark intangible asset 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.

For the Too Faced and DECIEM reporting units, as the carrying values of the trademarks did not exceed their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, the Company did not record impairment charges.

As of March 31, 2022, the estimated fair values of Too Faced’s and DECIEM's trademarks exceeded their carrying values by 13 % and 3 %, respectively.

For the Too Faced and DECIEM trademark intangible assets, if all other assumptions are held constant, an increase of 100 basis points and 50 basis points, respectively, in the weighted average cost of capital would result in an impairment charge.

After adjusting the carrying values of the trademarks, the Company completed interim quantitative impairment tests for goodwill.

As the estimated fair value of the Dr.Jart+, DECIEM and Too Faced reporting units were in excess of their carrying values, the Company concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units.

The fair value of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units.

The most significant unobservable input used to estimate the fair value of the Dr.Jart+ trademark intangible asset was the weighted-average cost of capital, which was 10.5 %.

A summary of the impairment charges for the three and nine months ended March 31, 2022 and the remaining trademark and goodwill carrying values as of March 31, 2022, for each reporting unit, are as follows:

(In millions) Impairment Charges Carrying Value

Three and Nine Months Ended March 31, 2022 As of March 31, 2022

Reporting Unit Geographic Region Trademarks Goodwill Trademarks Goodwill

GLAMGLOW The Americas $ 11 $ — $ — $ —

Dr.Jart+ Asia/Pacific 205 — 486 332

Total $ 216 $ — $ 486 $ 332

The impairment charges for the three and nine months ended March 31, 2022 were reflected in the skin care product category.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

Charges associated with the Post-COVID Business Acceleration Program for the three and nine months ended March 31, 2023 were as follows:

Net Sales) Cost of Sales Operating Expenses Total

(In millions) Restructuring

Charges Other

Three months ended March 31, 2023 $ 4 $ — $ 6 $ 4 $ 14

Nine months ended March 31, 2023 $ 10 $ ( 1 ) $ 12 $ 7 $ 28

The types of activities included in restructuring and other charges, and the related accounting criteria, are described below.

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.

Post-COVID Business Acceleration Program

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.

The PCBA Program is designed to help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty.

It is expected to further strengthen the Company by building upon the foundational capabilities in which the Company has invested.

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;

the reduction in brick-and-mortar point of sale employees and related support staff;

and the redesign of the Company’s regional branded marketing organizations, plus select opportunities in global brands and functions.

This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility.

As of March 31, 2023, the Company estimated a net reduction over the duration of the PCBA Program in the range of 2,500 to 3,000 positions globally, including temporary and part-time employees.

This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees and investment in new positions in key areas.

The Company also estimated 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.

As of June 30, 2022, the Company approved specific initiatives under the PCBA Program and expects to substantially complete those initiatives through fiscal 2023.

Inclusive of approvals from inception through June 30, 2022, the Company estimates, as of March 31, 2023, that the PCBA Program may result in related restructuring and other charges totaling between $ 450 million and $ 480 million, before taxes.

Additional information about the PCBA Program approvals is included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

Specific actions taken since the PCBA Program inception include:

• 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.

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.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Optimize Select Marketing, Brand and Global Functions – The Company has started to reduce its corporate and certain of its brand office footprints and is moving toward the future of work in a post-COVID-19 environment, by restructuring where and how its employees work and collaborate.

In addition, the Company has approved initiatives to reduce organizational complexity and leverage scale across various Global functions.

These actions will result in asset write-offs, employee severance, lease termination fees, and consulting and other professional services for the design and implementation of the future structures and processes.

• 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.

These anticipated closures reflect changing consumer behaviors including higher demand for online and omnichannel capabilities.

These activities will result in termination of contracts, a net reduction in workforce, product returns, and inventory and other asset write-offs.

• Exit of the Global Distribution of BECCA Products – In reviewing the Company's brand portfolio to improve efficiency and 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.

These activities resulted in charges for the impairment of goodwill and other intangible assets, product returns, termination of contracts, and employee severance.

The Company completed these initiatives during fiscal 2022.

• Exit of Certain Designer Fragrance Licenses – In reviewing the Company’s brand portfolio of fragrances and to focus on investing its resources on alternative opportunities for long-term growth and value creation globally, the Company announced that it would not be renewing its existing license agreements for the Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna product lines when their respective terms expire in June 2023.

The Company has since negotiated early termination agreements with each of the licensors effective June 30, 2022 and continued to sell products under these licenses until such time.

These actions resulted in asset write-offs, including charges for the impairment of goodwill, employee-related costs, and consulting and legal fees.

• Brand Transformation – In reviewing the Company’s brand portfolio to accelerate growth within the makeup product category and to support long-term investments, the decision was made to strategically reposition Smashbox to capitalize on changing consumer preferences and to mitigate the impact caused by the COVID-19 pandemic on the brand.

These actions will result primarily in product returns and inventory write-offs.

PCBA Program Restructuring and Other Charges

Restructuring charges are comprised of the following:

Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable.

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.

These costs also include goodwill and other intangible asset impairment charges relating to the exit of the global distribution of BECCA products.

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.

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.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other charges associated with restructuring activities are comprised of the following:

Sales Returns and Cost of Sales – Product returns (offset by the related cost of sales) and inventory write-offs or write-downs as a direct result of an approved restructuring initiative to exit certain businesses or locations will be recorded as a component of Net sales and/or Cost of sales when estimable and reasonably assured.

Other Charges – The Company approved other charges related to the design and implementation of approved initiatives, which are charged to Operating expenses as incurred and primarily include the following:

• Consulting and other professional services for organizational design of the future structures and processes as well as the implementation thereof;

• Temporary labor backfill;

• 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);

• Recruitment and training costs for new and reskilled employees to acquire and apply the capabilities needed to perform responsibilities as a direct result of an approved restructuring initiative.

The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met.

Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were:

Net Sales) Cost of Sales Operating Expenses Total

(In millions) Restructuring

Charges Other

Total Charges (Adjustments)

Cumulative through June 30, 2022 $ 18 $ 7 $ 310 $ 13 $ 348

Nine months ended March 31, 2023 10 ( 1 ) 12 7 28

Cumulative through March 31, 2023 $ 28 $ 6 $ 322 $ 20 $ 376

(In millions) Employee-

Costs Contract

Terminations Other Exit

Restructuring Charges (Adjustments)

Cumulative through June 30, 2022 $ 203 $ 86 $ 19 $ 2 $ 310

Nine months ended March 31, 2023 ( 8 ) 20 ( 3 ) 3 12

Cumulative through March 31, 2023 $ 195 $ 106 $ 16 $ 5 $ 322

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in accrued restructuring charges for the nine months ended March 31, 2023 relating to the PCBA Program were:

(In millions) Employee-

Costs Contract

Terminations Other Exit

Balance at June 30, 2022 $ 125 $ — $ — $ — $ 125

Charges ( 8 ) 20 ( 3 ) 3 12

Cash payments ( 27 ) — ( 1 ) ( 3 ) ( 31 )

Non-cash asset write-offs — ( 20 ) — — ( 20 )

Translation and other adjustments ( 5 ) — 4 — ( 1 )

Balance at March 31, 2023

$ 85 $ — $ — $ — $ 85

Accrued restructuring charges at March 31, 2023 relating to the PCBA Program are expected to result in cash expenditures funded from cash provided by operations of approximately $ 31 million, $ 41 million and $ 13 million for the remainder of fiscal 2023 and for fiscal 2024 and 2025, respectively.

The Company approved specific initiatives under the Post-COVID Business Acceleration Program (the “PCBA Program”) through fiscal 2022 and has substantially completed those initiatives through fiscal 2023.

Additional information about the PCBA Program is included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

NOTE 4 – DERIVATIVE FINANCIAL INSTRUMENTS

9 unchanged sentences

The Company also enters into foreign currency forward contracts, and may use option contracts, not designated as hedging instruments, to mitigate the change in fair value of specific assets and liabilities on the consolidated balance sheets.

At March 31, 2023, the notional amount of derivatives not designated as hedging instruments was $ 3,521 million.

At September 30, 2023, the notional amount of derivatives not designated as hedging instruments was $ 4,099 million.

The Company does not utilize derivative financial instruments for trading or speculative purposes.

11 unchanged sentences

(In millions) Balance Sheet

Location March 31, 2023 June 30, 2022 Balance Sheet

Location March 31, 2023 June 30, 2022

Location September 30, 2023 June 30, 2023 Balance Sheet

Location September 30, 2023 June 30, 2023

Derivatives Designated as Hedging Instruments:

11 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:

Amount of Gain (Loss)

Amount of Gain

Recognized in OCI on

Derivatives Location of Gain (Loss) Reclassified

Location of Gain Reclassified

from AOCI into

Earnings Amount of Gain (Loss)

Amount of Gain

Reclassified from AOCI into Earnings (1)

Three Months Ended

March 31 Three Months Ended

(In millions) 2023 2022 2023 2022

Derivatives in Cash Flow Hedging Relationships:

Foreign currency forward contracts $ ( 11 ) $ ( 2 ) Net sales

Interest rate-related derivatives ( 11 ) 10 Interest expense

( 22 ) 8 21 3

Derivatives in Net Investment Hedging Relationships (2) :

Foreign currency forward contracts (3)

( 23 ) 17 — —

Total derivatives $ ( 45 ) $ 25 $ 21 $ 3

(1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2) During the three months ended March 31, 2023 and 2022, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 6 million and $ 3 million, respectively.

(3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

Amount of Gain (Loss)

Recognized in OCI on

Derivatives Location of Gain (Loss) Reclassified

from AOCI into

Earnings Amount of Gain (Loss)

Reclassified from AOCI into Earnings (1)

Nine Months Ended

March 31 Nine Months Ended

September 30 Three Months Ended

(In millions) 2023 2022 2023 2022

2 unchanged sentences

Interest rate-related derivatives — 7 Interest expense

8 15 58 ( 6 )

Derivatives in Net Investment Hedging Relationships (2) :

Foreign currency forward contracts (3)

( 38 ) 87 — —

Total derivatives $ 58 $ 135 $ 9 $ 15

(2) During the nine months ended March 31, 2023 and 2022, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 19 million and $ 8 million, respectively.

(2) During the three months ended September 30, 2023 and 2022, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 5 million and $ 6 million, respectively.

(3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amount of Gain (Loss)

2 unchanged sentences

Three Months Ended

March 31 Nine Months Ended

(In millions) 2023 2022

5 unchanged sentences

(1) Changes in the fair value representing hedge components included in the assessment of effectiveness of the cross-currency swap contracts are exactly offset by the change in the fair value of the underlying intercompany foreign currency denominated debt.

The gain recognized in earnings from cross-currency swap contracts related to the amount excluded from effectiveness testing was $ 4 million.

The gain recognized in earnings from cross-currency swap contracts related to the amount excluded from effectiveness testing was $ 5 million during the three months ended September 30, 2023.

(2) 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.

5 unchanged sentences

Included in the Carrying Amount of the Hedged Liability

March 31, 2023 March 31, 2023

September 30, 2023 September 30, 2023

Long-term debt $ 814 $ ( 180 )

3 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:

Three Months Ended March 31

(In millions) Net Sales Selling, General and Administrative Interest

Expense Net Sales Selling, General and Administrative Interest

Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded $ 3,751 $ 2,281 $ 58 $ 4,245 $ 2,275 $ 41

The effects of fair value and cash flow hedging relationships:

Gain (loss) on fair value hedge relationships – interest rate contracts:

Hedged item N/A N/A ( 18 ) N/A N/A 69

Derivatives designated as hedging instruments N/A N/A 18 N/A N/A ( 69 )

Gain (loss) on fair value hedge relationships – cross-currency swap contracts:

Hedged item N/A ( 1 ) N/A N/A — N/A

Derivatives designated as hedging instruments N/A 1 N/A N/A — N/A

Gain (loss) on cash flow hedge relationships – interest rate contracts:

Amount of loss reclassified from AOCI into earnings N/A N/A ( 1 ) N/A N/A —

Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:

Amount of gain (loss) reclassified from AOCI into earnings 22 N/A N/A 3 N/A N/A

N/A (Not applicable)

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended March 31

Three Months Ended September 30

(In millions) Net Sales Selling, General and Administrative Interest

8 unchanged sentences

Derivatives designated as hedging instruments N/A 13 N/A N/A — N/A

Gain (loss) on cash flow hedge relationships – interest rate contracts:

Amount of loss reclassified from AOCI into earnings N/A N/A ( 1 ) N/A N/A ( 1 )

Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:

Amount of gain (loss) reclassified from AOCI into earnings 59 N/A N/A ( 5 ) N/A N/A

Gain on cash flow hedge relationships – foreign currency forward contracts:

Amount of gain reclassified from AOCI into earnings

9 N/A N/A 15 N/A N/A

N/A (Not applicable)

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows:

Amount of Gain (Loss)

Amount of Gain

Recognized in Earnings on Derivatives

Location of Gain (Loss) Recognized in Earnings on

Derivatives Three Months Ended

March 31 Nine Months Ended

Location of Gain Recognized in Earnings on

Three Months Ended

(In millions) 2023 2022

2 unchanged sentences

Selling, general and administrative $ 5 $ 11

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company's derivative instruments are subject to enforceable master netting agreements.

2 unchanged sentences

The following table provides information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties:

As of March 31, 2023 As of June 30, 2022

As of September 30, 2023 As of June 30, 2023

(In millions) Gross Amounts of Assets / (Liabilities) Presented in Balance Sheet Contracts Subject to Netting Net Amounts of Assets / (Liabilities) Gross Amounts of Assets / (Liabilities) Presented in Balance Sheet Contracts Subject to Netting Net Amounts of Assets / (Liabilities)

6 unchanged sentences

The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the cash flows that the Company receives from foreign subsidiaries.

The foreign currency forward contracts entered into to hedge anticipated transactions have been designated as cash flow hedges and have varying maturities through the end of December 2024.

The foreign currency forward contracts entered into to hedge anticipated transactions have been designated as cash flow hedges and have varying maturities through the end of March 2025.

Hedge effectiveness of the foreign currency forward contracts is based on the forward method, which includes time value in the effectiveness assessment.

At March 31, 2023, the Company had cash flow hedges outstanding with a notional amount totaling $ 2,382 million.

At September 30, 2023, the Company had cash flow hedges outstanding with a notional amount totaling $ 1,560 million.

The Company may enter into interest rate forward contracts to hedge anticipated issuance of debt for periods consistent with the Company’s identified exposures.

2 unchanged sentences

If it is probable that the forecasted transaction will no longer occur, then any gains or losses in AOCI are reclassified to current-period Net sales.

As of March 31, 2023, the Company’s foreign currency cash flow hedges were highly effective.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated net gain on the Company’s derivative instruments designated as cash flow hedges as of March 31, 2023 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $ 5 million.

The accumulated net gain on derivative instruments designated as cash flow hedges in AOCI was $ 40 million and $ 90 million as of March 31, 2023 and June 30, 2022, respectively.

As of September 30, 2023, the Company’s foreign currency cash flow hedges were highly effective.

The estimated net gain on the Company’s derivative instruments designated as cash flow hedges as of September 30, 2023 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $ 43 million.

The accumulated net gain on derivative instruments designated as cash flow hedges in AOCI was $ 99 million and $ 79 million as of September 30, 2023 and June 30, 2023, respectively.

Fair Value Hedges

The Company enters into interest rate derivative contracts to manage the exposure to interest rate fluctuations on its funded indebtedness.

At March 31, 2023, the Company has interest rate swap agreements, with notional amounts totaling $ 700 million and $ 300 million to effectively convert the fixed rate interest on its 2030 Senior Notes and 2031 Senior Notes, respectively, to variable interest rates based on three-month LIBOR plus a margin.

At September 30, 2023, the Company has interest rate swap agreements, with notional amounts totaling $ 700 million and $ 300 million to effectively convert the fixed rate interest on its 2030 Senior Notes and 2031 Senior Notes, respectively, to variable interest rates based on the three-month fallback rate SOFR 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.

The Company enters into cross-currency swap contracts to manage the exposure of foreign exchange rate fluctuations on it’s intercompany foreign currency denominated debt.

At March 31, 2023, the Company has cross-currency swap contracts with notional amounts totaling $ 491 million, to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company enters into cross-currency swap contracts to manage the exposure of foreign exchange rate fluctuations on its intercompany foreign currency denominated debt.

At September 30, 2023, the Company has cross-currency swap contracts with notional amounts totaling $ 491 million, to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt.

The cross-currency swap contracts are designated as fair value hedges of the related intercompany debt, and the gains and losses representing hedge components included in the assessment of effectiveness are presented in the same income statement line item as the earnings effect of the hedged transaction.

2 unchanged sentences

Any difference between the changes in the fair value of the excluded components and amounts recognized in earnings will be recognized in AOCI.

The estimated net gain on the Company’s derivative instruments designated as fair value hedges as of March 31, 2023 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $ 13 million.

The accumulated net loss on derivative instruments designated as fair value hedges in AOCI was $ 11 million as of March 31, 2023.

The estimated net gain on the Company’s derivative instruments designated as fair value hedges as of September 30, 2023 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $ 14 million.

The accumulated net loss on derivative instruments designated as fair value hedges in AOCI was $ 20 million as of September 30, 2023 and June 30, 2023.

Net Investment Hedges

2 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.

The net investment hedge contracts have varying maturities through the end of May 2023.

The net investment hedge contracts have varying maturities through the end of September 2024.

Hedge effectiveness of the net investment hedge contracts is based on the spot method.

At March 31, 2023, the Company had net investment hedges outstanding with a notional amount totaling $ 1,037 million.

At September 30, 2023, the Company had net investment hedges outstanding with a notional amount totaling $ 1,180 million.

As a matter of policy, the Company enters into derivative contracts only with counterparties that have a long-term credit rating of at least A- or higher by at least two nationally recognized rating agencies.

The counterparties to these contracts are major financial institutions.

Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $ 81 million at March 31, 2023.

Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $ 141 million at September 30, 2023.

To manage this risk, the Company has strict counterparty credit guidelines that are continually monitored.

Accordingly, management believes risk of loss under these hedging contracts is remote.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – FAIR VALUE MEASUREMENTS

9 unchanged sentences

The inputs are unobservable in the market and significant to the instrument’s valuation.

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023:

THE ESTÉE LAUDER COMPANIES INC.

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 September 30, 2023:

(In millions) Level 1 Level 2 Level 3 Total

1 unchanged sentence

Foreign currency forward contracts

Interest rate-related derivatives

$ 3,485 $ 81 $ — $ 3,566

Cross-currency swap contracts — 35 — 35

$ 2,094 $ 141 $ — $ 2,235

Foreign currency forward contracts

$ — $ 30 $ — $ 30

Interest rate-related derivatives

1 unchanged sentence

$ — $ 210 $ 103 $ 313

THE ESTÉE LAUDER COMPANIES INC.

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, 2023:

2 unchanged sentences

Foreign currency forward contracts

Interest rate-related derivatives

Cross-currency swap contracts — 22 — 22

$ 3,241 $ 98 $ — $ 3,339

4 unchanged sentences

$ — $ 199 $ 99 $ 298

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair values of the Company’s financial instruments are as follows:

March 31, 2023 June 30, 2022

September 30, 2023 June 30, 2023

(In millions) Carrying

6 unchanged sentences

DECIEM stock options 103 103 99 99

Cross-currency swap contracts - liability, net ( 11 ) ( 11 ) — —

Foreign currency forward contracts – liability, net ( 11 ) ( 11 ) 86 86

Deferred consideration payable 340 336 341 338

Cross-currency swap contracts – asset, net

Foreign currency forward contracts – asset, net

Interest rate-related derivatives – liability, net

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s impairment charges for the nine months ended March 31, 2023 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test during the three months ended December 31, 2022:

(In millions) Impairment charges Date of Fair Value Measurement Fair Value (1)

Other intangible assets, net (trademarks)

Dr.Jart+ $ 100 November 30, 2022 $ 330

Too Faced 86 November 30, 2022 186

Smashbox 21 December 31, 2022 —

Total $ 207 $ 516

(1) See Note 2 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

The following table presents the Company’s impairment charges for the nine months ended March 31, 2022 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions) Impairment charges Date of Fair Value Measurement Fair Value (1)

Other intangible assets, net (trademarks)

GLAMGLOW $ 11 March 31, 2022 $ —

Dr.Jart+ 205 February 28, 2022 486

Total 216 486

Total $ 216 $ 486

( 180 ) ( 180 ) ( 150 ) ( 150 )

The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments for which it is practicable to estimate that value:

3 unchanged sentences

The significant observable inputs to the model, such as swap yield curves and currency spot and forward rates, were obtained from an independent pricing service.

To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using LIBOR for contracts with maturities up to 12 months, and swap yield curves for contracts with maturities greater than 12 months.

To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using SOFR forward curves.

Cross-currency swap contracts – The fair value of the Company’s cross-currency swap contracts were determined using an industry-standard valuation model, which is based on the income approach.

1 unchanged sentence

Interest rate-related derivatives – The fair values of the Company’s interest rate contracts were determined using an industry-standard valuation model, which is based on the income approach.

The significant observable inputs to the model, such as treasury yield curves, swap yield curves and LIBOR forward rates, were obtained from independent pricing services.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The significant observable inputs to the model, such as treasury yield curves, swap yield curves and SOFR forward curves, were obtained from independent pricing services.

Current and long-term debt – The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities.

1 unchanged sentence

The Company’s debt is classified within Level 2 of the valuation hierarchy.

Deferred consideration payable – The deferred consideration payable consists primarily of deferred payments associated with the fiscal 2023 fourth quarter acquisition of TOM FORD.

The fair value of the payments treated as deferred consideration payable are calculated based on the net present value of cash payments using an estimated borrowing rate based on quoted prices for a similar liability.

The Company’s deferred consideration payable is classified within Level 2 of the valuation hierarchy.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

6 unchanged sentences

See Note 9 – Stock Programs for discussion .

Changes in the DECIEM stock option liability for the nine months ended March 31, 2023 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows:

Changes in the DECIEM stock option liability for the three months ended September 30, 2023 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows:

(In millions) Fair Value

2 unchanged sentences

Translation adjustments and other, net ( 4 )

DECIEM stock option liability as of March 31, 2023 $ 73

(1) Amount includes expense attributable to graded vesting of stock opti ons which is not material for the nine months ended March 31, 2023.

DECIEM stock option liability as of September 30, 2023 $ 103

NOTE 6 – REVENUE RECOGNITION

1 unchanged sentence

Accounts Receivable

Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $ 26 million and $ 27 million as of March 31, 2023 and June 30, 2022, respectively.

Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $ 31 million and $ 30 million as of September 30, 2023 and June 30, 2023, respectively.

Payment terms are short-term in nature and are generally less than one year.

Changes in the allowance for credit losses are as follows:

(In millions) March 31, 2023

(In millions) September 30, 2023

Balance at June 30, 2023 $ 16

Provision for expected credit losses 1

Write-offs, net & other 1

Balance at March 31, 2023 $ 12

The remaining balance of the allowance for doubtful accounts of $ 14 million and $ 17 million as of March 31, 2023 and June 30, 2022, respectively, relates to non-credit losses, which are primarily due to customer deductions.

Balance at September 30, 2023 $ 17

The remaining balance of the allowance for doubtful accounts and customer deductions of $ 14 million as of September 30, 2023 and June 30, 2023, respectively, relates to non-credit losses, which are primarily due to customer deductions.

THE ESTÉE LAUDER COMPANIES INC.

3 unchanged sentences

Three Months Ended

March 31 Nine Months Ended

(In millions) 2023 2022

1 unchanged sentence

Revenue recognized that was included in the deferred revenue balance at the beginning of the period ( 152 ) ( 149 )

Revenue deferred (released) during the period ( 15 ) ( 13 ) 261 285

Revenue deferred during the period

Other ( 7 ) ( 8 )

1 unchanged sentence

Transaction Price Allocated to the Remaining Performance Obligations

At March 31, 2023, 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 $ 306 million.

The remaining balance of deferred revenue at March 31, 2023 will be recognized beyond the next twelve months.

At September 30, 2023, 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, gift card liabilities and the Marcolin license arrangement related to TOM FORD that are unsatisfied (or partially unsatisfied) is $ 336 million.

The remaining balance of deferred revenue at September 30, 2023 will be recognized beyond the next twelve months, of which $ 232 million relates to the non-refundable upfront payment received as part of the Marcolin licensing arrangement that is being recognized on a straight-line basis over the estimated economic life of the license, which is 20 years.

Royalty Revenue – License Arrangements

The Company’s contractually guaranteed minimum royalty amounts due during future periods under its existing license arrangements is disclosed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

NOTE 7 – PENSION AND POST-RETIREMENT BENEFIT PLANS

3 unchanged sentences

Descriptions of these plans are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

The components of net periodic benefit cost for the three months ended March 31, 2023 and 2022 consisted of the following:

The components of net periodic benefit cost for the three months ended September 30, 2023 and 2022 consisted of the following:

Pension Plans Other than

6 unchanged sentences

Amortization of:

Actuarial loss — 4 — — — —

Prior service cost — — — — — —

Special termination benefits — — 1 1 — —

Actuarial loss (gain)

1 1 ( 2 ) ( 1 ) — —

Net periodic benefit cost $ 8 $ 6 $ 3 $ 5 $ 2 $ 2

During the three months ended September 30, 2023, the Company made contributions to its international pension plans totaling $ 3 million.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of net periodic benefit cost for the nine months ended March 31, 2023 and 2022 consisted of the following:

Pension Plans Other than

Pension Plans

International Post-retirement

(In millions) 2023 2022 2023 2022 2023 2022

Service cost $ 28 $ 35 $ 20 $ 24 $ — $ 2

Interest cost 30 23 10 8 6 4

Expected return on plan assets ( 42 ) ( 41 ) ( 13 ) ( 11 ) — ( 1 )

Amortization of:

Actuarial loss 2 11 ( 2 ) 1 — 1

Prior service cost — — — ( 1 ) — —

Special termination benefits — — 1 4 — —

Net periodic benefit cost $ 18 $ 28 $ 16 $ 25 $ 6 $ 6

During the nine months ended March 31, 2023, the Company made contributions to its international pension plans totaling $ 12 million.

The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following:

(In millions) March 31, 2023 June 30, 2022

(In millions) September 30, 2023 June 30, 2023

Other assets $ 112 $ 115

5 unchanged sentences

NOTE 8 – COMMITMENTS AND CONTINGENCIES

On April 28, 2023, the Company completed the acquisition of the TOM FORD brand.

The amount paid by the Company at closing was approximately $ 2,250 million.

This amount was funded by cash on hand and proceeds from the issuance of commercial paper, and approximately $ 250 million received at closing from Marcolin S.p.A.

(a continuing TOM FORD licensee).

An aggregate amount of $ 300 million, at 5 % interest per annum, to the sellers becomes due from the Company beginning in July 2025.

The completion of the acquisition of the brand resulted in the elimination of future license royalty payments on the Company's TOM FORD Beauty business.

In January 2023, the Company entered into a $ 2,000 million senior unsecured revolving credit facility that expires on January 2, 2024 (the “364-Day Facility”) for liquidity support for the Company's commercial paper program and general corporate purposes, of which the entire amount is currently undrawn and available.

Interest rates on borrowings under the 364-Day Facility will be based on prevailing market interest rates in accordance with the agreement.

The costs incurred to establish the 364-Day Facility were not material.

The 364-Day Facility has an annual fee of approximately $ 0.6 million, payable quarterly, based on the Company’s current credit ratings.

The 364-Day 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.

In January 2023, in connection with the 364-Day Facility, the Company increased its commercial paper program under which it may issue commercial paper in the United States from $ 2,500 million to $ 4,500 million.

As of March 31, 2023 and April 26, 2023, the Company had $ 2,250 million and $ 3,410 million, respectively, outstanding under its commercial paper program.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Legal Proceedings

7 unchanged sentences

Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs, including long-term price-vested units and share units.

Compensation expense attributable to net stock-based compensation was $ 69 million and $ 91 million for the three months ended March 31, 2023 and 2022, respectively, and was $ 234 million and $ 283 million for the nine months ended March 31, 2023 and 2022, respectively.

Compensation expense attributable to net stock-based compensation was $ 80 million and $ 53 million for the three months ended September 30, 2023 and 2022, respectively.

Stock Options

During the nine months ended March 31, 2023, the Company granted stock options in respect of approximately 1.2 million shares of Class A Common Stock with an weighted-average exercise price per share of $ 246.01 and a weighted-average grant date fair value per share of $ 79.09 .

During the three months ended September 30, 2023, the Company granted stock options in respect of approximately 1.8 million shares of Class A Common Stock with an exercise price per share of $ 156.39 and a weighted-average grant date fair value per share of $ 52.98 .

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model.

The aggregate intrinsic value of stock options exercised during the nine months ended March 31, 2023 was $ 74 million.

The aggregate intrinsic value of stock options exercised during the three months ended September 30, 2023 was $ 17 million.

Restricted Stock Units

During the nine months ended March 31, 2023, the Company granted RSUs in respect of approximately 1.1 million shares of Class A Common Stock with a weighted-average grant date fair value per share of $ 246.34 that, at the time of grant, are scheduled to vest at 0.4 million, 0.3 million, and 0.4 million shares per year, in fiscal 2024, fiscal 2025 and fiscal 2026, respectively.

During the three months ended September 30, 2023, the Company granted RSUs in respect of approximately 1.5 million shares of Class A Common Stock with a weighted-average grant date fair value per share of $ 156.23 that, at the time of grant, are scheduled to vest at 0.6 million, 0.5 million, and 0.4 million shares per year, in fiscal 2025, fiscal 2026 and fiscal 2027, respectively.

Vesting of RSUs is generally subject to the continued employment or the retirement of the grantees.

The RSUs are generally accompanied by dividend equivalent rights, payable upon settlement of the RSUs either in cash or shares (based on the terms of the particular award) and, as such, were generally valued at the closing market price of the Company’s Class A Common Stock on the date of grant.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Performance Share Units

During the nine months ended March 31, 2023, 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 $ 246.15 , 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, 2025, all subject to continued employment or the retirement of the grantees.

During the three months ended September 30, 2023, the Company granted PSUs with a target payout of approximately 0.2 million shares of Class A Common Stock with a grant date fair value per share of $ 156.39 , 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, 2026, all subject to continued employment or the retirement of the grantees.

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.

In September 2022, 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 0.1 million PSUs with a performance period ended June 30, 2022.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In August 2023, less than 0.1 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 0.2 million PSUs with a performance period ended June 30, 2023.

DECIEM Stock Options

1 unchanged sentence

Total stock-based compensation expense is attributable to the exchange or replacement of and the remaining requisite service period of stock options.

The total stock option expense for the three and nine months ended March 31, 2023 was not material.

The total stock option expense for the three and nine months ended March 31, 2022 resulted in income of $ 60 million and $ 58 million, respectively, net of foreign currency remeasurements and reflects a reduction in the fair value of the DECIEM stock options.

There were no DECIEM stock options exercised during the nine months ended March 31, 2023.

The DECIEM stock options are reported as a stock option liability of $ 73 million and $ 74 million in Other noncurrent liabilities in the accompanying consolidated balance sheets at March 31, 2023 and June 30, 2022, respectively.

The fair value of the stock options were calculated using the following key assumptions in the Monte Carlo Method:

March 31, 2023 June 30, 2022

The total stock option expense, net of foreign currency remeasurements, for the three months ended September 30, 2023 and 2022 was $ 8 million and $ 1 million, respectively.

There is no related income tax benefit on the DECIEM stock-based compensation expense.

There were no DECIEM stock options exercised during the three months ended September 30, 2023.

The DECIEM stock options are reported as a stock option liability of $ 103 million and $ 99 million in Other accrued liabilities in the accompanying consolidated balance sheets at September 30, 2023 and June 30, 2023, respectively.

The fair value of the stock options were calculated by incorporating significant assumptions including the starting equity value, actual and projected net sales and EBITDA and the following key assumptions into the Monte Carlo Method:

September 30, 2023 June 30, 2023

Risk-free rate 5.10 % 4.90 %

Term to mid of last twelve-month period 0.67 years 1.42 years

Term to mid of last twelve-month period 0.33 years

Operating leverage adjustment 0.45 0.45

9 unchanged sentences

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.

per common share assuming dilution (“diluted EPS”) is computed by reflecting potential dilution from stock-based awards using the treasury stock method.

THE ESTÉE LAUDER COMPANIES INC.

2 unchanged sentences

Three Months Ended

March 31 Nine Months Ended

(In millions, except per share data) 2023 2022

Net earnings attributable to The Estée Lauder Companies Inc.

$ 156 $ 558 $ 1,039 $ 2,338

Weighted-average common shares outstanding – Basic

357.9 359.2 357.8 360.7

Effect of dilutive stock options

2.5 3.5 2.4 3.9

Effect of PSUs

0.1 0.2 0.1 0.2

Effect of RSUs

0.7 0.7 0.6 1.0

Weighted-average common shares outstanding – Diluted

361.2 363.6 360.9 365.8

Net earnings attributable to The Estée Lauder Companies Inc.

per common share:

$ 0.44 $ 1.55 $ 2.90 $ 6.48

$ 0.43 $ 1.53 $ 2.88 $ 6.39

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:

Three Months Ended

March 31 Nine Months Ended

(In millions) 2023 2022

1 unchanged sentence

RSUs and PSUs 0.1 —

As of March 31, 2023 and 2022, 0.4 million and 0.7 million shares, 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 9 – Stock Programs .

As of September 30, 2023 and 2022, 0.4 million and 0.4 million shares, 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 9 – Stock Programs .

THE ESTÉE LAUDER COMPANIES INC.

3 unchanged sentences

Three Months Ended

March 31 Nine Months Ended

(In millions) 2023 2022 2023 2022

(In millions, except per share data) 2023 2022

Common stock, beginning of the period $ 6 $ 6

8 unchanged sentences

Net earnings attributable to The Estée Lauder Companies Inc.

156 558 1,039 2,338

Cumulative effect of adoption of new accounting standards — — — 121

Retained earnings, end of the period 13,784 14,185

Accumulated other comprehensive loss, beginning of the period ( 934 ) ( 762 )

Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc.

Other comprehensive loss attributable to The Estée Lauder Companies Inc.

( 129 ) ( 316 )

4 unchanged sentences

Treasury stock, end of the period ( 13,634 ) ( 13,471 )

Total stockholders’ equity – The Estée Lauder Companies Inc.

5,877 6,150 5,877 6,150

Noncontrolling interests, beginning of the period — 34 — 34

Net earnings attributable to noncontrolling interests — 3 — 8

Translation adjustments and other, net — ( 1 ) — ( 6 )

Noncontrolling interests, end of the period — 36 — 36

Total equity $ 5,342 $ 5,517

Redeemable noncontrolling interest, beginning of the period $ 832 $ 842

Net earnings (loss) attributable to redeemable noncontrolling interest ( 1 ) 12 3 12

Net earnings attributable to redeemable noncontrolling interest 5 1

Translation adjustments ( 11 ) ( 35 )

Adjustment of redeemable noncontrolling interest to redemption value — ( 1 ) — ( 1 )

Redeemable noncontrolling interest, end of the period $ 826 $ 808

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the nine months ended March 31, 2023:

The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the three months ended September 30, 2023:

Date Declared Record Date Payable Date Amount per Share

August 17, 2023 August 31, 2023 September 15, 2023 $ .66

November 1, 2022 November 30, 2022 December 15, 2022 $ .66

February 1, 2023 February 28, 2023 March 15, 2023 $ .66

On May 2, 2023, a dividend was declared in the amount of $ .66 per share on the Company’s Class A and Class B Common Stock.

The dividend is payable in cash on June 15, 2023 to stockholders of record at the close of business on May 31, 2023.

During the nine months ended March 31, 2023, the Company purchased approximately 1.2 million shares of its Class A Common Stock for $ 258 million.

On October 31, 2023, a dividend was declared in the amount of $ .66 per share on the Company’s Class A and Class B Common Stock.

The dividend is payable in cash on December 15, 2023 to stockholders of record at the close of business on November 30, 2023.

Beginning in December 2022, we temporarily suspended the repurchase of shares of our Class A Common Stock.

We may resume repurchases in the future.

Accumulated Other Comprehensive Income

The following table represents changes in AOCI, net of tax, by component for the nine months ended March 31, 2023:

The following table represents changes in AOCI, net of tax, by component for the three months ended September 30, 2023:

(In millions) Net Cash

6 unchanged sentences

Net current-period OCI 14 — — ( 143 ) ( 129 )

Balance at March 31, 2023 $ 30 $ ( 9 ) $ ( 114 ) $ ( 782 ) $ ( 875 )

Balance at September 30, 2023 $ 73 $ ( 15 ) $ ( 177 ) $ ( 944 ) $ ( 1,063 )

(1) See Note 4 – Derivative Financial Instruments for gains (losses) relating to net investment hedges.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and nine months ended March 31, 2023 and 2022:

The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three months ended September 30, 2023 and 2022:

Amount Reclassified from AOCI Affected Line Item in

1 unchanged sentence

Three Months Ended

March 31 Nine Months Ended

(In millions) 2023 2022

1 unchanged sentence

Foreign currency forward contracts $ 9 $ 15 Net sales

Interest rate-related derivatives ( 1 ) — ( 1 ) ( 1 ) Interest expense

21 3 58 ( 6 )

Benefit (provision) for deferred taxes ( 5 ) — ( 14 ) 2 Provision for income taxes

Provision for deferred taxes

( 2 ) ( 4 ) Provision for income taxes

7 11 Net earnings

3 unchanged sentences

Retirement Plan and Other Retiree Benefit Adjustments

Amortization of prior service cost — — — 1 Other components of net periodic benefit cost (1)

Amortization of actuarial loss 1 — Other components of net periodic benefit cost (1)

— ( 4 ) — ( 12 )

Benefit for deferred taxes — 1 — 3 Provision for income taxes

Provision for deferred taxes

— — Provision for income taxes

1 — Net earnings

1 unchanged sentence

(1) See Note 7 – Pension and Post-Retirement Benefit Plans for additional information.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – STATEMENT OF CASH FLOWS

Supplemental cash flow information for the nine months ended March 31, 2023 and 2022 is as follows:

Supplemental cash flow information for the three months ended September 30, 2023 and 2022 is as follows:

(In millions) 2023 2022

3 unchanged sentences

Property, plant and equipment accrued but unpaid $ 82 $ 171

Financing lease modifications $ — $ ( 13 )

Right-of-use assets obtained in exchange for new/modified operating lease liabilities $ 111 $ 70

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – SEGMENT DATA AND RELATED INFORMATION

10 unchanged sentences

Three Months Ended

March 31 Nine Months Ended

(In millions) 2023 2022

4 unchanged sentences

Hair Care 148 158

Other 11 11 39 40

3,755 4,246 12,311 14,179

Returns associated with restructuring and other activities — ( 5 )

5 unchanged sentences

Hair Care ( 22 ) ( 12 )

Other 9 — 8 3

315 761 1,547 3,135

Reconciliation:

9 unchanged sentences

Asia/Pacific 1,058 1,130

3,755 4,246 12,311 14,179

Returns associated with restructuring and other activities — ( 5 )

4 unchanged sentences

Asia/Pacific 138 208

315 761 1,547 3,135

Charges associated with restructuring and other activities ( 2 ) ( 6 )

Operating income $ 98 $ 661

(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 net sales of Dr.Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region.

Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

(1) The net sales from the Company's travel retail business are included in the Europe, the Middle East & Africa region, and operating income attributable to these net sales are included in that region and in The Americas.

The exception is for net sales and operating income of Dr.Jart+ in the travel retail channel in Korea that are reflected in Korea in the Asia/Pacific region.

THE ESTÉE LAUDER COMPANIES INC.

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.

What changed 10-Q

Item 1. Financial Statements