What changed in this filing

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Item 1. Financial Statements

2024-05-01 compared with 2024-02-05 · 262 added, 179 removed, 896 unchanged (33% of the section changed)

3 unchanged sentences

Three Months Ended

December 31 Six Months Ended

March 31 Nine Months Ended

(In millions, except per share data) 2024 2023 2024 2023

17 unchanged sentences

Net earnings 335 155 695 1,042

Net earnings attributable to redeemable noncontrolling interest

Net loss (earnings) attributable to redeemable noncontrolling interest

( 5 ) 1 ( 21 ) ( 3 )

12 unchanged sentences

Three Months Ended

December 31 Six Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023 2024 2023

1 unchanged sentence

Other comprehensive income (loss):

Net cash flow hedge loss

Net cash flow hedge gain (loss)

21 ( 43 ) ( 7 ) ( 50 )

Cross-currency swap contract gain

Cross-currency swap contract gain (loss) ( 4 ) ( 11 ) 10 ( 11 )

Retirement plan and other retiree benefit adjustments 24 — 22 —

Translation adjustments ( 185 ) ( 7 ) ( 89 ) ( 101 )

Benefit for income taxes on components of other comprehensive income

Total other comprehensive income (loss), net of tax 220 257 80 ( 94 )

Benefit (provision) for income taxes on components of other comprehensive income

( 29 ) 16 ( 29 ) 23

Total other comprehensive loss, net of tax

( 173 ) ( 45 ) ( 93 ) ( 139 )

Comprehensive income 162 110 602 903

Comprehensive loss (income) attributable to redeemable noncontrolling interest:

( 11 ) ( 3 ) ( 16 ) ( 4 )

Net loss (earnings) ( 5 ) 1 ( 21 ) ( 3 )

Translation adjustments 15 ( 1 ) 13 26

5 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In millions, except share data) December 31

(In millions, except share and per share data)

Current assets

13 unchanged sentences

Current liabilities

$ 1,500 $ 997

Accounts payable

12 unchanged sentences

Class A shares authorized:

1,300,000,000 at December 31, 2023 and June 30, 2023;

1,300,000,000 at March 31, 2024 and June 30, 2023;

shares issued:

470,748,805 at December 31, 2023 and 469,668,085 at June 30, 2023;

470,884,456 at March 31, 2024 and 469,668,085 at June 30, 2023;

Class B shares authorized:

304,000,000 at December 31, 2023 and June 30, 2023;

304,000,000 at March 31, 2024 and June 30, 2023;

shares issued and outstanding:

125,542,029 at December 31, 2023 and 125,542,029 at June 30, 2023

125,542,029 at March 31, 2024 and 125,542,029 at June 30, 2023

Paid-in capital

4 unchanged sentences

Treasury stock, at cost;

237,865,069 Class A shares at December 31, 2023 and 237,590,199 Class A shares at June 30, 2023

237,870,661 Class A shares at March 31, 2024 and 237,590,199 Class A shares at June 30, 2023

( 13,663 ) ( 13,631 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(In millions) 2024 2023

14 unchanged sentences

Decrease (increase) in inventory and promotional merchandise

Decrease in other assets, net

Decrease (increase) in other assets, net

Decrease in accounts payable ( 289 ) ( 313 )

4 unchanged sentences

Capital expenditures ( 702 ) ( 652 )

Purchases of other intangible assets — ( 8 )

Purchases of investments ( 8 ) ( 5 )

2 unchanged sentences

Cash flows from financing activities

Proceeds of current debt, net

Proceeds (repayments) of current debt, net

( 215 ) 2,228

Proceeds from issuance of long-term debt, net 649 —

Debt issuance costs ( 4 ) —

Repayments of commercial paper (maturities after three months)

4 unchanged sentences

Dividends paid to stockholders ( 710 ) ( 687 )

Net cash flows used for financing activities

Net cash flows provided by (used for) financing activities

( 1,059 ) 1,090

30 unchanged sentences

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 $ 232 million and $ 291 million, net of tax, during the three months ended December 31, 2023 and 2022, respectively, and $ 89 million and $( 61 ) million, net of tax, during the six months ended December 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 $ 192 million and $ 5 million, net of tax, during the three months ended March 31, 2024 and 2023, respectively, and $ 103 million and $ 66 million, net of tax, during the nine months ended March 31, 2024 and 2023, 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 on foreign currency transactions of $ 13 million and $ 20 million during the three months ended December 31, 2023 and 2022, respectively, and $ 29 million and $ 34 million during the six months ended December 31, 2023 and 2022, respectively.

The accompanying consolidated statements of earnings include net exchange gains on foreign currency transactions of $ 23 million and $ 25 million during the three months ended March 31, 2024 and 2023, respectively, and $ 52 million and $ 59 million during the nine months ended March 31, 2024 and 2023, 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 three and nine months ended March 31, 2024 sells products primarily in China travel retail.

This customer accounted for $ 395 million or 10 %, and $ 165 million, or 4 %, of the Company's consolidated net sales for the three months ended March 31, 2024 and 2023, respectively, and $ 750 million, or 6 %, and $ 887 million, or 7 %, for the nine months ended March 31, 2024 and 2023, respectively.

This customer accounted for $ 189 million, or 10 %, and $ 49 million, or 3 %, of the Company's accounts receivable at March 31, 2024 and June 30, 2023, respectively.

Inventory and Promotional Merchandise

Inventory and promotional merchandise consists of the following:

(In millions) December 31, 2023 June 30, 2023

(In millions) March 31, 2024 June 30, 2023

Raw materials

5 unchanged sentences

Property, plant and equipment consists of the following:

(In millions) December 31, 2023 June 30, 2023

(In millions) March 31, 2024 June 30, 2023

Assets (Useful Life)

10 unchanged sentences

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

Depreciation and amortization of property, plant and equipment was $ 163 million and $ 138 million during the three months ended December 31, 2023 and 2022, respectively, and $ 325 million and $ 274 million during the six months ended December 31, 2023 and 2022, respectively.

Depreciation and amortization of property, plant and equipment was $ 166 million and $ 147 million during the three months ended March 31, 2024 and 2023, respectively, and $ 491 million and $ 421 million during the nine months ended March 31, 2024 and 2023, 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 six months ended December 31, 2023 and 2022 are as follows:

The effective rate for income taxes for the three and nine months ended March 31, 2024 and 2023 are as follows:

Three Months Ended

Six Months Ended

March 31 Nine Months Ended

2024 2023 2024 2023

1 unchanged sentence

Basis-point change from the prior-year period ( 1,350 ) 600

For the three months ended December 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 2024, and the unfavorable impact associated with previously issued stock-based compensation, partially offset by a decrease in state and local income taxes.

For the six months ended December 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 2024, and the unfavorable impact associated with previously issued stock-based compensation.

For the three months ended March 31, 2024, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on the Company's foreign operations due to the timing of the estimated change in the Company's full year geographical mix of earnings in the current and prior-year periods, partially offset by the unfavorable impact associated with previously issued stock-based compensation.

For the nine months ended March 31, 2024, 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 2024, and the unfavorable impact associated with previously issued stock-based compensation.

On August 16, 2022, the U.S.

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 and six months ended December 31, 2023.

As of December 31, 2023 and June 30, 2023, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $ 63 million.

The total amount of unrecognized tax benefits at December 31, 2023 that, if recognized, would affect the effective tax rate was $ 53 million.

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

The total gross accrued interest and penalties in the accompanying consolidated balance sheets at each of December 31, 2023 and June 30, 2023, was $ 17 million and $ 15 million, respectively.

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

As of March 31, 2024 and June 30, 2023, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $ 64 million and $ 63 million, respectively.

The total amount of unrecognized tax benefits at March 31, 2024 that, if recognized, would affect the effective tax rate was $ 54 million.

The total gross interest and penalties accrued related to unrecognized tax benefits during the three and nine months ended March 31, 2024 in the accompanying consolidated statements of earnings was $ 1 million and $ 3 million, respectively.

The total gross accrued interest and penalties in the accompanying consolidated balance sheets at each of March 31, 2024 and June 30, 2023, was $ 18 million and $ 15 million, respectively.

On the basis of the information available as of March 31, 2024, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

During the fiscal 2024 second quarter, 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 and six months ended December 31, 2023.

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, 2024.

Supplier Finance Programs

2 unchanged sentences

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 $ 64 million and $ 52 million as of December 31, 2023 and June 30, 2023, respectively, are included in accounts payable in the accompanying consolidated balance sheets.

Outstanding obligations confirmed as valid totaling $ 54 million and $ 52 million as of March 31, 2024 and June 30, 2023, respectively, are included in accounts payable in the accompanying consolidated balance sheets.

THE ESTÉE LAUDER COMPANIES INC.

2 unchanged sentences

Other accrued liabilities consist of the following:

(In millions) December 31, 2023 June 30, 2023

(In millions) March 31, 2024 June 30, 2023

Advertising, merchandising and sampling $ 283 $ 235

Employee compensation 507 546

2 unchanged sentences

Payroll and other non-income taxes 307 297

Accrued income taxes 315 222

Sales return accrual 289 289

1 unchanged sentence

$ 3,351 $ 3,216

At December 31, 2023 and June 30, 2023, total Other noncurrent liabilities of $ 1,812 million and $ 1,943 million included $ 606 million and $ 620 million of deferred tax liabilities, respectively.

At March 31, 2024 and June 30, 2023, total Other noncurrent liabilities of $ 1,728 million and $ 1,943 million included $ 581 million and $ 620 million of deferred tax liabilities, respectively.

Recently Adopted Accounting Standards

13 unchanged sentences

In December 2022, the FASB issued authoritative guidance to defer the sunset date of ASC 848 from December 31, 2022 to December 31, 2024.

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

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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.

32 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEC Final Rule Release No.

33-11275 – The Enhancement and Standardization of Climate-Related Disclosures for Investors

In March 2024, the SEC adopted rules intended to enhance and standardize climate-related disclosures in registration statements and annual reports.

The rules require significant effects of severe weather events and other natural conditions, amounts related to carbon offsets and renewable energy credits or certificates, as well as material impacts on financial estimates and assumptions that are due to severe weather events and other natural conditions or disclosed climate-related targets or transition plans to be disclosed in the annual financial statements in certain circumstances.

Effective for the Company – On April 4, 2024, the SEC issued an order staying the final rule on climate-related disclosures pending certain legal challenges.

Under the rule as currently issued, the disclosure requirements related to the annual financial statements are expected to be effective for the Company's fiscal year ending June 30, 2026 Form 10-K.

The Company is not required to provide comparative information in the year of adoption.

Impact on consolidated financial statement s – The Company is currently evaluating the impact that this guidance will have on its annual financial statement disclosures.

NOTE 2 – GOODWILL AND OTHER INTANGIBLE ASSETS

7 unchanged sentences

Translation adjustments, goodwill

Translation adjustments, accumulated impairments

Balance as of December 31, 2023

( 32 ) — ( 1 ) — ( 33 )

Balance as of March 31, 2024

1,632 1,116 253 353 3,354

Accumulated impairments

3 unchanged sentences

Other intangible assets consist of the following:

December 31, 2023 June 30, 2023

March 31, 2024 June 30, 2023

(In millions) Gross

10 unchanged sentences

$ 5,438 $ 5,602

The aggregate amortization expense related to amortizable intangible assets was $ 37 million for the three months ended December 31, 2023 and 2022, and $ 73 million for the six months ended December 31, 2023 and 2022.

The aggregate amortization expense related to amortizable intangible assets was $ 36 million for the three months ended March 31, 2024 and 2023, and $ 109 million for the nine months ended March 31, 2024 and 2023.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1 unchanged sentence

Estimated aggregate amortization expense $ 35 $ 143 $ 143 $ 126 $ 101

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment Analysis During the Six Months Ended December 31, 2022

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.

16 unchanged sentences

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 six months ended December 31, 2022 and the remaining trademark and goodwill carrying values as of December 31, 2022, for each reporting unit, are as follows:

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 and Six Months Ended December 31, 2022 As of December 31, 2022

Reporting Unit Geographic Region Trademarks Goodwill Trademarks Goodwill

(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

The Americas $ — $ — $ 21 $ — $ — $ —

2 unchanged sentences

Total $ — $ — $ 207 $ — $ 516 $ 323

The impairment charges for the three and six months ended December 31, 2022 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

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.

NOTE 3 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

Post-COVID Business Acceleration Program

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.

Restructuring Program Component of the Profit Recovery Plan

Restructuring Program Component of the Profit Recovery Plan ("Restructuring Program")

As previously communicated on November 1, 2023, the Company has launched a Profit Recovery Plan to help progressively rebuild its profit margins in fiscal years 2025 and 2026.

5 unchanged sentences

The Company committed to this course of action on February 1, 2024.

In connection with the restructuring program, as of March 31, 2024, the Company estimates a net reduction in the range of approximately 1,800 to 3,000 positions globally, which is about 3 - 5 % of its positions including temporary and part-time employees as of June 30, 2023.

This reduction takes into account the elimination of some positions as well as retraining and redeployment of certain employees in select areas.

The Company plans to substantially complete specific initiatives under the restructuring program through fiscal 2026.

The Company expects that the restructuring program will result in restructuring and other charges totaling between $ 500 million and $ 700 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs associated with implementing these initiatives.

Restructuring Program Approvals

The Restructuring Program cumulative charges approved by the Company through March 31, 2024 were:

Net Sales) Cost of Sales Operating Expenses Total

(In millions) Restructuring

Charges Other

Total Charges Approved

Cumulative charges through March 31, 2024

$ — $ — $ 13 $ 21 $ 34

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Included in the above table, cumulative Restructuring Program restructuring initiatives approved by the Company through March 31, 2024 by major cost type were:

(In millions) Employee-

Costs Contract

Terminations Other Exit

Restructuring Charges Approved

Cumulative charges through March 31, 2024

$ 6 $ 4 $ — $ 3 $ 13

Specific actions taken since the Restructuring Program inception include:

• Value Chain Optimization – To help rebuild gross margin profitability, as part of a broader initiative associated with reorganizing and redesigning the Company’s supply chain to be completed in phases, the Company has approved an initiative to right-size a manufacturing location to improve efficiencies and optimize asset utilization.

These actions will primarily result in a net reduction in workforce, which includes employee severance, asset write-offs, and costs to decommission and relocate activities.

Restructuring Program Restructuring and Other Charges

The Company classifies restructuring charges as follows:

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 (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.

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 Company classifies other charges associated with restructuring activities as follows:

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 – 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 Project Management Office (“PMO”) for the duration of the Restructuring Program, including internal costs for employees dedicated solely to project management activities, and consulting services to assist with business case development;

• 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 ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Restructuring Program were:

Net Sales) Cost of Sales Operating Expenses Total

(In millions) Restructuring

Charges Other

Total Charges

Cumulative charges through March 31, 2024

$ — $ — $ 6 $ 11 $ 17

(In millions) Employee-

Costs Contract

Terminations Other Exit

Restructuring Charges

Cumulative charges through March 31, 2024

$ 6 $ — $ — $ — $ 6

Accrued restructuring charges of $ 7 million at March 31, 2024 relating to the Restructuring Component of the Profit Recovery Plan are expected to result in cash expenditures funded from cash provided by operations of approximately $ 2 million, $ 2 million, $ 2 million and $ 1 million for the remainder of fiscal 2024 and for fiscal 2025, 2026, and 2027, respectively.

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.

Restructuring Program April 2024 Approvals

Subsequent to March 31, 2024, between April 1, 2024 and April 24, 2024, the Company approved certain initiatives under the Restructuring Program within the areas of PMO, Enabling Function Re-Invention, which represents a broader initiative to reorganize and right-size the Company’s go-to-market structure, and Value Chain Optimization.

Once the relevant accounting criteria has been met, the Company expects to record restructuring and other charges of approximately $ 62 million.

The following presents the restructuring initiative charges approved from April 1, 2024 to April 24, 2024:

Net Sales) Cost of Sales Operating Expenses Total

(In millions) Restructuring

Charges Other

Approval Period

April 1, 2024 - April 24, 2024

$ — $ — $ 11 $ 51 $ 62

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Included in the above table, cumulative Restructuring Program restructuring initiative charges approved by the Company from April 1, 2024 to April 24, 2024 by major cost type were:

(In millions) Employee-

Costs Contract

Terminations Other Exit

Restructuring Charges Approved

April 1, 2024 - April 24, 2024

$ 9 $ 1 $ — $ 1 $ 11

Post-COVID Business Acceleration Program

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 – DEBT

In February 2024, the Company completed a public offering of $ 650 million aggregate principal amount of its 5.000 % Senior Notes due February 14, 2034 (the "2034 Senior Notes").

The Company intends to use the proceeds from this offering for general corporate purposes, which may include funding a portion of the price to purchase the remaining interest in DECIEM, operating expenses, working capital, capital expenditures and redemptions and repayment of short-term or long-term borrowings, including outstanding commercial paper as it matures.

These recently issued notes are summarized as follows:

($ in millions) Issue Date Price Yield Unamortized

Discount Debt

Costs Semi-annual

2034 Senior Notes (1)

February 2024 99.689 % 5.04 % $ ( 2 ) $ ( 5 ) February 14/August 14

(1) In March 2022, in anticipation of the issuance of the 2034 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $ 300 million at a weighted average all-in rate of 2.02 %.

The treasury lock agreements were terminated in September 2022, and the Company recognized a gain in OCI of $ 31 million that is being amortized to interest expense over the life of the 2034 Senior Notes.

As a result of the treasury lock agreements, as well as the debt discount and debt issuance costs, the effective interest rate on the 2034 Senior Notes will be 4.53 % over the life of the debt.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – 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 December 31, 2023, the notional amount of derivatives not designated as hedging instruments was $ 3,184 million.

At March 31, 2024, the notional amount of derivatives not designated as hedging instruments was $ 3,449 million.

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

Costs associated with entering into derivative financial instruments have not been material to the Company’s consolidated financial results.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For each derivative contract entered into, where the Company looks to obtain hedge accounting treatment, the Company formally and contemporaneously documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction, the nature of the risk being hedged, and how the hedging instruments’ effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively.

2 unchanged sentences

If based on the qualitative assessment, it is determined that a derivative has ceased to be a highly effective hedge, the Company will perform a quantitative assessment to determine whether to discontinue hedge accounting with respect to that derivative prospectively.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows:

3 unchanged sentences

(In millions) Balance Sheet

Location December 31, 2023 June 30, 2023 Balance Sheet

Location December 31, 2023 June 30, 2023

Location March 31, 2024 June 30, 2023 Balance Sheet

Location March 31, 2024 June 30, 2023

Derivatives Designated as Hedging Instruments:

18 unchanged sentences

Three Months Ended

December 31 Three Months Ended

March 31 Three Months Ended

(In millions) 2024 2023 2024 2023

8 unchanged sentences

(1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because it is probable that forecasted transactions will not occur by the end of the original time period was not material.

(2) During the three months ended December 31, 2023 and 2022, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 5 million and $ 7 million, respectively.

(2) During the three months ended March 31, 2024 and 2023, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 3 million and $ 6 million, respectively.

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

5 unchanged sentences

Reclassified from AOCI into Earnings (1)

Six Months Ended

December 31 Six Months Ended

Nine Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023 2024 2023

2 unchanged sentences

Interest rate-related derivatives — 1 Interest expense

( 8 ) 30 20 37

Derivatives in Net Investment Hedging Relationships (2) :

3 unchanged sentences

(2) During the six months ended December 31, 2023 and 2022, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 10 million and $ 13 million, respectively.

(2) During the nine months ended March 31, 2024 and 2023, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 13 million and $ 19 million, respectively.

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

5 unchanged sentences

Three Months Ended

December 31 Six Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023 2024 2023

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 during the three and six months ended December 31, 2023 was $ 4 million and $ 9 million, respectively.

The gain recognized in earnings from cross-currency swap contracts related to the amount excluded from effectiveness testing during the three months ended March 31, 2024 and 2023 was $ 5 million and $ 4 million, respectively, and for the nine months ended March 31, 2024 and 2023 was $ 14 million and $ 4 million, respectively.

(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

December 31, 2023 December 31, 2023

March 31, 2024 March 31, 2024

Long-term debt $ 845 $ ( 148 )

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 December 31

Three Months Ended March 31

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

11 unchanged sentences

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

Amount of gain reclassified from AOCI into earnings

12 N/A N/A 22 N/A N/A

Amount of gain reclassified from AOCI into earnings 15 N/A N/A 22 N/A N/A

N/A (Not applicable)

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended December 31

Nine Months Ended March 31

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

11 unchanged sentences

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

Amount of gain reclassified from AOCI into earnings

21 N/A N/A 37 N/A N/A

Amount of gain reclassified from AOCI into earnings 36 N/A N/A 59 N/A N/A

N/A (Not applicable)

3 unchanged sentences

Location of Gain Recognized in Earnings on

Three Months Ended

December 31 Six Months Ended

Derivatives Three Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023 2024 2023

8 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 December 31, 2023

As of June 30, 2023

As of March 31, 2024 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 June 2025.

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 2025.

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

At December 31, 2023, the Company had cash flow hedges outstanding with a notional amount totaling $ 1,752 million.

At March 31, 2024, the Company had cash flow hedges outstanding with a notional amount totaling $ 2,478 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 December 31, 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 December 31, 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 gain on derivative instruments designated as cash flow hedges in AOCI was $ 51 million and $ 79 million as of December 31, 2023 and June 30, 2023, respectively.

As of March 31, 2024, 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 March 31, 2024 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $ 25 million.

The accumulated net gain on derivative instruments designated as cash flow hedges in AOCI was $ 72 million and $ 79 million as of March 31, 2024 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 December 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 the three-month fallback rate SOFR plus a margin.

At March 31, 2024, 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.

2 unchanged sentences

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 December 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.

At March 31, 2024, 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 December 31, 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 $ 6 million and $ 20 million as of December 31, 2023 and June 30, 2023, respectively.

The estimated net gain on the Company’s derivative instruments designated as fair value hedges as of March 31, 2024 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 $ 10 million and $ 20 million as of March 31, 2024 and June 30, 2023, respectively.

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 October 2024.

The net investment hedge contracts have varying maturities through the end of March 2025.

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

At December 31, 2023, the Company had net investment hedges outstanding with a notional amount totaling $ 408 million.

At March 31, 2024, the Company had net investment hedges outstanding with a notional amount totaling $ 1,011 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 $ 55 million at December 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 $ 102 million at March 31, 2024.

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

13 unchanged sentences

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 December 31, 2023:

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, 2024:

(In millions) Level 1 Level 2 Level 3 Total

20 unchanged sentences

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

December 31, 2023 June 30, 2023

March 31, 2024 June 30, 2023

(In millions) Carrying

9 unchanged sentences

Cross-currency swap contracts - asset, net 52 52 22 22

Foreign currency forward contracts – asset (liability), net

( 15 ) ( 15 ) 27 27

Foreign currency forward contracts – asset, net

Interest rate-related derivatives – liability, net ( 148 ) ( 148 ) ( 150 ) ( 150 )

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s impairment charges for the three and six months ended December 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 during the three months ended December 31, 2022:

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)

11 unchanged sentences

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.

Cross-currency swap contracts – The fair values of the Company’s cross-currency swap 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 yield curves and currency spot and forward rates, were obtained from independent pricing services.

17 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in the DECIEM stock option liability for the six months ended December 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 nine months ended March 31, 2024 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 ( 1 )

DECIEM stock option liability as of December 31, 2023

DECIEM stock option liability as of March 31, 2024 $ 106

NOTE 7 – REVENUE RECOGNITION

1 unchanged sentence

Accounts Receivable

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

Accounts receivable, net is stated net of the allowance for doubtful accounts, including credit losses, and customer deductions totaling $ 27 million and $ 30 million as of March 31, 2024 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) December 31, 2023

(In millions) March 31, 2024

Balance at June 30, 2023 $ 16

1 unchanged sentence

Write-offs, net & other 2

Balance at December 31, 2023 $ 16

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

Balance at March 31, 2024 $ 15

The remaining balance of the allowance for doubtful accounts and customer deductions of $ 12 million and $ 14 million as of March 31, 2024 and June 30, 2023, respectively, relates to non-credit losses, which are primarily due to customer deductions.

Deferred Revenue

1 unchanged sentence

Three Months Ended

December 31 Six Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023 2024 2023

1 unchanged sentence

Revenue recognized that was included in the deferred revenue balance at the beginning of the period ( 26 ) ( 50 ) ( 275 ) ( 330 )

Revenue deferred during the period

124 119 293 276

Revenue deferred (released) during the period ( 38 ) ( 15 ) 255 261

Other ( 4 ) 26 ( 10 ) 21

3 unchanged sentences

Transaction Price Allocated to the Remaining Performance Obligations

At December 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, gift card liabilities and the Marcolin license arrangement related to TOM FORD that are unsatisfied (or partially unsatisfied) is $ 370 million.

The remaining balance of deferred revenue at December 31, 2023 will be recognized beyond the next twelve months, of which $ 229 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.

At March 31, 2024, 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 $ 306 million.

The remaining balance of deferred revenue at March 31, 2024 will be recognized beyond the next twelve months, of which $ 226 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

5 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 December 31, 2023 and 2022 consisted of the following:

The components of net periodic benefit cost for the three months ended March 31, 2024 and 2023 consisted of the following:

Pension Plans Other than

8 unchanged sentences

1 — ( 2 ) — — —

Prior service cost — — ( 1 ) — ( 1 ) —

Special termination benefits — — — 1 — —

Net periodic benefit cost $ 8 $ 6 $ 2 $ 6 $ 1 $ 2

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

The components of net periodic benefit cost for the nine months ended March 31, 2024 and 2023 consisted of the following:

Pension Plans Other than

8 unchanged sentences

3 2 ( 6 ) ( 2 ) — —

Prior service cost — — ( 1 ) — ( 1 ) —

Special termination benefits — — — 1 — —

Net periodic benefit cost $ 24 $ 18 $ 8 $ 16 $ 6 $ 6

2 unchanged sentences

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) December 31, 2023 June 30, 2023

(In millions) March 31, 2024 June 30, 2023

Other assets $ 113 $ 115

5 unchanged sentences

NOTE 9 – COMMITMENTS AND CONTINGENCIES

In April 2024, the Company notified the minority interest holders that it was exercising its option to purchase the remaining interests in DECIEM, pursuant to the terms of the net Put (Call) Option for a purchase price based on the performance of DECIEM.

This will result in the settlement of the DECIEM stock options and the redeemable noncontrolling interest balances during the fiscal 2024 fourth quarter.

Legal Proceedings

3 unchanged sentences

Reasonably possible losses in addition to the amounts accrued for such litigation and legal proceedings, including the matters referred to below, are not material to the Company’s consolidated financial statements.

On December 7, 2023 and also on January 22, 2024, the Company and its Chief Executive Officer and Chief Financial Officer were named as defendants in separate purported securities class action complaints filed in the United States District Court for the Southern District of New York.

The first complaint alleges that defendants made materially false and misleading statements during the period August 18, 2022 to May 2, 2023 in press releases, the Company’s public filings and during conference calls with analysts that artificially inflated the price of the Company’s stock.

The second complaint alleges that defendants made materially false and misleading statements during the period February 3, 2022 to October 31, 2023 in press releases, the Company’s public filings and during conference calls with analysts that artificially inflated the price of the Company’s stock.

Both securities class action complaints allege claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

Motions for appointment as lead plaintiff and lead counsel are due on February 5, 2024.

Defendants intend to defend the actions vigorously.

On February 1, 2024, a shareholder derivative action complaint was filed against certain of the Company’s officers, all the Company’s directors as of that date and certain of the Company’s former directors as of that date (collectively the “Derivative Action Defendants”) in the United States District Court for the Southern District of New York.

The complaint alleges that the Derivative Action Defendants breached their fiduciary duties to the Company based on the same alleged course of conduct identified in the securities class action complaints described above.

The Derivative Action Defendants intend to defend the action vigorously.

On December 7, 2023 and January 22, 2024, the Company and its Chief Executive Officer and Chief Financial Officer were named as defendants in separate purported securities class action complaints filed in the United States District Court for the Southern District of New York.

On February 20, 2024, those two purported securities class actions were consolidated into one action.

On March 22, 2024, plaintiffs filed their consolidated amended class action complaint, which alleges that defendants made materially false and misleading statements during the period February 3, 2022 to October 31, 2023 in press releases, the Company’s public filings and during conference calls with analysts that artificially inflated the price of the Company’s stock in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

Defendants intend to defend the action vigorously.

On February 1, 2024 and March 15, 2024, shareholder derivative action complaints were filed against certain of the Company’s officers, all the Company’s directors as of those dates and certain of the Company’s former directors as of those dates in the United States District Court for the Southern District of New York.

In April 2024, both complaints were voluntarily dismissed without prejudice;

and, subsequently, one of the former derivative plaintiffs made a litigation demand, requesting, among other things, that the Company's Board of Directors investigate potential claims on behalf of the Company based on the same alleged course of conduct identified in the securities case complaint (which were also reflected in the dismissed shareholder derivative actions complaints) described above.

THE ESTÉE LAUDER COMPANIES INC.

4 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 $ 109 million and $ 112 million for the three months ended December 31, 2023 and 2022, respectively, and was $ 189 million and $ 165 million for the six months ended December 31, 2023 and 2022, respectively.

Compensation expense attributable to net stock-based compensation was $ 87 million and $ 69 million for the three months ended March 31, 2024 and 2023, respectively, and was $ 276 million and $ 234 million for the nine months ended March 31, 2024 and 2023, respectively.

Stock Options

During the six months ended December 31, 2023, the Company granted stock options in respect of approximately 1.8 million shares of Class A Common Stock with a weighted average exercise price per share of $ 155.92 and a weighted average grant date fair value per share of $ 52.83 .

During the nine months ended March 31, 2024, the Company granted stock options in respect of approximately 1.8 million shares of Class A Common Stock with a weighted average exercise price per share of $ 155.92 and a weighted average grant date fair value per share of $ 52.83 .

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 six months ended December 31, 2023 was $ 20 million.

The aggregate intrinsic value of stock options exercised during the nine months ended March 31, 2024 was $ 25 million.

Restricted Stock Units

During the six months ended December 31, 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.

During the nine months ended March 31, 2024, the Company granted RSUs in respect of approximately 1.6 million shares of Class A Common Stock with a weighted average grant date fair value per share of $ 155.84 that, at the time of grant, are scheduled to vest at 0.6 million, 0.6 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.

1 unchanged sentence

Performance Share Units

During the six months ended December 31, 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.

During the nine months ended March 31, 2024, 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.

4 unchanged sentences

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 (income), net of foreign currency remeasurements, for the three months ended December 31, 2023 and 2022 was $( 5 ) million and $( 4 ) million, respectively, and for the six months ended December 31, 2023 and 2022 was $ 3 million and $( 3 ) million, respectively.

The total stock option expense (income), net of foreign currency remeasurements, for the three months ended March 31, 2024 and 2023 was $ 5 million and $ 1 million, respectively, and for the nine months ended March 31, 2024 and 2023 was $ 8 million and $( 2 ) 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 six months ended December 31, 2023.

There were no DECIEM stock options exercised during the nine months ended March 31, 2024.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2023 and June 30, 2023, respectively, as they are expected to be settled in the fiscal 2024 fourth quarter.

The DECIEM stock options are reported as a stock option liability of $ 106 million and $ 99 million in Other accrued liabilities in the accompanying consolidated balance sheets at March 31, 2024 and June 30, 2023, respectively, as they are expected to be settled in the fiscal 2024 fourth quarter.

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:

December 31, 2023 June 30, 2023

March 31, 2024 June 30, 2023

Risk-free rate 5.00 % 4.90 %

14 unchanged sentences

Three Months Ended

December 31 Six Months Ended

March 31 Nine Months Ended

(In millions, except per share data) 2024 2023 2024 2023

19 unchanged sentences

Three Months Ended

Six Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023 2024 2023

1 unchanged sentence

RSUs and PSUs 0.1 — 0.5 —

As of December 31, 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 .

As of March 31, 2024 and 2023, 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 10 – Stock Programs .

THE ESTÉE LAUDER COMPANIES INC.

3 unchanged sentences

Three Months Ended

December 31 Six Months Ended

March 31 Nine Months Ended

(In millions, except per share data)

13 unchanged sentences

Accumulated other comprehensive loss, beginning of the period ( 856 ) ( 829 ) ( 934 ) ( 762 )

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

Other comprehensive loss attributable to The Estée Lauder Companies Inc.

( 158 ) ( 46 ) ( 80 ) ( 113 )

6 unchanged sentences

Redeemable noncontrolling interest, beginning of the period $ 850 $ 819 $ 832 $ 842

Net earnings attributable to redeemable noncontrolling interest 11 3 16 4

Net earnings (loss) attributable to redeemable noncontrolling interest

Translation adjustments ( 15 ) 1 ( 13 ) ( 26 )

3 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 six months ended December 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 nine months ended March 31, 2024:

Date Declared Record Date Payable Date Amount per Share

1 unchanged sentence

October 31, 2023 November 30, 2023 December 15, 2023 $ .66

On February 2, 2024, 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 March 15, 2024 to stockholders of record at the close of business on February 29, 2024.

February 2, 2024 February 29, 2024 March 15, 2024 $ .66

On April 30, 2024, 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 17, 2024 to stockholders of record at the close of business on May 31, 2024.

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 six months ended December 31, 2023:

Accumulated Other Comprehensive Loss

The following table represents changes in accumulated other comprehensive loss, net of tax, by component for the nine months ended March 31, 2024:

(In millions) Net Cash

4 unchanged sentences

OCI before reclassifications (3)

21 19 23 ( 103 ) (1)

Amounts reclassified to Net earnings ( 26 ) ( 11 ) ( 3 ) — ( 40 )

Net current-period OCI ( 5 ) 8 20 ( 103 ) ( 80 )

Balance at December 31, 2023 $ 37 $ ( 4 ) $ ( 177 ) $ ( 712 ) $ ( 856 )

Balance at March 31, 2024 $ 54 $ ( 7 ) $ ( 157 ) $ ( 904 ) $ ( 1,014 )

(1) See Note 5 – Derivative Financial Instruments for gains (losses) relating to net investment hedges.

(2) The gain recognized in AOCI, net of tax from cross-currency swap contracts represents the amount excluded from effectiveness testing.

(3) The tax provision included in Net Cash Flow Hedge Gain (Loss), Cross-Currency Swap Contracts, Amounts Included in Net Periodic Benefit Cost and Translation Adjustments are $ 7 million, $ 5 million, $ 5 million, and $ 26 million, respectively.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and nine months ended March 31, 2024 and 2023:

Amount Reclassified from AOCI Affected Line Item in

1 unchanged sentence

Three Months Ended

December 31 Six Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023 2024 2023

2 unchanged sentences

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

Provision for deferred taxes

Provision for income taxes

( 5 ) ( 5 ) ( 9 ) ( 14 ) Provision for income taxes

10 16 26 44 Net earnings

1 unchanged sentence

Gain on cross-currency swap contracts 5 4 14 4 Selling, general and administrative

Provision for deferred taxes ( 1 ) — ( 2 ) — Provision for income taxes

Provision for income taxes

( 1 ) ( 1 ) ( 3 ) ( 1 ) Provision for income taxes

4 3 11 3 Net earnings

3 unchanged sentences

1 — 3 — Other components of net periodic benefit cost (1)

Provision for deferred taxes

Provision for income taxes

( 1 ) — ( 2 ) — Provision for income taxes

2 — 3 — Net earnings

4 unchanged sentences

NOTE 13 – STATEMENT OF CASH FLOWS

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

Supplemental cash flow information for the nine months ended March 31, 2024 and 2023 is as follows:

(In millions) 2024 2023

14 unchanged sentences

During the fiscal 2024 second quarter, the Company identified and corrected prior-period misclassifications of net sales and operating income between certain of the Company’s product categories in its segment footnote.

As a result, product category net sales and operating income have been adjusted from the amounts previously reported for the three and six months ended December 31, 2022 for comparability purposes.

Presentation of product category net sales and operating income for three and nine months ended March 31, 2023, and fiscal years ended June 30, 2023 and 2022, will also be adjusted to reflect the misclassifications arising in those periods for comparability purposes within the prospective filings.

As a result, product category net sales and operating income have been adjusted from the amounts previously reported for the three and nine months ended March 31, 2023, for comparability purposes.

Also presented below, product category net sales and operating income for the fiscal years ended June 30, 2023 and 2022 are adjusted to reflect the misclassifications arising in those periods for comparability purposes and will be reflected within the prospective filing.

The misclassifications had no impact on the current-period or prior-period consolidated statements of earnings, consolidated statements of comprehensive income, consolidated balance sheets, or the consolidated statements of cash flows, and the Company determined that the impact on the Company’s current-period and previously issued financial statements for the respective periods was not material.

2 unchanged sentences

Three Months Ended

December 31 Six Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023 2024 2023

39 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The tables below present the effect of the corrections for the three and six months ended December, 31, 2022, the three and nine months ended March 31, 2023, and fiscal years ended June 30, 2023 and 2022.

Three Months Ended

December 31, 2022

Six Months Ended

December 31, 2022

(In millions) As Previously Reported

As Previously Reported

PRODUCT CATEGORY DATA

Skin Care $ 2,382 $ 45 $ 2,427 $ 4,486 $ 53 $ 4,539

Makeup 1,268 ( 5 ) 1,263 2,320 $ — 2,320

Fragrance 775 ( 41 ) 734 1,382 ( 52 ) 1,330

Hair Care 182 1 183 340 $ — 340

Other 14 — 14 28 ( 1 ) 27

4,621 $ — 4,621 8,556 $ — 8,556

Returns associated with restructuring and other activities ( 1 ) $ — ( 1 ) ( 6 ) $ — ( 6 )

Net sales $ 4,620 $ — $ 4,620 $ 8,550 $ — $ 8,550

Operating income (loss):

Skin Care $ 421 $ 12 $ 433 $ 951 $ 18 $ 969

Makeup ( 37 ) 13 ( 24 ) ( 21 ) 17 ( 4 )

Fragrance 177 ( 24 ) 153 310 ( 33 ) 277

Hair Care 5 ( 1 ) 4 ( 7 ) ( 1 ) ( 8 )

Other ( 1 ) $ — ( 1 ) ( 1 ) ( 1 ) ( 2 )

565 $ — 565 1,232 $ — 1,232

Charges associated with restructuring and other activities ( 9 ) $ — ( 9 ) ( 15 ) $ — ( 15 )

Operating income $ 556 $ — $ 556 $ 1,217 $ — $ 1,217

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The tables below present the effect of the corrections for the three and nine months ended March 31, 2023, and fiscal years ended June 30, 2023 and 2022.

Three Months Ended

22 unchanged sentences

Operating income $ 297 $ — $ 297 $ 1,514 $ — $ 1,514

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended June 30, 2023

22 unchanged sentences

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