What changed in this filing

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Item 1. Financial Statements

2024-10-31 compared with 2024-05-01 · 307 added, 483 removed, 675 unchanged (54% of the section changed)

1 unchanged sentence

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF EARNINGS

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

Three Months Ended

March 31 Nine Months Ended

(In millions, except per share data) 2024 2023

1 unchanged sentence

Cost of sales

1,107 1,159 3,331 3,401

2,833 2,592 8,406 8,900

Operating expenses

Selling, general and administrative

2,284 2,281 7,177 7,155

Restructuring and other charges

Impairment of other intangible assets — — — 207

Talcum litigation settlement agreements

Total operating expenses

2,302 2,295 7,203 7,386

Operating income 531 297 1,203 1,514

Operating income (loss)

Interest expense 92 95

1 unchanged sentence

Other components of net periodic benefit cost 2 ( 2 )

Earnings before income taxes 486 280 1,051 1,445

Provision for income taxes 151 125 356 403

Net earnings 335 155 695 1,042

Net loss (earnings) attributable to redeemable noncontrolling interest

( 5 ) 1 ( 21 ) ( 3 )

Net earnings attributable to The Estée Lauder Companies Inc.

Earnings (loss) before income taxes

Provision (benefit) for income taxes

Net earnings (loss)

Net earnings attributable to redeemable noncontrolling interest — ( 5 )

Net earnings (loss) attributable to The Estée Lauder Companies Inc.

$ ( 156 ) $ 31

Net earnings attributable to The Estée Lauder Companies Inc.

Net earnings (loss) attributable to The Estée Lauder Companies Inc.

per common share

2 unchanged sentences

Weighted average common shares outstanding

359.1 357.9 358.8 357.8

360.8 361.2 360.4 360.9

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) 2024 2023

Net earnings $ 335 $ 155 $ 695 $ 1,042

Net earnings (loss)

$ ( 156 ) $ 36

Other comprehensive income (loss):

Net cash flow hedge gain (loss)

21 ( 43 ) ( 7 ) ( 50 )

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

Cross-currency swap contract gain

Retirement plan and other retiree benefit adjustments 2 ( 1 )

1 unchanged sentence

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

( 29 ) 16 ( 29 ) 23

Total other comprehensive loss, net of tax

Total other comprehensive income (loss), net of tax

Comprehensive loss

( 73 ) ( 104 )

Comprehensive income 162 110 602 903

Comprehensive loss (income) attributable to redeemable noncontrolling interest:

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

Net earnings — ( 5 )

Translation adjustments — 11

Total comprehensive loss (income) attributable to redeemable noncontrolling interest 10 — ( 8 ) 23

Comprehensive income attributable to The Estée Lauder Companies Inc.

Total comprehensive loss attributable to redeemable noncontrolling interest — 6

Comprehensive loss attributable to The Estée Lauder Companies Inc.

$ ( 73 ) $ ( 98 )

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)

(In millions, except share and per share data) September 30

Current assets

Cash and cash equivalents $ 2,350 $ 3,395

$ 3,701 $ 4,029

Accounts receivable, net 1,977 1,727

4 unchanged sentences

Operating lease right-of-use assets 1,973 1,833

Goodwill 2,162 2,143

Other intangible assets, net 5,207 5,183

Other assets 1,527 1,460

Total other assets 10,869 10,619

11,033 11,097

$ 22,700 $ 23,415

Total assets $ 21,317 $ 21,677

LIABILITIES AND EQUITY

Current liabilities

Current debt $ 504 $ 504

Accounts payable 1,135 1,440

7 unchanged sentences

Total noncurrent liabilities 10,747 10,661

10,700 10,758

Commitments and contingencies

Redeemable noncontrolling interest

Common stock, $ .01 par value;

Class A shares authorized:

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

1,300,000,000 at September 30, 2024 and June 30, 2024;

shares issued:

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

471,407,641 at September 30, 2024 and 471,018,569 at June 30, 2024;

Class B shares authorized:

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

304,000,000 at September 30, 2024 and June 30, 2024;

shares issued and outstanding:

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

125,542,029 at September 30, 2024 and June 30, 2024

Paid-in capital 6,778 6,685

Retained earnings 13,031 13,427

13,950 13,991

Accumulated other comprehensive loss ( 1,057 ) ( 1,140 )

1 unchanged sentence

Treasury stock, at cost;

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

237,972,181 Class A shares at September 30, 2024 and 237,871,995 Class A shares at June 30, 2024

( 13,674 ) ( 13,664 )

Total liabilities, redeemable noncontrolling interest and equity $ 22,700 $ 23,415

Total equity 5,084 5,314

Total liabilities and equity

$ 21,317 $ 21,677

See notes to consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

Three Months Ended

(In millions) 2024 2023

Cash flows from operating activities

Net earnings $ 695 $ 1,042

Adjustments to reconcile net earnings to net cash flows from operating activities:

Net earnings (loss)

$ ( 156 ) $ 36

Adjustments to reconcile net earnings (loss) to net cash flows from operating activities:

Depreciation and amortization 208 203

5 unchanged sentences

Pension and post-retirement benefit contributions ( 32 ) ( 54 )

Impairment of other intangible assets — 207

Other non-cash items 1 7

2 unchanged sentences

Decrease (increase) in inventory and promotional merchandise ( 10 ) 62

Decrease (increase) in other assets, net

Increase in other assets, net

( 47 ) ( 17 )

Decrease in accounts payable ( 337 ) ( 255 )

1 unchanged sentence

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

Net cash flows provided by operating activities 1,471 1,017

Net cash flows used for operating activities

( 670 ) ( 408 )

Cash flows from investing activities

Capital expenditures ( 141 ) ( 295 )

Purchases of other intangible assets — ( 8 )

Purchases of investments ( 1 ) —

2 unchanged sentences

Cash flows from financing activities

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)

Repayments of current debt, net

Repayments and redemptions of long-term debt ( 1 ) ( 3 )

1 unchanged sentence

Payments to acquire treasury stock ( 10 ) ( 3 )

Settlement of cross-currency swap

Settlement of cross-currency swaps

Dividends paid to stockholders ( 240 ) ( 236 )

Net cash flows provided by (used for) financing activities

Net cash flows used for financing activities

( 226 ) ( 219 )

1 unchanged sentence

Net decrease in Cash and cash equivalents ( 1,045 ) ( 939 )

( 328 ) 1,574

Cash and cash equivalents at beginning of period 3,395 4,029

26 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 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.

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 $ 115 million and $( 143 ) million, net of tax, during the three months ended September 30, 2024 and 2023, respectively.

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

dollar is the functional currency.

dollar is the functional currency, and these subsidiaries are not material to the Company's consolidated financial statements or liquidity.

Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings.

These subsidiaries are not material to the Company’s consolidated financial statements or liquidity.

The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures.

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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 $ 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 accompanying consolidated statements of earnings (loss) include net exchange gains on foreign currency transactions of $ 19 million and $ 16 million during the three months ended September 30, 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.

The Company’s largest customer during the first quarter of fiscal 2025 sells products primarily within the United States and accounted for $ 200 million, or 10 %, and $ 78 million, or 4 %, of the Company's accounts receivable at September 30, 2024 and June 30, 2024, respectively.

Inventory and Promotional Merchandise

Inventory and promotional merchandise consists of the following:

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

(In millions) September 30, 2024 June 30, 2024

Raw materials

5 unchanged sentences

Property, plant and equipment consists of the following:

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

(In millions) September 30, 2024 June 30, 2024

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 $ 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.

Depreciation and amortization of property, plant and equipment was $ 168 million and $ 162 million during the three months ended September 30, 2024 and 2023, respectively.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Three Months Ended

March 31 Nine Months Ended

2024 2023 2024 2023

Effective rate for income taxes 31.1 % 44.6 % 33.9 % 27.9 %

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

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.

The effective rate for income taxes was 13.3 % and 21.7 % for the three months ended September 30, 2024 and 2023, respectively.

The decrease in the effective tax rate of 840 basis points was primarily attributable to the impact of the discrete treatment of the charge associated with the talcum litigation settlement agreements (See Note 8 - Commitments and Contingencies for further discussion) and charges associated with restructuring and other activities recorded in the first quarter of fiscal 2025.

The loss before income taxes in the first quarter of fiscal 2025 increased the impact of these discrete items on the effective tax rate.

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 nine months ended March 31, 2024.

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 nine months ended March 31, 2024.

The corporate alternative minimum tax did not have an impact on the Company's consolidated financial statements for the three months ended September 30, 2024 and 2023.

On August 26, 2024, the U.S.

Tax Court issued a decision in Varian Medical Systems, Inc.

Commissioner.

The decision related to the Tax Cuts and Jobs Act deduction for certain deemed foreign dividends otherwise subject to the Transition Tax on unrepatriated earnings of applicable foreign subsidiaries.

Based on the Company's evaluation of the technical merits of this decision, the Company intends to timely file a protective refund claim with the U.S.

Internal Revenue Service in fiscal 2025 claiming a Transition Tax payable reduction of approximately $ 73 million.

Although the Company has accrued the $ 73 million estimated tax benefit in the provision for income taxes and reduced the Transition Tax payable in the fiscal 2025 first quarter by $ 73 million, at this time the Company believes it is more-likely-than-not that the intended Transition Tax payable reduction claim will not be sustained.

As such, in the fiscal 2025 first quarter the Company has correspondingly increased the provision for income taxes for the estimated $ 73 million tax benefit to establish an uncertain tax position reserve accrual for the estimated $ 73 million Transition Tax at issue.

As a result, there was no net impact from this development in the provision for income taxes and accompanying consolidated statement of earnings (loss) for the three months ended September 30, 2024.

In the accompanying consolidated balance sheet as of September 30, 2024, the $ 73 million Transition Tax payable reduction and offsetting $ 73 million uncertain tax position reserve accrual are included in Other noncurrent liabilities.

In December 2021, the Organization for Economic Cooperation and Development issued "Pillar Two" Global Anti-Base Erosion model rules for countries to enact into domestic law that would establish a 15% global minimum tax applied on a country-by-country basis for multinational companies.

In certain countries that have enacted legislation incorporating the global minimum tax, it became effective for the Company at the beginning of fiscal 2025.

The estimated tax impact of such legislation has been included in the provision for income taxes for the three months ended September 30, 2024 and was not material.

We are continuing to monitor and evaluate the potential impact of newly enacted legislation incorporating the global minimum tax in additional countries.

As of September 30, 2024 and June 30, 2024, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $ 138 million and $ 65 million, respectively.

The total amount of unrecognized tax benefits at September 30, 2024 that, if recognized, would affect the effective tax rate was $ 128 million.

The significant increase in the gross amount of unrecognized tax benefits as of September 30, 2024 as compared to June 30, 2024 was attributable to having established an uncertain tax position reserve accrual for the Transition Tax payable reduction position determined in the fiscal 2025 first quarter based on the August 26, 2024 U.S.

Tax Court decision in Varian Medical Systems v.

Commissioner, as discussed above.

The total gross interest and penalties accrued related to unrecognized tax benefits during the three months ended September 30, 2024 in the accompanying consolidated statements of earnings (loss) was $ 2 million.

The total gross accrued interest and penalties in the accompanying consolidated balance sheets at September 30, 2024 and June 30, 2024, was $ 19 million and $ 17 million, respectively.

On the basis of the information available as of September 30, 2024, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

At September 30, 2024 and June 30, 2024, total Other assets of $ 1,527 million and $ 1,460 million included $ 1,107 million and $ 1,018 million of deferred tax assets, respectively.

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.

Under the Company's 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 $ 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Accrued and Noncurrent Liabilities

Outstanding obligations confirmed as valid totaling $ 58 million as of September 30, 2024 and June 30, 2024, are included in Accounts payable in the accompanying consolidated balance sheets.

Other Accrued Liabilities

Other accrued liabilities consist of the following:

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

(In millions) September 30, 2024 June 30, 2024

Advertising, merchandising and sampling $ 298 $ 276

4 unchanged sentences

Accrued income taxes 182 335

Sales return accrual 289 289

Other 1,441 1,131

$ 3,454 $ 3,404

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

8 unchanged sentences

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 ” )

In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”) and applies to lease and other contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that reference LIBOR or another rate that is expected to be discontinued as a result of reference rate reform.

In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform.

The amendments clarify that for all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC 848.

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

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

8 unchanged sentences

Additionally, on an annual basis, the CODM’s title and position is required, as well as an explanation of how the CODM uses the reported measure(s) and other disclosures.

The guidance does not change how companies identify their operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

The guidance does not change how companies identify their operating segments, aggregate those operating segments, or apply the quantitative thresholds to determine their reportable segments.

Effective for the Company – The guidance is effective for the Company’s fiscal year ending June 30, 2025 Form 10-K and then in interim periods beginning in the Company’s first quarter of fiscal 2026.

2 unchanged sentences

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

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2023-09 – Income Taxes (Topic 740):

1 unchanged sentence

In December 2023, the FASB issued authoritative guidance to amend and enhance existing annual in come tax disclosures primarily focusing on two reporting areas:

(1) greater disaggregation of information in the effective tax rate reconciliations and (2) disclosure of income taxes paid by the companies, disaggregated by applicable jurisdiction.

(1) greater disaggregation of information in the effective tax rate reconciliations and (2) disclosure of income taxes paid, disaggregated by applicable jurisdiction.

Companies are required to use specific categories to prepare and disclose a tabular rate reconciliation (using both percentages and reporting currency amounts) of:

2 unchanged sentences

The guidance also requires companies to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign jurisdictions including individual jurisdictions with amounts paid equal to or greater than a specified quantitative threshold.

The guidance also requires companies to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign as well as income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign jurisdictions.

The guidance also codifies existing SEC rules that require companies to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign as well as income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign jurisdictions.

Effective for the Company – The guidance is effective for the Company’s fiscal year ending June 30, 2026 Form 10-K.

2 unchanged sentences

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

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEC Final Rule Release No.

6 unchanged sentences

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

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – GOODWILL AND OTHER INTANGIBLE ASSETS

7 unchanged sentences

Translation adjustments, goodwill

( 32 ) — ( 1 ) — ( 33 )

Translation adjustments, accumulated impairments

( 16 ) — — — ( 16 )

Balance as of March 31, 2024

Balance as of September 30, 2024

1,643 1,116 256 354 3,369

4 unchanged sentences

Other intangible assets consist of the following:

March 31, 2024 June 30, 2023

September 30, 2024 June 30, 2024

(In millions) Gross

10 unchanged sentences

$ 5,207 $ 5,183

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 aggregate amortization expense related to amortizable intangible assets was $ 36 million for the three months ended September 30, 2024 and 2023.

The estimated aggregate amortization expense for the remainder of fiscal 2025 and for each of the next four fiscal years is as follows:

1 unchanged sentence

Estimated aggregate amortization expense $ 109 $ 145 $ 128 $ 103 $ 102

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.

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 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 $ — $ — $ —

Asia/Pacific — — 100 — 330 310

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.

NOTE 3 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

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.

The Profit Recovery Plan is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility.

Restructuring Program Component of the Profit Recovery and Growth Plan

As announced on November 1, 2023, the Company launched the Profit Recovery and Growth Plan ("PRGP") to help progressively rebuild its profit margins in fiscal years 2025 and 2026.

The PRGP is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility.

The plan is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities.

Upon completion of this plan, the Company expects to have improved its gross margin and expense base to drive greater operating leverage for the future.

As a component of the Profit Recovery Plan, on February 5, 2024, the Company announced a two-year restructuring program.

As a component of the PRGP, on February 5, 2024, the Company announced a two-year restructuring program ("Restructuring Program").

The Restructuring Program’s main focus includes the reorganization and rightsizing of certain areas of the Company as well as simplification and acceleration of processes.

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.

In connection with the Restructuring Program, as of September 30, 2024, the Company continues to estimate 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.

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Restructuring Program Approvals

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

The Restructuring Program cumulative charges for initiatives approved by the Company during the three months ended September 30, 2024 and through October 25, 2024, were:

Net Sales) Cost of Sales Operating Expenses Total

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Total Charges Approved

Cumulative charges through March 31, 2024

Cumulative charges through June 30, 2024 $ — $ — $ 109 $ 78 $ 187

Three months ended September 30, 2024

1 9 83 20 113

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:

October 1, 2024 - October 25, 2024

Cumulative charges through October 25, 2024

$ 1 $ 9 $ 248 $ 99 $ 357

Included in the above table, Restructuring Program cumulative restructuring charges for initiatives approved by the Company during the three months ended September 30, 2024 and through October 25, 2024, by major cost type were:

(In millions) Employee-

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Restructuring Charges Approved

Cumulative charges through March 31, 2024

Cumulative charges through June 30, 2024 $ 93 $ 7 $ — $ 9 $ 109

Three months ended September 30, 2024

October 1, 2024 - October 25, 2024

Cumulative charges through October 25, 2024

$ 229 $ 7 $ — $ 12 $ 248

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.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Specific actions taken since the Restructuring Program inception to reorganize and right-size certain areas of the Company to drive future sales growth and productivity to rebuild gross and operating margin profitability include:

• Value Chain Optimization – The Company approved initiatives to reduce spans and layers and right-size organizational capability within its supply chain and research and development functions.

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

• Enabling Function Re-Invention - The Company approved initiatives to reorganize and right-size its go-to market structure, including across various corporate functions.

These activities will primarily result in employee severance through a net reduction in workforce.

• Future of Brand-led Model – The Company approved initiatives to focus on spans and layers to begin to develop a leaner, faster, and more agile marketing and creative organization.

These activities will primarily result in employee severance through a net reduction in workforce.

• Go-to-Market Operating Model Acceleration – The Company approved initiatives to exit unprofitable brands from specific markets and distribution channels.

These activities will result in inventory write-offs, employee severance through a net reduction in workforce, as well as costs associated with sales returns.

• Digital Organization Transformation – The Company approved initiatives to begin to reorganize and right-size its technology functions, which support its internal enterprise and commercial capabilities, to create a leaner, faster, more effective and more agile technology organization.

These activities will primarily result in employee severance through a net reduction in workforce.

Restructuring Program Restructuring and Other Charges

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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:

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• 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

• Costs to establish and maintain a Project Management Office 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 Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met.

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Total Charges

Cumulative charges through March 31, 2024

Cumulative charges through June 30, 2024 $ — $ — $ 92 $ 23 $ 115

Three months ended September 30, 2024

— 9 85 12 106

Cumulative charges through September 30, 2024 $ — $ 9 $ 177 $ 35 $ 221

(In millions) Employee-

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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:

Cumulative charges through June 30, 2024 $ 90 $ 2 $ — $ — $ 92

Three months ended September 30, 2024

Cumulative charges through September 30, 2024 $ 172 $ 4 $ — $ 1 $ 177

Changes in accrued restructuring charges from the Restructuring Program for the three months ended September 30, 2024 were:

(In millions) Employee-

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Terminations Other Exit

Restructuring Charges Approved

April 1, 2024 - April 24, 2024

Balance at June 30, 2024

Charges 82 2 — 1 85

Cash payments ( 7 ) — — ( 1 ) ( 8 )

Non-cash asset write-offs

— ( 2 ) — — ( 2 )

Translation and other adjustments

( 2 ) — — — ( 2 )

Balance at September 30, 2024 161 — $ — $ — $ 161

Accrued restructuring charges at September 30, 2024 relating to the Restructuring Program are expected to result in cash expenditures funded from cash provided by operations of approximately $ 92 million, $ 53 million, $ 15 million and $ 1 million for the remainder of fiscal 2025 and for fiscal 2026, 2027 and 2028, respectively.

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.

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

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, 2024.

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.

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The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments.

The Company enters into foreign currency forward contracts, and may enter into option contracts, to reduce the effects of fluctuating foreign currency exchange rates.

The Company also uses cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt.

In addition, the Company enters into interest rate derivatives to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances.

The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges.

The Company enters into the net investment hedges to offset the risk of changes in the U.S.

dollar value of the Company’s investment in these foreign operations due to fluctuating foreign exchange rates.

Time value is excluded from the effectiveness assessment and is recognized under a systematic and rational method over the life of the hedging instrument in Selling, general and administrative expenses.

The net gain or loss on net investment hedges is recorded within translation adjustments, as a component of accumulated OCI (“AOCI”) on the Company’s consolidated balance sheets, until the sale or substantially complete liquidation of the underlying assets of the Company’s investment.

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

At 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.

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

This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions.

At inception, the Company evaluates the effectiveness of hedge relationships quantitatively, and has elected to perform, after initial evaluation, qualitative effectiveness assessments of certain hedge relationships to support an ongoing expectation of high effectiveness, if effectiveness testing is required.

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

At September 30, 2024, the notional amount of derivatives not designated as hedging instruments was $ 4,026 million.

Fair Value Hedges

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

At September 30, 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 Secured Overnight Financing 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 its intercompany foreign currency denominated debt.

At September 30, 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.

Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis.

The earnings recognition of excluded components is presented in the same income statement line item as the earnings effect of the hedged transaction.

Any difference between the changes in the fair value of the excluded components and amounts recognized in earnings will be recognized in Accumulated Other Comprehensive Loss ("AOCI").

The estimated net gain on the Company’s derivative instruments designated as fair value hedges as of September 30, 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 gain (loss) on derivative instruments designated as fair value hedges in AOCI was $ 5 million and $( 7 ) million as of September 30, 2024 and June 30, 2024, respectively.

Cash Flow Hedges

The Company enters into foreign currency forward contracts, and may enter into foreign currency option contracts, to hedge anticipated transactions and receivables and payables denominated in foreign currencies, for periods consistent with the Company’s identified exposures.

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

The foreign currency forward contracts entered into to hedge anticipated transactions have been designated as cash flow hedges and have varying maturities through the end of June 2026.

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

At September 30, 2024, the Company had cash flow hedges outstanding with a notional amount totaling $ 1,927 million.

For foreign currency hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued and gains and losses in AOCI are reclassified to Net sales when the underlying forecasted transaction occurs.

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

As of September 30, 2024, the Company’s foreign currency cash flow hedges were highly effective.

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

The purpose of the hedging activities is to minimize the effect of interest rate movements on the cost of debt issuance.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated net loss on the Company’s derivative instruments designated as cash flow hedges as of September 30, 2024 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $ 12 million.

The accumulated net gain on derivative instruments designated as cash flow hedges in AOCI was $ 19 million and $ 75 million as of September 30, 2024 and June 30, 2024, respectively.

Net Investment Hedges

The Company enters into foreign currency forward contracts, designated as net investment hedges, to hedge a portion of its net investment in certain foreign operations.

The 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 September 2025.

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

At September 30, 2024, the Company had net investment hedges outstanding with a notional amount totaling $ 1,351 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 $ 64 million at September 30, 2024.

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

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

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(In millions) Balance Sheet

Location March 31, 2024 June 30, 2023 Balance Sheet

Location March 31, 2024 June 30, 2023

Location September 30, 2024 June 30, 2024 Balance Sheet

Location September 30, 2024 June 30, 2024

Derivatives Designated as Hedging Instruments:

Foreign currency cash flow hedges Prepaid expenses and other current assets $ 36 $ 56 Other accrued liabilities $ 8 $ 16

Cross-currency swap contracts Prepaid expenses and other current assets 52 22 Other accrued liabilities — —

Net investment hedges Prepaid expenses and other current assets 7 — Other accrued liabilities — 13

Foreign currency cash flow hedges (2)

Prepaid expenses and other current assets;

Other assets $ 5 $ 34 Other accrued liabilities $ 31 $ 4

Cross-currency swap contracts (3)

Prepaid expenses and other current assets;

Other assets 39 80 Other accrued liabilities — —

Net investment hedges

Prepaid expenses and other current assets 1 15 Other accrued liabilities 30 —

Interest rate-related derivatives Prepaid expenses and other current assets — — Other accrued liabilities 104 145

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(1) See Note 5 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined.

(2) Included in the asset derivatives for the foreign currency cash flow hedges at September 30, 2024 and June 30, 2024 is less than $ 1 million and $ 2 million, respectively, classified within Other assets in the accompanying consolidated balance sheets.

(3) Included in the asset derivatives for the cross-currency swap contracts at September 30, 2024 and June 30, 2024 is approximately $ 26 million and $ 70 million, respectively, classified within Other assets in the accompanying consolidated balance sheets.

THE ESTÉE LAUDER COMPANIES INC.

5 unchanged sentences

from AOCI into

Earnings Amount of Gain (Loss)

Earnings Amount of Gain

Reclassified from AOCI into Earnings (1)

Three Months Ended

March 31 Three Months Ended

September 30 Three Months Ended

(In millions) 2024 2023 2024 2023

7 unchanged sentences

Total derivatives $ ( 111 ) $ 58 $ 10 $ 9

(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 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.

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

(In millions) 2024 2023 2024 2023

Derivatives in Cash Flow Hedging Relationships:

Foreign currency forward contracts $ 28 $ 7 Net sales

Interest rate-related derivatives — 1 Interest expense

Derivatives in Net Investment Hedging Relationships (2) :

Foreign currency forward contracts (3)

( 6 ) ( 38 ) — —

Total derivatives $ 22 $ ( 30 ) $ 35 $ 58

(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.

(1) There is no 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.

(2) During the three months ended September 30, 2024 and 2023, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $ 7 million and $ 5 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) 2024 2023

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(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 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.

The gain recognized in earnings from cross-currency swap contracts related to the amount excluded from effectiveness testing during the three months ended September 30, 2024 and 2023 was $ 4 million and $ 5 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.

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Included in the Carrying Amount of the Hedged Liability

March 31, 2024 March 31, 2024

September 30, 2024 September 30, 2024

Long-term debt $ 890 $ ( 104 )

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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

Three Months Ended September 30

(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 $ 3,940 $ 2,284 $ 94 $ 3,751 $ 2,281 $ 58

Total amounts of income and expense line items presented in the consolidated statements of earnings (loss) in which the effects of fair value and cash flow hedges are recorded

$ 3,361 $ 2,298 $ 92 $ 3,518 $ 2,349 $ 95

The effects of fair value and cash flow hedging relationships:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nine 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 $ 11,737 $ 7,177 $ 287 $ 12,301 $ 7,155 $ 156

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 ( 3 ) N/A N/A 17

Derivatives designated as hedging instruments N/A N/A 3 N/A N/A ( 17 )

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

Hedged item N/A ( 19 ) N/A N/A ( 1 ) N/A

Derivatives designated as hedging instruments N/A 19 N/A N/A 1 N/A

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 on cash flow hedge relationships – foreign currency forward contracts:

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

N/A (Not applicable)

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

Amount of Gain (Loss)

Recognized in Earnings on Derivatives

Location of Gain Recognized in Earnings on

Derivatives Three Months Ended

March 31 Nine Months Ended

Location of Gain (Loss) Recognized in Earnings on

Three Months Ended

(In millions) 2024 2023

2 unchanged sentences

Selling, general and administrative $ ( 50 ) $ 5

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, 2024 As of June 30, 2023

As of September 30, 2024 As of June 30, 2024

(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)

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Total $ ( 124 ) $ — $ ( 124 ) $ ( 18 ) $ — $ ( 18 )

Cash Flow Hedges

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 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, 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.

The purpose of the hedging activities is to minimize the effect of interest rate movements on the cost of debt issuance.

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, 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 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.

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 it’s 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.

Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis.

The earnings recognition of excluded components is presented in the same income statement line item as the earnings effect of the hedged transaction.

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, 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

The Company enters into foreign currency forward contracts, designated as net investment hedges, to hedge a portion of its net investment in certain foreign operations.

The net gain or loss on these contracts is recorded within translation adjustments, as a component of AOCI on the Company’s consolidated balance sheets.

The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the Company’s net investment in these foreign operations.

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

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

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

The counterparties to these contracts are major financial institutions.

Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $ 102 million at March 31, 2024.

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.

NOTE 5 – FAIR VALUE MEASUREMENTS

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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 March 31, 2024:

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, 2024:

(In millions) Level 1 Level 2 Level 3 Total

6 unchanged sentences

Interest rate-related derivatives

DECIEM stock options — — 106 106

$ — $ 188 $ — $ 188

8 unchanged sentences

Interest rate-related derivatives — 145 — 145

DECIEM stock options — — 99 99

$ — $ 166 $ — $ 166

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

March 31, 2024 June 30, 2023

September 30, 2024 June 30, 2024

(In millions) Carrying

5 unchanged sentences

7,815 7,561 7,771 7,174

DECIEM stock options 106 106 99 99

Deferred consideration payable

344 347 341 340

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

Foreign currency forward contracts – asset, net

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

Cross-currency swap contracts - asset

Foreign currency forward contracts – asset (liability), net

( 59 ) ( 59 ) 47 47

Interest rate-related derivatives – liability

( 104 ) ( 104 ) ( 145 ) ( 145 )

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 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:

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

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.

The DECIEM stock options are subject to the terms and conditions of DECIEM's 2021 Stock Option Plan.

The DECIEM stock option liability is measured using the Monte Carlo Method, which requires certain assumptions.

Significant changes in the projected future operating results would result in a higher or lower fair value measurement.

Changes to the discount rates or volatilities would have a lesser effect.

These inputs are categorized as Level 3 of the valuation hierarchy.

The DECIEM stock options are remeasured to fair value at each reporting date through the period when the options are exercised or repurchased (i.e., when they are settled), which is expected in the fiscal 2024 fourth quarter, with an offsetting entry to compensation expense.

See Note 10 – Stock Programs for discussion .

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

DECIEM stock option liability as of June 30, 2023

Changes in fair value, net of foreign currency remeasurements

Translation adjustments and other, net ( 1 )

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

NOTE 6 – REVENUE RECOGNITION

The Company’s revenue recognition accounting policies are described 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.

Accounts Receivable

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.

Accounts receivable, net is stated net of the allowance for doubtful accounts, including credit losses, and customer deductions totaling $ 31 million and $ 26 million as of September 30, 2024 and June 30, 2024, 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, 2024

(In millions) September 30, 2024

Balance at June 30, 2024 $ 14

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Write-offs, net & other —

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.

Balance at September 30, 2024 $ 18

The remaining balance of the allowance for doubtful accounts and customer deductions of $ 13 million and $ 12 million as of September 30, 2024 and June 30, 2024, respectively, relates to non-credit losses, which are primarily due to customer deductions.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Revenue

1 unchanged sentence

Three Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023

1 unchanged sentence

Revenue recognized that was included in the deferred revenue balance at the beginning of the period ( 148 ) ( 152 )

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

Revenue deferred during the period

Other 1 ( 7 )

Deferred revenue, end of period $ 567 $ 581

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transaction Price Allocated to the Remaining Performance Obligations

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.

At September 30, 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 $ 338 million.

The remaining balance of deferred revenue at September 30, 2024 will be recognized beyond the next twelve months, of which $ 220 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

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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, 2024.

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

Pension Plans

International Post-retirement

(In millions) 2024 2023 2024 2023 2024 2023

Service cost $ 9 $ 10 $ 7 $ 7 $ — $ —

Interest cost 12 10 5 3 2 2

Expected return on plan assets ( 14 ) ( 14 ) ( 7 ) ( 5 ) — —

Amortization of:

Actuarial loss (gain)

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 nine months ended March 31, 2024 and 2023 consisted of the following:

The components of net periodic benefit cost for the three months ended September 30, 2024 and 2023 consisted of the following:

Pension Plans Other than

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Prior service cost — — — — ( 2 ) —

Special termination benefits — — — 1 — —

Net periodic benefit cost $ 14 $ 8 $ 4 $ 3 $ — $ 2

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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, 2024 June 30, 2023

(In millions) September 30, 2024 June 30, 2024

Other assets $ 132 $ 125

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NOTE 8 – 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

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However, management’s assessment of the Company’s current litigation and other legal proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against the Company not presently known to the Company or determinations by judges, juries or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or proceedings.

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

The Company establishes accruals for loss contingencies when it has determined that a loss is probable and that the amount of loss, or range of loss, can be reasonably estimated.

Amounts accrued for legal contingencies often result from a complex series of judgments about future events and uncertainties that rely on estimates and assumptions including timing of related payments.

Any such accruals are adjusted thereafter as appropriate to reflect changes in circumstances.

The Company also determines estimates of reasonably possible losses or ranges of reasonably possible losses in excess of related accrued liabilities, if any, when it has determined that a loss is reasonably possible, and it is able to determine such estimates.

Legal defense costs are recognized as incurred when the legal services are provided.

Reasonably possible losses in addition to the amounts accrued for such litigation and legal proceedings are not expected to be material to the Company’s consolidated financial statements (refer below for the Company’s Securities Class Action and Derivative Matters and Cosmetic Talcum Powder Matters and related assessment of these loss contingencies).

Securities Class Action and Derivative Matters

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.

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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.

In June 2024, the other former derivative plaintiff made a books and records demand on the Company related to any documents relevant to the same alleged course of conduct referenced above.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2024, it is not probable or reasonably possible that we will incur material losses as a result of the securities class action and derivative matters.

Cosmetic Talcum Powder Matters

The Company has been named as a defendant in civil actions alleging that certain cosmetic talcum powder products sold by the Company were contaminated with asbestos.

Most of these actions involve a number of co-defendants from a variety of different industries.

As of September 30, 2024, there were 151 individual cases (including cases that were settled in subsequent talcum litigation settlement agreements described below) pending against the Company in state and federal courts throughout the United States, as compared to 273 cases as of June 30, 2024.

During the three months ended September 30, 2024, 35 new cases were filed and 157 cases were resolved by settlement or voluntary dismissal (including pursuant to the cases that were settled in subsequent talcum litigation settlement agreements described below).

Due to the rising number of cases against the Company, as well as the evolving litigation landscape, there is an expectation that claims may increase in the future.

In order to mitigate our future exposure, from the end of August 2024 through October 2024, the Company reached agreements with certain plaintiff law firms (collectively, the “talcum litigation settlement agreements”) for:

(i) the resolution of over 200 pending cosmetic talcum powder matters handled by those firms as well as (ii) a process for resolving potential future cosmetic talcum powder claims expected to be brought on behalf of plaintiffs by those firms from January 1, 2025 through December 31, 2029, with annual capped amounts per year for each participating law firm.

To account for the talcum litigation settlement agreements, the Company recorded a charge of $ 159 million for the three months ended September 30, 2024 for the amount agreed to settle these current and potential future claims (amounts recorded for potential future claims is based on the best estimate of the probable loss and a reasonably possible loss beyond the amounts recorded is not expected to be material).

As of September 30, 2024, $ 63 million is recorded in Other accrued liabilities and $ 101 million is recorded in Other noncurrent liabilities in the accompanying consolidated balance sheet related to the talcum litigation settlement agreements (inclusive of accruals recorded in prior periods for any cases settled under these agreements).

There are and could be other plaintiff law firms outside of those included in the talcum litigation settlement agreements that bring claims against the Company.

The value of other settlements outside of the talcum litigation settlement agreements, either individually or in the aggregate, for the three months ended September 30, 2024 and 2023 was not material.

Given the inherent uncertainties of litigation, it is not possible to predict the outcome of all individual cases pending against the Company or potential unasserted claims, and therefore a specific estimate and associated provision is made for a small number of individual cases that have advanced to the later stages of legal proceedings.

For the remaining filed cases, we record an estimate of exposure loss on an aggregated and ongoing basis, which takes into account the historical outcomes of cases we have resolved to date.

Any adverse outcomes, either in an individual case or in the aggregate, could be material.

While the Company and its legal counsel intend to continue to defend these cases vigorously, there can be no assurances regarding the ultimate resolution of these matters.

The amounts recorded during the three months ended September 30, 2024 for such litigation, outside of the talcum litigation settlement agreements, are not material to the Company's consolidated financial statements.

The range of reasonably possible losses in excess of accrued liabilities currently cannot be reasonably estimated.

The Company believes that a portion of its costs incurred in defending and resolving these claims may be covered by insurance policies issued by several insurance carriers, subject to deductibles, exclusions, retentions and policy limits.

NOTE 9 – STOCK PROGRAMS

Additional information relating to the Company's stock programs and the DECIEM stock options 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 Company's Stock Programs

Additional information relating to the Company's stock programs 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, 2024.

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 $ 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.

Compensation expense attributable to net stock-based compensation was $ 74 million and $ 80 million for the three months ended September 30, 2024 and 2023, respectively.

Stock Options

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 .

During the three months ended September 30, 2024, the Company granted stock options in respect of approximately 0.8 million shares of Class A Common Stock with a weighted average exercise price per share of $ 92.87 and a weighted average grant date fair value per share of $ 29.53 .

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, 2024 was $ 25 million.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Units

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.

During the three months ended September 30, 2024, the Company granted RSUs in respect of approximately 3.2 million shares of Class A Common Stock with a weighted average grant date fair value per share of $ 92.71 that, at the time of grant, are scheduled to vest at 1.2 million, 1.1 million, and 0.9 million shares per year, in fiscal 2026, fiscal 2027 and fiscal 2028, 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 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.

During the three months ended September 30, 2024, the Company granted PSUs with a target payout of approximately 0.3 million shares of Class A Common Stock with a grant date fair value per share of $ 92.87 , 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, 2027, 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 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

The DECIEM stock options are liability-classified awards as they are expected to be settled in cash and are remeasured to fair value at each reporting date through date of settlement.

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 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 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 $ 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:

March 31, 2024 June 30, 2023

Risk-free rate 5.00 % 4.90 %

Term to mid of last twelve-month period 0.08 years

Operating leverage adjustment 0.45 0.45

Net sales discount rate 7.90 % 7.80 %

EBITDA discount rate 11.40 % 11.30 %

EBITDA volatility 31.80 % 32.00 %

Net sales volatility 14.30 % 14.40 %

NOTE 11 – NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

For the PSUs with a performance period ended June 30, 2024, the target goals set at the time of issuance were not achieved, resulting in no shares of the Company’s Class A Common Stock issued related to these awards.

Long-term Performance Share Units

On September 3, 2024, the Company issued 195,940 shares of the Company’s Class A Common Stock to its Chief Executive Officer in accordance with the terms of PSUs granted in February 2018.

The total fair value of PSUs issued during the three months ended September 30, 2024 was $ 18 million.

NOTE 10 – NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

PER COMMON SHARE

Net earnings attributable to The Estée Lauder Companies Inc.

per common share (“basic EPS”) is computed by dividing net earnings attributable to The Estée Lauder Companies Inc.

Net earnings (loss) attributable to The Estée Lauder Companies Inc.

per common share (“basic EPS”) is computed by dividing net earnings (loss) attributable to The Estée Lauder Companies Inc.

by the weighted average number of common shares outstanding and shares underlying PSUs and RSUs where the vesting conditions have been met.

Net earnings attributable to The Estée Lauder Companies Inc.

Net earnings (loss) attributable to The Estée Lauder Companies Inc.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows:

Three Months Ended

March 31 Nine Months Ended

(In millions, except per share data) 2024 2023

Net earnings attributable to The Estée Lauder Companies Inc.

Net earnings (loss) attributable to The Estée Lauder Companies Inc.

$ ( 156 ) $ 31

Weighted average common shares outstanding – Basic

359.1 357.9 358.8 357.8

Effect of dilutive stock options (1)

0.8 2.5 0.9 2.4

Effect of PSUs (1)

0.2 0.1 0.1 0.1

Effect of RSUs (1)

0.7 0.7 0.6 0.6

Weighted average common shares outstanding – Diluted

360.8 361.2 360.4 360.9

Net earnings attributable to The Estée Lauder Companies Inc.

Net earnings (loss) attributable to The Estée Lauder Companies Inc.

per common share:

1 unchanged sentence

$ ( .43 ) $ .09

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) For the three months ended September 30, 2024, the effects of potentially dilutive stock options, PSUs and RSUs were excluded from the computation of diluted EPS as they were anti-dilutive due to the net loss incurred during the period.

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) 2024 2023

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RSUs and PSUs

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 .

As of September 30, 2024 and 2023, 0.6 million and 0.4 million shares, respectively, of Class A Common Stock underlying PSUs have been excluded from the computation of diluted EPS as the number of shares ultimately issued is contingent on the achievement of applicable performance targets of the Company, as discussed in Note 9 – Stock Programs .

THE ESTÉE LAUDER COMPANIES INC.

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Three Months Ended

March 31 Nine Months Ended

(In millions, except per share data)

2024 2023 2024 2023

Common stock, beginning of the period $ 6 $ 6

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Common stock dividends ( 240 ) ( 238 )

Net earnings attributable to The Estée Lauder Companies Inc.

330 156 674 1,039

Net earnings (loss) attributable to The Estée Lauder Companies Inc.

Retained earnings, end of the period 13,031 13,784

Accumulated other comprehensive loss, beginning of the period ( 1,140 ) ( 934 )

Other comprehensive loss attributable to The Estée Lauder Companies Inc.

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

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

Accumulated other comprehensive loss, end of the period ( 1,057 ) ( 1,063 )

Treasury stock, beginning of the period ( 13,664 ) ( 13,631 )

Acquisition of treasury stock — — — ( 184 )

Stock-based compensation ( 10 ) ( 3 )

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

Net earnings (loss) attributable to redeemable noncontrolling interest

Net earnings attributable to redeemable noncontrolling interest

Translation adjustments — ( 11 )

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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, 2024:

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, 2024:

Date Declared Record Date Payable Date Amount per Share

August 16, 2024 August 30, 2024 September 16, 2024 $ .66

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

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.

On October 30, 2024, a dividend was declared in the amount of $ .35 per share on the Company’s Class A and Class B Common Stock.

The dividend is payable in cash on December 16, 2024 to stockholders of record at the close of business on November 29, 2024.

Beginning in December 2022, we suspended the repurchase of shares of our Class A Common Stock under our publicly announced program.

We may resume repurchases in the future.

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:

The following table represents changes in accumulated other comprehensive loss, net of tax, by component for the three months ended September 30, 2024:

(In millions) Net Cash

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( 36 ) 12 — 115 (1)

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

Amounts reclassified to Net loss

( 7 ) ( 3 ) 2 — ( 8 )

Net current-period OCI ( 43 ) 9 2 115 83

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

Balance at September 30, 2024 $ 14 $ 4 $ ( 181 ) $ ( 894 ) $ ( 1,057 )

(1) See Note 4 – 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.

(3) The tax provision (benefit) included in Net Cash Flow Hedge Gain (Loss), Cross-Currency Swap Contracts and Translation Adjustments are $( 11 ) million, $ 4 million, and $( 7 ) 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 nine months ended March 31, 2024 and 2023:

The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three months ended September 30, 2024 and 2023:

Amount Reclassified from AOCI Affected Line Item in

Statements of Earnings

Statements of Earnings (Loss)

Three Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023

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Foreign currency forward contracts $ 10 $ 9 Net sales

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

Provision for income taxes

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

10 16 26 44 Net earnings

Provision for income taxes ( 3 ) ( 2 ) Provision (benefit) for income taxes

7 7 Net earnings (loss)

Cross-Currency Swap Contracts

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Provision for income taxes

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

4 3 11 3 Net earnings

( 1 ) ( 1 ) Provision (benefit) for income taxes

3 4 Net earnings (loss)

Retirement Plan and Other Retiree Benefit Adjustments

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( 4 ) 1 Other components of net periodic benefit cost

Provision for income taxes

( 2 ) 1 Other components of net periodic benefit cost

Provision for income taxes

2 — 3 — Net earnings

Total reclassification adjustments, net $ 16 $ 19 $ 40 $ 47 Net earnings

(1) See Note 8 – Pension and Post-Retirement Benefit Plans for additional information.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

— — Provision (benefit) for income taxes

( 2 ) 1 Net earnings (loss)

Total reclassification adjustments, net $ 8 $ 12 Net earnings (loss)

NOTE 12 – STATEMENT OF CASH FLOWS

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

Supplemental cash flow information for the three months ended September 30, 2024 and 2023 is as follows:

(In millions) 2024 2023

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Right-of-use assets obtained in exchange for new/modified operating lease liabilities $ 210 $ 111

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – SEGMENT DATA AND RELATED INFORMATION

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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 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.

As a result, product category net sales and operating income have been adjusted from the amounts previously reported for the three months ended September 30, 2023, for comparability purposes.

The misclassifications had no impact on the 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 previously issued financial statements for the respective period was not material.

THE ESTÉE LAUDER COMPANIES INC.

1 unchanged sentence

Three Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023

4 unchanged sentences

Hair Care 139 148

Other 26 11 88 38

3,940 3,755 11,738 12,311

Returns associated with restructuring and other activities — —

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Hair Care ( 18 ) ( 22 )

Other 11 9 38 7

549 315 1,231 1,547

Reconciliation:

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Other components of net periodic benefit cost ( 2 ) 2

Earnings before income taxes $ 486 $ 280 $ 1,051 $ 1,445

Earnings (loss) before income taxes

$ ( 180 ) $ 46

GEOGRAPHIC DATA (1)

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Asia/Pacific 944 1,058

3,940 3,755 11,738 12,311

Returns associated with restructuring and other activities — —

4 unchanged sentences

Asia/Pacific 63 138

549 315 1,231 1,547

Charges associated with restructuring and other activities ( 106 ) ( 2 )

Operating income $ 531 $ 297 $ 1,203 $ 1,514

Operating income (loss)

$ ( 121 ) $ 98

(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.

2 unchanged sentences

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.

The table below presents the effect of the corrections for the three months ended September 30, 2023.

Three Months Ended

March 31, 2023

Nine Months Ended

March 31, 2023

(In millions) As Previously Reported

As Previously Reported

PRODUCT CATEGORY DATA

Skin Care $ 1,922 $ ( 7 ) $ 1,915 $ 6,408 $ 46 $ 6,454

Makeup 1,088 16 1,104 3,408 16 3,424

Fragrance 585 ( 8 ) 577 1,967 ( 60 ) 1,907

Hair Care 149 ( 1 ) 148 489 ( 1 ) 488

Other 11 — 11 39 ( 1 ) 38

3,755 — 3,755 12,311 — 12,311

Returns associated with restructuring and other activities ( 4 ) — ( 4 ) ( 10 ) — ( 10 )

Net sales $ 3,751 $ — $ 3,751 $ 12,301 $ — $ 12,301

Operating income (loss):

Skin Care $ 256 $ 13 $ 269 $ 1,207 $ 31 $ 1,238

Makeup ( 15 ) 10 ( 5 ) ( 36 ) 27 ( 9 )

Fragrance 89 ( 23 ) 66 399 ( 56 ) 343

Hair Care ( 24 ) — ( 24 ) ( 31 ) ( 1 ) ( 32 )

Other 9 — 9 8 ( 1 ) 7

315 — 315 1,547 — 1,547

Charges associated with restructuring and other activities ( 18 ) — ( 18 ) ( 33 ) — ( 33 )

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

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended June 30, 2023

Year Ended June 30, 2022

September 30, 2023

(In millions) As Previously Reported

As Previously Reported

PRODUCT CATEGORY DATA

13 unchanged sentences

Other 18 — 18

1,594 — 1,594 3,314 — 3,314

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

2 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