ESTEE LAUDER COMPANIES INC 10-Q

Item 1. Financial Statements. THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (Unaudited) Three Months Ended September 30 (In millions, except per share data) 2024 2023 Net sales $ 3,361 $ 3,518 Cost of sales 928 1,070 Gross profit 2,433 2,448 Operating expenses Selling, general and administrative 2,298 2,349 Restructuring and other charges 97 1 Talcum litigation settlement agreements 159 — Total operating expenses 2,554 2,350 Operating income (loss) ( 121 ) 98 Interest expense 92 95 Interest income and investment income, net 35 41 Other components of net periodic benefit cost 2 ( 2 ) Earnings (loss) before income taxes ( 180 ) 46 Provision (benefit) for income taxes ( 24 ) 10 Net earnings (loss) ( 156 ) 36 Net earnings attributable to redeemable noncontrolling interest — ( 5 ) Net earnings (loss) attributable to The Estée Lauder Companies Inc. $ ( 156 ) $ 31 Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share Basic $ ( .43 ) $ 0.09 Diluted $ ( .43 ) $ 0.09 Weighted average common shares outstanding Basic 359.6 358.4 Diluted 359.6 360.5 See notes to consolidated financial statements. 2 Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) Three Months Ended September 30 (In millions) 2024 2023 Net earnings (loss) $ ( 156 ) $ 36 Other comprehensive income (loss): Net cash flow hedge gain (loss) ( 57 ) 19 Cross-currency swap contract gain 12 — Retirement plan and other retiree benefit adjustments 2 ( 1 ) Translation adjustments 108 ( 120 ) Benefit (provision) for income taxes on components of other comprehensive income 18 ( 38 ) Total other comprehensive income (loss), net of tax 83 ( 140 ) Comprehensive loss ( 73 ) ( 104 ) Comprehensive loss (income) attributable to redeemable noncontrolling interest: Net earnings — ( 5 ) Translation adjustments — 11 Total comprehensive loss attributable to redeemable noncontrolling interest — 6 Comprehensive loss attributable to The Estée Lauder Companies Inc. $ ( 73 ) $ ( 98 ) See notes to consolidated financial statements. 3 Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions, except share and per share data) September 30 2024 June 30 2024 ASSETS Current assets Cash and cash equivalents $ 2,350 $ 3,395 Accounts receivable, net 1,977 1,727 Inventory and promotional merchandise 2,255 2,175 Prepaid expenses and other current assets 633 625 Total current assets 7,215 7,922 Property, plant and equipment, net 3,233 3,136 Other assets 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 Total assets $ 21,317 $ 21,677 LIABILITIES AND EQUITY Current liabilities Current debt $ 504 $ 504 Accounts payable 1,135 1,440 Operating lease liabilities 393 354 Other accrued liabilities 3,454 3,404 Total current liabilities 5,486 5,702 Noncurrent liabilities Long-term debt 7,311 7,267 Long-term operating lease liabilities 1,802 1,701 Other noncurrent liabilities 1,634 1,693 Total noncurrent liabilities 10,747 10,661 Commitments and contingencies Equity Common stock, $ .01 par value; Class A shares authorized: 1,300,000,000 at September 30, 2024 and June 30, 2024; shares issued: 471,407,641 at September 30, 2024 and 471,018,569 at June 30, 2024; Class B shares authorized: 304,000,000 at September 30, 2024 and June 30, 2024; shares issued and outstanding: 125,542,029 at September 30, 2024 and June 30, 2024 6 6 Paid-in capital 6,778 6,685 Retained earnings 13,031 13,427 Accumulated other comprehensive loss ( 1,057 ) ( 1,140 ) 18,758 18,978 Less: Treasury stock, at cost; 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 equity 5,084 5,314 Total liabilities and equity $ 21,317 $ 21,677 See notes to consolidated financial statements. 4 Table of Contents THE ESTÉE LAUDER COMPANIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended September 30 (In millions) 2024 2023 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 Deferred income taxes ( 79 ) ( 57 ) Non-cash stock-based compensation 74 80 Net loss on disposal of property, plant and equipment 1 1 Non-cash restructuring and other charges 11 2 Pension and post-retirement benefit expense 18 13 Pension and post-retirement benefit contributions ( 32 ) ( 54 ) Other non-cash items 1 7 Changes in operating assets and liabilities: Increase in accounts receivable, net ( 219 ) ( 477 ) Decrease (increase) in inventory and promotional merchandise ( 10 ) 62 Increase in other assets, net ( 47 ) ( 17 ) Decrease in accounts payable ( 337 ) ( 255 ) Increase (decrease) in other accrued and noncurrent liabilities ( 100 ) 51 Decrease in operating lease assets and liabilities, net ( 3 ) ( 3 ) Net cash flows used for operating activities ( 670 ) ( 408 ) Cash flows from investing activities Capital expenditures ( 141 ) ( 295 ) Purchases of investments ( 1 ) — Settlement of net investment hedges ( 18 ) — Net cash flows used for investing activities ( 160 ) ( 295 ) Cash flows from financing activities Repayments of current debt, net — ( 1 ) Repayments and redemptions of long-term debt ( 1 ) ( 3 ) Net proceeds from stock-based compensation transactions 15 15 Payments to acquire treasury stock ( 10 ) ( 3 ) Settlement of cross-currency swaps 10 9 Dividends paid to stockholders ( 240 ) ( 236 ) Net cash flows used for financing activities ( 226 ) ( 219 ) Effect of exchange rate changes on Cash and cash equivalents 11 ( 17 ) Net decrease in Cash and cash equivalents ( 1,045 ) ( 939 ) Cash and cash equivalents at beginning of period 3,395 4,029 Cash and cash equivalents at end of period $ 2,350 $ 3,090 See notes to consolidated financial statements. 5 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated. The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Certain prior year amounts in the notes to the consolidated financial statements have been reclassified to conform to current year presentation. Management Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed 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. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods. Currency Translation and Transactions All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $ 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, 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. 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. The Company also uses cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt. Additionally, the Company enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 4 – Derivative Financial Instruments for further discussion . The Company categorizes these instruments as entered into for purposes other than trading. 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. 6 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Concentration of Credit Risk The Company is a worldwide manufacturer, marketer and seller of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to retailers in its travel retail business, department stores, specialty multi-brand retailers and perfumeries. The Company grants credit to qualified customers. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor its customers' abilities, individually and collectively, to make timely payments. The Company’s largest customer during the first quarter of fiscal 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) September 30, 2024 June 30, 2024 Raw materials $ 673 $ 696 Work in process 272 308 Finished goods 1,025 903 Promotional merchandise 285 268 $ 2,255 $ 2,175 Property, Plant and Equipment Property, plant and equipment consists of the following: (In millions) September 30, 2024 June 30, 2024 Assets (Useful Life) Land and improvements (1) $ 76 $ 68 Buildings and improvements ( 10 to 40 years) 1,028 929 Machinery and equipment ( 3 to 20 years) 1,339 1,253 Computer hardware and software ( 4 to 10 years) 1,932 1,861 Furniture and fixtures ( 5 to 10 years) 141 137 Leasehold improvements 2,504 2,418 Construction in progress 470 500 7,490 7,166 Less accumulated depreciation and amortization ( 4,257 ) ( 4,030 ) $ 3,233 $ 3,136 (1) Land improvements are depreciated over a 10 year useful life. 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. 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 (loss). 7 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income Taxes 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 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. v. 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 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. 8 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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) September 30, 2024 June 30, 2024 Advertising, merchandising and sampling $ 298 $ 276 Employee compensation 442 576 Accrued sales incentives 397 426 Deferred revenue 338 327 Payroll and other non-income taxes 356 333 Accrued income taxes 182 335 Other 1,441 1,131 $ 3,454 $ 3,404 Recently Adopted Accounting Standards FASB ASU No. 2022-04 – Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations In September 2022, the FASB issued authoritative guidance which is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated rollforward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. Effective for the Company – The guidance became effective for the Company’s first quarter fiscal 2024 and has been applied on a retrospective basis, except for the requirement to disclose rollforward information annually which is effective prospectively for the Company beginning in fiscal 2025. Impact on consolidated financial statements – The Company has supplier financing arrangements and applied the disclosure requirements as required by the amendments. Such information is included in Supplier Finance Programs above within Note 1 – Summary of Significant Accounting Policies . Recently Issued Accounting Standards FASB ASU No. 2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the FASB issued authoritative guidance to improve reportable segment disclosure requirements. Companies are required to disclose significant segment expenses by reportable segment if they are regularly provided to the chief operating decision maker (CODM). Companies are also required to disclose other segment items by reportable segment. The guidance clarifies that companies may disclose more than one measure of segment profit or loss used by the CODM, provided that at least one of the reported measures includes the segment profit or loss measure that is most consistent with U.S. GAAP measurement principles. All existing annual disclosures about segment profit or loss, as well as the new requirements, must now be provided on an interim basis. 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, 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. Early adoption is permitted. The guidance should be applied retrospectively unless impracticable. Impact on consolidated financial statement s – The Company is currently evaluating the impact that this guidance will have on its financial statement disclosures. 9 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FASB ASU No. 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures 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, 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: • the reported income tax expense (or benefit) from continuing operations and the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal income tax rate of the jurisdiction of domicile; and • reconciling items within certain categories that are equal to or greater than a specified quantitative threshold, including the nature, effect, and underlying causes of the reconciling items and the judgment used in categorizing the reconciling items. 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 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. Early adoption is permitted. The guidance should be applied on a prospective basis with the option to apply the standard retrospectively. Impact on consolidated financial statement s – The Company is currently evaluating the impact that this guidance will have on its financial statement disclosures. SEC Final Rule Release No. 33-11275 – The Enhancement and Standardization of Climate-Related Disclosures for Investors In March 2024, the SEC adopted rules intended to enhance and standardize climate-related disclosures in registration statements and annual reports. The rules require significant effects of severe weather events and other natural conditions, amounts related to carbon offsets and renewable energy credits or certificates, as well as material impacts on financial estimates and assumptions that are due to severe weather events and other natural conditions or disclosed climate-related targets or transition plans to be disclosed in the annual financial statements in certain circumstances. Effective for the Company – On April 4, 2024, the SEC issued an order staying the final rule on climate-related disclosures pending certain legal challenges. Under the rule as currently issued, the disclosure requirements related to the annual financial statements are expected to be effective for the Company's fiscal year ending June 30, 2026 Form 10-K. The Company is not required to provide comparative information in the year of adoption. Impact on consolidated financial statement s – The Company is currently evaluating the impact that this guidance will have on its annual financial statement disclosures. 10 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 – GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill The following table presents goodwill by product category and the related change in the carrying amount: (In millions) Skin Care Makeup Fragrance Hair Care Total Balance as of June 30, 2024 Goodwill $ 1,612 $ 1,116 $ 253 $ 353 $ 3,334 Accumulated impairments ( 429 ) ( 732 ) ( 30 ) — ( 1,191 ) 1,183 384 223 353 2,143 Translation adjustments, goodwill 31 — 3 1 35 Translation adjustments, accumulated impairments ( 16 ) — — — ( 16 ) 15 — 3 1 19 Balance as of September 30, 2024 Goodwill 1,643 1,116 256 354 3,369 Accumulated impairments ( 445 ) ( 732 ) ( 30 ) — ( 1,207 ) $ 1,198 $ 384 $ 226 $ 354 $ 2,162 Other Intangible Assets Other intangible assets consist of the following: September 30, 2024 June 30, 2024 (In millions) Gross Carrying Value Accumulated Amortization Total Net Book Value Gross Carrying Value Accumulated Amortization Total Net Book Value Amortizable intangible assets: Customer lists and other $ 2,025 $ 948 $ 1,077 $ 1,971 $ 895 $ 1,076 Non-amortizable intangible assets: Trademarks 4,130 4,107 Total intangible assets $ 5,207 $ 5,183 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: Fiscal (In millions) 2025 2026 2027 2028 2029 Estimated aggregate amortization expense $ 109 $ 145 $ 128 $ 103 $ 102 11 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES 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 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 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. The Company plans to substantially complete specific initiatives under the Restructuring Program through fiscal 2026. The Company expects that the Restructuring Program will result in restructuring and other charges totaling between $ 500 million and $ 700 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs associated with implementing these initiatives. Restructuring Program Approvals The Restructuring Program cumulative charges for initiatives approved by the Company during the three months ended September 30, 2024 and through October 25, 2024, were: Sales Returns (included in Net Sales) Cost of Sales Operating Expenses Total (In millions) Restructuring Charges Other Charges Total Charges Approved Cumulative charges through June 30, 2024 $ — $ — $ 109 $ 78 $ 187 Three months ended September 30, 2024 1 9 83 20 113 October 1, 2024 - October 25, 2024 — — 56 1 57 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- Related Costs Asset- Related Costs Contract Terminations Other Exit Costs Total Restructuring Charges Approved Cumulative charges through June 30, 2024 $ 93 $ 7 $ — $ 9 $ 109 Three months ended September 30, 2024 81 — — 2 83 October 1, 2024 - October 25, 2024 55 — — 1 56 Cumulative charges through October 25, 2024 $ 229 $ 7 $ — $ 12 $ 248 12 Table of Contents 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 The Company classifies restructuring charges as follows: Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable. Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets (including rights associated with commercial operating leases and operating lease right-of-use assets) that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative. Contract Terminations – Costs related to contract terminations include continuing payments to a third party after the Company has ceased benefiting from the rights conveyed in the contract, or a payment made to terminate a contract prior to its expiration. Other Exit Costs – Other exit costs related to restructuring activities generally include costs to relocate facilities or employees, recruiting to fill positions as a result of relocation of operations, and outplacement for separated employees. The Company classifies other charges associated with restructuring activities as follows: Sales Returns and Cost of Sales – Product returns (offset by the related cost of sales) and inventory write-offs or write-downs as a direct result of an approved restructuring initiative to exit certain businesses or locations will be recorded as a component of Net sales and/or Cost of sales when estimable and reasonably assured. Other Charges – Other charges related to the design and implementation of approved initiatives, which are charged to Operating expenses as incurred and primarily include the following: • Consulting and other professional services for organizational design of the future structures and processes as well as the implementation thereof; • Temporary labor backfill; 13 Table of Contents 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; and • Recruitment and training costs for new and reskilled employees to acquire and apply the capabilities needed to perform responsibilities as a direct result of an approved restructuring initiative. The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for the Restructuring Program were: Sales Returns (included in Net Sales) Cost of Sales Operating Expenses Total (In millions) Restructuring Charges Other Charges Total Charges 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- Related Costs Asset- Related Costs Contract Terminations Other Exit Costs Total Restructuring Charges Cumulative charges through June 30, 2024 $ 90 $ 2 $ — $ — $ 92 Three months ended September 30, 2024 82 2 — 1 85 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- Related Costs Asset- Related Costs Contract Terminations Other Exit Costs Total Balance at June 30, 2024 88 — — — 88 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. Charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business. Post-COVID Business Acceleration Program 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. 14 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 – DERIVATIVE FINANCIAL INSTRUMENTS The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. The Company 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. 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. 15 Table of Contents 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. 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 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. Credit Risk As a matter of policy, the Company enters into derivative contracts only with counterparties that have a long-term credit rating of at least A- or higher by at least two nationally recognized rating agencies. The counterparties to these contracts are major financial institutions. Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $ 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. 16 Table of Contents 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: Asset Derivatives Liability Derivatives Fair Value (1) Fair Value (1) (In millions) Balance Sheet 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 (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 Total Derivatives Designated as Hedging Instruments 45 129 165 149 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Prepaid expenses and other current assets 19 19 Other accrued liabilities 23 17 Total derivatives $ 64 $ 148 $ 188 $ 166 (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. 17 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows: Amount of Gain (Loss) Recognized in OCI on Derivatives Location of Gain (Loss) Reclassified from AOCI into Earnings Amount of Gain Reclassified from AOCI into Earnings (1) Three Months Ended September 30 Three Months Ended September 30 (In millions) 2024 2023 2024 2023 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ ( 47 ) $ 28 Net sales $ 10 $ 9 Interest rate-related derivatives — — Interest expense — — ( 47 ) 28 10 9 Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) ( 64 ) 30 — — Total derivatives $ ( 111 ) $ 58 $ 10 $ 9 (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. Amount of Gain (Loss) Recognized in Earnings on Derivatives Location of Gain (Loss) Recognized in Earnings on Derivatives Three Months Ended September 30 (In millions) 2024 2023 Derivatives in Fair Value Hedging Relationships: Cross-currency swap contracts (1) Selling, general and administrative $ ( 53 ) $ 13 Interest rate swap contracts (2) Interest expense $ 41 $ ( 29 ) (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 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. Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows: (In millions) Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included Carrying Amount of the Hedged Liabilities Cumulative Amount of Fair Value Hedging Gain (Loss) Included in the Carrying Amount of the Hedged Liability September 30, 2024 September 30, 2024 Long-term debt $ 890 $ ( 104 ) Intercompany debt $ — $ 34 18 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows: Three Months Ended September 30 2024 2023 (In millions) Net Sales Selling, General and Administrative Interest Expense Net Sales Selling, General and Administrative Interest Expense 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: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item N/A N/A ( 41 ) N/A N/A 29 Derivatives designated as hedging instruments N/A N/A 41 N/A N/A ( 29 ) Gain (loss) on fair value hedge relationships – cross-currency swap contracts: Hedged item N/A 53 N/A N/A ( 13 ) N/A Derivatives designated as hedging instruments N/A ( 53 ) N/A N/A 13 N/A Loss on cash flow hedge relationships – interest rate contracts: Amount of loss reclassified from AOCI into earnings N/A N/A — N/A N/A — Gain on cash flow hedge relationships – foreign currency forward contracts: Amount of gain reclassified from AOCI into earnings 10 N/A N/A 9 N/A N/A N/A (Not applicable) 19 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows: Amount of Gain (Loss) Recognized in Earnings on Derivatives Location of Gain (Loss) Recognized in Earnings on Derivatives Three Months Ended September 30 (In millions) 2024 2023 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Selling, general and administrative $ ( 50 ) $ 5 The Company's derivative instruments are subject to enforceable master netting agreements. These agreements permit the net settlement of these contracts on a per-institution basis; however, the Company records the fair value on a gross basis on its consolidated balance sheets based on maturity dates, including those subject to master netting arrangements. 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 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) Derivative Financial Contracts Derivative assets $ 64 $ ( 40 ) $ 24 $ 148 $ ( 49 ) $ 99 Derivative liabilities ( 188 ) 40 ( 148 ) ( 166 ) 49 ( 117 ) Total $ ( 124 ) $ — $ ( 124 ) $ ( 18 ) $ — $ ( 18 ) NOTE 5 – FAIR VALUE MEASUREMENTS The Company records certain of its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The accounting for fair value measurements must be applied to nonfinancial assets and nonfinancial liabilities that require initial measurement or remeasurement at fair value, which principally consist of assets and liabilities acquired through business combinations and goodwill, indefinite-lived intangible assets and long-lived assets for the purposes of calculating potential impairment. The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows: Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date. Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation. 20 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024: (In millions) Level 1 Level 2 Level 3 Total Assets: Money market funds $ 640 $ — $ — $ 640 Foreign currency forward contracts — 25 — 25 Cross-currency swap contracts — 39 — 39 Total $ 640 $ 64 $ — $ 704 Liabilities: Foreign currency forward contracts $ — $ 84 $ — $ 84 Interest rate-related derivatives — 104 — 104 Total $ — $ 188 $ — $ 188 The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2024: (In millions) Level 1 Level 2 Level 3 Total Assets: Money market funds $ 1,507 $ — $ — $ 1,507 Foreign currency forward contracts — 68 — 68 Cross-currency swap contracts — 80 — 80 Total $ 1,507 $ 148 $ — $ 1,655 Liabilities: Foreign currency forward contracts $ — $ 21 $ — $ 21 Interest rate-related derivatives — 145 — 145 Total $ — $ 166 $ — $ 166 The estimated fair values of the Company’s financial instruments are as follows: September 30, 2024 June 30, 2024 (In millions) Carrying Amount Fair Value Carrying Amount Fair Value Nonderivatives Cash and cash equivalents $ 2,350 $ 2,350 $ 3,395 $ 3,395 Current and long-term debt 7,815 7,561 7,771 7,174 Deferred consideration payable 344 347 341 340 Derivatives Cross-currency swap contracts - asset 39 39 80 80 Foreign currency forward contracts – asset (liability), net ( 59 ) ( 59 ) 47 47 Interest rate-related derivatives – liability ( 104 ) ( 104 ) ( 145 ) ( 145 ) 21 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments for which it is practicable to estimate that value: Cash and cash equivalents – Cash and all highly-liquid securities with original maturities of three months or less are classified as cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds (classified within Level 1 of the valuation hierarchy). Cash deposits in interest bearing accounts and time deposits are carried at cost, which approximates fair value, due to the short maturity of cash equivalent instruments. Foreign currency forward contracts – The fair values of the Company’s foreign currency forward contracts were determined using an industry-standard valuation model, which is based on an income approach. The significant observable inputs to the model, such as swap yield curves and currency spot and forward rates, were obtained from an independent pricing service. To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using SOFR forward curves. Cross-currency swap contracts – The fair values of the Company’s cross-currency swap contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as yield curves and currency spot and forward rates, were obtained from independent pricing services. Interest rate-related derivatives – The fair values of the Company’s interest rate contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as treasury yield curves, swap yield curves and SOFR forward curves, were obtained from independent pricing services. Current and long-term debt – The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities. To a lesser extent, debt also includes finance lease obligations for which the carrying amount approximates the fair value. The Company’s debt is classified within Level 2 of the valuation hierarchy. Deferred consideration payable – The deferred consideration payable consists primarily of deferred payments associated with the fiscal 2023 fourth quarter acquisition of TOM FORD. The fair value of the payments treated as deferred consideration payable are calculated based on the net present value of cash payments using an estimated borrowing rate based on quoted prices for a similar liability. The Company’s deferred consideration payable is classified within Level 2 of the valuation hierarchy. NOTE 6 – REVENUE RECOGNITION Accounts Receivable 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) September 30, 2024 Balance at June 30, 2024 $ 14 Provision for expected credit losses 4 Write-offs, net & other — 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. 22 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Deferred Revenue Changes in deferred revenue during the period are as follows: Three Months Ended September 30 (In millions) 2024 2023 Deferred revenue, beginning of period $ 560 $ 572 Revenue recognized that was included in the deferred revenue balance at the beginning of the period ( 148 ) ( 152 ) Revenue deferred during the period 154 168 Other 1 ( 7 ) Deferred revenue, end of period $ 567 $ 581 Transaction Price Allocated to the Remaining Performance Obligations 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 The Company’s contractually guaranteed minimum royalty amounts due during future periods under its existing license arrangements is disclosed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024. NOTE 7 – PENSION AND POST-RETIREMENT BENEFIT PLANS The Company maintains pension plans covering substantially all of its full-time employees for its U.S. operations and a majority of its international operations. The Company also maintains post-retirement benefit plans that provide certain medical and dental benefits to eligible employees. 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 September 30, 2024 and 2023 consisted of the following: Pension Plans Other than Pension Plans U.S. International Post-retirement (In millions) 2024 2023 2024 2023 2024 2023 Service cost $ 9 $ 9 $ 7 $ 6 $ — $ — Interest cost 13 12 5 5 2 2 Expected return on plan assets ( 13 ) ( 14 ) ( 7 ) ( 6 ) — — Amortization of: Actuarial loss (gain) 5 1 ( 1 ) ( 2 ) — — Prior service cost — — — — ( 2 ) — Net periodic benefit cost $ 14 $ 8 $ 4 $ 3 $ — $ 2 23 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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) September 30, 2024 June 30, 2024 Other assets $ 132 $ 125 Other accrued liabilities ( 44 ) ( 44 ) Other noncurrent liabilities ( 327 ) ( 339 ) Funded status ( 239 ) ( 258 ) Accumulated other comprehensive loss 241 243 Net amount recognized $ 2 $ ( 15 ) NOTE 8 – COMMITMENTS AND CONTINGENCIES Legal Proceedings The Company is involved, from time to time, in litigation and other legal proceedings incidental to its business, including product liability matters (including asbestos-related claims), advertising, regulatory, employment, intellectual property, real estate, environmental, trade relations, securities, tax, and privacy. Management believes that the outcome of current litigation and legal proceedings will not have a material adverse effect upon the Company’s business, results of operations, financial condition or cash flows. However, management’s assessment of the Company’s current litigation and other legal proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against the Company not presently known to the Company or determinations by judges, juries or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or proceedings. 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. On February 20, 2024, those two purported securities class actions were consolidated into one action. On March 22, 2024, plaintiffs filed their consolidated amended class action complaint, which alleges that defendants made materially false and misleading statements during the period February 3, 2022 to October 31, 2023 in press releases, the Company’s public filings and during conference calls with analysts that artificially inflated the price of the Company’s stock in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Defendants intend to defend the action vigorously. On February 1, 2024 and March 15, 2024, shareholder derivative action complaints were filed against certain of the Company’s officers, all the Company’s directors as of those dates and certain of the Company’s former directors as of those dates in the United States District Court for the Southern District of New York. In April 2024, both complaints were voluntarily dismissed without prejudice; and, subsequently, one of the former derivative plaintiffs made a litigation demand, requesting, among other things, that the Company's Board of Directors investigate potential claims on behalf of the Company based on the same alleged course of conduct identified in the securities case complaint (which were also reflected in the dismissed shareholder derivative actions complaints) described above. 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. 24 Table of Contents 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 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 $ 74 million and $ 80 million for the three months ended September 30, 2024 and 2023, respectively. Stock Options 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. 25 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Restricted Stock Units 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. The RSUs are generally accompanied by dividend equivalent rights, payable upon settlement of the RSUs either in cash or shares (based on the terms of the particular award) and, as such, were generally valued at the closing market price of the Company’s Class A Common Stock on the date of grant. Performance Share Units 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. 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 (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 (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. 26 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows: Three Months Ended September 30 (In millions, except per share data) 2024 2023 Numerator: Net earnings (loss) attributable to The Estée Lauder Companies Inc. $ ( 156 ) $ 31 Denominator: Weighted average common shares outstanding – Basic 359.6 358.4 Effect of dilutive stock options (1) — 1.3 Effect of PSUs (1) — 0.1 Effect of RSUs (1) — 0.7 Weighted average common shares outstanding – Diluted 359.6 360.5 Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share: Basic $ ( .43 ) $ .09 Diluted $ ( .43 ) $ .09 (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 September 30 (In millions) 2024 2023 Stock options 7.6 4.8 RSUs and PSUs 1.2 0.1 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 . 27 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 – EQUITY AND REDEEMABLE NONCONTROLLING INTEREST Total Stockholders’ Equity – The Estée Lauder Companies Inc. Three Months Ended September 30 (In millions, except per share data) 2024 2023 Common stock, beginning of the period $ 6 $ 6 Stock-based compensation — — Common stock, end of the period 6 6 Paid-in capital, beginning of the period 6,685 6,153 Common stock dividends 3 2 Stock-based compensation 90 94 Paid-in capital, end of the period 6,778 6,249 Retained earnings, beginning of the period 13,427 13,991 Common stock dividends ( 240 ) ( 238 ) Net earnings (loss) attributable to The Estée Lauder Companies Inc. ( 156 ) 31 Retained earnings, end of the period 13,031 13,784 Accumulated other comprehensive loss, beginning of the period ( 1,140 ) ( 934 ) Other comprehensive earnings (loss) attributable to The Estée Lauder Companies Inc. 83 ( 129 ) Accumulated other comprehensive loss, end of the period ( 1,057 ) ( 1,063 ) Treasury stock, beginning of the period ( 13,664 ) ( 13,631 ) Stock-based compensation ( 10 ) ( 3 ) Treasury stock, end of the period ( 13,674 ) ( 13,634 ) Total equity $ 5,084 $ 5,342 Redeemable noncontrolling interest, beginning of the period $ — $ 832 Net earnings attributable to redeemable noncontrolling interest — 5 Translation adjustments — ( 11 ) Redeemable noncontrolling interest, end of the period $ — $ 826 Cash dividends declared per common share $ .66 $ .66 28 Table of Contents THE ESTÉE LAUDER COMPANIES INC. 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 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 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. Common Stock 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 three months ended September 30, 2024: (In millions) Net Cash Flow Hedge Gain (Loss) Cross-Currency Swap Contracts (2) Amounts Included in Net Periodic Benefit Cost Translation Adjustments Total Balance at June 30, 2024 $ 57 $ ( 5 ) $ ( 183 ) $ ( 1,009 ) $ ( 1,140 ) OCI before reclassifications (3) ( 36 ) 12 — 115 (1) 91 Amounts reclassified to Net loss ( 7 ) ( 3 ) 2 — ( 8 ) Net current-period OCI ( 43 ) 9 2 115 83 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 (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. 29 Table of Contents 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 months ended September 30, 2024 and 2023: Amount Reclassified from AOCI Affected Line Item in Consolidated Statements of Earnings (Loss) Three Months Ended September 30 (In millions) 2024 2023 Gain (Loss) on Cash Flow Hedges Foreign currency forward contracts $ 10 $ 9 Net sales Provision for income taxes ( 3 ) ( 2 ) Provision (benefit) for income taxes 7 7 Net earnings (loss) Cross-Currency Swap Contracts Gain on cross-currency swap contracts 4 5 Selling, general and administrative Provision for income taxes ( 1 ) ( 1 ) Provision (benefit) for income taxes 3 4 Net earnings (loss) Retirement Plan and Other Retiree Benefit Adjustments Amortization of prior service cost 2 — Other components of net periodic benefit cost Amortization of actuarial gain ( 4 ) 1 Other components of net periodic benefit cost ( 2 ) 1 Other components of net periodic benefit cost Provision for income taxes — — 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 three months ended September 30, 2024 and 2023 is as follows: (In millions) 2024 2023 Cash: Cash paid during the period for interest $ 63 $ 58 Cash paid during the period for income taxes $ 195 $ 131 Non-cash investing and financing activities: Property, plant and equipment accrued but unpaid $ 26 $ 82 Right-of-use assets obtained in exchange for new/modified operating lease liabilities $ 210 $ 111 30 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13 – SEGMENT DATA AND RELATED INFORMATION Reportable operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “Chief Executive”) in deciding how to allocate resources and in assessing performance. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis. Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and operating income (loss) before charges associated with restructuring and other activities. Returns and charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance, and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business. The accounting policies for the Company’s reportable segments are substantially the same as those for the consolidated financial statements, as 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, 2024. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced for the Chief Executive or included herein. There has been no significant variance in the total or long-lived asset values associated with the Company’s segment data since June 30, 2024. 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 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. 31 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended September 30 (In millions) 2024 2023 PRODUCT CATEGORY DATA Net sales: Skin Care $ 1,529 $ 1,640 Makeup 1,038 1,062 Fragrance 630 636 Hair Care 139 148 Other 25 32 3,361 3,518 Returns associated with restructuring and other activities — — Net sales $ 3,361 $ 3,518 Operating income (loss) before charges associated with restructuring and other activities: Skin Care $ 117 $ 37 Makeup ( 185 ) ( 40 ) Fragrance 60 107 Hair Care ( 18 ) ( 22 ) Other 11 18 ( 15 ) 100 Reconciliation: Charges associated with restructuring and other activities ( 106 ) ( 2 ) Interest expense ( 92 ) ( 95 ) Interest income and investment income, net 35 41 Other components of net periodic benefit cost ( 2 ) 2 Earnings (loss) before income taxes $ ( 180 ) $ 46 GEOGRAPHIC DATA (1) Net sales: The Americas $ 1,187 $ 1,208 Europe, the Middle East & Africa 1,230 1,252 Asia/Pacific 944 1,058 3,361 3,518 Returns associated with restructuring and other activities — — Net sales $ 3,361 $ 3,518 Operating income (loss): The Americas $ ( 168 ) $ ( 182 ) Europe, the Middle East & Africa 90 144 Asia/Pacific 63 138 ( 15 ) 100 Charges associated with restructuring and other activities ( 106 ) ( 2 ) 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. The exception is for net sales and operating income of Dr.Jart+ in the travel retail channel in Korea that are reflected in Korea in the Asia/Pacific region. 32 Table of Contents THE ESTÉE LAUDER COMPANIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The table below presents the effect of the corrections for the three months ended September 30, 2023. Three Months Ended September 30, 2023 (In millions) As Previously Reported Adjustments As Adjusted PRODUCT CATEGORY DATA Net sales: Skin Care $ 1,638 $ 2 $ 1,640 Makeup 1,063 ( 1 ) 1,062 Fragrance 637 ( 1 ) 636 Hair Care 148 — 148 Other 32 — 32 3,518 — 3,518 Returns associated with restructuring and other activities — — — Net sales $ 3,518 $ — $ 3,518 Operating income (loss): Skin Care $ 35 $ 2 $ 37 Makeup ( 39 ) ( 1 ) ( 40 ) Fragrance 108 ( 1 ) 107 Hair Care ( 22 ) — ( 22 ) Other 18 — 18 100 — 100 Charges associated with restructuring and other activities ( 2 ) — ( 2 ) Operating income $ 98 $ — $ 98 33 Table of Contents THE ESTÉE LAUDER COMPANIES INC.