What changed in this filing

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Item 1. Financial Statements

2025-05-01 compared with 2025-02-04 · 192 added, 191 removed, 966 unchanged (28% of the section changed)

3 unchanged sentences

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

(In millions, except per share data) 2025 2024 2025 2024

36 unchanged sentences

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

(In millions) 2025 2024 2025 2024

13 unchanged sentences

Comprehensive income (loss) 227 162 ( 720 ) 602

Comprehensive income attributable to redeemable noncontrolling interest:

Comprehensive loss (income) attributable to redeemable noncontrolling interest:

Net earnings — ( 5 ) — ( 21 )

Translation adjustments — 15 — 13

Total comprehensive income attributable to redeemable noncontrolling interest — ( 24 ) — ( 18 )

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

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

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data) December 31, 2024 June 30, 2024

(In millions, except share and per share data) March 31, 2025 June 30, 2024

Current assets

26 unchanged sentences

Class A shares authorized:

1,300,000,000 at December 31, 2024 and June 30, 2024;

1,300,000,000 at March 31, 2025 and June 30, 2024;

shares issued:

472,456,912 at December 31, 2024 and 471,018,569 at June 30, 2024;

472,522,958 at March 31, 2025 and 471,018,569 at June 30, 2024;

Class B shares authorized:

304,000,000 at December 31, 2024 and June 30, 2024;

304,000,000 at March 31, 2025 and June 30, 2024;

shares issued and outstanding:

125,542,029 at December 31, 2024 and June 30, 2024

125,542,029 at March 31, 2025 and June 30, 2024

Paid-in capital 6,966 6,685

3 unchanged sentences

Treasury stock, at cost;

238,306,192 Class A shares at December 31, 2024 and 237,871,995 Class A shares at June 30, 2024

238,313,007 Class A shares at March 31, 2025 and 237,871,995 Class A shares at June 30, 2024

( 13,698 ) ( 13,664 )

5 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(In millions) 2025 2024

13 unchanged sentences

Changes in operating assets and liabilities:

Decrease (increase) in accounts receivable, net

Increase in accounts receivable, net

( 77 ) ( 404 )

Decrease in inventory and promotional merchandise

1 unchanged sentence

Decrease in accounts payable ( 230 ) ( 289 )

Increase in other accrued and noncurrent liabilities

Increase (decrease) in other accrued and noncurrent liabilities

Decrease in operating lease assets and liabilities, net ( 21 ) ( 23 )

2 unchanged sentences

Capital expenditures ( 395 ) ( 702 )

Proceeds from sale of property, plant and equipment

Purchases of investments ( 1 ) ( 8 )

2 unchanged sentences

Cash flows from financing activities

Proceeds of current debt, net

Repayments of current debt, net

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

Debt issuance costs — ( 4 )

Repayments of commercial paper (maturities after three months) — ( 785 )

5 unchanged sentences

Dividends paid to stockholders ( 492 ) ( 710 )

Payment for acquisition of noncontrolling interest

Net cash flows used for financing activities

31 unchanged sentences

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 $( 323 ) million and $ 232 million, net of tax, during the three months ended December 31, 2024 and 2023, respectively, and $( 208 ) million and $ 89 million, net of tax, during the six months ended December 31, 2024 and 2023, respectively.

were $ 78 million and $( 192 ) million, net of tax, during the three months ended March 31, 2025 and 2024, respectively, and $( 130 ) million and $( 103 ) million, net of tax, during the nine months ended March 31, 2025 and 2024, 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.

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

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.

3 unchanged sentences

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 $ 25 million and $ 13 million during the three months ended December 31, 2024 and 2023, respectively, and $ 44 million and $ 29 million during the six months ended December 31, 2024 and 2023, respectively.

The accompanying consolidated statements of earnings (loss) include net exchange gains on foreign currency transactions of $ 11 million and $ 23 million during the three months ended March 31, 2025 and 2024, respectively, and $ 55 million and $ 52 million during the nine months ended March 31, 2025 and 2024, 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 as of December 31, 2024 sells products primarily in China travel retail.

This customer accounted for $ 163 million, or 10 %, and $ 206 million, or 12 %, of the Company's accounts receivable at December 31, 2024 and June 30, 2024, respectively.

The Company’s largest customer for the three and nine months ended March 31, 2025 sells products primarily in China travel retail.

This customer accounted for $ 218 million, or 12 %, and $ 206 million, or 12 %, of the Company's accounts receivable at March 31, 2025 and June 30, 2024, respectively.

Inventory and Promotional Merchandise

Inventory and promotional merchandise consists of the following:

(In millions) December 31, 2024 June 30, 2024

(In millions) March 31, 2025 June 30, 2024

Raw materials

6 unchanged sentences

Property, plant and equipment consists of the following:

(In millions) December 31, 2024 June 30, 2024

(In millions) March 31, 2025 June 30, 2024

Assets (Useful Life)

12 unchanged sentences

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

Depreciation and amortization of property, plant and equipment was $ 168 million and $ 163 million during the three months ended December 31, 2024 and 2023, respectively, and $ 336 million and $ 325 million during the six months ended December 31, 2024 and 2023, respectively.

Depreciation and amortization of property, plant and equipment was $ 167 million and $ 166 million during the three months ended March 31, 2025 and 2024, respectively, and $ 503 million and $ 491 million during the nine months ended March 31, 2025 and 2024, 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).

2 unchanged sentences

Three Months Ended

Six Months Ended

March 31, Nine Months Ended

2025 2024 2025 2024

1 unchanged sentence

Basis-point change from the prior-year period 290 ( 3,360 )

For the three months ended December 31, 2024, the decrease in the effective tax rate was primarily attributable to the impact of the discrete treatment of charges associated with restructuring and other activities, the impairment of goodwill and other intangible assets, as well as an unfavorable impact associated with previously issued stock-based compensation.

For the six months ended December 31, 2024, the decrease in the effective tax rate was primarily attributable to the impact of the discrete treatment of charges associated with restructuring and other activities, the impairment of goodwill and other intangible assets, the charge associated with the talcum litigation settlement agreements (See Note 8 - Commitments and Contingencies for further discussion) and an unfavorable impact associated with previously issued stock-based compensation.

For the three months ended March 31, 2025, 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 full year geographical mix of earnings in the current and prior-year periods, as well as an unfavorable impact associated with previously issued stock-based compensation.

For the nine months ended March 31, 2025, the decrease in the effective tax rate was primarily attributable to the impact of the discrete treatment of charges associated with restructuring and other activities, the impairment of goodwill and other intangible assets, the charge associated with the talcum litigation settlement agreements (See Note 8 - Commitments and Contingencies for further discussion) and an unfavorable impact associated with previously issued stock-based compensation.

On August 16, 2022, the U.S.

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

The corporate alternative minimum tax did not have an impact on the Company's consolidated financial statements for the three and six months ended December 31, 2024 and 2023.

The corporate alternative minimum tax did not have an impact on the Company's consolidated financial statements for the three and nine months ended March 31, 2025 and 2024.

On August 26, 2024, the U.S.

6 unchanged sentences

As such, in the fiscal 2025 first quarter the Company 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 and six months ended December 31, 2024.

In the accompanying consolidated balance sheet as of December 31, 2024, the $ 73 million Transition Tax payable reduction and offsetting $ 73 million uncertain tax position reserve accrual are included in Other noncurrent liabilities.

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 and nine months ended March 31, 2025.

In the accompanying consolidated balance sheet as of March 31, 2025, 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 and six months ended December 31, 2024 and was not material.

The estimated tax impact of such legislation has been included in the provision for income taxes for the three and nine months ended March 31, 2025 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 December 31, 2024 and June 30, 2024, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $ 139 million and $ 65 million, respectively.

The total amount of unrecognized tax benefits at December 31, 2024 that, if recognized, would affect the effective tax rate was $ 129 million.

The significant increase in the gross amount of unrecognized tax benefits as of December 31, 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.

As of March 31, 2025 and June 30, 2024, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $ 139 million and $ 65 million, respectively.

The total amount of unrecognized tax benefits at March 31, 2025 that, if recognized, would affect the effective tax rate was $ 129 million.

The significant increase in the gross amount of unrecognized tax benefits as of March 31, 2025 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 and six months ended December 31, 2024 in the accompanying consolidated statements of earnings (loss) was $ 1 million and $ 2 million, respectively.

The total gross accrued interest and penalties in the accompanying consolidated balance sheets at December 31, 2024 and June 30, 2024, was $ 20 million and $ 17 million, respectively.

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

The total gross interest and penalties accrued related to unrecognized tax benefits during the three and nine months ended March 31, 2025 in the accompanying consolidated statements of earnings (loss) was $ 1 million and $ 4 million, respectively.

The total gross accrued interest and penalties in the accompanying consolidated balance sheets at March 31, 2025 and June 30, 2024, was $ 21 million and $ 17 million, respectively.

On the basis of the information available as of March 31, 2025, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

THE ESTÉE LAUDER COMPANIES INC.

1 unchanged sentence

During the fiscal 2025 second quarter, the Company received notification of the formal conclusion of the compliance process with respect to its fiscal 2023 income tax return under the U.S.

Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three and six months ended December 31, 2024.

At December 31, 2024 and June 30, 2024, total Other assets of $ 1,693 million and $ 1,460 million included $ 1,250 million and $ 1,018 million of deferred tax assets, respectively.

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, 2025.

At March 31, 2025 and June 30, 2024, total Other assets of $ 1,726 million and $ 1,460 million included $ 1,298 million and $ 1,018 million of deferred tax assets, respectively.

Supplier Finance Programs

2 unchanged sentences

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

Outstanding obligations confirmed as valid totaling $ 70 million and $ 58 million as of December 31, 2024 and June 30, 2024, respectively, are included in Accounts payable in the accompanying consolidated balance sheets.

Outstanding obligations confirmed as valid totaling $ 67 million and $ 58 million as of March 31, 2025 and June 30, 2024, respectively, are included in Accounts payable in the accompanying consolidated balance sheets.

Other Accrued Liabilities

Other accrued liabilities consist of the following:

(In millions) December 31, 2024 June 30, 2024

(In millions) March 31, 2025 June 30, 2024

Advertising, merchandising and sampling $ 306 $ 276

1 unchanged sentence

Accrued sales incentives 328 426

Accrued restructuring

Deferred revenue 276 327

19 unchanged sentences

2024-03 and 2025-01 – Disaggregation of Income Statement Expenses (Subtopic 220-40)

In November 2024 and January 2025, the FASB issued authoritative guidance requiring disclosures, in a tabular format in the notes to the consolidated financial statements, on the disaggregation of relevant expense captions that are included on the face of the consolidated statement of earnings within continuing operations.

The relevant expense captions are required to be disaggregated into natural expense categories including purchases of inventory, employee compensation, depreciation and intangible asset amortization.

The guidance also requires certain expenses, gains or losses that require disclosure under existing U.S.

GAAP, and that are recorded in a relevant expense caption on the face of the consolidated statement of earnings, to be presented in the same tabular disclosure.

GAAP, and that are recorded in a relevant expense caption on the face of the consolidated statement of earnings (loss), to be presented in the same tabular disclosure.

Qualitative disclosures about any remaining amounts in relevant expense line items are required as well.

60 unchanged sentences

( 50 ) ( 13 ) — — ( 63 )

Balance as of December 31, 2024

Balance as of March 31, 2025

Goodwill, gross carrying amount

8 unchanged sentences

Other intangible assets consist of the following:

December 31, 2024 June 30, 2024

March 31, 2025 June 30, 2024

(In millions) Gross

10 unchanged sentences

$ 4,129 $ 5,183

The aggregate amortization expense related to amortizable intangible assets was $ 35 million and $ 37 million for the three months ended December 31, 2024 and 2023, respectively, and $ 71 million and $ 73 million for the six months ended December 31, 2024 and 2023, respectively.

The aggregate amortization expense related to amortizable intangible assets was $ 34 million and $ 36 million for the three months ended March 31, 2025 and 2024, respectively, and $ 105 million and $ 109 million for the nine months ended March 31, 2025 and 2024, respectively.

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 $ 31 $ 136 $ 119 $ 94 $ 93

Impairment Analysis During the Six Months Ended December 31, 2024

Impairment Analysis During the Nine Months Ended March 31, 2025

During the fiscal 2025 second quarter, the TOM FORD brand experienced lower-than-expected growth within key geographic regions and channels, including in mainland China, Asia travel retail and Hong Kong SAR.

12 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of the impairment charges for the three and six months ended December 31, 2024 and the remaining trademark and goodwill carrying values as of December 31, 2024, for the TOM FORD brand and Too Faced reporting unit, are as follows:

A summary of the impairment charges for the nine months ended March 31, 2025 and the remaining trademark and goodwill carrying values as of March 31, 2025, for the TOM FORD brand and Too Faced reporting unit, are as follows:

Impairment Charges (1)

Carrying Value

(In millions) Three and Six Months Ended

December 31, 2024

As of December 31, 2024

Brand/Reporting Unit

Geographic Region

(In millions) Nine Months Ended

March 31, 2025 As of March 31, 2025

Brand/Reporting Unit Geographic Region Trademark

Trademark (2)

2 unchanged sentences

(1) The date of the fair value measurement for the TOM FORD and Too Faced trademark intangible assets and Too Faced reporting unit was December 31, 2024.

(2) The carrying values of the trademark intangible assets, subsequent to the impairment charges, are equal to their fair values.

The impairment charge related to the TOM FORD trademark intangible asset for the three and six months ended December 31, 2024 of $ 773 million was reflected in the fragrance, makeup and other product categories of $ 549 million, $ 170 million and $ 54 million, respectively.

(2) The carrying values of the trademark intangible assets, immediately subsequent to the impairment charges, are equal to their fair values.

The impairment charge related to the TOM FORD trademark intangible asset for the nine months ended March 31, 2025 of $ 773 million was reflected in the fragrance, makeup and other product categories of $ 549 million, $ 170 million and $ 54 million, respectively.

The trademark and goodwill impairment charges related to Too Faced were reflected in the makeup product category.

19 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The expanded component of the restructuring program will begin during the Company’s fiscal 2025 third quarter with all initiatives to be approved by the end of fiscal 2026.

The expanded component of the restructuring program began during the Company’s fiscal 2025 third quarter with all initiatives to be approved by the end of fiscal 2026.

Specific initiatives under the expanded component of the restructuring program are expected to be substantially completed by the end of fiscal 2027.

4 unchanged sentences

Restructuring Program Component of the Profit Recovery and Growth Plan Approvals

The Restructuring Program cumulative charges for initiatives approved by the Company as of December 31, 2024 and through January 29, 2025 were:

Cumulative charges for initiatives approved by the Company in connection with the Restructuring Program as of March 31, 2025 and through April 24, 2025 were:

Net Sales) Cost of Sales Operating Expenses Total

2 unchanged sentences

Total Charges Approved

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

Six months ended December 31, 2024 1 9 257 25 292

Cumulative charges through December 31, 2024

Cumulative charges approved through June 30, 2024

$ — $ — $ 109 $ 78 $ 187

January 1, 2025 - January 29, 2025

Cumulative charges through January 29, 2025

Nine months ended March 31, 2025 5 10 351 42 408

Cumulative charges approved through March 31, 2025

5 10 460 120 595

Included in the above table, Restructuring Program cumulative restructuring charges for initiatives approved by the Company as of December 31, 2024 and through January 29, 2025 were:

April 1, 2025 - April 24, 2025

Cumulative charges approved through April 24, 2025

$ 5 $ 10 $ 488 $ 120 $ 623

Included in the above table, cumulative restructuring charges for initiatives approved by the Company in connection with the Restructuring Program as of March 31, 2025 and through April 24, 2025 were:

(In millions) Employee-

2 unchanged sentences

Restructuring Charges Approved

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

Six months ended December 31, 2024 245 6 — 6 257

Cumulative charges through December 31, 2024

Cumulative charges approved through June 30, 2024

$ 93 $ 7 $ — $ 9 $ 109

January 1, 2025 - January 29, 2025

Cumulative charges through January 29, 2025

Nine months ended March 31, 2025 330 6 3 12 351

Cumulative charges approved through March 31, 2025

423 13 3 21 460

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.

April 1, 2025 - April 24, 2025

Cumulative charges approved through April 24, 2025

$ 449 $ 13 $ 3 $ 23 $ 488

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Specific actions taken since the Restructuring Program inception 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 various corporate functions.

15 unchanged sentences

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.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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:

3 unchanged sentences

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

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

5 unchanged sentences

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

Three months ended September 30, 2024

— 9 85 12 106

Three months ended December 31, 2024

— — 171 11 182

Cumulative charges through December 31, 2024 $ — $ 9 $ 348 $ 46 $ 403

Six months ended December 31, 2024 — 9 256 23 288

Three months ended March 31, 2025 — — 81 14 95

Cumulative charges through March 31, 2025 $ — $ 9 $ 429 $ 60 $ 498

(In millions) Employee-

3 unchanged sentences

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

Three months ended September 30, 2024

Three months ended December 31, 2024

165 5 — 1 171

Cumulative charges through December 31, 2024 $ 337 $ 9 $ — $ 2 $ 348

Changes in accrued restructuring charges from the Restructuring Program for the six months ended December 31, 2024 were:

Six months ended December 31, 2024 247 7 — 2 256

Three months ended March 31, 2025 78 — 3 — 81

Cumulative charges through March 31, 2025 $ 415 $ 9 $ 3 $ 2 $ 429

For the three and nine months ended March 31, 2024, charges recorded associated with restructuring and other activities for the Restructuring Program were $ 17 million.

Changes in accrued restructuring charges from the Restructuring Program for the nine months ended March 31, 2025 were:

(In millions) Employee-

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( 8 ) — — — ( 8 )

Balance at December 31, 2024 $ 301 $ — $ — $ — $ 301

Accrued restructuring charges at December 31, 2024 relating to the Restructuring Program are expected to result in cash expenditures funded from cash provided by operations of approximately $ 134 million, $ 156 million, and $ 11 million for the remainder of fiscal 2025 and for fiscal 2026 and 2027, respectively.

Balance at March 31, 2025 $ 335 $ — $ 3 $ — $ 338

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued restructuring charges at March 31, 2025 relating to the Restructuring Program are expected to result in cash expenditures funded from cash provided by operations of approximately $ 122 million, $ 150 million, $ 61 million and $ 5 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.

2 unchanged sentences

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.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – DERIVATIVE FINANCIAL INSTRUMENTS

2 unchanged sentences

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

At December 31, 2024, the notional amount of derivatives not designated as hedging instruments was $ 3,443 million.

At March 31, 2025, the notional amount of derivatives not designated as hedging instruments was $ 3,704 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 December 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 Secured Overnight Financing Rate ("SOFR") plus a margin.

At March 31, 2025, 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 December 31, 2024, the Company has cross-currency swap contracts with notional amounts totaling $ 491 million, to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt.

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

At March 31, 2025, 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 line item as the earnings effect of the hedged transaction in the consolidated statements of earnings (loss).

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 December 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 less than $ 1 million and $ 7 million as of December 31, 2024 and June 30, 2024, respectively.

The earnings recognition of excluded components is presented in the same line item as the earnings effect of the hedged transaction in the consolidated statements of earnings (loss).

Any difference between the changes in the fair value of the excluded components and amounts recognized in earnings (loss) 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 March 31, 2025 that is expected to be reclassified from AOCI into earnings (loss), 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 $ 7 million and $( 7 ) million as of March 31, 2025 and June 30, 2024, respectively.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow Hedges

1 unchanged sentence

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 September 2026.

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 2026.

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

At December 31, 2024, the Company had cash flow hedges outstanding with a notional amount totaling $ 1,895 million.

At March 31, 2025, the Company had cash flow hedges outstanding with a notional amount totaling $ 2,129 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 December 31, 2024, the Company’s foreign currency cash flow hedges were highly effective.

As of March 31, 2025, 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 gain on the Company’s derivative instruments designated as cash flow hedges as of December 31, 2024 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $ 27 million.

The accumulated net gain on derivative instruments designated as cash flow hedges in AOCI was $ 74 million and $ 75 million as of December 31, 2024 and June 30, 2024, respectively.

The estimated net gain on the Company’s derivative instruments designated as cash flow hedges as of March 31, 2025 that is expected to be reclassified from AOCI into earnings (loss), net of tax, within the next twelve months is $ 13 million.

The accumulated net gain on derivative instruments designated as cash flow hedges in AOCI was $ 50 million and $ 76 million as of March 31, 2025 and June 30, 2024, respectively.

Net Investment Hedges

2 unchanged sentences

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

The net investment hedge contracts have varying maturities through the end of November 2029.

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 December 31, 2024, the Company had net investment hedges outstanding with a notional amount totaling $ 1,401 million.

At March 31, 2025, the Company had net investment hedges outstanding with a notional amount totaling $ 1,296 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 $ 206 million at December 31, 2024.

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 $ 119 million at March 31, 2025.

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

7 unchanged sentences

(In millions) Balance Sheet

Location December 31, 2024 June 30, 2024 Balance Sheet

Location December 31, 2024 June 30, 2024

Location March 31, 2025 June 30, 2024 Balance Sheet

Location March 31, 2025 June 30, 2024

Derivatives Designated as Hedging Instruments:

12 unchanged sentences

(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 forward contracts at December 31, 2024 and June 30, 2024 is $ 4 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 December 31, 2024 and June 30, 2024 is approximately $ 67 million and $ 70 million, respectively, classified within Other assets in the accompanying consolidated balance sheets.

(2) Included in the asset derivatives for the foreign currency forward contracts at March 31, 2025 and June 30, 2024 is $ 2 million, classified within Other assets in the accompanying consolidated balance sheets.

(3) Included in the asset derivatives for the cross-currency swap contracts at March 31, 2025 and June 30, 2024 is approximately $ 50 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 (Loss)

Amount of Gain (Loss)

Earnings (Loss) Amount of Gain (Loss)

Reclassified from AOCI into Earnings (Loss) (1)

Three Months Ended

March 31, Three Months Ended

(In millions) 2025 2024 2025 2024

13 unchanged sentences

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

(2) During the three months ended December 31, 2024 and 2023, the gain recognized in earnings (loss) from net investment hedges related to the amount excluded from effectiveness testing was $ 8 million and $ 5 million, respectively.

(2) During the three months ended March 31, 2025 and 2024, the gain recognized in earnings (loss) from net investment hedges related to the amount excluded from effectiveness testing was $ 7 million and $ 3 million, respectively.

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

3 unchanged sentences

from AOCI into

Earnings (Loss)

Amount of Gain (Loss)

Earnings (Loss) Amount of Gain (Loss)

Reclassified from AOCI into Earnings (Loss) (1)

Six Months Ended

Nine Months Ended

March 31, Nine Months Ended

(In millions) 2025 2024 2025 2024

4 unchanged sentences

Total cash flow hedges

23 ( 8 ) 25 20

Derivatives in Net Investment Hedging Relationships (2)(3) :

6 unchanged sentences

(2) During the six months ended December 31, 2024 and 2023, the gain recognized in earnings (loss) from net investment hedges related to the amount excluded from effectiveness testing was $ 15 million and $ 10 million, respectively.

(2) During the nine months ended March 31, 2025 and 2024, the gain recognized in earnings (loss) from net investment hedges related to the amount excluded from effectiveness testing was $ 22 million and $ 13 million, respectively.

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

5 unchanged sentences

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

(In millions) 2025 2024 2025 2024

5 unchanged sentences

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

The gain recognized in earnings (loss) from cross-currency swap contracts related to the amount excluded from effectiveness testing during the three months ended December 31, 2024 and 2023 was $ 5 million and $ 4 million, respectively, and during the six months ended December 31, 2024 and 2023 was $ 9 million.

The gain recognized in earnings (loss) from cross-currency swap contracts related to the amount excluded from effectiveness testing during each of the three months ended March 31, 2025 and 2024 was $ 5 million, and during each of the nine months ended March 31, 2025 and 2024 was $ 14 million.

(2) Changes in the fair value of the interest rate contracts are exactly offset by the change in the fair value of the underlying long-term debt.

5 unchanged sentences

Included in the Carrying Amount of the Hedged Liability

December 31, 2024 December 31, 2024

March 31, 2025 March 31, 2025

Long-term debt $ 877 $ ( 118 )

3 unchanged sentences

Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows:

Three Months Ended December 31,

Three Months Ended March 31,

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

9 unchanged sentences

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

Amount of gain (loss) reclassified from AOCI into earnings

Amount of gain (loss) reclassified from AOCI into earnings (loss)

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 14 N/A N/A 12 N/A N/A

Amount of gain reclassified from AOCI into earnings (loss)

7 N/A N/A 15 N/A N/A

N/A (Not applicable)

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended December 31,

Nine Months Ended March 31,

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

9 unchanged sentences

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

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

Amount of gain (loss) reclassified from AOCI into earnings (loss)

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 24 N/A N/A 21 N/A N/A

Amount of gain reclassified from AOCI into earnings (loss)

31 N/A N/A 36 N/A N/A

N/A (Not applicable)

5 unchanged sentences

Location of Gain (Loss) Recognized in Earnings (Loss) on

Three Months Ended

December 31, Six Months Ended

Derivatives Three Months Ended

March 31, Nine Months Ended

(In millions) 2025 2024 2025 2024

6 unchanged sentences

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

As of December 31, 2024 As of June 30, 2024

As of March 31, 2025 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)

17 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 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 March 31, 2025:

(In millions) Level 1 Level 2 Level 3 Total

19 unchanged sentences

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

December 31, 2024 June 30, 2024

March 31, 2025 June 30, 2024

(In millions) Carrying

10 unchanged sentences

Interest rate contracts – liability ( 118 ) ( 118 ) ( 145 ) ( 145 )

( 138 ) ( 138 ) ( 145 ) ( 145 )

THE ESTÉE LAUDER COMPANIES INC.

7 unchanged sentences

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.

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

Interest rate contracts – 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.

11 unchanged sentences

Accounts Receivable

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

Accounts receivable, net is stated net of the allowance for doubtful accounts, including credit losses, and customer deductions totaling $ 37 million and $ 26 million as of March 31, 2025 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) December 31, 2024

(In millions) March 31, 2025

Balance at June 30, 2024 $ 14

1 unchanged sentence

Write-offs, net & other ( 1 )

Balance at December 31, 2024 $ 18

Balance at March 31, 2025 $ 25

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The remaining balance of the allowance for doubtful accounts and customer deductions of $ 12 million as of March 31, 2025 and June 30, 2024 relates to non-credit losses, which are primarily due to customer deductions.

Deferred Revenue

1 unchanged sentence

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

(In millions) 2025 2024 2025 2024

1 unchanged sentence

Revenue recognized that was included in the deferred revenue balance at the beginning of the period ( 38 ) ( 26 ) ( 293 ) ( 275 )

Revenue deferred during the period 104 124 258 293

Revenue deferred (released) during the period ( 29 ) ( 38 ) 229 255

Other 1 ( 4 ) — ( 10 )

1 unchanged sentence

Transaction Price Allocated to the Remaining Performance Obligations

At December 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 $ 338 million.

The remaining balance of deferred revenue at December 31, 2024 will be recognized beyond the next twelve months, of which $ 217 million relates to the non-refundable upfront payment received as part of the Marcolin licensing arrangement that is being recognized on a straight-line basis over the estimated economic life of the license, which is 20 years.

At March 31, 2025, 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 $ 276 million.

The remaining balance of deferred revenue at March 31, 2025 will be recognized beyond the next twelve months, of which $ 214 million relates to the non-refundable upfront payment received as part of the Marcolin licensing arrangement that is being recognized on a straight-line basis over the estimated economic life of the license, which is 20 years.

Royalty Revenue – License Arrangements

5 unchanged sentences

Descriptions of these plans are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

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

The components of net periodic benefit cost for the three months ended March 31, 2025 and 2024 consisted of the following:

Pension Plans Other than

13 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The components of net periodic benefit cost for the nine months ended March 31, 2025 and 2024 consisted of the following:

Pension Plans Other than

12 unchanged sentences

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

(In millions) December 31, 2024 June 30, 2024

(In millions) March 31, 2025 June 30, 2024

Other assets $ 127 $ 125

18 unchanged sentences

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 December 7, 2023 and January 22, 2024, the Company and its then 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.

On March 31, 2025, the Court denied defendants' motion to dismiss.

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.

On February 1, 2024 and March 15, 2024, stockholder 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.

As of December 31, 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.

Subsequently, the Company's Board of Directors ("the Board") received stockholder litigation demands, requesting, among other things, that the Board 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 the subject of the voluntarily dismissed stockholder derivative actions complaints) described above.

A committee of the Board has been formed to review the stockholder demands and make recommendations, as appropriate in its discretion, to the Board.

As of March 31, 2025, the Company does not believe it is probable that it will incur losses as a result of the securities class action and derivative matters, and cannot reasonably estimate the loss or range of losses that are reasonably possible to be incurred in connection with these matters.

Cosmetic Talcum Powder Matters

1 unchanged sentence

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

As of December 31, 2024, there were 84 individual cases 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 six months ended December 31, 2024, 43 new cases were filed and 232 cases were resolved by settlement or voluntary dismissal (including pursuant to the cases that were settled in the talcum litigation settlement agreements described below).

As of March 31, 2025, there were 84 individual cases 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 nine months ended March 31, 2025, 57 new cases were filed and 246 cases were resolved by settlement or voluntary dismissal (including pursuant to the cases that were settled in the 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.

2 unchanged sentences

To account for the talcum litigation settlement agreements, the Company recorded a charge of $ 159 million during the fiscal 2025 first quarter for the amount agreed to settle the 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 December 31, 2024, $ 32 million is recorded in Other accrued liabilities and $ 89 million is recorded in Other noncurrent liabilities in the accompanying consolidated balance sheet related to the talcum litigation settlement agreements (inclusive of accruals recorded prior to the fiscal 2025 first quarter for any cases settled under these agreements).

As of March 31, 2025, $ 23 million is recorded in Other accrued liabilities and $ 89 million is recorded in Other noncurrent liabilities in the accompanying consolidated balance sheet related to the talcum litigation settlement agreements.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 and six months ended December 31, 2024 and 2023 was not material.

The value of other settlements outside of the talcum litigation settlement agreements, either individually or in the aggregate, for the three and nine months ended March 31, 2025 and 2024 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.

2 unchanged sentences

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 and six months ended December 31, 2024 for such litigation, outside of the talcum litigation settlement agreements, are not material to the Company's consolidated financial statements.

The amounts recorded during the three and nine months ended March 31, 2025 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 ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

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

Compensation expense attributable to net stock-based compensation was $ 106 million and $ 109 million for the three months ended December 31, 2024 and 2023, respectively, and was $ 180 million and $ 189 million for the six months ended December 31, 2024 and 2023, respectively.

Compensation expense attributable to net stock-based compensation was $ 75 million and $ 87 million for the three months ended March 31, 2025 and 2024, respectively, and was $ 255 million and $ 276 million for the nine months ended March 31, 2025 and 2024, respectively.

Stock Options

During the six months ended December 31, 2024, the Company granted stock options in respect of approximately 0.9 million shares of Class A Common Stock with a weighted average exercise price per share of $ 91.36 and a weighted average grant date fair value per share of $ 29.26 .

During the nine months ended March 31, 2025, the Company granted stock options in respect of approximately 0.9 million shares of Class A Common Stock with a weighted average exercise price per share of $ 90.93 and a weighted average grant date fair value per share of $ 29.24 .

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

Restricted Stock Units

During the six months ended December 31, 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.

During the nine months ended March 31, 2025, the Company granted RSUs in respect of approximately 3.4 million shares of Class A Common Stock with a weighted average grant date fair value per share of $ 91.82 that, at the time of grant, are scheduled to vest at 1.2 million, 1.2 million, and 1.0 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 six months ended December 31, 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.

During the nine months ended March 31, 2025, the Company granted PSUs with a target payout of approximately 0.4 million shares of Class A Common Stock with a grant date fair value per share of $ 92.02 , 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.

1 unchanged sentence

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 then Chief Executive Officer in accordance with the terms of PSUs granted in February 2018.

The total fair value of PSUs issued during the fiscal 2025 first quarter was $ 18 million.

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 then Chief Executive Officer in accordance with the terms of PSUs granted in February 2018.

At the time of issuance, the total fair value of PSUs was $ 18 million.

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

5 unchanged sentences

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

For the nine months ended March 31, 2025, 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.

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

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

(In millions, except per share data) 2025 2024 2025 2024

5 unchanged sentences

Effect of PSUs

0.2 0.2 — 0.1

Effect of RSUs

0.9 0.7 — 0.6

Weighted average common shares outstanding – Diluted

4 unchanged sentences

$ .44 $ .91 $ ( 1.63 ) $ 1.87

(1) For the three and six months ended December 31, 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

Six Months Ended

March 31, Nine Months Ended

(In millions) 2025 2024 2025 2024

3 unchanged sentences

0.2 0.1 1.8 0.5

As of December 31, 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 .

As of March 31, 2025 and 2024, 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.

3 unchanged sentences

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

(In millions, except per share data)

27 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the six months ended December 31, 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 nine months ended March 31, 2025:

Date Declared Record Date Payable Date Amount per Share

1 unchanged sentence

October 30, 2024 November 29, 2024 December 16, 2024 $ .35

On February 3, 2025, 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 March 17, 2025 to stockholders of record at the close of business on February 28, 2025.

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.

February 3, 2025 February 28, 2025 March 17, 2025 $ .35

On April 30, 2025, 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 June 16, 2025 to stockholders of record at the close of business on May 30, 2025.

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

The Company 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 six months ended December 31, 2024:

The following table represents changes in accumulated other comprehensive loss, net of tax, by component for the nine months ended March 31, 2025:

(In millions) Net Cash

7 unchanged sentences

Net current-period OCI ( 20 ) 11 6 ( 130 ) ( 133 )

Balance at December 31, 2024 $ 56 $ — $ ( 180 ) $ ( 1,217 ) $ ( 1,341 )

Balance at March 31, 2025 $ 37 $ 6 $ ( 177 ) $ ( 1,139 ) $ ( 1,273 )

(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 - Fair Value Hedge and Translation Adjustments are $ 5 million, $ 4 million, and $ 7 million, respectively.

(3) The tax provision (benefit) included in Net Cash Flow Hedge Gain (Loss), Cross-Currency Swap Contracts - Fair Value Hedge and Translation Adjustments are $ 1 million, $ 6 million, and $( 3 ) 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 (loss) for the three and six months ended December 31, 2024 and 2023:

The following table represents the effects of reclassification adjustments from AOCI into net earnings (loss) for the three and nine months ended March 31, 2025 and 2024:

Amount Reclassified from AOCI Affected Line Item in

1 unchanged sentence

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

(In millions) 2025 2024 2025 2024

5 unchanged sentences

Provision for income taxes ( 1 ) ( 5 ) ( 7 ) ( 9 ) Provision (benefit) for income taxes

Total gain on cash flow hedges, net of tax

12 9 19 16 Net earnings (loss)

Total gain on cash flow hedges, net of tax 6 10 25 26 Net earnings (loss)

Cross-Currency Swap Contracts - Fair Value Hedge

Gain on cross-currency swap contracts, before tax

5 4 9 9 Selling, general and administrative

Provision for income taxes

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

Total gain on cross-currency swap contracts - fair value hedge, net of tax

4 3 7 7 Net earnings (loss)

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

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

Total gain on cross-currency swap contracts - fair value hedge, net of tax 4 4 11 11 Net earnings (loss)

Retirement Plan and Other Retiree Benefit Adjustments

Amortization of prior service cost 1 2 4 2 Other components of net periodic benefit cost

Amortization of actuarial gain (loss)

( 3 ) 1 ( 7 ) 2 Other components of net periodic benefit cost

Amortization of actuarial gain (loss) ( 4 ) 1 ( 11 ) 3 Other components of net periodic benefit cost

Total retirement plan and other retiree benefit adjustments, before tax

9 unchanged sentences

NOTE 12 – STATEMENT OF CASH FLOWS

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

Supplemental cash flow information for the nine months ended March 31, 2025 and 2024 is as follows:

(In millions) 2025 2024

12 unchanged sentences

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.

THE ESTÉE LAUDER COMPANIES INC.

1 unchanged sentence

Three Months Ended

December 31, Six Months Ended

March 31, Nine Months Ended

(In millions) 2025 2024 2025 2024

40 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