UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
November 3, 2004
The Estee Lauder Companies Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-14064 11-2408943
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
767 Fifth Avenue, New York, New York 10153
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
212-572-4200
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 2.02 Results of Operations and Financial Condition.
On November 3, 2004, The Estee Lauder Companies Inc. (the "Company") issued
a press release announcing its financial results for the fiscal quarter ended
September 30, 2004. The release also includes estimates for its fiscal 2005
first half and full year net sales and diluted earnings per share. A copy of the
press release is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
ITEM 8.01 Other Events.
On November 3, 2004, the Company announced that its Board of Directors increased
the Company's dividend to $.40 per share on the Company's Class A and Class B
Common Stock. The dividend amount represents a 33% increase over the previous
annual rate of $.30 per share that was paid in January 2004. The $.40 per share
annual dividend will be payable on December 28, 2004 to stockholders of record
at the close of business on December 10, 2004. The dividend announced on
November 3, 2004 is expected to be the only dividend paid in the fiscal year
ending June 30, 2005, but it will be the second dividend paid in calendar 2004
due to a change in the payment date from January to December. Due to the change
in timing and amount, stockholders may wish to consult with their tax advisors
as to the effect of this dividend.
ITEM 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
----------- -----------
99.1 Press release dated November 3, 2004 of The Estee Lauder
Companies Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE ESTEE LAUDER COMPANIES INC.
Date: November 3, 2004 By: /s/Richard W. Kunes
--------------------------
Richard W. Kunes
Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
THE ESTEE LAUDER COMPANIES INC.
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
99.1 Press release dated November 3, 2004 of The Estee Lauder
Companies Inc.
EXHIBIT 99.1
THE News
ESTEE Contact:
LAUDER Investor Relations:
COMPANIES INC. Dennis D'Andrea
(212) 572-4384
767 Fifth Avenue
New York, NY 10153 Media Relations:
Sally Susman
(212) 572-4430
--------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE:
ESTEE LAUDER COMPANIES REPORTS 12% FIRST QUARTER
NET SALES GROWTH
DILUTED PER SHARE EARNINGS FROM CONTINUING OPERATIONS
INCREASE 22% TO $.41
BOARD DECLARES 33% DIVIDEND INCREASE
New York, NY, November 3, 2004 - The Estee Lauder Companies Inc. (NYSE: EL)
today reported net sales for its first fiscal quarter ended September 30, 2004
of $1.50 billion, a 12% increase over the $1.35 billion reported in the prior
year. Excluding the impact of foreign currency translation, net sales rose 9%.
The Company reported net earnings from continuing operations for the quarter
ended September 30, 2004, of $95.0 million, up 22% from $77.7 million last year.
Diluted earnings per common share from continuing operations for the quarter
rose 22% to $.41 from $.34 reported in the prior year. Net earnings and diluted
earnings per share for the quarter each increased 23% compared with the prior
year, including discontinued operations.
William P. Lauder, President and Chief Executive Officer, said, "Our entrance
into fiscal 2005 with strong double-digit top and bottom line growth sets the
stage and gives us confidence that we are on our way to achieving our
previously stated full year financial objectives. Sales and earnings this
quarter were led by a strong performance in our international business. Two of
our most important priorities this fiscal year continue to be developing and
enhancing our strong brand equities and talented people. Building on these
hallmarks of our success sends a clear message of our commitment to profitable
growth."
Separately, the Board of Directors of The Estee Lauder Companies Inc. today
voted to increase its dividend to $.40 per share on the Company's Class A and
Class B Common Stock. The dividend amount represents a 33% increase over the
previous annual rate of $.30 per share that was paid in January 2004. The $.40
per share annual dividend will be payable on December 28, 2004 to stockholders
of record at the close of business on December 10, 2004. The dividend announced
Page 1 of 7
today is expected to be the only dividend paid in fiscal 2005, but it will be
the second dividend paid in calendar 2004 due to a change in the payment date
from January to December. Due to the change in timing and amount, stockholders
may wish to consult with their tax advisors as to the effect of this dividend.
Mr. Lauder added, "This substantial increase in our dividend for the second year
in a row reflects the broad-based strength of our business, our confidence in
our ability to fund future growth, and our commitment to stockholder value."
Results by Product Category
---------------------------
Net sales of skin care products for the quarter increased 13% to $524.3 million
on a reported basis and rose 9% in local currencies. The higher sales reflect
recent launches from Estee Lauder of Future Perfect Anti-Wrinkle Radiance Creme
SPF 15 and Hydra Complete Multi-Level Moisture Creme, as well as strong sales
from Clinique's Repairwear line and growth from developing brands, including La
Mer and Darphin, which are primarily skin care brands. Initial shipments of
American Beauty and Good Skin(TM), two new brands from the Company's BeautyBank
division, launched in the second quarter in select Kohl's department stores,
also contributed to growth.
Makeup sales for the quarter rose a strong 23% to $599.5 million on a reported
basis and increased 20% in local currencies. Several new or recent products such
as Superbalanced Compact Makeup SPF 20 and the Colour Surge line of products
from Clinique, as well as Lash XL Maximum Length Mascara and Electric Intense
LipCreme from Estee Lauder contributed to the sharp sales increase. Solid growth
was also generated from the Company's makeup artist brands, M.A.C, Bobbi Brown
and Stila. The makeup category also benefited from initial shipments of the
Company's new American Beauty and Flirt! brands.
Fragrance sales on a reported basis decreased 6% to $311.7 million compared to
the prior year and declined 9% in local currencies. This category was up against
a difficult comparison to the prior-year quarter which grew 12% and reflected
major new product launches. The prior-period launches, along with existing Tommy
Hilfiger fragrances posted lower sales in the current quarter reflecting the
soft fragrance business in the United States. Fragrance sales benefited from the
current quarter launches of Lauder Beyond Paradise Men, True Star from Tommy
Hilfiger and initial shipments of DKNY Be Delicious, as well as improved results
in the Company's travel retail business.
Sales of hair care products for the quarter rose 15% to $63.1 million on a
reported basis and increased 14% in local currencies, due primarily to higher
sales at Aveda and Bumble and bumble. Aveda net sales growth was due to recent
product launches such as Air Control Hair Spray and Pure Abundance, as well as
increased concept salon distribution. Bumble and bumble's sales increased due to
the success of existing products and new salon openings.
Operating income increased in skin care and makeup due to higher sales.
Fragrance operating income decreased reflecting the soft domestic fragrance
business, ongoing development costs for new products and brands and sustained
support spending behind existing products. Hair care operating results were
lower reflecting increased operating expenses related to the growth of the
Company's business in the United States.
Page 2 of 7
Results by Geographic Region
----------------------------
In the Americas, net sales for the quarter increased 4% to $888.2 million. The
increase is due to the success of new and certain existing products, strong
growth from developing brands, increases from the Company's freestanding
retail stores and higher results in Canada. All major product categories in this
region had sales growth except fragrance, which had a difficult comparison to
last year's new launches, coupled with continued challenges in the U.S. prestige
fragrance business. Operating income in the Americas decreased reflecting a
difficult comparison to the prior-year quarter due in part to the relative size
of major product launches in that quarter compared to the current quarter
launches. Continued advertising, sampling and merchandising spending on products
launched in the prior-year quarter along with spending behind certain current
quarter launches contributed to the decline in operating results.
In Europe, the Middle East & Africa, net sales increased 29% from the prior-year
period to $423.8 million, and rose 20% in local currency. The higher sales were
primarily generated by the Company's travel retail business and growth in
virtually every country. In constant currency, strong sales were led by the
United Kingdom, Spain, Switzerland and Italy. Operating profitability increased
primarily due to significantly improved results from our travel retail business
and higher results in the United Kingdom, Italy, South Africa and Spain,
partially offset by lower results in France. These results reflect more
normalized levels following a difficult first quarter last year.
Asia/Pacific net sales grew 15% over the prior-year quarter to $192.1 million.
On a local currency basis, Asia/Pacific net sales rose 10%. In local currency
almost every country experienced sales growth, led by double-digit increases in
China, Hong Kong, Australia and Taiwan. Sales in Japan increased moderately in
the quarter. Operating profit in the region increased, reflecting improved
results in Hong Kong and Australia, partially offset by lower results in Japan,
as well as China, where we continue to invest in new brand expansion and
business opportunities.
Cash Flows
----------
For the three months ended September 30, 2004, net cash flows used for operating
activities were $101.2 million versus $46.9 million in the prior-year period.
The change primarily resulted from higher net earnings offset by increases in
certain seasonal working capital components. Operating cash flow was utilized
primarily for capital investments and the repurchase of shares of the Company's
Class A Common Stock.
Estimate of Fiscal 2005 First Half and Full Year
------------------------------------------------
Net sales for the first half of fiscal 2005 are expected to grow between 8% and
9% in dollars, including a benefit of slightly more than one percent due to
foreign currency exchange, versus fiscal 2004's first half. Geographic region
net sales growth in constant currency is expected to be led by Europe, the
Middle East & Africa, followed by Asia/Pacific and the Americas. On a product
category basis, in constant currency, hair care and makeup are expected to be
the leading growth categories, followed by skin care, while fragrance is
expected to post a decline. The Company now expects to achieve diluted earnings
per share of between $.96 and $.99 for the first half as it continues to invest
in advertising, sampling and merchandising and support significant launch
activity, particularly in the pre-holiday season.
Page 3 of 7
For the Company's fiscal 2005 full-year results, reported net sales are
expected to grow between 7% and 8% in dollars, which reflects a benefit of
approximately one-half of one percent foreign currency translation impact,
versus fiscal 2004. At the same time the Company continues to expect to achieve
diluted earnings per share of between $1.88 and $1.93 for the fiscal 2005 year.
Geographic region net sales growth in constant currency is expected to be led by
the Americas and Europe, the Middle East & Africa, followed by Asia/Pacific. On
a product category basis, in constant currency, hair care and skin care are
expected to be the leading sales growth categories, followed by makeup and
fragrance.
Forward-looking Statements
--------------------------
The forward-looking statements in this press release, including those containing
words like "believe," "expect," "anticipate," and "estimate," those in
Mr. Lauder's remarks and those in the "Estimate of Fiscal 2005 First Half and
Full Year" section involve risks and uncertainties. Factors that could cause
actual results to differ materially from those forward-looking statements
include the following:
(1) increased competitive activity from companies in the skin care,
makeup, fragrance and hair care businesses, some of which have greater
resources than the Company does;
(2) the Company's ability to develop, produce and market new products on
which future operating results may depend;
(3) consolidations, restructurings, bankruptcies and reorganizations in
the retail industry causing a decrease in the number of stores that
sell the Company's products, an increase in the ownership
concentration within the retail industry, ownership of retailers by
the Company's competitors and ownership of competitors by the
Company's customers that are retailers;
(4) shifts in the preferences of consumers as to where and how they shop
for the types of products and services the Company sells;
(5) social, political and economic risks to the Company's foreign or
domestic manufacturing, distribution and retail operations, including
changes in foreign investment and trade policies and regulations of
the host countries and of the United States;
(6) changes in the laws, regulations and policies that affect, or will
affect, the Company's business, including changes in accounting
standards, tax laws and regulations, trade rules and customs
regulations, and the outcome and expense of legal or regulatory
proceedings;
(7) foreign currency fluctuations affecting the Company's results of
operations and the value of its foreign assets, the relative prices at
which the Company and its foreign competitors sell products in the
same markets and the Company's operating and manufacturing costs
outside of the United States;
(8) changes in global or local economic conditions that could affect
consumer purchasing, the willingness of consumers to travel, the
financial strength of the Company's customers and suppliers, the cost
and availability of capital, which the Company may need for new
equipment, facilities or acquisitions, the cost and availability of
raw materials and the assumptions underlying the Company's critical
accounting estimates;
(9) shipment delays, depletion of inventory and increased production costs
resulting from disruptions of operations at any of the facilities
which, due to consolidations in the Company's manufacturing
operations, now manufacture nearly all of the Company's supply of a
particular type of product (i.e., focus factories);
(10) real estate rates and availability, which may affect the Company's
ability to increase the number of retail locations at which the
Company sells its products and the costs associated with the Company's
other facilities;
(11) changes in product mix to products which are less profitable;
(12) the Company's ability to acquire or develop new information and
distribution technologies, on a timely basis and within the Company's
cost estimates;
(13) the Company's ability to capitalize on opportunities for improved
efficiency, such as globalization, and to integrate acquired
businesses and realize value therefrom; and
(14) consequences attributable to the events that are currently taking
place in the Middle East, including further attacks, retaliation and
the threat of further attacks or retaliation.
Page 4 of 7
The Estee Lauder Companies Inc. is one of the world's leading manufacturers and
marketers of quality skin care, makeup, fragrance and hair care products. The
Company's products are sold in over 130 countries and territories under well-
recognized brand names, including Estee Lauder, Clinique, Aramis, Prescriptives,
Origins, M.A.C, Bobbi Brown, Tommy Hilfiger, La Mer, Donna Karan, Aveda, Stila,
Jo Malone, Bumble and bumble, kate spade beauty, Darphin, Michael Kors, Rodan +
Fields, American Beauty, Flirt! and Good Skin(TM).
An electronic version of this release can be found at the Company's website,
www.elcompanies.com.
- Tables Follow -
Page 5 of 7
THE ESTEE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; Dollars in millions, except per share data)
Three Months Ended
September 30 Percent
--------------------
2004 2003 Change
---- ---- ------
Net Sales................................................. $1,504.1 $1,346.6 11.7%
Cost of sales............................................. 411.3 364.1
-------- --------
Gross Profit.............................................. 1,092.8 982.5 11.2%
-------- --------
Gross Margin....................................... 72.7% 73.0%
Operating expenses:
Selling, general and administrative.................... 937.5 848.5
Related party royalties................................ - 4.3
-------- --------
937.5 852.8 9.9%
-------- --------
Operating Expense Margin........................... 62.4% 63.4%
Operating Income.......................................... 155.3 129.7 19.7%
Operating Income Margin............................ 10.3% 9.6%
Interest expense, net..................................... 4.1 7.7
-------- --------
Earnings before Income Taxes, Minority Interest
and Discontinued Operations............................ 151.2 122.0 23.9%
Provision for income taxes................................ 56.0 44.1
Minority interest, net of tax............................. (0.2) (0.2)
-------- --------
Net Earnings from Continuing Operations................... 95.0 77.7 22.3%
Discontinued operations, net of tax (A)................... - (0.7)
-------- --------
Net Earnings.............................................. $ 95.0 $ 77.0 23.4%
======== ========
Basic net earnings per common share:
Net earnings from continuing operations................ $ .42 $ .34 22.6%
Discontinued operations, net of tax.................... - -
-------- --------
Net earnings........................................... $ .42 $ .34 23.7%
======== ========
Diluted net earnings per common share:
Net earnings from continuing operations................ $ .41 $ .34 22.0%
Discontinued operations, net of tax.................... - (.01)
-------- --------
Net earnings........................................... $ .41 $ .33 23.1%
======== ========
Weighted average common shares outstanding:
Basic.................................................. 227.1 228.1
Diluted................................................ 231.2 230.6
(A) In February 2004, the Company sold the assets and operations of its
reporting unit that sold jane brand products. All consolidated results of
earnings information for the prior-year period have been restated for
comparative purposes, including the restatement of the makeup product category
and the Americas region data.
Page 6 of 7
THE ESTEE LAUDER COMPANIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; In millions)
September 30 June 30 September 30
2004 2004 2003
---- ---- ----
ASSETS
Current Assets
Cash and cash equivalents.............................................. $ 387.1 $ 611.6 $ 482.7
Accounts receivable, net............................................... 902.2 664.9 841.0
Inventory and promotional merchandise, net............................. 712.8 653.5 627.9
Prepaid expenses and other current assets.............................. 265.7 269.2 238.5
--------- --------- ---------
Total Current Assets.............................................. 2,267.8 2,199.2 2,190.1
--------- --------- ---------
Property, Plant and Equipment, net..................................... 641.2 647.0 604.4
Other Assets........................................................... 865.3 861.9 905.7
--------- --------- ---------
Total Assets...................................................... $ 3,774.3 $ 3,708.1 $ 3,700.2
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt........................................................ $ 77.5 $ 73.8 $ 8.6
Accounts payable....................................................... 260.7 267.3 242.9
Other current liabilities.............................................. 1,027.1 980.9 895.3
--------- --------- ---------
Total Current Liabilities......................................... 1,365.3 1,322.0 1,146.8
--------- --------- ---------
Noncurrent Liabilities
Long-term debt......................................................... 472.6 461.5 833.5
Other noncurrent liabilities and minority interest..................... 200.0 191.1 216.3
Total Stockholders' Equity............................................. 1,736.4 1,733.5 1,503.6
--------- --------- ---------
Total Liabilities and Stockholders' Equity........................ $ 3,774.3 $ 3,708.1 $ 3,700.2
========= ========= =========
SELECTED CASH FLOW DATA
(Unaudited; In millions)
Three Months Ended
September 30
--------------------
2004 2003
Cash Flows from Operating Activities
Net earnings......................................................................... $ 95.0 $ 77.0
Depreciation and amortization........................................................ 46.9 45.1
Deferred income taxes................................................................ 11.3 -
Other items.......................................................................... (1.3) 1.1
Changes in operating assets and liabilities:
Increase in accounts receivable, net............................................. (228.1) (214.2)
Increase in inventory and promotional merchandise, net........................... (52.8) (34.5)
Increase in accounts payable and other accrued liabilities....................... 22.9 89.2
Other operating assets and liabilities, net...................................... 4.9 (10.6)
------- -------
Net cash flows used for operating activities................................... $(101.2) $ (46.9)
======= =======
Capital expenditures................................................................. 35.5 42.2
Payments to acquire treasury stock................................................... 88.3 12.3
# # #
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