Annual Report Project Estee Lauder Companies, Inc.

Transcription

1 Annual Report Project Estee Lauder Companies, Inc. Yao Shen BUS 210 Secton 00A

2 Chief Executive Officer: Fabrizio Freda Location of home office: New York Ending date of last fiscal year: June 30 Principal products: Estee Lauder Companies are manufacteur and marketer for prestige skincare, makeup, fragrance and hair care products. Famous brands such as Estee Lauder, M A C, Bobbi Brown, Clinique, Aveda and Origins all belong to Estee Lauder Companies. Introduction

3 Estee Lauder Companies' products are sold in over 150 countries and territories. The Americas has 42 percent of total global sales, the largest portion in terms of sales. Japan is the first largest market in Asia, followed by China.

4 Audit Report Name of the independent auditors: KPMG LLP KPMG LLP concludes that the consolidated financial statements present fairly of June 30, 2012 and 2011, in conformity with U.S. generally accepting accounting principles. According to KPMG LLP, The Estee Lauder Companies Inc. maintained effective internal control over financial report as of June 30, 2012.

5 EL Companies Fiscal 2012 Overview

6 Stock Market Information Most recent price of Estee Lauder Companies' stock:$67.78 per share Dividend per share: $0.525 Date of above information: June 2, 2013 BUY because the price of stock has been increasing steadily in the last three quarters. Fiscal High Low Fiscal High Low th Quater (September 30) $54.39 $ th Quater (September 30) $65.13 $ rd Quater rd Quater (December 31) (December 31) 2nd Quater (March 31) nd Quater (March 31) st Quater (June 30) st Quater (June 30)

7 Income Statement The format of the income statement is multistep. The increases in gross profit, operation income, net income are significant. The company can expect a continuing increase of these items in the following years if they continue with make good uses of retained earnings. All in millions of dollars Gross Profit $7,717.8 $6,873.1 Income from operations 1, ,089.4 Net Income

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9 Balance Sheet All in millions of dollars Assets $ $ Liabilities+Stock holders' equity = = There is around 5% increases in the assets, liabilities and stockholder equity. However, depending on the fact of its huge base numbers, it is reasonable to conclude that Estee Lauder Companies are growing at a steadily pace in the past year.

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11 Statement of Cash Flows All in millions of dollars Operating activities Investing activities Financing activities $1,126.7 $1,027.0 (428.3) (606.9) (585.1) (313.1)

12 Statement of Cash Flows Cash flows from operations are MORE than net income for the past two years. Estee Lauder Companies have been buying business and intangible assets in Estee Lauder Companies primary resource of financing is through the borrowing of current debt. The primary source of decrease in financing is through payments to acquire treasury stock. Overall, the amount cash of Estee Lauder Companies has INCREASED in the past year.

13 Accounting Policies Revenue Inventories Stock Account receivable recognition:america: at the time the item is shipped; Europe, Middle East, Africa, Asia/ Pacific: upon the customer s receipt reported as net sale ( gross sale- products returned discounts incentive arrangement with retailers the amount established for anticipated product returns) FIFO (first in first out) state at lower of cost or fair-market-value All share (except par value per share), earnings per common share and cash dividends declared per common share information for all prior years reflect the two-for-one stock split on the Company s Class A and Class B Common Stock, which was effected in the form of a stock dividend for each share held by stockholders of record at the close of business on January 4, The estimate is based upon the evaluation of accounts receivable aging, specific exposures and historical trends.

14 Accounting Policies Property, plant and equipment Costs of computer software for internal use are capitalized in the application development stage and expensed as during the preliminary project and postimplementation stages. Depreciation method: straight line method In September 2011, the Financial Accounting Standards Board ( FASB ) amended its authoritative guidance related to multiemployer benefit plans. This amend effect fiscal In December 2010, the FASB amended its authoritative guidance related to business combinations entered into by an entity that are material on an individual or aggregate basis. It became effect since the first day of fiscal 2012.

15 Accounting Policies Topics of Financial Statements: principle of consolidation, management estimates,currency translation and transaction, cash and cash equivalents, accounts receivables, inventory and merchandise products, derivative financial instruments...

16 Financial Analysis Liquidity Ratios 2012 June June 30 Working Capital Current Ratio Receivable Turnover ( ) (3855.1/2125.8) (9713.6/[( )/2]) ( ) (3686.5/1943.3) (8810.0/[( )/2])

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18 Financial Analysis Liquidity Ratios 2012 June June 30 Ave. Days Sales Uncollected Inventory Turnover 2.02 (365/20.66) (1995.8/[( )/2]) (365/20.21) 2.13 (1936.9/[( )/2]) Average Days' inventory On Hand Operating Cycle (365/2.02) days ( ) (365/2.13) days ( )

19 Financial Analysis Liquidity Ratios El Companies have an increase in working capital, and also an increase in operating cycle. This increase indicates that it takes longer for EL Companies to purchase the producing materials and complete the sales process. If the trend of the increase in operating cycle is constant, it might be possible that the operation needs some improvement.

20 Financial Analysis Profitability Ratios 2012 June June 30 Profit Margin Total Asset Turnover Return On Assets Return On Equity 12.98% (1261.1/9713.6)*100% 1.51 (9713.6/[( )/2]) 15.50% (( *65%)/ ) 31.77% (856.9/[( )/2])*1 00% 11.64% (1025.5/8810.0)*100% 1.52 (8810.0/[( )/2]) 14.01% (( *65%/ ) 30.39% (700.8/[( )/2])*100%

21 Financial Analysis Profitability Ratios There are increases in profit margin, return on assets and return on equity. Increased profit margin indicates EL Companies have used their resources more efficiently in Increase in return on assets indicates the management operates more efficiently in using its assets to generate earnings. Return on equity is relatively high, which means EL Companies are likely to generate profit internally. Shareholders should keep their share of EL Companies since EL Companies are good at generating profits.

22 Financial Analysis Market Strength Ratios 2012 June June 30 Price/ Earning per Share 2.19 (856.9/[( )/ 2]) 1.76 (700.8/[( )/ 2]) Dividend Yield 0.80% (.525/65.60) 0.98% (1.05/106.57) The earning per share have increased over 24% compared with the data from This shows that the stock of EL Companies is strong and popular in the market. There is a decrease in dividend yield. However, considering the price of stock has dropped from to per share from 2011 to 2012, which is a significant decrease in price, the decrease of dividends is in response to the decrease of stock price.

23 Financial Analysis Solvency Ratio 2012 June June 30 Debit to Equity 1.39 Financing Gap 4.24 (( )/2/( )/2) (1995.8/[( )/2]) 1.52 (( )/( )) 4.44 (1936.9/[( )/2]) The decrease in debit to equity may come from decreased debt or increasing company assets. This increase is good for EL Companies in the short time. Further study for the increase is needed to conclude whether this increase in good in the long run.

24 Industry Situation Global beauty industry has a promising future. According to Research and Market, revenue in beauty industry is estimated to be $265 billion in 2017 with a CAGR of 3.4% in This is partly driven by increased demand in Asia Pacific and Europe due to increase in GDP and improving living standard. ( Rising income in consumers drives the need of luxury beauty products, which are the main products of Estee Lauder Companies.

25 Industry Situation &Company Plans Estee Lauder Companies have great promise in online sales. Sales (of Estee Lauder) have tripled in the last five years. Our big brands are winning online and represent more than half of our division sales said Dennis McEniry,the president of Estee Lauder online. ( Financial/Estee-Lauder-Online-business-looking-brighter-thanever?utm_source=copyright&utm_medium=OnSite&utm_campaign=copyright) Estee Lauder Companies have shown strong management skills since the term of new CEO Fabrizio Freda. The strong management skills can be reflected from the increase in the price of EL Companies stocks, which have gained more than 180 percent since Freda became chairman in esteelauder

26 Company Plans EL Companies plan to produce more innovative prestige beauty products corresponding the increased demand for luxury. (In 2012, EL Companies have developed innovative beauty products such as EL s idealist even skin tone illuminator, MAC s matchmaker spf 15 foundation and Aveda s three-step system for thinning hair. ) EL Companies plan to make their sale strategy more locally in order to meet the need of global customers. EL Companies plan to continue the expansion in China through brand Estee Lauder and La Mer.

27 Executive Summary After the analysis, Estee Lauder Companies have performed successful management skills and operation through the over 10% increase in sales, the increase in the price of the stock and the increase on return to equity. The investors in EL Companies can expect dividends and returns. Its growth on working capital and decrease on inventory turn over indicate that EL companies have sufficient resource and financial support to sustain the future development of EL Companies. Its accounting process and accounting policies are just, accurate and detailed. We can expect EL Companies to expand steadily in the following years.