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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________
FORM 10-Q
(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023
or

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
Commission file number 1-14064
The Estée Lauder Companies Inc.
(Exact name of registrant as specified in its charter)

Delaware | 11-2408943
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
767 Fifth Avenue, New York, New York | 10153
(Address of principal executive offices) | (Zip Code)

212-572-4200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Class A Common Stock, $.01 par value | EL | New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ | Accelerated filer | ☐
Non-accelerated filer | ☐ | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At April 26, 2023, 231,870,990 shares of the registrant’s Class A Common Stock, $.01 par value, and 125,542,029 shares of the registrant’s Class B Common Stock, $.01 par value, were outstanding.

Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
INDEX

| Page
Part I. Financial Information |
Item 1. Financial Statements (Unaudited) |
Consolidated Statements of Earnings — Three and Nine Months Ended March 31, 2023 and 2022 | 2
Consolidated Statements of Comprehensive Incom e — Three and Nine Months Ended March 31, 2023 and 2022 | 3
Consolidated Balance Sheets — March 31, 2023 and June 30, 2022 (Audited) | 4
Consolidated Statements of Cash Flows — Nine Months Ended March 31, 2023 and 2022 | 5
Notes to Consolidated Financial Statements | 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 38
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 70
Item 4. Controls and Procedures | 70
Part II. Other Information |
Item 1. Legal Proceedings | 70
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 71
Item 6. Exhibits | 71
Signatures | 72

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
THE ESTÉE LAUDER COMPANIES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)

|  |  |  | Three Months Ended March 31 |  | Nine Months Ended March 31
(In millions, except per share data) |  |  |  |  |  | 2023 |  | 2022 |  | 2023 |  | 2022
Net sales |  |  |  |  |  | $ | 3,751 |  |  | $ | 4,245 |  |  | $ | 12,301 |  |  | $ | 14,176 |
Cost of sales |  |  |  |  |  | 1,159 |  |  | 994 |  |  | 3,401 |  |  | 3,274 |
Gross profit |  |  |  |  |  | 2,592 |  |  | 3,251 |  |  | 8,900 |  |  | 10,902 |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |
Selling, general and administrative |  |  |  |  |  | 2,281 |  |  | 2,275 |  |  | 7,155 |  |  | 7,554 |
Restructuring and other charges |  |  |  |  |  | 14 |  |  | 22 |  |  | 24 |  |  | 41 |
Impairment of other intangible assets |  |  |  |  |  | — |  |  | 216 |  |  | 207 |  |  | 216 |
Total operating expenses |  |  |  |  |  | 2,295 |  |  | 2,513 |  |  | 7,386 |  |  | 7,811 |
Operating income |  |  |  |  |  | 297 |  |  | 738 |  |  | 1,514 |  |  | 3,091 |
Interest expense |  |  |  |  |  | 58 |  |  | 41 |  |  | 156 |  |  | 125 |
Interest income and investment income, net |  |  |  |  |  | 37 |  |  | 5 |  |  | 78 |  |  | 19 |
Other components of net periodic benefit cost |  |  |  |  |  | (4) |  |  | (1) |  |  | (9) |  |  | (2) |
Other income |  |  |  |  |  | — |  |  | — |  |  | — |  |  | 1 |
Earnings before income taxes |  |  |  |  |  | 280 |  |  | 703 |  |  | 1,445 |  |  | 2,988 |
Provision for income taxes |  |  |  |  |  | 125 |  |  | 130 |  |  | 403 |  |  | 630 |
Net earnings |  |  |  |  |  | 155 |  |  | 573 |  |  | 1,042 |  |  | 2,358 |
Net earnings attributable to noncontrolling interests |  |  |  |  |  | — |  |  | (3) |  |  | — |  |  | (8) |
Net loss (earnings) attributable to redeemable noncontrolling interest |  |  |  |  |  | 1 |  |  | (12) |  |  | (3) |  |  | (12) |
Net earnings attributable to The Estée Lauder Companies Inc. |  |  |  |  |  | $ | 156 |  |  | $ | 558 |  |  | $ | 1,039 |  |  | $ | 2,338 |
Net earnings attributable to The Estée Lauder Companies Inc. per common share |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  |  |  |  | $ | .44 |  |  | $ | 1.55 |  |  | $ | 2.90 |  |  | $ | 6.48 |
Diluted |  |  |  |  |  | $ | .43 |  |  | $ | 1.53 |  |  | $ | 2.88 |  |  | $ | 6.39 |
Weighted-average common shares outstanding |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  |  |  |  | 357.9 |  |  | 359.2 |  |  | 357.8 |  |  | 360.7 |
Diluted |  |  |  |  |  | 361.2 |  |  | 363.6 |  |  | 360.9 |  |  | 365.8 |

See notes to consolidated financial statements.
2

Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

|  |  | Three Months Ended March 31 |  | Nine Months Ended March 31 |  |
(In millions) |  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Net earnings |  |  | $ | 155 |  |  | $ | 573 |  |  | $ | 1,042 |  |  | $ | 2,358 |  |  |  |  |
Other comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |  |
Net cash flow hedge gain (loss) |  |  | (43) |  |  | 5 |  |  | (50) |  |  | 21 |  |  |  |  |
Cross-currency swap contract loss |  |  | (11) |  |  | — |  |  | (11) |  |  | — |  |  |  |  |
Retirement plan and other retiree benefit adjustments |  |  | — |  |  | 4 |  |  | — |  |  | 12 |  |  |  |  |
Translation adjustments |  |  | (7) |  |  | 28 |  |  | (101) |  |  | (173) |  |  |  |  |
Benefit (provision) for income taxes on components of other comprehensive income |  |  | 16 |  |  | (4) |  |  | 23 |  |  | (22) |  |  |  |  |
Total other comprehensive income (loss), net of tax |  |  | (45) |  |  | 33 |  |  | (139) |  |  | (162) |  |  |  |  |
Comprehensive income |  |  | 110 |  |  | 606 |  |  | 903 |  |  | 2,196 |  |  |  |  |
Comprehensive income attributable to noncontrolling interests: |  |  |  |  |  |  |  |  |  |  |  |  |
Net earnings |  |  | — |  |  | (3) |  |  | — |  |  | (8) |  |  |  |  |
Translation adjustments |  |  | — |  |  | 1 |  |  | — |  |  | 3 |  |  |  |  |
Total comprehensive income attributable to noncontrolling interests |  |  | — |  |  | (2) |  |  | — |  |  | (5) |  |  |  |  |
Comprehensive loss (income) attributable to redeemable noncontrolling interest: |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss (earnings) |  |  | 1 |  |  | (12) |  |  | (3) |  |  | (12) |  |  |  |  |
Translation adjustments |  |  | (1) |  |  | (14) |  |  | 26 |  |  | 3 |  |  |  |  |
Total comprehensive loss (income) attributable to redeemable noncontrolling interest |  |  | — |  |  | (26) |  |  | 23 |  |  | (9) |  |  |  |  |
Comprehensive income attributable to The Estée Lauder Companies Inc. |  |  | $ | 110 |  |  | $ | 578 |  |  | $ | 926 |  |  | $ | 2,182 |  |  |  |  |

See notes to consolidated financial statements.
3

Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
CONSOLIDATED BALANCE SHEETS

(In millions, except share data) |  | March 31 2023 |  | June 30 2022
|  | (Unaudited) |  |
ASSETS |  |  |  |
Current assets |  |  |  |
Cash and cash equivalents |  | $ | 5,531 |  |  | $ | 3,957 |
Accounts receivable, net |  | 1,904 |  |  | 1,629 |
Inventory and promotional merchandise |  | 3,097 |  |  | 2,920 |
Prepaid expenses and other current assets |  | 715 |  |  | 792 |
Total current assets |  | 11,247 |  |  | 9,298 |
Property, plant and equipment, net |  | 3,026 |  |  | 2,650 |
Other assets |  |  |  |
Operating lease right-of-use assets |  | 1,843 |  |  | 1,949 |
Goodwill |  | 2,468 |  |  | 2,521 |
Other intangible assets, net |  | 3,045 |  |  | 3,428 |
Other assets |  | 1,086 |  |  | 1,064 |
Total other assets |  | 8,442 |  |  | 8,962 |
Total assets |  | $ | 22,715 |  |  | $ | 20,910 |
LIABILITIES AND EQUITY |  |  |  |
Current liabilities |  |  |  |
Current debt |  | $ | 2,243 |  |  | $ | 268 |
Accounts payable |  | 1,520 |  |  | 1,822 |
Operating lease liabilities |  | 357 |  |  | 365 |
Other accrued liabilities |  | 3,580 |  |  | 3,360 |
Total current liabilities |  | 7,700 |  |  | 5,815 |
Noncurrent liabilities |  |  |  |
Long-term debt |  | 5,128 |  |  | 5,144 |
Long-term operating lease liabilities |  | 1,734 |  |  | 1,868 |
Other noncurrent liabilities |  | 1,457 |  |  | 1,651 |
Total noncurrent liabilities |  | 8,319 |  |  | 8,663 |
Commitments and Contingencies |  |  |  |
Redeemable Noncontrolling Interest |  | 819 |  |  | 842 |
Equity |  |  |  |
Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at March 31, 2023 and June 30, 2022; shares issued: 469,358,006 at March 31, 2023 and 467,949,351 at June 30, 2022; Class B shares authorized: 304,000,000 at March 31, 2023 and June 30, 2022; shares issued and outstanding: 125,542,029 at March 31, 2023 and 125,542,029 at June 30, 2022 |  | 6 |  |  | 6 |
Paid-in capital |  | 6,103 |  |  | 5,796 |
Retained earnings |  | 14,261 |  |  | 13,912 |
Accumulated other comprehensive loss |  | (875) |  |  | (762) |
|  | 19,495 |  |  | 18,952 |
Less: Treasury stock, at cost; 237,532,271 Class A shares at March 31, 2023 and 236,435,830 Class A shares at June 30, 2022 |  | (13,618) |  |  | (13,362) |
Total equity |  | 5,877 |  |  | 5,590 |
Total liabilities, redeemable noncontrolling interest and equity |  | $ | 22,715 |  |  | $ | 20,910 |

See notes to consolidated financial statements.
4

Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|  | Nine Months Ended March 31
(In millions) |  | 2023 |  | 2022
Cash flows from operating activities |  |  |  |
Net earnings |  | $ | 1,042 |  |  | $ | 2,358 |
Adjustments to reconcile net earnings to net cash flows from operating activities: |  |  |  |
Depreciation and amortization |  | 548 |  |  | 546 |
Deferred income taxes |  | (70) |  |  | (90) |
Non-cash stock-based compensation |  | 234 |  |  | 283 |
Net loss on disposal of property, plant and equipment |  | 8 |  |  | 6 |
Non-cash restructuring and other charges |  | 20 |  |  | 2 |
Pension and post-retirement benefit expense |  | 40 |  |  | 59 |
Pension and post-retirement benefit contributions |  | (20) |  |  | (30) |
Impairment of other intangible assets |  | 207 |  |  | 216 |
Gain on previously held equity method investment |  | — |  |  | (1) |
Other non-cash items |  | (9) |  |  | (4) |
Changes in operating assets and liabilities: |  |  |  |
Increase in accounts receivable, net |  | (254) |  |  | (548) |
Increase in inventory and promotional merchandise |  | (154) |  |  | (398) |
Increase in other assets, net |  | (69) |  |  | (61) |
Decrease in accounts payable |  | (313) |  |  | (199) |
Decrease in other accrued and noncurrent liabilities |  | (151) |  |  | (132) |
Decrease in operating lease assets and liabilities, net |  | (42) |  |  | (38) |
Net cash flows provided by operating activities |  | 1,017 |  |  | 1,969 |
Cash flows from investing activities |  |  |  |
Capital expenditures |  | (652) |  |  | (658) |
Payment for acquired business |  | — |  |  | (3) |
Purchases of other intangible assets |  | (8) |  |  | — |
Purchases of investments |  | (5) |  |  | (10) |
Settlement of net investment hedges |  | 138 |  |  | 108 |
Net cash flows used for investing activities |  | (527) |  |  | (563) |
Cash flows from financing activities |  |  |  |
Proceeds (repayments) of current debt, net |  | 2,228 |  |  | (4) |
Debt issuance costs |  | — |  |  | (1) |
Repayments and redemptions of long-term debt |  | (261) |  |  | (16) |
Net proceeds from stock-based compensation transactions |  | 68 |  |  | 127 |
Payments to acquire treasury stock |  | (258) |  |  | (1,998) |
Dividends paid to stockholders |  | (687) |  |  | (624) |
Net cash flows provided by (used for) financing activities |  | 1,090 |  |  | (2,516) |
Effect of exchange rate changes on Cash and cash equivalents |  | (6) |  |  | (12) |
Net increase (decrease) in Cash and cash equivalents |  | 1,574 |  |  | (1,122) |
Cash and cash equivalents at beginning of period |  | 3,957 |  |  | 4,958 |
Cash and cash equivalents at end of period |  | $ | 5,531 |  |  | $ | 3,836 |

See notes to consolidated financial statements.
5

Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated.
The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.
Certain prior year amounts in the notes to the consolidated financial statements have been reclassified to conform to current year presentation.
Management Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.
Currency Translation and Transactions
All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $(5) million and $13 million, net of tax, during the three months ended March 31, 2023 and 2022, respectively, and $(66) million and $(182) million, net of tax, during the nine months ended March 31, 2023 and 2022, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity.
The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. The Company also uses cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt. Additionally, the Company enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 4 – Derivative Financial Instruments for further discussion. The Company categorizes these instruments as entered into for purposes other than trading.
The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $25 million and $3 million during the three months ended March 31, 2023 and 2022, respectively, and $59 million and $(15) million during the nine months ended March 31, 2023 and 2022, respectively.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentration of Credit Risk
The Company is a worldwide manufacturer, marketer and seller of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to retailers in its travel retail business, department stores, specialty multi-brand retailers and perfumeries. The Company grants credit to qualified customers. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor its customers' abilities, individually and collectively, to make timely payments.
Inventory and Promotional Merchandise
Inventory and promotional merchandise consists of the following:

(In millions) |  | March 31, 2023 |  | June 30, 2022
Raw materials |  | $ | 916 |  |  | $ | 791 |
Work in process |  | 353 |  |  | 366 |
Finished goods |  | 1,527 |  |  | 1,449 |
Promotional merchandise |  | 301 |  |  | 314 |
|  | $ | 3,097 |  |  | $ | 2,920 |

Property, Plant and Equipment
Property, plant and equipment consists of the following:

(In millions) |  | March 31, 2023 |  | June 30, 2022
Assets (Useful Life) |  |  |  |
Land |  | $ | 55 |  |  | $ | 53 |
Buildings and improvements (10 to 40 years) |  | 503 |  |  | 491 |
Machinery and equipment (3 to 10 years) |  | 1,032 |  |  | 994 |
Computer hardware and software (4 to 10 years) |  | 1,565 |  |  | 1,468 |
Furniture and fixtures (5 to 10 years) |  | 133 |  |  | 129 |
Leasehold improvements |  | 2,284 |  |  | 2,246 |
Construction in progress |  | 1,140 |  |  | 759 |
|  | 6,712 |  |  | 6,140 |
Less accumulated depreciation and amortization |  | (3,686) |  |  | (3,490) |
|  | $ | 3,026 |  |  | $ | 2,650 |

Depreciation and amortization of property, plant and equipment was $147 million and $140 million during the three months ended March 31, 2023 and 2022, respectively, and $421 million and $406 million during the nine months ended March 31, 2023 and 2022, 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.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
The effective rate for income taxes for the three and nine months ended March 31, 2023 and 2022 are as follows:

| Three Months Ended March 31 |  | Nine Months Ended March 31
| 2023 |  | 2022 |  | 2023 |  | 2022
Effective rate for income taxes | 44.6 | % |  | 18.5 | % |  | 27.9 | % |  | 21.1 | %
Basis-point change from the prior-year period | 2,610 |  |  |  |  | 680 |  |  |

For the three months ended March 31, 2023, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company's foreign operations, due to the Company's geographical mix of earnings for fiscal 2023.
For the nine months ended March 31, 2023, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company's foreign operations, due to the Company's geographical mix of earnings for fiscal 2023, and a decrease in excess tax benefits associated with stock-based compensation arrangements.
On August 16, 2022, the U.S. federal government enacted the Inflation Reduction Act, with tax provisions primarily focused on implementing a 1% excise tax on share repurchases and a 15% corporate alternative minimum tax based on global adjusted financial statement income. The excise tax was effective beginning with the Company’s third quarter of fiscal 2023 and did not have an impact on the Company’s results of operations or financial position. The corporate alternative minimum tax will be effective beginning with the Company's first quarter of fiscal 2024. The Company continues to monitor developments and evaluate projected impacts, if any, of this provision to its consolidated financial statements.
As of March 31, 2023 and June 30, 2022, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $59 million and $61 million, respectively. The total amount of unrecognized tax benefits at March 31, 2023 that, if recognized, would affect the effective tax rate was $50 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and nine months ended March 31, 2023 in the accompanying consolidated statements of earnings was $1 million and $2 million, respectively. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at each of March 31, 2023 and June 30, 2022, was $16 million and $14 million, respectively. On the basis of the information available as of March 31, 2023, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.
During the fiscal 2023 first quarter, the Company formally concluded the compliance process with respect to its fiscal 2021 income tax return under the U.S. Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three and nine months ended March 31, 2023.
Other Accrued and Noncurrent Liabilities
Other accrued liabilities consist of the following:

(In millions) |  | March 31, 2023 |  | June 30, 2022
Advertising, merchandising and sampling |  | $ | 240 |  |  | $ | 250 |
Employee compensation |  | 525 |  |  | 693 |
Deferred revenue |  | 306 |  |  | 312 |
Payroll and other non-income taxes |  | 305 |  |  | 345 |
Accrued income taxes |  | 396 |  |  | 267 |
Sales return accrual |  | 342 |  |  | 252 |
Other |  | 1,466 |  |  | 1,241 |
|  | $ | 3,580 |  |  | $ | 3,360 |

At March 31, 2023 and June 30, 2022, total Other noncurrent liabilities of $1,457 million and $1,651 million included $625 million and $692 million of deferred tax liabilities, respectively.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Recently Issued Accounting Standards
FASB ASU No. 2022-04 – Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations
In September 2022, the FASB issued authoritative guidance which is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated rollforward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations.
Effective for the Company – The guidance becomes effective for the Company’s first quarter fiscal 2024 and is applied on a retrospective basis, except for the requirement to disclose rollforward information annually which is effective prospectively for the Company beginning in fiscal 2025. Early adoption is permitted. Annual disclosures, excluding the rollforward information, need to be provided in interim periods within the initial year of adoption.
Impact on consolidated financial statements – The Company has a supplier financing arrangement and will apply the disclosure requirements as required by the amendments.
Reference Rate Reform (ASC Topic 848 “ASC 848”)
In March 2020, t he FAS B issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”) and applies to lease and other contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that reference LIBOR or another rate that is expected to be discontinued as a result of reference rate reform.
In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clar ify that for all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC 848.
In December 2022, the FASB issued authoritative guidance to defer the sunset date of ASC 848 from December 31, 2022 to December 31, 2024.
Effective for the Company – This guidance can only be applied for a limited time through December 31, 2024.
Impact on consolidated financial statements – The Company currently has an implementation team in place that has performed a comprehensive evaluation and is assessing the impact of applying this guidance, which includes assessing the impact to business processes and internal controls over financial reporting and the related disclosure requirements. For treasury related arrangements, the Company references LIBOR in its interest rate swap agreements and LIBOR is also used for purposes of discounting certain foreign currency and interest rate forward contracts. The Company is currently evaluating the potential impact of modifying treasury related arrangements and applying the relevant ASC 848 optional practical expedients, as needed. For existing lease, debt arrangements and other contracts, the Company will not adopt any ASC 848 optional practical expedients as it relates to these arrangements. The Company will continue to monitor new contracts that could potentially be eligible for contract modification relief through December 31, 2024.
No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The following table presents goodwill by product category and the related change in the carrying amount:

(In millions) |  | Skin Care |  | Makeup |  | Fragrance |  | Hair Care |  | Total
Balance as of June 30, 2022 |  |  |  |  |  |  |  |  |  |
Goodwill |  | $ | 1,702 |  |  | $ | 1,116 |  |  | $ | 249 |  |  | $ | 353 |  |  | $ | 3,420 |
Accumulated impairments |  | (138) |  |  | (732) |  |  | (29) |  |  | — |  |  | (899) |
|  | 1,564 |  |  | 384 |  |  | 220 |  |  | 353 |  |  | 2,521 |
Translation and other adjustments, goodwill |  | (56) |  |  | — |  |  | 5 |  |  | — |  |  | (51) |
Translation and other adjustments, accumulated impairments |  | (1) |  |  | — |  |  | (1) |  |  | — |  |  | (2) |
|  | (57) |  |  | — |  |  | 4 |  |  | — |  |  | (53) |
Balance as of March 31, 2023 |  |  |  |  |  |  |  |  |  |
Goodwill |  | 1,646 |  |  | 1,116 |  |  | 254 |  |  | 353 |  |  | 3,369 |
Accumulated impairments |  | (139) |  |  | (732) |  |  | (30) |  |  | — |  |  | (901) |
|  | $ | 1,507 |  |  | $ | 384 |  |  | $ | 224 |  |  | $ | 353 |  |  | $ | 2,468 |

Other Intangible Assets
Other intangible assets consist of the following:

|  | March 31, 2023 |  | June 30, 2022
(In millions) |  | Gross Carrying Value |  | Accumulated Amortization |  | Total Net Book Value |  | Gross Carrying Value |  | Accumulated Amortization |  | Total Net Book Value
Amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |
Customer lists, license agreements and other |  | $ | 2,036 |  |  | $ | 734 |  |  | $ | 1,302 |  |  | $ | 2,064 |  |  | $ | 628 |  |  | $ | 1,436 |
Non-amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |
Trademarks |  |  |  |  |  | 1,743 |  |  |  |  |  |  | 1,992 |
Total intangible assets |  |  |  |  |  | $ | 3,045 |  |  |  |  |  |  | $ | 3,428 |

The aggregate amortization expense related to amortizable intangible assets was $36 million and $38 million for the three months ended March 31, 2023 and 2022, respectively, and $109 million and $122 million for the nine months ended March 31, 2023 and 2022, respectively.
The estimated aggregate amortization expense for the remainder of fiscal 2023 and for each of the next four fiscal years is as follows:

|  | Fiscal
(In millions) |  | 2023 |  | 2024 |  | 2025 |  | 2026 |  | 2027
Estimated aggregate amortization expense |  | $ | 38 |  |  | $ | 146 |  |  | $ | 146 |  |  | $ | 146 |  |  | $ | 129 |

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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impairment Analysis During the Nine Months Ended March 31, 2023
During the fiscal 2023 second quarter, given the lower-than-expected results in the overall business, the Company made revisions to the internal forecasts relating to its Smashbox reporting unit. The Company concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset. The remaining carrying value of the trademark intangible asset was not recoverable and the Company recorded an impairment charge of $21 million reducing the carrying value to zero.
During the fiscal 2023 second quarter, the Dr.Jart+ reporting unit experienced lower-than-expected growth within key geographic regions and channels that continue to be impacted by the spread of COVID-19 variants, resurgence in cases, and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the reporting unit. In addition, due to macro-economic factors, Dr.Jart+ has experienced lower-than-expected growth within key geographic regions. The Too Faced reporting unit experienced lower-than-expected results in key geographic regions and channels coupled with delays in future international expansion to areas that continue to be impacted by COVID-19. As a result, the Company made revisions to the internal forecasts relating to its Dr.Jart+ and Too Faced reporting units. Additionally, there were increases in the weighted average cost of capital for both reporting units as compared to the prior year annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2022.
The Company concluded that the changes in circumstances in the reporting units, along with increases in the weighted average cost of capital, triggered the need for interim impairment reviews of their trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of November 30, 2022. The Company concluded that the carrying value of the trademark intangible assets exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows and recorded an impairment charge of $100 million for Dr.Jart+ and $86 million for Too Faced. The Company concluded that the carrying amounts of the long-lived assets were recoverable. After adjusting the carrying values of the trademarks, the Company completed interim quantitative impairment tests for goodwill. As the estimated fair value of the Dr.Jart+ and Too Faced reporting units were in excess of their carrying values, the Company concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units. The fair values of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks. The most significant unobservable input used to estimate the fair values of the Dr.Jart+ and Too Faced trademark intangible assets was the weighted-average cost of capital, which was 11% and 13%, respectively.
A summary of the impairment charges for the three and nine months ended March 31, 2023 and the remaining trademark and goodwill carrying values as of March 31, 2023, for each reporting unit, are as follows:

|  |  |  | Impairment Charges |  | Carrying Value
(In millions) |  |  |  | Three Months Ended March 31, 2023 |  | Nine Months Ended March 31, 2023 |  | As of March 31, 2023
Reporting Unit |  | Geographic Region |  | Trademarks |  | Goodwill |  | Trademarks |  | Goodwill |  | Trademarks |  | Goodwill
Smashbox |  | The Americas |  | $ | — |  |  | $ | — |  |  | $ | 21 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Dr.Jart+ |  | Asia/Pacific |  | — |  |  | — |  |  | 100 |  |  | — |  |  | 330 |  |  | 310 |
Too Faced |  | The Americas |  | — |  |  | — |  |  | 86 |  |  | — |  |  | 186 |  |  | 13 |
Total |  |  |  | $ | — |  |  | $ | — |  |  | $ | 207 |  |  | $ | — |  |  | $ | 516 |  |  | $ | 323 |

The impairment charges for the nine months ended March 31, 2023 were reflected in the skin care product category for Dr.Jart+ and the makeup product category for Smashbox and Too Faced.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impairment Analysis During the Nine Months Ended March 31, 2022
During the fiscal 2022 third quarter, given the lower-than-expected results from international expansion to areas impacted by COVID-19, the Company made revisions to the internal forecasts relating to its GLAMGLOW reporting unit. The Company concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset. As of March 31, 2022, the remaining carrying value of the trademark intangible asset was not recoverable and the Company recorded an impairment charge of $11 million reducing the carrying value to zero.
During the fiscal 2022 third quarter, given the lower-than-expected growth within key geographic regions and channels for Dr.Jart+ impacted by the spread of COVID-19 variants and resurgence in cases and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the brand, the lower than expected growth in key retail channels for DECIEM, and the lower than expected results from international expansion to areas impacted by COVID-19 for Too Faced, the Company made revisions to the internal forecasts relating to its Dr.Jart+, DECIEM and Too Faced reporting units.
The Company concluded that the changes in circumstances in the reporting units triggered the need for interim impairment reviews of their trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s, DECIEM’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of February 28, 2022. The Company concluded that the carrying amounts of the long-lived assets were recoverable. For the Dr.Jart+ reporting unit, the Company also concluded that the carrying value of the trademark intangible asset exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge. For the Too Faced and DECIEM reporting units, as the carrying values of the trademarks did not exceed their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, the Company did not record impairment charges. As of March 31, 2022, the estimated fair values of Too Faced’s and DECIEM's trademarks exceeded their carrying values by 13% and 3%, respectively. For the Too Faced and DECIEM trademark intangible assets, if all other assumptions are held constant, an increase of 100 basis points and 50 basis points, respectively, in the weighted average cost of capital would result in an impairment charge. After adjusting the carrying values of the trademarks, the Company completed interim quantitative impairment tests for goodwill. As the estimated fair value of the Dr.Jart+, DECIEM and Too Faced reporting units were in excess of their carrying values, the Company concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units. The fair value of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks. The most significant unobservable input used to estimate the fair value of the Dr.Jart+ trademark intangible asset was the weighted-average cost of capital, which was 10.5%.
A summary of the impairment charges for the three and nine months ended March 31, 2022 and the remaining trademark and goodwill carrying values as of March 31, 2022, for each reporting unit, are as follows:

(In millions) |  |  |  | Impairment Charges |  | Carrying Value
|  |  |  | Three and Nine Months Ended March 31, 2022 |  | As of March 31, 2022
Reporting Unit |  | Geographic Region |  | Trademarks |  | Goodwill |  | Trademarks |  | Goodwill
GLAMGLOW |  | The Americas |  | $ | 11 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Dr.Jart+ |  | Asia/Pacific |  | 205 |  |  | — |  |  | 486 |  |  | 332 |
Total |  |  |  | $ | 216 |  |  | $ | — |  |  | $ | 486 |  |  | $ | 332 |

The impairment charges for the three and nine months ended March 31, 2022 were reflected in the skin care product category.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES
Charges associated with the Post-COVID Business Acceleration Program for the three and nine months ended March 31, 2023 were as follows:

|  | Sales Returns (included in Net Sales) |  | Cost of Sales |  | Operating Expenses |  | Total
(In millions) |  |  |  | Restructuring Charges |  | Other Charges |
Three months ended March 31, 2023 |  | $ | 4 |  |  | $ | — |  |  | $ | 6 |  |  | $ | 4 |  |  | $ | 14 |
Nine months ended March 31, 2023 |  | $ | 10 |  |  | $ | (1) |  |  | $ | 12 |  |  | $ | 7 |  |  | $ | 28 |

The types of activities included in restructuring and other charges, and the related accounting criteria, are described below.
Charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business.
Post-COVID Business Acceleration Program
On August 20, 2020, the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “PCBA Program”), designed to realign the Company's business to address the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The PCBA Program is designed to help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. It is expected to further strengthen the Company by building upon the foundational capabilities in which the Company has invested.
The PCBA Program’s main areas of focus include accelerating the shift to online with the realignment of the Company’s distribution network reflecting freestanding store and certain department store closures, with a focus on North America and Europe, the Middle East & Africa; the reduction in brick-and-mortar point of sale employees and related support staff; and the redesign of the Company’s regional branded marketing organizations, plus select opportunities in global brands and functions. This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility.
As of March 31, 2023, the Company estimated a net reduction over the duration of the PCBA Program in the range of 2,500 to 3,000 positions globally, including temporary and part-time employees. This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees and investment in new positions in key areas. The Company also estimated the closure over the duration of the PCBA Program of approximately 10% to 15% of its freestanding stores globally, primarily in Europe, the Middle East & Africa and in North America.
As of June 30, 2022, the Company approved specific initiatives under the PCBA Program and expects to substantially complete those initiatives through fiscal 2023. Inclusive of approvals from inception through June 30, 2022, the Company estimates, as of March 31, 2023, that the PCBA Program may result in related restructuring and other charges totaling between $450 million and $480 million, before taxes. Additional information about the PCBA Program approvals 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, 2022.
Specific actions taken since the PCBA Program inception include:
•Optimize Digital Organization and Other Go-To-Market Organizations – The Company approved initiatives to enhance its go-to-market capabilities and shift more resources to support online growth. These actions will result in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
•Optimize Select Marketing, Brand and Global Functions – The Company has started to reduce its corporate and certain of its brand office footprints and is moving toward the future of work in a post-COVID-19 environment, by restructuring where and how its employees work and collaborate. In addition, the Company has approved initiatives to reduce organizational complexity and leverage scale across various Global functions. These actions will result in asset write-offs, employee severance, lease termination fees, and consulting and other professional services for the design and implementation of the future structures and processes.
•Optimize Distribution Network – To help restore profitability to pre-COVID-19 pandemic levels in certain areas of its distribution network and, as part of a broader initiative to be completed in phases, the Company has approved initiatives to close a number of underperforming freestanding stores, counters and other retail locations, mainly in certain affiliates across all geographic regions, including the Company's travel retail network. These anticipated closures reflect changing consumer behaviors including higher demand for online and omnichannel capabilities. These activities will result in termination of contracts, a net reduction in workforce, product returns, and inventory and other asset write-offs.
•Exit of the Global Distribution of BECCA Products – In reviewing the Company's brand portfolio to improve efficiency and the sustainability of long-term investments, the decision was made to exit the global distribution of BECCA products due to its limited distribution, the ongoing decline in product demand and the challenging environment caused by the COVID-19 pandemic. These activities resulted in charges for the impairment of goodwill and other intangible assets, product returns, termination of contracts, and employee severance. The Company completed these initiatives during fiscal 2022.
•Exit of Certain Designer Fragrance Licenses – In reviewing the Company’s brand portfolio of fragrances and to focus on investing its resources on alternative opportunities for long-term growth and value creation globally, the Company announced that it would not be renewing its existing license agreements for the Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna product lines when their respective terms expire in June 2023. The Company has since negotiated early termination agreements with each of the licensors effective June 30, 2022 and continued to sell products under these licenses until such time. These actions resulted in asset write-offs, including charges for the impairment of goodwill, employee-related costs, and consulting and legal fees.
•Brand Transformation – In reviewing the Company’s brand portfolio to accelerate growth within the makeup product category and to support long-term investments, the decision was made to strategically reposition Smashbox to capitalize on changing consumer preferences and to mitigate the impact caused by the COVID-19 pandemic on the brand. These actions will result primarily in product returns and inventory write-offs.
PCBA Program Restructuring and Other Charges
Restructuring charges are comprised of the following:
Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable.
Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets in certain freestanding stores (including rights associated with commercial operating leases and operating lease right-of-use assets) that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative. These costs also include goodwill and other intangible asset impairment charges relating to the exit of the global distribution of BECCA products.
Contract Terminations – Costs related to contract terminations include continuing payments to a third party after the Company has ceased benefiting from the rights conveyed in the contract, or a payment made to terminate a contract prior to its expiration.
Other Exit Costs – Other exit costs related to restructuring activities generally include costs to relocate facilities or employees, recruiting to fill positions as a result of relocation of operations, and employee outplacement for separated employees.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other charges associated with restructuring activities are comprised of the following:
Sales Returns and Cost of Sales – Product returns (offset by the related cost of sales) and inventory write-offs or write-downs as a direct result of an approved restructuring initiative to exit certain businesses or locations will be recorded as a component of Net sales and/or Cost of sales when estimable and reasonably assured.
Other Charges – The Company approved other charges related to the design and implementation of approved initiatives, which are charged to Operating expenses as incurred and primarily include the following:
•Consulting and other professional services for organizational design of the future structures and processes as well as the implementation thereof;
•Temporary labor backfill;
•Costs to establish and maintain a PMO for the duration of the PCBA Program, including internal costs for employees dedicated solely to project management activities, and other PMO-related expenses incremental to the Company’s ongoing operations (e.g., rent and utilities); and
•Recruitment and training costs for new and reskilled employees to acquire and apply the capabilities needed to perform responsibilities as a direct result of an approved restructuring initiative.
The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were:

|  | Sales Returns (included in Net Sales) |  | Cost of Sales |  | Operating Expenses |  | Total
(In millions) |  |  |  | Restructuring Charges |  | Other Charges |
Total Charges (Adjustments) |  |  |  |  |  |  |  |  |  |
Cumulative through June 30, 2022 |  | $ | 18 |  |  | $ | 7 |  |  | $ | 310 |  |  | $ | 13 |  |  | $ | 348 |
Nine months ended March 31, 2023 |  | 10 |  |  | (1) |  |  | 12 |  |  | 7 |  |  | 28 |
Cumulative through March 31, 2023 |  | $ | 28 |  |  | $ | 6 |  |  | $ | 322 |  |  | $ | 20 |  |  | $ | 376 |

(In millions) |  | Employee- Related Costs |  | Asset- Related Costs |  | Contract Terminations |  | Other Exit Costs |  | Total
Restructuring Charges (Adjustments) |  |  |  |  |  |  |  |  |  |
Cumulative through June 30, 2022 |  | $ | 203 |  |  | $ | 86 |  |  | $ | 19 |  |  | $ | 2 |  |  | $ | 310 |
Nine months ended March 31, 2023 |  | (8) |  |  | 20 |  |  | (3) |  |  | 3 |  |  | 12 |
Cumulative through March 31, 2023 |  | $ | 195 |  |  | $ | 106 |  |  | $ | 16 |  |  | $ | 5 |  |  | $ | 322 |

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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in accrued restructuring charges for the nine months ended March 31, 2023 relating to the PCBA Program were:

(In millions) |  | Employee- Related Costs |  | Asset- Related Costs |  | Contract Terminations |  | Other Exit Costs |  | Total
Balance at June 30, 2022 |  | $ | 125 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 125 |
Charges |  | (8) |  |  | 20 |  |  | (3) |  |  | 3 |  |  | 12
Cash payments |  | (27) |  |  | — |  |  | (1) |  |  | (3) |  |  | (31) |
Non-cash asset write-offs |  | — |  |  | (20) |  |  | — |  |  | — |  |  | (20) |
Translation and other adjustments |  | (5) |  |  | — |  |  | 4 |  |  | — |  |  | (1) |
Balance at March 31, 2023 |  | $ | 85 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 85 |

Accrued restructuring charges at March 31, 2023 relating to the PCBA Program are expected to result in cash expenditures funded from cash provided by operations of approximately $31 million, $41 million and $13 million for the remainder of fiscal 2023 and for fiscal 2024 and 2025, respectively.
NOTE 4 – DERIVATIVE FINANCIAL INSTRUMENTS
The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. The Company enters into foreign currency forward contracts, and may enter into option contracts, to reduce the effects of fluctuating foreign currency exchange rates. The Company also uses cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt. In addition, the Company enters into interest rate derivatives to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. The Company enters into the net investment hedges to offset the risk of changes in the U.S. dollar value of the Company’s investment in these foreign operations due to fluctuating foreign exchange rates. Time value is excluded from the effectiveness assessment and is recognized under a systematic and rational method over the life of the hedging instrument in Selling, general and administrative expenses. The net gain or loss on net investment hedges is recorded within translation adjustments, as a component of accumulated OCI (“AOCI”) on the Company’s consolidated balance sheets, until the sale or substantially complete liquidation of the underlying assets of the Company’s investment. The Company also enters into foreign currency forward contracts, and may use option contracts, not designated as hedging instruments, to mitigate the change in fair value of specific assets and liabilities on the consolidated balance sheets. At March 31, 2023, the notional amount of derivatives not designated as hedging instruments was $3,521 million. The Company does not utilize derivative financial instruments for trading or speculative purposes. Costs associated with entering into derivative financial instruments have not been material to the Company’s consolidated financial results.
For each derivative contract entered into, where the Company looks to obtain hedge accounting treatment, the Company formally and contemporaneously documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction, the nature of the risk being hedged, and how the hedging instruments’ effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. At inception, the Company evaluates the effectiveness of hedge relationships quantitatively, and has elected to perform, after initial evaluation, qualitative effectiveness assessments of certain hedge relationships to support an ongoing expectation of high effectiveness, if effectiveness testing is required. If based on the qualitative assessment, it is determined that a derivative has ceased to be a highly effective hedge, the Company will perform a quantitative assessment to determine whether to discontinue hedge accounting with respect to that derivative prospectively.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows:

|  | Asset Derivatives |  | Liability Derivatives
|  |  |  | Fair Value (1) |  |  |  | Fair Value (1)
(In millions) |  | Balance Sheet Location |  | March 31, 2023 |  | June 30, 2022 |  | Balance Sheet Location |  | March 31, 2023 |  | June 30, 2022
Derivatives Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency cash flow hedges |  | Prepaid expenses and other current assets |  | $ | 22 |  |  | $ | 57 |  |  | Other accrued liabilities |  | $ | 22 |  |  | $ | 1 |
Cross-currency swap contracts |  | Prepaid expenses and other current assets |  | — |  |  | — |  |  | Other accrued liabilities |  | 11 |  |  | — |
Net investment hedges |  | Prepaid expenses and other current assets |  | — |  |  | 107 |  |  | Other accrued liabilities |  | 56 |  |  | — |
Interest rate-related derivatives |  | Prepaid expenses and other current assets |  | 1 |  |  | 24 |  |  | Other accrued liabilities |  | 138 |  |  | 115 |
Total Derivatives Designated as Hedging Instruments |  |  |  | 23 |  |  | 188 |  |  |  |  | 227 |  |  | 116 |
Derivatives Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | Prepaid expenses and other current assets |  | 58 |  |  | 27 |  |  | Other accrued liabilities |  | 13 |  |  | 104 |
Total derivatives |  |  |  | $ | 81 |  |  | $ | 215 |  |  |  |  | $ | 240 |  |  | $ | 220 |

(1)See Note 5 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows:

|  | Amount of Gain (Loss) Recognized in OCI on Derivatives |  | Location of Gain (Loss) Reclassified from AOCI into Earnings |  | Amount of Gain (Loss) Reclassified from AOCI into Earnings(1)
|  | Three Months Ended March 31 |  |  | Three Months Ended March 31
(In millions) |  | 2023 |  | 2022 |  |  | 2023 |  | 2022
Derivatives in Cash Flow Hedging Relationships: |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | (11) |  |  | $ | (2) |  |  | Net sales |  | $ | 22 |  |  | $ | 3 |
Interest rate-related derivatives |  | (11) |  |  | 10 |  |  | Interest expense |  | (1) |  |  | — |
|  | (22) |  |  | 8 |  |  |  |  | 21 |  |  | 3 |
Derivatives in Net Investment Hedging Relationships(2): |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts(3) |  | (23) |  |  | 17 |  |  |  |  | — |  |  | — |
Total derivatives |  | $ | (45) |  |  | $ | 25 |  |  |  |  | $ | 21 |  |  | $ | 3 |

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.
(2)During the three months ended March 31, 2023 and 2022, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $6 million and $3 million, respectively.
(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

|  | Amount of Gain (Loss) Recognized in OCI on Derivatives |  | Location of Gain (Loss) Reclassified from AOCI into Earnings |  | Amount of Gain (Loss) Reclassified from AOCI into Earnings(1)
|  | Nine Months Ended March 31 |  |  | Nine Months Ended March 31
(In millions) |  | 2023 |  | 2022 |  |  | 2023 |  | 2022
Derivatives in Cash Flow Hedging Relationships: |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | 7 |  |  | $ | 5 |  |  | Net sales |  | $ | 59 |  |  | $ | (5) |
Interest rate-related derivatives |  | 1 |  |  | 10 |  |  | Interest expense |  | (1) |  |  | (1) |
|  | 8 |  |  | 15 |  |  |  |  | 58 |  |  | (6) |
Derivatives in Net Investment Hedging Relationships(2): |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts(3) |  | (38) |  |  | 87 |  |  |  |  | — |  |  | — |
Total derivatives |  | $ | (30) |  |  | $ | 102 |  |  |  |  | $ | 58 |  |  | $ | (6) |

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.
(2)During the nine months ended March 31, 2023 and 2022, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $19 million and $8 million, respectively.
(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|  |  |  | Amount of Gain (Loss) Recognized in Earnings on Derivatives |  |  |  |
|  | Location of Gain (Loss) Recognized in Earnings on Derivatives |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended March 31 |  | Nine Months Ended March 31 |  |
(In millions) |  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Derivatives in Fair Value Hedging Relationships: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cross-currency swap contracts (1) |  | Selling, general and administrative |  | $ | 1 |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |  |  |  |  |
Interest rate swap contracts (2) |  | Interest expense |  | $ | 18 |  |  | $ | (69) |  |  | $ | (17) |  |  | $ | (85) |  |  |  |  |

(1)Changes in the fair value representing hedge components included in the assessment of effectiveness of the cross-currency swap contracts are exactly offset by the change in the fair value of the underlying intercompany foreign currency denominated debt. The gain recognized in earnings from cross-currency swap contracts related to the amount excluded from effectiveness testing was $4 million.
(2)Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.
Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows:

(In millions) |  |  |  |
Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included |  | Carrying Amount of the Hedged Liabilities |  | Cumulative Amount of Fair Value Hedging Gain (Loss) Included in the Carrying Amount of the Hedged Liability
|  | March 31, 2023 |  | March 31, 2023
Long-term debt |  | $ | 862 |  |  | $ | (132) |
Intercompany debt |  | — |  |  | 1 |

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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows:

|  | Three Months Ended March 31
|  | 2023 |  | 2022
(In millions) |  | Net Sales |  | Selling, General and Administrative |  | Interest Expense |  | Net Sales |  | Selling, General and Administrative |  | Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded |  | $ | 3,751 |  |  | $ | 2,281 |  |  | $ | 58 |  |  | $ | 4,245 |  |  | $ | 2,275 |  |  | $ | 41 |
The effects of fair value and cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on fair value hedge relationships – interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |
Hedged item |  | N/A |  | N/A |  | (18) |  |  | N/A |  | N/A |  | 69 |
Derivatives designated as hedging instruments |  | N/A |  | N/A |  | 18 |  |  | N/A |  | N/A |  | (69) |
Gain (loss) on fair value hedge relationships – cross-currency swap contracts: |  |  |  |  |  |  |  |  |  |  |  |
Hedged item |  | N/A |  | (1) |  |  | N/A |  | N/A |  | — |  |  | N/A
Derivatives designated as hedging instruments |  | N/A |  | 1 |  |  | N/A |  | N/A |  | — |  |  | N/A
Gain (loss) on cash flow hedge relationships – interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |
Amount of loss reclassified from AOCI into earnings |  | N/A |  | N/A |  | (1) |  |  | N/A |  | N/A |  | — |
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: |  |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from AOCI into earnings |  | 22 |  |  | N/A |  | N/A |  | 3 |  |  | N/A |  | N/A

N/A (Not applicable)
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|  | Nine Months Ended March 31
|  | 2023 |  | 2022
(In millions) |  | Net Sales |  | Selling, General and Administrative |  | Interest Expense |  | Net Sales |  | Selling, General and Administrative |  | Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded |  | $ | 12,301 |  |  | $ | 7,155 |  |  | $ | 156 |  |  | $ | 14,176 |  |  | $ | 7,554 |  |  | $ | 125 |
The effects of fair value and cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |  |  |
Gain (loss) on fair value hedge relationships – interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |
Hedged item |  | N/A |  | N/A |  | 17 |  |  | N/A |  | N/A |  | 85 |
Derivatives designated as hedging instruments |  | N/A |  | N/A |  | (17) |  |  | N/A |  | N/A |  | (85) |
Gain (loss) on fair value hedge relationships – cross-currency swap contracts: |  |  |  |  |  |  |  |  |  |  |  |
Hedged item |  | N/A |  | (1) |  |  | N/A |  | N/A |  | — |  |  | N/A
Derivatives designated as hedging instruments |  | N/A |  | 1 |  |  | N/A |  | N/A |  | — |  |  | N/A
Gain (loss) on cash flow hedge relationships – interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |
Amount of loss reclassified from AOCI into earnings |  | N/A |  | N/A |  | (1) |  |  | N/A |  | N/A |  | (1) |
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: |  |  |  |  |  |  |  |  |  |  |  |
Amount of gain (loss) reclassified from AOCI into earnings |  | 59 |  |  | N/A |  | N/A |  | (5) |  |  | N/A |  | N/A

N/A (Not applicable)
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows:

|  |  |  | Amount of Gain (Loss) Recognized in Earnings on Derivatives |  |  |  |
|  | Location of Gain (Loss) Recognized in Earnings on Derivatives |  | Three Months Ended March 31 |  | Nine Months Ended March 31 |  |
(In millions) |  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Derivatives Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | Selling, general and administrative |  | $ | 4 |  |  | $ | 17 |  |  | $ | 21 |  |  | $ | (32) |  |  |  |  |

The Company's derivative instruments are subject to enforceable master netting agreements. These agreements permit the net settlement of these contracts on a per-institution basis; however, the Company records the fair value on a gross basis on its consolidated balance sheets based on maturity dates, including those subject to master netting arrangements. The following table provides information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria in the event of default or termination as stipulated by the terms of netting arrangements with each of the counterparties:

|  |  | As of March 31, 2023 |  | As of June 30, 2022 |  |
(In millions) |  |  | Gross Amounts of Assets / (Liabilities) Presented in Balance Sheet |  | Contracts Subject to Netting |  | Net Amounts of Assets / (Liabilities) |  | Gross Amounts of Assets / (Liabilities) Presented in Balance Sheet |  | Contracts Subject to Netting |  | Net Amounts of Assets / (Liabilities) |  |  |  |
Derivative Financial Contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative assets |  |  | $ | 81 |  |  | $ | (73) |  |  | $ | 8 |  |  | $ | 215 |  |  | $ | (104) |  |  | $ | 111 |  |  |  |  |
Derivative liabilities |  |  | (240) |  |  | 73 |  |  | (167) |  |  | (220) |  |  | 104 |  |  | (116) |  |  |  |  |
Total |  |  | $ | (159) |  |  | $ | — |  |  | $ | (159) |  |  | $ | (5) |  |  | $ | — |  |  | $ | (5) |  |  |  |  |

Cash Flow Hedges
The Company enters into foreign currency forward contracts, and may enter into foreign currency option contracts, to hedge anticipated transactions and receivables and payables denominated in foreign currencies, for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the cash flows that the Company receives from foreign subsidiaries. The foreign currency forward contracts entered into to hedge anticipated transactions have been designated as cash flow hedges and have varying maturities through the end of December 2024. Hedge effectiveness of the foreign currency forward contracts is based on the forward method, which includes time value in the effectiveness assessment. At March 31, 2023, the Company had cash flow hedges outstanding with a notional amount totaling $2,382 million.
The Company may enter into interest rate forward contracts to hedge anticipated issuance of debt for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of interest rate movements on the cost of debt issuance.
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 March 31, 2023, the Company’s foreign currency cash flow hedges were highly effective.
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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 March 31, 2023 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $5 million. The accumulated net gain on derivative instruments designated as cash flow hedges in AOCI was $40 million and $90 million as of March 31, 2023 and June 30, 2022, respectively.
Fair Value Hedges
The Company enters into interest rate derivative contracts to manage the exposure to interest rate fluctuations on its funded indebtedness. At March 31, 2023, 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 three-month LIBOR 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 it’s intercompany foreign currency denominated debt. At March 31, 2023, the Company has cross-currency swap contracts with notional amounts totaling $491 million, to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt. The cross-currency swap contracts are designated as fair value hedges of the related intercompany debt, and the gains and losses representing hedge components included in the assessment of effectiveness are presented in the same income statement line item as the earnings effect of the hedged transaction. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis. The earnings recognition of excluded components is presented in the same income statement line item as the earnings effect of the hedged transaction. Any difference between the changes in the fair value of the excluded components and amounts recognized in earnings will be recognized in AOCI.
The estimated net gain on the Company’s derivative instruments designated as fair value hedges as of March 31, 2023 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $13 million. The accumulated net loss on derivative instruments designated as fair value hedges in AOCI was $11 million as of March 31, 2023.
Net Investment Hedges
The Company enters into foreign currency forward contracts, designated as net investment hedges, to hedge a portion of its net investment in certain foreign operations. The net gain or loss on these contracts is recorded within translation adjustments, as a component of AOCI on the Company’s consolidated balance sheets. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the Company’s net investment in these foreign operations. The net investment hedge contracts have varying maturities through the end of May 2023. Hedge effectiveness of the net investment hedge contracts is based on the spot method. At March 31, 2023, the Company had net investment hedges outstanding with a notional amount totaling $1,037 million.
Credit Risk
As a matter of policy, the Company enters into derivative contracts only with counterparties that have a long-term credit rating of at least A- or higher by at least two nationally recognized rating agencies. The counterparties to these contracts are major financial institutions. Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $81 million at March 31, 2023. To manage this risk, the Company has strict counterparty credit guidelines that are continually monitored. Accordingly, management believes risk of loss under these hedging contracts is remote.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 – FAIR VALUE MEASUREMENTS
The Company records certain of its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The accounting for fair value measurements must be applied to nonfinancial assets and nonfinancial liabilities that require initial measurement or remeasurement at fair value, which principally consist of assets and liabilities acquired through business combinations and goodwill, indefinite-lived intangible assets and long-lived assets for the purposes of calculating potential impairment. The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:
Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.
Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.
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, 2023:

(In millions) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Money market funds |  | $ | 3,485 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,485 |
Foreign currency forward contracts |  | — |  |  | 80 |  |  | — |  |  | 80 |
Interest rate-related derivatives |  | — |  |  | 1 |  |  | — |  |  | 1 |
Total |  | $ | 3,485 |  |  | $ | 81 |  |  | $ | — |  |  | $ | 3,566 |
Liabilities: |  |  |  |  |  |  |  |
Cross-currency swap contracts |  | $ | — |  |  | 11 |  |  | $ | — |  |  | $ | 11 |
Foreign currency forward contracts |  | — |  |  | 91 |  |  | — |  |  | 91 |
Interest rate-related derivatives |  | — |  |  | 138 |  |  | — |  |  | 138 |
DECIEM stock options |  | — |  |  | — |  |  | 73 |  |  | 73 |
Total |  | $ | — |  |  | $ | 240 |  |  | $ | 73 |  |  | $ | 313 |

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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022:

(In millions) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Money market funds |  | $ | 961 |  |  | $ | — |  |  | $ | — |  |  | $ | 961 |
Foreign currency forward contracts |  | — |  |  | 191 |  |  | — |  |  | 191 |
Interest rate-related derivatives |  | — |  |  | 24 |  |  | — |  |  | 24 |
Total |  | $ | 961 |  |  | $ | 215 |  |  | $ | — |  |  | $ | 1,176 |
Liabilities: |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | — |  |  | $ | 105 |  |  | $ | — |  |  | $ | 105 |
Interest rate-related derivatives |  | — |  |  | 115 |  |  | — |  |  | 115 |
DECIEM stock options |  | — |  |  | — |  |  | 74 |  |  | 74 |
Total |  | $ | — |  |  | $ | 220 |  |  | $ | 74 |  |  | $ | 294 |

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

|  | March 31, 2023 |  | June 30, 2022
(In millions) |  | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Nonderivatives |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 5,531 |  |  | $ | 5,531 |  |  | $ | 3,957 |  |  | $ | 3,957 |
Current and long-term debt |  | 7,371 |  |  | 7,034 |  |  | 5,412 |  |  | 5,139 |
DECIEM stock options |  | 73 |  |  | 73 |  |  | 74 |  |  | 74 |
Derivatives |  |  |  |  |  |  |  |
Cross-currency swap contracts - liability, net |  | (11) |  |  | (11) |  |  | — |  |  | — |
Foreign currency forward contracts – liability, net |  | (11) |  |  | (11) |  |  | 86 |  |  | 86 |
Interest rate-related derivatives – liability, net |  | (137) |  |  | (137) |  |  | (91) |  |  | (91) |

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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Company’s impairment charges for the nine months ended March 31, 2023 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test during the three months ended December 31, 2022:

(In millions) |  | Impairment charges |  | Date of Fair Value Measurement |  | Fair Value(1)
Other intangible assets, net (trademarks) |  |  |  |  |  |
Dr.Jart+ |  | $ | 100 |  |  | November 30, 2022 |  | $ | 330 |
Too Faced |  | 86 |  |  | November 30, 2022 |  | 186 |
Smashbox |  | 21 |  |  | December 31, 2022 |  | — |
Total |  | $ | 207 |  |  |  |  | $ | 516 |

(1)See Note 2 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.
The following table presents the Company’s impairment charges for the nine months ended March 31, 2022 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions) |  | Impairment charges |  | Date of Fair Value Measurement |  | Fair Value(1)
Other intangible assets, net (trademarks) |  |  |  |  |  |
GLAMGLOW |  | $ | 11 |  |  | March 31, 2022 |  | $ | — |
Dr.Jart+ |  | 205 |  |  | February 28, 2022 |  | 486 |
Total |  | 216 |  |  |  |  | 486 |
Total |  | $ | 216 |  |  |  |  | $ | 486 |

(1)See Note 2 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.
The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents – Cash and all highly-liquid securities with original maturities of three months or less are classified as cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds (classified within Level 1 of the valuation hierarchy). Cash deposits in interest bearing accounts and time deposits are carried at cost, which approximates fair value, due to the short maturity of cash equivalent instruments.
Foreign currency forward contracts – The fair values of the Company’s foreign currency forward contracts were determined using an industry-standard valuation model, which is based on an income approach. The significant observable inputs to the model, such as swap yield curves and currency spot and forward rates, were obtained from an independent pricing service. To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using LIBOR for contracts with maturities up to 12 months, and swap yield curves for contracts with maturities greater than 12 months.
Cross-currency swap contracts - The fair value of the Company’s cross-currency swap contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as yield curves and currency spot and forward rates, were obtained from independent pricing services.
Interest rate - related derivatives – The fair values of the Company’s interest rate contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as treasury yield curves, swap yield curves and LIBOR forward rates, were obtained from independent pricing services.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Current and long-term debt – The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities. To a lesser extent, debt also includes finance lease obligations for which the carrying amount approximates the fair value. The Company’s debt is classified within Level 2 of the valuation hierarchy.
DECIEM stock options – The stock option liability represents the employee stock options issued by DECIEM in replacement and exchange for certain vested and unvested DECIEM employee stock options previously issued by DECIEM, in connection with the Company's acquisition of DECIEM. The DECIEM stock options are subject to the terms and conditions of DECIEM's 2021 Stock Option Plan. The DECIEM stock option liability is measured using the Monte Carlo Method, which requires certain assumptions. Significant changes in the projected future operating results would result in a higher or lower fair value measurement. Changes to the discount rates or volatilities would have a lesser effect. These inputs are categorized as Level 3 of the valuation hierarchy. The DECIEM stock options are remeasured to fair value at each reporting date through the period when the options are exercised or repurchased (i.e., when they are settled), with an offsetting entry to compensation expense. See Note 9 – Stock Programs for discussion.
Changes in the DECIEM stock option liability for the nine months ended March 31, 2023 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows:

(In millions) |  | Fair Value
DECIEM stock option liability as of June 30, 2022 |  | $ | 74 |
Changes in fair value, net of foreign currency remeasurements(1) |  | (2) |
Translation adjustments and other, net |  | 1 |
DECIEM stock option liability as of March 31, 2023 |  | $ | 73 |

(1)Amount includes expense attributable to graded vesting of stock opti ons which is not material for the nine months ended March 31, 2023.
NOTE 6 – REVENUE RECOGNITION
The Company’s revenue recognition accounting policies are described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.
Accounts Receivable
Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $26 million and $27 million as of March 31, 2023 and June 30, 2022, respectively. Payment terms are short-term in nature and are generally less than one year.
Changes in the allowance for credit losses are as follows:

(In millions) |  | March 31, 2023
Balance at June 30, 2022 |  | $ | 10 |
Provision for expected credit losses |  | 1 |
Write-offs, net & other |  | 1 |
Balance at March 31, 2023 |  | $ | 12 |

The remaining balance of the allowance for doubtful accounts of $14 million and $17 million as of March 31, 2023 and June 30, 2022, respectively, relates to non-credit losses, which are primarily due to customer deductions.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred Revenue
Changes in deferred revenue during the period are as follows:

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
(In millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Deferred revenue, beginning of period |  | $ | 353 |  |  | $ | 421 |  |  | $ | 362 |  |  | $ | 371 |
Revenue recognized that was included in the deferred revenue balance at the beginning of the period |  | (50) |  |  | (40) |  |  | (330) |  |  | (288) |
Revenue deferred (released) during the period |  | (15) |  |  | (13) |  |  | 261 |  |  | 285 |
Other |  | 26 |  |  | (4) |  |  | 21 |  |  | (4) |
Deferred revenue, end of period |  | $ | 314 |  |  | $ | 364 |  |  | $ | 314 |  |  | $ | 364 |

Transaction Price Allocated to the Remaining Performance Obligations
At March 31, 2023, 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 and gift card liabilities that are unsatisfied (or partially unsatisfied) is $306 million. The remaining balance of deferred revenue at March 31, 2023 will be recognized beyond the next twelve months.
NOTE 7 – PENSION AND POST-RETIREMENT BENEFIT PLANS
The Company maintains pension plans covering substantially all of its full-time employees for its U.S. operations and a majority of its international operations. The Company also maintains post-retirement benefit plans that provide certain medical and dental benefits to eligible employees. Descriptions of these plans are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.
The components of net periodic benefit cost for the three months ended March 31, 2023 and 2022 consisted of the following:

|  | Pension Plans |  | Other than Pension Plans
|  | U.S. |  | International |  | Post-retirement
(In millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022
Service cost |  | $ | 10 |  |  | $ | 12 |  |  | $ | 7 |  |  | $ | 8 |  |  | $ | — |  |  | $ | 1 |
Interest cost |  | 10 |  |  | 8 |  |  | 3 |  |  | 3 |  |  | 2 |  |  | 1 |
Expected return on plan assets |  | (14) |  |  | (14) |  |  | (5) |  |  | (4) |  |  | — |  |  | — |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Actuarial loss |  | — |  |  | 4 |  |  | — |  |  | — |  |  | — |  |  | — |
Prior service cost |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Special termination benefits |  | — |  |  | — |  |  | 1 |  |  | 1 |  |  | — |  |  | — |
Net periodic benefit cost |  | $ | 6 |  |  | $ | 10 |  |  | $ | 6 |  |  | $ | 8 |  |  | $ | 2 |  |  | $ | 2 |

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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of net periodic benefit cost for the nine months ended March 31, 2023 and 2022 consisted of the following:

|  | Pension Plans |  | Other than Pension Plans
|  | U.S. |  | International |  | Post-retirement
(In millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022
Service cost |  | $ | 28 |  |  | $ | 35 |  |  | $ | 20 |  |  | $ | 24 |  |  | $ | — |  |  | $ | 2 |
Interest cost |  | 30 |  |  | 23 |  |  | 10 |  |  | 8 |  |  | 6 |  |  | 4 |
Expected return on plan assets |  | (42) |  |  | (41) |  |  | (13) |  |  | (11) |  |  | — |  |  | (1) |
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |
Actuarial loss |  | 2 |  |  | 11 |  |  | (2) |  |  | 1 |  |  | — |  |  | 1 |
Prior service cost |  | — |  |  | — |  |  | — |  |  | (1) |  |  | — |  |  | — |
Special termination benefits |  | — |  |  | — |  |  | 1 |  |  | 4 |  |  | — |  |  | — |
Net periodic benefit cost |  | $ | 18 |  |  | $ | 28 |  |  | $ | 16 |  |  | $ | 25 |  |  | $ | 6 |  |  | $ | 6 |

During the nine months ended March 31, 2023, the Company made contributions to its international pension plans totaling $12 million.
The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following:

(In millions) |  | March 31, 2023 |  | June 30, 2022
Other assets |  | $ | 134 |  |  | $ | 151 |
Other accrued liabilities |  | (24) |  |  | (24) |
Other noncurrent liabilities |  | (361) |  |  | (357) |
Funded status |  | (251) |  |  | (230) |
Accumulated other comprehensive loss |  | 156 |  |  | 155 |
Net amount recognized |  | $ | (95) |  |  | $ | (75) |

NOTE 8 – COMMITMENTS AND CONTINGENCIES
Commitments
On April 28, 2023, the Company completed the acquisition of the TOM FORD brand. The amount paid by the Company at closing was approximately $2,250 million. This amount was funded by cash on hand and proceeds from the issuance of commercial paper, and approximately $250 million received at closing from Marcolin S.p.A. (a continuing TOM FORD licensee). An aggregate amount of $300 million, at 5% interest per annum, to the sellers becomes due from the Company beginning in July 2025. The completion of the acquisition of the brand resulted in the elimination of future license royalty payments on the Company's TOM FORD Beauty business.
In January 2023, the Company entered into a $2,000 million senior unsecured revolving credit facility that expires on January 2, 2024 (the “364-Day Facility”) for liquidity support for the Company's commercial paper program and general corporate purposes, of which the entire amount is currently undrawn and available. Interest rates on borrowings under the 364-Day Facility will be based on prevailing market interest rates in accordance with the agreement. The costs incurred to establish the 364-Day Facility were not material. The 364-Day Facility has an annual fee of approximately $0.6 million, payable quarterly, based on the Company’s current credit ratings. The 364-Day Facility contains a cross-default provision whereby a failure to pay other material financial obligations in excess of $175 million (after grace periods and absent a waiver from the lenders) would result in an event of default and the acceleration of the maturity of any outstanding debt under this facility.
In January 2023, in connection with the 364-Day Facility, the Company increased its commercial paper program under which it may issue commercial paper in the United States from $2,500 million to $4,500 million. As of March 31, 2023 and April 26, 2023, the Company had $2,250 million and $3,410 million, respectively, outstanding under its commercial paper program.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Legal Proceedings
The Company is involved, from time to time, in litigation and other legal proceedings incidental to its business, including product liability matters (including asbestos-related claims), advertising, regulatory, employment, intellectual property, real estate, environmental, trade relations, tax, and privacy. Management believes that the outcome of current litigation and legal proceedings will not have a material adverse effect upon the Company’s business, results of operations, financial condition or cash flows. However, management’s assessment of the Company’s current litigation and other legal proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against the Company not presently known to the Company or determinations by judges, juries or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or proceedings. Reasonably possible losses in addition to the amounts accrued for such litigation and legal proceedings are not material to the Company’s consolidated financial statements.
NOTE 9 – STOCK PROGRAMS
Additional information relating to the Company's stock programs and the DECIEM stock options are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022.
The Company's Stock Programs
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 $69 million and $91 million for the three months ended March 31, 2023 and 2022, respectively, and was $234 million and $283 million for the nine months ended March 31, 2023 and 2022, respectively.
Stock Options
During the nine months ended March 31, 2023, the Company granted stock options in respect of approximately 1.2 million shares of Class A Common Stock with an weighted-average exercise price per share of $246.01 and a weighted-average grant date fair value per share of $79.09. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The aggregate intrinsic value of stock options exercised during the nine months ended March 31, 2023 was $74 million.
Restricted Stock Units
During the nine months ended March 31, 2023, the Company granted RSUs in respect of approximately 1.1 million shares of Class A Common Stock with a weighted-average grant date fair value per share of $246.34 that, at the time of grant, are scheduled to vest at 0.4 million, 0.3 million, and 0.4 million shares per year, in fiscal 2024, fiscal 2025 and fiscal 2026, respectively. Vesting of RSUs is generally subject to the continued employment or the retirement of the grantees. The RSUs are generally accompanied by dividend equivalent rights, payable upon settlement of the RSUs either in cash or shares (based on the terms of the particular award) and, as such, were generally valued at the closing market price of the Company’s Class A Common Stock on the date of grant.
Performance Share Units
During the nine months ended March 31, 2023, the Company granted PSUs with a target payout of approximately 0.1 million shares of Class A Common Stock with a grant date fair value per share of $246.15, 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, 2025, all subject to continued employment or the retirement of the grantees. For PSUs granted, no settlement will occur for results below the applicable minimum threshold. PSUs are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSUs and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant.
In September 2022, approximately 0.2 million shares of the Company’s Class A Common Stock were issued, and related accrued dividends were paid, relative to the target goals set at the time of the issuance, in settlement of 0.1 million PSUs with a performance period ended June 30, 2022.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECIEM Stock Options
The DECIEM stock options are liability-classified awards as they are expected to be settled in cash and are remeasured to fair value at each reporting date through date of settlement. Total stock-based compensation expense is attributable to the exchange or replacement of and the remaining requisite service period of stock options. The total stock option expense for the three and nine months ended March 31, 2023 was not material. The total stock option expense for the three and nine months ended March 31, 2022 resulted in income of $60 million and $58 million, respectively, net of foreign currency remeasurements and reflects a reduction in the fair value of the DECIEM stock options. There were no DECIEM stock options exercised during the nine months ended March 31, 2023.
The DECIEM stock options are reported as a stock option liability of $73 million and $74 million in Other noncurrent liabilities in the accompanying consolidated balance sheets at March 31, 2023 and June 30, 2022, respectively. The fair value of the stock options were calculated using the following key assumptions in the Monte Carlo Method:

|  | March 31, 2023 |  | June 30, 2022 |  |
Risk-free rate |  | 4.20% |  | 3.20% |  |
Term to mid of last twelve-month period |  | 0.67 years |  | 1.42 years |  |
Operating leverage adjustment |  | 0.45 |  | 0.45 |  |
Net sales discount rate |  | 7.00% |  | 6.00% |  |
EBITDA discount rate |  | 10.30% |  | 9.40% |  |
EBITDA volatility |  | 35.80% |  | 33.90% |  |
Net sales volatility |  | 16.10% |  | 15.30% |  |

NOTE 10 – NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC. PER COMMON SHARE
Net earnings attributable to The Estée Lauder Companies Inc. per common share (“basic EPS”) is computed by dividing net earnings attributable to The Estée Lauder Companies Inc. by the weighted-average number of common shares outstanding and shares underlying PSUs and RSUs where the vesting conditions have been met. Net earnings attributable to The Estée Lauder Companies Inc. per common share assuming dilution (“diluted EPS”) is computed by reflecting potential dilution from stock-based awards.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows:

|  | Three Months Ended March 31 |  |  |  | Nine Months Ended March 31
(In millions, except per share data) |  | 2023 |  | 2022 |  |  |  |  |  | 2023 |  | 2022
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net earnings attributable to The Estée Lauder Companies Inc. |  | $ | 156 |  |  | $ | 558 |  |  |  |  |  |  | $ | 1,039 |  |  | $ | 2,338 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average common shares outstanding – Basic |  | 357.9 |  |  | 359.2 |  |  |  |  |  |  | 357.8 |  |  | 360.7 |
Effect of dilutive stock options |  | 2.5 |  |  | 3.5 |  |  |  |  |  |  | 2.4 |  | 3.9
Effect of PSUs |  | 0.1 |  |  | 0.2 |  |  |  |  |  |  | 0.1 |  | 0.2
Effect of RSUs |  | 0.7 |  |  | 0.7 |  |  |  |  |  |  | 0.6 |  | 1.0
Weighted-average common shares outstanding – Diluted |  | 361.2 |  |  | 363.6 |  |  |  |  |  |  | 360.9 |  |  | 365.8 |
Net earnings attributable to The Estée Lauder Companies Inc. per common share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.44 |  |  | $ | 1.55 |  |  |  |  |  |  | $ | 2.90 |  |  | $ | 6.48 |
Diluted |  | $ | 0.43 |  |  | $ | 1.53 |  |  |  |  |  |  | $ | 2.88 |  |  | $ | 6.39 |

The shares of Class A Common Stock underlying stock options, RSUs and PSUs that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive were as follows:

| Three Months Ended March 31 |  | Nine Months Ended March 31
(In millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Stock options | 2.2 |  | 1.0 |  | 2.1 |  | 0.8
RSUs and PSUs | — |  | — |  | — |  | 0.1

As of March 31, 2023 and 2022, 0.4 million and 0.7 million shares, respectively, of Class A Common Stock underlying PSUs have been excluded from the calculation of diluted EPS because the number of shares ultimately issued is contingent on the achievement of certain performance targets of the Company, as discussed in Note 9 – Stock Programs.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – EQUITY AND REDEEMABLE NONCONTROLLING INTEREST
Total Stockholders’ Equity – The Estée Lauder Companies Inc.

|  | Three Months Ended March 31 |  |  |  | Nine Months Ended March 31
(In millions) |  | 2023 |  | 2022 |  |  |  |  |  | 2023 |  | 2022
Common stock, beginning of the period |  | $ | 6 |  |  | $ | 6 |  |  |  |  |  |  | $ | 6 |  |  | $ | 6 |
Stock-based compensation |  | — |  |  | — |  |  |  |  |  |  | — |  |  | — |
Common stock, end of the period |  | 6 |  |  | 6 |  |  |  |  |  |  | 6 |  |  | 6 |
Paid-in capital, beginning of the period |  | 6,000 |  |  | 5,605 |  |  |  |  |  |  | 5,796 |  |  | 5,335 |
Common stock dividends |  | 1 |  |  | 2 |  |  |  |  |  |  | 3 |  |  | 3 |
Stock-based compensation |  | 102 |  |  | 139 |  |  |  |  |  |  | 304 |  |  | 408 |
Paid-in capital, end of the period |  | 6,103 |  |  | 5,746 |  |  |  |  |  |  | 6,103 |  |  | 5,746 |
Retained earnings, beginning of the period |  | 14,342 |  |  | 13,735 |  |  |  |  |  |  | 13,912 |  |  | 12,244 |
Common stock dividends |  | (237) |  |  | (217) |  |  |  |  |  |  | (690) |  |  | (627) |
Net earnings attributable to The Estée Lauder Companies Inc. |  | 156 |  |  | 558 |  |  |  |  |  |  | 1,039 |  |  | 2,338 |
Cumulative effect of adoption of new accounting standards |  | — |  |  | — |  |  |  |  |  |  | — |  |  | 121 |
Retained earnings, end of the period |  | 14,261 |  |  | 14,076 |  |  |  |  |  |  | 14,261 |  |  | 14,076 |
Accumulated other comprehensive loss, beginning of the period |  | (829) |  |  | (646) |  |  |  |  |  |  | (762) |  |  | (470) |
Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc. |  | (46) |  |  | 20 |  |  |  |  |  |  | (113) |  |  | (156) |
Accumulated other comprehensive loss, end of the period |  | (875) |  |  | (626) |  |  |  |  |  |  | (875) |  |  | (626) |
Treasury stock, beginning of the period |  | (13,617) |  |  | (12,482) |  |  |  |  |  |  | (13,362) |  |  | (11,058) |
Acquisition of treasury stock |  | — |  |  | (568) |  |  |  |  |  |  | (184) |  |  | (1,850) |
Stock-based compensation |  | (1) |  |  | (2) |  |  |  |  |  |  | (72) |  |  | (144) |
Treasury stock, end of the period |  | (13,618) |  |  | (13,052) |  |  |  |  |  |  | (13,618) |  |  | (13,052) |
Total stockholders’ equity – The Estée Lauder Companies Inc. |  | 5,877 |  |  | 6,150 |  |  |  |  |  |  | 5,877 |  |  | 6,150 |
Noncontrolling interests, beginning of the period |  | — |  |  | 34 |  |  |  |  |  |  | — |  |  | 34 |
Net earnings attributable to noncontrolling interests |  | — |  |  | 3 |  |  |  |  |  |  | — |  |  | 8 |
Translation adjustments and other, net |  | — |  |  | (1) |  |  |  |  |  |  | — |  |  | (6) |
Noncontrolling interests, end of the period |  | — |  |  | 36 |  |  |  |  |  |  | — |  |  | 36 |
Total equity |  | $ | 5,877 |  |  | $ | 6,186 |  |  |  |  |  |  | $ | 5,877 |  |  | $ | 6,186 |
Redeemable noncontrolling interest, beginning of the period |  | $ | 819 |  |  | $ | 840 |  |  |  |  |  |  | $ | 842 |  |  | $ | 857 |
Net earnings (loss) attributable to redeemable noncontrolling interest |  | (1) |  |  | 12 |  |  |  |  |  |  | 3 |  |  | 12 |
Translation adjustments |  | 1 |  |  | 14 |  |  |  |  |  |  | (26) |  |  | (3) |
Adjustment of redeemable noncontrolling interest to redemption value |  | — |  |  | (1) |  |  |  |  |  |  | — |  |  | (1) |
Redeemable noncontrolling interest, end of the period |  | $ | 819 |  |  | $ | 865 |  |  |  |  |  |  | $ | 819 |  |  | $ | 865 |
Cash dividends declared per common share |  | $ | .66 |  |  | $ | .60 |  |  |  |  |  |  | $ | 1.92 |  |  | $ | 1.73 |

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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the nine months ended March 31, 2023:

Date Declared |  | Record Date |  | Payable Date |  | Amount per Share
August 17, 2022 |  | August 31, 2022 |  | September 15, 2022 |  | $ | .60 |
November 1, 2022 |  | November 30, 2022 |  | December 15, 2022 |  | $ | .66 |
February 1, 2023 |  | February 28, 2023 |  | March 15, 2023 |  | $ | .66 |

On May 2, 2023, a dividend was declared in the amount of $.66 per share on the Company’s Class A and Class B Common Stock. The dividend is payable in cash on June 15, 2023 to stockholders of record at the close of business on May 31, 2023.
Common Stock
During the nine months ended March 31, 2023, the Company purchased approximately 1.2 million shares of its Class A Common Stock for $258 million.
Accumulated Other Comprehensive Income
The following table represents changes in AOCI, net of tax, by component for the nine months ended March 31, 2023:

(In millions) |  | Net Cash Flow Hedge Gain (Loss) |  | Cross-Currency Swap Contracts (2) |  | Amounts Included in Net Periodic Benefit Cost |  | Translation Adjustments |  | Total
Balance at June 30, 2022 |  | $ | 68 |  |  | $ | — |  |  | $ | (114) |  |  | $ | (716) |  |  | $ | (762) |
OCI before reclassifications |  | 6 |  |  | (6) |  |  | — |  |  | (66) |  | (1) | (66) |
Amounts reclassified to Net earnings |  | (44) |  |  | (3) |  |  | — |  |  | — |  |  | (47) |
Net current-period OCI |  | (38) |  |  | (9) |  |  | — |  |  | (66) |  |  | (113) |
Balance at March 31, 2023 |  | $ | 30 |  |  | $ | (9) |  |  | $ | (114) |  |  | $ | (782) |  |  | $ | (875) |

(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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and nine months ended March 31, 2023 and 2022:

|  | Amount Reclassified from AOCI |  |  |  |  |  | Affected Line Item in Consolidated Statements of Earnings
|  | Three Months Ended March 31 |  | Nine Months Ended March 31 |  |  |
(In millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |
Gain (Loss) on Cash Flow Hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency forward contracts |  | $ | 22 |  |  | $ | 3 |  |  | $ | 59 |  |  | $ | (5) |  |  |  |  |  |  | Net sales
Interest rate-related derivatives |  | (1) |  |  | — |  |  | (1) |  |  | (1) |  |  |  |  |  |  | Interest expense
|  | 21 |  |  | 3 |  |  | 58 |  |  | (6) |  |  |  |  |  |  |
Benefit (provision) for deferred taxes |  | (5) |  |  | — |  |  | (14) |  |  | 2 |  |  |  |  |  |  | Provision for income taxes
|  | 16 |  |  | 3 |  |  | 44 |  |  | (4) |  |  |  |  |  |  | Net earnings
Cross-Currency Swap Contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain on cross-currency swap contracts |  | 4 |  |  | — |  |  | 4 |  |  | — |  |  |  |  |  |  | Selling, general and administrative
Provision for deferred taxes |  | (1) |  |  | — |  |  | (1) |  |  | — |  |  |  |  |  |  | Provision for income taxes
|  | 3 |  |  | — |  |  | 3 |  |  | — |  |  |  |  |  |  |
Retirement Plan and Other Retiree Benefit Adjustments |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortization of prior service cost |  | — |  |  | — |  |  | — |  |  | 1 |  |  |  |  |  |  | Other components of net periodic benefit cost (1)
Amortization of actuarial loss |  | — |  |  | (4) |  |  | — |  |  | (13) |  |  |  |  |  |  | Other components of net periodic benefit cost (1)
|  | — |  |  | (4) |  |  | — |  |  | (12) |  |  |  |  |  |  |
Benefit for deferred taxes |  | — |  |  | 1 |  |  | — |  |  | 3 |  |  |  |  |  |  | Provision for income taxes
|  | — |  |  | (3) |  |  | — |  |  | (9) |  |  |  |  |  |  | Net earnings
Total reclassification adjustments, net |  | $ | 19 |  |  | $ | — |  |  | $ | 47 |  |  | $ | (13) |  |  |  |  |  |  | Net earnings

(1)See Note 7 – Pension and Post-Retirement Benefit Plans for additional information.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – STATEMENT OF CASH FLOWS
Supplemental cash flow information for the nine months ended March 31, 2023 and 2022 is as follows:

(In millions) |  | 2023 |  | 2022
Cash: |  |  |  |
Cash paid during the period for interest |  | $ | 142 |  |  | $ | 110 |
Cash paid during the period for income taxes |  | $ | 387 |  |  | $ | 626 |
Non-cash investing and financing activities: |  |  |  |
Property, plant and equipment accrued but unpaid |  | $ | 239 |  |  | $ | 110 |
Financing lease modifications |  | $ | — |  |  | $ | (13) |
Right-of-use assets obtained in exchange for new/modified operating lease liabilities |  | $ | 197 |  |  | $ | 179 |

NOTE 13 – SEGMENT DATA AND RELATED INFORMATION
Reportable operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “Chief Executive”) in deciding how to allocate resources and in assessing performance. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis. Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and operating income (loss) before charges associated with restructuring and other activities. Returns and charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business.
The accounting policies for the Company’s reportable segments are substantially the same as those for the consolidated financial statements, as described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced for the Chief Executive or included herein. There has been no significant variance in the total or long-lived asset values associated with the Company’s segment data since June 30, 2022.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|  | Three Months Ended March 31 |  |  |  | Nine Months Ended March 31
(In millions) |  | 2023 |  | 2022 |  |  |  |  |  | 2023 |  | 2022
PRODUCT CATEGORY DATA |  |  |  |  |  |  |  |  |  |  |  |
Net sales: |  |  |  |  |  |  |  |  |  |  |  |
Skin Care |  | $ | 1,922 |  |  | $ | 2,395 |  |  |  |  |  |  | $ | 6,408 |  |  | $ | 8,003 |
Makeup |  | 1,088 |  |  | 1,114 |  |  |  |  |  |  | 3,408 |  |  | 3,674 |
Fragrance |  | 585 |  |  | 579 |  |  |  |  |  |  | 1,967 |  |  | 1,987 |
Hair Care |  | 149 |  |  | 147 |  |  |  |  |  |  | 489 |  |  | 475 |
Other |  | 11 |  |  | 11 |  |  |  |  |  |  | 39 |  |  | 40 |
|  | 3,755 |  |  | 4,246 |  |  |  |  |  |  | 12,311 |  |  | 14,179 |
Returns associated with restructuring and other activities |  | (4) |  |  | (1) |  |  |  |  |  |  | (10) |  |  | (3) |
Net sales |  | $ | 3,751 |  |  | $ | 4,245 |  |  |  |  |  |  | $ | 12,301 |  |  | $ | 14,176 |
Operating income (loss) before charges associated with restructuring and other activities: |  |  |  |  |  |  |  |  |  |  |  |
Skin Care |  | $ | 256 |  |  | $ | 667 |  |  |  |  |  |  | $ | 1,207 |  |  | $ | 2,466 |
Makeup |  | (15) |  |  | 7 |  |  |  |  |  |  | (36) |  |  | 228 |
Fragrance |  | 89 |  |  | 105 |  |  |  |  |  |  | 399 |  |  | 446 |
Hair Care |  | (24) |  |  | (18) |  |  |  |  |  |  | (31) |  |  | (8) |
Other |  | 9 |  |  | — |  |  |  |  |  |  | 8 |  |  | 3 |
|  | 315 |  |  | 761 |  |  |  |  |  |  | 1,547 |  |  | 3,135 |
Reconciliation: |  |  |  |  |  |  |  |  |  |  |  |
Charges associated with restructuring and other activities |  | (18) |  |  | (23) |  |  |  |  |  |  | (33) |  |  | (44) |
Interest expense |  | (58) |  |  | (41) |  |  |  |  |  |  | (156) |  |  | (125) |
Interest income and investment income, net |  | 37 |  |  | 5 |  |  |  |  |  |  | 78 |  |  | 19 |
Other components of net periodic benefit cost |  | 4 |  |  | 1 |  |  |  |  |  |  | 9 |  |  | 2 |
Other income |  | — |  |  | — |  |  |  |  |  |  | — |  |  | 1 |
Earnings before income taxes |  | $ | 280 |  |  | $ | 703 |  |  |  |  |  |  | $ | 1,445 |  |  | $ | 2,988 |
GEOGRAPHIC DATA(1) |  |  |  |  |  |  |  |  |  |  |  |
Net sales: |  |  |  |  |  |  |  |  |  |  |  |
The Americas |  | $ | 1,089 |  |  | $ | 1,053 |  |  |  |  |  |  | $ | 3,447 |  |  | $ | 3,547 |
Europe, the Middle East & Africa |  | 1,474 |  |  | 1,990 |  |  |  |  |  |  | 4,972 |  |  | 6,201 |
Asia/Pacific |  | 1,192 |  |  | 1,203 |  |  |  |  |  |  | 3,892 |  |  | 4,431 |
|  | 3,755 |  |  | 4,246 |  |  |  |  |  |  | 12,311 |  |  | 14,179 |
Returns associated with restructuring and other activities |  | (4) |  |  | (1) |  |  |  |  |  |  | (10) |  |  | (3) |
Net sales |  | $ | 3,751 |  |  | $ | 4,245 |  |  |  |  |  |  | $ | 12,301 |  |  | $ | 14,176 |
Operating income (loss): |  |  |  |  |  |  |  |  |  |  |  |
The Americas |  | $ | (93) |  |  | $ | 408 |  |  |  |  |  |  | $ | (53) |  |  | $ | 1,044 |
Europe, the Middle East & Africa |  | 176 |  |  | 281 |  |  |  |  |  |  | 919 |  |  | 1,366 |
Asia/Pacific |  | 232 |  |  | 72 |  |  |  |  |  |  | 681 |  |  | 725 |
|  | 315 |  |  | 761 |  |  |  |  |  |  | 1,547 |  |  | 3,135 |
Charges associated with restructuring and other activities |  | (18) |  |  | (23) |  |  |  |  |  |  | (33) |  |  | (44) |
Operating income |  | $ | 297 |  |  | $ | 738 |  |  |  |  |  |  | $ | 1,514 |  |  | $ | 3,091 |

(1) The net sales from the Company’s travel retail business are included in the Europe, the Middle East & Africa region, with the exception of net sales of Dr.Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region. Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
RESULTS OF OPERATIONS
We manufacture, market and sell beauty products including those in the skin care, makeup, fragrance and hair care categories, which are distributed in approximately 150 countries and territories. The following table is a comparative summary of operating results for the three and nine months ended March 31, 2023 and 2022, and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies for all periods presented. Products and services that do not meet our definition of skin care, makeup, fragrance and hair care have been included in the “other” category.

|  | Three Months Ended March 31 |  | Nine Months Ended March 31 |  |
(In millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
NET SALES |  |  |  |  |  |  |  |  |  |  |  |
By Product Category: |  |  |  |  |  |  |  |  |  |  |  |
Skin Care |  | $ | 1,922 |  |  | $ | 2,395 |  |  | $ | 6,408 |  |  | $ | 8,003 |  |  |  |  |
Makeup |  | 1,088 |  |  | 1,114 |  |  | 3,408 |  |  | 3,674 |  |  |  |  |
Fragrance |  | 585 |  |  | 579 |  |  | 1,967 |  |  | 1,987 |  |  |  |  |
Hair Care |  | 149 |  |  | 147 |  |  | 489 |  |  | 475 |  |  |  |  |
Other |  | 11 |  |  | 11 |  |  | 39 |  |  | 40 |  |  |  |  |
|  | 3,755 |  |  | 4,246 |  |  | 12,311 |  |  | 14,179 |  |  |  |  |
Returns associated with restructuring and other activities |  | (4) |  |  | (1) |  |  | (10) |  |  | (3) |  |  |  |  |
Net sales |  | $ | 3,751 |  |  | $ | 4,245 |  |  | $ | 12,301 |  |  | $ | 14,176 |  |  |  |  |
By Region(1): |  |  |  |  |  |  |  |  |  |  |  |
The Americas |  | $ | 1,089 |  |  | $ | 1,053 |  |  | $ | 3,447 |  |  | $ | 3,547 |  |  |  |  |
Europe, the Middle East & Africa |  | 1,474 |  |  | 1,990 |  |  | 4,972 |  |  | 6,201 |  |  |  |  |
Asia/Pacific |  | 1,192 |  |  | 1,203 |  |  | 3,892 |  |  | 4,431 |  |  |  |  |
|  | 3,755 |  |  | 4,246 |  |  | 12,311 |  |  | 14,179 |  |  |  |  |
Returns associated with restructuring and other activities |  | (4) |  |  | (1) |  |  | (10) |  |  | (3) |  |  |  |  |
Net sales |  | $ | 3,751 |  |  | $ | 4,245 |  |  | $ | 12,301 |  |  | $ | 14,176 |  |  |  |  |
OPERATING INCOME (LOSS) |  |  |  |  |  |  |  |  |  |  |  |
By Product Category: |  |  |  |  |  |  |  |  |  |  |  |
Skin Care |  | $ | 256 |  |  | $ | 667 |  |  | $ | 1,207 |  |  | $ | 2,466 |  |  |  |  |
Makeup |  | (15) |  |  | 7 |  |  | (36) |  |  | 228 |  |  |  |  |
Fragrance |  | 89 |  |  | 105 |  |  | 399 |  |  | 446 |  |  |  |  |
Hair Care |  | (24) |  |  | (18) |  |  | (31) |  |  | (8) |  |  |  |  |
Other |  | 9 |  |  | — |  |  | 8 |  |  | 3 |  |  |  |  |
|  | 315 |  |  | 761 |  |  | 1,547 |  |  | 3,135 |  |  |  |  |
Charges associated with restructuring and other activities |  | (18) |  |  | (23) |  |  | (33) |  |  | (44) |  |  |  |  |
Operating income |  | $ | 297 |  |  | $ | 738 |  |  | $ | 1,514 |  |  | $ | 3,091 |  |  |  |  |
By Region(1): |  |  |  |  |  |  |  |  |  |  |  |
The Americas |  | $ | (93) |  |  | $ | 408 |  |  | $ | (53) |  |  | $ | 1,044 |  |  |  |  |
Europe, the Middle East & Africa |  | 176 |  |  | 281 |  |  | 919 |  |  | 1,366 |  |  |  |  |
Asia/Pacific |  | 232 |  |  | 72 |  |  | 681 |  |  | 725 |  |  |  |  |
|  | 315 |  |  | 761 |  |  | 1,547 |  |  | 3,135 |  |  |  |  |
Charges associated with restructuring and other activities |  | (18) |  |  | (23) |  |  | (33) |  |  | (44) |  |  |  |  |
Operating income |  | $ | 297 |  |  | $ | 738 |  |  | $ | 1,514 |  |  | $ | 3,091 |  |  |  |  |

(1) The net sales from the Company's travel retail business are included in the Europe, the Middle East & Africa region, with the exception of net sales of Dr.Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region. Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.
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The following table presents certain consolidated earnings data as a percentage of net sales:

|  | Three Months Ended March 31 |  | Nine Months Ended March 31 |  |
|  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |
Net sales |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  |  |  |
Cost of sales |  | 30.9 |  |  | 23.4 |  |  | 27.6 |  |  | 23.1 |  |  |  |  |
Gross profit |  | 69.1 |  |  | 76.6 |  |  | 72.4 |  |  | 76.9 |  |  |  |  |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Selling, general and administrative |  | 60.8 |  |  | 53.6 |  |  | 58.2 |  |  | 53.3 |  |  |  |  |
Restructuring and other charges |  | 0.4 |  |  | 0.5 |  |  | 0.2 |  |  | 0.3 |  |  |  |  |
Impairment of other intangible assets |  | — |  |  | 5.1 |  |  | 1.7 |  |  | 1.5 |  |  |  |  |
Total operating expenses |  | 61.2 |  |  | 59.2 |  |  | 60.0 |  |  | 55.1 |  |  |  |  |
Operating income |  | 7.9 |  |  | 17.4 |  |  | 12.3 |  |  | 21.8 |  |  |  |  |
Interest expense |  | 1.5 |  |  | 1.0 |  |  | 1.3 |  |  | 0.9 |  |  |  |  |
Interest income and investment income, net |  | 1.0 |  |  | 0.1 |  |  | 0.6 |  |  | 0.1 |  |  |  |  |
Other components of net periodic benefit cost |  | (0.1) |  |  | — |  |  | (0.1) |  |  | — |  |  |  |  |
Earnings before income taxes |  | 7.5 |  |  | 16.6 |  |  | 11.7 |  |  | 21.1 |  |  |  |  |
Provision for income taxes |  | (3.3) |  |  | (3.1) |  |  | (3.3) |  |  | (4.4) |  |  |  |  |
Net earnings |  | 4.1 |  |  | 13.5 |  |  | 8.5 |  |  | 16.6 |  |  |  |  |
Net earnings attributable to noncontrolling interests |  | — |  |  | (0.1) |  |  | — |  |  | (0.1) |  |  |  |  |
Net loss (earnings) attributable to redeemable noncontrolling interest |  | — |  |  | (0.3) |  |  | — |  |  | (0.1) |  |  |  |  |
Net earnings attributable to The Estée Lauder Companies Inc. |  | 4.2 | % |  | 13.1 | % |  | 8.4 | % |  | 16.5 | % |  |  |  |

Not adjusted for differences caused by rounding
Period-over-period changes in our net sales are generally attributable to the impacts from (i) pricing on our base portfolio, including changes in mix and those due to strategic pricing actions, (ii) volume, including changes driven by the impact of new product innovation, (iii) acquisitions and/or divestitures, and/or (iv) foreign currency translation.
The net sales impact from pricing consists of changes in list prices, due to strategic pricing actions, and mix shifts within and among product categories, geographic regions and distribution channels. The prices at which we sell our products vary by brand, distribution channel (e.g., wholesale or direct-to-consumer) and may also vary by country. Our brands and products cover a broad array of pricing tiers. Prices of skin care and fragrance products are typically higher than makeup and hair care products.
New product innovation includes the introduction of new products, as well as changes related to existing products or where they are sold, including reformulations, regional expansion, repackaging and sets. A product is considered "new innovation" for the twelve-month period following the initial shipment date. Our innovation is launched at different price points than existing products and value derived from innovation may vary from year to year. We continually introduce new products, support new and established products through advertising, merchandising and sampling and phase out existing products that no longer meet the needs of our consumers or our objectives. The economics of developing, producing, launching, supporting and discontinuing products impact our sales and operating performance each period. The introduction of new products often has some cannibalizing effect on sales of existing products, which we take into account in our business planning. The impact of new product introductions, including timing compared to introductions in prior periods, also affects our results.
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THE ESTÉE LAUDER COMPANIES INC.
Non-GAAP Financial Measures
We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period helps investors and others compare operating performance between periods. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. See Reconciliations of Non-GAAP Financial Measures beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
We operate on a global basis, with the majority of our net sales generated outside the United States. Accordingly, fluctuations in foreign currency exchange rates can affect our results of operations. Therefore, we present certain net sales, operating results and diluted net earnings per common share information excluding the effect of foreign currency rate fluctuations to provide a framework for assessing the performance of our underlying business outside the United States. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency information by translating current-period results using monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities.
Overview
Business Update
We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with high quality products and services. Within prestige beauty, we are well diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point. We also leverage consumer analytics and insights with agility by deploying our brands to fast growing and profitable opportunities. These analytics and insights, combined with our creativity, inform our innovation to provide a broad, locally-relevant and inclusive range of prestige products allowing us to compete effectively for a greater share of a consumer's beauty routine. Elements of our strategy are described in the Overview on pages 30-32 of our Annual Report on Form 10-K for the year ended June 30, 2022, as well as below.
During the fiscal 2023 third quarter, the phase and pace of recovery from the COVID-19 pandemic continued to vary across markets globally. In the West, in both developed and emerging markets, the momentum of post-COVID-19 recovery growth continued with net sales growth in The Americas and markets in Europe, the Middle East & Africa, excluding travel retail. In Asia/Pacific, markets emerged from COVID-19 restrictions more gradually and over a longer period of time, compared to the pace of recovery experienced in the West. These markets continued to evolve in recovery during the fiscal 2023 third quarter, evidenced by strong net sales growth in many Asia/Pacific markets.
While we saw recovery in many markets globally, our Asia travel retail business continued to be pressured by the slower than anticipated recovery from the COVID-19 pandemic. Specifically, in Hainan, while traffic into the island exceeded prior year levels, conversion of travelers to consumers in prestige beauty lagged. This led to the slower than anticipated depletion of elevated levels of retailer inventory and, therefore, lower replenishment orders. In Korea, the shipments to duty free retailers were pressured owing to the transition to post-COVID-19 regulations as traveling consumers gradually return. In Korea, as well as in Asia more broadly, the travel retail recovery was challenged by slower than anticipated resumption of international flights, granting of visas, and organized group tours. Our business also continued to be pressured by the strong U.S. dollar, historically high inflation and recession concerns.
During the third quarter of fiscal 2023, net sales decreased 12%, reflecting the impacts noted above.
•Our skin care net sales declined 20%, including the unfavorable impact of foreign currency translation of 3%, driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
•Our makeup net sales decreased 2%, including the unfavorable impact of foreign currency translation of 2%, driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory. Partially offsetting these challenges were higher net sales from M·A·C, primarily driven by the recognition of the previously deferred revenue due to changes to the BACK-To-M·A·C take back program, and Clinique.
•Our fragrance net sales increased slightly, primarily driven by growth from Le Labo, TOM FORD Beauty, Estée Lauder, Kilian Paris and Editions de Parfums Frédéric Malle, partially offset by the impact of the license terminations related to certain of our designer fragrances of 10% and the unfavorable impact of foreign currency translation of 3%.
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•Our hair care net sales increased slightly, driven by higher net sales from The Ordinary reflecting growth due to the recent launch of hair care products, offset by lower net sales from Aveda driven by a decline in the salon business and lower online net sales in North America.
Our global distribution capability and operations allow us to focus on targeted expanded consumer reach wherever consumer demographics and trends are the most attractive. Our regional organizations, and the expertise of our people there, enable our brands to be more locally and culturally relevant in both product assortment and communications. We are evolving the way we connect with our consumers in stores, online and where they travel, including by expanding our digital and social media presence and the engagement of global and local influencers to amplify brand or product stories. We tailor implementation of our strategy by market to drive consumer engagement and embrace cultural diversity. We continuously strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets.
•Net sales in The Americas increased 3%, primarily driven by an increase in the United States, led by higher net sales from The Ordinary, partially offset by the impact of the license terminations related to certain of our designer fragrances effective June 30, 2022. Also contributing to the net sales increase in The Americas was an increase in net sales in Latin America, led by Mexico and Brazil, reflecting the continued recovery in makeup.
•Net sales in Europe, the Middle East & Africa decreased 26% driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
•Net sales in Asia/Pacific remained virtually flat, driven by the unfavorable impact of foreign currency translation of 7%, partially offset by growth in Hong Kong, Australia and Southeast Asia as the region recovers from the COVID-19 pandemic.
Outlook
We are experiencing a more gradual and prolonged recovery from the COVID-19 pandemic, particularly in our Asia travel retail business. In Asia travel retail, there have been, and are likely to continue to be, impacts on our business in the near-term, from the slower than anticipated depletion of elevated levels of retailer inventory and, therefore, lower replenishment orders, as well as the slower than anticipated resumption of international flights, granting of visas, and organized group tours. Additionally, in Korea, the shipments to duty free retailers were pressured owing to the transition to post-COVID-19 regulations as traveling consumers gradually return. In addition to impacting net sales and profitability, including any unfavorable impacts to our effective tax rate from changes to our geographical mix of earnings, these and other challenges may adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets (i.e. potentially resulting in impairments).
We believe that the best way to increase long-term stockholder value is to continue providing superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across geographic regions, product categories, brands, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths and make us more productive and profitable. We plan to build upon and leverage our history of outstanding creativity and innovation, high quality products and services, and engaging communications while investing for long-term sustainable growth.
We continue to monitor the effects of the global macro environment, including the risk of recession; currency volatility; inflationary pressures; supply chain challenges; social and political issues; regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. For example, the strengthening of the U.S. dollar could negatively impact results within Europe, the Middle East & Africa due to pricing pressures on our retail customers and consumers in key international travel retail locations. Additionally, we continue to monitor the geopolitical tensions between the United States and China, which could have a material adverse effect on our business. We are also mindful of inflationary pressures on our cost base and are monitoring the impact on consumer preferences.
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As the invasion of Ukraine continues and international sanctions evolve, we have substantially scaled down our operations in Russia based on our current plans. We expect to continue selling a limited selection of products to retailers in Russia. We will continue to monitor the risks and evolving situation that may further affect our business and will adjust our plans accordingly. In fiscal 2022, our net sales in Ukraine and Russia accounted for approximately 1% of consolidated net sales. There are uncertainties related to the future impacts on our business, including possible new sanctions that are difficult to predict due to the high level of geopolitical volatility. On a broader perspective, there could be additional negative impacts to our net sales, earnings, assets and cash flows from such uncertainties. We also note that worsening conditions could exacerbate economic challenges in other countries such as inflationary pressures, energy shortages, recessions or other consequences. Please refer to Risk Factors in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022, for a more complete discussion of the risks we encounter in our business and industry.
The uncertainty around the timing, speed and duration of the recovery from the adverse impacts of the COVID-19 pandemic, including the impacts on our business in Asia travel retail and China and the other macro challenges we are facing, will continue to affect our ability to grow sales profitably. We believe we can, to some extent, offset the impact of some of these challenges by continually developing and pursuing a diversified strategy with multiple engines of growth and by accelerating initiatives focused on areas of strength, discipline and agility, including continuing to execute upon and benefit from efficiencies attributable to previously approved initiatives under the Post-COVID Business Acceleration Program. As the current situation continues to progress, if economic and social conditions or the degree of uncertainty or volatility worsen, or the adverse conditions previously described are further prolonged, there could be a further negative effect on consumer confidence, demand, spending and willingness or ability to travel and, as a result, on our business. We are continuing to monitor these and other risks that may affect our business.
Post-COVID Business Acceleration Program
Information about our restructuring initiative, the Post-COVID Business Acceleration Program, is described in Notes to Consolidated Financial Statements, Note 3 – Charges Associated with Restructuring and Other Activities herein, as well as, in Notes to Consolidated Financial Statements, Note 8 – Charges Associated with Restructuring and Other Activities and in the Overview on page 33 of our Annual Report on Form 10-K for the year ended June 30, 2022.
Other Intangible Asset Impairments
During the fiscal 2023 second quarter, given the lower-than-expected results in the overall business, we made revisions to the internal forecasts relating to our Smashbox reporting unit. We concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset. The remaining carrying value of the trademark intangible asset was not recoverable and we recorded an impairment charge of $21 million reducing the carrying value to zero.
During the fiscal 2023 second quarter, the Dr.Jart+ reporting unit experienced lower-than-expected growth within key geographic regions and channels that continue to be impacted by the spread of COVID-19 variants, resurgence in cases, and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the reporting unit. In addition, due to macro-economic factors, Dr.Jart+ has experienced lower-than-expected growth within key geographic regions. The Too Faced reporting unit experienced lower-than-expected results in key geographic regions and channels coupled with delays in future international expansion to areas that continue to be impacted by COVID-19. As a result, we made revisions to the internal forecasts relating to our Dr.Jart+ and Too Faced reporting units. Additionally, there were increases in the weighted average cost of capital for both reporting units as compared to the prior year annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2022.
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We concluded that the changes in circumstances in the reporting units, along with increases in the weighted average cost of capital, triggered the need for interim impairment reviews of their trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, we performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of November 30, 2022. We concluded that the carrying value of the trademark intangible assets exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows and recorded an impairment charge of $100 million for Dr.Jart+ and $86 million for Too Faced. We concluded that the carrying amounts of the long-lived assets were recoverable. After adjusting the carrying values of the trademarks, we completed interim quantitative impairment tests for goodwill. As the estimated fair value of the Dr.Jart+ and Too Faced reporting units were in excess of their carrying values, we concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units. The fair values of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks. The most significant unobservable input used to estimate the fair values of the Dr.Jart+ and Too Faced trademark intangible assets was the weighted-average cost of capital, which was 11% and 13%, respectively.
A summary of the impairment charges for the three and nine months ended March 31, 2023 and the remaining trademark and goodwill carrying values as of March 31, 2023, for each reporting unit, are as follows:

|  |  |  | Impairment Charges |  | Carrying Value
(In millions) |  |  |  | Three Months Ended March 31, 2023 |  | Nine Months Ended March 31, 2023 |  | As of March 31, 2023
Reporting Unit: |  | Geographic Region |  | Trademarks |  | Goodwill |  | Trademarks |  | Goodwill |  | Trademarks |  | Goodwill
Smashbox |  | The Americas |  | $ | — |  |  | $ | — |  |  | $ | 21 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Dr.Jart+ |  | Asia/Pacific |  | — |  |  | — |  |  | 100 |  |  | — |  |  | 330 |  |  | 310 |
Too Faced |  | The Americas |  | — |  |  | — |  |  | 86 |  |  | — |  |  | 186 |  |  | 13 |
Total |  |  |  | $ | — |  |  | $ | — |  |  | $ | 207 |  |  | $ | — |  |  | $ | 516 |  |  | $ | 323 |

The impairment charges for the nine months ended March 31, 2023 were reflected in the skin care product category for Dr.Jart+ and the makeup product category for Smashbox and Too Faced.
The fair value of the Dr.Jart+ and Too Faced trademarks were equal to their carrying values subsequent to the impairment charges taken as of December 31, 2022. Additionally, the estimated fair value of the Dr.Jart+ and Too Faced reporting units exceeded their carrying value by 7% and 10%, respectively. For the Dr.Jart+ and Too faced reporting units, if all other assumptions are held constant, a decrease of 10% in the estimated future cash flows, inclusive of the terminal value, or an increase of 100 basis points in the weighted average cost of capital, would have caused the carrying value of these reporting units to approximate their fair value. The key assumptions used to determine the estimated fair value of the reporting units and their respective trademarks are primarily predicated on the estimated future impacts of COVID-19, the success of future new product launches, the achievement of distribution expansion plans, and the realization of cost reduction and other efficiency efforts. If such plans do not materialize, or if there are further challenges in the business environments in which the reporting unit operates, resulting changes in the key assumptions could have negative impacts on the estimated fair value of the reporting units, and their respective trademarks, and it is possible we could recognize additional impairment charges in the future.
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NET SALES

|  | Three Months Ended March 31 |  |  |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  |  |  |  |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |  |  |  |  |
Net sales |  | $ | 3,751 |  |  | $ | 4,245 |  |  |  |  |  |  | $ | 12,301 |  |  | $ | 14,176 |
$ Change from prior-year period |  | (494) |  |  |  |  |  |  |  |  | (1,875) |  |  |
% Change from prior-year period |  | (12) | % |  |  |  |  |  |  |  | (13) | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |  |  |  |  |
% Change from prior-year period in constant currency adjusting for returns associated with restructuring and other activities |  | (9) | % |  |  |  |  |  |  |  | (9) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported net sales decreased for the three months ended March 31, 2023, driven by lower net sales from the skin care and makeup product categories, partially offset by slightly higher net sales in the fragrance and hair care product categories. For the nine months ended March 31, 2023, reported net sales decreased due to lower net sales from the skin care, makeup and fragrance product categories, partially offset by higher net sales in the hair care product category.
For the three months ended March 31, 2023, reported net sales decreased due to lower net sales in Europe, the Middle East & Africa, from our travel retail business, and in Asia/Pacific, partially offset by higher net sales in The Americas. For the nine months ended March 31, 2023, reported net sales decreased due to lower net sales from all geographic regions.
The total net sales decrease was impacted by approximately $106 million and $564 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
Returns associated with restructuring and other activities are not allocated to our product categories or geographic regions because they result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select corporate functions and go-to-market structures. Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the impact of returns associated with restructuring and other activities for the three and nine months ended March 31, 2023 of $4 million and $10 million, respectively, and for the three and nine months ended March 31, 2022 of $1 million and $3 million, respectively.
Reported net sales decreased 12% for the three months ended March 31, 2023, driven by the decrease from volume of 7%, the unfavorable impact from foreign currency translation of 3%, the impact from the license terminations of certain of our designer fragrances of 1% and a decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
Reported net sales decreased 13% for the nine months ended March 31, 2023, driven by the decrease from volume of 9%, the unfavorable impact from foreign currency translation of 4% and the impact from the license terminations of certain of our designer fragrances of 1%. Partially offsetting these decreases was an increase from pricing of 1%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
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Product Categories
Skin Care

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Net sales |  | $ | 1,922 |  |  | $ | 2,395 |  |  | $ | 6,408 |  |  | $ | 8,003 |
$ Change from prior-year period |  | (473) |  |  |  |  | (1,595) |  |  |
% Change from prior-year period |  | (20) | % |  |  |  | (20) | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change from prior-year period in constant currency |  | (17) | % |  |  |  | (16) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported skin care net sales decreased for the three months ended March 31, 2023, reflecting lower net sales from La Mer, Estée Lauder, Dr.Jart+, Origins and Clinique, combined, of approximately $538 million, primarily driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
Reported skin care net sales decreased for the nine months ended March 31, 2023, reflecting lower net sales from Estée Lauder, La Mer, Dr.Jart+, Clinique and Origins, combined, of approximately $1,701 million, primarily driven by the evolution of the COVID-19 environment, including restrictions in mainland China and the rising number of COVID-19 cases (collectively the "COVID-19-Related Impacts") affecting Asia travel, including the tightening of inventory by certain of our retailers, retail traffic in mainland China and the Dr.Jart+ travel retail business in Korea during the first half of fiscal 2023. In addition, contributing to the decrease for the nine months ended March 31, 2023 was the lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory for the three months ended March 31, 2023.
Partially offsetting these decreases in skin care net sales for the three and nine months ended March 31, 2023 were higher net sales from The Ordinary and M·A·C, combined, of approximately $78 million and $104 million, respectively. The increase in net sales from The Ordinary in both periods was driven by success of hero products, new product launches and expanded distribution. The increase in net sales from M·A·C for the three and nine months ended March 31, 2023 was primarily driven by the fiscal 2023 third quarter launch of the Hyper Real franchise line of products.
The skin care net sales decrease was impacted by approximately $61 million and $298 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
Reported skin care net sales decreased 20% for the three months ended March 31, 2023, driven by the decrease from volume of 14%, the unfavorable impact from foreign currency translation of 3% and a decrease from pricing of 3%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
Reported skin care net sales decreased 20% for the nine months ended March 31, 2023, driven by the decrease from volume of 15%, the unfavorable impact from foreign currency translation of 4% and a decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
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Makeup

|  |  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |  |
Net sales |  |  | $ | 1,088 |  |  | $ | 1,114 |  |  | $ | 3,408 |  |  | $ | 3,674 |
$ Change from prior-year period |  |  | (26) |  |  |  |  | (266) |  |  |
% Change from prior-year period |  |  | (2) | % |  |  |  | (7) | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |  |
% Change from prior-year period in constant currency |  |  | — | % |  |  |  | (3) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported makeup net sales decreased for the three months ended March 31, 2023, reflecting lower net sales from Estée Lauder and La Mer, combined, of approximately $89 million, primarily driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
Reported makeup net sales decreased for the nine months ended March 31, 2023, reflecting lower net sales from Estée Lauder, TOM FORD Beauty and La Mer, combined, of approximately $339 million, primarily driven by COVID-19-Related Impacts affecting Asia travel retail, and retail traffic in mainland China, during the first half of fiscal 2023. In addition, contributing to the decrease for the nine months ended March 31, 2023 was lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory during the three months ended March 31, 2023.
Partially offsetting these decreases in makeup net sales for the three and nine months ended March 31, 2023 was an increase in net sales from M·A·C and Clinique, combined, of approximately $37 million and $79 million, respectively. The increase in net sales from M·A·C in both periods was driven by the recognition of previously deferred revenue due to changes to the BACK-To-M·A·C take back program. Net sales from Clinique increased in both periods, benefiting from solid performance in the lip, concealer and eye subcategories. Also partially offsetting the decreases in makeup net sales for the three months ended March 31, 2023, were increases in net sales from TOM FORD Beauty due to strength from products in the lip subcategory and increases in net sales from Too Faced driven by hero products, combined, of approximately $16 million.
The makeup net sales decrease was impacted by approximately $28 million and $151 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
Reported makeup net sales decreased 2% for the three months ended March 31, 2023, driven by the decrease from volume of 3% and the unfavorable impact from foreign currency translation of 2%. Partially offsetting these decreases was an increase from pricing of 3% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Reported makeup net sales decreased 7% for the nine months ended March 31, 2023, driven by the decrease from volume of 5% and the unfavorable impact from foreign currency translation of 4%. Partially offsetting these decreases was an increase from pricing of 2% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
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Fragrance

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Net sales |  | $ | 585 |  |  | $ | 579 |  |  | $ | 1,967 |  |  | $ | 1,987 |
$ Change from prior-year period |  | 6 |  |  |  |  | (20) |  |  |
% Change from prior-year period |  | 1 | % |  |  |  | (1) | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change from prior-year period in constant currency |  | 4 | % |  |  |  | 4 | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported fragrance net sales increased for the three months ended March 31, 2023, primarily reflecting higher net sales from Le Labo, TOM FORD Beauty, Estée Lauder, Kilian Paris and Editions de Parfums Frédéric Malle combined, of approximately $74 million. The increase in net sales from Le Labo reflected the continued success of hero product franchises and targeted expanded consumer reach. Net sales from Estée Lauder increased, reflecting a favorable year-over-year impact due to incremental sales of fragrance sets during the three months ended March 31, 2023, and success of the Beautiful and Estée Lauder Pleasures franchise line of products. The increase in net sales from TOM FORD Beauty reflected the continued success of Signature and Private Blend fragrances, expanded distribution and new product launches. Net sales from Kilian Paris increased, primarily driven by continued success of hero product franchises and new product launches. The increase in net sales from Editions de Parfums Frederic Malle reflected success of hero products and expanded distribution.
Partially offsetting the increase in fragrance net sales for the three months ended March 31, 2023 was the impact of the license terminations related to certain of our designer fragrances effective June 30, 2022 and lower net sales from Jo Malone London, combined, of approximately $70 million. Net sales from Jo Malone London decreased driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
Reported fragrance net sales decreased for the nine months ended March 31, 2023, primarily reflecting the impact of the license terminations related to certain of our designer fragrances effective June 30, 2022 and lower net sales from Jo Malone London, combined, of approximately $233 million. The decrease in net sales from Jo Malone London primarily reflected COVID-19-Related Impacts affecting Asia travel retail, and retail traffic in mainland China, during the first half of fiscal 2023. In addition, contributing to the decrease for the nine months ended March 31, 2023 was lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory during the three months ended March 31, 2023.
Partially offsetting the decrease in fragrance net sales for the nine months ended March 31, 2023 were higher net sales from Estée Lauder, TOM FORD Beauty, Le Labo and Clinique, combined, of approximately $201 million. Net sales from Estée Lauder increased, reflecting the continued success from the Beautiful franchise line of products and successful performance during holiday and key shopping moments. Net sales from Le Labo increased, reflecting the continued success of hero product franchises, targeted expanded consumer reach and successful performance during holiday and key shopping moments. The increase in net sales from TOM FORD Beauty reflected the continued success of Signature and Private Blend fragrances, expanded distribution, new product launches and successful performance during holiday and key shopping moments. Net sales from Clinique increased, primarily reflecting growth in the Clinique Happy franchise line of products.
Fragrance net sales were impacted by approximately $16 million and $100 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
Reported fragrance net sales increased 1% for the three months ended March 31, 2023, driven by the increase from volume of 9% and the increase from pricing of 5%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix. Partially offsetting these increases was the impact from the license terminations of certain of our designer fragrances of 10% and the unfavorable impact from foreign currency translation of 3%.
Reported fragrance net sales decreased 1% for the nine months ended March 31, 2023, driven by the impact from the license terminations of certain of our designer fragrances of 10% and the unfavorable impact from foreign currency translation of 5%.
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Partially offsetting these decreases was the increase from volume of 10% and the increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Hair Care

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Net sales |  | $ | 149 |  |  | $ | 147 |  |  | $ | 489 |  |  | $ | 475 |
$ Change from prior-year period |  | 2 |  |  |  |  | 14 |  |  |
% Change from prior-year period |  | 1 | % |  |  |  | 3 | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change from prior-year period in constant currency |  | 3 | % |  |  |  | 6 | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported hair care net sales increased for the three and nine months ended March 31, 2023, driven by higher net sales from The Ordinary reflecting growth due to the recent launch of hair care products, partially offset by a decrease in net sales from Aveda. For the three months ended March 31, 2023, Aveda net sales decreased, due to a decline in the salon business and lower online net sales in North America. Net sales from Aveda decreased for the nine months ended March 31, 2023, primarily driven by an unfavorable impact of foreign currency translation, partially offset by the fiscal 2023 first quarter distribution expansion into mainland China, new product launches and successful performance during holiday and key shopping moments.
The hair care net sales increase was impacted by approximately $2 million and $14 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
Reported hair care net sales increased 1% for the three months ended March 31, 2023, driven by the increase from volume of 4%, partially offset by the unfavorable impact from foreign currency translation of 2% and the decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
Reported hair care net sales increased 3% for the nine months ended March 31, 2023, driven by an increase from pricing of 7%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix. Partially offsetting this increase was the decrease from volume of 1% and the unfavorable impact from foreign currency translation of 3%.
Geographic Regions
We strategically time our new product launches by geographic market, which may account for differences in regional sales growth.
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The Americas

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Net sales |  | $ | 1,089 |  |  | $ | 1,053 |  |  | $ | 3,447 |  |  | $ | 3,547 |
$ Change from prior-year period |  | 36 |  |  |  |  | (100) |  |  |
% Change from prior-year period |  | 3 | % |  |  |  | (3) | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change from prior-year period in constant currency |  | 4 | % |  |  |  | (3) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported net sales in The Americas increased for the three months ended March 31, 2023, primarily driven by an increase in the United States and Latin America, combined of approximately $38 million. The increase in net sales in the United States for the three months ended March 31, 2023 was led by higher net sales from The Ordinary, partially offset by the impact of the license terminations related to certain of our designer fragrances effective June 30, 2022. Net sales in Latin America increased, led by Mexico and Brazil, reflecting continued recovery in makeup.
Reported net sales in The Americas decreased for the nine months ended March 31, 2023, primarily driven by a decrease in net sales in the United States of approximately $108 million, reflecting the tightening of inventory from certain of our retailers, lower shipments of replenishment orders in the fiscal 2023 second quarter and the impact of the license terminations related to certain of our designer fragrances. Partially offsetting the decrease in The Americas for the nine months ended March 31, 2023 was an increase in net sales in Latin America of approximately $28 million, led by Brazil and Mexico, reflecting continued recovery in makeup.
Net sales in The Americas were impacted by approximately $1 million of unfavorable and $13 million of favorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
Reported net sales in The Americas increased 3% for the three months ended March 31, 2023, driven by the increase from volume of 6%, partially offset by the impact from the license terminations related to certain of our designer fragrances of 2% and the unfavorable impact from foreign currency translation of 1%. The impact from pricing was flat period-over-period, due to the favorable impact from strategic pricing actions offset by changes in mix.
Reported net sales in The Americas decreased 3% for the nine months ended March 31, 2023, driven by the decrease from volume of 4% and the impact from the license terminations related to certain of our designer fragrances of 3%. Partially offsetting this decrease was an increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
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Europe, the Middle East & Africa

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Net sales |  | $ | 1,474 |  |  | $ | 1,990 |  |  | $ | 4,972 |  |  | $ | 6,201 |
$ Change from prior-year period |  | (516) |  |  |  |  | (1,229) |  |  |
% Change from prior-year period |  | (26) | % |  |  |  | (20) | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change from prior-year period in constant currency |  | (25) | % |  |  |  | (17) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported net sales decreased in Europe, the Middle East & Africa for the three months ended March 31, 2023, primarily driven by lower net sales from our travel retail business of approximately $589 million, driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
Partially offsetting the decrease in net sales in Europe, the Middle East & Africa for the three months ended March 31, 2023 was higher net sales from the United Kingdom and Germany combined, of approximately $31 million. The increase in net sales in the United Kingdom for the three months ended March 31, 2023 reflected higher net sales primarily in skin care, led by The Ordinary. Net sales in Germany increased for the three months ended March 31, 2023, primarily driven by brick-and-mortar recovery.
Reported net sales decreased in Europe, the Middle East & Africa for the nine months ended March 31, 2023, primarily driven by lower net sales from our travel retail business, Russia and the United Kingdom, combined, of approximately $1,273 million. The decrease in net sales from our travel retail business for the nine months ended March 31, 2023 reflects the COVID-19-Related Impacts affecting Asia travel retail, including the tightening of inventory by certain of our retailers during the first half of fiscal 2023. In addition, contributing to the decrease in our travel retail business for the nine months ended March 31, 2023 was lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory during the three months ended March 31, 2023. N et sales from Russia decreased for the nine months ended March 31, 2023, as we sold a limited selection of products to certain retailers, and completed the closure of all of our freestanding stores during the first half of fiscal 2023. The decrease in net sales from the United Kingdom for the nine months ended March 31, 2023 is driven by the unfavorable impact of foreign currency translation, partially offset by brick-and-mortar recovery, reflecting an increase in traffic, compared to the prior-year period.
Partially offsetting the decreases in net sales in Europe, the Middle East & Africa for the nine months ended March 31, 2023 were increases in net sales from Turkey and India, combined, of approximately $37 million. The net sales increase in Turkey was driven by growth in makeup and skin care. Net sales in India increased for the nine months ended March 31, 2023 led by growth in makeup.
Net sales in Europe, the Middle East & Africa were impacted by approximately $20 million and $205 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
Reported net sales in Europe, the Middle East & Africa decreased 26% for the three months ended March 31, 2023, driven by the decrease from volume of 21%, a decrease from pricing of 3%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions, the unfavorable impact from foreign currency translation of 1% and the impact from the license terminations related to certain of our designer fragrances of 1%.
Reported net sales in Europe, the Middle East & Africa decreased 20% for the nine months ended March 31, 2023, driven by the decrease from volume of 15%, the unfavorable impact from foreign currency translation of 3%, a decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions, and the impact from the license terminations related to certain of our designer fragrances of 1%.
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Asia/Pacific

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Net sales |  | $ | 1,192 |  |  | $ | 1,203 |  |  | $ | 3,892 |  |  | $ | 4,431 |
$ Change from prior-year period |  | (11) |  |  |  |  | (539) |  |  |
% Change from prior-year period |  | (1) | % |  |  |  | (12) | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change from prior-year period in constant currency |  | 6 | % |  |  |  | (4) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported net sales decreased in Asia/Pacific for the three months ended March 31, 2023, primarily driven by the unfavorable impact of foreign currency translation of 7%, resulting in a decrease in net sales in mainland China, and lower net sales in Korea, led by the Dr.Jart+ travel retail business in Korea, combined, of approximately $68 million. The decrease in Asia/Pacific net sales for the three months ended March 31, 2023 reflected lower demand in our Dr.Jart+ travel retail business that resulted in lower product shipments as retailers reduced inventory.
Reported net sales decreased in Asia/Pacific for the nine months ended March 31, 2023 was primarily driven by a decrease in net sales in mainland China and Korea, led by the Dr.Jart+ travel retail business in Korea, combined, of approximately $559 million, reflecting COVID-19-Related Impacts during the first half of fiscal 2023, combined with lower demand in our Dr.Jart+ travel retail business that resulted in lower product shipments as retailers reduced inventory.
Partially offsetting the net sales decrease in Asia/Pacific for the three and nine months ended March 31, 2023 were increases in Hong Kong, Australia and Southeast Asia, combined, of approximately $67 million, and increases in Southeast Asia, combined of $46 million, respectively, driven by the continued progression towards COVID-19 recovery.
Net sales in Asia/Pacific were impacted by approximately $86 million and $373 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
Reported net sales in Asia/Pacific decreased 1% for the three months ended March 31, 2023, driven by the unfavorable impact from foreign currency translation of 7% and the negative impact from the license terminations related to certain of our designer fragrances of 1%. Partially offsetting these decreases was the increase from volume of 6% and the increase from pricing of 1%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Reported net sales in Asia/Pacific decreased 12% for the nine months ended March 31, 2023, driven by the unfavorable impact from foreign currency translation of 8%, the decrease from volume of 4% and the impact from the license terminations related to certain of our designer fragrances of 1%. Partially offsetting these decreases was an increase from pricing of 1%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
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GROSS MARGIN
Gross margin decreased to 69.1% and 72.4% for the three and nine months ended March 31, 2023, respectively, as compared with 76.6% and 76.9% in the prior-year periods.

|  | Favorable (Unfavorable) Basis Points |  |
|  | March 31, 2023 |  |
|  | Three Months Ended |  | Nine Months Ended |  |
Mix of business |  | (400) |  |  | (295) |  |  |
Obsolescence charges |  | (225) |  |  | (85) |  |  |
Manufacturing costs and other |  | (145) |  |  | (85) |  |  |
Foreign exchange transactions |  | 20 |  |  | 15 |  |  |
Total |  | (750) |  |  | (450) |  |  |

The decrease in gross margin for the three and nine months ended March 31, 2023 reflected unfavorable impacts from our mix of business, higher obsolescence charges and higher manufacturing costs and other. The unfavorable impact from our mix of business in both periods is primarily driven by brand mix, reflecting the lower gross margin of The Ordinary products, and category mix, driven by the decrease in skin care net sales, as well as higher costs associated with promotional items. The unfavorable impact from obsolescence charges is primarily due to excess inventory on hand and increased levels of inventory destruction driven by lower demand that resulted in lower product shipments. In both periods, manufacturing costs and other increased, driven by higher costs within our inventory deferrals recognized during the current-year periods for freight and material commodities.
OPERATING EXPENSES
Operating expenses as a percentage of net sales was 61.2% and 60.0% for the three and nine months ended March 31, 2023, respectively, as compared with 59.2% and 55.1% in the prior-year periods.

|  | Favorable (Unfavorable) Basis Points |  |
|  | March 31, 2023 |  |
|  | Three Months Ended |  | Nine Months Ended |  |
General and administrative expenses |  | (160) |  |  | (50) |  |  |
Advertising, merchandising, sampling and product development |  | (230) |  |  | (190) |  |  |
Selling |  | (150) |  |  | (90) |  |  |
Stock-based compensation |  | 40 |  |  | 10 |  |  |
Store operating costs |  | (40) |  |  | (60) |  |  |
Shipping |  | (40) |  |  | (70) |  |  |
Foreign exchange transactions |  | 10 |  |  | 10 |  |  |
Subtotal |  | (570) |  |  | (440) |  |  |
Charges associated with restructuring and other activities |  | 10 |  |  | 10 |  |  |
Other intangible asset impairments |  | 510 |  |  | (20) |  |  |
Changes in fair value of acquisition-related stock options |  | (150) |  |  | (40) |  |  |
Total |  | (200) |  |  | (490) |  |  |

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The unfavorable change in operating expense margin for the three months ended March 31, 2023, reflected unfavorable impacts relating to advertising, merchandising, sampling and product development, general and administrative expenses and selling expenses primarily driven by the decrease in net sales, as well as the unfavorable year-over-year impact for the change in fair value of acquisition-related stock options of $61 million relating to the fiscal 2021 increase in our investment in DECIEM, partially offset by the fiscal 2022 third quarter impact of other intangible asset impairments of $216 million.
The unfavorable change in operating expense margin for the nine months ended March 31,2023 reflected unfavorable impacts relating to advertising, merchandising, sampling and product development, selling expenses, shipping expenses, and general and administrative expenses, driven by the decrease in net sales, as well as an unfavorable impact relating to store operating costs due to the brick-and-mortar recovery.
OPERATING RESULTS

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Operating income |  | $ | 297 |  |  | $ | 738 |  |  | $ | 1,514 |  |  | $ | 3,091 |
$ Change from prior-year period |  | (441) |  |  |  |  | (1,577) |  |  |
% Change from prior-year period |  | (60) | % |  |  |  | (51) | % |  |
Operating margin |  | 7.9 | % |  | 17.4 | % |  | 12.3 | % |  | 21.8 | %
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change in operating income from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, other intangible asset impairments and the change in fair value of acquisition-related stock options |  | (66) | % |  |  |  | (47) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
The decrease in reported operating margin for the three and nine months ended March 31, 2023 was primarily driven by a decrease in net sales, decrease in gross margin and the decrease in operating expense margin, discussed above.
Charges associated with restructuring and other activities are not allocated to our 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. Accordingly, the following discussions of Operating income by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities.
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Product Categories
Skin Care

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Operating income |  | $ | 256 |  |  | $ | 667 |  |  | $ | 1,207 |  |  | $ | 2,466 |
$ Change from prior-year period |  | (411) |  |  |  |  | (1,259) |  |  |
% Change from prior-year period |  | (62) | % |  |  |  | (51) | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments and the change in fair value of acquisition-related stock options |  | (69) | % |  |  |  | (50) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported skin care operating income decreased for the three months ended March 31, 2023 reflecting lower operating results from Estée Lauder, La Mer and Clinique, combined, of approximately $529 million and decreased for the nine months ended March 31, 2023, reflecting lower operating results from Estée Lauder, La Mer, Clinique and Origins, combined, of approximately $1,321 million, primarily driven by decreases in net sales. Skin care operating income also decreased for the three and nine months ended March 31, 2023, reflecting the unfavorable year-over-year impact for the change in fair value of acquisition-related stock options of $59 million and $54 million, respectively, relating to the fiscal 2021 increase in our investment in DECIEM. Also contributing to the decrease in operating income from Clinique for the three months ended March 31, 2023 was higher cost of sales due to higher costs for promotional items. The decrease in operating results from Estée Lauder for the nine months ended March 31, 2023 also reflected a higher cost of sales, due, in part to an increase related to promotional items. Partially offsetting the decrease in operating results from La Mer for the nine months ended March 31, 2023 was disciplined advertising and promotional expense management. Partially offsetting the decrease in operating results from Origins for the nine months ended March 31, 2023 was disciplined advertising and promotional expense management, lower cost of sales due to the net sales decrease and lower selling expenses due to the closure of freestanding stores during fiscal 2023.
Partially offsetting the decrease in skin care operating income for the three and nine months ended March 31, 2023 was the favorable year-over-year impact of other intangible asset impairments related to Dr.Jart+ of $205 million and $105 million, respectively.
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Makeup

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Operating income (loss) |  | $ | (15) |  |  | $ | 7 |  |  | $ | (36) |  |  | $ | 228 |
$ Change from prior-year period |  | (22) |  |  |  |  | (264) |  |  |
% Change from prior-year period |  | (100+)% |  |  |  | (100+)% |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments and the change in fair value of acquisition-related stock options |  | (100+)% |  |  |  | (69) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported makeup operating income decreased for the three and nine months ended March 31, 2023, reflecting lower results from Estée Lauder and La Mer, combined, of approximately $54 million and $213 million, respectively, primarily driven by a decrease in net sales. For the three and nine months ended March 31, 2023, the decrease in operating income from Estée Lauder was partially offset by disciplined advertising and promotional expense management. For the three and nine months ended March 31, 2023, the decrease in operating income from La Mer was partially offset by a decrease in cost of sales due to lower net sales compared to the prior-year period.
Also contributing to the decrease in makeup operating income for the nine months ended March 31, 2023 was the fiscal 2023 second quarter other intangible asset impairments related to Too Faced and Smashbox of $107 million, combined, and lower results from TOM FORD Beauty, driven by a decrease in net sales.
Partially offsetting the decreases in makeup operating income for the three months ended March 31, 2023 were higher results from Clinique and TOM FORD Beauty, combined, of approximately $16 million, driven by increases in net sales, partially offset by higher cost of sales, due, in part to an increase in promotional items.
Partially offsetting the decrease in makeup operating income for the nine months ended March 31, 2023 were higher results from M·A·C, primarily driven by the recognition of previously deferred revenue due to changes to the BACK-To-M·A·C take back program and disciplined advertising and promotional expense management, partially offset by an increase in cost of sales.
Fragrance

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Operating income |  | $ | 89 |  |  | $ | 105 |  |  | $ | 399 |  |  | $ | 446 |
$ Change from prior-year period |  | (16) |  |  |  |  | (47) |  |  |
% Change from prior-year period |  | (15) | % |  |  |  | (11) | % |  |

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Reported fragrance operating income decreased for the three and nine months ended March 31, 2023, reflecting lower results from Jo Malone London, driven by a decrease in net sales and higher cost of sales, due, in part to an increase in promotional items, as well and the impact of license terminations related to certain of our designer fragrances effective June 30, 2022, combined, of approximately $34 million and $127 million, respectively. Partially offsetting these decreases in both periods were higher results from Estée Lauder and Le Labo, combined, of approximately $34 million and $62 million, respectively, driven by increases in net sales. Contributing to the increase in operating income from Estée Lauder for the three months ended March 31, 2023 was disciplined advertising and promotional expense management. Contributing to the decrease in operating income from Jo Malone London for the nine months ended March 31, 2023 was higher selling expenses due to increased staffing costs compared to the prior-year period.
Also contributing to the decrease in fragrance operating income for the three months ended March 31, 2023 was lower results from TOM FORD Beauty, driven by higher advertising and promotional activities to support hero products and new product launches, and higher cost of sales due to the increase in net sales and selling expenses to support recovery, partially offset by an increase in net sales.
Hair Care

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Operating income (loss) |  | $ | (24) |  |  | $ | (18) |  |  | $ | (31) |  |  | $ | (8) |
$ Change from prior-year period |  | (6) |  |  |  |  | (23) |  |  |
% Change from prior-year period |  | (33) | % |  |  |  | (100+)% |  |

Reported hair care operating results decreased for the three and nine months ended March 31, 2023, primarily driven by lower results from Aveda and Bumble and bumble, combined, of approximately $20 million and $54 million, respectively. In both periods, the lower results from Aveda were primarily driven by a decrease in net sales, higher cost of sales and higher advertising and promotional activities to support the brand's expansion into mainland China during fiscal 2023. Also contributing to the higher advertising and promotional activities for Aveda for the nine months ended March 31, 2023 were higher advertising and promotional activities to support holiday and key shopping moments. Operating results from Bumble and bumble decreased for the three and nine months ended March 31, 2023, primarily driven by higher cost of sales.
Geographic Regions
The Americas

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Operating income (loss) |  | $ | (93) |  |  | $ | 408 |  |  | $ | (53) |  |  | $ | 1,044 |
$ Change from prior-year period |  | (501) |  |  |  |  | (1,097) |  |  |
% Change from prior-year period |  | (100+)% |  |  |  | (100+)% |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments and change in fair value of acquisition-related stock options |  | (100+)% |  |  |  | (95) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
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Reported operating results decreased in The Americas for the three months ended March 31, 2023, primarily reflecting lower operating results from North America of approximately $501 million. The decrease in operating results in North America is driven by the United States, primarily due to lower intercompany royalty income of $338 million compared to the prior-year-period, driven by a decrease in net sales in our travel retail business and higher cost of sales, partially offset by an increase in net sales. Also contributing to the decrease in operating income in North America was the unfavorable year-over-year impact for the change in fair value of acquisition-related stock options of $61 million relating to the fiscal 2021 increase in our investment in DECIEM.
Reported operating results decreased in The Americas for the nine months ended March 31, 2023, primarily reflecting lower operating results from North America of approximately $1,103 million. The decrease in operating results in North America is driven by the United States, primarily due to lower intercompany royalty income of $547 million compared to the prior-year period, driven by a decrease in net sales in our travel retail business, a decrease in net sales, and the unfavorable year-over-year impact of other intangible asset impairments of $96 million. Also contributing to the decrease in operating income in North America was the unfavorable year-over-year impact for the change in fair value of acquisition-related stock options of $56 million relating to the fiscal 2021 increase in our investment in DECIEM.
Europe, the Middle East & Africa

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Operating income |  | $ | 176 |  |  | $ | 281 |  |  | $ | 919 |  |  | $ | 1,366 |
$ Change from prior-year period |  | (105) |  |  |  |  | (447) |  |  |
% Change from prior-year period |  | (37) | % |  |  |  | (33) | % |  |

Reported operating income decreased in Europe, the Middle East & Africa for the three and nine months ended March 31, 2023, primarily driven by lower results from our travel retail business of approximately $130 million and $514 million, respectively. For the three and nine months ended March 31, 2023, operating income decreased in our travel retail business reflecting the decrease in net sales, partially offset by the decrease in intercompany royalty expense to The Americas of $338 million and $547 million, respectively, due to the net sales decrease. Partially offsetting the operating income decrease in Europe, the Middle East & Africa for the nine months ended March 31, 2023 was an increase in operating income in the United Kingdom, led by The Ordinary, driven by an increase in net sales.
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Asia/Pacific

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Operating income |  | $ | 232 |  |  | $ | 72 |  |  | $ | 681 |  |  | $ | 725 |
$ Change from prior-year period |  | 160 |  |  |  |  | (44) |  |  |
% Change from prior-year period |  | 100+% |  |  |  | (6) | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments |  | (16) | % |  |  |  | (16) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported operating income increased in Asia/Pacific for the three months ended March 31, 2023, primarily reflecting the favorable year-over-year impact of other intangible asset impairments of $205 million, partially offset by lower operating results in Korea. Operating results in Korea decreased for the three months ended March 31, 2023, led by Dr.Jart+, driven by a decrease in net sales.
Reported operating income decreased in Asia/Pacific for the nine months ended March 31, 2023, primarily reflecting decreases in operating results in mainland China, Korea and Japan, combined, of approximately $174 million, partially offset by the favorable year-over-year impact of other intangible asset impairments of $105 million and higher results from Southeast Asia due to increases in net sales, combined, of approximately $19 million. The lower operating results in mainland China for the nine months ended March 31, 2023 was driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management and lower selling costs compared to the prior-year period. Operating results in Korea decreased for the nine months ended March 31, 2023, led by Dr.Jart+, due to decreases in net sales, partially offset by lower selling expenses and cost of sales. For the nine months ended March 31, 2023, operating results in Japan decreased, driven by the decrease in net sales.
INTEREST AND INVESTMENT INCOME

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
(In millions) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Interest expense |  | $ | 58 |  |  | $ | 41 |  |  | $ | 156 |  |  | $ | 125 |
Interest income and investment income, net |  | $ | 37 |  |  | $ | 5 |  |  | $ | 78 |  |  | $ | 19 |

Interest expense increased in both periods, reflecting a higher debt balance due to the issuance of commercial paper during the fiscal 2023 third quarter and higher interest rates compared to the prior-year period. Interest income and investment income, net increased, primarily reflecting higher interest rates compared to the prior-year period.
PROVISION FOR INCOME TAXES
The provision for income taxes represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of share-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations. Our effective tax rate will change from quarter-to-quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of share-based compensation, the interaction of various global tax strategies and the impact from certain acquisitions. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change.
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| Three Months Ended March 31 |  | Nine Months Ended March 31
| 2023 |  | 2022 |  | 2023 |  | 2022
Effective rate for income taxes | 44.6 | % |  | 18.5 | % |  | 27.9 | % |  | 21.1 | %
Basis-point change from the prior-year period | 2,610 |  |  |  |  | 680 |  |  |

For the three months ended March 31, 2023, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company's foreign operations, due to the Company's geographical mix of earnings for fiscal 2023.
For the nine months ended March 31, 2023, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company's foreign operations, due to the Company's geographical mix of earnings for fiscal 2023, and a decrease in excess tax benefits associated with stock-based compensation arrangements.
NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

|  | Three Months Ended March 31 |  | Nine Months Ended March 31
($ in millions, except per share data) |  | 2023 |  | 2022 |  | 2023 |  | 2022
As Reported: |  |  |  |  |  |  |  |
Net earnings attributable to The Estée Lauder Companies Inc. |  | $ | 156 |  |  | $ | 558 |  |  | $ | 1,039 |  |  | $ | 2,338 |
$ Change from prior-year period |  | (402) |  |  |  |  | (1,299) |  |  |
% Change from prior-year period |  | (72) | % |  |  |  | (56) | % |  |
Diluted net earnings per common share |  | $ | .43 |  |  | $ | 1.53 |  |  | $ | 2.88 |  |  | $ | 6.39 |
% Change from prior-year period |  | (72) | % |  |  |  | (55) | % |  |
Non-GAAP Financial Measure(1): |  |  |  |  |  |  |  |
% Change in diluted net earnings per common share from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, other intangible asset impairments and the change in fair value of acquisition-related stock options |  | (75) | % |  |  |  | (50) | % |  |

(1)See “Reconciliations of Non-GAAP Financial Measures” below for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company’s underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period to period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. The following tables present Net sales, Operating income and Diluted net earnings per common share adjusted to exclude the impact of charges associated with restructuring and other activities; the change in fair value of acquisition-related stock options; other intangible asset impairments; and the effects of foreign currency translation.
The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
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($ in millions, except per share data) |  | Three Months Ended March 31 |  | Variance |  | % Change |  | % Change in constant currency
| 2023 |  | 2022 |  |  |
Net sales, as reported |  | $ | 3,751 |  |  | $ | 4,245 |  |  | $ | (494) |  |  | (12) | % |  | (9) | %
Returns associated with restructuring and other activities |  | 4 |  |  | 1 |  |  | 3 |  |  |  |  |
Net sales, as adjusted |  | $ | 3,755 |  |  | $ | 4,246 |  |  | $ | (491) |  |  | (12) | % |  | (9) | %
Operating income, as reported |  | $ | 297 |  |  | $ | 738 |  |  | $ | (441) |  |  | (60) | % |  | (59) | %
Charges associated with restructuring and other activities |  | 18 |  |  | 23 |  |  | (5) |  |  |  |  |
Other intangible asset impairments |  | — |  |  | 216 |  |  | (216) |  |  |  |  |
Change in fair value of acquisition-related stock options |  | 1 |  |  | (60) |  |  | 61 |  |  |  |  |
Operating income, as adjusted |  | $ | 316 |  |  | $ | 917 |  |  | $ | (601) |  |  | (66) | % |  | (65) | %
Diluted net earnings per common share, as reported |  | $ | .43 |  |  | $ | 1.53 |  |  | $ | (1.10) |  |  | (72) | % |  | (71) | %
Charges associated with restructuring and other activities |  | .04 |  |  | .05 |  |  | (.01) |  |  |  |  |
Other intangible asset impairments |  | — |  |  | .45 |  |  | (.45) |  |  |  |  |
Change in fair value of acquisition-related stock options (less portion attributable to redeemable noncontrolling interest) |  | — |  |  | (.13) |  |  | .13 |  |  |  |  |
Diluted net earnings per common share, as adjusted |  | $ | .47 |  |  | $ | 1.90 |  |  | $ | (1.43) |  |  | (75) | % |  | (74) | %

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($ in millions, except per share data) |  | Nine Months Ended March 31 |  | Variance |  | % Change |  | % Change in constant currency
| 2023 |  | 2022 |  |  |
Net sales, as reported |  | $ | 12,301 |  |  | $ | 14,176 |  |  | $ | (1,875) |  |  | (13) | % |  | (9) | %
Returns associated with restructuring and other activities |  | 10 |  |  | 3 |  |  | 7 |  |  |  |  |
Net sales, as adjusted |  | $ | 12,311 |  |  | $ | 14,179 |  |  | $ | (1,868) |  |  | (13) | % |  | (9) | %
Operating income, as reported |  | $ | 1,514 |  |  | $ | 3,091 |  |  | $ | (1,577) |  |  | (51) | % |  | (48) | %
Charges associated with restructuring and other activities |  | 33 |  |  | 44 |  |  | (11) |  |  |  |  |
Other intangible asset impairments |  | 207 |  |  | 216 |  |  | (9) |  |  |  |  |
Change in fair value of acquisition-related stock options |  | (2) |  |  | (58) |  |  | 56 |  |  |  |  |
Operating income, as adjusted |  | $ | 1,752 |  |  | $ | 3,293 |  |  | $ | (1,541) |  |  | (47) | % |  | (44) | %
Diluted net earnings per common share, as reported |  | $ | 2.88 |  |  | $ | 6.39 |  |  | $ | (3.51) |  |  | (55) | % |  | (52) | %
Charges associated with restructuring and other activities |  | .07 |  |  | .09 |  |  | (.02) |  |  |  |  |
Other intangible asset impairments |  | .44 |  |  | .45 |  |  | (.01) |  |  |  |  |
Change in fair value of acquisition-related stock options (less portion attributable to redeemable noncontrolling interest) |  | (.01) |  |  | (.13) |  |  | .12 |  |  |  |  |
Diluted net earnings per common share, as adjusted |  | $ | 3.38 |  |  | $ | 6.80 |  |  | $ | (3.42) |  |  | (50) | % |  | (47) | %

As diluted net earnings per common share, as adjusted, is used as a measure of the Company’s performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.
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The following tables reconcile the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:

|  | As Reported |  | Impact of foreign currency translation |  | Variance, in constant currency |  | % Change, as reported |  | % Change, in constant currency
|  | Three Months Ended March 31 |  |  |  |  |  |
($ in millions) |  | 2023 |  | 2022 |  | Variance |  |  |  |
By Product Category: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Skin Care |  | $ | 1,922 |  |  | $ | 2,395 |  |  | $ | (473) |  |  | $ | 61 |  |  | $ | (412) |  |  | (20) | % |  | (17) | %
Makeup |  | 1,088 |  |  | 1,114 |  |  | (26) |  |  | 28 |  |  | 2 |  |  | (2) |  |  | — |
Fragrance |  | 585 |  |  | 579 |  |  | 6 |  |  | 16 |  |  | 22 |  |  | 1 |  |  | 4 |
Hair Care |  | 149 |  |  | 147 |  |  | 2 |  |  | 2 |  |  | 4 |  |  | 1 |  |  | 3 |
Other |  | 11 |  |  | 11 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
|  | 3,755 |  |  | 4,246 |  |  | (491) |  |  | 107 |  |  | (384) |  |  | (12) |  |  | (9) |
Returns associated with restructuring and other activities |  | (4) |  |  | (1) |  |  | (3) |  |  | (1) |  |  | (4) |  |  |  |  |
Total |  | $ | 3,751 |  |  | $ | 4,245 |  |  | $ | (494) |  |  | $ | 106 |  |  | $ | (388) |  |  | (12) | % |  | (9) | %
By Region: |  |  |  |  |  |  |  |  |  |  |  |  |  |
The Americas |  | $ | 1,089 |  |  | $ | 1,053 |  |  | $ | 36 |  |  | $ | 1 |  |  | $ | 37 |  |  | 3 | % |  | 4 | %
Europe, the Middle East & Africa |  | 1,474 |  |  | 1,990 |  |  | (516) |  |  | 20 |  |  | (496) |  |  | (26) |  |  | (25) |
Asia/Pacific |  | 1,192 |  |  | 1,203 |  |  | (11) |  |  | 86 |  |  | 75 |  |  | (1) |  |  | 6 |
|  | 3,755 |  |  | 4,246 |  |  | (491) |  |  | 107 |  |  | (384) |  |  | (12) |  |  | (9) |
Returns associated with restructuring and other activities |  | (4) |  |  | (1) |  |  | (3) |  |  | (1) |  |  | (4) |  |  |  |  |
Total |  | $ | 3,751 |  |  | $ | 4,245 |  |  | $ | (494) |  |  | $ | 106 |  |  | $ | (388) |  |  | (12) | % |  | (9) | %

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|  | As Reported |  | Impact of foreign currency translation |  | Variance, in constant currency |  | % Change, as reported |  | % Change, in constant currency
|  | Nine Months Ended March 31 |  |  |  |  |  |
($ in millions) |  | 2023 |  | 2022 |  | Variance |  |  |  |
By Product Category: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Skin Care |  | $ | 6,408 |  |  | $ | 8,003 |  |  | $ | (1,595) |  |  | $ | 298 |  |  | $ | (1,297) |  |  | (20) | % |  | (16) | %
Makeup |  | 3,408 |  |  | 3,674 |  |  | (266) |  |  | 151 |  |  | (115) |  |  | (7) |  |  | (3) |
Fragrance |  | 1,967 |  |  | 1,987 |  |  | (20) |  |  | 100 |  |  | 80 |  |  | (1) |  |  | 4 |
Hair Care |  | 489 |  |  | 475 |  |  | 14 |  |  | 14 |  |  | 28 |  |  | 3 |  |  | 6 |
Other |  | 39 |  |  | 40 |  |  | (1) |  |  | 2 |  |  | 1 |  |  | (3) |  |  | 3 |
|  | 12,311 |  |  | 14,179 |  |  | (1,868) |  |  | 565 |  |  | (1,303) |  |  | (13) |  |  | (9) |
Returns associated with restructuring and other activities |  | (10) |  |  | (3) |  |  | (7) |  |  | (1) |  |  | (8) |  |  |  |  |
Total |  | $ | 12,301 |  |  | $ | 14,176 |  |  | $ | (1,875) |  |  | $ | 564 |  |  | $ | (1,311) |  |  | (13) | % |  | (9) | %
By Region: |  |  |  |  |  |  |  |  |  |  |  |  |  |
The Americas |  | $ | 3,447 |  |  | $ | 3,547 |  |  | $ | (100) |  |  | $ | (13) |  |  | $ | (113) |  |  | (3) | % |  | (3) | %
Europe, the Middle East & Africa |  | 4,972 |  |  | 6,201 |  |  | (1,229) |  |  | 205 |  |  | (1,024) |  |  | (20) |  |  | (17) |
Asia/Pacific |  | 3,892 |  |  | 4,431 |  |  | (539) |  |  | 373 |  |  | (166) |  |  | (12) |  |  | (4) |
|  | 12,311 |  |  | 14,179 |  |  | (1,868) |  |  | 565 |  |  | (1,303) |  |  | (13) |  |  | (9) |
Returns associated with restructuring and other activities |  | (10) |  |  | (3) |  |  | (7) |  |  | (1) |  |  | (8) |  |  |  |  |
Total |  | $ | 12,301 |  |  | $ | 14,176 |  |  | $ | (1,875) |  |  | $ | 564 |  |  | $ | (1,311) |  |  | (13) | % |  | (9) | %

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The following tables reconcile the change in operating results by product category and geographic region, as reported, to the change in operating income excluding the impact of other intangible asset impairments and the change in fair value of acquisition-related stock options:

|  | As Reported |  | Add: Changes in Other intangible asset impairments |  |  |  | Add: Change in fair value of acquisition-related stock options |  | Variance, as adjusted |  | % Change, as reported |  | % Change, as adjusted
|  | Three Months Ended March 31 |  |  |  |  |  |  |  |
($ in millions) |  | 2023 |  | 2022 |  | Variance |  |  |  |  |  |
By Product Category: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Skin Care |  | $ | 256 |  |  | $ | 667 |  |  | $ | (411) |  |  | $ | (216) |  |  |  |  | $ | 59 |  |  | $ | (568) |  |  | (62) | % |  | (69) | %
Makeup |  | (15) |  |  | 7 |  |  | (22) |  |  | — |  |  |  |  | 2 |  |  | (20) |  |  | (100+) |  | (100+)
Fragrance |  | 89 |  |  | 105 |  |  | (16) |  |  | — |  |  |  |  | — |  |  | (16) |  |  | (15) |  |  | (15) |
Hair Care |  | (24) |  |  | (18) |  |  | (6) |  |  | — |  |  |  |  | — |  |  | (6) |  |  | (33) |  |  | (33) |
Other |  | 9 |  |  | — |  |  | 9 |  |  | — |  |  |  |  | — |  |  | 9 |  |  | 100+ |  | 100+
|  | 315 |  |  | 761 |  |  | (446) |  |  | $ | (216) |  |  |  |  | $ | 61 |  |  | $ | (601) |  |  | (59) | % |  | (66) | %
Charges associated with restructuring and other activities |  | (18) |  |  | (23) |  |  | 5 |  |  |  |  |  |  |  |  |  |  |  |  |
Total |  | $ | 297 |  |  | $ | 738 |  |  | $ | (441) |  |  |  |  |  |  |  |  |  |  |  |  |
By Region: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
The Americas |  | $ | (93) |  |  | $ | 408 |  |  | $ | (501) |  |  | $ | (11) |  |  |  |  | $ | 61 |  |  | $ | (451) |  |  | (100+)% |  | (100+)%
Europe, the Middle East & Africa |  | 176 |  |  | 281 |  |  | (105) |  |  | — |  |  |  |  | — |  |  | (105) |  |  | (37) |  |  | (37) |
Asia/Pacific |  | 232 |  |  | 72 |  |  | 160 |  |  | (205) |  |  |  |  | — |  |  | (45) |  |  | 100+ |  | (16) |
|  | 315 |  |  | 761 |  |  | (446) |  |  | $ | (216) |  |  |  |  | $ | 61 |  |  | $ | (601) |  |  | (59) | % |  | (66) | %
Charges associated with restructuring and other activities |  | (18) |  |  | (23) |  |  | 5 |  |  |  |  |  |  |  |  |  |  |  |  |
Total |  | $ | 297 |  |  | $ | 738 |  |  | $ | (441) |  |  |  |  |  |  |  |  |  |  |  |  |

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|  | As Reported |  | Add: Changes in Other intangible asset impairments |  |  |  | Add: Change in fair value of acquisition-related stock options |  | Variance, as adjusted |  | % Change, as reported |  | % Change, as adjusted
|  | Nine Months Ended March 31 |  |  |  |  |  |  |  |
($ in millions) |  | 2023 |  | 2022 |  | Variance |  |  |  |  |  |
By Product Category: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Skin Care |  | $ | 1,207 |  |  | $ | 2,466 |  |  | $ | (1,259) |  |  | $ | (116) |  |  |  |  | $ | 54 |  |  | $ | (1,321) |  |  | (51) | % |  | (50) | %
Makeup |  | (36) |  |  | 228 |  |  | (264) |  |  | 107 |  |  |  |  | 2 |  |  | (155) |  |  | (100+) |  | (69) |
Fragrance |  | 399 |  |  | 446 |  |  | (47) |  |  | — |  |  |  |  | — |  |  | (47) |  |  | (11) |  |  | (11) |
Hair Care |  | (31) |  |  | (8) |  |  | (23) |  |  | — |  |  |  |  | — |  |  | (23) |  |  | (100+) |  | (100+)
Other |  | 8 |  |  | 3 |  |  | 5 |  |  | — |  |  |  |  | — |  |  | 5 |  |  | 100+ |  | 100+
|  | 1,547 |  |  | 3,135 |  |  | (1,588) |  |  | $ | (9) |  |  |  |  | $ | 56 |  |  | $ | (1,541) |  |  | (51) | % |  | (47) | %
Charges associated with restructuring and other activities |  | (33) |  |  | (44) |  |  | 11 |  |  |  |  |  |  |  |  |  |  |  |  |
Total |  | $ | 1,514 |  |  | $ | 3,091 |  |  | $ | (1,577) |  |  |  |  |  |  |  |  |  |  |  |  |
By Region: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
The Americas |  | $ | (53) |  |  | $ | 1,044 |  |  | $ | (1,097) |  |  | $ | 96 |  |  |  |  | $ | 56 |  |  | $ | (945) |  |  | (100+)% |  | (95) | %
Europe, the Middle East & Africa |  | 919 |  |  | 1,366 |  |  | (447) |  |  | — |  |  |  |  | — |  |  | (447) |  |  | (33) |  |  | (33) |
Asia/Pacific |  | 681 |  |  | 725 |  |  | (44) |  |  | (105) |  |  |  |  | — |  |  | (149) |  |  | (6) |  |  | (16) |
|  | 1,547 |  |  | 3,135 |  |  | (1,588) |  |  | $ | (9) |  |  |  |  | $ | 56 |  |  | $ | (1,541) |  |  | (51) | % |  | (47) | %
Charges associated with restructuring and other activities |  | (33) |  |  | (44) |  |  | 11 |  |  |  |  |  |  |  |  |  |  |  |  |
Total |  | $ | 1,514 |  |  | $ | 3,091 |  |  | $ | (1,577) |  |  |  |  |  |  |  |  |  |  |  |  |

FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad. At March 31, 2023, we had cash and cash equivalents of $5,531 million compared with $3,957 million at June 30, 2022. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.
Based on past performance and current expectations, we believe that cash on hand, cash generated from operations, available credit lines and access to credit markets will be adequate to support seasonal working capital needs, currently planned business operations, information technology enhancements, capital expenditures, acquisitions, dividends, stock repurchases, restructuring initiatives, commitments and other contractual obligations on both a near-term and long-term basis.
The Tax Cuts and Jobs Act (“TCJA”) resulted in the Transition Tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional U.S. federal income tax. As a result, we changed our indefinite reinvestment assertion related to certain foreign earnings, and we continue to analyze the indefinite reinvestment assertion on our remaining applicable foreign earnings. We do not believe that continuing to reinvest our foreign earnings impairs our ability to meet our domestic debt or working capital obligations. If these reinvested earnings were repatriated into the United States as dividends, we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions.
The effects of inflation have not been significant to our overall operating results in recent years; however, we have experienced inflationary pressures during the current year. Generally, we have been able to introduce new products at higher prices, increase prices and implement other operating efficiencies to offset some of these cost increases.
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On April 28, 2023, we completed the acquisition of the TOM FORD brand that we announced in November 2022. The amount paid by us at closing was approximately $2,250 million. This amount was funded by cash on hand and proceeds from the issuance of commercial paper, and approximately $250 million received at closing from Marcolin S.p.A. (a continuing TOM FORD licensee). An aggregate amount of $300 million in deferred payments, at 5% interest per annum, to the sellers becomes due from us beginning in July 2025. The completion of the acquisition of the brand resulted in the elimination of the existing license royalty payments on our TOM FORD Beauty business.
Credit Ratings
Changes in our credit ratings will likely result in changes in our borrowing costs. Our credit ratings also impact the cost of our revolving credit facility. Downgrades in our credit ratings may reduce our ability to issue commercial paper and/or long-term debt and would likely increase the relative costs of borrowing. A credit rating is not a recommendation to buy, sell, or hold securities, is subject to revision or withdrawal at any time by the assigning rating organization, and should be evaluated independently of any other rating. As of April 26, 2023, our long-term debt is rated A+ with a stable outlook by Standard & Poor’s and A1 with a stable outlook by Moody’s.
Debt
At March 31, 2023, our outstanding borrowings were as follows:

($ in millions) |  | Long-term Debt |  | Current Debt |  | Total Debt
3.125% Senior Notes, due December 1, 2049 (“2049 Senior Notes”) (1), (12) |  | $ | 636 |  |  | $ | — |  |  | $ | 636 |
4.15% Senior Notes, due March 15, 2047 (“2047 Senior Notes”) (2), (12) |  | 494 |  |  | — |  |  | 494 |
4.375% Senior Notes, due June 15, 2045 (“2045 Senior Notes”) (3), (12) |  | 454 |  |  | — |  |  | 454 |
3.70% Senior Notes, due August 15, 2042 (“2042 Senior Notes”) (4), (12) |  | 247 |  |  | — |  |  | 247 |
6.00% Senior Notes, due May 15, 2037 (“2037 Senior Notes”) (5), (12) |  | 295 |  |  | — |  |  | 295 |
5.75% Senior Notes, due October 15, 2033 (“2033 Senior Notes”) (6) |  | 197 |  |  | — |  |  | 197 |
1.950% Senior Notes, due March 15, 2031 ("2031 Senior Notes") (7), (12) |  | 556 |  |  | — |  |  | 556 |
2.600% Senior Notes, due April 15, 2030 ("2030 Senior Notes") (8), (12) |  | 602 |  |  | — |  |  | 602 |
2.375% Senior Notes, due December 1, 2029 (“2029 Senior Notes”) (9), (12) |  | 643 |  |  | — |  |  | 643 |
3.15% Senior Notes, due March 15, 2027 (“2027 Senior Notes”) (10), (12) |  | 499 |  |  | — |  |  | 499 |
2.00% Senior Notes, due December 1, 2024 (“2024 Senior Notes”) (11), (12) |  | 498 |  |  | — |  |  | 498 |
Commercial paper (13) |  | — |  |  | 2,233 |  |  | 2,233 |
Other long-term borrowings |  | 7 |  |  | — |  |  | 7 |
Other current borrowings |  | — |  |  | 10 |  |  | 10 |
|  | $ | 5,128 |  |  | $ | 2,243 |  |  | $ | 7,371 |

(1)Consists of $650 million principal, unamortized debt discount of $8 million and debt issuance costs of $6 million.
(2)Consists of $500 million principal, unamortized debt discount of $1 million and debt issuance costs of $5 million.
(3)Consists of $450 million principal, net unamortized debt premium of $9 million and debt issuance costs of $5 million.
(4)Consists of $250 million principal, unamortized debt discount of $1 million and debt issuance costs of $2 million.
(5)Consists of $300 million principal, unamortized debt discount of $3 million and debt issuance costs of $2 million.
(6)Consists of $200 million principal, unamortized debt discount of $2 million and debt issuance costs of $1 million.
(7)Consists of $600 million, principal, unamortized debt discount of $3 million, debt issuance costs of $4 million and a $37 million loss to reflect the fair value of interest rate swaps.
(8)Consists of $700 million principal, unamortized debt discount of $1 million, debt issuance costs of $3 million and a $94 million loss to reflect the fair value of interest rate swaps.
(9)Consists of $650 million principal, unamortized debt discount of $4 million and debt issuance costs of $3 million.
(10)Consists of $500 million principal and debt issuance costs of $1 million.
(11)Consists of $500 million principal, unamortized debt discount of $1 million and debt issuance costs of $1 million.
(12)The Senior Notes contain certain customary incurrence–based covenants, including limitations on indebtedness secured by liens.
(13)Consists of $2,250 million principal and unamortized debt discount of $17 million.
Total debt as a percent of total capitalization was 56% and 49% at March 31, 2023 and June 30, 2022, respectively.
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In January 2023, we entered into a $2,000 million senior unsecured revolving credit facility that expires on January 2, 2024 (the “364-Day Facility”) for liquidity support for our commercial paper program and general corporate purposes, of which the entire amount is currently undrawn and available. Interest rates on borrowings under the 364-Day Facility will be based on prevailing market interest rates in accordance with the agreement.
In January 2023, in connection with the 364-Day Facility, we increased our commercial paper program under which we may issue commercial paper in the United States from $2,500 million to $4,500 million. As of April 26, 2023, we had $3,410 million outstanding under our commercial paper program.
Cash Flows

|  | Nine Months Ended March 31
(In millions) |  | 2023 |  | 2022
Net cash flows provided by operating activities |  | $ | 1,017 |  |  | $ | 1,969 |
Net cash flows used for investing activities |  | $ | (527) |  |  | $ | (563) |
Net cash flows provided by (used for) financing activities |  | $ | 1,090 |  |  | $ | (2,516) |

The change in net cash flows provided by operating activities primarily reflected lower earnings before tax, excluding non-cash items, partially offset by the favorable change in working capital, reflecting a favorable change in accounts receivable and inventory and promotional merchandise, partially offset by lower other accrued and noncurrent liabilities, which includes the settlement of net investment hedges and lower accounts payable due to timing of payments.
The change in net cash flows used for investing activities primarily reflected a favorable impact from the settlement of net investment hedges, which is offset by the unfavorable change in other accrued liabilities as discussed above.
The change in net cash flows provided by (used for) financing activities primarily reflected an increase in current debt due to the increase in proceeds from commercial paper and lower treasury stock repurchases compared to the prior-year period, partially offset by an increase in repayments of long-term debt.
Dividends
For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the nine months ended March 31, 2023, see Notes to Consolidated Financial Statements, Note 11 – Equity and Redeemable Noncontrolling Interest.
Pension and Post-retirement Plan Funding
There have been no significant changes to our pension and post-retirement funding as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.
Commitments, Contractual Obligations and Contingencies
There have been no other significant changes to our commitments and contractual obligations as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, except as disclosed in Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies. For a discussion of contingencies, see Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies.
Derivative Financial Instruments and Hedging Activities
For a discussion of our derivative financial instruments and hedging activities, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments.
Foreign Exchange Risk Management
For a discussion of foreign exchange risk management, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments (Cash Flow Hedges, Net Investment Hedges).
Credit Risk
For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments (Credit Risk).
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Market Risk
We address certain financial exposures through a controlled program of market risk management that includes the use of foreign currency forward contracts to reduce the effects of fluctuating foreign currency exchange rates and to mitigate the change in fair value of specific assets and liabilities on the balance sheet. To perform a sensitivity analysis of our foreign currency forward contracts, we assess the change in fair values from the impact of hypothetical changes in foreign currency exchange rates. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our portfolio would have resulted in a net decrease in the fair value of our portfolio of approximately $301 million and $259 million as of March 31, 2023 and June 30, 2022, respectively. This potential change does not consider our underlying foreign currency exposures.
We also enter into cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our cross-currency swap contracts would have resulted in a net decrease in the fair value of our cross-currency swap contracts of approximately $49 million as of March 31, 2023.
In addition, we enter into interest rate derivatives to manage the effects of interest rate movements on our aggregate liability portfolio, including future debt issuances. Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $11 million and $41 million as of March 31, 2023 and June 30, 2022, respectively.
Our sensitivity analysis represents an estimate of reasonably possible net losses that would be recognized on our portfolio of derivative financial instruments assuming hypothetical movements in future market rates and is not necessarily indicative of actual results, which may or may not occur. It does not represent the maximum possible loss or any expected loss that may occur, since actual future gains and losses will differ from those estimated, based upon actual fluctuations in market rates, operating exposures, and the timing thereof, and changes in our portfolio of derivative financial instruments during the year. We believe, however, that any such loss incurred would be offset by the effects of market rate movements on the respective underlying transactions for which the derivative financial instrument was intended.
OFF-BALANCE SHEET ARRANGEMENTS
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.
CRITICAL ACCOUNTING POLICIES
As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those financial statements. These estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies relate to goodwill, other intangible assets and long-lived assets - impairment assessment and income taxes. Since June 30, 2022, there have been no significant changes to the assumptions and estimates related to our critical accounting policies, except as disclosed in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 39-40.
RECENTLY ISSUED ACCOUNTING STANDARDS
For a discussion regarding the impact of accounting standards that were recently issued but not yet effective, on the Company’s consolidated financial statements, see Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
We and our representatives from time to time make written or oral forward-looking statements, including in this and other filings with the Securities and Exchange Commission, in our press releases and in our reports to stockholders, which may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may address our expectations regarding sales, earnings or other future financial performance and liquidity, other performance measures, product introductions, entry into new geographic regions, information technology initiatives, new methods of sale, our long-term strategy, restructuring and other charges and resulting cost savings, and future operations or operating results. These statements may contain words like “expect,” “will,” “will likely result,” “would,” “believe,” “estimate,” “planned,” “plans,” “intends,” “may,” “should,” “could,” “anticipate,” “estimate,” “project,” “projected,” “forecast,” and “forecasted” or similar expressions. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, actual results may differ materially from our expectations. Factors that could cause actual results to differ from expectations include, without limitation:
(1)increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses;
(2)our ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in our business;
(3)consolidations, restructurings, bankruptcies and reorganizations in the retail industry causing a decrease in the number of stores that sell our products, an increase in the ownership concentration within the retail industry, ownership of retailers by our competitors or ownership of competitors by our customers that are retailers and our inability to collect receivables;
(4)destocking and tighter working capital management by retailers;
(5)the success, or changes in timing or scope, of new product launches and the success, or changes in timing or scope, of advertising, sampling and merchandising programs;
(6)shifts in the preferences of consumers as to where and how they shop;
(7)social, political and economic risks to our 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;
(8)changes in the laws, regulations and policies (including the interpretations and enforcement thereof) that affect, or will affect, our business, including those relating to our products or distribution networks, changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action we may take as a result;
(9)foreign currency fluctuations affecting our results of operations and the value of our foreign assets, the relative prices at which we and our foreign competitors sell products in the same markets and our operating and manufacturing costs outside of the United States;
(10)changes in global or local conditions, including those due to volatility in the global credit and equity markets, natural or man-made disasters, real or perceived epidemics, supply chain challenges, inflation, or increased energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase our products while traveling, the financial strength of our customers, suppliers or other contract counterparties, our operations, the cost and availability of capital which we may need for new equipment, facilities or acquisitions, the returns that we are able to generate on our pension assets and the resulting impact on funding obligations, the cost and availability of raw materials and the assumptions underlying our critical accounting estimates;
(11)impacts attributable to the COVID-19 pandemic, including disruptions to our global business;
(12)shipment delays, commodity pricing, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture our products or at our distribution or inventory centers, including disruptions that may be caused by the implementation of information technology initiatives, or by restructurings;
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(13)real estate rates and availability, which may affect our ability to increase or maintain the number of retail locations at which we sell our products and the costs associated with our other facilities;
(14)changes in product mix to products which are less profitable;
(15)our ability to acquire, develop or implement new information and distribution technologies and initiatives on a timely basis and within our cost estimates and our ability to maintain continuous operations of such systems and the security of data and other information that may be stored in such systems or other systems or media;
(16)our ability to capitalize on opportunities for improved efficiency, such as publicly-announced strategies and restructuring and cost-savings initiatives, and to integrate acquired businesses and realize value therefrom;
(17)consequences attributable to local or international conflicts around the world, as well as from any terrorist action, retaliation and the threat of further action or retaliation;
(18)the timing and impact of acquisitions, investments and divestitures; and
(19)additional factors as described in our filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended June 30, 2022.
We assume no responsibility to update forward-looking statements made herein or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The information required by this item is set forth in Item 2 of this Quarterly Report on Form 10-Q under the caption Liquidity and Capital Resources - Market Risk and is incorporated herein by reference.
Item 4. Controls and Procedures.
Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of March 31, 2023 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.
As part of our review of internal control over financial reporting, we make changes to systems and processes to improve such controls and increase efficiencies, while ensuring that we maintain an effective internal control environment. There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the third quarter of fiscal 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
For a discussion of legal proceedings, see Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Share Repurchase Program
We are authorized by the Board of Directors to repurchase shares of our Class A Common Stock in the open market or in privately negotiated transactions, depending on market conditions and other factors. The following table provides information relating to our repurchase of Class A Common Stock during the referenced periods:

Period |  | Total Number of Shares Purchased(1) |  | Average Price Paid Per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Program |  | Maximum Number of Shares that May Yet Be Purchased Under the Program(2)
January 2023 |  | 5,100 |  | $ | 270.02 |  |  | — |  | 25,073,242
February 2023 |  | 104 |  | 242.00 |  |  | — |  | 25,073,242
March 2023 |  | 93 |  | 247.34 |  |  | — |  | 25,073,242
|  | 5,297 |  | 269.07 |  |  | — |  |

(1)Includes shares that were repurchased by the Company to satisfy tax withholding obligations upon the payout of certain stock-based compensation arrangements.
(2)The Board of Directors has authorized the current repurchase program for up to 80.0 million shares. The total amount was last increased by the Board on October 31, 2018. Our repurchase program does not have an expiration date.
Beginning in December 2022, we temporarily suspended the repurchase of shares of our Class A Common Stock. We may resume repurchases in the future.
Item 6. Exhibits.

Exhibit Number |  | Description
10.1 |  | Employment Agreement with Jane Lauder (SEC File No. 1-14064).†
31.1 |  | Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO).
31.2 |  | Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO).
32.1 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO). (furnished)
32.2 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO). (furnished)
101.1 |  | The following materials from The Estée Lauder Companies Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements
104 |  | The cover page from The Estée Lauder Companies Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023 is formatted in iXBRL

† Exhibit is a management contract or compensatory plan or arrangement.
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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 thereunto duly authorized.

| THE ESTÉE LAUDER COMPANIES INC.
| By: | /s/ TRACEY T. TRAVIS
Date: May 3, 2023 |  | Tracey T. Travis
|  | Executive Vice President and Chief Financial Officer
|  | (Principal Financial and Accounting Officer)

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