University of Tennessee, Knoxville

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Supervised Undergraduate Student Research

Chancellor’s Honors Program Projects and Creative Work

5-2002

The Estee Lauder Companies Background and History

Ashley Brooke Howerton
University of Tennessee - Knoxville

Follow this and additional works at: https://trace.tennessee.edu/utk_chanhonoproj

Part of the Other Business Commons

Recommended Citation
Howerton, Ashley Brooke, "The Estee Lauder Companies Background and History" (2002). Chancellor’s
Honors Program Projects.
https://trace.tennessee.edu/utk_chanhonoproj/553

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Appendix E- UNIVERSITY HONORS PROGRAM
SENIOR PROJECT - APPROVAL

College: -I!h~ Department: ~ LAd

Faculty Mentor: a ..aa..tt.dA~ L
PROJECT TITLE: fu.., £ &&.i,lh ~t(.u

~~~~.r

his completed senior honors thesis with this student and certify that it is a project
ith honors 1 el undergraduate research in this field.

Signed: -""jL_ _"-----==-~~'-C"L.:..--=~~~..-:------' Faculty Mentor

Date: 2/z, I~
-----.;C-!+---=7~~t!L-=---

General Assessment - please provide a short paragraph that highlights the most significant
features of the project.

Comments (Optional):

Brooke has done a gcxxl job of researching and analyzing the major business
theroos associated with Estee Lauder I s marketplace perfonnance. She merged
data from a variety of primary and secondary sources, and did a nice job
organizing and analyzing the data.
Brooke was a pleasure to work with, she responded well to my carments and feedback,
and she put in significant effort on this reIX>rt.
The Estee Lauder Companies
Background and History
by
Ashley.Brooke Howerton
 Executive Summary

I selected the topic of "Estee Lauder Companies Background and History"

because I am thoroughly interested in the subject matter. I am a consultant for Clinique at

Proffitts Knoxville Center. I am interested in moving forward with the company and

developing a future with Clinique by making it a career.

Research on this topic has been extensive. I have gotten basic company

information, internal documents, company chronology, press releases, financial

institution information and of course first-hand knowledge. The researched information

came in most part from the Internet at various sites. The internal documents consist of

information sent to consultants worldwide. The financial information came from Morgan

Stanley.

I discovered in the research a great deal of knowledge about the Estee Lauder

Companies Inc. in which I was unaware of prior to the research. The five key subjects

'that I focused on were background and history, financial development, operational

strategies, brand equity and innovation/social responsibility. One key finding is the

number of companies in which the Estee Lauder Companies consist. The Company's

products are sold in over 120 countries and territories under well-recognized brand

names, including Estee Lauder, Aramis, Clinique, Prescriptives, Origins, MAC, La Mer,

Bobbi Brown, Tommy Hilfiger,jane, Donna Karan, Aveda, Stila, Jo Malone and Bumble

and bumble. I also discovered a large amount of research from Morgan Stanley about the

flllancial development of the company. The Company has posted a 23% compound

annual growth since 1996 and has completed about $800 million in acquisitions in recent
years. Also, Estee Lauder holds the number one position with a market share of at least

500/0 in the U.S. prestige beauty market, with a 550/0 share in makeup and skincare and

30% in fragrances.

I have thoroughly enjoyed researching this topic of choice. I learned a great deal

about the Estee Lauder Companies Inc. I feel confident that the company" will continue its

successfulness in the upcoming years. I look forward to continuing my career with them

in the future.
 Table of Contents

Estee Lauder Companies Background and History .......................................... 1

Company Timeline ....................................................................... 1-2

Financial Development. .......................................................................... 2-9

Press Release ............................................................................... 4

Morgan Stanley Research Update .... : ................................................ .4-6

Downgrade ................................................................................ 6-7

Growth Strategies .......................................................................... 7

Investment Risks ......................................................................... 8-9

Operational Strategies ............................................................................ 9-12

Supply-Chain Management. ............................................................. 11

Internet Strategy .......................................................................... 11

Company Addition ........................................ ; ............................... 12

Brand Equity ........................................................................................ 13

Innovation/Social Responsibility .............................................................. 13-19

Safe Environment ................. , ....................................................... 14

Equal Opportunity Employment. .................................................... 15-16

Philanthropy ............................................................................ 16-1 7

Corporate Contributions .............................................................. 17-18

Employee Volunteerism .... , .......................................................... 18

 Estee Lauder Companies Background and History

The Estee Lauder Companies is one of the world's leading manufacturers and

marketers of quality skin care, makeup, fragrance and, recently, hair care products. The

.., Company's products are sold in over 120 countries and territories under well-recognized
....
.-..
brand names, including Estee Lauder, Aramis, Clinique, Prescriptives, Origins, MAC, La

Mer, Bobbi Brown, Tommy Hilfiger, jane, Donna Karan, A veda, Stila, Jo Malone and
~
Bumble and bumble .
.,
... Company Timeline
....
... The Company was founded in 1946 by Mrs. Estee Lauder and her husband,

... Joseph Lauder. Although the principal brand began with Estee Lauder the company

.... progressed to a great deal more .

~
• Estee Lauder, was launched with four products: Super Rich All Purpose
~

.,. Creme, Creme Pack, Cleansing Oil, and Skin Lotion .

... • Following this launch was Aramis, a line of high prestige fragrance and
.....
., grooming products for men, in 1964 .
..,
• Clinique, the first allergy-tested, dermatologist-guided, fragrance free
"IIIJt

..,
...,., •
cosmetics brand, followed in 1968 .

Prescriptives, a color authority with an advanced collection of highly

--.... individualized products, was founded in 1979 .

., • Origins Natural Resources, a line of skin care, makeup, bath/body and

.., Sensory Therapy products that use age-old remedies from nature, was
.,
.... introduced in 1990 .
..,.
~

.....
 2

• In the 1990s the Company acquired two important makeup artist brands:

MAC and Bobbi Brown. The Company acquired a majority equity interest in

MAC in 1994, completing the acquisition in 1998. Bobbi Brown was acquired

...... •
in 1995 .

In 1997, the Company invented Sassaby, Inc., owner of the color cosmetics
.,
,.., brand jane, and Aveda Corporation, a leader ip the U.S. prestige hair care
...
-....
., •
industry.

In 1999, the Company then invented Stila Cosmetics, Inc., a Los Angeles-

based prestigious cosmetics company, and Jo Malone, the London-based

..,.

.....
~

•
marketer of prestige skin care and fragrance products.

In 2000, the Company acquired a majority equity interest in New York-based

..... Bumble and bumble, a premier hair salon, and Bumble and bumble products,
.....
a developer, marketer and distributor of quality hair care products .
.....
.,
... • The Estee Lauder Companies is also the global licensee for fragrances and

-
.......
cosmetics for the Tommy Hilfiger, Donna Karan New York, DKNY and Kate

Spade brands .

.... Financial Development

.... The Estee Lauder Companies hoped to accomplish diversity in the marketplace by

-
.....
undertaking this dynamic strategy. According to Morgan Stanley this acquisition became
..,
.., a success for the once meager cosmetics company. Morgan Stanley calculates that the

.., company has posted a 230/0 compound annual growth since 1996 and has completed
.,
....... about $800 million in acquisitions in recent years. Trade industry data have shown that

.....
 .,
J

Estee Lauder holds the number one position with a market share of at least 500/0 in the

U.S. prestige beauty market, with a 550/0 share in makeup and skincare and 300/0 in

fragrances. It has increased its market share, aided by its strong portfolio of brands (7).

For fiscal year 2001, net sales were $4.6 billion and net earnings before the

cumulative effect of a change in accounting principle and before restructuring and other

one-time charges were $347.7 million. The Company has recorded more than 45 years of

consecutive annual sales increases. During this time the Americas region represented

61 % of net sales and 540/0 of operating income before restructuring and other

nonrecurring charges. Morgan Stanley rates Estee Lauder Outperform, with a $37 price

target, which they calculate to be a fair value, based on a weighted average of traditional

multiples and intrinsic valuation. The Estee Lauder Companies shares' drop in 2001 has

been deeper in retreats by the company's global peers and the S & P 500-stock index. Yet

Estee Lauder is statistically attractive, in Morgan Stanley's view, in terms of its relative

price-to-eamings multiple and their estimates of the ratio of the company's earnings

before interest, taxes, depreciation, and amortization for calendar 2002. Estee Lauder has

dominant market shares, a strong balance sheet, and solid returns on assets, with near-

term EPS uncertainties linked to consumer spending. Morgan Stanley believes possible

elimination of excess inventories soon could be a catalyst for the stock. Estee Lauder has

-
indicated that excess inventories should be eliminated by the third quarter of fiscal 2002,

partly through adjusted production ~ates and a gradual recovery expected in U.S. and

travel retailing (13). Morgan Stanley forecasts Estee Lauder will generate free cash flow

of $222 million, or 630/0 of the financial corporations estimate of net income, slightly less
 4

.....
....
than the sector average. Morgan Stanley believes that Estee Lauder is underleveraged,

.... and they project interest coverage and return on net assets that would exceed the

--,., company's weighted average cost of capital. With its outsize returns, low debt, strong

free cash flow, and a low capital-spending business, the company s~ould be able to
--
"lIP accumulate a lot of cash to make further strategic acquisitions and repurchase its shares,

.....,-- in their view .

...... Press Release

In a recent press release on December 19, 2001, The Estee Lauder Companies Inc .
,.,
., announced it is revising downward its net sales and net earnings expectations for its fiscal

...... 2002 second quarter. This unexpected drop lowered consumer confidence, spending and

..
~
travel. The lower expectations are primarily due to the significant inventory contraction

by U.S. retailers. Despite erosion of economic conditions and consumer sentiment, at this
~

.,. point in the quarter, consumer take away of the Company's products has outpaced sell-in

... by approximately 50/0 in the U.S. In addition, the Company's freestanding retail stores

--
-
.....
continue to generate strong results (9).

Morgan Stanley Research Update

....-- In a recent Morgan Stanley research update on January 30, Estee Lauder was

--
-
~

,.,
downgraded to neutral from outperform. They also reduced their F2002 EPS ending June

to $1.15 (versus $ L20 previously). Their initial point estimate for F2003 is $1.33. While

... growth has been stymied, reflecting inventory contraction by U.S. retailers and softness

--
..,
at travel retail, Morgan Stanley thinks Estee Lauder needs to do a better job retrenching

..
~
and restricting capital. With a 460/0 share in the U.S., Estee Lauder has become a market

,.,
,.,
 5

leader, and Morgan Stanley has little doubt that two to three years from now the company
...,
..
..., will remain a dominant player in the industry (13) .

Morgan Stanley's sector investment approach has been to try to identify

--
."
undervalued companies that will likely generate improving return on net operating assets .
,... The company recommended Estee Lauder in 1999 because they believed Estee Lauder
.,
was in the early innings of its development as a prestige cosmetics company. While Estee
--
.,
-
.,
,.,
Lauder's competition position is good and getting better, in their view, its ROrC is

declining. Morgan Stanley forecasts asset turns to decline to lAx in F2002 from 2.0x in

F1997, for return on net operating assets of 17-18% versus 320/0 in 1997. Returns will
.,
.., likely be hampered by working capital inefficiencies and a business model that is
~
becoming more retail-oriented, and conseql;lently more capital intensive. Morgan Stanley
..,
"W expects operating margins to decline to 10.5%) from 12.1 % a year ago and all while
., industry demand is slowing. Although the stock has rebounded off its December low, it
.,
..... has not done well. In the last 12 months, the shares are down 21 % versus down 20% for
,.
the S & P 500 and up 6% for the global peer universe. Still, Morgan Stanley believes the
,..
... current valuation does not reflect Estee Lauder's deteriorating business fundamentals .
...
...
....
The shares are trading at 25 times C2002 PIE versus 24 times for the global peer group .

Based on a weighted average of traditional multiples, Morgan Stanley sees 12-month fair
,..,
,.., value of $33, below its current price. That said, Morgan Stanley believes this is a stock

.., the market will likely come back to, particularly if the company does a good job of
..,
..., retrenching and restricting capitaL Estee Lauder's market shares at Makeup and Skincare

,.,.
.,
,..,
...
 6

are still strong, the balance sheet is rock solid and travel retail could certainly become

more cooperative (13).

.... Downgrade
....,. Morgan Stanley has lowered their F2002 EPS forecast by $0.05 to $1.15 (down
....
-
...,..
14%) to reflect higher-than-expected marketing investments in the second half ofF2002

to bolster revenue growth. Morgan Stanley forecasts F2002 sales to be flat to down 1% .

...., This should be driven by Asia Pacific, while sales should remain virtually flat hit by

contiriw~g weakness in travel retail, and Americas should decline 1-20/0. Once again,
...,
Haircare should be the fastest growing division, followed by Skincare, Makeup, while
...,
~ . Fragrance should decline 10%, as a result of lower department store and travel retail
...,
revenues. Earnings should be helped by a lower tax rate and reduced interest expenses,
.".,
...., partly offset by increased minority interests. The primary reasons for the downgrade are
... the following:

1. Returns are still under pressure - Estee Lauder's return on invested capital has

been trending down over the past five years and they forecast ROlC to fall

340/bps to 17.60/0 in F2002. Over the past few years, Estee Lauder has been

actively opening new free-standing stores under the Aveda, MAC and Origins

brands. The company now owns 340 stores and intends to open another 60-

160 doors within the next couple of years. The opening of new standing store

requires a capital investment of $350-400 million and sales usually reach

$750,000 to $1 million in the first year of operation. After two to three years
 7

of business, profitability ramps up to 150/0, on average, as strong volume gro~h

more than offsets start-up costs.

2. Deteriorating profitability Due to the before mentioned F2002 operating

margins to 10.50/0 from 12.1 % a year ago, Estee Lauder management could be

more proactive with cost cutting. There is significant potential for overhead

cost improvement. Morgan Stanley calculated that a decrease of overhead

expenses to the sector average level, would generate $780 million extra

profits, or an additional $2.00 on earnings.

3. Sluggish industry growth - While Estee Lauder fared somewhat better than

the market in 2001, Prestige Beauty sales in U.S. Department stores declined

20/0 in the fourth quarter versus more normalized growth of 4-50/0. The

slowdown was triggered by the U.S. recession and compounded by September

11 th events. Morgan Stanley expects 2002 to remain challenging with a

potential upturn in the economy lying ahead in the back half of the year.

Growth Strategies

One of the ways the Company is growing is by acquiring companies that make

sense to the organization. Estee Lauder projects long-term earnings growth

at 7 -90/0 annually and has an EBIT margin target of 150/0. The following are criteria which

the Company uses in acquiring new brands or companies: they must be unique business

opportunities that complement - not cannibalize - its existing brands; they must focus on

quality and innovation; they must have the potential for global development and they

must have the potential for long-term growth both in the U.S. and internationally (4).
 8

Investment Risks

,The Estee Lauder Companies face three key investment risks:

• Susceptibility to economic downturns. Estee Lauder's'EPS face

pressure from the U.S. recession, doubts about consumer confidence

and spending, and U.S. retailers' contraction of inventories. Morgan

Stanley's EPS estimates also reflect expected pressure on margins and

a more tempered outlook for travel retail in Europe and Japan; this

business accounts for 5-6% of sales. In response to slowing

economies, and especially effects on U.S. sales, Morgan Stanley has

• lowered their estimate of Estee Lauder's sales growth for fiscal 2002

to 1-20/0, after cutting that recently from 2-30/0, 4%, and 7%. Morgan

Stanley believes proactive management should bode well for cash flow

and could be a catalyst for Estee Lauder shares, though they do not

expect this to emerge until calendar 2002. The company has taken

excess inventories into account in its production forecast and shipped

at rates less than those of consumption. Surplus products should work

their way through the supply chain with the next two quarters, they

expect.

• Foreign-exchange factors. Because Estee Lauder derives about 40% of

its sales and operating profit internationally, its results are susceptible

to any recession overseas or weakness in currencies. To counter

exposure to global markets, Estee Lauder enters into forward-

...
...
'W

~
9
..,
... • exchange contracts to hedge purchases, receivables, and payables in-
.... foreign currencies .
...,
... • Limited public float. The Lauder family has controlled Estee Lauder
... since its founding, and owns 90.90/0 of the voting power of the
~

....
-
....
'W'
common stock and 53.70/0 of the shares outstanding. The public float

totals 105 million Class ,A shares, or 440/0 of the total common stock

outstanding.
....
.... Operational Strategies
..,
The Company sells its products basically through limited distribution channels to
..,
..., complement the images associated with its brands. Estee Lauder sells and markets its
...., products at more than 9,000 points-of-sale globally. Its range of brands covers

., strategically different niche markets, minimizing cannibalization of brand share. They

....
...., primarily consist of upscale department stores, specialty retailers, upscale perfumeries

and pharmacies and, to a lesser extent, freestanding company stores and spas, stores on
....
..,. cruise ships, in-flight and duty free shops in airports and cities. In November 1998, the

..... Company also began to sell certain of its products over the Internet. The Estee Lauder

Companies created a new division, ELC Online, responsible for all online strategies and
---
--,.., activities for all brands, in the Spring of 1999 (3). Morgan Stanley believes that because

.... of Estee Lauder Companies exclusive distribution, the perceived quality of its bran9-s

-- should heighten, which should in turn generate superior margins. On March 15, 2002, the

Estee Lauder Companies said it won a lawsuit that addressed questions about advertising

in cyberspace. The New York cosmetics company said that Germany's District Court of
 10

Hamburg ordered Internet companies Excite Inc. and iBeauty to stop using certain Estee

Lauder trademarks as keywords to trigger banner ads on Web sites. Estee said the court

decided that Excite's sale to iBeauty of the trademarks Estee Lauder, Clinique, and

Origins as keywords amounted to unfair competition under Germany law. Estee Lauder

has filed similar suits against iBeauty and Excite in France and in U.S. federal court in

New York, and said it expects rulings in those cases soon. An iBeauty representative said

the German court's ruling "will have little to no effect on iBeauty's business, since

iBeauty does not ship these products internationally." Representatives of Excite, a unit of

Excite@home Corp, based in Redwood City, California, said they had not reviewed

the ruling with their German trademark lawyers, but that the company reserves the right

to appeaL Drew Ianni, an analyst for Jupiter Communications in New York, said the case

"has major implications for many sites across the Web", since keyword-based ads

generate hundreds of millions of dollars in revenue. He said Germany is known for

"having strict laws that tend to favor trademark corporations", and said '~he did know

what effect the nlling could have on Estee's U.S. case". He said the German decision, "is

at least a flrst precedent out there in cyberspace related to this type of conflict. Estee

Lauder filed the German suit in January 1999, alleging trademark infringement, false

representation, unfair competition and false advertising. It said the court also ordered

iBeauty, formerly named Fragrance Counter Inc., to stop shipping products not sold by .

authorized Estee Lauder retailers to Germany from the U.S. (11).

....
..,
.....,
"-

. 11

...,. Supply-Chain Management

,., The Estee Lauder Companies initiatives to streamline supply-chain management

....., and enhance working capital bode well for process-led growth in the long term, Morgan

...,., Stanley believes. The moves include reconfiguring the global brand structure,

reevaluating supply-chain systems, and closing underperforming brand-name shops in

..,
... stores. In fiscal 2003, they expect the launch of new material-requirement planning. The
... new systems, along with better sales forecasting procedures, should enable Estee Lauder
'W'

... to improve inventory reductions, associated carrying costs, and obsolescence write-offs .
...
..... The company projects total savings from inventory cuts, transportation and distribution

optimization, and quality procurement and manufacturing activities at $90-110 million in

... the next three years (7).

.....-- Internet Strategy

..... The Estee Lauder Con1panies recently announced that it would buy Gloss.com

and revamp its Internet strategy. The move would make Estee Lauder the second business
.,
... to absorb a beauty-oriented pure-play. Terms were not disclosed, but Estee Lauder says
.... the 'deal would have no impact on its earnings. Estee Lauder says it plans to implement a
,..,.
-- three-pronged strategy. It says it will protect its brand by developing modules on sites

...
'W'
that already sell its products. In addition, it will launch two more branded sites,

... EsteeLauder.com and MacCosmetics.com. Finally, it will incorporate all of its brands
... into Gloss.com, on which consumers can buy a range of Estee Lauder beauty products

...
:.,-

(8) .
...
.....,
....,
 12

Company Addition

Recently, there has been an addition to the Estee Lauder Companies. Former

executive for Compaq, Edward Straw is the new president of operations for the Estee

Lauder Companies. Straw will help the New York-based company manage its complex

web of distribution outlets. In his new job, Straw will oversee the corporate senior vice

presidents heading Estee Lauder's manufacturing, research and development, information

systems, packaging and quality assurance areas. "As the Estee Lauder Companies

increases its global presence with innovative products, new brands and expanded

distribution, the skill and efficiencies of our operating units become increasingly

important to our success," said the president and chief executive Fred Langhammer (10).

On September 6, 2001, American supermodel Carolyn Murphy joined British

actress and producer Elizabeth Hurley as spokesmodels for Estee Lauder. In this new

dual image, Carolyn Murphy will promote the makeup, skincare and spa products plus

the free standing stores. Elizabeth Hurley will continue to appear in ads for the very

lucrative fragrance lines. She will also make personal appearances around the world on

behalf of Estee Lauder. Leonard Lauder, Chairman of The Estee Lauder Companies Inc.,

said of the global plan, "Elizabeth and C~rolyn complement each other perfectly in both

personality and natural beauty". The new Estee Lauder dual global image maximizes the

combined beauty and potential of Elizabeth Hurley's captivating persona and Carolyn

Murphy's classic American style to convey the unique messages of the brand to

consumers worldwide (1).

 13

Brand Equity

Building brand equity is one of the fundamentals the Company was built on. The

Estee Lauder Companies Inc. is committed to ~~Bringing the Best to Everyone We Touch"

(5). From Estee Lauder's core brands to its newer brands, it is nunlber one in prestige.

The Company invests heavily in aggressive, well-funded marketing programs. Each

individual brand has a single global image in advertising and merchandising presentation.

On November 30 th of last year, the Estee Lauder Companies announced that Jim Nevins

would become a senior member of the team leading the conceptual brand renewal process

for the Estee Lauder brand. Due to this new personnel development, the company

believes this will continue to make their aggressive marketing programs a success.

"Clearly, Jim has a strong track record in marketing and brand building, and a deep

understanding of the retail business on a worldwide basis," Mr. Bousquet-Chavanne said.

"He is a creative visionary who will work closely with the Estee Lauder leadership group

and me as we continue to redefine luxury and aspiration in contemporary terms" (15).

Innovation/Social Responsibility

The Company has been at the forefront of technology over the years by virtue of

its investment in Research and Development. Consumer safety has always been top

priority at the Estee Lauder Companies Inc. Therefore, their product safety testing

requires a collaboration of experts across several sciences. Approximately 395 leading

chemists, biologists, microbiologists and physicists are currently on staff. To ensure the

safety of all products brought to market by the Estee Lauder Companies Inc.,

formulations and their packaging must exceed the high Company standards for ingredient
.....
~

..,
.., 14
..,
..., preservation and stability, product efficacy, and package compatibility. All Estee Lauder

-...
Companies Inc. products are tested for irritancJ and allergy, using biological assays and

human volunteers. They do not test their products on animals, nor do they ask others to
.,
conduct animal testing on their behalf. They are proud of the enviable safety record the

"Wt Estee Lauder Companies Inc. has sustained since their Company was founded in 1946
..,
and their continued commitment to producing quality products that are clean, pure, and
~

., safe. Generally, one-third of the Company's sales volume in a year comes from products
.,
., developed at Research and Development within the previous three years. Estee Lauder
., Companies' Research and Development facilities are located in Melville, New York;
.,

..
.., Oevel, Belgium; Tokyo, Japan; Markham, Ontario; and Blaine, Minnesota (12) .

-
,.,
'W
Safe Environment

The Estee Lauder Companies Inc. is also highly committed to maintaining a safe

...
..
..,
and healthy work place for all employees, and to protect the environment and the

communities in which they operate through continued responsible action. The

., Company's commitment to excellence begins at the top. The Chief Executive Officer and
., the Corporate Environmental Committee, comprised of senior level executives from all
~

areas of the Company, provide overall guidance and direction. The President of

Operations establishes their environmental and safety philosophy. This is executed

through the Senior Vice-President of Global Operations, who directs the activities of the

Department of Environmental Affairs & Safety and the Facility Managers/Subsidiary

VP's. The success of the Company's environmental and safety programs is a result of the

commitment of its employees. All operations and facilities are dedicated to excellence
.....
.....
... 15

--
w
and to continuous improvement through implementation of environmental and safety

...... initiatives. The Company has set specific objectives to meet these commitments (14):

• To meet or exceed all requirements of applicable environmental, health, and

.....
."
safety laws and regulations, where products are developed, manufactured,

... and distributed .

-.. • To provide support to all organizational units via the Company's

.,
...., Environmental Affairs & Safety department. This will promote employee

safety and mirumize environmental impact throughout their products'

-.. development, production, and distribution .
....
., • To encourage and apply pollution prevention, resource conservation, waste
...
... minimization, reuse, and recycling practices .

...... • To minimize waste disposal costs and promote application of safe and

..., innovative technologies for waste disposal.

...
... • To promote responsible environmental and safety practices, enhancing

-
awareness among their employees and the communities in which they
~

operate.
~

.,. • To strive to continuously improve their environmental and safety

'w
management systems and practices. This includes an annual review of

objectives and targets.

Equal Opportunity Employment

It is the policy and practice of the Estee Lauder Companies Inc. and its officers, to

ensure equal opportunities without regard to race, color, religion, sex, age, national
 16

origin, citizenship status, handicap, disabled veteran or Vietnam-era veteran status, and to

affirmatively seek to advance the principles of equal employment opportunity to ensure

that there is equality of opportunity in all terms and conditions of employment. The

above-stated policy and Affirmative Action Plan confirm the Company's commitment to

(6):

• Recruit, hire, train and promote in accordance with the principles of equal

employment opportunity;

• Ensure that promotion decisions comply with the principles of equal

employment opportunity;

• Ensure that all personnel actions, including compensation, benefits, transfers,

terminations, company sponsored training, tuition assistance, and social and

recreational programs are administered in accordance with the principles of

equalopponxullty;and

• Reaffirm its policy to provide equal employment opportunities to qualified

handicapped persons, disabled veterans and Vietnam-era veterans.

Philanthropy

Over the years, the corporate philanthropy program and community involvement

initiatives have supported the activities and growth of numerous organizations dedicated

to health and human services, education, the environment and the arts. The Company

stri ves to be responsible citizens in every community they serve: their corporate fund

drives help sustain local public schools and needy charities; they work to preserve the
 17

environment through broad-based recycling programs; and they strongly endorse

employee volunteerism.

The Company's most significant philanthropic endeavor - initiated by Estee

Lauder U.S.A. is their highly visible ~'Pink Ribbon" Breast Cancer Awareness Program

introduced in October 1992 to draw public attention to breast cancer and spread the

message to women that early detection certainly saves lives. The "Pink Ribbon" Breast

Cancer Awareness Program is now globally recognized as the symbol of breast health.

More than 17 million pink ribbons have been distributed at counters worldwide. In the

millenium year the program was implemented in 43 countries, fifteen'ofwhich have

officially designated a month to Breast Cancer Awareness. In addition, 21 cities around

the world launched International Breast Cancer Awareness by joining them in their "'2000

Global Landmarks Illumination Initiative." In 1993, Mrs. Evelyn H. Lauder, Senior

Corporate Vice-President, established The Breast Cancer Research Foundation, a not-for-

profit organization, to fill critical gaps in medical research funding. Since its founding,

more than $31,000,000 has been raised by the Foundation, of which $4,200,000 is

attributable to their collaborative fund raising endeavors with retailers, and the activities

organized and supported by employees of the Estee Lauder Companies Inc. On June 8,

1999, CNN's "Business Un-Usual" featured The Breast Cancer Research Foundation as

an exemplary organization in its work to combat breast cancer (5).

Corporate Contributions

The Estee Lauder Companies make corporate contributions each and every year.

As part of their strategy to maximize the effectiveness and sustained impact of their
 18

contribution dollars, they carefully screen the recipient institutions, and from the many

beneficiaries select a few to which they pledge long-term, significant resources. See

Appendix B for a full list of the charities in which the Estee Lauder Companies are

involved. This, however, does not reflect the many hundreds of institutions to which they

annually contribute in the millions of dollars through contributions of products.

Donations support women's "self-help" groups, charity benefit events, fundraisers,

...,.,
'W'
auctions, raffles, etc. (5).

Employee Volunteerism
..,
....
In conjunction with their corporate philanthropy, the Estee Lauder Companies
,.,
Inc. also sustains numerous volunteer endeavors that exemplify their commitment to "be

..
.,
responsible citizens in every community we serve" (5). Employees are heavily

encouraged to contribute their time, enthusiasm and talents to a number of causes: First
..,
..
Step lob Readiness Program, Dear Santa Holiday Program, Look Good ... Feel Better,
.-
New York Cares Day, Take Our Daughters to Work Day, Lighthouse International,

....
"..,

Partnerships with Schools, The Murry Bergtraum H.S. for Business Careers, P.S. 20, lHS

99, Roberto Clemente HighSchool, PS811X, Support/partnerships with other public

".,

school related organizations, Corporate Recycling Programs & Collection Drives, and
...
~

...., Corporate Drives/Collections (5) .

Due to the Estee Lauder Companies Inc. Financial Development, Operational

~
Strategies, Brand Equity and Innovation/Social Responsibility they have been in business
,.,
'W' for 56 years. They would have been so successful hadn't they had a global marketing
,.,
..
~
 19

strategic plan and the drive of "Bringing the Best to Everyone We Touch" (5). I feel

confident that the company will continue its successfulness in the upcoming years.
 Works Cited

1. "Carolyn & Liz: Estee Lauder Faces." Online. Internet. Available:

http://www. fashionwindows.comlfashion models/200 1/ carD lyn mumhv. asp

2. "Company Chronology." Online. Internet. Available:

http://www.elcompanies.com/htmlcontentimll.htm

3. '"Company Facts at a Glance." Online. Internet. Available:

http://www.eicompanies.comfhtmlcontent/mI2.htm

4. "Company Overview." Online. Internet. Available:

http://www.elcompanies.com/htmlcontentim13.htm

5. "Corporate Philanthropy/Community Involvement." Online. Internet. Available:

http://www.eicompanies.com/htm/contentlmI5.htm .

6. "Equal Opportunity Employment." Online. Internet. Available:

http://www.elcornpanies.com/htmlcontent/mI45.htm

7. "Estee Lauder." Morgan Stanley. December 18,2001.

8. "Estee Lauder Applies Internet Gloss." Online. Internet. Available:

http://www.thestandard.com/article/display/0.IIS1 ,l4071,00.html

9. "Estee Lauder Companies Revised Outlook for Fiscal 2002 Second Quarter." Online.
Internet. Available: http://www.elcompanies.com/htmlframesetlfnnm4.htm

10. "Estee Lauder Snags Compaq Executive." Online. Internet. Available:

http://news.zdnet.co.uk/story/0,,s2076737,00.html

11. "Estee Lauder Wins Suit over Web Use of Trademark." Online. Internet. Available:
http://www.financialexpress.comlfe/daily/20000316/efe160 18.html

12. "Product Testing.;' Online. Internet. Available:

http://www.elcompanies.com/htm/contentlm14.htm

13. "ROre Still Under Pressure; Downgrade to Neutral." Morgan Stanley. February 7,
2002.

- 14. '''Safety and the Environment." Online. Internet. Available:

http://www.eicompanies.com/htrnlcontent/mI44.htm

15. "The Estee Lauder Companies Inc. Names Jim Nevins to Creative Post On Estee
Lauder Brand." Online. Internet. Available:
http://investor.cnet.comlinvestor/news/newsitemlO-9900-1 028-8029577 -0 .html
.,

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 ~
MorganStanley

El<hibit 12
The Estee Lauder Companies: Annual Balance Sheet, 1995-200SE
Fiscal year ends June 30 1995 1996 1997 1998 1999 2000 2001 2002E 2003E 2oo4E 200sE
$ Millions, e>eept per share

Assets
Cash and equivalents 281.4 254.8 255.6 277.5 347.5 320.3 346.7 377.7 449.1 524.5 630.5
Receivables 447.5 434.0 471.7 497.8 533.7 550.2 580.6 589.0 606.7 612.3 616.5
Inventories 392.5 452.8 440.6 513.2 513.0 546.3 630.3 555.4 533.2 545.1 556.6
Prepaid Expenses and Olher 161.4 148.8 143.2 166.1 176.0 201.7 181.3 179.9 188.2 197.8 207.7
Current assets 1,282.8 1,290.4 1,311.1 1,454.6 1.570.2 1,618.5 1.738.9 1.702.0 1,7n.2 1,679.7 2,011.2

Property & equipment, net 199.0 229.3 265.0 335.8 383.6 480.3 528.7 6502 739.9 805.8 847.1
Intangible assets 42.0 146.6 161.3 563.3 608.5 708.1 699.7 658.1 616.5 574.9 533.3
Other 197.9 113.1 135.7 159.1 184.4 236.4 251.5 251.5 251.5 251.5 251.5
TotBI Assets 1,721.7 1,779.4 1,873.1 2,512.8 2,746.7 3,043.3 3,218.8 3,261.8 3,385.1 3,511.9 3,643.2

Liabilities Ie Equity
Notes Payable 128.5 105.6 31.1 11.5 6.6 7.0 5.8 5.8 5.8 5.8 5.8
Accounts Payable 166.8 175.3 165.8 209.1 223.1 236.5 239.8 228.8 229.8 226.3 221.8
Acc Uabilities 455.3 469.1 505.2 537.4 544.9 574.1 532.1 527.9 552.4 580.4 609.5
Income taxes 62.6 72.9 57.4 79.4 87.6 84.2 79.0 79.0 79.0 79.0 79.0
Current lIablllUM 813.2 822.9 759.5 837.4 862.2 901.8 856.7 811.7 837.2 861.7 887.3

long-Term Debt 65.5 21.9 425.0 422.5 418.4 410.9 410.9 410.9 410.9 410.9
Other Noncurrent UablHtles 147.9 180.4 205.9 194.0 177.5 202.8 239.1 243.9 248.8 253.7 258.8
Preferred Stock, $6.50 360.0 360.0 360.0 360.0 360.0 360.0 360.0 360.0 360.0 360.0 360.0
Shareholder's equity 335.1 3942 547.7 696.4 924.5 1,160.3 1,352.1 1,435.3 1,528.3 1,625.5 1,7262
Total Llabllltln and Equity 1,721.7 1,779.4 1,873.1 2,512.8 2,746.7 3,043.3 3,218.8 3,261.8 3,385.1 3,511.9 3,843.2

A•• % of LTM revenues

Receivables 15.4% 13.6% 13.9% 13.8% 13.5% 12.6% 12.6% 12.9% 12.7% 12.2% 11.7%
Inventories 13.5% 14.2% 13.0% 14.2% 12.9% 12.5% 13.70/0 12.1% 11.1% 10.8% 10.5%
Raw Material Inventories 3.9% 3.3% 3.5% 4.0% 4.4% 5.1% 3.9%
Prepald ElCpenses 5.6% 4.70/0 4.2% 4.6% 4.4% 4.6% 3.9% 3.9% 3.9% 3.9% 3.9%
Accounts Payable 5.8% 5.50/0 4.9% 5.8% 5.6% 5.4% 5.2% 5.0% 4.8% 4.5% 4.2%
Acc UablllUes 15.]0/0 14.7% 14.9% 14.9% 13.8% 13.1% 11.5% 11.5% 11.5% 11.5% 11.5%
WOI'klng Capital 23.2% 22.3% 22.1% 22.2% 20.8% 19.7% 21.0% 20.0% 19.0% 18.5% 18.0%

liquidity Analysis
Avg t; Days Inventory 211.0 190.6 208.6 187.7 186.1 210.3 224.5 .197.0 187.5 184.2
+ Receivables Outstanding 50.4 56.3 53.2 52.8 48.4 49.9 46.6 45.5 44.2 42.4
.. Length of Operating Cycle 261.4 246.9 . 261.9 240.5 234.4 260.2 271.2 242.6 231.7 226.6
- Payables Outstanclng 78.9 72.5 73.8 77.1 n.2 74.0 96.2 84.9 78.4 74.2
Length of Cash Cycle 182.5 174.3 188.0 163.4 1572 186.2 174.9 157.7 153.3 152.5

~ , ») ) JU"l A"Jg"··tta-ivPieo-t ) J ) »• , » » .~ • t » ) » ) ) », t ) »t ) ) , » t ) • ) }
 ~
MorganStanley

ElChibit 9
Cosmetics, Household & Personal Care: Global Valuation Table

CL.N Colgate ($) N 55 57 3% 4% 10% 29.0 ~4 22.9 123.1 117.3 115.2 la8 15.8 14B

G.N Gillatte ($) N 33 32 -2% 4% 9% 33.3 2a5 26.8 141.3 135.9 134.9 1~5 15.7 142
KMB.N Kimberly Clark ($) OP 60 70 17% 4% 8% 18.3 1~4 16.2 77.7 80.3 81.3 1Q8 10.7 102
PG.N Procter & Gamble ($) N 83 84 1% 3% 9% 25.4 tt2 20.4 107.9 102.3 102.7 la6 13.3 12~

Unc.AS Unilever NV (auro) N 65 na na 4 %

14% 18.2 1~8 13.0 77.4 68.3 65.4 11.1 10.3 9.3
ULVR.L Unilavsr PLC (p) N 575 na na 4% 14% 17.7 1~4 12.6 75.1 66.3 63.5 lQ5 9.9 8.9
OREP.PA L'Oraal (auro) NR 77 na na 8% 15% 43.4 3~9 33.1 184.4 174.8 166.3 1&7 16.8 14B

Large Cap Average 4% 11% 27.9 2~5 20.7 118.6 113.2 104.2 1~8 13.8 12j

AVP.N Avon Products ($) N 49 55 14% 5% 11% 23.2 20.9 18.9 98.6 96.6 95.1 13.6 12.1 10.9

BEIG.DE Belarsdorl (auro) OP 137 135 -1 % 10% 150/0 40.7 35.9 30.9 172.9 165.7 155.3 17.7 15.5 13.4

EL.N Estee Lauder ($) N 31 33 7% 4% 9% 24.4 25.0 21.9 103.6 115.4 110.1 11.2 11.4 102
IFEN Inti Flavors& Frag ($) OP 32 36 12% 1% 9% 23.0 16.4 15.2 97.6 75.7 76.4 10.3 9.7 9.0

RB.L Reckitt Bencklser (p) OP 1,059 1,150 9% 5% 10% 21.1 19.6 17.4 89.6 90.6 87.5 13.1 11.7 10.4

Mid & Small Cap AveraDe 4% 11% 24.5 22.1 19.5 103.8 101.8 98.3 12.1 11.3 10.1
4% 11% 27.3 24.1 20.0 115.8 114.7 104.5 14.0 13.0 11.5
1,084 10% 23.6 21.7 19.9 100.0 100.0 100.0

Source: Morgan Stanley Research,' KMB co-covered by Matt Berler; Unilever, Beiersdoif and Reckitt covered by Sylvain Massot.
Rnf;nur' M= MpJlfrnl· np = ()lIfnprfnrm: NR = Nnt Rated

• , ) a - » • , J ). ~ ) J ) • • , » J ~ • t » • » ,) , ) , » , ) J ) ) ) » _ ) ),
 ~
MorganStanley

Exhibit 14
The Estee Lauder Companies: Discounted Cash Flow and Residual Income Valuations
Dlacounllld Cah Flow Analy."
SMilIons. 8lCepl per stUI'S 2001 2002£ 2OO3E 2OO4E 2OO5E 2006E 2007E 200sE 2009E 2010
CanpotnIlng perkxl 6 8 9 10
Net PPE 529 6SO 746 824 829 834 839 844 849 854
DepI9CiaIial as a '" 01 beg. nat PPE 21 .1'" 21 .9"'- 23.6% 25.O'Yo 25.0% 25.0% 25.O'Yo 25.0% 25.0"'{'
Net CAPEX as a '" 01 in:rementaI rllY8l1Ues -191.0% 25.5% 15.1% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
AlIY8I1Uegrow1h 5.7% -<l.8% 4.6% 5.1 % 4.9% 4.7% 4.5% 4.3% 4.1% 3.9"'{'
4.616 4,580 4.792 5.035 5.280 5.527 5.n4 6.021 6.266 6.500
eerrDAmll'gin 15.5"- 13.8'% 14.4% 15.4% 15.9"'- 16.4% 16.9"'- 17.4% 17.9"'- 18.4%
EBITDA 715 633 692 n4 838 905 975 1.046 1.120 1.196
- Depreci8lial (102) (111) (142) (176) (206) (207) (208) (210) (211) (212)
- Amort. 01 non-dedu:t. goodwill (54) (42) (42) (42) (50) (SO) (SO) (50) (50) (SO)
EBlT 559 480 508 557 582 648 716 787 859 934
- IlnpIAed __ on eerr (221) (188) (198) (215) (228) (251) (276) (301) (327) (354)
EBIAT 338 292 310 341 355 397 440 485 532 580
+ Deprecialion & amaIzaIion 156 153 184 218 256 257 258 260 261 262
-Capital~ (1901 (222) (238) (254) (261) (262) (263) (265) (266) (267)
- + (In:r.)lDecr. WC Mel OCher .seta (199) 53 (14) (19) (82) (82) (81) (80) (79) (87)
Netlrwelmenlln capital (233) (16) (68) (56) (87) (87) (86) (85) (84) (92)
Frae c.-tl flow 10 dI!bI & equity 105 276 242 285 268 310 354 400 448 488
FCF grCMth raI8 163.7% -12.4% 17.8'% ~.1% 15.7% 142% 13.0% 11.9"'- 9.0%
Discan fecta 1.000 0.868 Q.6OO 0.753 0.702 0.654 0.600 0.568 0.529 0.493
PV 01 Ir. cash flow 10 debI & equity $ 105 $ 240 $ 196 $ 215 $ 188 $ 203 $ 216 $ 227 $ 237 $ 240
Sum PV 01 fr. ci.h flow $ 7.493
+ MV 01 eqUly ~ts $ Weighted A"...e Cost of Debt .. EquIty capital (WACC)
+ MV 01 ~ asseIs $ Shares wtslll'lding (mm) 242.2
+Olher $ Plicepll'share $ 30.98
$ 7.493 MInat value 01 eqlity (WE) $ 7.503.4
$ (105) L_ed bela for !his Comperly 0.85
- C8pitaItzad elf ballrce slleelleases $ 30 year risk frae raI8
- P_1on & 0Iher non-h.rlded llablity $ Mar1Iet risk prernIun basad on sile
- MV 01 na'\ caw.t. prafe-red slOck $ (360) Cost at equtty:
- PV 01 milcrty Inta'esl $ Martcat value 01 Ida! """esl banlg debI (MVD)
- MV 01 opIIons 0IAI1Irdng $ Marginal cost 0I1ong-Iann debI
Eq.IIy II8Iue $ 7.OZT Marginal tax raI8
Shares 0IAS1IIndlng (mil) 242.2 AIIM'-alx co.t at debt:
equity nlualsMre &.4)1 29.Q2 MVE/{MVD+MVE)
Equity valuelshar. &.4)2 MvD/(MVD+MVE)
Equity nl~ 12102
equity nluelshar. 06103
EquIty nluelshar. 12103
l.alg-tenn slBtainabIe growtl rille

Residual Income ....ty. .

2001 2002£ 2003E 2OO4E 2005E 2OO6E 2007E 20081! 2009E 2010

Begimtng capillll $ 1.625 1.859 $ 1.875 $ 1.943 $ 2.030 $ 2.117 $ 2.203 $ 2.288 $ 2.373 $ 2.465
AIMnJ85/ beg. caplal 2.8 2.5 2.6 2.6 ~ ~ ~ ~ ~ ~
CapiI8II1c»!h rate 14.4% 0.9% 3.6% 4.5% 4.3% 4.1% 3.9% 3.7% 3.9"'-
EBIAT $ 338 $ 292 $ 310 $ 341 355 $ 397 $ 440 $ 485 $ 532 $ 580
Ad~ted
nJIUn on capilal employed (ROCE) 20.8% 15.7% 16.5% 17.6% 17.5% 18.7% 20.0% 21.2% 22.4% 23.5%
WACC ~ on bela 7.3% 7.3% 7.3% 7.3% 7.3% 7.3% 7.3% 7.3% 7.34% 7.34%
ROCE-WACC 13.5% 8.4% 9.2% 10.2% 10.1% 11.4% 12.6% 13.9% 15.1% 16.2%
EVA 219 156 $ 173 $ 199 $ 206 241 $ 279 $ 317 358 $ 399
discount factor 1.000 0.868 0.809 0.753 0.702 0.654 0.609 0.568 0.529 0.493
PVEVA $ 219 135 $ 139 150 144 $ 158 170 $ 180 $ 189 $ 196
SumPV EVA $ S. 744 77'% illI8Iue from grc»1h + lrIderstalad boOI vl!iua
+ IllIated capilal aI mid )'811' $ 1.684 23% iI value from aci&1ing boOI vtiue
+ MV 01 eqlityi~ts $ 0% iI value from inIalmenlS
+ MV 01 elf na'\~ assets $ 0% iI Y8Iua from ~. ISSeta
+Olher ..:$:.-_ _ _ _ _.::.0%.=.6 II8Iue from ana-
Enta-prisevalue $ 7.428 100%
- MV 01 net debI debt $ (105)
- CapiIaIImd elf balance sheelleases $ To... capital Provkled
- P_ion & 0Ihar non-fulded Mabilly $ STdabt $ 7
- Preferred Stock $ (360) - Cash & securhlS $ (320)
- MV 01 minoI1ty inter_ $ +LTdabt $ 418
- MV 01 opIIons 0IAI1IInding $ + Capilallzed leeses nat 01 depreciallon $
EquIy YIIIua $ 6,963 + Pension & aner non-fundad liability $
Shares 0IAStan:l1ng (mil) 242.2 + Defe-red tax liability $
equity valueWshant &.4)1 $ 211.75 + Minortty inIanIst $
equity va~ MI2 $ 30M + Prafa-rad Stock $ 360
Equity varu.t.hare 12102 1$ 32.00 1 +EalitY $ 1.160
EquIty value/share 0M:I3 1$ 33.111 -Total caohal Drovlded $ 1125
Equity valUalsh_ 12103 1 $ 34.37 1

Source: Morgan Stanley Research; Years 11-50 available upon request

.. MorganStanley
~

ElChibit 10
The Estee Lauder Companies: Annual Income Statement, 1995-2005E
CAGR CAGR
1995 1996 1997 1998 1999 2001 2OO3E 95..QO 01'()sE
Jun..96 Jun..99 Jun.Ol Jun.Q2 Jun-03 Jtrt-OS

R_rllg!on
AI-*:. 1.519.7 1,799.4 1.939.4 2,204.7 2,397.9 2,668.8 2.818.6 2.767.5 2,906.9 3,0&1.2 3,203.8
E~ YcIdIII Eaat&Alrica 786.0 855.9 Sla3 960.8 1.082.4 1,131.0 1.209.0 1,207.8 1,255.6 1,312.3 1,371.8
AsWPlCille 53l.<4 539.2 532.9 <462.5 <481.2 577.0 590.6 604.7 630.4 671.5 711.7
R_...llragionll 2,899.1 3,19<4.5 3,38U 3.618.0 3.961.5 4,366.11 4.&1&.1 <4,579.8 4,791.9 5.035.0 5,267.1
"-PradUCI
Slikare 1.215.9 1,274.0 1,291.0 1,248.3 1.398.8 1.552.4 1,640.0 1,675.5 1,725.7 1,79<4.8 1,866.11
WiIk&Ip 1,003.3 1,131.6 1,251.7 1,317.7 1.412.11 1.579.5 1.700.0 1,722.5 1,825.9 1.935.4 2.0&1.6
F~e 679.9 769.7 817.9 !iIil'.8 1.048.11 1,092.3 1,Q80.0 952.9 971.9 991.4 1,011.2
Hllin:aAl 19.2 16.5 52.4 82.4 113.9 ll!O.7 213.7 245.8 275.2 306.3
0IIMw 4.7 12.0 la9 2&7 36.4 15.3 22.11 311.2 49.&
R _ ... ..,.._ 2.899.1 3,1940.5 3,38U 3,IJ18.0 3.181.5 4,3IILfl 4,1.111.1 4,57U 4.7111,9 5,035.0 5,2111'.1
COGS 674.8 731.0 766.1 819.5 899.9 972.1 971.2 963.7 1,008.3 1,049.4 1,091.4
GroeaPtaii 2.224.3 2,-463.5 2,616.5 2.198.5 3.061.6 3.39<4.7 3,&#.9 3,8HI.2 3,7113.8 3,986.6 4,195.8
S,G6A 1.967.7 2.11&0 2,224.8 2.357.8 2.572.1 2.845.7 3.083.7 3,13) 3.259.11 3,412.9 3,571.1
Rei_lid PMy floyaIleI 36.7 37.2 32.8 31.11 32.6 33.2 22.6 16.1 16.1 16.1 16.1
0!Mr1II1n1l ProIIt- .. _ _
230.9 310.3 -" «19.1 41i1L9 515,11 558.6 480.3 507,9 5StI.7 608.7
1,....11ncI:Ime j8ll*1Ml 2.1 2.7 3.8 (6.3) (l6.n (17.1) (12.3) (lo.n (6.9) (3.9) 0.8
P .... 1ncI:Ime 233.0 313.0 382.9 0402.8 440.2 498.7 S46.3 489.8 501.1 5&2.11 609.3 1&~

108.0 138.3 152.4 1111.1 1&7.3 184.6 196.7 162.0 171.7 186.4 206.4
(3.8) (14.3) (12.9) (4.9) 11.2 9.0 9.9 10.9
121.2 160.<4 197.8 23&.8 212.9 314.1 347.7 299.4 338.4 374.4 413.8 21~

25.3 23.4 23.4 23.4 23.4 23.4 23.4 23.3 23.3 23.3 23.3
NIIo_lMIoreclwge 91.9 137.0 174.2 213.4 lMaS 2!lO.7 324.3 27&1 315.1 351.1 3!lO..5
ElirIordInIry clwge (39.8)
NIIo_IIIII• •rclwge 95.9 137.0 174.2 213.4 lMaS 2!lO.7 284.5 271.1 315.1 361.1 3!lO.5

EPS IMIfare cIw. . $0.41 $O.S9 $0.73 $0.89 $1.(13 $1.20 $1.34 $1.15 $1..33 $1.111 $1.71 24'.110
Ef'S II1II. d8'geI $0.41 $0.59 $0.73 $0.89 51.03 $1.20 $1.18 $1.15 $1.33 $1.51 51.71 24%
Dblll ...... out., N<I- 23& 233 237 239 241 243 242 240 236 232 228

"'IIInAna,,'"
Groea 77.~ 77.3~ 79.0'lI0 79.0% 79.2'M. 79.4~

COGS 22.~ 22.~ 21.0'lI0 21.0% 2Q.", 2Q.6%

S.G&A BIll goocIwiI 66.2'M. 64.~ 116.4~ 66.~ 66.0'lI0 67.~

B,G&#. 65.2'M. 64.9% 66."~ &8.1~ &7.8'!10 &7.5~

RIIIaIII FqaIIyPartlel O.~ 0."" 0.5% O."~ 0.3~ O.~

EB1TOA 14.0'lI0 14.0'lI0 15.5~ 13..,. 15.4% 1~

11.~ 1'.1'lI> 12.1% 1Q.S')1, "_1~ l1.5'lro

0!Mr1IIIn1l Prallt-" - -
Pre-«. 1'.'~ 11.1' 11.", 10.3% 11~ 1'.5~
T.R-. oIO.O'lIo 3&0'lI0 38.0'lI0 34.ft 34.1~ 33.9'!Iio
N.IO_ 5.ft 6.3~ 7.0'lI0 6.0'lI0 7~ 7.4%
v _ _..,.. cIIInges
R_
AInIricaa 7.'" 13.~ a", 10.ft 5.ft -1.~ 5.0'lI0 5~

El.IfQpe.lotIcIdIeEall&NricII 8.2'M. 5.~ 12.7~ 4.5~ 6.ft -o.l~ 4.5~ 4.5%

EMEA-Ic:GlI l'.O'lIo 13.0'lI0 12.~ 1'.~ 16.0'lI0 O.l~ 6.0'lI0 6.0'lI0
EIEA.f'IX ·4.'" ·7.~ o.~ -7.4~ ..g.1~ .o.~ -1.5% ·1.5'

,,-_.
...._Pacille ·1.2'M. ·15.1~ 11.3% 19.~ 2.4% 2.4~ 6.~ 6.0'lI0

-- ....... Pacilc~ 8.~ 4.0'lI0 7.0'lI0 1S.~ 8.4~ 11.3% aO'llo 8.0'lI0
....... Pacillc-F1X -7.2'M. ·12.1~ .o.~ 4.6% -6.t~ ~.9'110 ·1.5~ .2.0'lI0
..,..,- 5.11'% 7..0% t.1'lI> lD.2'lfo 5.~ -G.8'lIo 5.1~ 5.0%
R-.I~ 9.0% 11.0% 9.ft ll.5'lro IL2"Io o.~ S.8% 5,6%
....I_·FIX -3.1~ ~.0'lI0 .o.t~ ·1.~ -3.5% ·l.ft .0.5% .Q.5~

~ 4.0'lI0
12.1~ 5."' 4.0%
........
SIoIncInI,

F~
1.~
10.~
8.~
4.~
5.~
3).~
7.2'M.
6.2'M.
l'.O'lIo
11."'
4.2'M.
7.~
-3.0'lI0
1~
-10.1~
8.0'lI0
2.0'lI0
8.0'lI0
2.0'lI0
HlliICln ·14.1~ 217.", S7.3~ 38.2'M. 54ft. 18.3% 12.0'lI0 12.0'lI0
68.9'!Iio 29.~
0Ih.
COGS 4.~ 7.1~
S7.5~
9.",
51.ft
8.0'lI0
23.,"
.o.l~ .fl..,.
-56.9'110
".1~ 4.0'lI0
GIOAMltgin 1I.2'M. 7.0'lI0 9.4~ 10.~ 7.4~ .0.'" 5.3'110 s.~

B,G&#. S.1~ 8.0'lI0 9.1~ 10.6% 7.~ 1.'" 4.7% 4.8%

RIIIaIII PMy floyaIleI -l'.ft .J..O% 2.5~ 1."' 41.ft .2&9'110 0.0'lI0 0.0'lI0
()peralInf PraIIt 15.~ 13.11'% 11.7'110 12.5IlI. &.3'!1; ·1~ U'% 9.3'JI.
EBITO.... 21.5~ '''4~ 9."' 1S.~ 10.'" ·1'.4~ 11.'" 11~

Pr_,,-,- 1S.~ 11.0% 9.3% 13.3% 9.5~ ·14..0% 1~ 10.2'lf.

22.5~ 11.9'!Iio 16.5~ 11."' ·14.9'!Iio 1'.4~ 11~
Nil 1 0 _ 27.2'M.
15.~ 11.9'!Iio -14.3'!Io 13.~ 13~
EPS 25.0'lI0 21.4~
''''~ O.5~ .0.li'ii0 -1.~ ·1.7~
Sha'. <UII1roding 1.~ 0.9'!Iio 0.8~ .0.3%

Source: Morgan Stanley Research

- MorganStanley
~

E.lChibit 11
The Estee Lauder Companies: Quarterly Income Statement, F2001·2002E

"--region
AmIIrIcaIs 783.1 741.1 888.5 599.8 765.4 722.7 879.8 599.8 2,787.5
Eu!:lpe. Mickie East&AfI1ca 255.1 366.9 282.4 3QU 212.3 359.5 269.5 306.3 1.207.8
AlWPIdfic 139.5 177.8 132.8 140.7 150.0 175.2 134.3 145.2 604.7
I'IIIIert» IIINgIonI 1,177.1 1.291.8 1,101.1 1,046.1 1,187.7 1,257.4 1,083,4 1,051.3 4,579.8
,,--product
SWn:a1t 395.2 423.2 4111.1 402.5 393.5 431.7 431.7 418.6 1,875.5
MaIreI.cI 431.3 420.5 464.1 3&4.1 447.S 418.1 <459.5 399.5 1.722.5

---..-
FrIIp'C4I 299.8 3116.9 112.11 lllO.4 291.3 348.7 143.5 171.4 952.9
ttIIin:aN <45.8 43.0 39.9 52,2 50.0 58.4 47.9 57.4 213.7
0IrIIr 5.8 8.0 5.7 15.9 5.4 4.5 0.9 4.5 15.3
1,177.7 1.2..... 1,101.7 1,041.1 1.1'7.7 I,2S1A 1,083.4 1,051.3 4,579.8
COGS 263.3 278.0 226.1 2«1.8 2S4.5 278.4 227.8 206.0 963.7
GIoNPn:IIiI 914.4 1,013.8 875.8 841.3 tm.2 981.0 855.8 846.3 3.818.2
S,G&A 152.9 D.O 788.7 741.1 n8.3 832.7 762.4 748.3 3.120
ReIIad Patty RqelIies a2 7.1 3.8 3.7 4.0 4.8 3.5 3.7 16.1
~ProftI·d_ 153.3 203.5 105.3 • .5 152.. 1435 111.7 M.2 480.3
I_ _ tncome(~

(2.5) (2.5) (10.7)

(5.1) (4.3) (2.0) (0.9) (3.6) (1.1.1)
148.2 199.2 103.3 116.8 149.1 141.8 87.2 91.7 489.8
Income_ 53.4 71.1 37.2 34.4 51.4 48.9 30.1 31.6 182.0
MInarily IIt8n!IIt 0.2 0.2 1.0 0.5 0.6 2.8 2.5 2.5 8.2
NtlIr1conM 94.8 121.3 85.1 00.7 97_1 1lO.1 5U 57.8 299.4
PnIIemId 0Mdands 5.9 5.8 5.11 5.8 5.9 5.8 5.8 5.8 23.3
HI 10 common babrII ~ 88.1 121.5 59.2 54.11 91.2 84.3 48.8 51.8 278.1

... ~c~
HID common iIIfta' 1Idrc/wgB&
(2..2)
88.5

$10.37
SO.36
121.5

$0.50
$O.SO
59.2
(37.6)
17.3

$0..23
$0.07
91.2

$10.311
SO.38
$0.36
SO-3S
48.8

$0.20
$0.20
51.8

$0.22
SO.22
278.1

$1.15
$1.15
242 242 241 242 241 240 239 240

MarvIn AnIty"
GIoN n.fA 79.5% 78.8% 78.0% 79.0% 00.5% 79.0'11.
COGS 22.4% 20.5% 21.4% 22.0% 21.0% 19.5% 21.0%
S,G&A 8ef goodwII 83.9'!I. 5."- 86.8% 68.0% 70.8% 71.4% 68.2%
S,G&A 83.9'!10 5."- 86.4"- 68.2% 70.4"- 71.2% 88.1%
RM.s RoIaIIIt PIrtIaa 0.7% 0.3% 0.3"- 0.4"- 0.3'!fo 0.4% 0."%
EBIltIA 15.8% 13.3% 16.1"- 14.5% 11.8% 12.8'110 13.8"-
u.cw. •.u. 12..... 11.4% L3% t.cw. 10.n.
12.fA 9.4% 12.11"- 11.3% 8.0% 8.7% 10.3"-
36.0% 36.0% 34.5"- 34.5"- 34.5% 34.5% 34.5"-
7.5% 5."% 7.7"- 8.7% 4.5"- 4.9'!10 6.0%

y~~
f'IIrwoert.IIt
AInericM 9.4% 4.0% 4.0% 5.8% ·2.3"- -3.3% -1.0% 0.0% ·1.'7%
Eu!:lpe. Midde EaIt&AIrica -1.0% S.M. 14.0% 10.2% 8.7% -2.0% ....11"- 0.8'110 -0.1%
a.tEMoclII 9.0% 19.M. 21.0% 18.fA 7.7% -3.0% -3.0'11. -2.0% 0.1"-
eMeJ..FIX -10.0% ·'4.M. -7.0% -8.5"- -1.0% 1.0% -1.8'110 2.8% -0.2"-

"*' 0.2% -"-"'''- 7.5"- -1."% 1.1% 3.2% 2.4"-

---..-
18.0'11. 8.M.
Pa::iIc
AMI Pa::iIc-lDcal 16.0% 13.0% 10.0% -0.8% 18.0% 8.0% lQ.O% 12.0% 11.3%
,.., P8ClIc·FlX 0.0% -7.0% -a.fA -8.8% ·10.5"- -7.""- -8.9% -8.8"- -8.9%
7_1"4 4••% I.cw. .u'JI, o..n. -2..n. -1.1"- o..n. .o.n.
---...---=-
AI~·FIX
11.1"4
-2.0%
U%
-S.M.
1I.cw.
-3.0%
L3%
-3.1"-
2.K
-2.0%
-1.n.
-1.0%
ILI%
-2.2%
1.cw.
..0.4%
0.1"4
-1.5"-
SWfare 11.fA 9.0% 4.0% ..0.5% ..c.4% 2.0% 3.0% ".0% 2.2%
MaIreI.cI 8.fA 13.M. 10.0% 0.5"- 3.n. -1.0% -1.0% 4.0% 1.3"-
f'nIcpnce -2."% .9.0% ....0% 11.1"- -2.8% -12."- -17.0'11. ·10.0% ·,0.'''-
ttIIin:aN 97.4% "".0% 40.0% 81.1"- 9.11"- 35.fA 20.0% 10.0% 18.3'!fo
0Iher -8.5'110 -3.6% 11."- 7".fA -8.9% -43.fA -84.""- -71.8"- -S6.9%
COGS 4."- ·1.8% -2.0% ·1.3"- -3.3"- ..c.6'l!o 0.'7% 0.8'110 -0.8%
1.5% 8.3% 8.2% 2.1"- -3.2% -2.3% 0.8% -0.8%
0.. MIrQin 8.fA
8.0% 6.1% 9.3% 7.4% 3.1"- 3.1"- ..c.Il% 1.0% 1.8%
S,G&A
-53.2% -55.4"- -51.2'% -32.4% -1.'7% 0.6'l!o ·28.9%
AIIIIIed Patty RO\IIIIII8S 2.5% -22.8%
12.3% 5..". 2."- .().3'l!. -2!l.5'lIo -l4.no. .2.3'l!. -14.0'%
0pemIng Profl '.3%
10.3% 12.1% 11.1% 9.1% 2.1"- -25.8% -12.8% -3.'7% -11.4"-
EBlTDA
PNotII"-"t 13.cw. 10.1% 7""' 5.5% o..n. -21.1% -15.no. .....cw. -14.0%
8.8% 2.8'l1o -30.6'l!o -17.5% -5.8% ·14.9%
NtllOcommcn 15."- 12.4% 8."-
15.8% 12.4% 9.1% 7.""- 2.1"- -30.2% -18.8% ....6'l!o -14.3"-
EPS
..0.2% -0.5'110 -0.5% O.M. -0.8'110 -0.8% -1.0% -o.Il%
StweI ~1IW1dilg 0.M.

Source: Morgan Stanley Research; PF F200J is adjusted for goodwill amortization

 ...
...., ~

,... MorganStanley
.,
.....,
....
Exhibit 13
The Estee Lauder Companies: Annual Cash Flow Statement, 1995-2005E
1995 1996 1997 1998 1999 2000 2001 2002E 2003E 2004E

--
FISCaIl!! endS June 30 2006E
$ Mllia'lS, eJCepl per share

.., Operating Ac::IIvIt*

Net incane
Depreciaticn and ama1izatial
121.2
42.0
160.4
47.7
197.6
58.3
236.S
79.S
272.9
99.6
314.1
129.1
305.2
156.3
299.4
153.0
337.3
183.6
372.5
217.5
410.9
254.S
,., Am<lrtizaDal d purchased rO(Blty right
Other na1 CUlTent 1IS$ets/ Nei> (44.1)
11.1
17.1
17.7
3.3
17.7
(55.7)
17.7
(42.9)
17.7
1S.9
6.6
36.6 (25.2) 4.9 5.0 5.1

.... Changes in WoOOng Capital

-
Rec8vabIes (31.1) (27.6) (56.3) (31.9) (38.0) (24.4) (57.3) (S.2) (29.4) (31.4) (32.5)
Inventories . o..S (75.1) 4.4 (71.S) (31.1) (102.1) 75.1 (1.S) (3.1) (1.6)
Payables 19.7 16.1 (5.5) 40.7 14.0 12.2 14.2 (11.2) 1.0 (3.4) (4.5)

....., Other WC Items

Change In WorIdng Capital

ITotal cash from OperaUons

DIscretionary Sourceal U...
52.6
42.0

161.1
22.3
(84.3)

172.0
33.6
(23.8)

253.1
42.6
(20.4)

258.2
29.0
5.0

352.3
6.2
(37.1)

442.7
(54.1)
(199.3)

305.4
(2.S)
52.9

480.2
16.1
(14.0)

511.8
1S.5
(19.4)

575.6
19.2
(19.5)

851.~

Purchase d PP&E (46.0) (63.4) (82.9) (120.6) (117.9) (180.9) (192.2) (225.0) (24O.S) (257.6) (275.6)
..... SeIad PP&E
ACQUisitials
20.2
(1S.5)
13.3
(25.6) (46.5) (459.9) (75.0)
3.0
(180.5)
1.9 2.7
(10.3)
3.0 3.3 3.6

..
..- Divestitures 1.0 (16.0)
Other (6.2) 1.2 (1.3) 3.3 (S.4) (15.9)
Cuh from investing (5Q.5) (74.5) (130.7) (577.2) (200.3) (374.3) (206.3) (232.6) (237.8) (254.3) (272.0)

Financing Ac::IIvtti..

,.,. Purchase d Stock

Issuance d Stock 60.6 38.1
431.2
(12.7) (23.6) (0.1)

24.5
(14O.0) (161.0) (185.2) (212.9)

.., Issuance d LT Debt

RepI!'fI'I18'1td LT Debt
Increasal (decrease) 5T Debt
18.4
(37.0)
40.0
(25.O)
(41.7)
(43.7)
(52.7)
(21.9)
(10.7)
205.2
(210.9)
(5.S)
(6.S)
(0.6)
(30.1)
(0.1) (0.2)
Exercise d Options (1.1) 4.9 0.2 14.6 14.0 13.3 2.7
W' DiYidends paid (36.3) (107.3) (63.4) (53.6) (63.6) (70.9) (71.0) (n.4) (84.4) (91.9) (100.2)
Cash from ftnandng (1&.0) (113.4) (118.8) 345.2 (73.2) (87.9) (83.5) (214.9) (245.4) (2n.1) (313.1)

-
-., Effect d Excha1ge Rate 2.0 2.8 (4.S) (4.3) (8.8) (7.5) (9.2)

Increeae (decreue) In cash 96.6 (13.1) o.s 21.9 70.0 (27.0) 26.4 32.7 28.6 44.2 88.0
Cash. begiming 171.3 267.9 254.8 255.6 m.5 347.5 320.5 346.9 379.6 408.3 452.4
m.5
.., Cash, ending

Free caen Flow calculation

267.9 254.S 255.6 347.5 320.5 346.9 379.6 408.3 452.4 518.5

,. Net Incane
Plus D~a1 iVld amatiZlliicn
121.2
42.0
160.4
58.8
197.6
76.0
236.8
97.5
272.9
117.3
314.1
146.8
347.7
162.9
(145.2)
299.4
153.0
337.3
183.6
(30.1)
372.5
217.5
(37.9)
410.9
254.8
(38.7)
.., Lass Waking Capital Usage 42.0 (86.6) (57.4) (63.0) (24.0) (43.3) 55.7
Less Capital Expenditures (46.0) (63.4) (82.9) (120.6) (117.9) (180.9) (192.2) (225.0) (240.8) (257.6) (275.6)
Lass restructuring cash rutlays (30.0)
Free caen Row 159.2 19.2 133.3 150.7 248.3 236.7 173.2 253.2 250.0 214.5 351.4

--... as a percent d net incane

RdoAnaly_
131% 43'Yo 67% 64% 91% 75% 50% 85% 74% 79% 86%

7.3%

...
Net earnings I r8\/enUeS 3.3% 4.3% 5.2% 5.9% 6.3% 6.7% 7.0% 6.0% 6.6% 6.9%
x l1MI'lues I avg. assets 1.82 1.85 1.65 1.51 1.51 1.47 1.41 1.44 1.46 1.48
=ROA 7.8% 9.5% 9.7% 9.5% 10.0% 10.4% 8.5% 9.4% 10.1% 10.8%
x illig. assets I illig. equity 4.80 3.88 3.53 3.24 2.78 2.49 2.32 2.24 2.19 2.14

..... = ROE 37.6% 37.0% 34.3% 30.8% 27.9% 25.8% 19.8% 21.2% 22.1% 23.2%

... After Tax Ebit 173.2 2aI.3 245.5 283.3 324.9 357.5 314.7 333.8 367.0 402.5

..
Invested Capitat 607.7 626.9 683.2 1.215.4 1.366.1 1,625.4 1,782.1 1,803.8 1.867.1 1.918.3 1,951.0
A'verage Invested C~taI 617.3 655.1 949.3 1,290.8 1,495.8 1.703.8 1.792.9 1,835.4 1,892.7 1,934.6
Aft.....x Return on Capital 28.1% 31.8'% 25.9% 21.9% 21.7% 21.0% 17.6% 18.2% 19.4% 20.8%
WACC 7.3% 7.3% 7.3% 7.3% 7.3%
ROIC-WACC 13.6% 10.2% 10.9% 12.1% 13.5%

...., CUlTentralio
Total Debt I Capitat
1.6
27.7"10
1.6
19.4%
1.7
9.5%
1.7
32.3%
1.8
35.6%
1.8
3O.2'Yo
2.0
26.6%
2.1
25.4%
2.1
24.3%
2.2
23.2%
2.2
22.1%
223.7

--
Interest cOoI8rage -130.0 -132.6 -114.5 80.4 33.3 37.7 58.1 59.2 81.6 115.1

Valudon I Perfonnance Hist EV iVld Price I Hist Pert. T s EV iVld Price I Forecast P8Ifamance
1995 1996 1997 1998 1999 2001E 2003E E 2005E
W 1.8 1.9 1.7 1.6 1.7 1.6 1.5 1.4

,.,. EV I Revenue 1.6

EV I EBITOA 12.7 13.2 13.7 11.8 10.6 12.0 11.0 9.8 8.S
16.3 16,7 14.S 13.6 15.8 15.0 13.7 12.5

...,.
EVI EBIT 15.4
EV/Boc:j(Capitai 9.1 5.5 5.3 4.6 4.1 3.9 3.8 3.6 3.4
61.5 60.6 29.9 25.8 23.1 27.0 23.3 20.6 lS.3
Price I ElVTIings
Price I Bod( Equity 19.6 18.6 8.1 6.5 5.5 5.2 4.9 4.6 4.4

Source: Morgan Stanley Research

--,.,.
..,
..,
....
Appendix A (2)

Company Chronology

1946 Joseph and Estee Lauder found Estee Lauder in New York City with four
Products: Estee Lauder Creme Pack, Estee Lauder Cleansing Oil, Estee
Lauder All Purpose Creme and Skin Lotion

1947 The first deparment store account is established with Saks Fifth Avenue,
New York City

1953 Estee Lauder introduces Youth Dew, the first bath oil to double as a
perfume

1957 Estee Lauder introduces Re-Nutriv

1958 Leonard Lauder joins the company

1960 Estee Lauder International operations begin. Markets open in the United
Kingdom (first account - Harrods in London)

Canada and Puerto Rico open

1961 Central America, Denmark and Hong Kong open

1962 Italy, Spain and Switzerland open

Golden Diamond Collection launches as the Company's first evening

makeup collection

Mrs. Estee Lauder receives The Neiman Marcus Award for Distinguished
Service in the Field of Fashion

1963 Austrailia, Belgium, The Netherlands, Nevv Zealand, Portugal and Sweden
open

1964 Ronald Lauder joins the Company

Aramis Inc. is established

France opens

1965 Manufacturing facilities open in Oevel, Belgium, Finland, Greece,

Germany, and Norway open
1966 Austria, Japan, Singapore and Thailand open

1967 Mrs. Estee Lauder is named one of ten Outstanding Women in Business in
The United States by business and financial editors

The Whitman Plant opens in the United Kingdom

The Estee Lauder Melville Plant opens in Melville, Long Island

1968 Mrs. Estee Lauder receives the Spirit of Achievement Award given by the
Albert Einstein College of Medicine of Yeshiva University

Clinique Laboratories, Inc. is founded

Estee, the first superperfume is founded

1970 Aramis 900: Scientifically formulated, fragrance free, problem-solving

products for men are introduced

Melville Plant capacity is doubled; separate Research and Development

Laboratories

Mexico open~

1971 The Melville plant receives an award from the American Institute of
Architects for notable design

Clinique introduces Aromatics fragrance

1972 Estee Lauder introduces Aliage, the first sports fragrance

1979 Prescripti ves is founded

1981 New expanded manufacturing facilities open in Petersfield, U.K.

Estee Lauder products become available for sale in perfumeries in

Moscow, Leningrad and Kiev

Aramis introduces JHL

1982 Estee Lauder introduces Night Repair Cellular Recovery Complex

1984 Aramis introduces Tuscany fragrance

1985 Mrs. Estee Lauder's autobiography, ESTEE: A Success Story, is published

.. Estee Lauder introduces Beautiful fragrance

Prescriptives introduces Calyx fragrance

1986 Clinique is the first cosmetic company to be invited to exhibit at the

Academy of Ophthalmology convention

Aramis introduces the New West fragrance for him

1987 Estee Lauder introduces Eyzone Repair Gel

Aramis introduces Lab Series for Men

1990 Estee Lauder introduces Time Zone Moisture Recharging Complex

Prescriptives introduces Eyewear

Origins is founded

Origins introduces Starting Over, the first AHA product sold in

department stores

Origins launches Peace of Mind

1991 Estee Lauder introduces Advanced Night Repair Protective Recovery

Complex

Prescriptives introduces All Skins foundation

Origins opens its first freestanding store in Cambridge, Massachusetts

.., Origins International debuts in the KaDeWe department store in Berlin,

Germany

Clinique launches City Block, first chemical sunscreen-free sunblock for

daily protection

Astronauts us Clinique products on space shuttle

1992 Mrs. Estee Lauder receives The Neiman Marcus Award for Distinguished
Service in the Field of Fashion, making her the first person ever to be
twice honored with this award

Origins opens a freestanding store in SoHo, New York City

 Origins launches at Nlagasin K in Copenhagen, Denmark

Clinique's Turnaround Cream is the first face cream with salicylic acid

1994 l\1rs. Estee Lauder is honored by the American Society of Perfumers with
their first Living Legend Award

The Skin Cancer Foundation presents the first annual Skin Sense A ward to
the Lauder family

Clinique opens a freestanding store, its first worldwide, in Budapest,

Hungary

Clinique launches ~'Beauty Isn't About Looking Young But Looking

Good" Campaign

Youth Dew receives the Fragrance Foundation's Fifi Award for Perennial
Success, celebrating forty years of popularity

Estee Lauder opens its first freestanding store in Prague, Czech Republic

Clinique launches Cyberface an interactive software program on skin

care and makeup

Clinique On Campus launches at Yale University

Clinique launches its first assisted-sell counter at Foley's Memorial City

Origins opens lOth freestanding store in Tampa, Florida

Estee Lauder Companies acquires a majority interest in MAC Cosmetics

(December 1994) and assumes distribution for MAC products outside the
U.S. and Canada

Aramis introduces Havana in the United States

1995 Origins introduces its first fragrance, Spring Fever

Aramis launches "tommy" the first fragrance under license from Tommy
Hilfiger

1996 Origins launches store-with-a-store at Isetan in Tokyo, Japan

-- The Estee Lauder Companies establish a partnership, called Palladio

Fragrances International, with Herbert Frommen
....
."

,.,
.,
., Kiton, a fragrance for men, is launched in select international markets

... Clinique opens its first U.S. freestanding store at the Pittsburgh
'WI International Airport
..,
Clinique introduces All About Lips and City Base Compact Foundation

-
.-
..,
..,
SPF 15

Clinique launches Website on the Internet,

....., The Fragrance Foundation awards the newly launched Estee Lauder
Pleasures "Fragrance Star of the Year;" "Bes~ Women's Fragrance in
Broad Distribution;" and "Best Women's Fragrance Package in
..,
-...
Broad/MassiAlternate Distribution"

The Fragrance Foundation awards "tommy" America's "Men's Fragrance

' WI Star of the Year;" "Best Men's Fragrance Introduction of the Year in
Limited Distribution;" "Best Package of the Year for a Men's Fragrance in
ExclusivelLimited Distribution"; "Best National Print Campaign for a
WI'
Men's Fragrance Introduction;" and "Best National TV Campaign for a
.., Men's 1995 Fragrance Introduction" (first time ever that one fragrance
"W
won 5 Fifi Awards)

....., First MAC store opens in Paris

,., Clinique International opens its first store in Prague, Czech Republic
., Clinique's Moisture On-Call wins the German Cosmopolitan Prix de
.., Beaute and the Belgian Marie Claire Prix d'Excellence
.,
1998 Clinique launches Weather Everything SPF 15 Environmental Cream
'WI

,.. Clinique launches All About Eyes, an eye gel-cream

,.,
., Clinique launches Smudgesicles, a cream eyeshadow packed in a
retractable tube
..,
.., Clinique launches Quickliner for Eyes and Blushwear
...., Estee Lauder Re-Nutriv Intensive Lifting Creme is awarded the Prix de

...., Beaute for Face Care by Cosmopolitan in Germany and Annabelle in

Switzerland

Estee Lauder Day Wear is awarded Best New Skincare Product by the
.... Austrailian New Woman Beauty A wards

.....
.,

...
 Estee Lauder Body Smoother Exfoliating Cream is Best New Body
Product by the UK N ew Woman Beauty A wards

Estee Lauder introduces Re-Nutriv Intensive Lifting Series and Re-Nutriv

Intensive Lifting Eye Cream

Estee Lauder introduces Advanced Night Repair Whitening Recovery

Complex, a new reformulation of best-selling Advanced Night Repair,

.. exclusively in Asia-Pacific markets

Estee Lauder introduces a garden of pleasures, three limited-edition

fragrances based on the original best-selling Estee Lauder pleasures
fragrance, sold exclusively in international markets

Estee Lauder introduces a skin care line for oily skin exclusively in
international markets: Clear Difference Purifying Cleansing Gel, Clear
Difference Purifying Oil-Control Lotion and Clear Difference Pore
Cleansing Mask join Clear Difference Oil-Control Hydrator (launched
1997)

The Estee Lauder Companies Inc. acquires the remaining equity interest in
Make-Up Art Cosmetics (MAC) (2/98)

Bobbi Brown launches her first fragrance, bobbi

Prescriptives introduces two new fast-acting makeup removers - Quick

Remover for Face Makeup and Quick Remover For Eye Makeup

Prescriptives launches a new women's fragrance, Flirt

Tommy Hilfiger Toiletries launches Hilfiger Athletics

Tommy Hilfiger Toiletries open "tommy's shops" with the launch of 14

new body, hair and face products. The store-within-a-store concept allows
the new products to be sold alongside leading "tommy," "tommy girl" and
Hilfiger Athletics fragrances

Lab Series for Men introduces Lift Off! Power Wash

Lab Series for men introduces U-Turn Age Defying Formula

For the first time in its history, Estee Lauder launches two completely
different fragrances under one brand concept. Dazzling GOLD and
 SILVER capture the feeling of celebration and spending time with the
people you love

According to the 1998 NPD Report, Estee Lauder pleasures and Beautiful
were the number one and two prestige fragrances for calendar year 1997,
respectively

Prescriptives launches Anywhere SPF 1S, the new age of sunscreen

lightweight enough to wear on bare skin, over moisturizer, even over
makeup

Prescriptives launches LSW, Retinol for visible improvement of Lines,

Spots and Wrinkles

Origins introduces Never A Dull Moment age-erasing skin polisher with

fruit enzymes, which became Origins number one product during the first
three months of the launch

Origins introduces Clearance Time to see less oil each day

Origins introduces Let's Circulate Salt rub soap, the first line extension of
their highly successful Salt Rub franchise

Origins introduces Night-A-Mins Cream, a creamier, more emollient

version of Night-A-Mins Lotion

Clinique launches in Brazil at Iguatemi Mall in Sao Paulo

Clinique wins "Top Brand" category in the UK Marie Claire Health &
Beauty Magazine Awards

Clinique's Dramatically Different Moisturizing Lotion wins "Top

Product" category in the UK Marie Claire Health & Beauty Magazine
Awards

Clinique launches City Cover Compact Concealer SPF 1S

Clinique Happy Fragrance expands with Body Wash and Body Smoother

Clinique launches Superlast Cream Lipstick

Clinique launches Smooth Delivery Body Treatment, a body moisturizer

and exfoliator in one

Clinique launches Sheer Matteness T -Zone Shine Control

..
Clinique launches e-commerce site at www.clinique.com. becoming the first
prestige cosmetic brand to sell its entire line of cosmetics over the Internet

The Fragrance Foundation awards Clinique Happy "Fragrance Star of the

Year" "Best Women's Fragrance in Specialty or Department Stores"

Allure Magazine awards Clinique top "Best of Beauty Award" for 1998.
In addition to being presented with 10 other "Best of Beauty Awards",
Clinique's 3-Step System was inducted into the 1st Annual Allure Hall of
Fame, which honors beauty's '"Gold Standards"

Clinique conducts global landmark study on the relationship between

mothers and daughters

Clinique launches in Bulgaria

Estee Lauder International opens freestanding stores in Morocco and

Bulgaria

Estee Lauder Diminish Anti-wrinkle Retinol Treatment is awarded the

French Marie Claire Prix d'Excellence award for Best New Skincare
Product, the first time a company won two years in a row. Diminish also
wins Australia's distinguished New Woman Beauty Award for "Best Anti-
Aging Product of the Year"; Spain's Telva Beauty Award for "Best Facial
Skincare Product"; Norway's Tique magazine nomination for "Best
Skincare Product of-1998"; and placed first in the "'Face Care and
Treatment Category" in Switzerland's Annabelle magazine's Prix de
Beaute

Estee Lauder Uncircle Eye Treatment for Dark Circles and Self-Action
Sunless SuperTan recognized as best beauty products at 1998 CEW
Beauty Awards Luncheon

Estee LauderU ncircle Eye Treatment for Dark C,ircles was named "1998
Product of the Year" in Hong Kong by B-lnternational, a leading English-
language beauty magazine

Estee Lauder Futurist Makeup won German Cosmopolitan's Prix de

Beaute and in AustrailiaClear Difference Oil Control Hydrator won the
New Women Beauty Award for "Best Skincare Product"

Lauder introduces Pure Color Nail Lacquer, an improved nail

formula in a ~"jewel" of a bottle, in France

Estee Lauder launches 1000/0 Time Release Moisture Cream and Lotion
 Estee Lauder launches Indelible Lipstick Classic, first transfer-resistant,
long-wearing lipstick in traditional lipstick case

In connection with an I8-month independent study on the impact of anti-

oxidants when applied to skin, Estee Lauder launches DayWear Protective
Anti-Oxidant Creme and Lotion SPF 15 with exclusive SU.VI.MAX
blend. The SU.VLMAX blend was found to reduce the appearance of new
lines and wrinkles by 23 %

Estee Lauder introduces Attitude Compact, after hours compact with

mood cover

Estee Lauder launches DoubleWear Stay-in-Place Concealer

Estee Lauder opens full-service, state-of-the-art day spa at Bloomingdale's

59 th Street

Estee Lauder introduces pleasures Body Smoothing Spray

Estee Lauder introduces Soft Clean Rinse-Off Cleanser

Estee Lauder introduces Lash Luxe Conditioning Mascara, treatment

mascara in gold case

Estee Lauder launches Resilience Lift Face and Throat Creme and Lotion
SPF 15, new skin care product for women in their 40s, 50s and beyond.
Former Estee Lauder model Karen Graham is featured in Resilience Lift
advertising. This is the first time Estee Lauder targets an ad campaign to a
more mature customer. Also, it is the only time a former model is featured
. .
In a new campaign

Aramis introduces Aramis Gold, a sensual fragrance that is offered

exclusively at Bergdorf Goodman and Neiman Marcus

La Mer introduces The Cleansing Lotion, The Cleansing Gel, The Oil
Absorbing Tonic and The Tonic

Tommy Hilfiger Toiletries introduces the tommy home fragrm1ce

collection. The collection of scented candles and fragrance room sprays is
available in three scents: Townhouse, Country Place and Summer

Prescriptives introduces four new makeup brushes: Foundation Brush,

..
Soft Shadow Brush, Finelining Brush and Buff Brush

Prescriptives introduces 'Lavish Lipsticks' in 40 shades

 Prescriptives reafflmls their reign as ~'The Foundation Authority" by
introducing Photochrome Compact Makeup, the light-adjusting, full

coverage, transfer-resistant cream foundation in the industry and the fIrst

patent pending Ergonomic Sponge

Prescriptives introduces Vibrant-Vitamin Infuser for dull, stressed skin-

brightens overtired, lackluster skin

Prescriptives develops new "2001" selling concept at retail- putting

merchandise on tables and out of caseline

.. Origins launches Original Skin Pressed makeup with you-control-it

coverage, a compact foundation that sweeps on like a second skin and
stays fresh-faced all day

Origins launches Peace of Mind Gumballs, an edible form of the nUInber

one Sensory Therapy product, Peace of Mind

MAC launches its first partnered store location at Le Printemps in Paris

MAC adds an additional door in Germany at Beck in Munich

MAC launches its first door in Spain at EI Corte Ingles Castellana in

Madrid Approximately 1,600 people attended the opening party, hosted
by RuPaul

MAC enters the Austrailian market at Grace Bros in Sydney and Myer in
Melbourne. Both RuPaul and k.d. lang traveled to Austrailia for the
opening events

MAC opens its first sh9P in an airport - in London Heathrow's Terminal 3

MAC adds three additional DFS locations in Asia DFS Sun Plaza in
Hong Kong, DFS Saipan, and DFS Millennia in Singapore

MAC PRO Store - a store for makeup artists only launches in New York
City

MAC introduces new packaging with the launch of the Fall 1999 color
story, Earth Goddess

MAC introduces three new mascara formulas Sheer, Natural and Xtra

MAC introduces four Brow Pencils and Brow Set

...,
..
-
...,
.., NfAC launches Creme Colour Base, an emollient-based color product that
.., can be used on cheeks, lips and eyes

....., "tommy's shops" grows the face, hair, body care lines with the addition of
seven face care products, seven hair care products (including the
.... introduction of shampoos, conditioners and hair gels) and five body

....., products (including shower gel and body hydrators)

Aveda's Volumizing Tonic is awarded Allure's Reader's Choice for Best

... Volumizer

.....
.... A veda launches Hand Relief A veda launches Cuticle Control

Aveda launches Pure-Fume Brilliant Extensions: Pure-Fume Brilliant

... Shampoo, Pure-Fume Brilliant Conditioner, Pure':'Fume Brilliant

.... Retexturing Gel and Pure-Fume Brilliant Thermal Styling Creme

Aveda introduces a Men's Line: Shampoo Body Bar, Anti-Perspirant,

...
...,
Shave Cream, After-Shave Balm and Pure-Fume Body Tonic

Aveda's Elixer is chosen as Allure's Editors' Choice for Best Conditioner

....... 1999 MAC opens its fITst door in New Zealand at Smith & Caughey in

...,., Auckland

MAC introduces additional hair products - Intensive Conditioner, Hair

., Gloss, Hair Gel, Clarifying Shampoo

...., MAC launches 5 Sins of Lipglass, a tinted version of its top-selling

'W

Lipglass lip gloss

...... MAC opens first partnered store location in Austria in Vienna's Steffl

Estee Lauder launches Futurist Full Treatment Lipstick SPF 15

..... Estee Lauder launches SunCare line, featuring new Face SPF 15 and 30
and Body SPF 15 and 25
....
...- Estee Lauder introduces ReNutriv Intensive Lifting Body Creme
...., Clinique launches its first anti-aging product - Stop Signs Visible Anti-
Aging Serum
.... Clinique launches Superfit Makeup, an ingenious blend of featherlight,
..,
......, high performance fibers never before used in the cosmetics industry

--...
....
that absorb sebum and draw excess moisture away from skin for
immediate evaporation

Clinique Happy Fragrance expands with the introduction of Happy

Hydrating Mist, a lightly fragranced, luxurious hydrating spray

Clinique's All About Eyes is awarded "Best Skin Care 'Product in Limited
Distribution" by Cosmetic Executive Women (CEW)

Clinique Happy is awarded the American Marketing Association's

"Edison Best New Products Award" as one of the best new products of
1998 in the Women's Fragrance Category

Origins expands its strategy of creating a General Store by introducing

two products designed for the home, Knock on Wood Wood Therapy
cream and Cleaning Service Nature's Household Cleaner

Origins launches its Baby line with seven products formulated with
calming, child-safe essential oils to soothe and comfort babies. The key
product in the line is Bare Hugs Baby massage cream

Origins introduces As Good As It Gets Foundation/concealer/finishing

powder in one

Origins launches two new sun products, Beach Blanket SPF 15 with no
chemical sunscreen and Cover Your Mouth Lip protector with SPF 8

Origins introduces Origins For the Bath, a line of 36 bath and body
products that deal with emotional as well as physical well-being

Origins launches its own Website with interactive activities designed to

cope with and reduce stress, as well as shop on-line

Origins unveils its newest concept for total well-being at the NorthPark
Center in Dallas, Texas. The new flagship store is a 2,600 square foot, '
multi-dimensional, shopping experience that also features a Feel-Good
Spa with a unique spa-experience called "100 Minutes of Pure Heaven", a
Tea Room and outdoor Garden in the same location

Origins opens its first freestanding stores in Brighton, England and

Tienmu, Taiwan

Origins opens the Singapore market at one of the country's premier

retailers, Isetan on Scotts Road

Estee Lauder launches Pure Color Nail Lacquer in international markets

 Estee Lauder introduces Swiss Whitening Protectective Foundation With
Advanced Whitening Formula SPF 15+, a wet/dry foundation, in Asian
. markets

Prescriptives introduces Potent - the first luxuriously comfortable,

transfer-resistant lipstick in the preferred traditional bullet form

Prescriptives introduces Super Line Preventor, smart stress-sensitive skin

care

Prescriptives introduces Vibrant Instant Eye Brightener for Dark Circles

and Puffmess

Estee Lauder launches Perfectly Clean Cleansers

Estee Lauder launches Unline Total E yecare

Estee Lauder launches dazzling touch-on perfume sticks

La Mer introduces The Face Mist, The Eye Balm, The Body Serum and
The Body Lotion

Tommy Hilfiger Toiletries introduces Tommy Hilfiger Color, a

comprehensive color cosmetics line (186 sku's) that includes: Fresh Talk
Conditioning Lip Color, All Talk Lip Crayon, Small Talk Lip Pencil, Fast
Talk Lip Shine, Double Feature wet/dry Eye Color, Border Line Eye
Pencil, Retro Liner Liquid Eyeliner, Big Deal Volumizing Lash Color,
Glow For It Cheek Color, Front Row Nail Polish and Get Lost Makeup
Remover

Tommy Hilfiger Freedom for her and Freedom for him fragrances are
launched

Bobbi Brown introduces baby essentials with 5 pampering and gently

formulated products for babies

Estee Lauder Companies creates a new division, ELC Online, responsible

for all online strategies and activities for all brands in Spring 1999

The Estee Lauder Companies acquires Stila Cosmetics Inc.

The Estee Lauder Companies acquires Jo Malone Limited

The Estee Lauder Companies signs a licensing agreement with Kate Spade
LLC, owner of the Kate Spade trademark. Under the agreement,
 Prescriptives Inc. obtains exclusive worldwide rights to the Kate Spade
trademark and related trademarks for the manufacture, marketing,
distribution and sale of beauty and beauty-related products, including
fragrances, cosmetics, skin care products, toiletries and beauty-related
accessories

Clinique launches in Poland

Clinique launches City Stick SPF 15 - a versatile, swivel-up foundation

stick that does double-duty as a concealer

Clinique Happy is honored by Marie Claire in the magazine's Fashion and

Beauty Awards as "Best Fragrance"

Clinique launches Longstemmed Lashes, an innovative lengthening

mascara that applies the latest in hair technology to the lashes

Clinique introduces Happy for Men, a unique men's fragrance that takes
freshness beyond the initial impression

Clinique launches Acne Solutions, a super-efficacious system of

medicated over-the-counter anti -acne products. The products work
synergistically to gently provide four crucial anti-acne benefits:
exfoliation, antibacterial and anti-irritation action and oil control

For the fourth consecutive year, Allure's October issue spotlights the
"Best of Beauty" with 122 beauty products chosen by the magazine's
editors and readers. Clinique takes home the most Readers' Choice
Awards for the "Best of Beauty" As a way to reach new customers and
... better service current customers,

Clinique opens six open-service "Kiosks" in malls throughout the U.S.

Lab Series introduces Frequent Flier Daily Face Lotion

Prescriptives introduces *magic by Prescriptives - a collection of first-of-

their kind products that manipulate light and shadow and obscure
imperfections to create the illusion of flawless skin. The collection
includes illuminating Liquid Potion, Illuminating Cream Potion, Liquid
Powder, Cooling Globe, Cooling Wand and Invisible Line Smoother

Estee Lauder introduces Spotlight Skin Tone Perfector

Estee Lauder opens full-service state-of-the-art day spa at Bloomingdale's,

Tysons Comer, Virginia
Estee Lauder Resilience Lift Creme recognized as one often healthiest
beauty products for 1999 by Health Magazine

Estee Lauder extends its Resilience Lift Franchise with the launch of
Resilience Lift Eye Cream

Estee Lauder extends its popular Re-Nutriv Line with Re-Nutriv Intensive
Lifting Creme

Estee Lauder introduces Airiness Long Last Makeup in Asia

Elizabeth Hurley appears as part of the 25 th Anniversary Celebration of the

the brand in Greece

Estee Lauder continues the success of its Solid Perfume Compact Museum
exhibitions in Italy, Spain and Austrailia

Lab Series for Men introduces four products (two new formulas) to the
Lab Series Shave Series: Mega Foam Shave Formula, Close Call Shave
Solution, Razor Bum Relief Plus, Tri Gel Extra Shave Formula

Tommy Hilfiger Color introduces 'Tommy's Top 100' - musically named

lipstick wall of 100 shades launched in the Pacific Northwest. Includes
'Tommy's Top Five' - five lipsticks named after current recording artists:
Dido, Vitamin C, Luscious Jackson, Mya and Kendall Payne

Tommy Hilfiger Color launches 'Sweet Stix' - six flavored lipsticks

"tommy's shops" further expands the face, hair and body care lines by
adding Tommy's Lip Calm, six new hair products, eight new flavored
shower gels, eight flavored moisturizing body creams and eight flavored
bath fizz balls

MAC introduces the Essences of MAC: Hyper Souk, Synthetic Nirvana

and Asphalt Flower potions. These scents have a very high concentration
of perfume in an oil base

MAC continues to expand internationally, entering several new markets:

Mexico City, Mexico; Buenos Aires, Argentina; Copenhagen, Denmark;
Stockholm, Sweden; Amsterdam, The Netherlands; Seoul, Korea; Kuwait
City, Kuwait

Origins continues to offer alternative solutions to everyday problems by

introducing Sensory Therapy Sleep, seven products to help combat sleep
depri vation
...,.
...
...
...
W'
Origins expands the successful Salt Rub franchise and introduces Salt
1iW Suds Foaming Body Wash, Salt Butter Skin Softening Bath Soak and
., Ginger Body Scrub Smoothing Body Buffer
... Origins opens a freestanding store in Bath, England

....,.-- Origins expands into Northern Europe and opens a store-within-a-store in

NK department store in Stockholm, Sweden

.....
..... Origins expands in Asia, opening a store-within-a-store in Isetan Kuala
Lumpur in Malaysia

..
.-..
Talk show host Oprah Winfrey declares Origins Ginger Souffle Whipped
Body Cream one of her "favorite" products on her annual holiday gift
show. Sales of the product increase 10000/0 in the weeks following the
... mention
"Ir
Origins further expands the Sensory Therapy category launching a line of
.., Cold Care products, four botanically-based products to help relieve
.,. symptoms associated with a cold, flu or allergies
~

... Bobbi Brown launches in Spain at El Corte Ingles in Barcelona

......, A veda launches Rosemary Mint Shampoo

... A veda launches Shampure Conditioner

~ Aveda launches Tourmaline Charged Hydrating Creme

......
.....
Aveda's Lip Saver wins Allure's Editors' Choice for Best Lip Balm

Health Magazine chooses All-Sensitive Shampoo- as Healthiest Shampoo

.....
'-"
2000 On January 1, Fred H. Langhammer assumes position of Chief Executive
Officer, Estee Lauder Companies Leonard A. Lauder remains Chairman

..,., Estee Lauder Companies signs a licensing agreement with Toni Gard

..
Fashion GmbH, owner of the Toni Gard trademark

The Estee Lauder Companies announces a comprehensive Internet

,... strategy; as part of the strategy, Estee Lauder Companies acquires

--
...,
gloss.com

Aramis introduces Surface - a new collection of seven grooming products

.... for men that work In-An-Instant
..,
...,
,.,.
...,
...
'tIr

.,..
,..
.., Estee Lauder extends its Futurist franchise with the launch of Futurist Full
.., Treatment Eye Makeup and Futurist Lash-Extending Mascara
.,
...., Estee Lauder introduces three new fonnulas in the mask category
Polished, So Moist and So Clean
So

...., Estee Lauder launches Go Pout Lipcolor - ten new shades offering
dimensional color in a blue enamel case

.... th
Estee Lauder celebrates Beautiful's 15 Anniversary with three new body

..
..... products and new print and television advertisements

Estee Lauder unveils Idealist a first of its kind non-acid skin refmisher

-
w

..,
..,
Estee Lauder introduces the WhiteLight Brightening System in Asia - a
five-product line created by a collaboration between Asian, European and
American Research & Development

... Estee Lauder makes its first foray into the European body line market with
.... Body Power - a five-product collection which combines skin care benefits
....., with aromachology

2001 MAC opens its first locations in Moscow, Russia and Athens, Greece
..,.
., Bobbi Brown launches Extra, a skin care collection in Bergdorf Goodman,
., Neiman Marcus and Holt Renfrew

...,. Bobbi Brown launches in the Middle East

~
th
., Bobbi Brown celebrates the 10 anniversary of her business

~ Jo Malone introduces Red Roses, a new fragrance available in the United

States
...
'-

Jo Malone opens U.S. flagship store in New York City's Flatiron Building
....
...,., DKNY For Men launches in all international markets

....., Creme de la Mer launches in Benelux, Nordic and Argentina

Prescriptives launches Luxe Soft Glow Moisture Makeup in all

,., international markets
,.,
..,
..
--...
..,
 Origins adds two key retail stores: one in the historic Flatiron Building in
New York City and another in Century City, California. The Century City
location is the largest Origins store in the world and boasts a Zen Garden

Origins updates its skin care collection with five new products for all skin
types: Grin from Year to Year Brightening face firmer, Look Alive
Vitality moisture cream, Calm Balm Sensitive skin eye cream, Checks and
Balances Frothy face wash, United State Balancing Tonic and Balanced
Diet Lightweight moisture cream

Origins initiates phase II of the re-launch of its color collection with 42

new shades for lips, eyes and cheeks. The second phase introduces Liquid
Lip Color (nine shades) and Transforming Lip Glaze, as well as ten new
blush shades and 22 new eyeshadow shades (7)

-
Appendix B (5)

Charities

• The Breast Cancer Foundation

• The Coalition for the Homeless' First Step Job Readiness Program

(which in 1997,1999 and 2001 honored The Estee Lauder

Companies Inc. for their corporate philanthropy)

• New York Cares

• Pencil, Inc.

• Materials for the Arts

• American Cancer Society

• March of Dimes

• City of Hope

• Lighthouse International

• Mount Sinai Medical Center

• Memorial Sloan-Kettering Cancer Center

• The Momentum AIDS Project

• Kips Bay Boys & Girls Club

• Girl Scout Counsel of Greater New York

• The Museum of Modem Art

• Whitney Museum of American Art

• American Museum of Natural History

• The Metropolitan Museum of Art

• Natural Resources Defense Council

• Central Park Conservancy

• Citymeals-on-Wheels

• New York City Outward Bound Center

• Action Against Hunger

• The University of Pennsylvania

• OHEL Children's Homes and Family Services

• Fresh Air Fund

• Institute of International Education

• Scholarship Fund

• Vassar College

• Parsons School of Design

• Versailles Foundation (for Monet's gardens)

• Many, many others