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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 December 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 January 29, 2024, 232,931,380 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
Consolidated Statements of Earnings — Three and Six Months Ended December 31, 2023 and 2022
Consolidated Statements of Comprehensive Income — Three and Six Months Ended December 31, 2023 and 2022
Consolidated Balance Sheets — December 31, 2023 and June 30, 2023 (Audited)
Consolidated Statements of Cash Flows — Six Months Ended December 31, 2023 and 2022


Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended
December 31		Six Months Ended
December 31
(In millions, except per share data)2023202220232022
Net sales
$4,279 $4,620 $7,797 $8,550 
Cost of sales
1,154 1,219 2,224 2,242 
Gross profit
3,125 3,401 5,573 6,308 
Operating expenses
Selling, general and administrative
2,544 2,630 4,893 4,874 
Restructuring and other charges
7 8 8 10 
Impairment of other intangible assets— 207 — 207 
Total operating expenses
2,551 2,845 4,901 5,091 
Operating income574 556 672 1,217 
Interest expense98 52 193 98 
Interest income and investment income, net40 26 81 41 
Other components of net periodic benefit cost(3)(2)(5)(5)
Earnings before income taxes519 532 565 1,165 
Provision for income taxes195 135 205 278 
Net earnings324 397 360 887 
Net earnings attributable to redeemable noncontrolling interest
(11)(3)(16)(4)
Net earnings attributable to The Estée Lauder Companies Inc.$313 $394 $344 $883 
Net earnings attributable to The Estée Lauder Companies Inc. per common share
Basic
$.87 $1.10 $.96 $2.47 
Diluted
$.87 $1.09 $.95 $2.45 
Weighted average common shares outstanding
Basic
358.7 357.7 358.6 357.8 
Diluted
360.0 360.4 360.3 360.9 
See notes to consolidated financial statements.
2
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THE ESTÉE LAUDER COMPANIES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
December 31		Six Months Ended
December 31
(In millions)2023202220232022
Net earnings$324 $397 $360 $887 
Other comprehensive income (loss):
Net cash flow hedge loss
(47)(56)(28)(7)
Cross-currency swap contract gain
14 — 14 — 
Retirement plan and other retiree benefit adjustments(1)— (2)— 
Translation adjustments216 287 96 (94)
Benefit for income taxes on components of other comprehensive income
38 26 — 7 
Total other comprehensive income (loss), net of tax220 257 80 (94)
Comprehensive income544 654 440 793 
Comprehensive loss (income) attributable to redeemable noncontrolling interest:
Net earnings
(11)(3)(16)(4)
Translation adjustments(13)(8)(2)27 
Total comprehensive loss (income) attributable to redeemable noncontrolling interest(24)(11)(18)23 
Comprehensive income attributable to The Estée Lauder Companies Inc.$520 $643 $422 $816 
See notes to consolidated financial statements.
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THE ESTÉE LAUDER COMPANIES INC.
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)December 31
2023		June 30
2023
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents
$3,939 $4,029 
Accounts receivable, net
1,752 1,452 
Inventory and promotional merchandise
2,603 2,979 
Prepaid expenses and other current assets
621 679 
Total current assets
8,915 9,139 
Property, plant and equipment, net
3,220 3,179 
Other assets
Operating lease right-of-use assets
1,819 1,797 
Goodwill
2,497 2,486 
Other intangible assets, net
5,554 5,602 
Other assets
1,278 1,212 
Total other assets
11,148 11,097 
Total assets
$23,283 $23,415 
LIABILITIES AND EQUITY
Current liabilities
Current debt
$1,500 $997 
Accounts payable
1,252 1,670 
Operating lease liabilities
366 357 
Other accrued liabilities
3,456 3,216 
Total current liabilities
6,574 6,240 
Noncurrent liabilities
Long-term debt
6,640 7,117 
Long-term operating lease liabilities
1,695 1,698 
Other noncurrent liabilities
1,812 1,943 
Total noncurrent liabilities
10,147 10,758 
Commitments and contingencies


Redeemable noncontrolling interest
850 832 
Equity
Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at December 31, 2023 and June 30, 2023; shares issued: 470,748,805 at December 31, 2023 and 469,668,085 at June 30, 2023; Class B shares authorized: 304,000,000 at December 31, 2023 and June 30, 2023; shares issued and outstanding: 125,542,029 at December 31, 2023 and 125,542,029 at June 30, 2023
6 6 
Paid-in capital
6,367 6,153 
Retained earnings
13,858 13,991 
Accumulated other comprehensive loss(856)(934)
19,375 19,216 
Less: Treasury stock, at cost; 237,865,069 Class A shares at December 31, 2023 and 237,590,199 Class A shares at June 30, 2023
(13,663)(13,631)
Total equity
5,712 5,585 
Total liabilities, redeemable noncontrolling interest and equity$23,283 $23,415 
See notes to consolidated financial statements.
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THE ESTÉE LAUDER COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31
(In millions)20232022
Cash flows from operating activities
Net earnings$360 $887 
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization408 359 
Deferred income taxes(83)(31)
Non-cash stock-based compensation189 165 
Net loss on disposal of property, plant and equipment2 4 
Non-cash restructuring and other charges4 14 
Pension and post-retirement benefit expense27 26 
Pension and post-retirement benefit contributions(62)(12)
Impairment of other intangible assets— 207 
Other non-cash items14 (5)
Changes in operating assets and liabilities:
Increase in accounts receivable, net(279)(295)
Decrease (increase) in inventory and promotional merchandise
405 (156)
Decrease in other assets, net
44 33 
Decrease in accounts payable(251)(310)
Increase (decrease) in other accrued and noncurrent liabilities
175 (106)
Decrease in operating lease assets and liabilities, net(16)(29)
Net cash flows provided by operating activities937 751 
Cash flows from investing activities
Capital expenditures(527)(419)
Purchases of investments(4)(4)
Settlement of net investment hedges(26)138 
Net cash flows used for investing activities(557)(285)
Cash flows from financing activities
Proceeds of current debt, net
780 244 
Repayments of commercial paper (maturities after three months)
(785)— 
Repayments and redemptions of long-term debt(5)(258)
Net proceeds from stock-based compensation transactions19 37 
Payments to acquire treasury stock(33)(257)
Settlement of cross-currency swap
9 — 
Dividends paid to stockholders(474)(451)
Net cash flows used for financing activities
(489)(685)
Effect of exchange rate changes on Cash and cash equivalents19 (13)
Net decrease in Cash and cash equivalents
(90)(232)
Cash and cash equivalents at beginning of period4,029 3,957 
Cash and cash equivalents at end of period$3,939 $3,725 
See notes to consolidated financial statements.
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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, 2023.

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, 2023. 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 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 $232 million and $291 million, net of tax, during the three months ended December 31, 2023 and 2022, respectively, and $89 million and $(61) million, net of tax, during the six months ended December 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 on foreign currency transactions of $13 million and $20 million during the three months ended December 31, 2023 and 2022, respectively, and $29 million and $34 million during the six months ended December 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)December 31, 2023June 30, 2023
Raw materials
$830 $876 
Work in process
296 362 
Finished goods
1,167 1,404 
Promotional merchandise
310 337 
$2,603 $2,979 

Property, Plant and Equipment

Property, plant and equipment consists of the following:
(In millions)December 31, 2023June 30, 2023
Assets (Useful Life)
Land and improvements(1)
$74 $70 
Buildings and improvements (10 to 40 years)
909 843 
Machinery and equipment (3 to 10 years)
1,160 1,071 
Computer hardware and software (4 to 10 years)
1,810 1,651 
Furniture and fixtures (5 to 10 years)
140 136 
Leasehold improvements
2,426 2,310 
Construction in progress726 827 
7,245 6,908 
Less accumulated depreciation and amortization
(4,025)(3,729)
$3,220 $3,179 
(1)Land improvements are depreciated over a 10 year useful life.

Depreciation and amortization of property, plant and equipment was $163 million and $138 million during the three months ended December 31, 2023 and 2022, respectively, and $325 million and $274 million during the six months ended December 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 six months ended December 31, 2023 and 2022 are as follows:

Three Months Ended
December 31
Six Months Ended
December 31
2023202220232022
Effective rate for income taxes37.6 %25.4 %36.3 %23.9 %
Basis-point change from the prior-year period1,220 1,240 

For the three months ended December 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 2024, and the unfavorable impact associated with previously issued stock-based compensation, partially offset by a decrease in state and local income taxes.

For the six months ended December 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 2024, and the unfavorable impact associated with previously issued stock-based compensation.

On August 16, 2022, the U.S. federal government enacted the Inflation Reduction Act, including a tax provision implementing a 15% corporate alternative minimum tax based on global adjusted financial statement income. The corporate alternative minimum tax became effective beginning with the Company's first quarter of fiscal 2024 and did not have an impact on the Company's consolidated financial statements for the three and six months ended December 31, 2023.

As of December 31, 2023 and June 30, 2023, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $63 million. The total amount of unrecognized tax benefits at December 31, 2023 that, if recognized, would affect the effective tax rate was $53 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and six months ended December 31, 2023 in the accompanying consolidated statements of earnings was $2 million. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at each of December 31, 2023 and June 30, 2023, was $17 million and $15 million, respectively. On the basis of the information available as of December 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 2024 second quarter, the Company formally concluded the compliance process with respect to its fiscal 2022 income tax return under the U.S. Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three and six months ended December 31, 2023.

Supplier Finance Programs

Under its supplier finance programs, the Company agrees to pay the banks the stated amount of confirmed invoices from its designated suppliers on the due dates of the invoices. The Company may terminate the agreements upon written notice (with notice periods ranging from 30 to 60 days) or immediately upon a breach. The supplier invoices that have been confirmed as valid under the programs require payment in full within 90 days of the invoice date.

Outstanding obligations confirmed as valid totaling $64 million and $52 million as of December 31, 2023 and June 30, 2023, respectively, are included in accounts payable in the accompanying consolidated balance sheets.










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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other Accrued and Noncurrent Liabilities

Other accrued liabilities consist of the following:
(In millions)December 31, 2023June 30, 2023
Employee compensation$475 $546 
Accrued sales incentives447 321 
Deferred revenue370 323 
Payroll and other non-income taxes333 297 
Sales return accrual302 289 
Other1,529 1,440 
$3,456 $3,216 

At December 31, 2023 and June 30, 2023, total Other noncurrent liabilities of $1,812 million and $1,943 million included $606 million and $620 million of deferred tax liabilities, respectively.

Recently Adopted 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 became effective for the Company’s first quarter fiscal 2024 and has been 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.

Impact on consolidated financial statements – The Company has supplier financing arrangements and applied the disclosure requirements as required by the amendments. Such information is included in Supplier Finance Programs above within Note 1 – Summary of Significant Accounting Policies.

Reference Rate Reform (ASC Topic 848 “ASC 848”)
In March 2020, the FASB 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 clarify 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.





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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impact on consolidated financial statements – The Company completed its comprehensive evaluation of applying this guidance and adopted certain practical expedients for its interest rate swap agreements in the fiscal 2024 first quarter which did not have a significant impact on its consolidated financial statements. The practical expedients that were adopted permit its hedging relationships to continue without de-designation upon changes due to reference rate reform. Foreign currency forward contracts do not reference LIBOR and no practical expedients were elected but are now discounted using the Secured Overnight Financing Rate ("SOFR"). For existing lease, debt arrangements and other contracts, the Company did not adopt any ASC 848 practical expedients as it relates to these arrangements.

Recently Issued Accounting Standards

FASB ASU No. 2023-07 – Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued authoritative guidance to improve reportable segment disclosure requirements. Companies are required to disclose significant segment expenses by reportable segment if they are regularly provided to the chief operating decision maker (CODM). Companies are also required to disclose other segment items by reportable segment. The guidance clarifies that companies may disclose more than one measure of segment profit or loss used by the CODM, provided that at least one of the reported measures includes the segment profit or loss measure that is most consistent with U.S. GAAP measurement principles. All existing annual disclosures about segment profit or loss, as well as the new requirements, must now be provided on an interim basis. Additionally, on an annual basis, the CODM’s title and position is required, as well as an explanation of how the CODM uses the reported measure(s) and other disclosures. The guidance does not change how companies identify their operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

Effective for the Company – The guidance is effective for the Company’s fiscal year ending June 30, 2025 Form 10-K and then in interim periods beginning in the Company’s first quarter of fiscal 2026. Early adoption is permitted. The guidance should be applied retrospectively unless impracticable.

Impact on consolidated financial statements – The Company is currently evaluating the impact that this guidance will have on its financial statement disclosures.

FASB ASU No. 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures
In December 2023, the FASB issued authoritative guidance to amend and enhance existing annual income tax disclosures primarily focusing on two reporting areas: (1) greater disaggregation of information in the effective tax rate reconciliations and (2) disclosure of income taxes paid by the companies, disaggregated by applicable jurisdiction.

Companies are required to use specific categories to prepare and disclose a tabular rate reconciliation (using both percentages and reporting currency amounts) of:
•the reported income tax expense (or benefit) from continuing operations and the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal income tax rate of the jurisdiction of domicile.
•reconciling items within certain categories that are equal to or greater than a specified quantitative threshold, including the nature, effect, and underlying causes of the reconciling items and the judgment used in categorizing the reconciling items.

The guidance also requires companies to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign jurisdictions including individual jurisdictions with amounts paid equal to or greater than a specified quantitative threshold. The guidance also requires companies to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign as well as income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign jurisdictions.

Effective for the Company – The guidance is effective for the Company’s fiscal year ending June 30, 2026 Form 10-K. Early adoption is permitted. The guidance should be applied on a prospective basis with the option to apply the standard retrospectively.

Impact on consolidated financial statements – The Company is currently evaluating the impact that this guidance will have on its financial statement disclosures.






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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 CareMakeupFragranceHair CareTotal
Balance as of June 30, 2023
Goodwill
$1,664 $1,116 $254 $353 $3,387 
Accumulated impairments
(139)(732)(30)— (901)
1,525 384 224 353 2,486 
Translation adjustments, goodwill
10 — 1 — 11 
Translation adjustments, accumulated impairments
— — — — — 
10 — 1 — 11 
Balance as of December 31, 2023
Goodwill
1,674 1,116 255 353 3,398 
Accumulated impairments
(139)(732)(30)— (901)
$1,535 $384 $225 $353 $2,497 

Other Intangible Assets

Other intangible assets consist of the following:

December 31, 2023June 30, 2023
(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 and other
$2,051 $845 $1,206 $2,030 $766 $1,264 
Non-amortizable intangible assets:
Trademarks4,348 4,338 
Total intangible assets
$5,554 $5,602 

The aggregate amortization expense related to amortizable intangible assets was $37 million for the three months ended December 31, 2023 and 2022, and $73 million for the six months ended December 31, 2023 and 2022.

The estimated aggregate amortization expense for the remainder of fiscal 2024 and for each of the next four fiscal years is as follows:

Fiscal
(In millions)20242025202620272028
Estimated aggregate amortization expense$75 $147 $147 $130 $105 




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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Impairment Analysis During the Six Months Ended December 31, 2022

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 six months ended December 31, 2022 and the remaining trademark and goodwill carrying values as of December 31, 2022, for each reporting unit, are as follows:
Impairment ChargesCarrying Value
(In millions)Three and Six Months Ended December 31, 2022As of December 31, 2022
Reporting UnitGeographic RegionTrademarksGoodwillTrademarksGoodwill
Smashbox
The Americas$21 $— $— $— 
Dr.Jart+
Asia/Pacific100 — 339 318 
Too Faced
The Americas86 — 186 13 
Total$207 $— $525 $331 

The impairment charges for the three and six months ended December 31, 2022 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
NOTE 3 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

Post-COVID Business Acceleration Program

The Company approved specific initiatives under the Post-COVID Business Acceleration Program (the “PCBA Program”) through fiscal 2022 and has substantially completed those initiatives through fiscal 2023. Additional information about the PCBA Program is included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

Restructuring Program Component of the Profit Recovery Plan

As previously communicated on November 1, 2023, the Company has launched a Profit Recovery Plan to help progressively rebuild its profit margins in fiscal years 2025 and 2026.

The Profit Recovery Plan is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility. The plan is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities. Upon completion of this plan, the Company expects to have improved its gross margin and expense base to drive greater operating leverage for the future.

As a component of the Profit Recovery Plan, on February 5, 2024, the Company announced a two-year restructuring program. The restructuring program’s main focus includes the reorganization and rightsizing of certain areas of the Company as well as simplification and acceleration of processes. The Company committed to this course of action on February 1, 2024.
The Company plans to substantially complete specific initiatives under the restructuring program through fiscal 2026. The Company expects that the restructuring program will result in restructuring and other charges totaling between $500 million and $700 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs associated with implementing these initiatives.

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 December 31, 2023, the notional amount of derivatives not designated as hedging instruments was $3,184 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.







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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.

The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows:

Asset DerivativesLiability Derivatives
Fair Value (1)
Fair Value (1)
(In millions)Balance Sheet
Location		December 31, 2023June 30, 2023Balance Sheet
Location		December 31, 2023June 30, 2023
Derivatives Designated as Hedging Instruments:
Foreign currency cash flow hedgesPrepaid expenses and other current assets$25 $56 Other accrued liabilities$22 $16 
Cross-currency swap contractsPrepaid expenses and other current assets25 22 Other accrued liabilities— — 
Net investment hedgesPrepaid expenses and other current assets— — Other accrued liabilities5 13 
Interest rate-related derivativesPrepaid expenses and other current assets— — Other accrued liabilities131 150 
Total Derivatives Designated as Hedging Instruments50 78 158 179 
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contractsPrepaid expenses and other current assets5 20 Other accrued liabilities18 20 
Total derivatives$55 $98 $176 $199 
(1)See Note 5 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows:
Amount of Gain (Loss)
Recognized in OCI on
Derivatives		Location of Gain (Loss) Reclassified
from AOCI into
Earnings
Amount of Gain (Loss)
Reclassified from AOCI into Earnings(1)
Three Months Ended
December 31		Three Months Ended
December 31
(In millions)2023202220232022
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts$(36)$(39)
Net sales
$12 $22 
Interest rate-related derivatives— 5 
Interest expense
(1)— 
(36)(34)11 22 
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)
(47)(86)— — 
Total derivatives(83)$(120)$11 $22 
(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because it is probable that forecasted transactions will not occur by the end of the original time period was not material.
(2)During the three months ended December 31, 2023 and 2022, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $5 million and $7 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)
Six Months Ended
December 31
Six Months Ended
December 31
(In millions)2023202220232022
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts$(8)$18 
Net sales
$21 $37 
Interest rate-related derivatives— 12 
Interest expense
(1)— 
(8)30 20 37 
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)
(17)(15)— — 
Total derivatives(25)$15 $20 $37 
(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because it is probable that forecasted transactions will not occur by the end of the original time period was not material.
(2)During the six months ended December 31, 2023 and 2022, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $10 million and $13 million, respectively.
(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amount of Gain (Loss)
Recognized in Earnings on
Derivatives
Location of Gain (Loss) Recognized in Earnings on Derivatives
Three Months Ended
December 31		Six Months Ended
December 31
(In millions)2023202220232022
Derivatives in Fair Value Hedging Relationships:
Cross-currency swap contracts (1)
Selling, general and administrative$(24)$— $(11)$— 
Interest rate swap contracts (2)
Interest expense$49 $4 $20 $(35)
(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 during the three and six months ended December 31, 2023 was $4 million and $9 million, respectively.
(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 IncludedCarrying Amount of the
Hedged Liabilities		Cumulative Amount of Fair
Value Hedging Gain (Loss)
Included in the Carrying Amount of the Hedged Liability
December 31, 2023December 31, 2023
Long-term debt$862 $(131)
Intercompany debt$— $32 


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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 December 31
20232022
(In millions)Net SalesSelling, General and AdministrativeInterest
Expense		Net SalesSelling, General and AdministrativeInterest
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$4,279 $2,544 $98 $4,620 $2,630 $52 
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged itemN/AN/A(49)N/AN/A(4)
Derivatives designated as hedging instrumentsN/AN/A49 N/AN/A4 
Gain (loss) on fair value hedge relationships – cross-currency swap contracts:
Hedged itemN/A24 N/AN/A— N/A
Derivatives designated as hedging instrumentsN/A(24)N/AN/A— N/A
Loss on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earningsN/AN/A(1)N/AN/A— 
Gain on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings
12 N/AN/A22 N/AN/A
N/A (Not applicable)
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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended December 31
20232022
(In millions)Net SalesSelling, General and AdministrativeInterest
Expense		Net SalesSelling, General and AdministrativeInterest
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$7,797 $4,893 $193 $8,550 $4,874 $98 
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged itemN/AN/A(20)N/AN/A35 
Derivatives designated as hedging instrumentsN/AN/A20 N/AN/A(35)
Gain (loss) on fair value hedge relationships – cross-currency swap contracts:
Hedged itemN/A11 N/AN/A— N/A
Derivatives designated as hedging instrumentsN/A(11)N/AN/A— N/A
Loss on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earningsN/AN/A(1)N/AN/A— 
Gain on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings
21 N/AN/A37 N/AN/A
N/A (Not applicable)

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
Recognized in Earnings on Derivatives
Location of Gain Recognized in Earnings on
Derivatives
Three Months Ended
December 31		Six Months Ended
December 31
(In millions)2023202220232022
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts
Selling, general and administrative$7 $6 $13 $17 



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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 December 31, 2023
As of June 30, 2023
(In millions)Gross Amounts of Assets / (Liabilities) Presented in Balance SheetContracts Subject to NettingNet Amounts of Assets / (Liabilities)Gross Amounts of Assets / (Liabilities) Presented in Balance SheetContracts Subject to NettingNet Amounts of Assets / (Liabilities)
Derivative Financial Contracts
Derivative assets$55 $(32)$23 $98 $(53)$45 
Derivative liabilities(176)32 (144)(199)53 (146)
Total$(121)$— $(121)$(101)$— $(101)

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 June 2025. Hedge effectiveness of the foreign currency forward contracts is based on the forward method, which includes time value in the effectiveness assessment. At December 31, 2023, the Company had cash flow hedges outstanding with a notional amount totaling $1,752 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 December 31, 2023, the Company’s foreign currency cash flow hedges were highly effective.

The estimated net gain on the Company’s derivative instruments designated as cash flow hedges as of December 31, 2023 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $14 million. The accumulated net gain on derivative instruments designated as cash flow hedges in AOCI was $51 million and $79 million as of December 31, 2023 and June 30, 2023, 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 December 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 the three-month fallback rate SOFR plus a margin. These interest rate swap agreements are designated as fair value hedges of the related long-term debt, and the changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

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THE ESTÉE LAUDER COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 December 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 December 31, 2023 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $14 million. The accumulated net loss on derivative instruments designated as fair value hedges in AOCI was $6 million and $20 million as of December 31, 2023 and June 30, 2023, respectively.

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 October 2024. Hedge effectiveness of the net investment hedge contracts is based on the spot method. At December 31, 2023, the Company had net investment hedges outstanding with a notional amount totaling $408 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 $55 million at December 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.

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.
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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 December 31, 2023:

(In millions)Level 1Level 2Level 3Total
Assets:
Money market funds$2,458 $— $— $2,458 
Foreign currency forward contracts
— 30 — 30 
Cross-currency swap contracts— 25 — 25 
Total
$2,458 $55 $— $2,513 
Liabilities:
Foreign currency forward contracts
$— $45 $— $45 
Interest rate-related derivatives
— 131 — 131 
DECIEM stock options— — 103 103 
Total
$— $176 $103 $279 

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, 2023: