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Microsoft Excel LibreOffice Calc

Estée Lauder Cos. Inc. (NYSE:EL)


Economic Value Added (EVA)

Advanced level

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.


Economic Profit

Estée Lauder Cos. Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. Estée Lauder Cos. Inc.’s economic profit increased from 2017 to 2018 and from 2018 to 2019.

Net Operating Profit after Taxes (NOPAT)

Estée Lauder Cos. Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Net earnings attributable to The Estée Lauder Companies Inc.
Deferred income tax expense (benefit)1
Increase (decrease) in allowance for doubtful accounts and customer deductions2
Increase (decrease) in deferred revenue3
Increase (decrease) in accrued restructuring initiatives4
Increase (decrease) in equity equivalents5
Interest expense
Interest expense, operating lease liability6
Adjusted interest expense
Tax benefit of interest expense7
Adjusted interest expense, after taxes8
(Gain) loss on marketable securities
Investment income, before taxes
Tax expense (benefit) of investment income9
Investment income, after taxes10
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for doubtful accounts and customer deductions.

3 Addition of increase (decrease) in deferred revenue.

4 Addition of increase (decrease) in accrued restructuring initiatives.

5 Addition of increase (decrease) in equity equivalents to net earnings attributable to The Estée Lauder Companies Inc..

6 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

7 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

8 Addition of after taxes interest expense to net earnings attributable to The Estée Lauder Companies Inc..

9 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

10 Elimination of after taxes investment income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. Estée Lauder Cos. Inc.’s NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Cash Operating Taxes

Estée Lauder Cos. Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Provision for income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. Estée Lauder Cos. Inc.’s cash operating taxes increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

Invested Capital

Estée Lauder Cos. Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Current debt
Long-term debt
Operating lease liability1
Total reported debt & leases
Stockholders’ equity, The Estée Lauder Companies Inc.
Net deferred tax (assets) liabilities2
Allowance for doubtful accounts and customer deductions3
Deferred revenue4
Accrued restructuring initiatives5
Equity equivalents6
Accumulated other comprehensive (income) loss, net of tax7
Noncontrolling interests
Adjusted stockholders’ equity, The Estée Lauder Companies Inc.
Available-for-sale investments8
Invested capital

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of deferred revenue.

5 Addition of accrued restructuring initiatives.

6 Addition of equity equivalents to stockholders’ equity, The Estée Lauder Companies Inc..

7 Removal of accumulated other comprehensive income.

8 Subtraction of available-for-sale investments.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. Estée Lauder Cos. Inc.’s invested capital increased from 2017 to 2018 and from 2018 to 2019.

Cost of Capital

Estée Lauder Cos. Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Current and long-term debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (filing date: 2019-08-23).

1 US$ in millions

2 Equity. See details »

3 Current and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Current and long-term debt3 ÷ = × × (1 – 28.10%) =
Operating lease liability4 ÷ = × × (1 – 28.10%) =
Total:

Based on: 10-K (filing date: 2018-08-24).

1 US$ in millions

2 Equity. See details »

3 Current and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Current and long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2017-08-25).

1 US$ in millions

2 Equity. See details »

3 Current and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Current and long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2016-08-24).

1 US$ in millions

2 Equity. See details »

3 Current and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Current and long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2015-08-20).

1 US$ in millions

2 Equity. See details »

3 Current and long-term debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Current and long-term debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (filing date: 2014-08-20).

1 US$ in millions

2 Equity. See details »

3 Current and long-term debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Estée Lauder Cos. Inc., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data (US$ in millions)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

1 Economic profit. See details »

2 Invested capital. See details »

3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Estée Lauder Cos. Inc.’s economic spread ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Economic Profit Margin

Estée Lauder Cos. Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Jun 30, 2019 Jun 30, 2018 Jun 30, 2017 Jun 30, 2016 Jun 30, 2015 Jun 30, 2014
Selected Financial Data (US$ in millions)
Economic profit1
Net sales
Add: Increase (decrease) in deferred revenue
Adjusted net sales
Performance Ratio
Economic profit margin2

Based on: 10-K (filing date: 2019-08-23), 10-K (filing date: 2018-08-24), 10-K (filing date: 2017-08-25), 10-K (filing date: 2016-08-24), 10-K (filing date: 2015-08-20), 10-K (filing date: 2014-08-20).

1 Economic profit. See details »

2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × ÷ =

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. Estée Lauder Cos. Inc.’s economic profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.