1. T H E E S T { E L A U D E R C O M PA N I E S I N C . 2 0 0 3 A N N UA L R E P O R T

2. 02 Portfolio of Brands
06 Chairman’s Message
10 Chief Executive’s Review
34 Board of Directors
35 Officers
36 Financial Highlights
37 Selected Financial Data
38 Consolidated Statements of Earnings
39 Management’s Discussion and Analysis of
CO N T E N TS Financial Condition and Results of Operations
56 Consolidated Balance Sheets
57 Consolidated Statements of Stockholders’ Equity
and Comprehensive Income
58 Consolidated Statements of Cash Flows
59 Notes to Consolidated Financial Statements
82 Independent Auditors’ Report
84 Stockholder Information
THE EST{E LAUDER COMPANIES INC.
The Estée Lauder Companies Inc. is one of the world’s leading manufacturers and marketers of
quality skin care, makeup, fragrance and hair care products. The Company’s products are sold in over
130 countries and territories under well recognized brand names, including Estée Lauder, Aramis,
Clinique, Prescriptives, Origins, M.A . C, La Mer, Bobbi Brown, Tommy Hilfiger, jane, Donna Karan, Aveda,
Stila, Jo Malone, Bumble and bumble, kate spade beauty, Michael Kors and Darphin.
THE AMERICAS — The Company was founded by Estée Lauder in 1946 in New York City.
In fiscal 2003, the Americas region represented 58% of net sales and 48% of operating
income, before special charges.
EUROPE, THE MIDDLE EAST & AFRICA — Our first international door opened in 1960 in
London. In fiscal 2003, Europe, the Middle East & Africa represented 29% of net sales
and 44% of operating income, before special charges. This region includes results from
our travel retail business.
ASIA/PACIFIC — We established a presence in Hong Kong in 1961. In fiscal 2003, the
Asia/Pacific region represented 13% of net sales and 8% of operating income, before
special charges.

3. P O RT F O L I O O F B R A N D S
02
EST{E LAUDER
Introduced in 1946 . Sold in more than 120 countries and territories . Select products:
Perfectionist Correcting Serum for Lines/Wrinkles, Idealist Skin Refinisher, Re-Nutriv
Ultimate Lifting Creme, So Ingenious Multi-Dimension Liquid Makeup SPF 8,
MagnaScopic Maximum Volume Mascara, Estée Lauder pleasures intense, Pure Color
Long Lasting Lipstick, Pure Color EyeShadow and Beautiful . Technologically advanced
and high-performance products with a reputation for innovation, sophistication and
superior quality.
ARAMIS
Introduced in 1964 . Sold in more than 120 countries and territories . Select products:
Aramis Classic, Age Rescue by Lab Series for Men, Eye Rescue by Lab Series for Men
and Mega Foam Shave Formula by Lab Series for Men . A pioneer in the marketing of
prestige men’s fragrance, grooming and skin care products.
CLINIQUE
Introduced in 1968 . Sold in more than 130 countries and territories . Select products:
3-Step Skin Care System, Total Turnaround Visible Skin Renewer, Repairwear Intensive
Night Cream and Lotion, Advanced Stop Signs, Lash Curling Mascara, City Block
Sheer Shimmer Oil-Free Daily Face Protector SPF 15, Superbalm Tinted Lip Treatment,
Aromatics Elixir, Clinique Happy and Clinique Happy Heart, Colour Surge Lipstick and
Skin Supplies for Men . A leading skin care authority, Clinique develops allergy-tested,
fragrance-free products based on the research of leading dermatologists.

4. PRESCRIPTIVES
Introduced in 1979 . Sold in ten countries and territories . Select products: Traceless Skin
Responsive Tint, False Eyelashes Plush Mascara, Super Line Preventor+, Dermapolish,
magic by Prescriptives and Virtual Youth Lifting Moisture Makeup . A foundation
authority that celebrates women of all skins and all ages with its Colorprinting system,
Prescriptives is known for its Custom Beauty approach and technologically innovative 03
skin care and makeup lines.
ORIGINS
Introduced in 1990 . Sold in more than 25 countries and territories . Select products:
A Perfect World White tea skin guardian, Have a Nice Day Super-charged moisture
cream and lotion SPF 15, Ginger Souffle Whipped body cream and A Perfect World
Intensely hydrating body cream with White Tea . A feel-good alternative to traditional
health and beauty, featuring multi-sensory skin care, color, bath and body, fragrance,
hair care products and lifestyle accessories.
M.A . C
Majority interest acquired in 1994; acquisition completed in 1998 . Sold in more than
45 countries and territories . Select products: Studio Fix Powder Plus Foundation, M.A. C
Paints, M.A. C Lipstick in seven formulas and Lipglass . A broad line of color-oriented
cosmetics, makeup tools, skin care, foundations, fragrances and accessories targeting
professional makeup artists and fashion-conscious consumers. M.A . C: All races,
All ages, All sexes.
LA MER
Acquired in 1995 . Sold in more than 30 countries and territories . Select products:
Crème de la Mer, The Face Serum, The Eye Balm, The Concentrate and La Mer
SkinColor . An exclusive and highly sought-after treatment line combining the finest
ingredients with a unique scientific process. In 1999, La Mer expanded from the original,
best-selling Crème de la Mer into a complete range of facial skin care and body products.
BOBBI BROWN
Acquired in 1995 . Sold in more than 30 countries and territories . Select products:
Foundation Stick, Creamy Concealer Kit, Lip Color, Lip Gloss, Shimmer Brick Compact,
Bobbi Brown Extra, Long-Wear Gel Eyeliner and Bobbi Brown Beach . A professional
beauty line developed by celebrated makeup artist Bobbi Brown, encompassing color
cosmetics, skin care, professional makeup brushes, accessories and fragrance.

5. TOMMY HILFIGER
Exclusive global license agreement signed in 1993 . Sold in more than 120 countries
and territories . Select products: “tommy,” “tommy girl,” T for Him, T Girl, “tommy”
and “tommy girl” Summer Colognes . Fragrances and body products that reflect the
all-American lifestyle themes of designer Tommy Hilfiger.
jane
Acquired in 1997 . Sold in the U.S. in mass merchandisers and chain drug outlets .
Select products: Iced Shadow, MegaBites Glossy Gloss, Fabulizer for Lips, Double Talk
04
Longwear Lip Color, Hi-Fiber Mascara and Lucky Star Pure Sparkling Lip Color . A color
cosmetics brand targeted to young women, offering a complete line of face, lip, eye
and nail products.
DONNA KARAN
Exclusive global license agreement signed in 1997 . Sold in more than 120 countries and
territories . Select products: Donna Karan Black Cashmere, Donna Karan Cashmere
Mist, Donna Karan Formula Cleanser, Donna Karan Tinted Moisturizer, DKNY The
Fragrance for Women and DKNY The Fragrance for Men . Luxury fragrance, bath
and body collections that reflect the quality, style and innovation identified with
designer Donna Karan.
AVEDA
Acquired in 1997 . Sold in 25 countries and territories . Select products: Sap Moss
Styling Spray, Color Conserve Foaming Leave-In Conditioner, Hand Relief, Shampure
Shampoo and Conditioner, Rosemary Mint Body Care, Aveda Love Pure-Fume, Light
Elements and Curessence Damage Relief Shampoo . Premium professional and con-
sumer hair care, styling, professional hair color, skin, body and spa, aroma, makeup and
lifestyle products based on the art and science of pure flower and plant essences that
fulfill the brand’s mission of environmental responsibility.
STILA
Acquired in 1999 . Sold in more than 20 countries and territories . Select Products:
Lip Glaze, Illuminating Liquid Foundation, All Over Shimmer, Convertible Color,
Convertible Lip Color and Bouquet de Jour . Stila is Style. Los Angeles-based, created and
led by Hollywood makeup artist Jeanine Lobell; stylish and pretty color cosmetics
and body products known for their sense of shimmer, eco-friendly packaging and
whimsical illustrations.

6. JO MALONE
Acquired in 1999 . Sold in five countries . Select products: Lime Basil & Mandarin
Cologne, Vitamin E Gel, Orange Blossom Cologne and Grapefruit Scented Home
Candle . Sophisticated yet simple lifestyle collection of everyday luxuries created by
British fragrance and skin care authority Jo Malone.
BUMBLE AND BUMBLE
Majority interest acquired in 2000 . Sold in more than 15 countries and territories .
Select products: Surf Spray, Does It All Styling Spray, Hair Powder and Gentle
Shampoo . A New York-based hair care company and salon that markets and sells
quality hair care products distributed through top-tier salons and prestige retailers.
kate spade beauty
Exclusive global license agreement signed in 1999 . Introduced in spring 2002 . Sold in
specialty and select department stores in the United States, Canada and the United
Kingdom . Select products: parfum, eau de parfum, soap trio, buttercream, body
moisturizer and travel vanity . kate spade beauty is a collection of fragrance, bath and
body products created by American handbag designer Kate Spade. The distinctive
fragrance is feminine, timeless and unexpected — a bouquet of Kate’s favorite white
flowers — complex, yet beautifully tuned.
MICHAEL KORS
Exclusive global license agreement signed and certain assets acquired in 2003 .
Sold in five countries . Select products: MICHAEL Eau de Parfum Spray and Leg Shine;
Michael Kors SHEER Eau de Parfum Spray and Body Lotion; MICHAEL for Men Eau de
Toilette Spray and After Shave Splash; KORS Michael Kors Eau de Parfum Spray
and Opalescent Body Creme . Award-winning designer fragrances and bath and
body products created by Michael Kors, one of the leading American designers of
luxury sportswear.
DARPHIN
Acquired in 2003 . Sold in more than 50 countries and territories . Select products: Black
Mascara, Stimulskin Plus Firming and Smoothing Cream, Stimulskin Plus Eye Contour
Cream, Camomile Aromatic Care, Predermine Cream and Denblan . A well-established
Paris-based brand considered la haute couture of beauty, offering prestige skin care
products formulated with a high concentration of active natural ingredients and a carefully
chosen blend of pure essential oils, applying the benefits of aromatherapy to skin care.

7. C H A I R M A N ’ S M E S S AG E
06
Dear Fellow Stockholders:
In preparing this year’s annual report, I reviewed the seven reports that have been issued since The Estée
Lauder Companies went public in 1995. Each annual report is a chapter in the story of this thriving Company.
This year, we’ve turned a significant page in the history of the Company as we’ve
reached our highest level of sales ever.
What is the glue that binds each chapter to the next and keeps us on a successful
course? I believe the secret to our success as a 57-year old Company is staying true to
the clear vision that launched this Company in 1946 — to offer the finest quality
products in the best stores in the world.
Mrs. Estée Lauder’s original vision — of who we are and what we stand for — has proven
LEONARD A. LAUDER
to be resilient and timeless. Over the years, our Company has grown because
we’ve remained true to those early core philosophies. We come into work each day with a passion to
keep that vision vibrant.
DEFINING WHO WE ARE
From the beginning, we have understood what prestige means. A prestige business defines itself as much by
what it doesn’t do, as by what it does. Similarly, we are defined by where we don’t advertise, as much as
by where we do advertise, and by where we don’t sell, as much as by where we do sell. Throughout our
history, we have refined the delicate role of being a prestige player.

8. A prestige company relies on consistent imagery worldwide. When we started expanding internationally in
the 1960s, we observed the industry landscape and saw that our competitors looked different in every
country. We made a decision then — one that we still adhere to
OV E R T H E L A ST Y EA R ,
today — to keep a consistent image around the world. Wherever you
O U R CO M PA N Y H A S
travel — be it to the highly competitive French market or the wonder-
GROWN BECAUSE WE’VE
fully unique Asian countries — you will recognize The Estée Lauder
R E M A I N E D T R U E TO
Companies’ brands for their consistent imagery. Each product in
THOSE E A R LY C O R E
every package reinforces our commitment to the highest quality
P H I L O S O P H I E S.
around the world. 07
We are a company where style matters. Style is the intersection of fashion, design, elegance and taste. At The
Estée Lauder Companies, we have a sense of style that extends to every corner of our business. You can see
our distinctive sense of style in our exceptional packaging; the way our beauty advisors, consultants and
makeup artists are groomed and dressed at the counter, and the fashion leadership of our newest spokes-
people, international model Liya Kebede and tennis star Andre Agassi.
Another defining trait of our Company is that we are passionate. When I meet a candidate for a new position,
I often ask, “Does this individual burn?” Does she burn with passion to develop the best product? Do I see
passion to provide the most outstanding service? Will this person care deeply about building strong
relationships and leading the best people?
Our people are passionate about being the best and leave no stone unturned in that pursuit. I am grateful that
our more than 20,000 colleagues at this Company share and embrace our founder’s vision.
KNOWING WHAT WE STAND FOR
Over our 57-year history, we have developed a strong sense of what we stand for as a Company. We do not
waver from our core principles or choose a “flavor-of-the-month” set of management priorities. Our loyal
customers, suppliers, consumers and employees know that we stand for the highest quality, leading-edge
innovation and uncompromising integrity.
Quality ingredients run through all of our products. Quality packaging surrounds the products. Quality
service delivers those products to our customers and consumers. Quality is our mantra. I remember a time
when an employee came to Mrs. Estée Lauder and said that we could save money by using a lesser ingredient.
She responded by saying, “A woman always remembers quality.” It is the quality in our fragrance, skin care,
makeup and hair care products that keeps the consumer coming back.

9. Over the years, we’ve insisted on being the best innovators and coming to the marketplace first with new
ideas. Hundreds of scientists in our laboratories collaborate with researchers at universities and medical
institutions around the world to find breakthroughs in dermatology, biophysics, molecular biology, immunology
and chemistry.
Our research insights led to this year’s major launch of Clinique’s revolutionary and patent-pending
Repairwear, which optimizes the skin’s natural repair processes while you sleep. We call the line’s three
products (Repairwear Intensive Night Cream, Repairwear Intensive Night Lotion and Repairwear Extra Help
Serum) the “Dream Team” — and they’ve been a dream come true for consumers and retailers alike.
08
At the Estée Lauder brand, our scientists triumphed by creating the brand’s most technically advanced
volumizing mascara: MagnaScopic Maximum Volume Mascara. Its newly patented formula builds up the
lashes, magnifying them up to four times their original thickness, with-
WE DO NOT WAVER FROM
out weight or clumping, through a unique lofting complex called
OUR CORE PRINCIPLES OR
Expandex and its dedicated Speed-Meter Brush. Color is intensified
CHOOSE A “FLAVOR - OF - by 30 percent. Mascara has become enormously competitive this
THE-MONTH” SET OF year with one major magazine referring to “The Mascara Wars.” With
MANAGEMENT PRIORITIES. our innovation, we are emerging as a leader in the mascara business.
Our legacy in innovation — with our drive to be first to market — has given rise to a funny saying that I often
hear around the industry: “Follow the Lauder.”
Integrity and a high standard of ethics have always been cornerstones of our Company. Sadly, we’ve seen
many major companies falter over the last couple of years because of lapses in integrity. At The Estée Lauder
Companies, we strive to keep the precious faith of our stockholders, customers, suppliers, consumers and
employees by always being fair, transparent and ethical.
KEEPING OUR “FOUNDING VISION” ALIVE TODAY
Our mission is to keep that founding vision alive and vibrant today. Our traditions are reinvigorated by attract-
ing and retaining the best people, taking inspiration from ideas generated all over the world and holding
a leadership position in this dynamic industry.
People want to come to work for The Estée Lauder Companies, and they want to stay. I believe our
retention rates far exceed the industry average. At our Company, most employees find more than a job —
they find a home.

10. I know we have hired the best people when I apply my simple elevator test. Whenever I ride in the elevator
at any of our office locations around the world, I pick out those people who will step off the elevator at
our floor. I distinguish them by all of the qualities we’ve mentioned
MRS. EST{E L AUDER’S
here — that burning passion, that style, that desire to be the best.
ORIGINAL VISION — OF
In addition to our people, it is ideas that keep our vision alive.
WHO WE ARE AND
We exchange new concepts between headquarters and the more
WHAT WE STAND FOR —
than 130 countries and territories where our products are sold
H A S P R OV E N TO B E
around the world. Both our packaging concepts and our technology
RESILIENT AND TIMELESS. 09
in makeup and skin care reflect the influence of global teams. In the
last year alone, I have traveled more than 200 days to make the point that we must learn from people
around the world.
Finally, we define leadership in our industry. Leadership doesn’t just mean sales leadership, but
thought leadership.
We have an outstanding Board of Directors to whom we look for unbiased guidance and leadership. We are
particularly delighted that Rose Marie Bravo, Chief Executive of Burberry, joined us this year. Ms. Bravo
herself is a leader, currently in charge of one of the world’s most prestigious brands, and is an expert at
retailing, having led Saks Fifth Avenue and I. Magnin.
As we now face the future of the Company, we are certain to grow and expand globally as the world presents
more opportunity. But one thing is certain — that we will evolve and grow by holding on to the original vision
of Mrs. Estée Lauder to “Keep Your Own Image Straight in Your Mind,” and to “Hire the Best People.”
It is to all of these people that I now extend my thanks for persisting in their pursuit of excellence. My thanks,
as well, to our stockholders, customers and consumers for continuing to believe in our vision. May our vision
burn as brightly over the next 50 years as it has over the last 57 years.
Sincerely,
Leonard A. Lauder
Chairman of the Board

11. C H I E F EX E C U T I V E ’ S R EV I EW
10
Dear Fellow Stockholders:
Our Company performed very well in fiscal 2003 by continuing our 57-year tradition of uninterrupted sales
growth and achieving our first $5 billion sales year in our history. We extended this remarkable streak by
continuing to do what we do best: building brands, exciting customers with product innovation, evolving our
distribution around consumer shopping patterns, forging more deeply into markets
around the globe, strengthening our position in our four product categories and
focusing on our most important relationships.
While staying true to our core principles and strategies, we grew in many important
ways over the last 12 months. Our portfolio of brands grew from 16 to 18 with
the acquisitions of Darphin and the Michael Kors fragrance license. Darphin is
a Paris-based skin care line that deepens our penetration in skin care, builds our
position in Europe and places us in the very important independent pharmacy
channel. Similarly, we have great expectations for the Michael Kors fragrances,
FRED H. LANGHAMMER
which are inspired by a wonderfully dynamic designer. We believe the brand’s
prospects for further growth, inside and outside the United States, are strong.
As for our financial results in fiscal year 2003, we generated net sales of $5.12 billion, an 8% increase over last
year. Our net earnings were $319.8 million compared with $191.9 million in fiscal 2002 and diluted earnings
per common share were $1.26, compared with $.70 in the prior year. Earnings in fiscal 2002 were impacted
by a restructuring charge of $76.9 million after-tax, or $.32 per share, and a one-time charge of $20.6 million,
or $.08 per share, related to the cumulative effect of a change in accounting principle. Earnings in fiscal year
2003 were impacted by a $13.5 million or $.06 per share after-tax charge relating to the pending settlement
of an industry-wide lawsuit involving us and 20 other cosmetic companies and retailers. We determined
that a settlement was in our best interest. While we did not do anything wrong, we decided to settle to allow
ourselves to focus on our business and not become mired in protracted litigation.

12. We continued to improve in all regions and, for the first time in years, we benefited from the effect of
a weaker U.S. dollar.
• In Europe, the Middle East & Africa, annual net sales increased 19% to $1.51 billion. In local currencies, sales
in the region rose 8%.
• In Asia/Pacific, annual net sales rose 8% to $657.8 million, while sales in local currency grew 3%.
• In the Americas, annual net sales increased 3% to $2.95 billion.
RESULTS BY PRODUCT CATEGORY
Our motto, “Bringing the Best to Everyone We Touch,” is imbedded in each of our more than 9,000
products. As a result, these products draw new consumers to our brands while building loyalty with our 11
long-standing consumers.
• In fiscal year 2003, skin care benefited from a heightened interest in treatment products. Thanks in part to
the strong launches of Estée Lauder’s Perfectionist Correcting Serum for Lines/Wrinkles and Clinique’s
Repairwear Intensive Night Cream and Repairwear Intensive Night Lotion, our skin care sales were $1.89 billion,
up 11% on a reported basis and 7% on a constant currency basis.
WE ARE ABLE TO
• Makeup sales continued to be a growth engine for the Company.
I N V E ST A G G R E S S I V E LY
Net sales of makeup products for the year were $1.91 billion, rising
IN N E W V E N T U R E S ,
7% on a reported basis and 4% on a constant currency basis.
Both M . A . C and Bobbi Brown performed extraordinarily well AS WELL AS GLOBAL
during the fiscal year. E X PA N S I O N , B E C A U S E
W E H AV E M A N A G E D
• The fragrance industry as a whole was challenged as consumers
made fewer impulse purchases given the economic environment
OUR RESOURCES WISELY.
and the challenging market climate. Nevertheless, in fiscal 2003,
our fragrance business grew to $1.06 billion, up 4% on a reported basis, but was relatively unchanged on
a constant currency basis. We continue to believe in our ability to pick the winners in this category and
have four of the top ten prestige fragrances for women sold in department stores in the United States.
• Hair care continued to show growth. For fiscal year 2003, our reported hair care sales were up 6% to $228.9
million. We continue to see a vast opportunity in the estimated $4.6 billion worldwide prestige hair care and
scalp treatment business. We are building our two hair care brands — Aveda and Bumble and bumble — to
capitalize on this opportunity.
COMMUNICATING WITH CONSUMERS
We are incredibly fortunate to have intensely loyal consumers who are passionate about our brands. Over the
last year, we reached more consumers through more diverse and interconnected communications channels
than ever before. For example, the Internet has proven to be an effective and efficient way to build rapport
with customers. While our e-commerce business grew 44% last year, the real Internet revolution is communi-
cation via on-line media. We are reaching consumers interested in our products on-line, telling them about
new launches, servicing them more extensively and inviting them to the counter.

13. BUILDING BRANDS
Our dialogue with consumers reminds us that our most important assets are our brands and their credibility.
We continuously find that consumers want to do more than buy a brand; they want to associate with a
brand’s values.
Each of our 18 brands has built a compelling brand proposition through which it creates and maintains mean-
ingful relationships with our consumers. For example, in our biggest brands this year, we’ve seen the Estée
Lauder brand redefine the notion of contemporary beauty with
W E A R E I N C R E D I B LY outstanding products, appealing packaging and a trio of glamorous
spokesmodels. Meanwhile, our colleagues at Clinique reinforced
F O RT U N AT E TO H AV E
their leadership position in skin care, remaining true to their
12 I N T E N S E LY LOYAL
dermatological heritage. As consumers fight the aging effects of
CO N S U M E R S W H O A R E sun, stress and pollution, Clinique rightfully captures the market for
high-performance skin care.
PA S S I O N AT E ABOUT
Communicating these propositions is critical, and it is a point of pride
O U R B R A N D S.
that we did not retreat from our advertising and promotion commit-
ments during this period of slower growth. In fact, we saw this as an opportunity to build brand equity and
capture greater market share. Accordingly, we have been aggressive in our advertising and promotion
spending, raising it to $1.43 billion from $1.33 billion in the previous year.
Beyond our current brands, we will continue to be opportunistic in our acquisitions. We will look for brands
that strategically enhance our portfolio and meet our high standards. We endeavor to be the best company,
not the biggest.
STRENGTHENING DISTRIBUTION
Integral to being the best company is utilizing a distribution system that is modern, efficient and appealing
to customers. We have always been committed to being in the finest stores in the world. Our relationships
with retailers have never been stronger.
Additionally, we conduct a tremendous amount of business through retailers at airports and other travel
venues around the world. Even during a year when many people were deferring their travel, our travel retail
division delivered strong sales growth.
INTERNATIONAL EXPANSION
We still have a significant opportunity to grow in countries outside the United States. There is a long list
of countries that have welcomed our brands — both the established and newer lines — over the last year.
In fiscal year 2003, we launched Stila in Greece, Spain and Singapore, and M.A . C products are now
sold in Brazil.
In emerging markets, Russia and China present an enormous opportunity for us to reach new consumers who
are eager to enjoy the benefits of prestige cosmetics. To take full advantage of the opportunity in China,
we will be moving our Asia regional headquarters to Shanghai in the coming year. In Moscow, we are
establishing our own affiliate for Russia to serve this fast-growing market.

14. With ten more countries from Central Europe joining the European Union, we see big opportunities for
growth and efficiencies as Pan-European synergies unfold.
PRODUCT INNOVATION
New products are still the lifeblood of this business. Our Research and Development team provides an
important competitive asset. This year we launched more than 315 new products, many with groundbreaking
results. In particular, we reinforced our strength in skin care, positioned ourselves as innovators in the highly
competitive mascara arena and made great strides in hair and scalp care.
PERFORMANCE IMPROVEMENTS
We are able to invest aggressively in new ventures, as well as global expansion, because we have managed
our resources wisely. Last year, cost savings from our Global Operations Group helped achieve goals and 13
fuel profitability. Additional savings were gained through ongoing globalization efforts. Cost of goods as
a percentage of net sales improved 70 basis points over last year and speed-to-market improved dramatically.
FOCUSING ON EMPLOYEES
Once again, the creativity, passion and drive of our employees was a source of inspiration. From the
challenges of geo-political unrest to the threat of SARS, our employees remained shining examples of
composure, commitment and good humor.
I am especially delighted that in January, William P. Lauder became our Chief Operating Officer. William
and I agree that the development and growth of our people is a top priority. He will lead the effort to improve
our training programs and evaluation methods to ensure we attract and retain the very best people.
In addition to leading the Human Resources function, William’s responsibilities as COO include the Inter-
national Division, Operations and our Specialty Brands.
THE FUTURE
Throughout this letter, I have expressed themes you’ve heard before. However, we firmly believe good
strategies never go out of fashion. Our core competencies reinforce a sound strategy, build strong relation-
ships over time and inspire our more than 20,000 colleagues globally.
Though we are steadfast in our strategy and core values, we are open to new ideas, new people and new ways
of looking at the world. One of the great strengths of The Estée Lauder Companies is our ability to combine
trends with traditions.
I want to thank our Chairman, Leonard Lauder, and the entire Board of Directors for guiding us through
another successful, productive and profitable year.
Sincerely,
Fred H. Langhammer
President and Chief Executive Officer

15. H I G H L I G H TS
EV E N TS
Generating excitement for our brands as we continue to reinforce their authority
remains an important strategy. This year, two books, Bobbi Brown Beauty Evolution
and Michael Gordon’s Hair Heroes, from the founder of Bumble and bumble,
shared the wisdom and experience of two of the beauty business’ most respected
leaders. More than 100 medical professionals attended the Clinique-sponsored
First Annual Dermatology Update to gain new insights into skin aging. And the
Company once again supported Breast Cancer Awareness by sponsoring the
lighting of hundreds of global landmarks in pink, including Harrods department
store in London.
AWA R D S
Leading beauty associations and media worldwide honored The Estée Lauder
Companies’ products and people with over 150 prestigious awards. The Company
received Cosmetic Executive Women Best in Beauty awards for Estée Lauder,
Clinique and Origins; a FiFi award for kate spade beauty, and the Prix Santé award
for Clinique. Evelyn H. Lauder, Senior Corporate Vice President and Founder and
Chairman of The Breast Cancer Research Foundation, received France’s Legion
of Honor in recognition of her campaign to raise awareness and funds to fight
breast cancer. She also celebrated the publication of An Eye for Beauty, which
benefits the Foundation.

16. 15
PEOPLE
Dynamic people are one of our Company’s most important assets. This year, we
added several exciting new faces to our team. Liya Kebede became the first
spokesmodel of African descent to represent the Estée Lauder brand, underscoring
its commitment to global beauty. Aramis signed a multi-year contract with tennis
superstar Andre Agassi to endorse its new fragrance, Aramis Life, which launches
this fall. William P. Lauder became Chief Operating Officer, and Leonard A. Lauder
continued his role as the Company’s ambassador, with appearances at the U.S.
Naval Academy and many other important sites.
BRANDS
The Estée Lauder Companies made two strategic investments in the prestige arena.
We acquired Darphin, the Paris-based maker of products incorporating natural
ingredients and essential oils. The Company entered into a license agreement
with Michael Kors L.L.C. for their award-winning fragrance, bath and body line.
Among our existing brands, M.A . C opened its first freestanding store in Berlin,
bringing the total number of M.A. C doors in Germany to 13, and Aveda sponsored
its bi-annual Congress for 6,000 customers.
Clockwise from top left: Harrods department store; An Eye for Beauty by Evelyn H. Lauder; Bobbi Brown Beauty Evolution; Clinique’s
brochure for the First Annual Dermatology Update; Chief Operating Officer William P. Lauder; Liya Kebede, Estée Lauder’s new
spokesmodel; Andre Agassi, spokesman for Aramis Life; Products from Darphin; M.A. C ’s Berlin store; Michael Kors’ fragrance line;
Participants at Aveda’s Congress; FiFi Bath & Body Star award for kate spade beauty; CEW Best in Beauty Awards for Estée Lauder,
Clinique and Origins products; Hair Heroes by Michael Gordon; Leonard A. Lauder at the U.S. Naval Academy

18. F R AG R A N C E 17
UNFORGETTABLE SCENTS POSITIONED IN INSPIRED WAYS
Unforgettable scents positioned in inspired ways have been a hallmark of The Estée Lauder
Companies since our first fragrance, Youth Dew, was launched in 1953. In a challenging year
complicated by war, SARS and economic issues, our fragrance sales rose 4% on a reported
basis and were relatively unchanged when measured in constant currency. One of approxi-
mately every four bottles of fragrance sold in United States prestige department stores in which
we sell carried an Estée Lauder Companies brand name. We also continued to develop our
business in Europe despite a challenging category worldwide.
Customizing business strategies for each of our fragrances enables us to achieve our objectives
and maximize our connection with consumers. Often, that means updating traditional
approaches with innovative new ones that remain true to each fragrance’s heritage. In 2003,

19. 18
“sibling” scents, including Estée Lauder pleasures intense — one of the best-selling
offerings of this kind in the industry — Beautiful Sheer and Clinique Happy Heart,
refreshed well-established positioning and attracted new consumers. At the
same time, Beautiful, Clinique Happy and Estée Lauder pleasures remained the
top three prestige fragrances in department stores in the United States.
Fragrances that are relevant, approachable and modern continue to drive our
business. Donna Karan Cashmere Mist celebrated its tenth anniversary as one of
the fastest-growing fragrances in United States department stores. Donna Karan
also introduced Black Cashmere, inspired by two of the designer’s foundation
concepts: the fashion-consciousness of the color black and the sensual luxury
of cashmere.
In May, we allied ourselves with Michael Kors, the high-profile fashion designer
known for his young, luxury-minded customers, when we entered into a license
agreement to offer his three fragrance, bath and body lines. MICHAEL, the

20. FiFi award-winning women’s fragrance, MICHAEL for Men and KORS Michael
Kors have a strong specialty store following. This new brand also complements
existing licenses like Tommy Hilfiger, which successfully launched T Girl in fiscal
2003. Meanwhile, kate spade beauty has built a solid business in the United States,
19
winning the United States FiFi for Bath and Body Star of the Year. And Aramis
announced that tennis superstar Andre Agassi will endorse Aramis Life, a new
men’s fragrance that launches this fall.
Fragrances that deliver rich, multi-sensory experiences are another key focus for
the Company. The vanilla flavor of M.A . C’s lipsticks has become the foundation
for its new MV1, MV2 and MV3 scents. Stila also explores sensory positioning
with Crème Bouquet, which incorporates vanilla, pink lilac and lily of the valley,
and Jade Blossom, a blend including green tea, cucumber and lemon verbena.
Each scent can be customized with one of three companion body lotions, each
scented with a key fragrance note.
Flowers also figured importantly for Jo Malone in the launch of Orange Blossom,
a blend of clementine, orange blossom and water lily. The ancient spring festival of
Floralia inspired Origins Frolic Floral Fantasy Mist, composed of linden blossom,
rose, muguet de Mai and honeysuckle. And Bobbi Brown Beach’s success as a
limited-edition fragrance last year has earned the blend of sand jasmine, sea spray,
dianthus and neroli an ongoing place in the makeup artist’s line.

22. MAKEUP 21
THE WATCHWORD IN MAKEUP IS “HIGH-PERFORMANCE”
Whether the focus is lips, eyes or face, the watchword in makeup for 2003 is “high-performance.”
Longer, flirtier lashes, more lustrous lips, high-impact pigments in eye shadows and founda-
tions that do more than cover and correct were among the year’s key concepts. Our makeup
sales increased 7% on a reported basis and 4% in constant currency.
The Estée Lauder Companies gained momentum in mascara with breakthrough formulas driven
by our unwavering commitment to technology. Estée Lauder made its mark with the introduc-
tion of MagnaScopic Maximum Volume Mascara, which is designed to increase the volume
of lashes by increasing their original thickness up to four times. Clinique launched Lash
Curling Mascara with a formula that provides significant lift to straight lashes, while Prescriptives
continued with False Eyelashes Plush Mascara and added new EyeLash Curler Mascara.

23. 22
M . A . C’s Pro LongLash delivered results as well as loyal users, helping the
brand more than double the number of consumers that purchased its mascara
products in fiscal 2002. Younger consumers weren’t left out either, as jane offered
Hi-Fiber Mascara.
In eye shadow, many brands turned up the volume with newer, more artistic
pigments that provide color and shading ranging from dramatic to subtle. M.A . C
launched Sheer Lustre for eyes as a limited edition but made it an ongoing part
of the collection after consumer enthusiasm established it as a best-seller. Pure
Color by Estée Lauder continued to gain momentum around the world with its
distinctive, stylish cube and eye-opening colors, earning it the award for Best New
Cosmetic Product (Luxury Brands) at the New Woman Beauty Awards 2003 in
the United Kingdom.
Weightless lipstick that bursts with color was one of the season’s most successful
trends. Colour Surge from Clinique delivered with an alluring palette of deep reds,
pinks and browns that use rich pigments to give delicious depth. M.A. C extended

24. its fashion focus with the introduction of Lustre Lipstick in 26 shades, addressing
the current trend for sheer formulas. Stila flashed its style with Convertible Lip
Color, a double lipstick that features matte and sheer versions of the same shade.
Origins brought treatment to lips with Service with a Smile Anti-chap lip color,
which incorporates softening ingredients like mango butter, Vitamin E and
jojoba oil.
Beauty expert Bobbi Brown has won a strong following among women every-
where with her collection of clean, modern shades and philosophy that “makeup
is a way for a woman to look and feel like herself, only prettier and more confident.”
Bobbi Brown Beauty Evolution, her third book, offers women of all ages insights and
advice on finding inner and outer beauty. Shimmer Gloss Stick, the brand’s most
recent introduction in the lip category, is an innovative formula that delivers the
shimmer and high-shine look of a gloss with the ease and feel of a lipstick.
Foundation continued to grow for several of our brands. Clinique, which
introduced Dewy Smooth Anti-Aging Makeup SPF 15 in fiscal 2003, maintains its
global leadership in foundation. Estée Lauder drove innovation with So Ingenious
and Amber Bronze. Two new entries from M.A . C for face include M.A . C Select
SPF 15 Foundation and Sheertone Blush, which contributed significantly to the
brand’s overall growth in the face category, while Prescriptives launched Virtual
Youth Lifting Moisture Makeup.

26. SKIN CARE 25
QUALITY PRODUCTS THAT DELIVER VISIBLE RESULTS
Skin care sales continued to grow at The Estée Lauder Companies. Net sales increased 11% on
a reported basis and rose 7% before foreign currency translation. Holding true to our heritage
of developing highly innovative, quality products that deliver visible results helps drive our
success in this area.
As the art of cosmetic science becomes more advanced, research and development plays a
larger role in creating products that deliver more clinically proven benefits to the skin. More
than 400 Estée Lauder Companies scientists work in seven labs around the world to stay
on the cutting edge of skin science. From this research, we introduced several dazzling

27. new products in fiscal 2003. Clinique successfully launched Repairwear Intensive
Night Cream, Intensive Night Lotion and Extra Help Serum globally as a new repair
and anti-aging line.
Estée Lauder Perfectionist Correcting Serum for Lines/Wrinkles won international
acclaim and is enjoying brisk sales, joining the highly successful Idealist Skin
26
Refinisher as a leader in prestige department store sales in the United States.
A Perfect World White tea skin guardian from Origins continues to build momen-
tum with its extremely loyal following.
Prescriptives is experiencing double-digit growth in skin care by delving deeper
into the world of dermatologist-inspired products, such as the Dermapolish
System, which promises to deliver results similar to a professional salon micro-
dermabrasion at home.
La Mer bolstered its success as one of the world’s most sought-after skin care lines
with the launch of its luxurious hand cream and its introduction of The Concentrate.
Lab Series for Men targeted younger men with the launch of its Ab Rescue,
designed to tighten and firm the appearance of abdominal muscles. Skin Supplies
for Men from Clinique is gaining momentum around the world as the product line
continues to draw attention to the skin care needs of men.
Jo Malone expanded on her skin care line by adding custom blends that cater to
women who seek a personal touch.

28. Strong sales for existing products also helped sustain The Estée Lauder Companies’
position as a global leader in skin care. Resilience Lift Overnight Face and Throat
Creme, DayWear Protective Anti-Oxident Creme and Lotion SPF 15, Advanced
Night Repair Eye Recovery Complex and Re-Nutriv Ultimate Lifting Creme helped
the Estée Lauder brand maintain its strong foothold in skin care. A bottle of
Dramatically Different Moisturizing Lotion from Clinique is sold every 3.5
seconds around the world. If Clinique’s 3-Step Skin Care System, including
Cleansing Soap, Clarifying Lotion and Dramatically Different Moisturizing Lotion,
were a separate skin care brand, that brand would be the fourth largest skin care
brand in United States department stores.
Finally, we added the Darphin brand to our portfolio and anticipate that this
aromatherapy-based line from France will expand our expertise in skin care.

30. HAIR CARE 29
PRESTIGE HAIR CARE IS AN IMPORTANT PRIORITY
Defining prestige hair care is an important priority for The Estée Lauder Companies, which
enjoyed another year of growth in sales in this category. Our hair care business grew 6%.
Domestic performance was particularly robust, thanks to new product offerings and our focus
on increasing business with our existing salons.
In the United States, Aveda’s sales to salon customers grew. Internationally, the brand sustained
its momentum in established markets like the United Kingdom while bolstering its developing
businesses in Italy and Germany and laying the groundwork for its launch in Japan this fall.
Product innovation also contributed to Aveda’s success. It launched Light Elements, four
styling products that refresh and define hair, including Defining Whip, Smoothing Fluid,

31. Finishing Solution and Reviving Mist. Color Current Energized Gel Color, a
conditioning, ammonia- and peroxide-free hair color, enhanced the brand’s salon-
professional-only hair color portfolio. Aveda also added to its hair care offerings
with Curessence Damage Relief Shampoo, a deep treatment shampoo that
30
fortifies and improves the condition of damaged hair, and Sap Moss Styling Spray,
a moisturizing spray gel that delivers flexible firm hold, replenishment and shine.
Meanwhile, Color Conserve Foaming Leave-In Conditioner made its debut,
incorporating conditioners and sun filters to protect hair color from fading.
At Bumble and bumble, Thickening Conditioner, a light moisturizer and detangler
for fine and limp hair, joined Thickening Shampoo and Thickening Spray, and Extra
Strength Holding Spray enhanced the brand’s hairspray portfolio. Educational
programs for salon owners and staff were also expanded in 2003. By the end of the
fiscal year, more than a third of Bumble and bumble’s United States salon cus-
tomers had taken advantage of “Bumble and bumble University,” which focuses
on building hairdressers’ and stylists’ technical expertise and product knowledge
with an eye toward growing business skills and overall productivity. This fall,
Bumble and bumble will open a new training facility and corporate headquarters
in New York City that will enable it to expand and enrich its offerings.

32. Multi-sensory positioning and formulas enhanced with real essential oils sustained
Origins’ position in hair care. The brand added Rich Rewards Intensive Moisture
Treatment for Scalp and Hair, a five-minute, deep conditioning therapy containing
wheat protein, Vitamins E and A, and William’s Pear, to its already strong hair
care line.
Clinique’s Simple Hair Care System maintained its ranking as the top department
store hair care brand in the United States on the strength of products like Daily
Shampoo, a lightweight formula that cleanses without stripping, and Healthy Shine
Serum, which promotes shine while controlling frizz.

33. A DV E RT I S I N G & P R O M OT I O N
32
Communicating with consumers is crucial to the growth of our Company. Our
brands continually refresh themselves, developing advertising and promotional
strategies that create new excitement for customers. A number of these brand-
building initiatives generated enthusiastic responses from consumers this year.
They included the famous icon Clinique advertising campaign by photographer
Irving Penn; personal appearances by Carolyn Murphy and Elizabeth Hurley
for the Estée Lauder brand; Hollywood tie-ins such as Stila’s exclusive makeup
partnership with the film Legally Blonde 2: Red, White and Blonde, starring Reese
Witherspoon; dynamic makeup collections like M.A . C’s Aquadisiac, and in-store
promotions like Bobbi Brown’s “10 Minute Face Event”.

34. 33
Our philanthropic activities also deepen our relationships with consumers. Our
Breast Cancer Awareness Campaign celebrated its 10th year by distributing
millions of pink ribbons and informational bookmarks worldwide and spear-
heading the Global Landmarks Illumination Initiative, which bathes hundreds of
monuments in pink light to build awareness of the importance of early detection
and the fight for the cure. The M.A. C AIDS Fund, which has raised nearly $30 million,
supported the creation and distribution of an HIV/AIDS educational packet for
high school students; donated $250,000 to the United Nations HIV/AIDS pro-
grams, and developed a widely-aired public service announcement aimed at
teenagers. Aveda’s Earth Month efforts raised more than $720,000 for grass-roots
environmental organizations. The brand also embarked on a partnership with the
RARE Center for Tropical Conservation, which helps rural people living near at-risk
sites in more than 30 countries benefit from protecting biodiversity. These sites
include Ecuador’s Galapagos Islands and Australia’s Great Barrier Reef.

35. ROSE MARIE BRAVO FRED H. LANGHAMMER
CHARLENE BARSHEFSKY 1 IRVINE O. HOCKADAY, JR. 1
Chief Executive President
Senior International Partner Retired President and
Burberry Group Plc. Chief Executive Officer
Wilmer, Cutler & Pickering Chief Executive Officer
The Estée Lauder Companies Inc.
Hallmark Cards, Inc.
B OA R D O F D I R E C TO R S
34
RONALD S. LAUDER 1 Member of Audit Committee
LEONARD A. LAUDER 3
2 Member of Compensation Committee
Chairman
Chairman
3 Member of Nominating and Board Affairs Committee
Clinique Laboratories, Inc.
The Estée Lauder Companies Inc. 4 Member of Stock Plan Subcommittee
Private Investor
WILLIAM P. LAUDER RICHARD D. PARSONS 2,3 MARSHALL ROSE 2,4 LYNN FORESTER DE ROTHSCHILD 1,2,3,4
Chief Operating Officer Chairman Managing Partner Chief Executive Officer
The Estée Lauder Companies Inc. Chief Executive Officer The Georgetown Group ELR Holdings, Ltd.
AOL Time Warner Inc.

36. OFFICERS 35
PATRICK BOUSQUET-CHAVANNE RONALD S. LAUDER
Group President Chairman
Clinique Laboratories, Inc.
DANIEL J. BRESTLE
Group President WILLIAM P. LAUDER
Chief Operating Officer
ANDREW J. CAVANAUGH
Senior Vice President SARA E. MOSS
Global Human Resources Senior Vice President
General Counsel and Secretary
RICHARD W. KUNES
Senior Vice President CEDRIC PROUVÉ
Chief Financial Officer Group President
International
FRED H. LANGHAMMER
President PHILIP SHEARER
Chief Executive Officer Group President
EVELYN H. LAUDER EDWARD M. STRAW
Senior Corporate Vice President Group President
Global Operations
LEONARD A. LAUDER
Chairman SALLY SUSMAN
Senior Vice President
Global Communications

37. F I N A N C I A L H IGH L IGH T S
Percent
2002 Change
2003
YEAR ENDED JUNE 30
(Dollars in millions, except per share data)
Net Sales* $4,743.7 8%
$5,117.6
Operating Income* 341.4 45%
495.1
Net Earnings (before preferred dividends)* 191.9 67%
319.8
Net Earnings Per Share — Diluted* 0.70 80%
1.26
AT JUNE 30
Total Assets $3,416.5 (2%)
$3,349.9
Stockholder’s Equity 1,461.9 (3%)
1,423.6
NET SALES* OPERATING INCOME* NET EARNINGS* †
(Dollars in billions) (Dollars in millions) (Dollars in millions)
4.04 4.44 4.67 4.74 5.12 456.9 515.8 495.6 341.4 495.1 272.9 314.1 305.2 191.9 319.8
1999 2000 2001 2002 2003 1999 2000 2001 2002 2003 1999 2000 2001 2002 2003
* Fiscal 2003 information includes the effect of a special charge of $22.0 million ($13.5 million after-tax), or $.06 per diluted common share, related to
the proposed settlement of a legal action. Fiscal 2002 information includes the effect of restructuring charges of $117.4 million ($76.9 million after-tax),
or $.32 per common share, and is after the cumulative effect of adopting a new accounting principle in the amount of $20.6 million, or $.08 per
common share. Fiscal 2001 information is reported after considering the effect of restructuring and special charges of $63.0 million ($40.3 million
after-tax), or $.17 per common share, and after the cumulative effect of adopting a new accounting principle in the amount of $2.2 million after-tax,
or $.01 per common share. For a more detailed description of our operating results, including the impact of these items refer to “Management’s
Discussion and Analysis of Financial Condition — Results of Operations.”
† Before preferred dividends.
A HERITAGE OF UNINTERRUPTED SALES GROW TH
1953 1972 1985 1991 2003
$100 million $1 billion $2 billion $5.1 billion
36
T H E E S T { E L AU DE R COM PA N I E S I N C.

38. SE L E C T E D F I N A N C I A L DATA
The table below summarizes selected financial information. For further information, refer to the audited consolidated
financial statements and the notes thereto beginning on page 56 of this report.
2002 2001 2000 1999
2003
YEAR ENDED OR AT JUNE 30
(In millions, except per share data)
STATEMENT OF EARNINGS DATA:
Net sales(a) $4,743.7 $4,667.7 $4,440.3 $4,040.3
$5,117.6
Gross profit(a) 3,470.3 3,441.3 3,202.3 2,877.5
3,781.9
Operating income 341.4 495.6 515.8 456.9
495.1
Earnings before income taxes, minority interest and
accounting change 331.6 483.3 498.7 440.2
487.0
191.9(c) 305.2(d)
319.8(b)
Net earnings 314.1 272.9
Preferred stock dividends 23.4 23.4 23.4 23.4
23.4
168.5(c) 281.8(d)
296.4(b)
Net earnings attributable to common stock 290.7 249.5
CASH FLOW DATA:
Net cash flows provided by operating activities $ 518.0 $ 305.4 $ 442.5 $ 352.3
$ 548.5
Net cash flows used for investing activities (217.0) (206.3) (374.3) (200.3)
(192.5)
Net cash flows used for financing activities (121.8) (63.5) (87.9) (73.2)
(550.4)
PER SHARE DATA:
Net earnings per common share:
.71(c) 1.18(d)
1.27(b)
Basic $ $ $ 1.22 $ 1.05
$
.70(c) 1.16(d)
1.26(b)
Diluted $ $ $ 1.20 $ 1.03
$
Weighted average common shares outstanding:
Basic 238.2 238.4 237.7 237.0
232.6
Diluted 241.1 242.2 242.5 241.2
234.7
Cash dividends declared per common share $ .20 $ .20 $ .20 $ .1775
$ .20
BALANCE SHEET DATA:
Working capital $ 968.0 $ 882.2 $ 716.7 $ 708.0
$ 791.3
Total assets 3,416.5 3,218.8 3,043.3 2,746.7
3,349.9
Total debt 410.5 416.7 425.4 429.1
291.4
Redeemable preferred stock 360.0 360.0 360.0 360.0
360.0
Stockholders’ equity 1,461.9 1,352.1 1,160.3 924.5
1,423.6
(a) Effective January 1, 2002, we adopted Emerging Issues Task Force (“EITF”) Issue No. 01-9, “Accounting for Consideration Given by a Vendor to a
Customer.” Upon adoption of this Issue, we reclassified revenues generated from our purchase with purchase activities as sales and the costs of our
purchase with purchase and gift with purchase activities as cost of sales, which were previously reported net as operating expenses. Operating
income has remained unchanged by this adoption. For purposes of comparability, these reclassifications have been reflected retroactively for all
periods presented.
(b) Net earnings, net earnings attributable to common stock and net earnings per common share for the year ended June 30, 2003 included a special
charge related to the proposed settlement of a legal action of $13.5 million, after-tax, or $.06 per diluted common share.
(c) Net earnings, net earnings attributable to common stock and net earnings per common share for the year ended June 30, 2002 included a
restructuring charge of $76.9 million, after-tax, or $.32 per diluted common share, and a one-time charge of $20.6 million, or $.08 per diluted common
share, attributable to the cumulative effect of adopting Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other
Intangible Assets.”
(d) Net earnings, net earnings attributable to common stock and net earnings per common share for the year ended June 30, 2001 included
restructuring and other non-recurring charges of $40.3 million, after-tax, or $.17 per diluted common share, and a one-time charge of $2.2 million,
after-tax, or $.01 per diluted common share, attributable to the cumulative effect of adopting SFAS No. 133, “Accounting for Derivative Instruments
and Hedging Activities.”
37 T H E E S T { E L AU DE R COM PA N I E S I N C.

39. CON S OL I DAT E D S TAT E M E N T S OF E A R N I N G S
2002 2001
2003
YEAR ENDED JUNE 30
(In millions, except per share data)
$4,743.7 $4,667.7
Net Sales $5,117.6
Cost of sales 1,273.4 1,226.4
1,335.7
3,470.3 3,441.3
Gross Profit 3,781.9
Operating expenses:
Selling, general and administrative 3,002.0 2,869.2
3,244.5
Restructuring 110.4 37.6
—
Special charges — 16.3
22.0
Related party royalties 16.5 22.6
20.3
3,128.9 2,945.7
3,286.8
341.4 495.6
Operating Income 495.1
Interest expense, net 9.8 12.3
8.1
331.6 483.3
Earnings before Income Taxes, Minority Interest and Accounting Change 487.0
Provision for income taxes 114.4 174.0
160.5
Minority interest, net of tax (4.7) (1.9)
(6.7)
212.5 307.4
Net Earnings before Accounting Change 319.8
Cumulative effect of a change in accounting principle, net of tax (20.6) (2.2)
—
191.9 305.2
Net Earnings 319.8
Preferred stock dividends 23.4 23.4
23.4
$ 168.5 $ 281.8
Net Earnings Attributable to Common Stock $ 296.4
Basic net earnings per common share:
Net earnings attributable to common stock before accounting change $ .79 $ 1.19
$ 1.27
Cumulative effect of a change in accounting principle, net of tax (.08) (.01)
—
Net earnings attributable to common stock $ .71 $ 1.18
$ 1.27
Diluted net earnings per common share:
Net earnings attributable to common stock before accounting change $ .78 $ 1.17
$ 1.26
Cumulative effect of a change in accounting principle, net of tax (.08) (.01)
—
Net earnings attributable to common stock $ .70 $ 1.16
$ 1.26
Weighted average common shares outstanding:
Basic 238.2 238.4
232.6
Diluted 241.1 242.2
234.7
See notes to consolidated financial statements.
38
T H E E S T { E L AU DE R COM PA N I E S I N C.

40. M A N AGE M E N T ’ S DI S C US S ION A N D A N A LYS I S OF
F I N A N C I A L CON DI T ION A N D R E SU LT S OF OPE R AT ION S
sell products primarily within North America. Although
CRITICAL ACCOUNTING POLICIES
management believes that these customers are sound
AND ESTIMATES
The discussion and analysis of our financial condition and and creditworthy, a severe adverse impact on their busi-
results of operations are based upon our consolidated ness operations could have a corresponding material
financial statements, which have been prepared in con- adverse effect on our net sales, cash flows, and/or finan-
formity with accounting principles generally accepted in cial condition.
the United States. The preparation of these financial state- In the ordinary course of business, we have established
ments requires us to make estimates and assumptions that an allowance for doubtful accounts and customer deduc-
affect the reported amounts of assets, liabilities, revenues tions in the amount of $31.8 million and $30.6 million as
and expenses reported in those financial statements. of June 30, 2003 and 2002, respectively. Our allowance
These judgments can be subjective and complex, and for doubtful accounts is a subjective critical estimate that
consequently actual results could differ from those esti- has a direct impact on reported net earnings. This reserve
mates. Our most critical accounting policies relate to reve- is based upon the evaluation of accounts receivable
nue recognition; concentration of credit risk; inventory; aging, specific exposures and historical trends.
pension and other postretirement benefit costs; goodwill
and other intangible assets; income taxes; and derivatives. INVENTORY
We state our inventory at the lower of cost or fair market
REVENUE RECOGNITION value, with cost being determined on the first-in, first-out
Generally, revenues from merchandise sales are recorded (FIFO) method. We believe FIFO most closely matches
at the time the product is shipped to the customer. We the flow of our products from manufacture through sale.
report our sales levels on a net sales basis, which is com- The reported net value of our inventory includes saleable
puted by deducting from gross sales the amount of actual products, promotional products, raw materials and
returns received and an amount established for antici- componentry that will be sold or used in future periods.
pated returns. Inventory cost includes raw materials, direct labor
As is customary in the cosmetics industry, our practice and overhead.
is to accept returns of our products from retailers if prop- We also record an inventory obsolescence reserve,
erly requested, authorized and approved. In accepting which represents the difference between the cost of the
returns, we typically provide a credit to the retailer against inventory and its estimated market value, based on vari-
sales and accounts receivable from that retailer on a ous product sales projections. This reserve is calculated
dollar-for-dollar basis. using an estimated obsolescence percentage applied to
Our sales return accrual is a subjective critical estimate the inventory based on age, historical trends and require-
that has a direct impact on reported net sales. This accrual ments to support forecasted sales. In addition, and as
is calculated based on a history of gross sales and actual necessary, we may establish specific reserves for future
returns by region and product category. In addition, as known or anticipated events.
necessary, specific accruals may be established for future
known or anticipated events. As a percentage of gross PENSION AND OTHER POSTRETIREMENT
sales, sales returns were 5.2%, 4.9% and 4.9% in fiscal BENEFIT COSTS
2003, 2002 and 2001, respectively. We offer the following benefits to some or all of our
employees: a domestic trust-based noncontributory
CONCENTRATION OF CREDIT RISK defined benefit pension plan (“U.S. Plan”); an unfunded,
An entity is more vulnerable to concentrations of credit nonqualified domestic noncontributory pension plan to
risk if it is exposed to risk of loss greater than it would provide benefits in excess of statutory limitations; a con-
have had it mitigated its risk through diversification of cus- tributory defined contribution plan; international pension
tomers. Such risks of loss manifest themselves differently, plans, which vary by country, consisting of both defined
depending on the nature of the concentration, and vary in benefit and defined contribution pension plans; deferred
significance. compensation; and certain other postretirement benefits.
We have three major customers that owned and oper- The amounts necessary to fund future payouts under
ated retail stores that in the aggregate accounted for these plans are subject to numerous assumptions and
approximately $1.24 billion, or 24%, of our consolidated variables. Certain significant variables require us to
net sales in fiscal 2003 and $179.8 million, or 28%, of our make assumptions that are within our control such as an
accounts receivable at June 30, 2003. These customers anticipated discount rate, expected rate of return on plan
39 T H E E S T { E L AU DE R COM PA N I E S I N C.

41. assets and future compensation levels. We evaluate these INCOME TAXES
assumptions with our actuarial advisors and we believe We have accounted for, and currently account for, income
they are within accepted industry ranges, although an taxes in accordance with SFAS No. 109, “Accounting for
increase or decrease in the assumptions or economic Income Taxes.” This Statement establishes financial
events outside our control could have a direct impact on accounting and reporting standards for the effects of
reported net earnings. income taxes that result from an enterprise’s activities dur-
The pre-retirement discount rate for each plan used for ing the current and preceding years. It requires an asset
determining future pension obligations is based on a and liability approach for financial accounting and report-
review of highly rated long-term bonds. At June 30, 2003, ing of income taxes.
we used a pre-retirement discount rate for our U.S. Plan As of June 30, 2003, we have current net deferred tax
of 5.75% and varying rates on our international plans of assets of $116.0 million and non-current net deferred
between 2.75% and 7.0%. For fiscal 2003, we used an tax assets of $38.7 million. These net deferred tax assets
expected return on plan assets of 8.5% for our U.S. Plan assume sufficient future earnings for their realization,
and varying rates of between 4.5% and 8.25% for our as well as the continued application of current tax
international plans. In determining the long-term rate of rates. Included in net deferred tax assets is a valuation
return for a plan, we consider the historical rates of return, allowance of approximately $2.9 million for deferred tax
the nature of the plan’s investments and an expectation assets, which relates to foreign tax loss carryforwards not
for the plan’s investment strategies. The U.S. Plan asset utilized to date, where management believes it is more
allocation as of June 30, 2003 was approximately likely than not that the deferred tax assets will not be real-
58% equity investments, 23% fixed income investments, ized in the relevant jurisdiction. Based on our assess-
13% cash and 6% other investments. ments, no additional valuation allowance is required. If we
For fiscal 2004, we will use a pre-retirement discount determine that a deferred tax asset will not be realizable,
rate for the U.S. Plan of 5.75% and anticipate using an an adjustment to the deferred tax asset will result in a
expected return on plan assets of 8.00%. The change reduction of earnings at that time.
in this assumption from that used in fiscal 2003 will cause Furthermore, we provide tax reserves for Federal, state
an increase in pension expense in fiscal 2004. We will and international exposures relating to audit results, plan-
continue to monitor the market conditions relative to ning initiatives and compliance responsibilities. The devel-
these assumptions and adjust them accordingly. opment of these reserves requires judgments about tax
issues, potential outcomes and timing, and is a subjective
GOODWILL AND OTHER INTANGIBLE ASSETS critical estimate.
Goodwill is calculated as the excess of the cost of pur-
chased businesses over the value of their underlying net DERIVATIVES
assets. Other intangible assets principally consist of We currently account for derivative financial instruments
purchased royalty rights and trademarks. Goodwill and in accordance with SFAS No. 133, “Accounting for Deriva-
other intangible assets that have an indefinite life are tive Instruments and Hedging Activities,” as amended,
not amortized. which establishes accounting and reporting standards for
On an annual basis, we test goodwill and other intan- derivative instruments, including certain derivative instru-
gible assets for impairment. To determine the fair value of ments embedded in other contracts, and for hedging
these intangible assets, there are many assumptions and activities. This Statement also requires the recognition of
estimates used that directly impact the results of the all derivative instruments as either assets or liabilities on
testing. We have the ability to influence the outcome and the balance sheet and that they be measured at fair value.
ultimate results based on the assumptions and estimates We currently use derivative financial instruments to
we choose. To mitigate undue influence, we use industry hedge certain anticipated transactions and interest rates,
accepted valuation models and set criteria that are as well as receivables and payables denominated in for-
reviewed and approved by various levels of management. eign currencies. We do not utilize derivatives for trading
Additionally, we evaluate our recorded goodwill with the or speculative purposes. Hedge effectiveness is docu-
assistance of a third-party valuation firm. mented, assessed and monitored by our employees who
are qualified to make such assessments and monitor the
instruments. Variables that are external to us such as
social, political and economic risks may have an impact
on our hedging program and the results thereof.
40
T H E E S T { E L AU DE R COM PA N I E S I N C.

42. RESULTS OF OPERATIONS
We manufacture, market and sell skin care, makeup, fragrance and hair care products which are distributed in over 130
countries and territories. The following is a comparative summary of operating results for fiscal 2003, 2002 and 2001 and
reflects the basis of presentation described in Note 2 and Note 18 to the Notes to Consolidated Financial Statements for
all periods presented. Products and services that do not meet our definition of skin care, makeup, fragrance and hair
care have been included in the “other” category.
2002 2001
2003
YEAR ENDED JUNE 30
(In millions)
NET SALES
By Region:
The Americas $2,878.2 $2,857.8
$2,953.4
Europe, the Middle East & Africa 1,261.1 1,221.8
1,506.4
Asia/Pacific 610.6 596.1
657.8
4,749.9 4,675.7
5,117.6
Restructuring* (6.2) (8.0)
—
$4,743.7 $4,667.7
$5,117.6
By Product Category:
Skin Care $1,703.3 $1,660.7
$1,893.7
Makeup 1,790.5 1,721.6
1,909.4
Fragrance 1,017.3 1,085.1
1,059.6
Hair Care 215.8 180.7
228.9
Other 23.0 27.6
26.0
4,749.9 4,675.7
5,117.6
Restructuring* (6.2) (8.0)
—
$4,743.7 $4,667.7
$5,117.6
OPERATING INCOME
By Region:
The Americas $ 222.9 $ 299.9
$ 246.7
Europe, the Middle East & Africa 179.9 201.8
227.7
Asia/Pacific 56.0 56.9
42.7
458.8 558.6
517.1
Restructuring and Special Charges* (117.4) (63.0)
(22.0)
$ 341.4 $ 495.6
$ 495.1
By Product Category:
Skin Care $ 248.4 $ 266.9
$ 273.2
Makeup 183.2 212.5
198.0
Fragrance 13.4 63.6
32.1
Hair Care 13.7 13.1
14.8
Other 0.1 2.5
(1.0)
458.8 558.6
517.1
Restructuring and Special Charges* (117.4) (63.0)
(22.0)
$ 341.4 $ 495.6
$ 495.1
*Refer to the following tables and discussion for further information regarding these charges.
41 T H E E S T { E L AU DE R COM PA N I E S I N C.