ESTEE LAUDER COMPANIES INC

Previous wording

The following table is a comparative summary of operating results for the three months ended September 30, 2025 and 2024, for our product categories and geographic regions and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies and Note 13 – Segment Data and Related Information, for our product categories that meet the definition of reportable segments, for all periods presented. Royalty revenue from license arrangements, and products and services that do not fit within our definitions of skin care, makeup, fragrance and hair care have been included in the “other” category.

Current wording

The following table is a comparative summary of operating results for the three and six months ended December 31, 2025 and 2024, for our product categories and geographic regions and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies and Note 13 – Segment Data and Related Information, for our product categories that meet the definition of reportable segments, for all periods presented. Royalty revenue from license arrangements, and products and services that do not fit within our definitions of skin care, makeup, fragrance and hair care have been included in the “other” category.

Previous wording

New product innovation includes the introduction of new products, as well as changes related to existing products or where they are sold, including reformulations, regional expansion, repackaging and sets. A product is considered "new innovation" for the twelve-month period following the initial shipment date. Our innovation is launched at different price points than existing products and value derived from innovation may vary from year to year. We continually introduce new products, support new and established products through advertising, merchandising and sampling and phase out existing products that no longer meet the needs of our consumers or our objectives. The economics of developing, producing, launching, supporting and discontinuing products impact our sales and operating performance each period. The introduction of new products often has some cannibalizing effect on sales of existing products, which we take into account in our business planning. The impact of new product introductions, including timing compared to introductions in prior periods, also affects our results.

Current wording

New product innovation includes the introduction of new products, as well as changes related to existing products or where they are sold, including reformulations, regional expansion, repackaging and sets. A product is considered "new innovation" for the twelve-month period following the initial shipment date. Our innovation is launched at different price points than existing products and value derived from innovation may vary from year to year. We continually introduce new products, support new and established products through advertising, merchandising and sampling and phase out existing products that no longer meet the needs of our consumers or our objectives. The economics of developing, producing, launching, supporting and discontinuing products impact our sales and operating performance each period. The introduction of new products often has some cannibalizing effect on sales of existing products, inclusive of potential sales returns, which we take into account in our business planning. The impact of new product introductions, including timing compared to introductions in prior periods, also affects our results.

Previous wording

We have experienced challenges within our business and we expect volatility and uncertainty to continue. Although there are signs of stabilization in Mainland China, travel retail conversion continues to be weak and challenges persist in Western Europe, including subdued sentiment. Additionally, within the United States we continue to experience headwinds from challenges in department stores. These challenges are collectively expected to impact net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings.

Current wording

We have experienced challenges within our business and we expect volatility and uncertainty to continue. Although there are signs of stabilization in Mainland China, challenges persist in Western Europe, including subdued sentiment. Within our Asia travel retail business, we continue to experience volatility, including the incremental transitory headwind from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses. Additionally, within the United States we continue to experience headwinds from challenges in department stores, including the recent announcement of a retailer bankruptcy. We continue to monitor and assess the impact that these challenges may have on net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings.

Previous wording

We are continuing to monitor and assess the potential effects of new and existing tariffs in the United States as well as in other markets in which we operate. These tariffs have led to significant volatility and uncertainty in global markets and difficulty in forecasting demand. We have implemented and are continuing to implement and consider additional mitigation measures. The impact was not material to fiscal 2026 first quarter profitability and cash flows, however, even if we can minimize some of these impacts, we anticipate higher tariff rates to have an adverse effect on fiscal 2026 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.

Current wording

We are continuing to monitor and assess the potential effects of new and existing tariffs in the United States as well as in other markets in which we operate. These tariffs have led to significant volatility and uncertainty in global markets and difficulty in forecasting demand. We have implemented and are continuing to implement and consider additional mitigation measures. Our strategy remains optimizing our global supply chain network, by sourcing and manufacturing in the geography of sale where feasible. We also continue to leverage trade programs where available and monitor for additional opportunities as countries continue to update their trade programs. We continue to anticipate higher tariff rates to have an adverse effect on fiscal 2026 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.

Previous wording

We continue to believe that the best way to increase long-term stockholder value is to provide superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across product categories, brands, geographic regions, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths, such as our history of outstanding creativity and innovation, high quality products and services, and engaging communications, and make us more productive and profitable. With the transition of leadership in the second and third quarters of fiscal 2025, we have embarked on "Beauty Reimagined," a strategic vision which focuses on accelerating best-in-class consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies and reimagining the way we work, including through the expansion of the Profit Recovery and Growth Plan ("PRGP"), as discussed below.

Current wording

We continue to believe that the best way to increase long-term stockholder value is to provide superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across product categories, brands, geographic regions, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths, such as our history of outstanding creativity and innovation, high quality products and services, and engaging communications, and make us more productive and profitable. With the transition of leadership in the second and third quarters of fiscal 2025, as previously announced we have embarked on "Beauty Reimagined," a strategic vision which focuses on accelerating best-in-class consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies and reimagining the way we work, including through the expansion of the Profit Recovery and Growth Plan ("PRGP") during the fiscal 2025 third quarter, as discussed below.

Previous wording

We continue to monitor the effects of the global macro environment, including the risk of recession; currency volatility; inflationary pressures; supply chain challenges; social and political issues; competitive pressures; legal and regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. We are also mindful of inflationary pressures (including those caused by tariffs) on our cost base and are monitoring the impact on consumer preferences, the impact of changes being made in the organization, including those related to Beauty Reimagined and the PRGP, as well as the potential impact of changes expected to be made as part of the PRGP on suppliers, retailers and others, and challenges relating to successfully outsourcing select services. In our outlook, we have made assumptions relating to these and other internal and external factors and challenges. Declines in net sales and profitability have, and may continue to, adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments.

Current wording

We continue to monitor the effects of the global macro environment, including the risk of recession; currency volatility; inflationary pressures; supply chain challenges; social and political issues; competitive pressures; legal and regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. We are also mindful of inflationary pressures (including those caused by tariffs) on our cost base and are monitoring the impact on consumer preferences, the impact of changes being made in the organization, including those related to Beauty Reimagined and the PRGP, as well as the potential impact of changes expected to be made as part of the PRGP on suppliers, retailers and others, and challenges relating to successfully outsourcing select services. Declines in net sales and profitability have, and may continue to, adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments.

Previous wording

Our ability to recognize deferred tax assets, inclusive of utilizing net operating loss carryforwards, tax credits, and other carryforwards is dependent on the generation of sufficient taxable income in future periods. Accordingly, there can be no assurance that additional valuation allowances on our deferred tax assets will not be required should our financial performance be negatively impacted in the future. Such valuation allowance could be material. We are also monitoring certain provisions in global tax regulations that may expire during fiscal 2026, which, if not extended, could increase our effective tax rate.

Current wording

Our ability to recognize deferred tax assets, inclusive of utilizing net operating loss carryforwards, tax credits, and other carryforwards is dependent on the generation of sufficient taxable income in future periods. Accordingly, there can be no assurance that additional valuation allowances on our deferred tax assets will not be required should our financial performance be negatively impacted in the future. Such valuation allowance could be material.

Previous wording

By geographic region, reported net sales increased across all geographic regions, with the exception of The Americas. The increase in net sales was primarily driven by higher net sales in our travel retail business, and to a lesser extent, in Mainland China.

Current wording

By geographic region, reported net sales increased across all geographic regions for the three and six months ended December 31, 2025, with the exception of The Americas, for the six months ended December 31, 2025. The increase in net sales for the three and six months ended December 31, 2025 was primarily driven by Mainland China and EUKEM, and the increase in net sales for the six months ended December 31, 2025 was also driven by Asia/Pacific.

Previous wording

Reported net sales increased 4% for the three months ended September 30, 2025, driven by the increase from pricing of 2% reflecting the favorable impact from strategic price actions and changes in mix, the increase from volume of 1%, and the favorable impact from foreign currency translation of 1%.

Current wording

Reported net sales increased 5% for the six months ended December 31, 2025, driven by the increase from volume of 2%, the increase from pricing of 1%, reflecting the favorable impact from strategic price actions and changes in mix, and the favorable impact from foreign currency translation of 1%.

Previous wording

Returns associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Net sales by Product Categoriesand Geographic Regions exclude the impacts of return adjustments associated with restructuring and other activities of $1 million for the three months ended September 30, 2025. There were no returns associated with restructuring and other activities for the three months ended September 30, 2024.

Current wording

Returns associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Net sales by Product Categoriesand Geographic Regions exclude the impacts of return adjustments associated with restructuring and other activities of $1 million for the six months ended December 31, 2025. There were no returns associated with restructuring and other activities for the three months ended December 31, 2025 and the three and six months ended December 31, 2024.

Previous wording

Reported net sales for our product categories for the three months ended September 30, 2025 and 2024 were as follows:

Current wording

Reported net sales for our product categories for the three and six months ended December 31, 2025 and 2024 were as follows:

Previous wording

The decrease in net sales from Bobbi Brown was primarily driven by lower net sales in the face subcategory reflecting the unfavorable year-over-year impact of new product launch shipments and lower net sales in the eye subcategory reflecting a reduction in color palettes. Net sales from Too Faced decreased, primarily driven by North America, reflecting lower net sales in the face and eye subcategories.

Current wording

Partially offsetting the makeup net sales increase for the six months ended December 31, 2025 were lower net sales from Estée Lauder, Bobbi Brown Cosmetics and Too Faced, combined, of approximately $46 million. The decrease in net sales from Estée Lauder was primarily driven by the aforementioned impact of estimated returns as discussed above. The decrease in net sales from Bobbi Brown was primarily driven by lower net sales in the face subcategory reflecting the unfavorable year-over-year impact of new product launch shipments and lower net sales in the eye subcategory reflecting a reduction in color palettes. Net sales from Too Faced decreased, reflecting lower net sales in the face and eye subcategories.

Previous wording

Reported net sales in EUKEM increased 4% for the three months ended September 30, 2025, driven by the favorable impact of foreign currency translation of 4% and an increase from pricing of 3% reflecting the favorable impact from strategic pricing actions and changes in mix. Partially offsetting these increases was the decrease from volume of 3%.

Current wording

Reported makeup net sales increased 1% for the three months ended December 31, 2025, driven by the increase from volume of 4% and the favorable impact from foreign currency translation of 2%. Partially offsetting these increases was the decrease from pricing of 5%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions.

Previous wording

Reported fragrance net sales increased $91 million, or 14% for the three months ended September 30, 2025, primarily driven by higher net sales from Le Labo, TOM FORD, and Jo Malone London, combined, of approximately $76 million. The increase in net sales for Le Labo reflected growth from targeted expanded consumer reach and the success of hero products. Net sales from TOM FORD increased, primarily driven by growth in the Private Blend and Signature franchises, reflecting the benefit from new product launches which created halo benefits on existing products. Net sales from Jo Malone London increased reflecting higher net sales in the cologne subcategory, including success from hero franchises and holiday campaigns, as well as new product launches.

Current wording

Reported fragrance net sales increased $68 million, or 9%, and $159 million, or 12%, for the three and six months ended December 31, 2025, respectively, primarily driven by higher net sales from TOM FORD and Le Labo, combined, of approximately $55 million and $112 million, for the respective periods. Net sales from TOM FORD increased in both periods, primarily driven by growth in the Private Blend and Signature franchises, reflecting the benefit from new product launches which created halo benefits on existing products. Le Labo net sales increased in both periods, led by the Classic Collection, reflecting growth from targeted expanded consumer reach and new product launches.

Previous wording

Reported net sales in Mainland China increased 9% for the three months ended September 30, 2025, driven by an increase from volume of 12%, partially offset by a decrease in pricing of 3%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions.

Current wording

Reported fragrance net sales increased 9% for the three months ended December 31, 2025, driven by the increase from pricing of 5%, reflecting changes in mix and the favorable impact from strategic pricing actions, the favorable impact from foreign currency translation of 3% and the increase from volume of 1%.

Previous wording

Reported hair care net sales decreased $10 million, or 7%, for the three months ended September 30, 2025, driven by lower net sales from Aveda, reflecting the brand’s strategies to improve long-term performance, including (i) planned reductions in online promotional activity and (ii) the exit from underperforming doors, including freestanding stores. Also contributing to the decrease in Aveda net sales was continued softness in the salon channel. These declines were partially offset by the impact from its launch in Amazon's U.S. Premium Beauty store during the fiscal 2025 fourth quarter.

Current wording

Reported hair care net sales decreased slightly, $1 million, or less than 1%, for the six months ended December 31, 2025, primarily reflecting lower net sales from Aveda and higher net sales from The Ordinary. The decrease in net sales from Aveda reflected the brand’s strategies to improve long-term performance, including (i) planned reductions in online promotional activity and (ii) the exit from underperforming doors, including freestanding stores. These declines were partially offset by the impact from its launch in Amazon's U.S. Premium Beauty store during the fiscal 2025 fourth quarter. The increase in net sales from The Ordinary reflected the aforementioned growth as discussed above.

Previous wording

Reported net sales by geographic region for the three months ended September 30, 2025 and 2024 were as follows:

Current wording

Reported net sales by geographic region for the three and six months ended December 31, 2025 and 2024 were as follows:

Previous wording

The increase in net sales in Asia/Pacific was primarily driven by higher net sales in our travel retail business, led by Asia travel retail, attributable to the low prior-year period net sales base which reflected (i) the challenging retail environment, including low consumer sentiment and conversion from Chinese consumers, as well as (ii) our prior-year efforts to improve in-trade inventory levels. Also contributing to the increase in net sales from our travel retail business was higher net sales from our Europe, the Middle East & Africa travel retail business, primarily driven by growth in fragrance.

Current wording

Reported net sales increased for the six months ended December 31, 2025, reflecting higher net sales in Mainland China, primarily driven by the aforementioned growth as discussed above, and higher net sales in our travel retail business, combined, of approximately $244 million. The increase in net sales in our travel retail business was driven by Asia travel retail, reflecting favorability attributable to the low prior-year period net sales base which reflected (i) the challenging retail environment, including low consumer sentiment and conversion from Chinese consumers, as well as (ii) our prior-year efforts to improve in-trade inventory levels. These increases were partially offset by impacts associated with the transitory headwind from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses. Also contributing to the increase in net sales in our travel retail business were higher net sales from our Europe, the Middle East & Africa travel retail business, primarily driven by growth in fragrance.

Previous wording

Gross margin increased to 73.4% for the three months ended September 30, 2025, as compared with 72.4% in the prior-year period.

Current wording

Gross margin increased to 76.5% and 75.1% for the three and six months ended December 31, 2025, as compared with 76.1% and 74.4% in the prior-year periods.

Previous wording

The increase in gross margin for the three months ended September 30, 2025 reflected net benefits from the PRGP, which included favorable impacts across our mix of business, obsolescence charges and manufacturing costs and other. The favorability within mix of business was driven by reductions in promotional activity, and the favorability within obsolescence charges was driven by reductions in excess inventory. Manufacturing costs and other reflects the favorable impact of cost efficiencies within our global supply chain network, partially offset by the impact of inflation on our costs.

Current wording

The increase in gross margin for the three and six months ended December 31, 2025 reflected net benefits from the PRGP, largely offset by unfavorable impacts in manufacturing costs and other, reflecting the impact of tariffs and inflation on our costs, as well as changes in our mix of business. The PRGP benefits were driven by the favorable impact of cost efficiencies within our global supply chain network and reductions in excess inventory.

Previous wording

Operating expenses as a percentage of net sales was 68.5% for the three months ended September 30, 2025, as compared with 76.0% in the prior-year period.

Current wording

Operating expenses as a percentage of net sales was 67.0% and 67.7% for the three and six months ended December 31, 2025, as compared with 90.6% and 83.9% in the prior-year periods.

Previous wording

The favorability in our operating expense margin reflects lower expenses within non-consumer-facing areas of the business, primarily within general and administrative, marketing and product development expenses. These reductions were driven by lower employee-related costs realized through initiatives as part of the PRGP, with the general and administrative favorability partially offset by the year-over-year increase in employee incentive costs. Partially offsetting these expense reductions were increased investments in consumer-facing areas of the business to drive sales, including advertising, selling, promotion and store operating expenses.

Current wording

The favorability in our operating expense margin for the three and six months ended December 31, 2025 reflected the impact of the increase in net sales, as well as lower expenses within non-consumer-facing areas of the business collectively, primarily within marketing, product development and general and administrative expenses, reflecting lower employee-related costs realized through initiatives as part of the PRGP. The decrease in general and administrative expenses also includes the favorable year-over-year impact of a change in policy related to local government subsidies in China, which negatively impacted the fiscal 2025 second quarter, partially offset by higher employee incentive costs. Partially offsetting these expense reductions were increased investments in consumer-facing areas of the business to drive sales, including advertising, store operating costs, selling and promotion expenses.

Previous wording

The increase in reported operating margin for the three months ended September 30, 2025 was driven by the favorable year-over-year impact of the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million, reflected within the favorable operating expense margin, as well as the increase in net sales and increase in gross margin, as discussed above.

Current wording

The increase in reported operating margin for the three and six months ended December 31, 2025 was driven by the favorable operating expense margin, which includes the year-over-year impact of the goodwill and other intangible asset impairment charges in the fiscal 2025 second quarter of $861 million, as well as the increase in net sales and increase in gross margin, as discussed above.

Previous wording

Charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Operating income (loss) by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities for the three months ended September 30, 2025 and 2024 of $86 million and $106 million, respectively.

Current wording

Charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Operating income (loss) by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities for the three months ended December 31, 2025 and 2024 of $207 million and $181 million, respectively, and for the six months ended December 31, 2025 and 2024 of $293 million and $287 million, respectively.

Previous wording

Reported Operating income (loss) for our product categories for the three months ended September 30, 2025 and 2024 were as follows:

Current wording

Reported Operating income (loss) for our product categories for the three and six months ended December 31, 2025 and 2024 were as follows:

Previous wording

Reported skin care operating income increased $70 million, or 60%, for the three months ended September 30, 2025, reflecting an increase in net sales, as well as lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP.

Current wording

Reported skin care operating income increased $148 million, or 48%, and $218 million, or 52%, for the three and six months ended December 31, 2025, respectively, reflecting an increase in net sales, as well as lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP, partially offset by an increase in investments in consumer-facing areas of the business, including to support key campaigns, new product launches and targeted expanded consumer reach.

Previous wording

Reported operating income in Asia/Pacific increased $74 million, or 97%, for the three months ended September 30, 2025, reflecting higher net sales and lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP, partially offset by higher cost of sales.

Current wording

Reported hair care operating results increased $21 million, or over 100%, for the three months ended December 31, 2025, primarily reflecting an increase in net sales and lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP.

Previous wording

Reported operating results in The Americas increased $172 million, or over 100%, for the three months ended September 30, 2025, reflecting the favorable year-over-year impact of the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million, and to a lesser extent, lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP, and lower cost of sales, partially offset by lower net sales.

Current wording

Reported hair care operating income increased $27 million, or over 100%, for the six months ended December 31, 2025, primarily reflecting lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP, and lower cost of sales.

Previous wording

Reported operating income in EUKEM decreased $4 million, or 40%, for the three months ended September 30, 2025, reflecting an increase in investments in consumer-facing areas of the business, including to support targeted expanded consumer reach and to support key campaigns and activations, offset by higher net sales.

Current wording

Reported operating income in EUKEM increased $11 million, or 8%, and $7 million, or 5%, for the three and six months ended December 31, 2025, respectively, including the favorable impact of foreign currency translation of 11% and 12% for the respective periods. The increase in operating income reflected higher net sales, offset in part by higher cost of sales and an increase in investments in consumer-facing areas of the business, including to support targeted expanded consumer reach, key campaigns and new product launches.

Previous wording

Interest expense decreased for the three months ended September 30, 2025, primarily reflecting a lower average debt balance compared to the prior-year period. Interest income and investment income, net decreased, primarily reflecting a lower average cash balance and lower average interest rates compared to the prior-year period.

Current wording

Interest expense decreased for the three and six months ended December 31, 2025, primarily reflecting a lower average debt balance compared to the prior-year period. Interest income and investment income, net decreased for the three and six months ended December 31, 2025, reflecting lower average interest rates compared to the prior-year period, partially offset by the favorable year-over-year impact of cost method investment activity. Also contributing to the decrease in Interest income and investment income, net for the six months ended December 31, 2025 was a lower average cash balance compared to the prior-year period.

Previous wording

We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company’s underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period to period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. The following tables present Net sales, Operating income (loss) and Diluted net earnings (loss) per common share adjusted to exclude the impact of charges associated with restructuring and other activities; talcum litigation settlement agreements; and the effects of foreign currency translation.

Current wording

We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company’s underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period to period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. The following tables present Net sales, Operating income (loss) and Diluted net earnings (loss) per common share adjusted to exclude the impact of charges associated with restructuring and other activities; impairment of goodwill and other intangible assets; talcum litigation settlement agreements; and the effects of foreign currency translation.

Previous wording

The following table provides reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Current wording

The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Previous wording

As diluted net earnings (loss) per common share, as adjusted, is used as a measure of the Company’s performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.

Current wording

As diluted net earnings per common share, as adjusted, is used as a measure of the Company’s performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.

Previous wording

The following table reconciles the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:

Current wording

The following tables reconcile the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:

Previous wording

The following table reconciles the change in operating results by product category and geographic region, as reported, to the change in operating results excluding the impact of talcum litigation settlement agreements:

Current wording

The following tables reconcile the change in operating results by product category and geographic region, as reported, to the change in operating results excluding the impact of impairment of goodwill and other intangible assets, as well as the talcum litigation settlement agreements for the six months ended December 31, 2025:

Previous wording

Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad. At September 30, 2025, we had cash and cash equivalents of $2,219 million compared with $2,921 million at June 30, 2025. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.

Current wording

Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad. At December 31, 2025, we had cash and cash equivalents of $3,082 million compared with $2,921 million at June 30, 2025. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.

Previous wording

Inflation impacted our operating results in the fiscal 2026 first quarter and we expect it to continue. Generally, we have plans to introduce new products at higher prices, increase prices and implement other operating efficiencies which we expect to offset some of these cost increases.

Current wording

Tariffs negatively impacted our operating results in the fiscal 2026 second quarter and we expect these impacts to continue. Generally, we have plans to introduce new products at higher prices, increase prices and implement other operating efficiencies which we expect to offset some of these impacts.

Previous wording

(4)Consists of $450 million principal, net unamortized debt premium of $9 million and debt issuance costs of $4 million.

Current wording

(4)Consists of $450 million principal, net unamortized debt premium of $8 million and debt issuance costs of $5 million.

Previous wording

(6)Consists of $300 million principal, unamortized debt discount of $3 million and debt issuance costs of $2 million.

Current wording

(6)Consists of $300 million principal, unamortized debt discount of $2 million and debt issuance costs of $2 million.

Previous wording

(7)Consists of $650 million principal, unamortized debt discount of $2 million, debt issuance costs of $4 million and a $4 million loss to reflect the fair value of interest rate swaps.

Current wording

(7)Consists of $650 million principal, unamortized debt discount of $2 million, debt issuance costs of $4 million and a $10 million loss to reflect the fair value of interest rate swaps.