Estee Lauder Companies Inc – ‘10-Q’ for 3/31/05

On:  Thursday, 4/28/05, at 6:07pm ET   ·   As of:  4/29/05   ·   For:  3/31/05   ·   Accession #:  1001250-5-47   ·   File #:  1-14064

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Quarterly Report   —   Form 10-Q
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Period Ended 3-31-05                        32    184K 
 2: EX-31       CEO Certification                                      2±     9K 
 3: EX-31       CFO Certification                                      2±     9K 
 4: EX-32       CEO Certifiacation                                     1      6K 
 5: EX-32       CFO Certification                                      1      6K 

10-Q   —   Quarterly Period Ended 3-31-05
Document Table of Contents

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================================================================================
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549-1004
______________________

 FORM 10-Q

(Mark One)                                                      

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934                   

 For the quarterly period ended March 31, 2005

OR

 [_]  Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934                   

 For the transition period from __________ to __________

 Commission file number: 1-14064

 The Estee Lauder Companies Inc.
(Exact name of registrant as specified in its charter)

Delaware                               11-2408943 
(State or other jurisdiction of       (IRS Employer Identification No.) 
incorporation or organization)                                          

767 Fifth Avenue, New York, New York                 10153          
(Address of principal executive offices)             (Zip Code)         

 Registrant's telephone number, including area code 212-572-4200

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was     
required to file such reports), and (2) has been subject to such filing         
requirements for the past 90 days. Yes [X]  No [_]                              

Indicate by check mark whether the registrant is an accelerated filer (as       
defined in Rule 12b-2 of the Exchange Act). Yes [X]  No [_]                     

At April 26, 2005, 134,714,378 shares of the registrant's Class A Common Stock, 
$.01 par value, and 91,112,901 shares of the registrant's Class B Common Stock, 
$.01 par value, were outstanding.                                               

================================================================================

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 INDEX
                                                                        Page
                                                                        ----
Part I. Financial Information                                                   

Item 1. Financial Statements                                                    
Consolidated Statements of Earnings --                    
                  Three and Nine Months Ended March 31, 2005 and 2004    2

Consolidated Balance Sheets --                            
                  March 31, 2005 and June 30, 2004                       3

Consolidated Statements of Cash Flows --                  
                  Nine Months Ended March 31, 2005 and 2004              4

        Notes to Consolidated Financial Statements                       5

Item 2. Management's Discussion and Analysis of                                 
                   Financial Condition and Results of Operations          13

Item 3. Quantitative and Qualitative Disclosures About Market Risk          26  

Item 4. Controls and Procedures                                             26  

Part II. Other Information                                                      

Item 1. Legal Proceedings                                                   27  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds         29  

Item 6. Exhibits                                                            29  

Signatures                                                                  30  

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 PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.                                                   

 CONSOLIDATED STATEMENTS OF EARNINGS
 (Unaudited)

                                                        [Enlarge/Download Table]

                                                Three Months Ended            Nine Months Ended     
                                                     March 31                      March 31         
                                             --------------------------    -------------------------
                                                2005           2004           2005          2004    
                                             -----------    -----------    -----------    ----------

                                                          (In millions, except per share data)      

                                                                                                    
Net Sales                                    $  1,538.2     $  1,421.6     $  4,792.6     $ 4,387.3 
Cost of Sales                                     386.5          358.6        1,245.8       1,135.4 
                                             -----------    -----------    -----------    ----------

Gross Profit                                    1,151.7        1,063.0        3,546.8       3,251.9 
                                             -----------    -----------    -----------    ----------

Operating expenses:                                                                                 
   Selling, general and administrative            975.3          887.9        2,984.6       2,716.7 
   Related party royalties                           --            5.5             --          16.9 
                                             -----------    -----------    -----------    ----------
                                                  975.3          893.4        2,984.6       2,733.6 
                                             -----------    -----------    -----------    ----------
Operating Income                                  176.4          169.6          562.2         518.3 

Interest expense, net                               3.3            6.9           10.7          21.8 
                                             -----------    -----------    -----------    ----------
Earnings before Income Taxes, Minority                                                              
  Interest and Discontinued Operations            173.1          162.7          551.5         496.5 

Provision for income taxes                         64.7           60.9          206.2         185.7 
Minority interest, net of tax                      (2.2)          (1.7)          (5.8)         (6.7)
                                             -----------    -----------    -----------    ----------
Net Earnings from Continuing Operations           106.2          100.1          339.5         304.1 

Discontinued operations, net of tax                  --           (1.8)            --         (33.1)
                                             -----------    -----------    -----------    ----------
Net Earnings                                 $    106.2     $     98.3     $    339.5     $   271.0 
                                             ===========    ===========    ===========    ==========

Basic net earnings per common share:                                                                
   Net earnings from continuing operations   $      .47     $      .44     $     1.50     $    1.33 
   Discontinued operations, net of tax               --           (.01)            --          (.14)
                                             -----------    -----------    -----------    ----------
   Net earnings                              $      .47     $      .43     $     1.50     $    1.19 
                                             ===========    ===========    ===========    ==========

Diluted net earnings per common share:                                                              
   Net earnings from continuing operations   $      .46     $      .43     $     1.48     $    1.31 
   Discontinued operations, net of tax               --           (.01)            --          (.14)
                                             -----------    -----------    -----------    ----------
   Net earnings                              $      .46     $      .42     $     1.48     $    1.17 
                                             ===========    ===========    ===========    ==========

Weighted average common shares outstanding:                                                         
   Basic                                          225.5          228.3          226.1         228.3 
   Diluted                                        228.7          231.9          229.7         231.4 

Cash dividends declared per common share     $       --     $       --     $      .40     $     .30 


 See notes to consolidated financial statements.

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 CONSOLIDATED BALANCE SHEETS

                                                        [Enlarge/Download Table]


                                                                                         March 31                  June 30  
                                                                                           2005                     2004    
                                                                                     --------------           --------------
                                                                                        (Unaudited)                         

                                                                                                 (In millions)              

                                                                                                                            
                                        ASSETS                                                                              
Current Assets                                                                                                              
Cash and cash equivalents                                                            $       518.0            $       611.6 
Accounts receivable, net                                                                     921.5                    664.9 
Inventory and promotional merchandise, net                                                   723.3                    653.5 
Prepaid expenses and other current assets                                                    267.1                    269.2 
                                                                                     --------------           --------------
      Total current assets                                                                 2,429.9                  2,199.2 
                                                                                     --------------           --------------

Property, Plant and Equipment, net                                                           690.4                    647.0 
                                                                                     --------------           --------------

Other Assets                                                                                                                
Investments, at cost or market value                                                          12.7                     12.6 
Goodwill, net                                                                                684.5                    672.3 
Other intangible assets, net                                                                  72.1                     71.9 
Other assets, net                                                                             94.6                    105.1 
                                                                                     --------------           --------------
      Total other assets                                                                     863.9                    861.9 
                                                                                     --------------           --------------
         Total assets                                                                $     3,984.2            $     3,708.1 
                                                                                     ==============           ==============

                         LIABILITIES AND STOCKHOLDERS' EQUITY                                                               
Current Liabilities                                                                                                         
Short-term debt                                                                      $       113.8            $        73.8 
Accounts payable                                                                             251.0                    267.3 
Accrued income taxes                                                                         120.7                    109.4 
Other accrued liabilities                                                                    918.2                    871.5 
                                                                                     --------------           --------------
      Total current liabilities                                                            1,403.7                  1,322.0 
                                                                                     --------------           --------------

Noncurrent Liabilities                                                                                                      
Long-term debt                                                                               441.8                    461.5 
Other noncurrent liabilities                                                                 206.4                    175.6 
                                                                                     --------------           --------------
      Total noncurrent liabilities                                                           648.2                    637.1 
                                                                                     --------------           --------------

Minority Interest                                                                             18.5                     15.5 
                                                                                     --------------           --------------

Stockholders' Equity                                                                                                        
Common Stock, $.01 par value; 650,000,000 shares Class A authorized; shares issued:                                         
  156,050,339 at March 31, 2005 and 150,969,807 at June 30, 2004;  240,000,000                                              
  shares Class B authorized; shares issued and outstanding: 91,112,901 at March 31,                                         
  2005 and 93,012,901 at June 30, 2004                                                         2.5                      2.4 
Paid-in capital                                                                              465.3                    382.3 
Retained earnings                                                                          2,136.6                  1,887.2 
Accumulated other comprehensive income                                                        75.4                     10.5 
                                                                                     --------------           --------------
                                                                                           2,679.8                  2,282.4 
Less: Treasury stock, at cost; 21,378,660 Class A shares at                                                                 
    March 31, 2005 and 16,455,660 Class A shares at June 30, 2004                           (766.0)                  (548.9)
                                                                                     --------------           --------------
      Total stockholders' equity                                                           1,913.8                  1,733.5 
                                                                                     --------------           --------------
         Total liabilities and stockholders' equity                                  $     3,984.2            $     3,708.1 
                                                                                     ==============           ==============

 See notes to consolidated financial statements.

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 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)

                                                        [Enlarge/Download Table]


                                                                                             Nine Months Ended           
                                                                                                  March 31               
                                                                                  ---------------------------------------
                                                                                       2005                      2004    
                                                                                  --------------           --------------
                                                                                                                         
                                                                                              (In millions)              
Cash Flows from Operating Activities                                                                                     
  Net earnings                                                                    $       339.5            $       271.0 
   Adjustments to reconcile net earnings to net cash flows provided by operating                                         
    activities from continuing operations:                                                                               
      Depreciation and amortization                                                       144.0                    139.2 
      Deferred income taxes                                                                36.1                     12.0 
      Minority interest, net of tax                                                         5.8                      6.7 
      Non-cash stock compensation                                                          (1.2)                     5.6 
      Discontinued operations, net of tax                                                    --                     33.1 
      Other non-cash items                                                                  0.9                      0.8 
Changes in operating assets and liabilities                                                                              
     Increase in accounts receivable, net                                                (215.2)                  (128.9)
     (Increase) decrease in inventory and promotional merchandise, net                    (41.2)                    39.6 
     Decrease in other assets, net                                                          1.2                      6.0 
     Decrease in accounts payable                                                         (31.7)                   (12.4)
     Increase in accrued income taxes                                                      37.1                     32.3 
     Increase in other accrued liabilities                                                  6.9                    127.2 
     Increase in other noncurrent liabilities                                               5.2                     18.5 
                                                                                  --------------           --------------
        Net cash flows provided by operating activities of continuing operations          287.4                    550.7 
                                                                                  --------------           --------------

Cash Flows from Investing Activities                                                                                     
   Capital expenditures                                                                  (154.2)                  (130.9)
   Acquisition of businesses, net of cash acquired                                         (6.9)                    (3.9)
   Proceeds from divestitures                                                                --                      3.0 
   Purchases of long-term investments                                                      (0.3)                    (0.1)
                                                                                  --------------           --------------
        Net cash flows used for investing activities of continuing operations            (161.4)                  (131.9)
                                                                                  --------------           --------------

Cash Flows from Financing Activities                                                                                     
   Increase (decrease) in short-term debt, net                                              8.3                     (2.0)
   Proceeds from the issuance of long-term debt, net                                         --                    195.5 
   Proceeds from the net settlement of treasury rate lock agreements                         --                     15.0 
   Repayments of long-term debt                                                            (0.7)                    (2.1)
   Net proceeds from employee stock transactions                                           74.4                     43.7 
   Payments to acquire treasury stock                                                    (217.1)                   (98.3)
   Dividends paid to stockholders                                                         (90.1)                   (68.5)
   Distributions made to minority holders                                                  (3.2)                    (2.8)
                                                                                  --------------           --------------
         Net cash flows (provided by) used for financing activities                                                      
           of continuing operations                                                      (228.4)                    80.5 
                                                                                  --------------           --------------

Effect of Exchange Rate Changes on Cash and Cash Equivalents                                9.7                      5.5 
                                                                                  --------------           --------------
Cash Flows used for Discontinued Operations                                                (0.9)                    (1.1)
                                                                                  --------------           --------------

   Net Increase (Decrease) in Cash and Cash Equivalents                                   (93.6)                   503.7 
   Cash and Cash Equivalents at Beginning of Period                                       611.6                    364.1 
                                                                                  --------------           --------------
   Cash and Cash Equivalents at End of Period                                     $       518.0            $       867.8 
                                                                                  ==============           ==============
Supplemental disclosures of cash flow information:                                                                       
   Cash paid during the period for:                                                                                      
         Interest                                                                 $        16.1            $        25.9 
                                                                                  ==============           ==============
         Income taxes                                                             $       127.4            $       134.6 
                                                                                  ==============           ==============
   Non-cash items:                                                                                                       
         Estimated tax benefit from exercise of stock options                     $        26.0            $        14.1 
                                                                                  ==============           ==============
         Liability associated with acquisition of business                        $         5.6            $          -- 
                                                                                  ==============           ==============
         Capital lease obligations                                                $         6.9            $          -- 
                                                                                  ==============           ==============

 See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                            

Basis of Presentation                                                           

The accompanying consolidated financial statements include the accounts of The  
Estee Lauder Companies Inc. and its subsidiaries (collectively, the "Company")  
as continuing operations, with the exception of the operating results of its    
reporting unit that sold jane brand products, which have been reflected as      
discontinued operations for the three and nine-month periods ended March 31,    
2004. All significant intercompany balances and transactions have been          
eliminated.                                                                     

The consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles for interim financial information and  
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.            
Accordingly, they do not include all of the information and footnotes required  
by U.S. generally accepted accounting principles for complete financial         
statements. In the opinion of management all adjustments (consisting of normal  
recurring accruals) considered necessary for a fair presentation have been      
included. The results of operations of any interim period are not necessarily   
indicative of the results of operations to be expected for the fiscal year. For 
further information, refer to the consolidated financial statements and         
accompanying footnotes included in the Company's Annual Report on Form 10-K for 
the year ended June 30, 2004.                                                   

Certain amounts in the consolidated financial statements of prior periods have  
been reclassified to conform to current period presentation for comparative     
purposes.                                                                       

Net Earnings Per Common Share                                                   

For the three and nine-month periods ended March 31, 2005 and 2004, net earnings
per common share ("basic EPS") is computed by dividing net earnings by the      
weighted average number of common shares outstanding and contingently issuable  
shares (which satisfy certain conditions). Net earnings per common share        
assuming dilution ("diluted EPS") is computed by reflecting potential dilution  
from the exercise of stock options.                                             

A reconciliation between the numerators and denominators of the basic and       
diluted EPS computations is as follows:                                         

                                                        [Enlarge/Download Table]


                                                         Three Months Ended        Nine Months Ended   
                                                              March 31                  March 31       
                                                      ---------------------      ----------------------

                                                         2005        2004          2005          2004  
                                                      ---------    ---------     ---------    ---------
                                                                          (Unaudited)                  
                                                                (In millions, except per share data)   
                                                                                                       
Numerator:                                                                                             
Net earnings from continuing operations               $  106.2     $  100.1      $  339.5     $  304.1 
Discontinued operations, net of tax                         --         (1.8)           --        (33.1)
                                                      ---------    ---------     ---------    ---------
Net earnings                                          $  106.2     $   98.3      $  339.5     $  271.0 
                                                      =========    =========     =========    =========

Denominator:                                                                                           
Weighted average common shares outstanding - Basic       225.5        228.3         226.1        228.3 
Effect of dilutive securities: Stock options               3.2          3.6           3.6          3.1 
                                                      ---------    ---------     ---------    ---------
Weighted average common shares outstanding - Diluted     228.7        231.9         229.7        231.4 
                                                      =========    =========     =========    =========

Basic net earnings per common share:                                                                   
Net earnings from continuing operations               $    .47     $    .44      $   1.50     $   1.33 
Discontinued operations, net of tax                         --         (.01)           --         (.14)
                                                      ---------    ---------     ---------    ---------
Net earnings                                          $    .47     $    .43      $   1.50     $   1.19 
                                                      =========    =========     =========    =========

Diluted net earnings per common share:                                                                 
Net earnings from continuing operations               $    .46     $    .43      $   1.48     $   1.31 
Discontinued operations, net of tax                         --         (.01)           --         (.14)
                                                      ---------    ---------     ---------    ---------

Net earnings                                          $    .46     $    .42      $   1.48     $   1.17 
                                                      =========    =========     =========    =========

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2005 and 2004, outstanding options to purchase 6.7 million and  
9.4 million shares, respectively, of Class A Common Stock were not included in  
the computation of diluted EPS because the exercise prices of those options were
greater than the average market price of the common stock and their inclusion   
would be anti-dilutive.                                                         

Stock-Based Compensation                                                        

As of March 31, 2005, the Company had established a number of share incentive   
programs as discussed in more detail in the Company's Annual Report on Form 10-K
for the year ended June 30, 2004. The Company applies the intrinsic value method
as outlined in Accounting Principles Board Opinion ("APB") No. 25, "Accounting  
for Stock Issued to Employees," and related interpretations in accounting for   
stock options and share units granted under these programs. Under the intrinsic 
value method, no compensation expense is recognized if the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of the grant. Accordingly, no compensation cost has been recognized 
on options granted to employees. Statement of Financial Accounting Standard     
("SFAS") No. 123, "Accounting for Stock-Based Compensation," ("SFAS No. 123")   
requires that the Company provide pro forma information regarding net earnings  
and net earnings per common share as if compensation cost for the Company's     
stock option programs had been determined in accordance with the fair value     
method prescribed therein. The Company adopted the disclosure portion of SFAS   
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," 
requiring quarterly SFAS No. 123 pro forma disclosure. The pro forma charge for 
compensation cost related to stock options granted is recognized over the       
service period. The service period represents the period of time between the    
date of grant and the date each option becomes exercisable without consideration
of acceleration provisions (e.g., retirement, change of control, etc.). The     
following table illustrates the effect on net earnings per common share as if   
the fair value method had been applied to all outstanding awards in each period 
presented.                                                                      

                                                        [Enlarge/Download Table]


                                                                         Three Months Ended          Nine Months Ended    
                                                                              March 31                   March 31         
                                                                    ---------------------------   ------------------------
                                                                         2005          2004          2005          2004   
                                                                    -----------    ------------   -----------  -----------
                                                                                         (Unaudited)                      

                                                                              (In millions, except per share data)        

                                                                                                                          
Net earnings, as reported                                           $    106.2     $      98.3    $    339.5   $    271.0 
Deduct: Total stock-based employee compensation expense                                                                   
         determined under fair value method for all awards, net of                                                        
         related tax effects.                                             (4.7)           (7.1)        (18.2)       (24.3)
                                                                    -----------    ------------   -----------  -----------

Pro forma net earnings                                              $    101.5     $      91.2    $    321.3   $    246.7 
                                                                    ===========    ============   ===========  ===========

Earnings per common share:                                                                                                
   Net earnings per common share - Basic, as reported               $      .47     $       .43    $     1.50   $     1.19 
                                                                    ===========    ============   ===========  ===========
   Net earnings per common share - Basic, pro forma                 $      .45     $       .40    $     1.42   $     1.08 
                                                                    ===========    ============   ===========  ===========

   Net earnings per common share - Diluted, as reported             $      .46     $       .42    $     1.48   $     1.17 
                                                                    ===========    ============   ===========  ===========
   Net earnings per common share - Diluted, pro forma               $      .44     $       .39    $     1.39   $     1.06 
                                                                    ===========    ============   ===========  ===========

On August 27, 2004, stock units in respect of 365,580 shares of Class A Common  
Stock were converted into a cash equivalent amount of $16.1 million, which was  
paid in December 2004.                                                          

Accounts Receivable                                                             

Accounts receivable is stated net of the allowance for doubtful accounts and    
customer deductions of $32.9 million and $30.1 million as of March 31, 2005 and 
June 30, 2004, respectively.                                                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventory and Promotional Merchandise                                           

Inventory and promotional merchandise only includes inventory considered        
saleable or usable in future periods, and is stated at the lower of cost or     
fair-market value, with cost being determined on the first-in, first-out method.
Cost components include raw materials, componentry, direct labor and overhead   
(e.g., indirect labor, utilities, depreciation, purchasing, receiving,          
inspection and warehousing) as well as inbound freight. Promotional merchandise 
is charged to expense at the time the merchandise is shipped to the Company's   
customers.                                                                      

                                                        [Enlarge/Download Table]

                                                                                   March 31                   June 30  
                                                                                     2005                      2004    
                                                                                 -----------               ------------
                                                                                     (Unaudited)                       
                                                                                               (In millions)           
                                                                                                                       
Inventory and promotional merchandise consists of:                                                                     
   Raw materials                                                                 $    141.4                $     148.1 
   Work in process                                                                     31.4                       36.5 
   Finished goods                                                                     404.6                      317.7 
   Promotional merchandise                                                            145.9                      151.2 
                                                                                 -----------               ------------
                                                                                 $    723.3                $     653.5 
                                                                                 ===========               ============

Property, Plant and Equipment                                                                                          

Property, plant and equipment, including leasehold and other improvements that                                         
extend an asset's useful life or productive capabilities, are carried at cost                                          
less accumulated depreciation and amortization. For financial statement                                                
purposes, depreciation is provided principally on the straight-line method over                                        
the estimated useful lives of the assets. Leasehold improvements are amortized                                         
on a straight-line basis over the shorter of the lives of the respective leases                                        
or the expected useful life of those improvements.                                                                     

                                                                                   March 31                   June 30  
                                                                                     2005                      2004    
                                                                                 -----------               ------------
                                                                                    (Unaudited)                        
                                                                                                (In millions)          
Assets (Useful Life)                                                                                                   
    Land                                                                         $     13.9                $      13.6 
    Buildings and improvements (10 to 40 years)                                       171.6                      160.9 
    Machinery and equipment (3 to 10 years)                                           746.6                      661.1 
    Furniture and fixtures (5 to 10 years)                                            111.4                      101.9 
    Leasehold improvements                                                            705.0                      630.3 
                                                                                 -----------               ------------
                                                                                    1,748.5                    1,567.8 
    Less accumulated depreciation and amortization                                  1,058.1                      920.8 
                                                                                 -----------               ------------
                                                                                 $    690.4                $     647.0 
                                                                                 ===========               ============

Depreciation and amortization of property, plant and equipment was $47.3 million
and $44.8 million during the three months ended March 31, 2005 and 2004,        
respectively, and $136.4 million and $129.3 million during the nine months ended
March 31, 2005 and 2004, respectively. Depreciation and amortization related to 
our manufacturing process is included in cost of sales and all other            
depreciation and amortization is included in selling, general and administrative
expenses in the accompanying consolidated statements of earnings.               

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating Leases                                                                

In connection with a February 7, 2005 letter from the Office of the Chief       
Accountant of the Securities and Exchange Commission to the American Institute  
of Certified Public Accountants expressing its views of existing accounting     
literature related to lease accounting, the Company has completed a review of   
its lease accounting policies. Generally, leasing is not a significant portion  
of the Company's business and it has determined that any changes to its previous
practices would not result in a material impact on its results of operations and
statements of financial position and cash flows for the current period or any   
individual prior year. Accordingly, the Company's consolidated financial        
statements for prior periods will not be restated.                              

Currently, the Company recognizes rent expense from operating leases with       
periods of free and scheduled rent increases on a straight-line basis over the  
applicable lease term. The Company considers lease renewals in the useful life  
of its leasehold improvements when such renewals are reasonably assured. From   
time to time, the Company may receive capital improvement funding from its      
lessors. These amounts are recorded as deferred liabilities and amortized over  
the remaining lease term as a reduction of rent expense.                        

Pension and Postretirement Benefit Plans                                        

The Company maintains pension plans covering substantially all of its full-time 
employees for its U.S. operations and a majority of its international           
operations. The Company also maintains a domestic postretirement benefit plan   
which provides certain medical and dental benefits to eligible employees.       
Descriptions of these plans are discussed in the Company's Annual Report on Form
10-K for the year ended June 30, 2004.                                          

The components of net periodic benefit cost for the three months ended March 31,
2005 and 2004 consisted of the following:                                       

                                                        [Enlarge/Download Table]

                                                                                                        Other than        
                                                        Pension Plans                                  Pension Plans      
                                 -------------------------------------------------------------  --------------------------
                                            U.S.                         International                Postretirement      
                                 ---------------------------      ----------------------------  --------------------------

                                    2005            2004              2005            2004         2005           2004    
                                -----------      -----------      -----------      -----------  -----------    -----------
                                                                                                                          
(Unaudited)                                                                                                               
(In millions)                                                                                                             
Service cost, net               $      4.8       $      4.2       $      2.8       $      2.7   $      0.8     $      0.7 
Interest cost                          5.3              5.0              2.5              2.3          1.0            0.9 
Expected return on plan assets        (6.0)            (5.2)            (2.9)            (2.6)          --             -- 
Amortization of:                                                                                                          
    Transition asset                    --               --               --              0.1           --             -- 
    Prior service cost                 0.1              0.1              0.1              0.1           --             -- 
    Actuarial loss                     1.2              1.6              1.0              0.9           --             -- 
                                -----------      -----------      -----------      -----------  -----------    -----------
Net periodic benefit cost       $      5.4       $      5.7       $      3.5       $      3.5   $      1.8     $      1.6 
                                ===========      ===========      ===========      ===========  ===========    ===========


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of net periodic benefit cost for the nine months ended March 31, 
2005 and 2004 consisted of the following:                                       

                                                        [Enlarge/Download Table]

                                                                                                        Other than           
                                                        Pension Plans                                   Pension Plans        
                                --------------------------------------------------------------  -----------------------------
                                            U.S.                         International                 Postretirement        
                                ----------------------------      ----------------------------  -----------------------------

                                   2005              2004             2005             2004          2005             2004   
                                -----------      -----------      -----------      -----------   -----------      -----------
                                                                                                                             
(Unaudited)                                                                                                                  
(In millions)                                                                                                                
Service cost, net               $     14.5       $     12.7       $      8.5       $      7.9    $      2.4       $      2.1 
Interest cost                         15.9             15.0              7.4              6.7           3.0              2.6 
Expected return on plan assets       (18.1)           (15.5)            (8.4)            (7.6)           --               -- 
Amortization of:                                                                                                             
    Transition asset                    --               --               --              0.3            --               -- 
    Prior service cost                 0.4              0.4              0.2              0.2            --               -- 
    Actuarial loss                     3.4              4.6              3.0              2.6            --               -- 
                                -----------      -----------      -----------      -----------   -----------      -----------
Net periodic benefit cost       $     16.1       $     17.2       $     10.7       $     10.1    $      5.4       $      4.7 
                                ===========      ===========      ===========      ===========   ===========      ===========

The Company previously disclosed in its consolidated financial statements for   
the fiscal year ended June 30, 2004 that it expected to contribute $25.0 million
and $18.0 million to the U.S. and international pension plans, respectively,    
during the fiscal year ending June 30, 2005. As of March 31, 2005, the expected 
contributions for U.S. pension plans for the fiscal year ending June 30, 2005   
have been decreased by approximately $18.0 million, for a total of $7.0 million,
and the expected contributions for the international pension plans are expected 
to increase $2.8 million for a total of $20.8 million.                          

Management Estimates                                                            

The preparation of financial statements in conformity with U.S. generally       
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets, liabilities, revenues   
and expenses reported in those financial statements. These judgments can be     
subjective and complex, and consequently actual results could differ from those 
estimates and assumptions. The Company's most critical accounting policies      
relate to revenue recognition, concentration of credit risk, inventory, pension 
and other postretirement benefit costs, goodwill and other intangible assets,   
income taxes and derivatives. Descriptions of these policies are discussed in   
the Company's Annual Report on Form 10-K for the year ended June 30, 2004.      

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued Accounting Standards                                            

On December 21, 2004, the Financial Accounting Standards Board ("FASB") issued  
FASB Staff Position No. FAS 109-1, "Application of FASB Statement No. 109,      
Accounting for Income Taxes, to the Tax Deduction on Qualified Production       
Activities Provided by the American Jobs Creation Act of 2004" ("FSP No.        
109-1"), and FASB Staff Position No. FAS 109-2, "Accounting and Disclosure      
Guidance for the Foreign Earnings Repatriation Provision within the American    
Jobs Creation Act of 2004" ("FSP No. 109-2"). These staff positions provide     
accounting guidance on how companies should account for the effects of the      
American Jobs Creation Act of 2004 ("AJCA") that was signed into law on October 
22, 2004. FSP No. 109-1 states that the tax relief (special tax deduction for   
domestic manufacturing) from this legislation should be accounted for as a      
"special deduction" instead of a tax rate reduction. The special deduction for  
domestic manufacturing becomes effective for the Company in the first quarter of
fiscal 2006. The Company believes this legislation and the provisions of FSP No.
109-1 will not have a significant impact on its effective tax rate. FSP No.     
109-2 gives a company additional time to evaluate the effects of the legislation
on any plan for reinvestment or repatriation of foreign earnings for purposes of
applying FASB Statement No. 109. The Company is investigating the repatriation  
provision to determine whether it might repatriate extraordinary dividends, as  
defined in the AJCA, of up to $500 million during fiscal 2005 or fiscal 2006.   
The Company is currently evaluating all available U.S. Treasury guidance, as    
well as awaiting anticipated further guidance. The Company expects to complete  
this evaluation within a reasonable amount of time after additional guidance is 
published. The Company estimates the potential income tax effect of any such    
repatriation would be to record a tax liability based on the effective 5.25%    
rate provided by the AJCA. While it is anticipated that this liability will     
increase the overall effective rate for income taxes, the actual tax rate impact
will only become determinable once further technical guidance has been issued.  

In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment" ("SFAS 
No. 123(R)"). This statement replaces SFAS No. 123, "Accounting for Stock-Based 
Compensation" and supersedes APB No. 25, "Accounting for Stock Issued to        
Employees." SFAS 123(R) requires all stock-based compensation to be recognized  
as an expense in the financial statements and that such cost be measured        
according to the fair value of stock options. SFAS 123(R) will be effective for 
the Company's first quarter of fiscal 2006. While the Company currently provides
the pro forma disclosures required by SFAS No. 148, "Accounting for Stock-Based 
Compensation - Transition and Disclosure," on a quarterly basis (see "Note 1 -  
Stock-Based Compensation"), it is currently evaluating the impact this statement
will have on its consolidated financial statements. In March 2005, Staff        
Accounting Bulletin No. 107 ("SAB No. 107") was issued to provide guidance from 
the Securities and Exchange Commission to simplify some of the implementation   
challenges of SFAS No. 123(R) as this statement relates to the valuation of     
share-based payment arrangements for public companies. The Company will apply   
the principles of SAB No. 107 in conjunction with its adoption of SFAS 123(R).  

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment 
of ARB No. 43, Chapter 4" ("SFAS No. 151"). SFAS No. 151 requires all companies 
to recognize a current-period charge for abnormal amounts of idle facility      
expense, freight, handling costs and wasted materials. This statement also      
requires that the allocation of fixed production overhead to the costs of       
conversion be based on the normal capacity of the production facilities. SFAS   
No. 151 will be effective for fiscal years beginning after June 15, 2005. The   
Company believes the adoption of this statement will not have a material impact 
on its consolidated financial statements.                                       

On May 19, 2004, the FASB issued FASB Staff Position No. FAS 106-2, "Accounting 
and Disclosure Requirements Related to the Medicare Prescription Drug,          
Improvement and Modernization Act of 2003" ("FSP No. 106-2"), in response to a  
new law regarding prescription drug benefits under Medicare ("Medicare Part D") 
and a Federal subsidy to sponsors of retiree health care benefit plans that     
provide a benefit that is at least actuarially equivalent to Medicare Part D.   
Currently, SFAS No. 106, "Employers' Accounting for Postretirement Benefits     
Other Than Pensions" ("SFAS No. 106"), requires that changes in relevant law be 
considered in current measurement of postretirement benefit costs. FSP No. 106-2
is effective for financial statements of companies for the first interim or     
annual period beginning after June 15, 2004. The Company adopted FSP No. 106-2  
in the first quarter of fiscal 2005 and recognized the impact of the new law    
under Medicare Part D, which was not material to the Company's results of       
operations, cash flows or financial condition.                                  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 -- COMPREHENSIVE INCOME                                                  

The components of accumulated other comprehensive income ("OCI") included in the
accompanying consolidated balance sheets consist of net unrealized investment   
gain (loss), net gain or (loss) on derivative instruments designated and        
qualifying as cash-flow hedging instruments, net minimum pension liability      
adjustments and cumulative translation adjustments as of the end of each period.

Comprehensive income and its components, net of tax, are as follows:            

                                                        [Enlarge/Download Table]

                                                     Three Months Ended            Nine Months Ended    
                                                          March 31                     March 31         
                                                 --------------------------     ------------------------
                                                    2005            2004           2005          2004   
                                                    ----            ----           ----          ----   
                                                                      (Unaudited)                       
                                                                     (In millions)                      
                                                                                                        
Net earnings                                     $    106.2      $     98.3     $    339.5     $  271.0 
                                                 ----------      ----------     ----------     -------- 
Other comprehensive income (loss):                                                                      
      Net unrealized investment gain                    0.2             0.2            0.2          0.2 
      Net derivative instruments gain (loss)            3.3             4.1           (3.4)         9.4 
      Net minimum pension liability adjustments          --              --             --          0.5 
      Translation adjustments                          (8.2)            2.7           68.1         39.9 
                                                 ----------      ----------     ----------     -------- 
      Other comprehensive income (loss)                (4.7)            7.0           64.9         50.0 
                                                 ----------      ----------     ----------     -------- 
Comprehensive income                             $    101.5      $    105.3     $    404.4     $  321.0 
                                                 ==========      ==========     ==========     ======== 


The accumulated net gain (loss) on derivative instruments consists of the       
following:                                                                      

                                                        [Enlarge/Download Table]

                                                          Three Months Ended           Nine Months Ended    
                                                               March 31                     March 31        
                                                       -------------------------     -----------------------
                                                          2005          2004            2005         2004   
                                                          ----          ----            ----         ----   
                                                                           (Unaudited)                      
                                                                          (In millions)                     
                                                                                                            
OCI-derivative instruments, beginning of period        $      3.5    $       3.8     $     10.2    $   (1.5)
                                                       ----------    -----------     ----------    -------- 
      Gain (loss) on derivative instruments                   0.2            0.2          (13.6)        0.7 
      Reclassification to earnings of net loss during         4.9            6.0            8.6        14.7 
          the period                                                                                        
      (Provision) benefit for deferred income taxes          (1.8)          (2.1)           1.6        (6.0)
                                                       ----------    -----------     ----------    -------- 
      Net derivative instruments gain (loss)                  3.3            4.1           (3.4)        9.4 
                                                       ----------    -----------     ----------    -------- 
OCI-derivative instruments, end of period              $      6.8    $       7.9     $      6.8    $    7.9 
                                                       ==========    ===========     ==========    ======== 

Of the $6.8 million, net of tax, derivative instrument gain recorded in OCI at  
the end of the current period, $8.9 million, net of tax, related to the gain on 
the settlement of the treasury rate lock agreements upon issuance of the 5.75%  
Senior Notes in September 2003, which will be reclassified to earnings as an    
offset to interest expense over the life of the debt. This was offset by a $2.1 
million loss, net of tax, related to forward and option contracts which the     
Company will reclassify to earnings during the next fifteen months.             

At the end of the prior-year period, the $7.9 million, net of tax, derivative   
instrument gain recorded in OCI included $9.1 million, net of tax, related to   
the gain on the settlement of the treasury rate lock agreements upon issuance of
the 5.75% Senior Notes, which will be reclassified to earnings as an offset to  
interest expense over the life of the debt. This was offset by a $1.2 million   
loss, net of tax, related to forward and option contracts which the Company is  
reclassifying to earnings through the fiscal year ending June 30, 2005.         

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 -- ACQUISITION OF BUSINESS                                               

In July 2004, the Company acquired a majority equity interest in its former     
distributor in Portugal. The aggregate payments made through March 31, 2005 to  
acquire the distributor were funded by cash provided by operations and did not  
have a material effect on the Company's results of operations or financial      
condition. In addition, the Company incurred debt and other long-term           
obligations of 4.6 million Euros associated with the acquisition (approximately 
$5.6 million at acquisition date exchange rates). The debt incurred is payable  
semi-annually through February 2008 at a variable interest rate.                

NOTE 4 -- SEGMENT DATA AND RELATED INFORMATION                                  

Reportable operating segments include components of an enterprise about which   
separate financial information is available that is evaluated regularly by the  
chief operating decision maker (the "Chief Executive") in deciding how to       
allocate resources and in assessing performance. Although the Company does      
business in one operating segment, beauty products, management also evaluates   
performance on a product category basis. Performance is measured based upon net 
sales and operating income. Operating income represents earnings before income  
taxes and net interest expense. The accounting policies for the Company's       
reportable segment are substantially the same as those for the consolidated     
financial statements, as described in the segment data and related information  
footnote included in the Company's Annual Report on Form 10-K for the year ended
June 30, 2004. The assets and liabilities of the Company are managed centrally  
and are reported internally in the same manner as the consolidated financial    
statements; thus, no additional information is produced for the Chief Executive 
or included herein. There has been no significant variance in the total or      
long-lived asset value associated with the Company's segment data since June 30,
2004.                                                                           

                                                        [Enlarge/Download Table]

                                                   Three Months Ended                Nine Months Ended    
                                                        March 31                         March 31         
                                               --------------------------        -------------------------
                                                  2005            2004              2005            2004  
                                                  ----            ----              ----            ----  
                                                                       (Unaudited)                        
                                                                      (In millions)                       
                                                                                                          
SEGMENT DATA                                                                                              
   Net Sales:                                                                                             
      Skin Care                                $    608.2      $    559.1        $  1,749.9      $ 1,594.1
      Makeup                                        628.2           591.0           1,820.1        1,607.1
      Fragrance                                     228.7           203.4             999.0          980.9
      Hair Care                                      67.3            61.3             202.0          179.1
      Other                                           5.8             6.8              21.6           26.1
                                               ----------      ----------        ----------      ---------
                                               $  1,538.2      $  1,421.6        $  4,792.6      $ 4,387.3
                                               ==========      ==========        ==========      =========
   Operating Income:                                                                                      
      Skin Care                                $     89.3      $     96.0        $    275.0      $   253.8
      Makeup                                         90.1            96.1             227.3          206.1
      Fragrance                                      (9.2)          (27.6)             40.3           38.7
      Hair Care                                       5.6             3.3              17.7           16.8
      Other                                           0.6             1.8               1.9            2.9
                                               ----------      ----------        ----------      ---------
                                                    176.4           169.6             562.2          518.3
       Reconciliation:                                                                                    
          Interest expense, net                       3.3             6.9              10.7           21.8
                                               ----------      ----------        ----------      ---------
      Earnings before income taxes, minority                                                              
         interest and discontinued operations  $    173.1      $    162.7        $    551.5      $   496.5
                                               ==========      ==========        ==========      =========

REGIONAL DATA                                                                                             
   Net Sales:                                                                                             
      The Americas                             $    844.6      $    783.1        $  2,610.5      $ 2,439.3
      Europe, the Middle East & Africa              496.2           453.1           1,548.9        1,367.6
      Asia/Pacific                                  197.4           185.4             633.2          580.4
                                               ----------      ----------        ----------      ---------
                                               $  1,538.2      $  1,421.6        $  4,792.6      $ 4,387.3
                                               ==========      ==========        ==========      =========
    Operating Income:                                                                                     
      The Americas                             $    112.5      $    102.8        $    302.8      $   281.3
      Europe, the Middle East & Africa               53.1            57.2             212.4          193.7
      Asia/Pacific                                   10.8             9.6              47.0           43.3
                                               ----------      ----------        ----------      ---------
                                               $    176.4      $    169.6        $    562.2      $   518.3
                                               ==========      ==========        ==========      =========

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION             
AND RESULTS OF OPERATIONS                                       

RESULTS OF OPERATIONS                                                           
---------------------                                                           

We manufacture, market and sell beauty products including those in the skin     
care, makeup, fragrance and hair care categories which are distributed in over  
130 countries and territories. The following is a comparative summary of        
operating results for the three and nine months ended March 31, 2005 and 2004,  
and reflects the basis of presentation described in Note 1 to the consolidated  
financial statements for all periods presented. Sales of products and services  
that do not meet our definition of skin care, makeup, fragrance or hair care    
have been included in the "other" category.                                     

                                                        [Enlarge/Download Table]

                                             Three Months Ended                      Nine Months Ended     
                                                  March 31                               March 31          
                                        ----------------------------            ---------------------------
                                           2005              2004                  2005            2004    
                                           ----              ----                  ----            ----    
                                                                   (In millions)                           
                                                                                                           
Net Sales                                                                                                  
   By Region:                                                                                              
      The Americas                      $     844.6       $    783.1            $  2,610.5     $    2,439.3
      Europe, the Middle East & Africa        496.2            453.1               1,548.9          1,367.6
      Asia/Pacific                            197.4            185.4                 633.2            580.4
                                        -----------       ----------            ----------     ------------
                                        $   1,538.2       $  1,421.6            $  4,792.6     $    4,387.3
                                        ===========       ==========            ==========     ============

   By Product Category:                                                                                    
      Skin Care                         $     608.2       $    559.1            $  1,749.9     $    1,594.1
      Makeup                                  628.2            591.0               1,820.1          1,607.1
      Fragrance                               228.7            203.4                 999.0            980.9
      Hair Care                                67.3             61.3                 202.0            179.1
      Other                                     5.8              6.8                  21.6             26.1
                                        -----------       ----------            ----------     ------------
                                        $   1,538.2       $  1,421.6            $  4,792.6     $    4,387.3
                                        ===========       ==========            ==========     ============
OPERATING INCOME                                                                                           
   By Region:                                                                                              
      The Americas                      $     112.5       $    102.8            $    302.8     $      281.3
      Europe, the Middle East & Africa         53.1             57.2                 212.4            193.7
      Asia/Pacific                             10.8              9.6                  47.0             43.3
                                        -----------       ----------            ----------     ------------
                                        $     176.4       $    169.6            $    562.2     $      518.3
                                        ===========       ==========            ==========     ============

   By Product Category:                                                                                    
      Skin Care                         $      89.3       $     96.0            $    275.0     $      253.8
      Makeup                                   90.1             96.1                 227.3            206.1
      Fragrance                                (9.2)           (27.6)                 40.3             38.7
      Hair Care                                 5.6              3.3                  17.7             16.8
      Other                                     0.6              1.8                   1.9              2.9
                                        -----------       ----------            ----------     ------------
                                        $     176.4       $    169.6            $    562.2     $      518.3
                                        ===========       ==========            ==========     ============

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The following table presents certain consolidated earnings data as a percentage 
of net sales:                                                                   

                                                        [Enlarge/Download Table]

                                                         Three Months Ended        Nine Months Ended     
                                                              March 31                 March 31          
                                                     ------------------------   ------------------------ 
                                                       2005           2004        2005            2004   
                                                       ----           ----        ----            ----   
                                                                                                         
Net sales                                               100.0%          100.0%      100.0%         100.0%
Cost of sales                                            25.1            25.2        26.0           25.9 
                                                     --------       ---------   ---------       -------- 
Gross profit                                             74.9            74.8        74.0           74.1 
                                                     --------       ---------   ---------       -------- 
Operating expenses:                                                                                      
   Selling, general and administrative                   63.4            62.5        62.3           61.9 
   Related party royalties                                 --             0.4          --            0.4 
                                                     --------       ---------   ---------       -------- 
                                                         63.4            62.9        62.3           62.3 
                                                     --------       ---------   ---------       -------- 

Operating income                                         11.5            11.9        11.7           11.8 
Interest expense, net                                     0.2             0.5         0.2            0.5 
                                                     --------       ---------   ---------       -------- 
Earnings before income taxes, minority interest and                                                      
    discontinued operations                              11.3            11.4        11.5           11.3 

Provision for income taxes                                4.2             4.3         4.3            4.2 
Minority interest, net of tax                            (0.2)           (0.1)       (0.1)          (0.2)
                                                     --------       ---------   ---------       -------- 
Net earnings from continuing operations                   6.9             7.0         7.1            6.9 
Discontinued operations, net of tax                        --            (0.1)         --           (0.7)
                                                     --------       ---------   ---------       -------- 
Net earnings                                              6.9%            6.9%        7.1%           6.2%
                                                     ========       =========   =========       ======== 

Third Quarter Fiscal 2005 as Compared with Third Quarter Fiscal 2004            

NET SALES                                                                       

Net sales increased 8% or $116.6 million to $1,538.2 million due to growth in   
all major product categories and geographic regions. Product category increases 
were led by strong fragrance sales in the Americas as well as increased global  
sales of makeup and skin care products. In each case, the increases reflected   
new and recent product launches. Excluding the impact of foreign currency       
translation, net sales increased 6%.                                            

PRODUCT CATEGORIES                                                              
In order to meet the demands of consumers, we continually introduce new         
products, support new and established products through advertising, sampling and
merchandising and phase out existing products that no longer meet the needs of  
our consumers. The economics of developing, producing and launching these new   
products influence our sales and operating performance each period.             

SKIN CARE                                                                       
Net sales of skin care products increased 9% or $49.1 million to $608.2 million,
led by new and recently launched products. Increases amounting to approximately 
$60 million were attributable to Superdefense Triple Action Moisturizers SPF 25 
by Clinique, certain new launches in the Perfectionist and Re-Nutriv lines of   
products and Future Perfect Anti-Wrinkle Radiance Creme SPF 15 by Estee Lauder  
and The Lifting Face Serum & The Lifting Intensifier by La Mer. Partially       
offsetting these increases was a decrease of approximately $17 million in sales 
of Hydra Complete Multi-Level Moisture Creme, Perfectionist Correcting Serum for
Lines/Wrinkles and Body Performance Anti-cellulite Visible Contouring Serum by  
Estee Lauder. Excluding the impact of foreign currency translation, skin care   
net sales increased 6%.                                                         

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MAKEUP                                                                          
Makeup net sales increased 6% or $37.2 million to $628.2 million. Increases of  
approximately $41 million were attributable to the recent launches of Tender    
Blush, Ideal Matte Refinishing Makeup SPF 12 and AeroMatte Ultralucent Pressed  
Powder by Estee Lauder, Superbalanced Compact Makeup SPF 20 and Colour Surge Eye
Shadow from Clinique and the current period inclusion of sales from American    
Beauty and Flirt!, which are the two BeautyBank brands with makeup lines. Strong
sales from M.A.C.'s Small Eye Shadow, Lustreglass and Studio Fix products also  
contributed approximately $15 million to the increase. Partially offsetting     
these increases was a decrease of approximately $25 million of sales of the High
Impact Mascara and High Impact Eye Shadow collections and Perfectly Real Makeup 
from Clinique and Electric Intense LipCreme and Pure Colour Eye Shadow by Estee 
Lauder. Excluding the impact of foreign currency translation, makeup net sales  
increased 5%.                                                                   

FRAGRANCE                                                                       
Net sales of fragrance products increased 12% or $25.3 million to $228.7        
million, primarily due to the recent launches of DKNY Be Delicious and Be       
Delicious Men, True Star from Tommy Hilfiger, Happy To Be from Clinique, Donald 
Trump, The Fragrance and Lauder Beyond Paradise Men from Estee Lauder.          
Collectively, these launches generated sales of approximately $55 million, which
was partially offset by a decrease in sales of approximately $31 million of     
Beyond Paradise from Estee Lauder, Simply from Clinique and Tommy Jeans from    
Tommy Hilfiger. Excluding the impact of foreign currency translation, fragrance 
net sales increased 11%.                                                        

HAIR CARE                                                                       
Hair care net sales increased 10% or $6.0 million to $67.3 million. This        
increase was due to sales growth from Aveda and Bumble and bumble products and  
services. Aveda sales increased as a result of ongoing demand for professional  
color products and the recent introduction of Air Control and Pure Abundance    
hair care products. Bumble and bumble benefited from increases in sales from its
hair and scalp treatment line and new points of distribution. Excluding the     
impact of foreign currency translation, hair care net sales increased 9%.       

The introduction of new products may have some cannibalizing effect on sales of 
existing products, which we take into account in our business planning.         

GEOGRAPHIC REGIONS                                                              
Net sales in the Americas increased 8% or $61.5 million to $844.6 million. This 
increase was due to net sales from new and recently launched fragrance products,
the current-period inclusion of net sales of BeautyBank products, an overall    
increase in sales from our makeup artist lines and higher net sales in Canada.  

In Europe, the Middle East & Africa, net sales increased 10% or $43.1 million to
$496.2 million, primarily reflecting higher net sales in our travel retail      
business, Spain, the United Kingdom, Russia, South Africa and Benelux of        
approximately $42 million, collectively. Partially offsetting these increases   
were lower sales in France and Italy of approximately $5 million, combined. On a
local currency basis, net sales in Europe, the Middle East & Africa increased   
6%.                                                                             

Net sales in Asia/Pacific increased 6% or $12.0 million to $197.4 million. This 
increase reflected higher net sales of approximately $16 million in China,      
Korea, Hong Kong and Australia, partially offset by decreases in Japan and      
Taiwan of approximately $5 million. Excluding the impact of foreign currency    
translation, Asia/Pacific net sales increased 2%.                               

We strategically stagger our new product launches by geographic market, which   
may account for differences in regional sales growth.                           

COST OF SALES                                                                   

Cost of sales as a percentage of total net sales decreased to 25.1% as compared 
with 25.2% in the prior-year quarter. Cost of sales as a percentage of net sales
reflected favorable net changes in production and supply chain efforts of       
approximately 50 basis points, primarily driven by favorable material sourcing. 
These net changes were partially offset by an increase in obsolescence charges  
proportionate to the change in inventory levels of approximately 30 basis       
points.                                                                         

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Since certain promotional activities are a component of sales or cost of sales  
and the timing and level of promotions vary with our promotional calendar, we   
have experienced, and expect to continue to experience, fluctuations in the cost
of sales percentage. In addition, future cost of sales mix may be impacted by   
the inclusion of new brands which have margin and product cost structures       
different from those of our existing brands.                                    

OPERATING EXPENSES                                                              

Operating expenses increased to 63.4% of net sales as compared with 62.9% of net
sales in the prior-year quarter. Contributing to this increase were our planned 
levels of spending due to launch activity, as well as a slight shift in our     
business activity to the third quarter from the fourth quarter resulting from   
the early Easter holiday. These increases were partially offset by our ongoing  
cost containment efforts to maintain expenses in line with our business needs.  
Additionally, in the prior-year quarter, we experienced a greater increase in   
net sales which contributed favorably to that period's operating expense margin.
The collective increase in operating expense margin of approximately 90 basis   
points was partially offset by the benefit of approximately 40 basis points from
the elimination of royalty payments made to Mrs. Estee Lauder. We will continue 
to realize a period-to-period benefit from the elimination of these royalty     
payments, which ceased to accrue in April 2004.                                 

Changes in advertising, sampling and merchandising spending result from the     
type, timing and level of activities related to product launches and rollouts,  
as well as the markets being emphasized.                                        

OPERATING RESULTS                                                               

Based on the growth of net sales and the decrease in our cost of sales, offset  
by the increase in our operating expense margin as previously discussed,        
operating income increased 4% or $6.8 million to $176.4 million as compared with
the prior-year quarter. Operating margins were 11.5% of net sales in the        
current-year quarter as compared with 11.9% in the prior-year quarter.          

PRODUCT CATEGORIES                                                              
Operating results improved 67% or $18.4 million in fragrance reflecting net     
sales from new and recently launched products as well as the strategic          
redeployment of advertising, merchandising and sampling to new and recently     
launched products in our skin care and makeup categories. Accordingly, operating
income decreased 7% or $6.7 million in skin care and 6% or $6.0 million in      
makeup. To a lesser extent, these decreases also include a shift from the second
quarter into the third quarter of costs related to certain gift-with-purchase   
programs. Hair care operating income increased 70% or $2.3 million reflecting   
improved results internationally, partially offset by an increase in operating  
expenses related to the growth of our business in the United States.            

GEOGRAPHIC REGIONS                                                              
Operating income in the Americas increased 9% or $9.7 million to $112.5 million,
primarily reflecting an improved performance in our fragrance product category, 
partially offset by lower results in our makeup and skin care product categories
reflecting our emphasis on advertising and promotional spending behind new and  
recently launched products.                                                     

In Europe, the Middle East & Africa, operating income decreased 7% or $4.1      
million to $53.1 million primarily due to lower results in the United Kingdom,  
France and Italy of approximately $8 million, collectively. Improved results in 
Spain and South Africa of approximately $6 million partially offset those       
decreases.                                                                      

In Asia/Pacific, operating income increased 13% or $1.2 million to $10.8        
million. This increase reflects higher results of approximately $6 million in   
Korea, Thailand, Australia and Taiwan, partially offset by lower results from   
Japan and Hong Kong of approximately $5 million.                                

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INTEREST EXPENSE, NET                                                           

Net interest expense was $3.3 million as compared with $6.9 million in the      
prior-year period. The decrease in net interest expense was due primarily to a  
$4.0 million decrease in preferred stock dividends as a result of the redemption
of $291.6 million aggregate principal amount of the 2015 Preferred Stock on June
10, 2004 and the reduction in the dividend rate on the remaining $68.4 million  
of the 2015 Preferred Stock.                                                    

PROVISION FOR INCOME TAXES                                                      

The provision for income taxes represents Federal, foreign, state and local     
income taxes. The effective rate for income taxes for the three months ended    
March 31, 2005 and 2004 was 37.4%. The effective rate differs from statutory    
rates due to the effect of state and local taxes, tax rates in foreign          
jurisdictions and certain nondeductible expenses. While there was no change in  
the overall effective rate between the two periods, the effective tax rate for  
the three months ended March 31, 2005 included an extra 100 basis points        
attributable to the anticipated full-year mix of global earnings, which was     
offset by the reduction in the amount of nondeductible preferred stock dividends
of approximately 100 basis points.                                              

The American Jobs Creation Act of 2004 ("AJCA") was enacted in October 2004. It 
includes a special one-time dividends received deduction on the repatriation of 
certain foreign earnings to a U.S. taxpayer (the "repatriation provision"),     
provided certain criteria are met. We are investigating the repatriation        
provision to determine whether we might repatriate extraordinary dividends, as  
defined in the AJCA, of up to $500 million during fiscal 2005 or fiscal 2006. We
are currently evaluating all available U.S. Treasury guidance, as well as       
awaiting anticipated further guidance. We expect to complete this evaluation    
within a reasonable amount of time after additional guidance is published. We   
estimate the potential income tax effect of any such repatriation would be to   
record a tax liability based on the effective 5.25% rate provided by the AJCA.  
While it is anticipated that this liability will increase the overall effective 
rate for income taxes, the actual tax rate impact will only become determinable 
once further technical guidance has been issued.                                

DISCONTINUED OPERATIONS                                                         

In February 2004, we sold the assets and operations of our reporting unit that  
sold jane brand products. During the prior-year quarter, we recorded a loss of  
$1.8 million, net of tax, which represented additional costs associated with the
sale and discontinuation of the business.                                       

Nine Months Fiscal 2005 as Compared with Nine Months Fiscal 2004                

NET SALES                                                                       

Net sales increased 9% or $405.3 million to $4,792.6 million reflecting growth  
in all major product categories, led by makeup and skin care, and growth in all 
geographic regions, led by Europe, the Middle East & Africa. Excluding the      
impact of foreign currency translation, net sales increased 6%.                 

PRODUCT CATEGORIES                                                              
In order to meet the demands of consumers, we continually introduce new         
products, support new and established products through advertising, sampling and
merchandising and phase out existing products that no longer meet the needs of  
our consumers. The economics of developing, producing and launching these new   
products influence our sales and operating performance each period.             

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SKIN CARE                                                                       
Net sales of skin care products increased 10% or $155.8 million to $1,749.9     
million. Approximately $121 million of this increase in sales was related to the
introduction of Future Perfect Anti-Wrinkle Radiance Creme SPF 15 and new       
launches in the Perfectionist and Re-Nutriv product lines by Estee Lauder, new  
launches of Superdefense Triple Action Moisturizers SPF 25 and certain          
Repairwear products by Clinique and to the introduction of certain BeautyBank   
brands. Strong sales of The Lifting Face Serum & The Lifting Intensifier by La  
Mer and products in Clinique's 3-Step Skin Care System contributed approximately
$25 million to the sales increase, combined. Partially offsetting these         
increases was a decrease of approximately $30 million in sales of Idealist      
Micro-D Deep Thermal Refinisher, the LightSource line of products and           
Perfectionist Correcting Serum for Lines/Wrinkles by Estee Lauder. Excluding the
impact of foreign currency translation, skin care net sales increased 7%.       

MAKEUP                                                                          
Makeup net sales increased 13% or $213.0 million to $1,820.1 million, partially 
due to strong net sales of our makeup artist lines, which accounted for         
approximately $114 million of the increase. Our makeup artist lines benefited   
from new points of distribution both domestically and internationally and the   
success of recent product launches. In addition, approximately $106 million of  
the increase in sales was attributable to the recent launches of Superbalanced  
Compact Makeup SPF 20, Colour Surge Eye Shadow, Colour Surge Soft Shimmer and   
the Colour Surge Lip Lacquer line of products from Clinique, Tender Blush,      
AeroMatte Ultralucent Pressed Powder, Pure Color Eyeliner and Pure Color Lip    
Tint by Estee Lauder and the current period inclusion of net sales from American
Beauty and Flirt!, which are the two BeautyBank brands with makeup lines. Also  
contributing to sales growth were increased sales of Lash XL Maximum Length     
Mascara and Pure Pops Brush-on Color by Estee Lauder and Perfectly Real Makeup  
and Colour Surge Bare Brilliance from Clinique of approximately $38 million,    
collectively. Partially offsetting these increases was a decrease of            
approximately $42 million of sales of the Glosswear line of products and the    
High Impact Mascara and High Impact Eye Shadow collections by Clinique as well  
as Pure Color Lip Vinyl and Ideal Matte Refinishing Makeup SPF 8 by Estee       
Lauder. Excluding the impact of foreign currency translation, makeup net sales  
increased 11%.                                                                  

FRAGRANCE                                                                       
Net sales of fragrance products increased 2% or $18.1 million to $999.0 million.
The increase is due to approximately $138 million in sales generated by the     
recent launches of True Star from Tommy Hilfiger, DKNY Be Delicious and Be      
Delicious Men, Lauder Beyond Paradise Men from Estee Lauder, Happy To Be from   
Clinique and Donald Trump, the Fragrance. Partially offsetting the new product  
sales were decreases in sales of approximately $74 million of Aramis Life, Estee
Lauder Beyond Paradise and Clinique Simply, which were launched in the          
prior-year period, and decreases in sales of approximately $50 million of Tommy,
Tommy Jeans and Tommy Girl products from Tommy Hilfiger and Lauder Intuition Men
from Estee Lauder. Excluding the impact of foreign currency translation,        
fragrance net sales decreased 1%.                                               

HAIR CARE                                                                       
Hair care net sales increased 13% to $202.0 million. This $22.9 million increase
was due to sales growth from Aveda and Bumble and bumble products. Aveda net    
sales increased as a result of sales of new professional color products and the 
introduction of Air Control and Pure Abundance hair care products, while Bumble 
and bumble benefited from recent launches in its hair and scalp treatment line  
of products and the addition of new points of distribution. Excluding the impact
of foreign currency translation, hair care net sales increased 12%.             

The introduction of new products may have some cannibalizing effect on sales of 
existing products, which we take into account in our business planning.         

GEOGRAPHIC REGIONS                                                              
Net sales in the Americas increased 7% or $171.2 million to $2,610.5 million.   
Our makeup artist brands in North America contributed approximately $65 million 
to the increase. In addition, higher net sales in Canada, higher sales from our 
hair care brands and the inclusion of BeautyBank products contributed           
approximately $75 million, collectively.                                        

In Europe, the Middle East & Africa, net sales increased 13% or $181.3 million  
to $1,548.9 million primarily due to higher net sales in the United Kingdom, our
travel retail business, Spain, South Africa, Germany and Portugal of            
approximately $138 million, collectively. We also benefited from the effect of  
favorable foreign currency exchange rates to the U.S. dollar. Excluding the     
impact of foreign currency translation, net sales in Europe, the Middle East &  
Africa increased 7%.                                                            

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Net sales in Asia/Pacific increased 9% or $52.8 million to $633.2 million. This 
increase reflected higher net sales of approximately $44 million in China, Hong 
Kong, Australia and Taiwan, partially offset by lower sales in Japan of         
approximately $1 million. Excluding the impact of foreign currency translation, 
Asia/Pacific net sales increased 5%.                                            

We strategically stagger our new product launches by geographic market, which   
may account for differences in regional sales growth.                           

COST OF SALES                                                                   

Cost of sales as a percentage of total net sales increased to 26.0% from 25.9%  
reflecting unfavorable changes in exchange rates of approximately 10 basis      
points and the net change in the mix of our business within our geographic      
regions and product categories, as discussed above, of approximately 30 basis   
points. Partially offsetting these changes were favorable net changes in        
production and supply chain efforts of approximately 30 basis points, primarily 
driven by favorable material sourcing.                                          

The higher price of oil is beginning to impact our cost of raw materials and    
componentry, however, we believe this will not have a material adverse effect on
our cost of sales margin in the near future.                                    

Since certain promotional activities are a component of sales or cost of sales  
and the timing and level of promotions vary with our promotional calendar, we   
have experienced, and expect to continue to experience, fluctuations in the cost
of sales percentage. In addition, future cost of sales mix may be impacted by   
the inclusion of new brands which have margin and product cost structures       
different from those of our existing brands.                                    

OPERATING EXPENSES                                                              

Operating expenses as a percentage of net sales were 62.3% and remained         
unchanged compared with the prior year. Our planned increase in advertising,    
merchandising and sampling for spring launches over the prior year of           
approximately 90 basis points was partially offset by our ongoing cost          
containment efforts to maintain expenses in line with our business needs of     
approximately 50 basis points. We also realized a benefit of approximately 40   
basis points from the elimination of royalty payments made to Mrs. Estee Lauder.
We will continue to realize a period-to-period benefit from the elimination of  
these royalty payments, which ceased to accrue in April 2004.                   

Changes in advertising, sampling and merchandising spending result from the     
type, timing and level of activities related to product launches and rollouts,  
as well as the markets being emphasized.                                        

OPERATING RESULTS                                                               

Based on the growth of net sales, increase in our cost of sales margin and our  
constant operating expense margin as previously discussed, operating income     
increased 9% or $43.9 million to $562.2 million as compared with the prior-year 
period. Operating margins were 11.7% of net sales in the current period as      
compared with 11.8% in the prior-year period.                                   

PRODUCT CATEGORIES                                                              
Operating income increased 10% or $21.2 million in makeup and 8% or $21.2       
million in skin care reflecting overall sales growth and sales of recently      
launched products. Operating results also increased 4% or $1.6 million in       
fragrance reflecting sales growth resulting from new and recently launched      
products. While we experienced significantly improved results in the fiscal 2005
third quarter due to these new launches, the fragrance business in the Americas 
continues to be soft. Hair care operating results increased 5% or $0.9 million  
reflecting the growth in net sales as previously discussed, partially offset by 
an increase in operating expenses related to the growth of our business in the  
United States.                                                                  

GEOGRAPHIC REGIONS                                                              
Operating income in the Americas increased 8% or $21.5 million to $302.8        
million. The current-period increase reflects strong sales in all of our product
categories due to new and recently launched products as well as continued growth
from our makeup artist brands.                                                  

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In Europe, the Middle East & Africa, operating income increased 10% or $18.7    
million to $212.4 million primarily due to improved results from the United     
Kingdom, South Africa, Spain and Switzerland of approximately $21 million,      
collectively, partially offset by lower results in Russia of approximately $3   
million.                                                                        

In Asia/Pacific, operating income increased 9% or $3.7 million to $47.0 million.
This increase reflects improved results in Taiwan, Australia, Hong Kong and     
Thailand of approximately $10 million, collectively, partially offset by a      
decrease in operating income in China, where we continue to invest in new brand 
expansion and business opportunities, and in Japan of approximately $8 million, 
collectively.                                                                   

INTEREST EXPENSE, NET                                                           

Net interest expense was $10.7 million as compared with $21.8 million in the    
prior-year period. The decrease in net interest expense was due primarily to a  
$13.8 million decrease in preferred stock dividends as a result of the          
redemption of $291.6 million aggregate principal amount of the 2015 Preferred   
Stock on June 10, 2004 and the reduction in the dividend rate on the remaining  
$68.4 million of the 2015 Preferred Stock. This improvement was partially offset
by an increase in interest expense as a result of higher debt balances and, to a
lesser extent, higher interest rates.                                           

PROVISION FOR INCOME TAXES                                                      

The provision for income taxes represents Federal, foreign, state and local     
income taxes. The effective rate for income taxes for the nine months ended     
March 31, 2005 and 2004 was 37.4%. The effective rate differs from statutory    
rates due to the effect of state and local taxes, tax rates in foreign          
jurisdictions and certain nondeductible expenses. While there was no change in  
the overall effective rate between the two periods, the effective tax rate for  
the nine months ended March 31, 2005 included an extra 100 basis points         
attributable to the anticipated full-year mix of global earnings, which was     
offset by the reduction in the amount of nondeductible preferred stock dividends
of approximately 100 basis points.                                              

The AJCA was enacted in October 2004. It includes a special one-time dividends  
received deduction on the repatriation of certain foreign earnings to a U.S.    
taxpayer (the "repatriation provision"), provided certain criteria are met. We  
are investigating the repatriation provision to determine whether we might      
repatriate extraordinary dividends, as defined in the AJCA, of up to $500       
million during fiscal 2005 or fiscal 2006. We are currently evaluating all      
available U.S. Treasury guidance, as well as awaiting anticipated further       
guidance. We expect to complete this evaluation within a reasonable amount of   
time after additional guidance is published. We estimate the potential income   
tax effect of any such repatriation would be to record a tax liability based on 
the effective 5.25% rate provided by the AJCA. While it is anticipated that this
liability will increase the overall effective rate for income taxes, the actual 
tax rate impact will become determinable once further technical guidance has    
been issued.                                                                    

DISCONTINUED OPERATIONS                                                         

In February 2004, we sold the assets and operations of our reporting unit that  
sold jane brand products. Prior to the sale of the business, we committed, in   
December 2003, to a plan to sell such assets and operations. At the time such   
decisions were made, circumstances warranted that we conduct an assessment of   
the tangible and intangible assets of this business. Based on this assessment,  
we determined that the carrying amount of these assets as reflected on our      
consolidated balance sheets exceeded their estimated fair value. Accordingly, we
recorded an after-tax charge to discontinued operations of $33.1 million for the
nine months ended March 31, 2004. The charge represents the impairment of       
goodwill in the amount of $26.4 million, the reduction in value of other        
tangible assets of $1.3 million, net of tax, and the operating loss of $5.4     
million, net of tax, for the nine month period ended March 31, 2004. Included in
the operating loss of the period were additional costs associated with the sale 
and discontinuation of the business.                                            

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FINANCIAL CONDITION                                                             
-------------------                                                             

LIQUIDITY AND CAPITAL RESOURCES                                                 

Our principal sources of funds historically have been cash flows from operations
and borrowings under our commercial paper program, borrowings from the issuance 
of long-term debt and committed and uncommitted credit lines provided by banks  
in the United States and abroad. At March 31, 2005, we had cash and cash        
equivalents of $518.0 million compared with $611.6 million at June 30, 2004.    

At March 31, 2005, our outstanding borrowings of $555.6 million included: (i)   
$238.4 million of 6% Senior Notes due January 2012 consisting of $250.0 million 
principal, unamortized debt discount of $0.8 million and a $10.8 million        
adjustment to reflect the fair value of an outstanding interest rate swap; (ii) 
$197.3 million of 5.75% Senior Notes due October 2033 consisting of $200.0      
million principal and unamortized debt discount of $2.7 million; (iii) $68.4    
million of 2015 Preferred Stock, which shares have a mandatory redemption date  
of June 30, 2015; (iv) a 3.0 billion Japanese yen term loan (approximately $28.5
million at the exchange rate at March 31, 2005), which is due in March 2006; (v)
a 1.8 million Euro note (approximately $2.4 million at the exchange rate at     
March 31, 2005) payable semi-annually through February 2008 at a variable       
interest rate; (vi) $6.9 million of capital lease obligations; and (vii) $13.7  
million of other short-term borrowings.                                         

We have a $750.0 million commercial paper program under which we may issue      
commercial paper in the United States. Our commercial paper is currently rated  
A-1 by Standard & Poor's and P-1 by Moody's. Our long-term credit ratings are A+
with a stable outlook by Standard & Poor's and A1 with a stable outlook by      
Moody's. At March 31, 2005, we had no commercial paper outstanding. We also have
an effective shelf registration statement covering the potential issuance of up 
to an additional $300.0 million in debt securities. As of March 31, 2005, we had
an unused $400.0 million revolving credit facility, expiring on June 28, 2006,  
and $146.1 million in additional uncommitted credit facilities, of which $13.7  
million was used.                                                               

Our business is seasonal in nature and, accordingly, our working capital needs  
vary. From time to time, we may enter into investing and financing transactions 
that require additional funding. To the extent that these needs exceed cash from
operations, we could, subject to market conditions, issue commercial paper,     
issue long-term debt securities or borrow under the revolving credit facility.  

Total debt as a percent of total capitalization was 23% at March 31, 2005 and   
24% at June 30, 2004.                                                           

The effects of inflation have not been significant to our overall operating     
results in recent years. Generally, we have been able to introduce new products 
at higher selling prices or increase selling prices sufficiently to offset cost 
increases, which have been moderate.                                            

We believe that cash on hand, cash generated from operations, available credit  
lines and access to credit markets will be adequate to support currently planned
business operations and capital expenditures on both a near-term and long-term  
basis.                                                                          

CASH FLOWS                                                                      
Net cash provided by operating activities from continuing operations was $287.4 
million during the nine months ended March 31, 2005 as compared with $550.7     
million in the prior-year period. The reduction in cash flows provided by       
operating activities primarily reflected changes in other accrued liabilities,  
inventory and accounts receivable, net. The change in other accrued liabilities 
reflects significant deferred compensation and supplemental pension payments    
made to retired executives. The increase in inventory was primarily due to      
actual and anticipated sales levels, the building of safety stock in our new    
distribution center in Europe and, to a lesser extent, the inclusion of new     
points of distribution such as BeautyBank and new affiliate activities.         
Increased accounts receivable levels reflect overall sales growth in the current
period and the timing of our receipt of customer payments, which occurred in the
beginning of the fiscal 2005 fourth quarter. These reductions in cash flows     
provided by operating activities as compared with the prior-year period were    
partially offset by increased net earnings.                                     

Net cash used for investing activities was $161.4 million during the nine months
ended March 31, 2005 compared with $131.9 million in the prior-year period. For 
both periods the use of cash primarily reflected capital expenditures, which    
were higher during the current period.                                          

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Net cash used for financing activities was $228.4 million during the nine months
ended March 31, 2005 compared to net cash provided by financing activities of   
$80.5 million in the prior-year period. This change from the prior-year period  
primarily reflected an increase in the acquisition of treasury stock and an     
increase in the annual common stock dividend paid to stockholders, partially    
offset by an increase in proceeds from the exercise of employee stock options.  
Additionally, $210.5 million of proceeds were received in the prior-year period 
from transactions associated with the issuance of long-term debt.               

DIVIDENDS                                                                       
On November 3, 2004, the Board of Directors declared an annual dividend of $.40 
per share, or $90.1 million, on our Class A and Class B Common Stock, which was 
paid on December 28, 2004 to stockholders of record at the close of business on 
December 10, 2004. On November 5, 2003, the Board of Directors declared an      
annual dividend of $.30 per share on our Class A and Class B Common Stock, which
was paid on January 6, 2004 to stockholders of record at the close of business  
on December 16, 2003. Dividends declared on the cumulative redeemable preferred 
stock were $0.6 million and $14.4 million for the nine months ended March 31,   
2005 and 2004, respectively. The preferred stock dividends have been            
characterized as interest expense in the accompanying consolidated statements of
earnings for the nine months ended March 31, 2005 and 2004.                     

SHARE REPURCHASE PROGRAM                                                        
We are authorized by the Board of Directors to repurchase up to 28.0 million    
shares of Class A Common Stock in the open market or in privately negotiated    
transactions, depending on market conditions and other factors. As of March 31, 
2005, the cumulative total of acquired shares pursuant to the authorization was 
21.6 million, reducing the remaining authorized share repurchase balance to 6.4 
million. During the first nine months of fiscal 2005, we purchased approximately
4.9 million shares for $217.1 million as outlined in the following table:       

                                                        [Enlarge/Download Table]
                                                                                                                         

                                                                      Total Number of Shares        Maximum Number of    
                                                                       Purchased as Part of      Shares that May Yet Be  
                      Total Number of Shares    Average Price Paid      Publicly Announced         Purchased Under the   
             Period          Purchased              Per Share               Program(1)                   Program         
--------------------  -----------------------  ---------------------  -------------------------  ------------------------
          July 2004                         -                     -                          -          11,327,900       
        August 2004                 1,275,700                $43.03                  1,275,700          10,052,200       
     September 2004                   750,000                 44.61                    750,000           9,302,200       
       October 2004                         -                     -                          -           9,302,200       
      November 2004                 2,222,300                 44.71                  2,222,300           7,079,900       
      December 2004                                               -                                      7,079,900       
       January 2005                         -                     -                          -           7,079,900       
      February 2005                   675,000                 43.58                    675,000           6,404,900       
         March 2005                         -                     -                          -           6,404,900       
                      -----------------------                         -------------------------                          
       Year-to-date                 4,923,000                 44.11                  4,923,000                           
                      =======================                         =========================                          

(1)  The publicly announced repurchase program was last increased by 10.0       
     million shares on May 11, 2004. The initial program covering the repurchase
     of 8.0 million shares was announced in September 1998 and increased by 10.0
million shares on October 30, 2002.                                   

COMMITMENTS AND CONTINGENCIES                                                   
There have been no significant changes to our commitments and contingencies as  
discussed in our Annual Report on Form 10-K for the year ended June 30, 2004.   

CONTRACTUAL OBLIGATIONS                                                         
There have been no significant changes to our contractual obligations as        
discussed in our Annual Report on Form 10-K for the year ended June 30, 2004.   

BUSINESS ACQUISITIONS                                                           
In July 2004, we acquired a majority equity interest in our former distributor  
in Portugal. The aggregate payments made through March 31, 2005 to acquire the  
distributor were funded by cash provided by operations and did not have a       
material effect on our results of operations or financial condition. In         
addition, we incurred debt and other long-term obligations of 4.6 million Euros 
associated with the acquisition (approximately $5.6 million at acquisition date 
exchange rates). The debt incurred is payable semi-annually through February    
2008 at a variable interest rate.                                               

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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES                         
There have been no significant changes to our derivative financial instruments  
and hedging activities as discussed in our Annual Report on Form 10-K for the   
year ended June 30, 2004.                                                       

FOREIGN EXCHANGE RISK MANAGEMENT                                                
We enter into forward exchange contracts to hedge anticipated transactions as   
well as receivables and payables denominated in foreign currencies for periods  
consistent with our identified exposures. The purpose of the hedging activities 
is to minimize the effect of foreign exchange rate movements on our costs and on
the cash flows that we receive from foreign subsidiaries. Almost all foreign    
currency contracts are denominated in currencies of major industrial countries  
and are with large financial institutions rated as strong investment grade by a 
major rating agency. We also enter into foreign currency options to hedge       
anticipated transactions where there is a high probability that anticipated     
exposures will materialize. The forward exchange contracts and foreign currency 
options entered into to hedge anticipated transactions have been designated as  
cash-flow hedges. As of March 31, 2005, these cash-flow hedges were highly      
effective, in all material respects.                                            

As a matter of policy, we only enter into contracts with counterparties that    
have at least an "A" (or equivalent) credit rating. The counterparties to these 
contracts are major financial institutions. We do not have significant exposure 
to any one counterparty. Our exposure to credit loss in the event of            
nonperformance by any of the counterparties is limited to only the recognized,  
but not realized, gains attributable to the contracts. Management believes risk 
of loss under these hedging contracts is remote and in any event would not be   
material to the consolidated financial results. The contracts have varying      
maturities through the end of June 2006. Costs associated with entering into    
such contracts have not been material to our consolidated financial results. We 
do not utilize derivative financial instruments for trading or speculative      
purposes. At March 31, 2005, we had foreign currency contracts in the form of   
forward exchange contracts and option contracts in the amount of $819.8 million 
and $136.2 million, respectively. The foreign currencies included in forward    
exchange contracts (notional value stated in U.S. dollars) are principally the  
Euro ($177.9 million), Swiss franc ($145.6 million), British pound ($132.7      
million), Canadian dollar ($91.5 million), Australian dollar ($56.4 million) and
Japanese yen ($47.5 million). The foreign currencies included in the option     
contracts (notional value stated in U.S. dollars) are principally the Japanese  
yen ($33.6 million), South Korean won ($26.3 million), Euro ($25.7 million) and 
Swiss franc ($25.3 million).                                                    

INTEREST RATE RISK MANAGEMENT                                                   
We enter into interest rate derivative contracts to manage the exposure to      
fluctuations of interest rates on our funded indebtedness and anticipated       
issuance of debt, as well as cash investments, for periods consistent with the  
identified exposures. All interest rate derivative contracts are with large     
financial institutions rated as strong investment grade by a major rating       
agency.                                                                         

We have an interest rate swap agreement with a notional amount of $250.0 million
to effectively convert fixed interest on the existing $250.0 million 6% Senior  
Notes to variable interest rates based on LIBOR. We designated the swap as a    
fair-value hedge. As of March 31, 2005, the fair-value hedge was highly         
effective, in all material respects.                                            

MARKET RISK                                                                     
Using the value-at-risk model, as discussed in our Annual Report on Form 10-K   
for the fiscal year ended June 30, 2004, our average value-at-risk, calculated  
for the most recent twelve months, is $8.8 million related to our foreign       
exchange contracts. As of March 31, 2005, our average value-at-risk related to  
our interest rate contracts for the twelve month period for which these         
contracts were outstanding was $11.9 million. There have been no significant    
changes in market risk since June 30, 2004 that would have a material effect on 
our calculated value-at-risk exposure, as disclosed in our Annual Report on Form
10-K for the fiscal year ended June 30, 2004.                                   

OFF-BALANCE SHEET ARRANGEMENTS                                                  
We do not maintain any off-balance sheet arrangements, transactions, obligations
or other relationships with unconsolidated entities that would be expected to   
have a material current or future effect upon our financial condition or results
of operations.                                                                  

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CRITICAL ACCOUNTING POLICIES                                                    

As disclosed in our Annual Report on Form 10-K for the fiscal year ended June   
30, 2004, the discussion and analysis of our financial condition and results of 
operations are based upon our consolidated financial statements, which have been
prepared in conformity with U.S. generally accepted accounting principles. The  
preparation of these financial statements requires us to make estimates and     
assumptions that affect the reported amounts of assets, liabilities, revenues   
and expenses reported in those financial statements. These judgments can be     
subjective and complex, and consequently actual results could differ from those 
estimates and assumptions. Our most critical accounting policies relate to      
revenue recognition, concentration of credit risk, inventory, pension and other 
postretirement benefit costs, goodwill and other intangible assets, income taxes
and derivatives. Since June 30, 2004, there have been no changes in our critical
accounting policies and no significant changes to the assumptions and estimates 
related to them.                                                                

RECENTLY ISSUED ACCOUNTING STANDARDS                                            

On December 21, 2004, the Financial Accounting Standards Board ("FASB") issued  
FASB Staff Position No. FAS 109-1, "Application of FASB Statement No. 109,      
Accounting for Income Taxes, to the Tax Deduction on Qualified Production       
Activities Provided by the American Jobs Creation Act of 2004" ("FSP No.        
109-1"), and FASB Staff Position No. FAS 109-2, "Accounting and Disclosure      
Guidance for the Foreign Earnings Repatriation Provision within the American    
Jobs Creation Act of 2004" ("FSP No. 109-2"). These staff positions provide     
accounting guidance on how companies should account for the effects of the      
American Jobs Creation Act of 2004 that was signed into law on October 22, 2004.
FSP No. 109-1 states that the tax relief (special tax deduction for domestic    
manufacturing) from this legislation should be accounted for as a "special      
deduction" instead of a tax rate reduction. The special deduction for domestic  
manufacturing becomes effective for us in the first quarter of fiscal 2006. We  
believe this legislation and the provisions of FSP No. 109-1 will not have a    
significant impact on our effective tax rate. FSP No. 109-2 gives a company     
additional time to evaluate the effects of the legislation on any plan for      
reinvestment or repatriation of foreign earnings for purposes of applying FASB  
Statement No. 109. We are investigating the repatriation provision to determine 
whether it might repatriate extraordinary dividends, as defined in the AJCA, of 
up to $500 million during fiscal 2005 or fiscal 2006. We are currently          
evaluating all available U.S. Treasury guidance, as well as awaiting anticipated
further guidance. We expect to complete this evaluation within a reasonable     
amount of time after additional guidance is published. We estimate the potential
income tax effect of any such repatriation would be to record a tax liability   
based on the effective 5.25% rate provided by the AJCA. While it is anticipated 
that this liability will increase the overall effective rate for income taxes,  
the actual tax rate impact will only become determinable once further technical 
guidance has been issued.                                                       

In December 2004, the FASB issued Statement of Financial Accounting Standard    
("SFAS") No. 123(R), "Share-Based Payment" ("SFAS No. 123(R)"). This statement  
replaces SFAS No. 123, "Accounting for Stock-Based Compensation" and supersedes 
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to     
Employees." SFAS 123(R) requires all stock-based compensation to be recognized  
as an expense in the financial statements and that such cost is measured        
according to the fair value of stock options. SFAS 123(R) will be effective for 
our first quarter of fiscal 2006. While we currently provide the pro forma      
disclosures required by SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure," on a quarterly basis (see "Note 1 - Stock-Based     
Compensation"), we are currently evaluating the impact this statement will have 
on our consolidated financial statements. In March 2005, Staff Accounting       
Bulletin No. 107 ("SAB No. 107") was issued to provide guidance from the        
Securities and Exchange Commission to simplify some of the implementation       
challenges of SFAS No. 123(R) as this statement relates to the valuation of     
share-based payment arrangements for public companies. We will apply the        
principles of SAB No. 107 in conjunction with our adoption of SFAS 123(R).      

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment 
of ARB No. 43, Chapter 4" ("SFAS No. 151"). SFAS No. 151 requires all companies 
to recognize a current-period charge for abnormal amounts of idle facility      
expense, freight, handling costs and wasted materials. This statement also      
requires that the allocation of fixed production overhead to the costs of       
conversion be based on the normal capacity of the production facilities. SFAS   
No. 151 will be effective for fiscal years beginning after June 15, 2005. We    
believe the adoption of this statement will not have a material impact on our   
consolidated financial statements.                                              

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On May 19, 2004, the FASB issued FASB Staff Position No. FAS 106-2, "Accounting 
and Disclosure Requirements Related to the Medicare Prescription Drug,          
Improvement and Modernization Act of 2003" ("FSP No. 106-2"), in response to a  
new law regarding prescription drug benefits under Medicare ("Medicare Part D") 
and a Federal subsidy to sponsors of retiree health care benefit plans that     
provide a benefit that is at least actuarially equivalent to Medicare Part D.   
Currently, SFAS No. 106, "Employers' Accounting for Postretirement Benefits     
Other Than Pensions" ("SFAS No. 106"), requires that changes in relevant law be 
considered in current measurement of postretirement benefit costs. FSP No. 106-2
is effective for financial statements of companies for the first interim or     
annual period beginning after June 15, 2004. We adopted FSP No. 106-2 in the    
first quarter of fiscal 2005 and recognized the impact of the new law under     
Medicare Part D, which was not material to our results of operations, cash flows
or financial condition.                                                         

FORWARD-LOOKING INFORMATION                                                     

We and our representatives from time to time make written or oral               
forward-looking statements, including statements contained in this and other    
filings with the Securities and Exchange Commission, in our press releases and  
in our reports to stockholders. The words and phrases "will likely result,"     
"expect," "believe," "planned," "may," "could," "anticipated," "estimate,"      
"project" or similar expressions are intended to identify "forward-looking      
statements" within the meaning of the Private Securities Litigation Reform Act  
of 1995. These statements include, without limitation, our expectations         
regarding sales, earnings or other future financial performance and liquidity,  
product introductions, entry into new geographic regions, information systems   
initiatives, new methods of sale and future operations or operating results.    
Although we believe that our expectations are based on reasonable assumptions   
within the bounds of our knowledge of our business and operations, actual       
results may differ materially from our expectations. Factors that could cause   
actual results to differ from expectations include, without limitation:         

       (1) increased competitive activity from companies in the skin care,
          makeup, fragrance and hair care businesses, some of which have greater
resources than we do;                                       

        (2) our ability to develop, produce and market new products on which
future operating results may depend;                        

        (3) consolidations, restructurings, bankruptcies and reorganizations
          in the retail industry causing a decrease in the number of stores that
        sell our products, an increase in the ownership concentration within
      the retail industry, ownership of retailers by our competitors and
 ownership of competitors by our customers that are retailers;

       (4) shifts in the preferences of consumers as to where and how they
shop for the types of products and services we sell;        

       (5) social, political and economic risks to our foreign or domestic
        manufacturing, distribution and retail operations, including changes
        in foreign investment and trade policies and regulations of the host
countries and of the United States;                         

          (6) changes in the laws, regulations and policies that affect, or will
        affect, our business, including changes in accounting standards, tax
      laws and regulations, trade rules and customs regulations, and the
          outcome and expense of legal or regulatory proceedings, and any action
we may take as a result;                                    

         (7) foreign currency fluctuations affecting our results of operations
        and the value of our foreign assets, the relative prices at which we
         and our foreign competitors sell products in the same markets and our
   operating and manufacturing costs outside of the United States;

        (8) changes in global or local conditions that could affect consumer
     purchasing, the willingness of consumers to travel, the financial
        strength of our customers or suppliers, our operations, the cost and
 availability of capital, which we may need for new equipment,
          facilities or acquisitions, the cost and availability of raw materials
     and the assumptions underlying our critical accounting estimates;

        (9) shipment delays, depletion of inventory and increased production
costs resulting from disruptions of operations at any of the
facilities which, due to consolidations in our manufacturing
        operations, now manufacture nearly all of our supply of a particular
type of product (i.e., focus factories);                    

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         (10) real estate rates and availability, which may affect our ability
   to increase the number of retail locations at which we sell our
products and the costs associated with our other facilities;

      (11) changes in product mix to products which are less profitable;

(12) our ability to acquire or develop new information and  
    distribution technologies, on a timely basis and within our cost
estimates;                                                  

(13) our ability to capitalize on opportunities for improved
efficiency, such as globalization, and to integrate acquired
businesses and realize value therefrom;                     

          (14) consequences attributable to the events that are currently taking
        place in the Middle East, including further attacks, retaliation and
the threat of further attacks or retaliation; and           

          (15) the impact of repatriating, or planning to repatriate, certain of
    our foreign earnings to the United States in connection with The
American Jobs Creation Act of 2004.                         

We assume no responsibility to update forward-looking statements made herein or 
otherwise.                                                                      

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.             

The information required by this item is set forth in Item 2 of this Quarterly  
Report on Form 10-Q under the caption "Liquidity and Capital Resources - Market 
Risk" and is incorporated herein by reference.                                  

ITEM 4. CONTROLS AND PROCEDURES.                                                

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and       
15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange  
Act")) are designed to ensure that information required to be disclosed in the  
reports that we file or submit under the Exchange Act is recorded, processed,   
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. The Chief Executive Officer and the  
Chief Financial Officer, with assistance from other members of management, have 
reviewed the effectiveness of our disclosure controls and procedures as of March
31, 2005 and, based on their evaluation, have concluded that the disclosure     
controls and procedures were effective as of such date.                         

There has been no change in our internal control over financial reporting (as   
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred     
during the third quarter of fiscal 2005 that has materially affected, or is     
reasonably likely to materially affect, the Company's internal control over     
financial reporting.                                                            

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.                                                      

We are involved in various routine legal proceedings incident to our business.  
In management's opinion, the outcome of pending legal proceedings, separately   
and in the aggregate, will not have a material adverse effect on our business or
consolidated financial condition.                                               

On March 30, 2005, the United States District Court for the Northern District of
California entered a Final Judgment approving the settlement agreement we       
entered into in July 2003 with the plaintiffs, the other Manufacturer Defendants
(as defined below) and the Department Store Defendants (as defined below) in a  
consolidated class action lawsuit that had been pending in the Superior Court of
the State of California in Marin County since 1998. The time to appeal that     
judgment has not yet expired. Assuming no appeal, the Final Judgment will result
in the plaintiffs' claims being dismissed, with prejudice, in their entirety in 
both the Federal and California actions. There was no finding or admission of   
any wrongdoing by the Company or any other defendant in this lawsuit. We entered
into the settlement agreement solely to avoid protracted and costly litigation. 
In connection with the settlement agreement, the defendants, including the      
Company, will provide consumers with certain free products and pay the          
plaintiffs' attorneys' fees. To meet its obligations under the settlement, the  
Company took a special pre-tax charge of $22.0 million, or $13.5 million after  
tax, equal to $.06 per diluted common share in the fourth quarter of fiscal     
2003. At March 31, 2005, the remaining accrual balance was $21.0 million. The   
charge did not have a material adverse effect on the Company's consolidated     
financial condition. In the Federal action, the plaintiffs, purporting to       
represent a class of all U.S. residents who purchased prestige cosmetics        
products at retail for personal use from eight department stores groups that    
sold such products in the United States (the "Department Store Defendants"),    
alleged that the Department Store Defendants, the Company and eight other       
manufacturers of cosmetics (the "Manufacturer Defendants") conspired to fix and 
maintain retail prices and to limit the supply of prestige cosmetics products   
sold by the Department Store Defendants in violation of state and Federal laws. 
The plaintiffs sought, among other things, treble damages, equitable relief,    
attorneys' fees, interest and costs.                                            

In 1998, the Office of the Attorney General of the State of New York (the       
"State") notified the Company and ten other entities that they are potentially  
responsible parties ("PRPs") with respect to the Blydenburgh landfill in Islip, 
New York. Each PRP may be jointly and severally liable for the costs of         
investigation and cleanup, which the State estimates to be $16 million for all  
the PRPs. In 2001, the State sued other PRPs (including Hickey's Carting, Inc., 
Dennis C. Hickey and Maria Hickey, collectively the "Hickey Parties"), in the   
U.S. District Court for the Eastern District of New York to recover such costs  
in connection with the site, and in September 2002, the Hickey Parties brought  
contribution actions against the Company and other Blydenburgh PRPs. These      
contribution actions seek to recover, among other things, any damages for which 
the Hickey Parties are found liable in the State's lawsuit against them, and    
related costs and expenses, including attorneys' fees. In June 2004, the State  
added the Company and other PRPs as defendants in its pending case against the  
Hickey Parties. The Company and certain other PRPs have engaged in settlement   
discussions which to date have been unsuccessful. The Company has accrued an    
amount which it believes would be necessary to resolve its share of this matter.
If settlement discussions are not successful, then the Company intends to       
vigorously defend the pending claims. While no assurance can be given as to the 
ultimate outcome, management believes that the resolution of the Blydenburgh    
matters will not have a material adverse effect on the Company's consolidated   
financial condition.                                                            

In January 2004, the Portuguese Tax Administration issued a report alleging that
our subsidiary had income subject to tax in Portugal for the three calendar     
years ended December 31, 2002. Our subsidiary has been operating in the Madeira 
Free Trade Zone since 1989 under license from the Madeira Development           
Corporation and, in accordance with such license and the laws of Portugal, the  
Company believes that its income is not subject to Portuguese income tax. In    
February 2004, the subsidiary filed an appeal of the finding in the report to   
the Portuguese Secretary of State for Fiscal Matters. The appeal is still       
pending. On December 20, 2004, the subsidiary received a notice of assessment   
from the Portuguese Tax Administration solely in respect of the calendar year   
ended December 31, 2000. The assessment, which includes interest, amounted to   
approximately 26 million Euros (approximately $34 million at the exchange rate  
at March 31, 2005). At the end of March 2005, the subsidiary filed an opposition
to the assessment. Despite filing the opposition, the Portuguese Tax            
Administration could seek to collect on the assessment, in which case it may be 
necessary for us to provide a form of financial guarantee. While no assurance   
can be given as to the ultimate outcome in respect of the foregoing assessment  
or any additional assessments that may be issued for subsequent periods,        
management believes that the likelihood that the assessment or any future       
assessments ultimately will be upheld is remote.                                

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PART II. OTHER INFORMATION

In December 2004, a plaintiff purporting to represent a nationwide class brought
an action in the Superior Court of California for the County of San Diego. The  
complaint, as amended, names two of our subsidiaries and approximately 25 other 
defendants, including manufacturers and retailers. The plaintiff is seeking     
injunctive relief, restitution, and general, special and punitive damages for   
alleged violations of the California Unfair Competition Law, the California     
False Advertising Law, and for negligent and intentional misrepresentation. The 
purported class includes individuals "who have purchased skin care products from
defendants that have been falsely advertised to have an 'anti-aging' or youth   
inducing benefit or effect." We intend to defend ourselves vigorously. While no 
assurance can be given as to the ultimate outcome, management believes that the 
resolution of this lawsuit will not have a material adverse effect on the       
Company's consolidated financial condition.                                     

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PART II. OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.            

The information required by this item is set forth in Part I Item 2 of this     
Quarterly Report on Form 10-Q under the caption "Liquidity and Capital Resources
- Share Repurchase Program" and is incorporated herein by reference.            

ITEM 6. EXHIBITS.                                                               

Exhibit                                                         
Number                          Description                     
------                          -----------                     

         10.1       Summary of Grant of Additional Target Bonus Opportunities to
               Daniel J. Brestle, Patrick Bousquet-Chavanne and Philip
                Shearer Reflecting Changes in Responsibilities (filed as
                Item 1.01 to the Company's Current Report on Form 8-K on
February 10, 2005). *+                  

  10.2       Employment Agreement with Daniel J. Brestle (filed as
                  Exhibit 10.2 to the Company's Current Report on Form 8-K/A
on February 10, 2005). *+               

31.1       Certification pursuant to Rule 13a-14(a) (CEO).    

31.2       Certification pursuant to Rule 13a-14(a) (CFO).    

   32.1       Certification pursuant to Rule 13a-14(b) and 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
     Sarbanes-Oxley Act of 2002 (CEO). (furnished)

   32.2       Certification pursuant to Rule 13a-14(b) and 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
     Sarbanes-Oxley Act of 2002 (CFO). (furnished)

_________________                                                               

*  Incorporated herein by reference.                                            

+  Exhibit is a management contract or compensatory plan or arrangement.        

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SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the    
undersigned thereunto duly authorized.                                          

                                             THE ESTEE LAUDER COMPANIES INC.

Date:  April 28, 2005                          By:   /s/ RICHARD W. KUNES       
                                                   -----------------------------
                                                Richard W. Kunes
                                                Executive Vice President
                                                 and Chief Financial Officer
                                                (Principal Financial and
                                             Accounting Officer)

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INDEX TO EXHIBITS 

Exhibit                                                         
Number                          Description                     
------                          -----------                     

         10.1       Summary of Grant of Additional Target Bonus Opportunities to
               Daniel J. Brestle, Patrick Bousquet-Chavanne and Philip
                Shearer Reflecting Changes in Responsibilities (filed as
                Item 1.01 to the Company's Current Report on Form 8-K on
February 10, 2005). *+                  

  10.2       Employment Agreement with Daniel J. Brestle (filed as
                  Exhibit 10.2 to the Company's Current Report on Form 8-K/A
on February 10, 2005). *+               

31.1       Certification pursuant to Rule 13a-14(a) (CEO).    

31.2       Certification pursuant to Rule 13a-14(a) (CFO).    

   32.1       Certification pursuant to Rule 13a-14(b) and 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
     Sarbanes-Oxley Act of 2002 (CEO). (furnished)

   32.2       Certification pursuant to Rule 13a-14(b) and 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
     Sarbanes-Oxley Act of 2002 (CFO). (furnished)

_________________                                                               

*  Incorporated herein by reference.                                            

+  Exhibit is a management contract or compensatory plan or arrangement.        

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-Q’ Filing		Date		First		Last			Other Filings
		6/30/15		22
		6/28/06		22
		6/30/05		10		12			10-K,  5,  8-K
		6/15/05		11		25			4,  8-K
Filed as of:		4/29/05
Filed on:		4/28/05		31					8-K
		4/26/05		1					4
For Period End:		3/31/05		1		28			8-K
		3/30/05		28
		2/10/05		30		32			8-K,  8-K/A
		2/7/05		9					4,  8-K
		12/28/04		23					4
		12/21/04		11		25
		12/20/04		28
		12/10/04		23
		11/3/04		23					8-K
		10/22/04		11		25
		8/27/04		7
		6/30/04		4		25			10-K,  10-K/A,  4,  8-K
		6/15/04		11		26
		6/10/04		18		21			4
		5/19/04		11		26			8-K/A
		5/11/04		23					4,  8-K
		3/31/04		2		23			10-Q,  8-K
		1/6/04		23					4,  8-K
		12/16/03		23					4
		11/5/03		23					4,  DEF 14A
		12/31/02		28					10-Q
		10/30/02		23					10-Q,  4,  8-K,  DEF 14A
		12/31/00		28					10-Q,  4
									List all Filings