COVER PAGE
COVER PAGE - shares | 9 Months Ended | |
Mar. 31, 2020 | Apr. 24, 2020 | |
Entity Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 1-14064 | |
Entity Registrant Name | Estée Lauder Companies Inc | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 11-2408943 | |
Entity Address, Address Line One | 767 Fifth Avenue | |
Entity Address, City or Town | New York | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 10153 | |
City Area Code | 212 | |
Local Phone Number | 572-4200 | |
Title of 12(b) Security | Class A Common Stock, $.01 par value | |
Trading Symbol | EL | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Current Fiscal Year End Date | --06-30 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001001250 | |
Amendment Flag | false | |
Common Class A | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 224,763,197 | |
Common Class B | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 135,235,429 |
CONSOLIDATED STATEMENTS OF EARN
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||||
Net sales | $ 3,345 | $ 3,744 | $ 11,864 | $ 11,273 |
Cost of sales | 836 | 819 | 2,785 | 2,552 |
Gross profit | 2,509 | 2,925 | 9,079 | 8,721 |
Operating expenses | ||||
Selling, general and administrative | 2,030 | 2,170 | 6,753 | 6,435 |
Restructuring and other charges | 24 | 29 | 54 | 99 |
Goodwill impairment | 275 | 48 | 786 | 68 |
Impairments of other intangible and long-lived assets | 71 | 4 | 337 | 22 |
Total operating expenses | 2,400 | 2,251 | 7,930 | 6,624 |
Operating income | 109 | 674 | 1,149 | 2,097 |
Interest expense | 42 | 32 | 112 | 101 |
Interest income and investment income, net | 14 | 15 | 41 | 42 |
Other components of net periodic benefit cost | 1 | 1 | 3 | 1 |
Other income, net | 0 | 71 | 576 | 71 |
Earnings before income taxes | 80 | 727 | 1,651 | 2,108 |
Provision for income taxes | 84 | 170 | 496 | 472 |
Net earnings (loss) | (4) | 557 | 1,155 | 1,636 |
Net earnings attributable to noncontrolling interests | (2) | (2) | (9) | (8) |
Net earnings (loss) attributable to The Estée Lauder Companies Inc. | $ (6) | $ 555 | $ 1,146 | $ 1,628 |
Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share | ||||
Basic (in dollars per share) | $ (0.02) | $ 1.53 | $ 3.18 | $ 4.47 |
Diluted (in dollars per share) | $ (0.02) | $ 1.51 | $ 3.12 | $ 4.39 |
Weighted-average common shares outstanding | ||||
Basic (in shares) | 360.2 | 361.9 | 360.6 | 364 |
Diluted (in shares) | 360.2 | 368.3 | 367.1 | 370.9 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings (loss) | $ (4) | $ 557 | $ 1,155 | $ 1,636 |
Other comprehensive income (loss): | ||||
Net unrealized investment gain | 0 | 9 | 0 | 14 |
Net cash flow hedge gain (loss) | 34 | (7) | 10 | 2 |
Amounts included in net periodic benefit cost | 6 | 3 | 16 | 10 |
Translation adjustments | (185) | (72) | (191) | (87) |
Benefit (provision) for deferred income taxes on components of other comprehensive income | 2 | (1) | 15 | (4) |
Total other comprehensive loss | (143) | (68) | (150) | (65) |
Comprehensive income (loss) | (147) | 489 | 1,005 | 1,571 |
Comprehensive income attributable to noncontrolling interests: | ||||
Net earnings | (2) | (2) | (9) | (8) |
Translation adjustments | 0 | 0 | 1 | 1 |
Total comprehensive income (loss) attributable to noncontrolling interests | (2) | (2) | (8) | (7) |
Comprehensive income (loss) attributable to The Estée Lauder Companies Inc. | $ (149) | $ 487 | $ 997 | $ 1,564 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 31, 2020 | Jun. 30, 2019 |
Current assets | ||
Cash and cash equivalents | $ 4,876 | $ 2,987 |
Accounts receivable, net | 1,846 | 1,831 |
Inventory and promotional merchandise | 2,087 | 2,006 |
Prepaid expenses and other current assets | 424 | 388 |
Total current assets | 9,233 | 7,212 |
Property, plant and equipment, net | 2,092 | 2,068 |
Other assets | ||
Operating lease right-of-use assets | 2,446 | |
Goodwill | 1,633 | 1,868 |
Other intangible assets, net | 2,190 | 1,203 |
Other assets | 769 | 805 |
Total other assets | 7,038 | 3,876 |
Total assets | 18,363 | 13,156 |
Current liabilities | ||
Current debt | 1,527 | 516 |
Accounts payable | 1,162 | 1,490 |
Operating lease liabilities | 371 | |
Other accrued liabilities | 2,621 | 2,599 |
Total current liabilities | 5,681 | 4,605 |
Noncurrent liabilities | ||
Long-term debt | 4,674 | 2,896 |
Long-term operating lease liabilities | 2,288 | |
Other noncurrent liabilities | 1,362 | 1,244 |
Total noncurrent liabilities | 8,324 | 4,140 |
Contingencies | ||
Equity | ||
Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at March 31, 2020 and June 30, 2019; shares issued: 451,339,096 at March 31, 2020 and 443,685,124 at June 30, 2019; Class B shares authorized: 304,000,000 at March 31, 2020 and June 30, 2019; shares issued and outstanding: 135,235,429 at March 31, 2020 and 139,537,814 at June 30, 2019 | 6 | 6 |
Paid-in capital | 4,760 | 4,403 |
Retained earnings | 10,595 | 9,984 |
Accumulated other comprehensive loss | (712) | (563) |
Stockholders' equity before treasury stock | 14,649 | 13,830 |
Less: Treasury stock, at cost; 226,588,577 Class A shares at March 31, 2020 and 222,120,630 Class A shares at June 30, 2019 | (10,320) | (9,444) |
Total stockholders’ equity – The Estée Lauder Companies Inc. | 4,329 | 4,386 |
Noncontrolling interests | 29 | 25 |
Total equity | 4,358 | 4,411 |
Total liabilities and equity | $ 18,363 | $ 13,156 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2020 | Jun. 30, 2019 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Treasury stock, shares | 226,588,577 | 222,120,630 |
Common Class A | ||
Common stock, shares authorized | 1,300,000,000 | 1,300,000,000 |
Common stock, shares issued | 451,339,096 | 443,685,124 |
Common Class B | ||
Common stock, shares authorized | 304,000,000 | 304,000,000 |
Common stock, shares issued | 135,235,429 | 139,537,814 |
Common stock, shares outstanding | 135,235,429 | 139,537,814 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities | ||
Net earnings | $ 1,155 | $ 1,636 |
Adjustments to reconcile net earnings to net cash flows from operating activities: | ||
Depreciation and amortization | 447 | 404 |
Deferred income taxes | (65) | (46) |
Non-cash stock-based compensation | 210 | 201 |
Net loss on disposal of property, plant and equipment | 6 | 6 |
Non-cash restructuring and other charges | 19 | 0 |
Pension and post-retirement benefit expense | 62 | 53 |
Pension and post-retirement benefit contributions | (54) | (23) |
Goodwill, other intangible and long-lived asset impairments | 1,123 | 90 |
Changes in fair value of contingent consideration | (9) | (18) |
Gain on liquidation of an investment in a foreign subsidiary, net | 0 | (71) |
Gain on previously held equity method investment | (553) | 0 |
Other non-cash items | (11) | (17) |
Changes in operating assets and liabilities: | ||
Increase in accounts receivable, net | (48) | (377) |
Increase in inventory and promotional merchandise | (41) | (184) |
Increase in other assets, net | (63) | (73) |
Decrease in accounts payable | (317) | (105) |
Increase in other accrued and noncurrent liabilities | 62 | 280 |
Increase in operating lease assets and liabilities, net | 22 | |
Net cash flows provided by operating activities | 1,945 | 1,756 |
Cash flows from investing activities | ||
Capital expenditures | (468) | (441) |
Payments for acquired businesses, net of cash acquired | (1,047) | 0 |
Proceeds from the disposition of investments | 0 | 1,229 |
Purchases of investments | (5) | (14) |
Settlement of net investment hedges | (37) | 0 |
Net cash flows provided by (used for) investing activities | (1,557) | 774 |
Cash flows from financing activities | ||
Proceeds (repayments) of current debt, net | 1,514 | (167) |
Proceeds from issuance of long-term debt, net | 1,783 | 0 |
Debt issuance costs | (14) | 0 |
Repayments and redemptions of long-term debt | (511) | (1) |
Net proceeds from stock-based compensation transactions | 148 | 154 |
Payments to acquire treasury stock | (883) | (1,344) |
Payments of contingent consideration | (3) | 0 |
Dividends paid to stockholders | (502) | (453) |
Payments to noncontrolling interest holders for dividends | (7) | (3) |
Net cash flows provided by (used for) financing activities | 1,525 | (1,814) |
Effect of exchange rate changes on Cash and cash equivalents | (24) | 5 |
Net increase in Cash and cash equivalents | 1,889 | 721 |
Cash and cash equivalents at beginning of period | 2,987 | 2,181 |
Cash and cash equivalents at end of period | $ 4,876 | $ 2,902 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated. The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature 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 full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. Certain amounts in the consolidated financial statements of prior years have been reclassified to conform to current year presentation. COVID-19 Business Update During the third quarter of fiscal 2020, the outbreak and global spread of COVID-19 caused a significant disruption in the Company’s operating environment. Accordingly, the Company modified a number of its business practices, in part due to legislation, executive orders and guidance from government entities and healthcare authorities. These include the temporary closing of businesses deemed “non-essential,” travel bans and restrictions, social distancing and quarantines. The Company will continue to monitor the impact of COVID-19 on its consolidated financial statements. Management Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods. Currency Translation and Transactions All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at weighted-average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as cumulative translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $(173) million and $2 million, net of tax, during the three months ended March 31, 2020 and 2019, respectively, and $(170) million and $(11) million, net of tax, during the nine months ended March 31, 2020 and 2019, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity. In fiscal 2019, the Company had an investment in a foreign subsidiary that owned the Company’s available-for-sale securities. During the three months ended March 31, 2019, the Company sold its available-for-sale securities, which liquidated this investment in the foreign subsidiary. As a result, the Company recorded a realized foreign currency gain on liquidation of $77 million and a gross loss on the sale of available-for-sale securities of $6 million, both of which were reclassified from accumulated OCI (“AOCI”) to Other income, net in the accompanying consolidated statements of earnings (loss). The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. Beginning in the first quarter of fiscal 2020, the Company entered into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 7 – Derivative Financial Instruments for further discussion . The Company categorizes these instruments as entered into for purposes other than trading. The accompanying consolidated statements of earnings (loss) include net exchange gains on foreign currency transactions of $15 million and $73 million during the three months ended March 31, 2020 and 2019, respectively, and $40 million and $52 million during the nine months ended March 31, 2020 and 2019, respectively. Concentration of Credit Risk The Company is a worldwide manufacturer, marketer and distributor of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to department stores, perfumeries, specialty multi-brand retailers and retailers in its travel retail business. The Company grants credit to qualified customers. As a result of COVID-19, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of COVID-19 on its customers' abilities, individually and collectively, to make timely payments. Inventory and Promotional Merchandise Inventory and promotional merchandise consists of: (In millions) March 31 June 30 Raw materials $ 540 $ 541 Work in process 261 268 Finished goods 1,106 981 Promotional merchandise 180 216 $ 2,087 $ 2,006 Property, Plant and Equipment (In millions) March 31 June 30 Assets (Useful Life) Land $ 33 $ 29 Buildings and improvements (10 to 40 years) 385 337 Machinery and equipment (3 to 10 years) 840 811 Computer hardware and software (4 to 10 years) 1,297 1,264 Furniture and fixtures (5 to 10 years) 117 116 Leasehold improvements 2,370 2,274 5,042 4,831 Less accumulated depreciation and amortization (2,950) (2,763) $ 2,092 $ 2,068 The cost of assets related to projects in progress of $509 million and $474 million as of March 31, 2020 and June 30, 2019, respectively, is included in their respective asset categories above. Depreciation and amortization of property, plant and equipment was $131 million and $121 million during the three months ended March 31, 2020 and 2019, respectively, and $383 million and $358 million during the nine months ended March 31, 2020 and 2019, respectively. Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings (loss). Income Taxes The effective rate for income taxes was 105.0% and 23.4% for the three months ended March 31, 2020 and 2019, respectively, and 30.0% and 22.4% for the nine months ended March 31, 2020 and 2019, respectively. The increase in the effective tax rate in both periods was primarily attributable to the impact of nondeductible goodwill impairment charges associated with the Company’s Too Faced, BECCA and Smashbox reporting units, a higher effective tax rate on the Company’s foreign operations and the lower amount of earnings before income taxes, which increases the impact of the nondeductible charges. As of March 31, 2020 and June 30, 2019, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $69 million and $67 million, respectively. The total amount of unrecognized tax benefits at March 31, 2020 that, if recognized, would affect the effective tax rate was $52 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and nine months ended March 31, 2020 in the accompanying consolidated statements of earnings (loss) was $1 million and $3 million, respectively. At March 31, 2020 and June 30, 2019, the total gross accrued interest and penalties in the accompanying consolidated balance sheets was $13 million and $12 million, respectively. On the basis of the information available as of March 31, 2020, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months. Other Accrued Liabilities Other accrued liabilities consist of the following: (In millions) March 31 June 30 Advertising, merchandising and sampling $ 405 $ 352 Employee compensation 379 574 Deferred revenue 306 314 Other 1,531 1,359 $ 2,621 $ 2,599 Recently Adopted Accounting Standards Leases (Accounting Standards Codification (“ASC”) Topic 842 – Leases (“ASC 842”)) In February 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires lessees to account for most leases on their balance sheets with the liability being equal to the present value of the lease payments. The right-of-use asset is based on the lease liability adjusted for certain costs such as initial direct costs, prepaid lease payments and lease incentives received. Lease expense is recognized similar to previous accounting guidance with operating leases resulting in a straight-line expense, and finance leases resulting in a front-loaded expense similar to the previous accounting for capital leases. In July 2018, the FASB amended this guidance to clarify certain narrow aspects of the new lease accounting standard that may have been incorrectly or inconsistently applied, and did not add new guidance. Also, in July 2018, the FASB issued authoritative guidance that allows companies to elect to adopt the new standard using a modified retrospective transition approach with a cumulative-effect adjustment to retained earnings in the period of adoption. Companies that elect the new adoption method were not required to restate the prior comparative periods in the financial statements. Effective for the Company – Fiscal 2020 first quarter. An entity is permitted to apply the foregoing guidance using either of the modified retrospective transition approaches described in the standard, with certain practical expedients. Impact on consolidated financial statements – On July 1, 2019, the Company adopted ASC 842, see Note 4 – Leases for further discussion . Recently Issued Accounting Standards FASB Staff Question-and-Answer Document (Q&A): ASC Topic 842 and ASC Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic In April 2020, the FASB issued a Staff Q&A that focuses on the application of the lease guidance for lease concessions related solely to the effects of COVID-19. The FASB issued the guidelines to reduce the burden and complexity for companies to account for such lease concessions (e.g., rent abatements or other economic incentives) under current lease accounting rules due to COVID-19 by providing certain practical expedients that can be used. Effective for the Company – The Company can immediately apply the optional accounting for lease concessions related to the effects of COVID-19 as of April 2020. Impact on consolidated financial statements – The Company is currently assessing the impact of applying this guidance on its lease arrangements and expects to adopt this guidance in the fiscal 2020 fourth quarter. Reference Rate Reform (ASC Topic 848) (Accounting Standards Update (“ASU”) 2020-04 - Facilitation of the Effects of Reference Rate Reform on Financial Reporting) In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as LIBOR, which is expected to be phased out at the end of calendar 2021, and applies to lease contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that have LIBOR as the benchmark rate. Effective for the Company – This guidance can be applied for a limited time, as of the beginning of the interim period that includes March 12, 2020 or any date thereafter, through December 31, 2022. The guidance will no longer be available to apply after December 31, 2022. Impact on consolidated financial statements – The Company is currently assessing the impact of applying this guidance on its existing derivative contracts, leases and other arrangements, as well as when to adopt this guidance. Measurement of Credit Losses on Financial Instruments (ASC Topic 326 – Financial Instruments – Credit Losses) In June 2016, the FASB issued authoritative guidance that requires companies to utilize an impairment model for most financial assets measured at amortized cost and certain other financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses. In addition, this guidance changes the recognition method for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk, and requires additional disclosures. In general, modified retrospective adoption will be required for all outstanding instruments that fall under this guidance. In November 2019, the FASB issued authoritative guidance (ASU 2019-11 – Codification Improvements to Topic 326, Financial Instruments – Credit Losses) that amends ASC Topic 326 to clarify, improve and amend certain aspects of this guidance, such as disclosures related to accrued interest receivables and the estimation of credit losses associated with financial assets secured by collateral. In February 2020, the FASB issued authoritative guidance (ASU 2020-02 – Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842)) that amends and clarifies Topic 326 and Topic 842. For Topic 326, the codification was updated to include the Securities and Exchange Commission staff interpretations associated with registrants engaged in lending activities. Effective for the Company – Fiscal 2021 first quarter. Impact on consolidated financial statements – The Company is currently evaluating the impact of applying this guidance on its financial instruments, such as accounts receivable. While the Company’s evaluation is ongoing, we are also assessing the impact that COVID-19 will have on the adoption of this standard on its consolidated financial statements. Goodwill and Other – Internal-Use Software (ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract) In August 2018, the FASB issued authoritative guidance that permits companies to capitalize the costs incurred for setting up business systems that operate on cloud technology. The new guidance aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance does not affect the accounting for the service element of a hosting arrangement that is a service contract. Capitalized costs associated with a hosting arrangement that is a service contract must be amortized over the term of the hosting arrangement to the same line item in the income statement as the expense for fees for the hosting arrangement. Effective for the Company – Fiscal 2021 first quarter, with early adoption permitted in any interim period. This guidance can be adopted either retrospectively, or prospectively to all implementation costs incurred after the date of adoption. Impact on consolidated financial statements – The Company has determined that it will adopt this guidance on a prospective basis to all implementation costs incurred after the date of adoption and is currently evaluating the impact of applying this guidance to its business systems that operate on cloud technology. While the Company’s evaluation is ongoing, the adoption of this standard is not expected to have a material impact on its consolidated financial statements. Income Taxes (ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes) In December 2019, the FASB issued authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas. Effective for the Company – Fiscal 2022 first quarter, with early adoption permitted in any interim period. If adopted early, the Company must adopt all the amendments in the same period. The amendments have differing adoption methods including retrospectively, prospectively and/or modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, depending on the specific change. Impact on consolidated financial statements – The Company is currently evaluating the impact of applying this guidance and believes that it has transactions that may fall under the scope. No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements. |
ACQUISITION OF BUSINESS
ACQUISITION OF BUSINESS | 9 Months Ended |
Mar. 31, 2020 | |
Business Combinations [Abstract] | |
ACQUISITION OF BUSINESS | NOTE 2 – ACQUISITION OF BUSINESS On December 18, 2019, the Company acquired the remaining 66.66% equity interest in Have&Be Co. Ltd. (“Have & Be”), the global skin care company behind Dr. Jart+ and men’s grooming brand Do The Right Thing, for $1,268 million in cash. This acquisition is expected to further strengthen the Company’s leadership position in skin care and expand its consumer reach in Asia/Pacific, North America, the United Kingdom and travel retail. We originally acquired a minority interest in Have & Be in December 2015, and that investment structure included a formula-based call option for the remaining equity interest. The original minority interest was accounted for as an equity method investment, which had a carrying value of $133 million at the acquisition date. The acquisition of the remaining equity interest in Have & Be was considered a step acquisition, whereby the Company remeasured the previously held equity method investment to its fair value of $682 million, resulting in the recognition of a gain of $549 million. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of $4 million, which was reclassified from accumulated OCI. The total gain on the Company’s previously held equity method investment of $553 million is included in Other income, net in the accompanying consolidated statements of earnings (loss) for the nine months ended March 31, 2020. The fair value of the previously held equity method investment was determined based upon a valuation of the acquired business, as of the date of acquisition, using an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies. As of March 31, 2020, the accounting for the Have & Be business combination is provisional pending the calculation of the final purchase price, finalization of the opening balance sheet (working capital adjustments), the final valuation report, and allocation of the total consideration transferred. The amount paid at closing was funded by cash on hand including the proceeds from the issuance of debt. In anticipation of the closing, the Company transferred cash to a foreign subsidiary for purposes of making the closing payment. As a result, the Company recognized a foreign currency gain of $23 million, which is also included in Other income, net in the accompanying consolidated statements of earnings (loss) for the nine months ended March 31, 2020. The Company recorded a preliminary allocation of the total consideration transferred, which includes the cash paid at closing and the fair value of its previously held equity method investment, to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value at the acquisition date. The excess of the total consideration transferred over the fair value of the net tangible and intangible assets acquired was recorded as goodwill. The preliminary allocation of the total consideration transferred, including immaterial measurement period adjustments as of March 31, 2020, has been recorded as follows: (In millions, unaudited) Cash $ 228 Accounts receivable 13 Inventory 91 Other current assets 5 Property, plant and equipment 3 Right-of-use assets 3 Intangible assets 1,427 Goodwill 573 Other long-term assets 4 Total assets acquired 2,347 Accounts payable 15 Other accrued liabilities 25 Deferred income taxes 352 Lease liability 1 Total liabilities assumed 393 Total consideration transferred $ 1,954 The results of operations of Have & Be are reported on a one-month lag to facilitate consolidated reporting. For the three and nine months ended March 31, 2020, the Company's consolidated statements of earnings (loss) included approximately $67 million of net sales and $11 million net of tax, of net loss, inclusive of acquisition-related costs, related to Have & Be. Acquisition-related costs, which primarily include financial advisory, accounting and legal fees, in the amount of $1 million and $7 million are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings (loss) for the three and nine months ended March 31, 2020, respectively. Pro forma results of operations reflecting the acquisition of Have & Be are not presented, as the impact on the Company’s consolidated financial results would not have been material. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 9 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 3 – GOODWILL AND OTHER INTANGIBLE ASSETS As previously discussed in Note 2 – Acquisition of Business , in December 2019, the Company acquired Have & Be, which included the addition of goodwill of $573 million, amortizable intangible assets (customer lists) of $842 million with amortization periods of 7.5 years to 17.5 years, and non-amortizable intangible assets (trademarks) of $585 million. Goodwill associated with the acquisition is primarily attributable to the future revenue growth opportunities associated with additional share in the skin care category, as well as the value associated with assembled workforce. As such, the goodwill has been allocated to the Company’s skin care product category. The goodwill recorded in connection with this acquisition is not expected to be deductible for tax purposes. As of March 31, 2020, the accounting for the Have & Be business combination is provisional pending the calculation of the final purchase price, finalization of the opening balance sheet (working capital adjustments), the final valuation report, and allocation of the total consideration transferred. During the nine months ended March 31, 2020, the Company recognized $10 million of goodwill associated with the continuing earn-out obligations related to the acquisition of the Bobbi Brown brand. The intangible assets acquired in connection with the acquisition of Have & Be are classified as level 3 in the fair value hierarchy. The estimate of the fair values of the acquired amortizable intangible assets were determined using a multi-period excess earnings income approach by discounting the incremental after-tax cash flows over multiple periods. Fair value was determined under this approach by estimating future cash flows over multiple periods, as well as a terminal value, and discounting such cash flows at a rate of return that reflects the relative risk of the cash flows. The estimate of the fair values of the acquired intangible assets not subject to amortization were determined using an income approach, specifically the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. The following table presents goodwill by product category and the related change in the carrying amount: (In millions) Skin Care Makeup Fragrance Hair Care Total Balance as of June 30, 2019 Goodwill $ 185 $ 1,199 $ 254 $ 390 $ 2,028 Accumulated impairments (36) (68) (22) (34) (160) 149 1,131 232 356 1,868 Goodwill acquired during the period 573 10 — — 583 Impairment charges (52) (734) — — (786) Translation adjustments, goodwill (30) — (2) (2) (34) Translation adjustments, accumulated impairments 1 — — 1 2 492 (724) (2) (1) (235) Balance as of March 31, 2020 Goodwill 728 1,209 252 388 2,577 Accumulated impairments (87) (802) (22) (33) (944) $ 641 $ 407 $ 230 $ 355 $ 1,633 Other intangible assets consist of the following: March 31, 2020 June 30, 2019 (In millions) Gross Carrying Value Accumulated Amortization Total Net Book Value Gross Carrying Value Accumulated Amortization Total Net Book Value Amortizable intangible assets: Customer lists and other $ 1,482 $ 411 $ 1,071 $ 684 $ 369 $ 315 License agreements 43 43 — 43 43 — $ 1,525 $ 454 $ 1,071 $ 727 $ 412 $ 315 Non-amortizable intangible assets: Trademarks 1,119 888 Total intangible assets $ 2,190 $ 1,203 The aggregate amortization expense related to amortizable intangible assets was $23 million and $13 million for the three months ended March 31, 2020 and 2019, respectively, and was $45 million and $38 million for the nine months ended March 31, 2020 and 2019, respectively. The estimated aggregate amortization expense for the remainder of fiscal 2020 and for each of the next four fiscal years is as follows: Fiscal (In millions) 2020 2021 2022 2023 2024 Estimated aggregate amortization expense $ 30 $ 104 $ 103 $ 103 $ 101 Impairment Testing During the Nine Months Ended March 31, 2020 During December 2019, given the continuing declines in prestige makeup, generally in North America, and the ongoing competitive activity, the Company’s Too Faced, BECCA and Smashbox reporting units made revisions to their internal forecasts concurrent with the Company’s brand strategy review process. The Company concluded that the changes in circumstances in these reporting units triggered the need for an interim impairment review of their respective trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of their respective long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and recoverability tests for the long-lived assets as of December 31, 2019. The Company concluded that the carrying amounts of the long-lived assets were recoverable. The Company also concluded that the carrying values of the trademarks exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded impairment charges totaling $266 million for trademarks during the three months ended December 31, 2019. After adjusting the carrying value of the trademarks, the Company completed interim quantitative impairment tests for goodwill and recorded goodwill impairment charges for each of these reporting units, totaling $511 million during the three months ended December 31, 2019. The fair value of each reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. During March 2020, given the actual and the estimate of the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the Company, the Company made revisions to the internal forecasts relating to its Too Faced, BECCA, Smashbox and GLAMGLOW reporting units. The Company concluded that the changes in circumstances in these reporting units triggered the need for an interim impairment review of their respective trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of their respective long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and recoverability tests for the long-lived assets as of March 31, 2020. The Company concluded that the carrying amounts of the long-lived assets were recoverable. The Company also concluded that the carrying values of the trademarks exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows based on probability weighted cash flows, and recorded impairment charges. After adjusting the carrying value of the trademarks, the Company completed interim quantitative impairment tests for goodwill and recorded goodwill impairment charges for each of these reporting units. The fair value of each reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows, based on probability weighted undiscounted cash flows, and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. A summary of the impairment charges for the three and nine months ended March 31, 2020 and the remaining trademark and goodwill carrying values as of March 31, 2020, for each reporting unit, are as follows: Impairment Charge (In millions) Three Months Ended Nine Months Ended Carrying Value Reporting Unit: Product Category Region Trademark Goodwill Trademark Goodwill Trademark Goodwill Too Faced Makeup The Americas $ 42 $ 162 $ 253 $ 592 $ 272 $ 13 BECCA Makeup The Americas 14 35 47 70 51 28 Smashbox Makeup The Americas 1 26 23 72 32 — GLAMGLOW Skin care The Americas 1 52 1 52 62 62 Total $ 58 $ 275 $ 324 $ 786 $ 417 $ 103 Impairment Testing During the Nine Months Ended March 31, 2019 During December 2018, the Company’s Smashbox reporting unit made revisions to its internal forecasts reflecting a slowdown of its makeup business driven by increased competitive activity and lower than expected growth in key retail channels for the brand. The Company concluded that these changes in circumstances in the Smashbox reporting unit triggered the need for an interim impairment review of its trademark and goodwill. Accordingly, the Company performed an interim impairment test as of December 31, 2018. The Company concluded that the carrying value of the Smashbox trademark exceeded its estimated fair value, which was determined utilizing a royalty rate to determine discounted projected future cash flows. As a result, the Company recognized an impairment charge of $18 million for the trademark during the three months ended December 31, 2018. After adjusting the carrying value of the trademark, the Company completed an interim quantitative impairment test for goodwill and recorded a goodwill impairment charge related to the Smashbox reporting unit of $20 million during the three months ended December 31, 2018. During March 2019, the Company’s Smashbox reporting unit made additional revisions to its internal forecasts reflecting the continued slowdown of its makeup business driven by ongoing competitive activity and lower than expected growth in key retail channels for the brand. The Company concluded that these changes in circumstances in the Smashbox reporting unit triggered the need for an interim impairment review of its trademark and goodwill. Accordingly, the Company performed an interim impairment test as of March 31, 2019. The Company concluded that the carrying value of the Smashbox trademark exceeded its estimated fair value, which was determined utilizing a royalty rate to determine discounted projected future cash flows. As a result, the Company recognized an impairment charge of $4 million for the trademark during the three months ended March 31, 2019. After adjusting the carrying value of the trademark, the Company completed an interim quantitative impairment test for goodwill and recorded a goodwill impairment charge related to the Smashbox reporting unit of $48 million during the three months ended March 31, 2019. The Company compared the fair value of the Smashbox reporting unit with its carrying amount to calculate the impairment charge. The fair values of the reporting unit as of December 31, 2018 and March 31, 2019 were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. These impairment charges were reflected in the makeup product category and in The Americas region. |
LEASES
LEASES | 9 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
LEASES | NOTE 4 - LEASES During the first quarter of fiscal 2020, the Company adopted ASC 842 using the modified retrospective transition approach permitted under the new standard for leases that existed at July 1, 2019 and, accordingly, the prior comparative periods were not restated. Under this method, the Company was required to assess the remaining future payments of existing leases as of July 1, 2019. Additionally, as of the date of adoption, the Company elected the package of practical expedients that did not require the Company to assess whether expired or existing contracts contain leases as defined in ASC 842, did not require reassessment of the lease classification (i.e. operating lease vs. finance lease) for expired or existing leases, and did not require a change to the accounting for previously capitalized initial direct costs. The adoption of this standard impacted the Company’s consolidated balance sheet due to the recognition of right-of-use (“ROU”) assets and associated lease liabilities related to operating leases as compared to the previous accounting. The accounting for finance leases under ASC 842 is consistent with the prior accounting for capital leases. The impact of the adoption of this standard on the Company’s consolidated statements of earnings (loss) and consolidated statement of cash flows was not material. Per the guidance of ASC 842, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset. The Company recognizes a lease liability and a related ROU asset at the commencement date for leases on its consolidated balance sheet, excluding short-term leases as noted below. The lease liability is equal to the present value of unpaid lease payments over the remaining lease term. The Company’s lease term at the commencement date may reflect options to extend or terminate the lease when it is reasonably certain that such options will be exercised. To determine the present value of the lease liability, the Company uses an incremental borrowing rate, which is defined as the rate of interest that the Company would have to pay to borrow (on a collateralized basis over a similar term) an amount equal to the lease payments in similar economic environments. The ROU asset is based on the corresponding lease liability adjusted for certain costs such as initial direct costs, prepaid lease payments and lease incentives received. Both operating and finance lease ROU assets are reviewed for impairment, consistent with other long-lived assets, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. After an ROU asset is impaired, any remaining balance of the ROU asset is amortized on a straight-line basis over the shorter of the remaining lease term or the estimated useful life. After the lease commencement date, the Company evaluates lease modifications, if any, that could result in a change in the accounting for leases. For a lease modification, an evaluation is performed to determine if it should be treated as either a separate lease or a change in the accounting of an existing lease. In addition, significant changes in events or circumstances within the Company’s control are assessed to determine whether a change in the accounting for leases is required. Certain of the Company’s leases provide for variable lease payments for the right to use an underlying asset that vary due to changes in facts and circumstances occurring after the commencement date, other than the passage of time. Variable lease payments that are dependent on an index or rate (e.g., Consumer Price Index) are included in the initial measurement of the lease liability, the initial measurement of the ROU asset, and the lease classification test based on the index or rate as of the commencement date. Any changes from the commencement date estimation of the index- and rate-based variable payments are expensed as incurred in the period of the change. Variable lease payments that are not known at the commencement date and are determinable based on the performance or use of the underlying asset , are not included in the initial measurement of the lease liability or the ROU asset, but instead are expensed as incurred. The Company’s variable lease payments primarily include rents based on a percentage of sales in excess of stipulated levels, common area maintenance based on the percentage of the total square footage leased by the Company, as well as costs relating to embedded leases, such as third-party manufacturing agreements. Upon the adoption of ASC 842, the Company made the following accounting policy elections: • Certain of the Company’s contracts contain lease components as well as non-lease components, such as an agreement to purchase services. Unless an accounting policy is elected to the contrary, the contract consideration must be allocated to the separate lease and non-lease components in accordance with ASC 842. For purposes of allocating contract consideration, the Company elected not to separate the lease components from non-lease components for all asset classes. This was applied to all existing leases as of July 1, 2019 and will be applied to new leases on an ongoing basis. • The Company elected not to apply the measurement and recognition requirements of ASC 842 to short-term leases (i.e. leases with a term of 12 months or less). Accordingly, short-term leases will not be recorded as ROU assets or lease liabilities on the Company’s consolidated balance sheets, and the related lease payments will be recognized in net earnings on a straight-line basis over the lease term. • For certain leases relating to automobiles, information technology equipment and office equipment, the Company elected to apply the guidance of ASC 842 utilizing a portfolio approach. Under this approach, the Company combined and accounted for leases (as a portfolio) with similar characteristics (e.g., lease term, discount rates, etc.) as a single lease, provided its application is not materially different when compared to the application at the individual lease level. As a result of the adoption of ASC 842, the Company recorded a cumulative adjustment of $29 million, net of tax, as a reduction to its fiscal 2020 opening balance of retained earnings, primarily to reflect the fair value of operating lease ROU assets that were impaired at, or prior to, the adoption date. In addition, the Company recognized operating lease ROU assets and liabilities of $2,598 million and $2,764 million, respectively, as of July 1, 2019. Finance lease ROU assets and liabilities are not material. The Company has operating and finance leases primarily for real estate properties, including corporate offices, facilities to support the Company’s manufacturing, assembly, research and development and distribution operations and retail stores, as well as information technology equipment, automobiles and office equipment, with remaining terms of approximately 1 year to 59 years. Some of the Company’s lease contracts include options to extend the leases for up to 30 years, while others include options to terminate the leases within 25 years. A summary of total lease costs and other information for the periods relating to the Company’s finance and operating leases is as follows: (In millions) Three Months Ended Nine Months Ended Total lease cost Finance lease cost: Amortization of right-of-use assets $ 3 $ 9 Interest on lease liabilities — — Operating lease cost 150 383 Short-term lease cost 5 20 Variable lease cost 41 133 Total $ 199 $ 545 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 350 Financing cash flows from finance leases $ 10 Right-of-use assets obtained in exchange for new operating lease liabilities $ 216 Weighted-average remaining lease term – finance leases 2 years Weighted-average remaining lease term – operating leases 11 years Weighted-average discount rate – finance leases 2.7 % Weighted-average discount rate – operating leases 2.5 % The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating and finance leases for the remainder of fiscal 2020 and for each of the next four fiscal years and thereafter is as follows: (In millions) Operating Leases Finance Leases Remainder of fiscal 2020 $ 113 $ 4 Fiscal 2021 397 7 Fiscal 2022 364 3 Fiscal 2023 324 1 Fiscal 2024 291 — Thereafter 1,586 — Total future minimum lease payments 3,075 15 Less imputed interest (416) — Total $ 2,659 $ 15 Operating lease and finance lease liabilities included in the consolidated balance sheet are as follows: March 31, 2020 (In millions) Operating Leases Finance Leases Total current liabilities $ 371 $ 9 Total noncurrent liabilities 2,288 6 Total $ 2,659 $ 15 The ROU assets and lease liabilities related to finance leases are included in Other assets and in Current debt and Long-term debt, respectively, in the accompanying consolidated balance sheet as of March 31, 2020. The following table summarizes scheduled maturities of the Company’s contractual obligations relating to operating leases for which cash flows are fixed and determinable as of June 30, 2019: (In millions) Payments Due in Fiscal Year (1) Fiscal 2020 $ 421 Fiscal 2021 383 Fiscal 2022 348 Fiscal 2023 316 Fiscal 2024 289 Thereafter 1,625 Total contractual obligations $ 3,382 ______________________________________________ (1) Minimum operating lease commitments only include base rent. Certain leases provide for contingent rents that are not measurable at inception and primarily include rents based on a percentage of sales in excess of stipulated levels, as well as common area maintenance. These amounts are excluded from minimum operating lease commitments and are included in the determination of total rent expense when it is probable that the expense has been incurred and the amount is reasonably measurable. Such amounts have not been material to total rent expense. The Company recognized $13 million of long-lived asset impairments, included in Impairments of other intangible and long-lived assets, in the accompanying consolidated statements of earnings (loss) for the three and nine months ended March 31, 2020, related to operating lease ROU assets and the related property, plant and equipment in certain freestanding stores primarily in North America due to the impact of the COVID-19 pandemic. As of March 31, 2020, the Company has additional operating lease obligations, relating primarily to facilities to support the Company’s manufacturing operations, retail stores, and corporate offices, that have not yet commenced of $98 million. These leases will commence between fiscal 2020 and fiscal 2030 with lease terms of 1 year to 20 years. |
LEASES | NOTE 4 - LEASES During the first quarter of fiscal 2020, the Company adopted ASC 842 using the modified retrospective transition approach permitted under the new standard for leases that existed at July 1, 2019 and, accordingly, the prior comparative periods were not restated. Under this method, the Company was required to assess the remaining future payments of existing leases as of July 1, 2019. Additionally, as of the date of adoption, the Company elected the package of practical expedients that did not require the Company to assess whether expired or existing contracts contain leases as defined in ASC 842, did not require reassessment of the lease classification (i.e. operating lease vs. finance lease) for expired or existing leases, and did not require a change to the accounting for previously capitalized initial direct costs. The adoption of this standard impacted the Company’s consolidated balance sheet due to the recognition of right-of-use (“ROU”) assets and associated lease liabilities related to operating leases as compared to the previous accounting. The accounting for finance leases under ASC 842 is consistent with the prior accounting for capital leases. The impact of the adoption of this standard on the Company’s consolidated statements of earnings (loss) and consolidated statement of cash flows was not material. Per the guidance of ASC 842, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset. The Company recognizes a lease liability and a related ROU asset at the commencement date for leases on its consolidated balance sheet, excluding short-term leases as noted below. The lease liability is equal to the present value of unpaid lease payments over the remaining lease term. The Company’s lease term at the commencement date may reflect options to extend or terminate the lease when it is reasonably certain that such options will be exercised. To determine the present value of the lease liability, the Company uses an incremental borrowing rate, which is defined as the rate of interest that the Company would have to pay to borrow (on a collateralized basis over a similar term) an amount equal to the lease payments in similar economic environments. The ROU asset is based on the corresponding lease liability adjusted for certain costs such as initial direct costs, prepaid lease payments and lease incentives received. Both operating and finance lease ROU assets are reviewed for impairment, consistent with other long-lived assets, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. After an ROU asset is impaired, any remaining balance of the ROU asset is amortized on a straight-line basis over the shorter of the remaining lease term or the estimated useful life. After the lease commencement date, the Company evaluates lease modifications, if any, that could result in a change in the accounting for leases. For a lease modification, an evaluation is performed to determine if it should be treated as either a separate lease or a change in the accounting of an existing lease. In addition, significant changes in events or circumstances within the Company’s control are assessed to determine whether a change in the accounting for leases is required. Certain of the Company’s leases provide for variable lease payments for the right to use an underlying asset that vary due to changes in facts and circumstances occurring after the commencement date, other than the passage of time. Variable lease payments that are dependent on an index or rate (e.g., Consumer Price Index) are included in the initial measurement of the lease liability, the initial measurement of the ROU asset, and the lease classification test based on the index or rate as of the commencement date. Any changes from the commencement date estimation of the index- and rate-based variable payments are expensed as incurred in the period of the change. Variable lease payments that are not known at the commencement date and are determinable based on the performance or use of the underlying asset , are not included in the initial measurement of the lease liability or the ROU asset, but instead are expensed as incurred. The Company’s variable lease payments primarily include rents based on a percentage of sales in excess of stipulated levels, common area maintenance based on the percentage of the total square footage leased by the Company, as well as costs relating to embedded leases, such as third-party manufacturing agreements. Upon the adoption of ASC 842, the Company made the following accounting policy elections: • Certain of the Company’s contracts contain lease components as well as non-lease components, such as an agreement to purchase services. Unless an accounting policy is elected to the contrary, the contract consideration must be allocated to the separate lease and non-lease components in accordance with ASC 842. For purposes of allocating contract consideration, the Company elected not to separate the lease components from non-lease components for all asset classes. This was applied to all existing leases as of July 1, 2019 and will be applied to new leases on an ongoing basis. • The Company elected not to apply the measurement and recognition requirements of ASC 842 to short-term leases (i.e. leases with a term of 12 months or less). Accordingly, short-term leases will not be recorded as ROU assets or lease liabilities on the Company’s consolidated balance sheets, and the related lease payments will be recognized in net earnings on a straight-line basis over the lease term. • For certain leases relating to automobiles, information technology equipment and office equipment, the Company elected to apply the guidance of ASC 842 utilizing a portfolio approach. Under this approach, the Company combined and accounted for leases (as a portfolio) with similar characteristics (e.g., lease term, discount rates, etc.) as a single lease, provided its application is not materially different when compared to the application at the individual lease level. As a result of the adoption of ASC 842, the Company recorded a cumulative adjustment of $29 million, net of tax, as a reduction to its fiscal 2020 opening balance of retained earnings, primarily to reflect the fair value of operating lease ROU assets that were impaired at, or prior to, the adoption date. In addition, the Company recognized operating lease ROU assets and liabilities of $2,598 million and $2,764 million, respectively, as of July 1, 2019. Finance lease ROU assets and liabilities are not material. The Company has operating and finance leases primarily for real estate properties, including corporate offices, facilities to support the Company’s manufacturing, assembly, research and development and distribution operations and retail stores, as well as information technology equipment, automobiles and office equipment, with remaining terms of approximately 1 year to 59 years. Some of the Company’s lease contracts include options to extend the leases for up to 30 years, while others include options to terminate the leases within 25 years. A summary of total lease costs and other information for the periods relating to the Company’s finance and operating leases is as follows: (In millions) Three Months Ended Nine Months Ended Total lease cost Finance lease cost: Amortization of right-of-use assets $ 3 $ 9 Interest on lease liabilities — — Operating lease cost 150 383 Short-term lease cost 5 20 Variable lease cost 41 133 Total $ 199 $ 545 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 350 Financing cash flows from finance leases $ 10 Right-of-use assets obtained in exchange for new operating lease liabilities $ 216 Weighted-average remaining lease term – finance leases 2 years Weighted-average remaining lease term – operating leases 11 years Weighted-average discount rate – finance leases 2.7 % Weighted-average discount rate – operating leases 2.5 % The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating and finance leases for the remainder of fiscal 2020 and for each of the next four fiscal years and thereafter is as follows: (In millions) Operating Leases Finance Leases Remainder of fiscal 2020 $ 113 $ 4 Fiscal 2021 397 7 Fiscal 2022 364 3 Fiscal 2023 324 1 Fiscal 2024 291 — Thereafter 1,586 — Total future minimum lease payments 3,075 15 Less imputed interest (416) — Total $ 2,659 $ 15 Operating lease and finance lease liabilities included in the consolidated balance sheet are as follows: March 31, 2020 (In millions) Operating Leases Finance Leases Total current liabilities $ 371 $ 9 Total noncurrent liabilities 2,288 6 Total $ 2,659 $ 15 The ROU assets and lease liabilities related to finance leases are included in Other assets and in Current debt and Long-term debt, respectively, in the accompanying consolidated balance sheet as of March 31, 2020. The following table summarizes scheduled maturities of the Company’s contractual obligations relating to operating leases for which cash flows are fixed and determinable as of June 30, 2019: (In millions) Payments Due in Fiscal Year (1) Fiscal 2020 $ 421 Fiscal 2021 383 Fiscal 2022 348 Fiscal 2023 316 Fiscal 2024 289 Thereafter 1,625 Total contractual obligations $ 3,382 ______________________________________________ (1) Minimum operating lease commitments only include base rent. Certain leases provide for contingent rents that are not measurable at inception and primarily include rents based on a percentage of sales in excess of stipulated levels, as well as common area maintenance. These amounts are excluded from minimum operating lease commitments and are included in the determination of total rent expense when it is probable that the expense has been incurred and the amount is reasonably measurable. Such amounts have not been material to total rent expense. The Company recognized $13 million of long-lived asset impairments, included in Impairments of other intangible and long-lived assets, in the accompanying consolidated statements of earnings (loss) for the three and nine months ended March 31, 2020, related to operating lease ROU assets and the related property, plant and equipment in certain freestanding stores primarily in North America due to the impact of the COVID-19 pandemic. As of March 31, 2020, the Company has additional operating lease obligations, relating primarily to facilities to support the Company’s manufacturing operations, retail stores, and corporate offices, that have not yet commenced of $98 million. These leases will commence between fiscal 2020 and fiscal 2030 with lease terms of 1 year to 20 years. |
CHARGES ASSOCIATED WITH RESTRUC
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES | 9 Months Ended |
Mar. 31, 2020 | |
Restructuring and Related Activities [Abstract] | |
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES | NOTE 5 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES In May 2016, the Company announced a multi-year initiative (“Leading Beauty Forward” or “LBF”) to build on its strengths and better leverage its cost structure to free resources for investment to continue its growth momentum. LBF is designed to enhance the Company’s go-to-market capabilities, reinforce its leadership in global prestige beauty and continue creating sustainable value. As of June 30, 2019, the Company concluded the approvals of all major initiatives under LBF related to the optimization of select corporate functions, supply chain activities, and corporate and regional market support structures, as well as the exit of underperforming businesses, and expects to substantially complete those initiatives through fiscal 2021. The approved restructuring and other charges expected to be incurred were: Sales Cost of Sales Operating Expenses Total (In millions) Restructuring Other Total Charges Approved Cumulative through March 31, 2020 $ 14 $ 88 $ 507 $ 358 $ 967 (In millions) Employee- Asset- Contract Other Exit Total Restructuring Charges Approved Cumulative through March 31, 2020 $ 461 $ 7 $ 25 $ 14 $ 507 The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for LBF were: (In millions) Sales Cost of Sales Operating Expenses Total Restructuring Other Total Charges Cumulative through June 30, 2019 $ 14 $ 55 $ 457 $ 265 $ 791 Nine months ended March 31, 2020 — 9 20 34 63 Cumulative through March 31, 2020 $ 14 $ 64 $ 477 $ 299 $ 854 (In millions) Employee- Asset- Contract Other Exit Total Restructuring Charges (Adjustments) Cumulative through June 30, 2019 $ 445 $ 4 $ 3 $ 5 $ 457 Nine months ended March 31, 2020 (5) 19 5 1 20 Cumulative through March 31, 2020 $ 440 $ 23 $ 8 $ 6 $ 477 For the three and nine months ended March 31, 2020, the Company recognized $18 million of asset-related costs due to the impairment of operating lease ROU assets as a result of closed freestanding retail stores, approved under LBF, whereby the ability to sublease the locations was negatively impacted by the COVID-19 pandemic. These charges were initially approved under LBF prior to fiscal 2020 as contract terminations related to continuing lease payments to landlords after exiting the location. Employee-related costs reflect adjustments to the accrual estimate for certain employees who either resigned or transferred to other existing positions within the Company. Changes in accrued restructuring charges for the nine months ended March 31, 2020 were: (In millions) Employee- Related Costs Asset- Related Costs Contract Terminations Other Exit Costs Total Balance at June 30, 2019 $ 202 $ — $ — $ 1 $ 203 Charges (adjustments) (5) 19 5 1 20 Cash payments (74) — (5) (2) (81) Translation adjustments (2) — — — (2) Non-cash asset write-offs — (19) — — (19) Balance at March 31, 2020 $ 121 $ — $ — $ — $ 121 Accrued restructuring charges at March 31, 2020 are expected to result in cash expenditures funded from cash provided by operations of approximately $35 million, $63 million, $20 million and $3 million for the remainder of fiscal 2020 and for fiscal 2021, 2022 and 2023, respectively. Additional information about LBF is included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. |
DEBT
DEBT | 9 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
DEBT | NOTE 6 – DEBT In November 2019, the Company completed a public offering of $500 million aggregate principal amount of its 2.000% Senior Notes due December 1, 2024 (the “2024 Senior Notes”), $650 million aggregate principal amount of its 2.375% Senior Notes due December 1, 2029 (the “2029 Senior Notes”) and $650 million aggregate principal amount of its 3.125% Senior Notes due December 1, 2049 (the “2049 Senior Notes”). The Company used proceeds from this offering for general corporate purposes, including to fund the acquisition of Have & Be and refinance its $500 million aggregate principal amount of 1.80% Senior Notes that became due February 7, 2020. These recently issued notes are summarized as follows: Notes Issue Date Price Yield Unamortized Debt Semi-annual ($ in millions) 2024 Senior Notes November 2019 99.421 % 2.122 % $ 3 $ 3 June 1/December 1 2029 Senior Notes (1) November 2019 99.046 2.483 6 4 June 1/December 1 2049 Senior Notes November 2019 98.769 3.189 8 7 June 1/December 1 ______________________________________________ (1) In April and May 2019, in anticipation of the issuance of the 2029 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $500 million at a weighted-average all-in rate of 2.50%. The treasury lock agreements were settled upon the issuance of the new debt, and the Company recognized a loss in OCI of $33 million that is being amortized to interest expense over the life of the 2029 Senior Notes. As a result of the treasury lock agreements, as well as the debt discount and debt issuance costs, the effective interest rate on the 2029 Senior Notes will be 3.15% over the life of the debt. In March 2020, the Company borrowed $1,300 million under its existing $1,500 million revolving credit facility, and had $200 million of commercial paper outstanding as of March 31, 2020. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 9 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE FINANCIAL INSTRUMENTS | NOTE 7 – DERIVATIVE FINANCIAL INSTRUMENTS The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. The Company enters into foreign currency forward contracts, and may enter into option contracts, to reduce the effects of fluctuating foreign currency exchange rates. In addition, the Company enters into interest rate derivatives to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances. During the first quarter of fiscal 2020, the Company entered into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. The Company entered into the net investment hedges to offset the risk of changes in the U.S. dollar value of the Company’s investment in these foreign operations due to fluctuating foreign exchange rates. Time value is excluded from the effectiveness assessment and is recognized under a systematic and rational method over the life of the hedging instrument in Selling, general and administrative expenses. The net gain or loss on net investment hedges is recorded within translation adjustments, as a component of accumulated OCI (“AOCI”) on the Company’s consolidated balance sheets, until the sale or substantially complete liquidation of the underlying assets of the Company’s investment. The Company also enters into foreign currency forward contracts, and may use option contracts, not designated as hedging instruments, to mitigate the change in fair value of specific assets and liabilities on the balance sheet. At March 31, 2020, the notional amount of derivatives not designated as hedging instruments was $3,399 million. The Company does not utilize derivative financial instruments for trading or speculative purposes. Costs associated with entering into derivative financial instruments are not material to the Company’s consolidated financial results. For each derivative contract entered into, where the Company looks to obtain hedge accounting treatment, the Company formally and contemporaneously documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction, the nature of the risk being hedged, and how the hedging instruments’ effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. At inception, the Company evaluates the effectiveness of hedge relationships quantitatively, and has elected to perform, after initial evaluation, qualitative effectiveness assessments of certain hedge relationships to support an ongoing expectation of high effectiveness, if effectiveness testing is required. If based on the qualitative assessment, it is determined that a derivative has ceased to be a highly effective hedge, the Company will perform a quantitative assessment to determine whether to discontinue hedge accounting with respect to that derivative prospectively. The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are as follows: Asset Derivatives Liability Derivatives Fair Value (1) Fair Value (1) (In millions) Balance Sheet Location March 31 June 30 Balance Sheet Location March 31 June 30 Derivatives Designated as Hedging Instruments Foreign currency cash flow hedges Prepaid expenses and other current assets $ 48 $ 23 Other accrued liabilities $ 3 $ 4 Net investment hedges Prepaid expenses and other current assets — — Other accrued liabilities 17 — Interest rate-related derivatives Prepaid expenses and other current assets 14 3 Other accrued liabilities 1 26 Total Derivatives Designated as Hedging Instruments 62 26 21 30 Derivatives Not Designated as Hedging Instruments Foreign currency forward contracts Prepaid expenses and other current assets 24 4 Other accrued liabilities 24 2 Total derivatives $ 86 $ 30 $ 45 $ 32 ______________________________________________ (1) See Note 8 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined. The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows: Amount of Gain or (Loss) Location of Gain or Amount of Gain or (Loss) Reclassified from AOCI into Earnings (1) Three Months Ended Three Months Ended (In millions) 2020 2019 2020 2019 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ 46 $ 2 Net sales $ 10 $ 8 Interest rate-related derivatives (2) — Interest expense — 1 44 2 Total derivatives $ 10 $ 9 Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) (20) — Total derivatives $ 24 $ 2 ______________________________________________ (1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material. (2) During the three months ended March 31, 2020, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $12 million. (3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets. Amount of Gain or (Loss) Location of Gain or Amount of Gain or (Loss) Reclassified from AOCI into Earnings (1) Nine Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ 50 $ 18 Net sales $ 29 $ 15 Interest rate-related derivatives (11) — Interest expense — 1 39 18 Total derivatives $ 29 $ 16 Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) (54) — Total derivatives $ (15) $ 18 ______________________________________________ (1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material. (2) During the nine months ended March 31, 2020, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $37 million. (3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets. Amount of Gain or (Loss) Recognized in Earnings on Derivatives (1) Location of Gain or (Loss) Recognized in Earnings on Derivatives Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Derivatives in Fair Value Hedging Relationships: Interest rate swap contracts Interest expense $ 12 $ 8 $ 13 $ 17 ______________________________________________ (1) Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt. Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows: (In millions) Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included Carrying Amount of the Cumulative Amount of Fair March 31, 2020 March 31, 2020 Current debt $ — $ — Long-term debt 713 14 Total debt $ 713 $ 14 Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows: Three Months Ended March 31 2020 2019 (In millions) Net Sales Interest Net Sales Interest Total amounts of income and expense line items presented in the consolidated statements of earnings (loss) in which the effects of fair value and cash flow hedges are recorded $ 3,345 $ 42 $ 3,744 $ 32 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable (12) Not applicable (8) Derivatives designated as hedging instruments Not applicable 12 Not applicable 8 Gain (loss) on cash flow hedge relationships – interest rate contracts: Amount of gain reclassified from AOCI into earnings Not applicable — Not applicable 1 Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: Amount of gain reclassified from AOCI into earnings 10 Not applicable 8 Not applicable Nine Months Ended March 31 2020 2019 (In millions) Net Sales Interest Expense Net Sales Interest Expense Total amounts of income and expense line items presented in the consolidated statements of earnings (loss) in which the effects of fair value and cash flow hedges are recorded $ 11,864 $ 112 $ 11,273 $ 101 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable (13) Not applicable (17) Derivatives designated as hedging instruments Not applicable 13 Not applicable 17 Gain (loss) on cash flow hedge relationships – interest rate contracts: Amount of gain reclassified from AOCI into earnings Not applicable — Not applicable 1 Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: Amount of gain reclassified from AOCI into earnings 29 Not applicable 15 Not applicable The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows: Amount of Gain or (Loss) Location of Gain or (Loss) Recognized in Earnings on Derivatives Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Selling, general and administrative $ 49 $ (12) $ 52 $ (2) Cash Flow Hedges The Company enters into foreign currency forward contracts, and may enter into foreign currency option contracts, to hedge anticipated transactions and receivables and payables denominated in foreign currencies, for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the cash flows that the Company receives from foreign subsidiaries. The foreign currency forward contracts entered into to hedge anticipated transactions have been designated as cash flow hedges and have varying maturities through the end of March 2022. Hedge effectiveness of the foreign currency forward contracts is based on the forward method, which includes time value in the effectiveness assessment. At March 31, 2020, the Company had cash flow hedges outstanding with a notional amount totaling $1,584 million. The Company may enter into interest rate forward contracts to hedge anticipated issuance of debt for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of interest rate movements on the cost of debt issuance. For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued, and gains and losses in AOCI are reclassified to sales when the underlying forecasted transaction occurs. If it is probable that the forecasted transaction will no longer occur, then any gains or losses in AOCI are reclassified to current-period sales. As of March 31, 2020, the Company’s foreign currency cash flow hedges were highly effective. The estimated net gain on the Company’s derivative instruments designated as cash flow hedges as of March 31, 2020 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $22 million. The accumulated net gain on derivative instruments in AOCI was $39 million and $29 million as of March 31, 2020 and June 30, 2019, respectively. Fair Value Hedges The Company enters into interest rate derivative contracts to manage the exposure to interest rate fluctuations on its funded indebtedness. The Company has interest rate swap agreements, with notional amounts totaling $450 million and $250 million to effectively convert the fixed rate interest on its 2021 Senior Notes and 2022 Senior Notes, respectively, to variable interest rates based on three-month LIBOR plus a margin. These interest rate swap agreements are designated as fair value hedges of the related long-term debt, and the changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt. Net Investment Hedges The Company enters into foreign currency forward contracts, designated as net investment hedges, to hedge a portion of its net investment in certain foreign operations. The net gain or loss on these contracts is recorded within translation adjustments, as a component of AOCI on the Company’s consolidated balance sheets. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the Company’s net investment in these foreign operations. The net investment hedge contracts have varying maturities through the end of April 2020. Hedge effectiveness of the net investment hedge contracts is based on the spot method. At March 31, 2020, the Company had net investment hedges outstanding with a notional amount totaling $1,759 million. Credit Risk As a matter of policy, the Company enters into derivative contracts only with counterparties that have a long-term credit rating of at least A- or higher by at least two nationally recognized rating agencies. The counterparties to these contracts are major financial institutions. Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $86 million at March 31, 2020. To manage this risk, the Company has strict counterparty credit guidelines that are continually monitored. Accordingly, management believes risk of loss under these hedging contracts is remote. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 8 – FAIR VALUE MEASUREMENTS The Company records certain of its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The accounting for fair value measurements must be applied to nonfinancial assets and nonfinancial liabilities that require initial measurement or remeasurement at fair value, which principally consist of assets and liabilities acquired through business combinations and goodwill, indefinite-lived intangible assets and long-lived assets for the purposes of calculating potential impairment. The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows: Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date. Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation. The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2020: (In millions) Level 1 Level 2 Level 3 Total Assets: Foreign currency forward contracts $ — $ 72 $ — $ 72 Interest rate-related derivatives — 14 — 14 Total $ — $ 86 $ — $ 86 Liabilities: Foreign currency forward contracts $ — $ 44 $ — $ 44 Interest rate-related derivatives — 1 — 1 Contingent consideration — — 27 27 Total $ — $ 45 $ 27 $ 72 The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2019: (In millions) Level 1 Level 2 Level 3 Total Assets: Foreign currency forward contracts $ — $ 27 $ — $ 27 Interest rate-related derivatives — 3 — 3 Total $ — $ 30 $ — $ 30 Liabilities: Foreign currency forward contracts $ — $ 6 $ — $ 6 Interest rate-related derivatives — 26 — 26 Contingent consideration — — 36 36 Total $ — $ 32 $ 36 $ 68 The estimated fair values of the Company’s financial instruments are as follows: March 31 June 30 (In millions) Carrying Amount Fair Value Carrying Amount Fair Value Nonderivatives Cash and cash equivalents $ 4,876 $ 4,876 $ 2,987 $ 2,987 Current and long-term debt 6,201 6,454 3,412 3,706 Additional purchase price payable — — 3 3 Contingent consideration 27 27 36 36 Derivatives Foreign currency forward contracts – asset (liability), net 28 28 21 21 Interest rate-related derivatives – asset (liability), net 13 13 (23) (23) The following table presents the Company’s impairment charges for the nine months ended March 31, 2020 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test: (In millions) Impairment charges Date of Fair Value Fair Value (1) Goodwill $ 786 March 31, 2020 $ 103 Other intangible assets, net (trademark) 324 March 31, 2020 417 Long-lived assets 13 March 31, 2020 11 Total $ 1,123 $ 531 ______________________________________________ (1) See Note 3 – Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs. The following table presents the Company’s impairment charges for the nine months ended March 31, 2019 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test: (In millions) Impairment charges Date of Fair Value Measurement Fair Value (1) Goodwill $ 68 March 31, 2019 $ 72 Other intangible assets, net (trademark) 22 March 31, 2019 55 Total $ 90 $ 127 ______________________________________________ (1) See Note 3 – Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs. The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments for which it is practicable to estimate that value: Cash and cash equivalents – Cash and all highly-liquid securities with original maturities of three months or less are classified as cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds (classified within Level 1 of the valuation hierarchy). The carrying amount approximates fair value, primarily due to the short maturity of cash equivalent instruments. Foreign currency forward contracts – The fair values of the Company’s foreign currency forward contracts were determined using an industry-standard valuation model, which is based on an income approach. The significant observable inputs to the model, such as swap yield curves and currency spot and forward rates, were obtained from an independent pricing service. To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using LIBOR for contracts with maturities up to 12 months, and swap yield curves for contracts with maturities greater than 12 months. Interest rate contracts – The fair values of the Company’s interest rate contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as treasury yield curves, swap yield curves and LIBOR forward rates, were obtained from independent pricing services. Current and long-term debt – The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities. To a lesser extent, debt also includes finance lease obligations for which the carrying amount approximates the fair value. The Company’s debt is classified within Level 2 of the valuation hierarchy. Additional purchase price payable – The Company’s additional purchase price payable represents fixed minimum additional purchase price that was discounted using the Company’s incremental borrowing rate, which was approximately 1%. The additional purchase price payable is classified within Level 2 of the valuation hierarchy. Contingent consideration – Contingent consideration obligations consist of potential obligations related to the Company’s acquisitions in previous years. The amounts to be paid under these obligations are contingent upon the achievement of stipulated financial targets by the business subsequent to acquisition. At March 31, 2020, the fair values of the contingent consideration related to certain acquisition earn-outs were based on the Company’s estimate of the applicable financial targets as per the terms of the agreements. Significant changes in the projected future operating results would result in a significantly higher or lower fair value measurement. As these are unobservable inputs, the Company’s contingent consideration is classified within Level 3 of the valuation hierarchy. Changes in the fair value of the contingent consideration obligations for the nine months ended March 31, 2020 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings (loss) and were as follows: (In millions) Fair Value Contingent consideration at June 30, 2019 $ 36 Changes in fair value (9) Contingent consideration at March 31, 2020 $ 27 |
REVENUE RECOGNITION
REVENUE RECOGNITION | 9 Months Ended |
Mar. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGNITION | NOTE 9 – REVENUE RECOGNITION The Company’s revenue recognition accounting policies are described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. Accounts Receivable Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $39 million and $32 million as of March 31, 2020 and June 30, 2019, respectively. The allowance for doubtful accounts is based upon the evaluation of accounts receivable aging, specific exposures and historical trends. Payment terms are short-term in nature and are generally less than one year. Deferred Revenue Significant changes in deferred revenue during the period are as follows: (In millions) March 31, 2020 Balance at June 30, 2019 $ 361 Revenue recognized that was included in the deferred revenue balance at the beginning of the period (268) Revenue deferred during the period 269 Balance at March 31, 2020 $ 362 Transaction Price Allocated to the Remaining Performance Obligations At March 31, 2020, the combined estimated revenue expected to be recognized in the next twelve months related to performance obligations for customer loyalty programs, gift with purchase promotions, purchase with purchase promotions and gift card liabilities that are unsatisfied (or partially unsatisfied) is $306 million. |
PENSION AND POST-RETIREMENT BEN
PENSION AND POST-RETIREMENT BENEFIT PLANS | 9 Months Ended |
Mar. 31, 2020 | |
Retirement Benefits [Abstract] | |
PENSION AND POST-RETIREMENT BENEFIT PLANS | NOTE 10 – PENSION AND POST-RETIREMENT 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 post-retirement benefit plans that provide certain medical and dental benefits to eligible employees. Descriptions of these plans are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. The components of net periodic benefit cost for the three months ended March 31, 2020 and 2019 consisted of the following: Pension Plans Other than U.S. International Post-retirement (In millions) 2020 2019 2020 2019 2020 2019 Service cost $ 9 $ 10 $ 9 $ 8 $ — $ 1 Interest cost 9 10 3 3 2 2 Expected return on plan assets (14) (15) (4) (3) — (1) Amortization of: Actuarial loss 5 3 1 — — — Special termination benefits — — 1 — — — Net periodic benefit cost $ 9 $ 8 $ 10 $ 8 $ 2 $ 2 The components of net periodic benefit cost for the nine months ended March 31, 2020 and 2019 consisted of the following: Pension Plans Other than U.S. International Post-retirement (In millions) 2020 2019 2020 2019 2020 2019 Service cost $ 29 $ 28 $ 27 $ 23 $ 2 $ 2 Interest cost 26 28 8 9 5 6 Expected return on plan assets (40) (41) (11) (10) (1) (2) Amortization of: Actuarial loss 12 8 4 2 — — Special termination benefits — — 1 — — — Net periodic benefit cost $ 27 $ 23 $ 29 $ 24 $ 6 $ 6 During the nine months ended March 31, 2020, the Company made contributions to its U.S. qualified defined benefit pension plan and international pension plans totaling $30 million and $11 million, respectively. The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following: (In millions) March 31 June 30 Other assets $ 125 $ 105 Other accrued liabilities (27) (27) Other noncurrent liabilities (430) (418) Funded status (332) (340) Accumulated other comprehensive loss 319 334 Net amount recognized $ (13) $ (6) |
CONTINGENCIES
CONTINGENCIES | 9 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
CONTINGENCIES | NOTE 11 – CONTINGENCIES Legal Proceedings The Company is involved, from time to time, in litigation and other legal proceedings incidental to its business, including employment, intellectual property, real estate, environmental, regulatory, advertising, trade relations, tax, privacy, and product liability matters (including asbestos-related claims). Management believes that the outcome of current litigation and legal proceedings will not have a material adverse effect upon the Company’s business, results of operations, financial condition or cash flows. However, management’s assessment of the Company’s current litigation and other legal proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against the Company not presently known to the Company or determinations by judges, juries or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or proceedings. Reasonably possible losses in addition to the amounts accrued for such litigation and legal proceedings are not material to the Company’s consolidated financial statements. Contingencies During the fiscal 2018 third quarter, the Company learned that some of its testing related to certain product advertising claims did not meet the Company’s standards, necessitating further validation. This review is ongoing, resulting in modifications to certain advertising claims. This is not a product safety issue and does not relate to the quality of the ingredients or the manufacturing of the Company’s products. Based on the Company’s review to date, it does not believe that this matter will be material to the Company, and no accrual has been recorded. |
STOCK PROGRAMS
STOCK PROGRAMS | 9 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
STOCK PROGRAMS | NOTE 12 – STOCK PROGRAMS Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs, and share units. Compensation expense attributable to net stock-based compensation is as follows: Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Compensation expense $ 71 $ 70 $ 210 $ 201 Income tax benefit $ 13 $ 13 $ 39 $ 38 Stock Options During the nine months ended March 31, 2020, the Company granted stock options in respect of approximately 1.3 million shares of Class A Common Stock with an exercise price per share of $199.24 and a weighted-average grant date fair value per share of $51.44. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The aggregate intrinsic value of stock options exercised during the nine months ended March 31, 2020 was $252 million. Restricted Stock Units The Company granted RSUs in respect of approximately 0.8 million shares of Class A Common Stock during the nine months ended March 31, 2020 with a weighted-average grant date fair value per share of $199.25 that, at the time of grant, were scheduled to vest as follows: 0.3 million in fiscal 2021, 0.3 million in fiscal 2022 and 0.2 million in fiscal 2023. Vesting of RSUs is generally subject to the continued employment or the retirement of the grantees. The RSUs are accompanied by dividend equivalent rights, payable upon settlement of the RSUs either in cash or shares (based on the terms of the particular award) and, as such, were valued at the closing market price of the Company’s Class A Common Stock on the date of grant. Performance Share Units During the nine months ended March 31, 2020, the Company granted PSUs with a target payout of approximately 0.1 million shares of Class A Common Stock with a grant date fair value per share of $199.18, which will be settled in stock subject to the achievement of the Company’s net sales, diluted net earnings per common share and return on invested capital goals for the three fiscal years ending June 30, 2022, all subject to continued employment or the retirement of the grantees. In January 2020 and March 2020, the Company granted PSUs with a target payout of approximately 0.1 million shares with a weighted-average grant date fair value per share of $162.15, which will be settled in stock subject to the achievement of certain net sales and net operating profit goals of certain subsidiaries of the Company for the calendar year ending 2022. For PSUs granted, no settlement will occur for results below the applicable minimum threshold. PSUs are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSUs and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant. In September 2019, approximately 0.4 million shares of the Company’s Class A Common Stock were issued, and related accrued dividends were paid, relative to the target goals set at the time of the issuance, in settlement of 0.3 million PSUs which vested as of June 30, 2019. |
NET EARNINGS (LOSS) ATTRIBUTABL
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE | 9 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE | NOTE 13 – NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC. PER COMMON SHARE Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share (“basic EPS”) is computed by dividing net earnings (loss) attributable to The Estée Lauder Companies Inc. by the weighted-average number of common shares outstanding and contingently issuable shares (which satisfy certain conditions). Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share assuming dilution (“diluted EPS”) is computed by reflecting potential dilution from stock-based awards. A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows: Three Months Ended Nine Months Ended (In millions, except per share data) 2020 2019 2020 2019 Numerator: Net earnings (loss) attributable to The Estée Lauder Companies Inc. $ (6) $ 555 $ 1,146 $ 1,628 Denominator: Weighted-average common shares outstanding – Basic 360.2 361.9 360.6 364.0 Effect of dilutive stock options — 4.6 4.6 4.8 Effect of PSUs — 0.3 0.3 0.3 Effect of RSUs — 1.5 1.6 1.8 Weighted-average common shares outstanding – Diluted 360.2 368.3 367.1 370.9 Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share: Basic $ (0.02) $ 1.53 $ 3.18 $ 4.47 Diluted $ (0.02) $ 1.51 $ 3.12 $ 4.39 For the three months ended March 31, 2020, the effects of potentially dilutive stock options, PSUs and RSUs were excluded from the computation of diluted EPS as they were anti-dilutive due to the net loss incurred during the period. As of March 31, 2020 and 2019, the number of shares of Class A Common Stock underlying options that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive was 1.3 million shares and 1.6 million shares, respectively. As of March 31, 2020 and 2019, 1.2 million and 1.3 million shares, respectively, of Class A Common Stock underlying PSUs have been excluded from the calculation of diluted EPS because the number of shares ultimately issued is contingent on the achievement of certain performance targets of the Company, as discussed in Note 12 – Stock Programs . |
EQUITY
EQUITY | 9 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
EQUITY | NOTE 14 – EQUITY Total Stockholders’ Equity – The Estée Lauder Companies Inc. Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Common stock, beginning of the period $ 6 $ 6 $ 6 $ 6 Stock-based compensation — — — — Common stock, end of the period 6 6 6 6 Paid-in capital, beginning of the period 4,615 4,162 4,403 3,972 Common stock dividends 1 — 3 — Stock-based compensation 144 169 354 359 Paid-in capital, end of the period 4,760 4,331 4,760 4,331 Retained earnings, beginning of the period 10,775 9,586 9,984 9,040 Common stock dividends (174) (157) (506) (455) Net earnings (loss) attributable to The Estée Lauder Companies Inc. (6) 555 1,146 1,628 Cumulative effect of adoption of new accounting standards — — (29) (229) Retained earnings, end of the period 10,595 9,984 10,595 9,984 Accumulated other comprehensive loss, beginning of the period (569) (430) (563) (434) Other comprehensive loss (143) (68) (149) (64) Accumulated other comprehensive loss, end of the period (712) (498) (712) (498) Treasury stock, beginning of the period (10,253) (9,018) (9,444) (7,896) Acquisition of treasury stock (65) (215) (768) (1,248) Stock-based compensation (2) (2) (108) (91) Treasury stock, end of the period (10,320) (9,235) (10,320) (9,235) Total stockholders’ equity – The Estée Lauder Companies Inc. 4,329 4,588 4,329 4,588 Noncontrolling interests, beginning of the period 27 27 25 22 Net earnings attributable to noncontrolling interests 2 2 9 8 Distribution to noncontrolling interest holders — — (4) — Other comprehensive loss — — (1) (1) Noncontrolling interests, end of the period 29 29 29 29 Total equity $ 4,358 $ 4,617 $ 4,358 $ 4,617 Cash dividends declared per common share $ .48 $ .43 $ 1.39 $ 1.24 The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the nine months ended March 31, 2020: Date Declared Record Date Payable Date Amount per Share August 16, 2019 August 30, 2019 September 16, 2019 $ .43 October 30, 2019 November 29, 2019 December 16, 2019 $ .48 February 5, 2020 February 28, 2020 March 16, 2020 $ .48 Common Stock During the nine months ended March 31, 2020, the Company purchased approximately 4.6 million shares of its Class A Common Stock for $883 million. Beginning in early February 2020, the Company temporarily suspended its repurchase of shares of the Company's Class A Common Stock, and may resume repurchases in the future. During the nine months ended March 31, 2020, approximately 4.3 million shares of the Company’s Class B Common Stock were converted into the same amount of shares of the Company’s Class A Common Stock. Accumulated Other Comprehensive Income (Loss) The following table represents changes in AOCI, net of tax, by component for the nine months ended March 31, 2020: (In millions) Net Cash Flow Hedge Gain (Loss) Amounts Included in Net Periodic Benefit Cost Translation Adjustments Total Balance at June 30, 2019 $ 21 $ (253) $ (331) $ (563) OCI before reclassifications 29 (1) (1) (170) (2) (142) Amounts reclassified to Net earnings (loss) (22) 13 2 (7) Net current-period OCI 7 12 (168) (149) Balance at March 31, 2020 $ 28 $ (241) $ (499) $ (712) ______________________________________________ (1) Consists of foreign currency translation losses. (2) See Note 7 – Derivative Financial Instruments for gains (losses) relating to net investment hedges. The following table represents the effects of reclassification adjustments from AOCI into net earnings (loss) for the three and nine months ended March 31, 2020 and 2019: Amount Reclassified from AOCI Affected Line Item in Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Gain (Loss) on Investments Gain (loss) on investments $ — $ (6) $ — $ (6) Other income, net Benefit (provision) for deferred taxes — — — — Provision for income taxes $ — $ (6) $ — $ (6) Net earnings (loss) Gain (Loss) on Cash Flow Hedges Foreign currency forward contracts $ 10 $ 8 $ 29 $ 15 Net sales Interest rate-related derivatives — 1 — 1 Interest expense 10 9 29 16 Benefit (provision) for deferred taxes (2) (2) (7) (4) Provision for income taxes $ 8 $ 7 $ 22 $ 12 Net earnings (loss) Amounts Included in Net Periodic Benefit Cost Amortization of actuarial loss $ (6) $ (3) $ (16) $ (10) Earnings before income taxes (1) Benefit for deferred taxes 1 1 3 3 Provision for income taxes $ (5) $ (2) $ (13) $ (7) Net earnings (loss) Cumulative Translation Adjustments Gain on previously held equity method investment $ — $ — $ 4 $ — Other income, net Loss on liquidation of an investment in a foreign subsidiary — — (6) — Restructuring and other charges Gain on liquidation of an investment in a foreign subsidiary — 77 — 77 Other income, net $ — $ 77 $ (2) $ 77 Net earnings (loss) Total reclassification adjustments, net $ 3 $ 76 $ 7 $ 76 Net earnings (loss) ______________________________________________ (1) See Note 10 – Pension and Post-Retirement Benefit Plans for additional information. |
STATEMENT OF CASH FLOWS
STATEMENT OF CASH FLOWS | 9 Months Ended |
Mar. 31, 2020 | |
Supplemental Cash Flow Elements [Abstract] | |
STATEMENT OF CASH FLOWS | NOTE 15 – STATEMENT OF CASH FLOWS Supplemental cash flow information for the nine months ended March 31, 2020 and 2019 is as follows: (In millions) 2020 2019 Cash: Cash paid during the period for interest $ 94 $ 99 Cash paid during the period for income taxes $ 472 $ 400 Non-cash investing and financing activities: Capital lease, capitalized interest and asset retirement obligations incurred $ — $ 8 Property, plant and equipment accrued but unpaid $ 47 $ 39 |
SEGMENT DATA AND RELATED INFORM
SEGMENT DATA AND RELATED INFORMATION | 9 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
SEGMENT DATA AND RELATED INFORMATION | NOTE 16 – 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 operates in one business segment, beauty products, management also evaluates performance on a product category basis. Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and earnings before income taxes, other components of net periodic benefit cost, interest expense, interest income and investment income, net, other income, net, and charges associated with restructuring and other activities. Returns and charges associated with restructuring and other activities are not allocated to the product categories because they result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select corporate functions and go-to-market structures. During the fiscal 2020 first quarter, changes were made to reflect certain Leading Beauty Forward enhancements made to the capabilities and cost structure of the Company’s travel retail business, which are primarily centralized in The Americas region, and resulted in a change to the royalty structure of the travel retail business to reflect the value created in The Americas region. Accordingly, the fiscal 2019 operating income of The Americas was increased, with a corresponding decrease in Europe, the Middle East & Africa, by $229 million and $640 million for the three and nine months ended March 31, 2019, respectively, to conform with the current year methodology and presentation. The accounting policies for the Company’s reportable segments are substantially the same as those for the consolidated financial statements, as described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. 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. Other than the changes in total assets as a result of the acquisition discussed in Note 2 - Acquisition of Business , which impacted the Asia/Pacific region, and the goodwill and other intangible asset impairments discussed in Note 3 – Goodwill and Other Intangible Assets , which impacted The Americas region, there has been no significant variance in the total or long-lived asset values associated with the Company’s segment data since June 30, 2019. Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 PRODUCT CATEGORY DATA Net sales: Skin Care $ 1,723 $ 1,744 $ 5,770 $ 4,962 Makeup 1,146 1,461 4,249 4,427 Fragrance 349 392 1,392 1,401 Hair Care 119 136 417 433 Other 8 13 36 52 3,345 3,746 11,864 11,275 Returns associated with restructuring and other activities — (2) — (2) Net sales $ 3,345 $ 3,744 $ 11,864 $ 11,273 Operating income (loss) before charges associated with restructuring and other activities: Skin Care $ 418 $ 593 $ 1,822 $ 1,624 Makeup (283) 99 (790) 398 Fragrance — 17 163 156 Hair Care (2) (2) 10 27 Other 1 2 7 9 134 709 1,212 2,214 Reconciliation: Charges associated with restructuring and other activities (25) (35) (63) (117) Interest expense (42) (32) (112) (101) Interest income and investment income, net 14 15 41 42 Other components of net periodic benefit cost (1) (1) (3) (1) Other income, net — 71 576 71 Earnings before income taxes $ 80 $ 727 $ 1,651 $ 2,108 GEOGRAPHIC DATA (1) Net sales: The Americas $ 892 $ 1,155 $ 3,278 $ 3,609 Europe, the Middle East & Africa 1,525 1,625 5,281 4,825 Asia/Pacific 928 966 3,305 2,841 3,345 3,746 11,864 11,275 Returns associated with restructuring and other activities — (2) — (2) Net sales $ 3,345 $ 3,744 $ 11,864 $ 11,273 Operating income (loss): The Americas $ (217) $ 200 $ (571) $ 583 Europe, the Middle East & Africa 202 265 1,084 940 Asia/Pacific 149 244 699 691 134 709 1,212 2,214 Charges associated with restructuring and other activities (25) (35) (63) (117) Operating income $ 109 $ 674 $ 1,149 $ 2,097 ______________________________________________ (1) The net sales and operating income from the Company’s travel retail business are included in the Europe, the Middle East & Africa region. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 17 – SUBSEQUENT EVENTS Debt In April 2020, the Company completed a public offering of $700 million aggregate principal amount of its 2.600% Senior Notes due April 15, 2030. The Company intends to use the proceeds from this offering for general corporate purposes, which may include operating expenses, working capital, capital expenditures and redemption and repayment of short-term or long-term borrowings, including outstanding commercial paper as it matures. Also in April 2020, the Company repaid the $200 million in commercial paper that was outstanding at March 31, 2020 and borrowed the remaining $200 million under its existing $1,500 million revolving credit facility. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated. The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal recurring nature 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 full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. Certain amounts in the consolidated financial statements of prior years have been reclassified to conform to current year presentation. |
COVID-19 Business Update | COVID-19 Business UpdateDuring the third quarter of fiscal 2020, the outbreak and global spread of COVID-19 caused a significant disruption in the Company’s operating environment. Accordingly, the Company modified a number of its business practices, in part due to legislation, executive orders and guidance from government entities and healthcare authorities. These include the temporary closing of businesses deemed “non-essential,” travel bans and restrictions, social distancing and quarantines. The Company will continue to monitor the impact of COVID-19 on its consolidated financial statements. |
Management Estimates | Management Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods. |
Currency Translation and Transactions | Currency Translation and Transactions All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at weighted-average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as cumulative translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $(173) million and $2 million, net of tax, during the three months ended March 31, 2020 and 2019, respectively, and $(170) million and $(11) million, net of tax, during the nine months ended March 31, 2020 and 2019, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity. In fiscal 2019, the Company had an investment in a foreign subsidiary that owned the Company’s available-for-sale securities. During the three months ended March 31, 2019, the Company sold its available-for-sale securities, which liquidated this investment in the foreign subsidiary. As a result, the Company recorded a realized foreign currency gain on liquidation of $77 million and a gross loss on the sale of available-for-sale securities of $6 million, both of which were reclassified from accumulated OCI (“AOCI”) to Other income, net in the accompanying consolidated statements of earnings (loss). The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. Beginning in the first quarter of fiscal 2020, the Company entered into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 7 – Derivative Financial Instruments for further discussion . The Company categorizes these instruments as entered into for purposes other than trading. The accompanying consolidated statements of earnings (loss) include net exchange gains on foreign currency transactions of $15 million and $73 million during the three months ended March 31, 2020 and 2019, respectively, and $40 million and $52 million during the nine months ended March 31, 2020 and 2019, respectively. |
Concentration of Credit Risk | Concentration of Credit RiskThe Company is a worldwide manufacturer, marketer and distributor of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to department stores, perfumeries, specialty multi-brand retailers and retailers in its travel retail business. The Company grants credit to qualified customers. As a result of COVID-19, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of COVID-19 on its customers' abilities, individually and collectively, to make timely payments. |
Inventory and Promotional Merchandise | Inventory and Promotional Merchandise Inventory and promotional merchandise consists of: (In millions) March 31 June 30 Raw materials $ 540 $ 541 Work in process 261 268 Finished goods 1,106 981 Promotional merchandise 180 216 $ 2,087 $ 2,006 |
Property, Plant and Equipment | Property, Plant and Equipment (In millions) March 31 June 30 Assets (Useful Life) Land $ 33 $ 29 Buildings and improvements (10 to 40 years) 385 337 Machinery and equipment (3 to 10 years) 840 811 Computer hardware and software (4 to 10 years) 1,297 1,264 Furniture and fixtures (5 to 10 years) 117 116 Leasehold improvements 2,370 2,274 5,042 4,831 Less accumulated depreciation and amortization (2,950) (2,763) $ 2,092 $ 2,068 |
Income Taxes | Income Taxes The effective rate for income taxes was 105.0% and 23.4% for the three months ended March 31, 2020 and 2019, respectively, and 30.0% and 22.4% for the nine months ended March 31, 2020 and 2019, respectively. The increase in the effective tax rate in both periods was primarily attributable to the impact of nondeductible goodwill impairment charges associated with the Company’s Too Faced, BECCA and Smashbox reporting units, a higher effective tax rate on the Company’s foreign operations and the lower amount of earnings before income taxes, which increases the impact of the nondeductible charges. As of March 31, 2020 and June 30, 2019, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $69 million and $67 million, respectively. The total amount of unrecognized tax benefits at March 31, 2020 that, if recognized, would affect the effective tax rate was $52 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and nine months ended March 31, 2020 in the accompanying consolidated statements of earnings (loss) was $1 million and $3 million, respectively. At March 31, 2020 and June 30, 2019, the total gross accrued interest and penalties in the accompanying consolidated balance sheets was $13 million and $12 million, respectively. On the basis of the information available as of March 31, 2020, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months. |
Other Accrued Liabilities | Other Accrued Liabilities Other accrued liabilities consist of the following: (In millions) March 31 June 30 Advertising, merchandising and sampling $ 405 $ 352 Employee compensation 379 574 Deferred revenue 306 314 Other 1,531 1,359 $ 2,621 $ 2,599 |
Recently Adopted and Issued Accounting Standards | Recently Adopted Accounting Standards Leases (Accounting Standards Codification (“ASC”) Topic 842 – Leases (“ASC 842”)) In February 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires lessees to account for most leases on their balance sheets with the liability being equal to the present value of the lease payments. The right-of-use asset is based on the lease liability adjusted for certain costs such as initial direct costs, prepaid lease payments and lease incentives received. Lease expense is recognized similar to previous accounting guidance with operating leases resulting in a straight-line expense, and finance leases resulting in a front-loaded expense similar to the previous accounting for capital leases. In July 2018, the FASB amended this guidance to clarify certain narrow aspects of the new lease accounting standard that may have been incorrectly or inconsistently applied, and did not add new guidance. Also, in July 2018, the FASB issued authoritative guidance that allows companies to elect to adopt the new standard using a modified retrospective transition approach with a cumulative-effect adjustment to retained earnings in the period of adoption. Companies that elect the new adoption method were not required to restate the prior comparative periods in the financial statements. Effective for the Company – Fiscal 2020 first quarter. An entity is permitted to apply the foregoing guidance using either of the modified retrospective transition approaches described in the standard, with certain practical expedients. Impact on consolidated financial statements – On July 1, 2019, the Company adopted ASC 842, see Note 4 – Leases for further discussion . Recently Issued Accounting Standards FASB Staff Question-and-Answer Document (Q&A): ASC Topic 842 and ASC Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic In April 2020, the FASB issued a Staff Q&A that focuses on the application of the lease guidance for lease concessions related solely to the effects of COVID-19. The FASB issued the guidelines to reduce the burden and complexity for companies to account for such lease concessions (e.g., rent abatements or other economic incentives) under current lease accounting rules due to COVID-19 by providing certain practical expedients that can be used. Effective for the Company – The Company can immediately apply the optional accounting for lease concessions related to the effects of COVID-19 as of April 2020. Impact on consolidated financial statements – The Company is currently assessing the impact of applying this guidance on its lease arrangements and expects to adopt this guidance in the fiscal 2020 fourth quarter. Reference Rate Reform (ASC Topic 848) (Accounting Standards Update (“ASU”) 2020-04 - Facilitation of the Effects of Reference Rate Reform on Financial Reporting) In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as LIBOR, which is expected to be phased out at the end of calendar 2021, and applies to lease contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that have LIBOR as the benchmark rate. Effective for the Company – This guidance can be applied for a limited time, as of the beginning of the interim period that includes March 12, 2020 or any date thereafter, through December 31, 2022. The guidance will no longer be available to apply after December 31, 2022. Impact on consolidated financial statements – The Company is currently assessing the impact of applying this guidance on its existing derivative contracts, leases and other arrangements, as well as when to adopt this guidance. Measurement of Credit Losses on Financial Instruments (ASC Topic 326 – Financial Instruments – Credit Losses) In June 2016, the FASB issued authoritative guidance that requires companies to utilize an impairment model for most financial assets measured at amortized cost and certain other financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses. In addition, this guidance changes the recognition method for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk, and requires additional disclosures. In general, modified retrospective adoption will be required for all outstanding instruments that fall under this guidance. In November 2019, the FASB issued authoritative guidance (ASU 2019-11 – Codification Improvements to Topic 326, Financial Instruments – Credit Losses) that amends ASC Topic 326 to clarify, improve and amend certain aspects of this guidance, such as disclosures related to accrued interest receivables and the estimation of credit losses associated with financial assets secured by collateral. In February 2020, the FASB issued authoritative guidance (ASU 2020-02 – Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842)) that amends and clarifies Topic 326 and Topic 842. For Topic 326, the codification was updated to include the Securities and Exchange Commission staff interpretations associated with registrants engaged in lending activities. Effective for the Company – Fiscal 2021 first quarter. Impact on consolidated financial statements – The Company is currently evaluating the impact of applying this guidance on its financial instruments, such as accounts receivable. While the Company’s evaluation is ongoing, we are also assessing the impact that COVID-19 will have on the adoption of this standard on its consolidated financial statements. Goodwill and Other – Internal-Use Software (ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract) In August 2018, the FASB issued authoritative guidance that permits companies to capitalize the costs incurred for setting up business systems that operate on cloud technology. The new guidance aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance does not affect the accounting for the service element of a hosting arrangement that is a service contract. Capitalized costs associated with a hosting arrangement that is a service contract must be amortized over the term of the hosting arrangement to the same line item in the income statement as the expense for fees for the hosting arrangement. Effective for the Company – Fiscal 2021 first quarter, with early adoption permitted in any interim period. This guidance can be adopted either retrospectively, or prospectively to all implementation costs incurred after the date of adoption. Impact on consolidated financial statements – The Company has determined that it will adopt this guidance on a prospective basis to all implementation costs incurred after the date of adoption and is currently evaluating the impact of applying this guidance to its business systems that operate on cloud technology. While the Company’s evaluation is ongoing, the adoption of this standard is not expected to have a material impact on its consolidated financial statements. Income Taxes (ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes) In December 2019, the FASB issued authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas. Effective for the Company – Fiscal 2022 first quarter, with early adoption permitted in any interim period. If adopted early, the Company must adopt all the amendments in the same period. The amendments have differing adoption methods including retrospectively, prospectively and/or modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, depending on the specific change. Impact on consolidated financial statements – The Company is currently evaluating the impact of applying this guidance and believes that it has transactions that may fall under the scope. No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of inventory and promotional merchandise | Inventory and promotional merchandise consists of: (In millions) March 31 June 30 Raw materials $ 540 $ 541 Work in process 261 268 Finished goods 1,106 981 Promotional merchandise 180 216 $ 2,087 $ 2,006 |
Schedule of property, plant and equipment | (In millions) March 31 June 30 Assets (Useful Life) Land $ 33 $ 29 Buildings and improvements (10 to 40 years) 385 337 Machinery and equipment (3 to 10 years) 840 811 Computer hardware and software (4 to 10 years) 1,297 1,264 Furniture and fixtures (5 to 10 years) 117 116 Leasehold improvements 2,370 2,274 5,042 4,831 Less accumulated depreciation and amortization (2,950) (2,763) $ 2,092 $ 2,068 |
Schedule of other accrued liabilities | Other accrued liabilities consist of the following: (In millions) March 31 June 30 Advertising, merchandising and sampling $ 405 $ 352 Employee compensation 379 574 Deferred revenue 306 314 Other 1,531 1,359 $ 2,621 $ 2,599 |
ACQUISITION OF BUSINESS (Tables
ACQUISITION OF BUSINESS (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Business Combinations [Abstract] | |
Preliminary allocation of total consideration transferred | The preliminary allocation of the total consideration transferred, including immaterial measurement period adjustments as of March 31, 2020, has been recorded as follows: (In millions, unaudited) Cash $ 228 Accounts receivable 13 Inventory 91 Other current assets 5 Property, plant and equipment 3 Right-of-use assets 3 Intangible assets 1,427 Goodwill 573 Other long-term assets 4 Total assets acquired 2,347 Accounts payable 15 Other accrued liabilities 25 Deferred income taxes 352 Lease liability 1 Total liabilities assumed 393 Total consideration transferred $ 1,954 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill by product category and related change in the carrying amount | The following table presents goodwill by product category and the related change in the carrying amount: (In millions) Skin Care Makeup Fragrance Hair Care Total Balance as of June 30, 2019 Goodwill $ 185 $ 1,199 $ 254 $ 390 $ 2,028 Accumulated impairments (36) (68) (22) (34) (160) 149 1,131 232 356 1,868 Goodwill acquired during the period 573 10 — — 583 Impairment charges (52) (734) — — (786) Translation adjustments, goodwill (30) — (2) (2) (34) Translation adjustments, accumulated impairments 1 — — 1 2 492 (724) (2) (1) (235) Balance as of March 31, 2020 Goodwill 728 1,209 252 388 2,577 Accumulated impairments (87) (802) (22) (33) (944) $ 641 $ 407 $ 230 $ 355 $ 1,633 |
Schedule of other intangible assets, by type | Other intangible assets consist of the following: March 31, 2020 June 30, 2019 (In millions) Gross Carrying Value Accumulated Amortization Total Net Book Value Gross Carrying Value Accumulated Amortization Total Net Book Value Amortizable intangible assets: Customer lists and other $ 1,482 $ 411 $ 1,071 $ 684 $ 369 $ 315 License agreements 43 43 — 43 43 — $ 1,525 $ 454 $ 1,071 $ 727 $ 412 $ 315 Non-amortizable intangible assets: Trademarks 1,119 888 Total intangible assets $ 2,190 $ 1,203 |
Estimated aggregate amortization expense for the remainder of the current fiscal year and the next four years | The estimated aggregate amortization expense for the remainder of fiscal 2020 and for each of the next four fiscal years is as follows: Fiscal (In millions) 2020 2021 2022 2023 2024 Estimated aggregate amortization expense $ 30 $ 104 $ 103 $ 103 $ 101 |
Summary of impairment charges and remaining trademark and goodwill carrying values | A summary of the impairment charges for the three and nine months ended March 31, 2020 and the remaining trademark and goodwill carrying values as of March 31, 2020, for each reporting unit, are as follows: Impairment Charge (In millions) Three Months Ended Nine Months Ended Carrying Value Reporting Unit: Product Category Region Trademark Goodwill Trademark Goodwill Trademark Goodwill Too Faced Makeup The Americas $ 42 $ 162 $ 253 $ 592 $ 272 $ 13 BECCA Makeup The Americas 14 35 47 70 51 28 Smashbox Makeup The Americas 1 26 23 72 32 — GLAMGLOW Skin care The Americas 1 52 1 52 62 62 Total $ 58 $ 275 $ 324 $ 786 $ 417 $ 103 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Summary of total lease costs and other information | A summary of total lease costs and other information for the periods relating to the Company’s finance and operating leases is as follows: (In millions) Three Months Ended Nine Months Ended Total lease cost Finance lease cost: Amortization of right-of-use assets $ 3 $ 9 Interest on lease liabilities — — Operating lease cost 150 383 Short-term lease cost 5 20 Variable lease cost 41 133 Total $ 199 $ 545 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 350 Financing cash flows from finance leases $ 10 Right-of-use assets obtained in exchange for new operating lease liabilities $ 216 Weighted-average remaining lease term – finance leases 2 years Weighted-average remaining lease term – operating leases 11 years Weighted-average discount rate – finance leases 2.7 % Weighted-average discount rate – operating leases 2.5 % |
Schedule of total future minimum lease payments, over the remaining lease term, relating to operating leases | The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating and finance leases for the remainder of fiscal 2020 and for each of the next four fiscal years and thereafter is as follows: (In millions) Operating Leases Finance Leases Remainder of fiscal 2020 $ 113 $ 4 Fiscal 2021 397 7 Fiscal 2022 364 3 Fiscal 2023 324 1 Fiscal 2024 291 — Thereafter 1,586 — Total future minimum lease payments 3,075 15 Less imputed interest (416) — Total $ 2,659 $ 15 |
Schedule of total future minimum lease payments, over the remaining lease term, relating to finance leases | The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating and finance leases for the remainder of fiscal 2020 and for each of the next four fiscal years and thereafter is as follows: (In millions) Operating Leases Finance Leases Remainder of fiscal 2020 $ 113 $ 4 Fiscal 2021 397 7 Fiscal 2022 364 3 Fiscal 2023 324 1 Fiscal 2024 291 — Thereafter 1,586 — Total future minimum lease payments 3,075 15 Less imputed interest (416) — Total $ 2,659 $ 15 |
Schedule of operating lease and finance lease liabilities included in the consolidated balance sheet | Operating lease and finance lease liabilities included in the consolidated balance sheet are as follows: March 31, 2020 (In millions) Operating Leases Finance Leases Total current liabilities $ 371 $ 9 Total noncurrent liabilities 2,288 6 Total $ 2,659 $ 15 |
Scheduled maturities of the Company's contractual obligations relating to operating leases for which cash flows are fixed and determinable | The following table summarizes scheduled maturities of the Company’s contractual obligations relating to operating leases for which cash flows are fixed and determinable as of June 30, 2019: (In millions) Payments Due in Fiscal Year (1) Fiscal 2020 $ 421 Fiscal 2021 383 Fiscal 2022 348 Fiscal 2023 316 Fiscal 2024 289 Thereafter 1,625 Total contractual obligations $ 3,382 ______________________________________________ (1) Minimum operating lease commitments only include base rent. Certain leases provide for contingent rents that are not measurable at inception and primarily include rents based on a percentage of sales in excess of stipulated levels, as well as common area maintenance. These amounts are excluded from minimum operating lease commitments and are included in the determination of total rent expense when it is probable that the expense has been incurred and the amount is reasonably measurable. Such amounts have not been material to total rent expense. |
CHARGES ASSOCIATED WITH RESTR_2
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES | |
Schedule of total cumulative charges by type recorded associated with restructuring and other activities | (In millions) Employee- Asset- Contract Other Exit Total Restructuring Charges (Adjustments) Cumulative through June 30, 2019 $ 445 $ 4 $ 3 $ 5 $ 457 Nine months ended March 31, 2020 (5) 19 5 1 20 Cumulative through March 31, 2020 $ 440 $ 23 $ 8 $ 6 $ 477 |
Leading Beauty Forward | |
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES | |
Schedule of total cumulative charges expected to be incurred associated with restructuring and other activities | The approved restructuring and other charges expected to be incurred were: Sales Cost of Sales Operating Expenses Total (In millions) Restructuring Other Total Charges Approved Cumulative through March 31, 2020 $ 14 $ 88 $ 507 $ 358 $ 967 |
Schedule of total cumulative charges by type approved associated with restructuring initiatives | (In millions) Employee- Asset- Contract Other Exit Total Restructuring Charges Approved Cumulative through March 31, 2020 $ 461 $ 7 $ 25 $ 14 $ 507 |
Schedule of total cumulative charges recorded associated with restructuring and other activities | Total cumulative charges recorded associated with restructuring and other activities for LBF were: (In millions) Sales Cost of Sales Operating Expenses Total Restructuring Other Total Charges Cumulative through June 30, 2019 $ 14 $ 55 $ 457 $ 265 $ 791 Nine months ended March 31, 2020 — 9 20 34 63 Cumulative through March 31, 2020 $ 14 $ 64 $ 477 $ 299 $ 854 |
Schedule of changes in accrued restructuring charges | Changes in accrued restructuring charges for the nine months ended March 31, 2020 were: (In millions) Employee- Related Costs Asset- Related Costs Contract Terminations Other Exit Costs Total Balance at June 30, 2019 $ 202 $ — $ — $ 1 $ 203 Charges (adjustments) (5) 19 5 1 20 Cash payments (74) — (5) (2) (81) Translation adjustments (2) — — — (2) Non-cash asset write-offs — (19) — — (19) Balance at March 31, 2020 $ 121 $ — $ — $ — $ 121 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt | These recently issued notes are summarized as follows: Notes Issue Date Price Yield Unamortized Debt Semi-annual ($ in millions) 2024 Senior Notes November 2019 99.421 % 2.122 % $ 3 $ 3 June 1/December 1 2029 Senior Notes (1) November 2019 99.046 2.483 6 4 June 1/December 1 2049 Senior Notes November 2019 98.769 3.189 8 7 June 1/December 1 ______________________________________________ (1) In April and May 2019, in anticipation of the issuance of the 2029 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $500 million at a weighted-average all-in rate of 2.50%. The treasury lock agreements were settled upon the issuance of the new debt, and the Company recognized a loss in OCI of $33 million that is being amortized to interest expense over the life of the 2029 Senior Notes. As a result of the treasury lock agreements, as well as the debt discount and debt issuance costs, the effective interest rate on the 2029 Senior Notes will be 3.15% over the life of the debt. |
DERIVATIVE FINANCIAL INSTRUME_2
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of fair values of the derivative financial instruments included in the consolidated balance sheets | The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are as follows: Asset Derivatives Liability Derivatives Fair Value (1) Fair Value (1) (In millions) Balance Sheet Location March 31 June 30 Balance Sheet Location March 31 June 30 Derivatives Designated as Hedging Instruments Foreign currency cash flow hedges Prepaid expenses and other current assets $ 48 $ 23 Other accrued liabilities $ 3 $ 4 Net investment hedges Prepaid expenses and other current assets — — Other accrued liabilities 17 — Interest rate-related derivatives Prepaid expenses and other current assets 14 3 Other accrued liabilities 1 26 Total Derivatives Designated as Hedging Instruments 62 26 21 30 Derivatives Not Designated as Hedging Instruments Foreign currency forward contracts Prepaid expenses and other current assets 24 4 Other accrued liabilities 24 2 Total derivatives $ 86 $ 30 $ 45 $ 32 ______________________________________________ (1) See Note 8 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined. |
Schedule of gains and losses related to derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness | The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows: Amount of Gain or (Loss) Location of Gain or Amount of Gain or (Loss) Reclassified from AOCI into Earnings (1) Three Months Ended Three Months Ended (In millions) 2020 2019 2020 2019 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ 46 $ 2 Net sales $ 10 $ 8 Interest rate-related derivatives (2) — Interest expense — 1 44 2 Total derivatives $ 10 $ 9 Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) (20) — Total derivatives $ 24 $ 2 ______________________________________________ (1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material. (2) During the three months ended March 31, 2020, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $12 million. (3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets. Amount of Gain or (Loss) Location of Gain or Amount of Gain or (Loss) Reclassified from AOCI into Earnings (1) Nine Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ 50 $ 18 Net sales $ 29 $ 15 Interest rate-related derivatives (11) — Interest expense — 1 39 18 Total derivatives $ 29 $ 16 Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) (54) — Total derivatives $ (15) $ 18 ______________________________________________ (1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material. (2) During the nine months ended March 31, 2020, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $37 million. (3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets. Amount of Gain or (Loss) Recognized in Earnings on Derivatives (1) Location of Gain or (Loss) Recognized in Earnings on Derivatives Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Derivatives in Fair Value Hedging Relationships: Interest rate swap contracts Interest expense $ 12 $ 8 $ 13 $ 17 ______________________________________________ (1) Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt. |
Schedule of cumulative amount of fair value hedging adjustments for designated and qualifying hedged items | Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows: (In millions) Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included Carrying Amount of the Cumulative Amount of Fair March 31, 2020 March 31, 2020 Current debt $ — $ — Long-term debt 713 14 Total debt $ 713 $ 14 |
Schedule of effects of fair value and cash flow hedging relationships for designated and qualified hedging instruments | Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows: Three Months Ended March 31 2020 2019 (In millions) Net Sales Interest Net Sales Interest Total amounts of income and expense line items presented in the consolidated statements of earnings (loss) in which the effects of fair value and cash flow hedges are recorded $ 3,345 $ 42 $ 3,744 $ 32 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable (12) Not applicable (8) Derivatives designated as hedging instruments Not applicable 12 Not applicable 8 Gain (loss) on cash flow hedge relationships – interest rate contracts: Amount of gain reclassified from AOCI into earnings Not applicable — Not applicable 1 Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: Amount of gain reclassified from AOCI into earnings 10 Not applicable 8 Not applicable Nine Months Ended March 31 2020 2019 (In millions) Net Sales Interest Expense Net Sales Interest Expense Total amounts of income and expense line items presented in the consolidated statements of earnings (loss) in which the effects of fair value and cash flow hedges are recorded $ 11,864 $ 112 $ 11,273 $ 101 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable (13) Not applicable (17) Derivatives designated as hedging instruments Not applicable 13 Not applicable 17 Gain (loss) on cash flow hedge relationships – interest rate contracts: Amount of gain reclassified from AOCI into earnings Not applicable — Not applicable 1 Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: Amount of gain reclassified from AOCI into earnings 29 Not applicable 15 Not applicable |
Schedule of gains and losses related to derivative financial instruments not designated as hedging instruments | The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows: Amount of Gain or (Loss) Location of Gain or (Loss) Recognized in Earnings on Derivatives Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Selling, general and administrative $ 49 $ (12) $ 52 $ (2) |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of financial assets and liabilities measured at fair value on a recurring basis | The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2020: (In millions) Level 1 Level 2 Level 3 Total Assets: Foreign currency forward contracts $ — $ 72 $ — $ 72 Interest rate-related derivatives — 14 — 14 Total $ — $ 86 $ — $ 86 Liabilities: Foreign currency forward contracts $ — $ 44 $ — $ 44 Interest rate-related derivatives — 1 — 1 Contingent consideration — — 27 27 Total $ — $ 45 $ 27 $ 72 The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2019: (In millions) Level 1 Level 2 Level 3 Total Assets: Foreign currency forward contracts $ — $ 27 $ — $ 27 Interest rate-related derivatives — 3 — 3 Total $ — $ 30 $ — $ 30 Liabilities: Foreign currency forward contracts $ — $ 6 $ — $ 6 Interest rate-related derivatives — 26 — 26 Contingent consideration — — 36 36 Total $ — $ 32 $ 36 $ 68 |
Schedule of estimated fair values of financial instruments | The estimated fair values of the Company’s financial instruments are as follows: March 31 June 30 (In millions) Carrying Amount Fair Value Carrying Amount Fair Value Nonderivatives Cash and cash equivalents $ 4,876 $ 4,876 $ 2,987 $ 2,987 Current and long-term debt 6,201 6,454 3,412 3,706 Additional purchase price payable — — 3 3 Contingent consideration 27 27 36 36 Derivatives Foreign currency forward contracts – asset (liability), net 28 28 21 21 Interest rate-related derivatives – asset (liability), net 13 13 (23) (23) |
Impairment charges measured at fair value on a nonrecurring basis, classified as Level 3 | The following table presents the Company’s impairment charges for the nine months ended March 31, 2020 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test: (In millions) Impairment charges Date of Fair Value Fair Value (1) Goodwill $ 786 March 31, 2020 $ 103 Other intangible assets, net (trademark) 324 March 31, 2020 417 Long-lived assets 13 March 31, 2020 11 Total $ 1,123 $ 531 ______________________________________________ (1) See Note 3 – Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs. The following table presents the Company’s impairment charges for the nine months ended March 31, 2019 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test: (In millions) Impairment charges Date of Fair Value Measurement Fair Value (1) Goodwill $ 68 March 31, 2019 $ 72 Other intangible assets, net (trademark) 22 March 31, 2019 55 Total $ 90 $ 127 ______________________________________________ (1) See Note 3 – Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs. |
Changes in the fair value of the contingent consideration obligations | Changes in the fair value of the contingent consideration obligations for the nine months ended March 31, 2020 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings (loss) and were as follows: (In millions) Fair Value Contingent consideration at June 30, 2019 $ 36 Changes in fair value (9) Contingent consideration at March 31, 2020 $ 27 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of significant changes in deferred revenue | Significant changes in deferred revenue during the period are as follows: (In millions) March 31, 2020 Balance at June 30, 2019 $ 361 Revenue recognized that was included in the deferred revenue balance at the beginning of the period (268) Revenue deferred during the period 269 Balance at March 31, 2020 $ 362 |
PENSION AND POST-RETIREMENT B_2
PENSION AND POST-RETIREMENT BENEFIT PLANS (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Retirement Benefits [Abstract] | |
Schedule of components of net periodic benefit cost for pension and other post-retirement benefit plans | The components of net periodic benefit cost for the three months ended March 31, 2020 and 2019 consisted of the following: Pension Plans Other than U.S. International Post-retirement (In millions) 2020 2019 2020 2019 2020 2019 Service cost $ 9 $ 10 $ 9 $ 8 $ — $ 1 Interest cost 9 10 3 3 2 2 Expected return on plan assets (14) (15) (4) (3) — (1) Amortization of: Actuarial loss 5 3 1 — — — Special termination benefits — — 1 — — — Net periodic benefit cost $ 9 $ 8 $ 10 $ 8 $ 2 $ 2 The components of net periodic benefit cost for the nine months ended March 31, 2020 and 2019 consisted of the following: Pension Plans Other than U.S. International Post-retirement (In millions) 2020 2019 2020 2019 2020 2019 Service cost $ 29 $ 28 $ 27 $ 23 $ 2 $ 2 Interest cost 26 28 8 9 5 6 Expected return on plan assets (40) (41) (11) (10) (1) (2) Amortization of: Actuarial loss 12 8 4 2 — — Special termination benefits — — 1 — — — Net periodic benefit cost $ 27 $ 23 $ 29 $ 24 $ 6 $ 6 |
Schedule of amounts recognized in the consolidated balance sheets related to the Company's pension and post-retirement benefit plans | The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following: (In millions) March 31 June 30 Other assets $ 125 $ 105 Other accrued liabilities (27) (27) Other noncurrent liabilities (430) (418) Funded status (332) (340) Accumulated other comprehensive loss 319 334 Net amount recognized $ (13) $ (6) |
STOCK PROGRAMS (Tables)
STOCK PROGRAMS (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of stock-based compensation expense and related income tax benefits | Compensation expense attributable to net stock-based compensation is as follows: Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Compensation expense $ 71 $ 70 $ 210 $ 201 Income tax benefit $ 13 $ 13 $ 39 $ 38 |
NET EARNINGS (LOSS) ATTRIBUTA_2
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of reconciliation between the numerator and denominator of the basic and diluted EPS computations | A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows: Three Months Ended Nine Months Ended (In millions, except per share data) 2020 2019 2020 2019 Numerator: Net earnings (loss) attributable to The Estée Lauder Companies Inc. $ (6) $ 555 $ 1,146 $ 1,628 Denominator: Weighted-average common shares outstanding – Basic 360.2 361.9 360.6 364.0 Effect of dilutive stock options — 4.6 4.6 4.8 Effect of PSUs — 0.3 0.3 0.3 Effect of RSUs — 1.5 1.6 1.8 Weighted-average common shares outstanding – Diluted 360.2 368.3 367.1 370.9 Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share: Basic $ (0.02) $ 1.53 $ 3.18 $ 4.47 Diluted $ (0.02) $ 1.51 $ 3.12 $ 4.39 |
EQUITY (Tables)
EQUITY (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Schedule of equity | Total Stockholders’ Equity – The Estée Lauder Companies Inc. Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Common stock, beginning of the period $ 6 $ 6 $ 6 $ 6 Stock-based compensation — — — — Common stock, end of the period 6 6 6 6 Paid-in capital, beginning of the period 4,615 4,162 4,403 3,972 Common stock dividends 1 — 3 — Stock-based compensation 144 169 354 359 Paid-in capital, end of the period 4,760 4,331 4,760 4,331 Retained earnings, beginning of the period 10,775 9,586 9,984 9,040 Common stock dividends (174) (157) (506) (455) Net earnings (loss) attributable to The Estée Lauder Companies Inc. (6) 555 1,146 1,628 Cumulative effect of adoption of new accounting standards — — (29) (229) Retained earnings, end of the period 10,595 9,984 10,595 9,984 Accumulated other comprehensive loss, beginning of the period (569) (430) (563) (434) Other comprehensive loss (143) (68) (149) (64) Accumulated other comprehensive loss, end of the period (712) (498) (712) (498) Treasury stock, beginning of the period (10,253) (9,018) (9,444) (7,896) Acquisition of treasury stock (65) (215) (768) (1,248) Stock-based compensation (2) (2) (108) (91) Treasury stock, end of the period (10,320) (9,235) (10,320) (9,235) Total stockholders’ equity – The Estée Lauder Companies Inc. 4,329 4,588 4,329 4,588 Noncontrolling interests, beginning of the period 27 27 25 22 Net earnings attributable to noncontrolling interests 2 2 9 8 Distribution to noncontrolling interest holders — — (4) — Other comprehensive loss — — (1) (1) Noncontrolling interests, end of the period 29 29 29 29 Total equity $ 4,358 $ 4,617 $ 4,358 $ 4,617 Cash dividends declared per common share $ .48 $ .43 $ 1.39 $ 1.24 |
Summary of cash dividends declared per share on the Company's Class A and Class B Common Stock | The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the nine months ended March 31, 2020: Date Declared Record Date Payable Date Amount per Share August 16, 2019 August 30, 2019 September 16, 2019 $ .43 October 30, 2019 November 29, 2019 December 16, 2019 $ .48 February 5, 2020 February 28, 2020 March 16, 2020 $ .48 |
Schedule of components of AOCI, net of tax | The following table represents changes in AOCI, net of tax, by component for the nine months ended March 31, 2020: (In millions) Net Cash Flow Hedge Gain (Loss) Amounts Included in Net Periodic Benefit Cost Translation Adjustments Total Balance at June 30, 2019 $ 21 $ (253) $ (331) $ (563) OCI before reclassifications 29 (1) (1) (170) (2) (142) Amounts reclassified to Net earnings (loss) (22) 13 2 (7) Net current-period OCI 7 12 (168) (149) Balance at March 31, 2020 $ 28 $ (241) $ (499) $ (712) ______________________________________________ (1) Consists of foreign currency translation losses. (2) See Note 7 – Derivative Financial Instruments for gains (losses) relating to net investment hedges. |
Schedule of effects of reclassification adjustments from AOCI into net earnings | The following table represents the effects of reclassification adjustments from AOCI into net earnings (loss) for the three and nine months ended March 31, 2020 and 2019: Amount Reclassified from AOCI Affected Line Item in Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 Gain (Loss) on Investments Gain (loss) on investments $ — $ (6) $ — $ (6) Other income, net Benefit (provision) for deferred taxes — — — — Provision for income taxes $ — $ (6) $ — $ (6) Net earnings (loss) Gain (Loss) on Cash Flow Hedges Foreign currency forward contracts $ 10 $ 8 $ 29 $ 15 Net sales Interest rate-related derivatives — 1 — 1 Interest expense 10 9 29 16 Benefit (provision) for deferred taxes (2) (2) (7) (4) Provision for income taxes $ 8 $ 7 $ 22 $ 12 Net earnings (loss) Amounts Included in Net Periodic Benefit Cost Amortization of actuarial loss $ (6) $ (3) $ (16) $ (10) Earnings before income taxes (1) Benefit for deferred taxes 1 1 3 3 Provision for income taxes $ (5) $ (2) $ (13) $ (7) Net earnings (loss) Cumulative Translation Adjustments Gain on previously held equity method investment $ — $ — $ 4 $ — Other income, net Loss on liquidation of an investment in a foreign subsidiary — — (6) — Restructuring and other charges Gain on liquidation of an investment in a foreign subsidiary — 77 — 77 Other income, net $ — $ 77 $ (2) $ 77 Net earnings (loss) Total reclassification adjustments, net $ 3 $ 76 $ 7 $ 76 Net earnings (loss) ______________________________________________ (1) See Note 10 – Pension and Post-Retirement Benefit Plans for additional information. |
STATEMENT OF CASH FLOWS (Tables
STATEMENT OF CASH FLOWS (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental cash flow information | Supplemental cash flow information for the nine months ended March 31, 2020 and 2019 is as follows: (In millions) 2020 2019 Cash: Cash paid during the period for interest $ 94 $ 99 Cash paid during the period for income taxes $ 472 $ 400 Non-cash investing and financing activities: Capital lease, capitalized interest and asset retirement obligations incurred $ — $ 8 Property, plant and equipment accrued but unpaid $ 47 $ 39 |
SEGMENT DATA AND RELATED INFO_2
SEGMENT DATA AND RELATED INFORMATION (Tables) | 9 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of segment data and related information | Three Months Ended Nine Months Ended (In millions) 2020 2019 2020 2019 PRODUCT CATEGORY DATA Net sales: Skin Care $ 1,723 $ 1,744 $ 5,770 $ 4,962 Makeup 1,146 1,461 4,249 4,427 Fragrance 349 392 1,392 1,401 Hair Care 119 136 417 433 Other 8 13 36 52 3,345 3,746 11,864 11,275 Returns associated with restructuring and other activities — (2) — (2) Net sales $ 3,345 $ 3,744 $ 11,864 $ 11,273 Operating income (loss) before charges associated with restructuring and other activities: Skin Care $ 418 $ 593 $ 1,822 $ 1,624 Makeup (283) 99 (790) 398 Fragrance — 17 163 156 Hair Care (2) (2) 10 27 Other 1 2 7 9 134 709 1,212 2,214 Reconciliation: Charges associated with restructuring and other activities (25) (35) (63) (117) Interest expense (42) (32) (112) (101) Interest income and investment income, net 14 15 41 42 Other components of net periodic benefit cost (1) (1) (3) (1) Other income, net — 71 576 71 Earnings before income taxes $ 80 $ 727 $ 1,651 $ 2,108 GEOGRAPHIC DATA (1) Net sales: The Americas $ 892 $ 1,155 $ 3,278 $ 3,609 Europe, the Middle East & Africa 1,525 1,625 5,281 4,825 Asia/Pacific 928 966 3,305 2,841 3,345 3,746 11,864 11,275 Returns associated with restructuring and other activities — (2) — (2) Net sales $ 3,345 $ 3,744 $ 11,864 $ 11,273 Operating income (loss): The Americas $ (217) $ 200 $ (571) $ 583 Europe, the Middle East & Africa 202 265 1,084 940 Asia/Pacific 149 244 699 691 134 709 1,212 2,214 Charges associated with restructuring and other activities (25) (35) (63) (117) Operating income $ 109 $ 674 $ 1,149 $ 2,097 ______________________________________________ (1) The net sales and operating income from the Company’s travel retail business are included in the Europe, the Middle East & Africa region. |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Currency Translation and Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Currency Translation and Transactions | ||||
Unrealized translation gains (losses), net of tax | $ (173) | $ 2 | $ (170) | $ (11) |
Realized foreign currency gain on liquidation | 77 | |||
Loss on sale of available-for-sale securities | 6 | |||
Net exchange gains (losses) on foreign currency transactions | $ 15 | $ 73 | $ 40 | $ 52 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventory and Promotional Merchandise (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Jun. 30, 2019 |
Accounting Policies [Abstract] | ||
Raw materials | $ 540 | $ 541 |
Work in process | 261 | 268 |
Finished goods | 1,106 | 981 |
Promotional merchandise | 180 | 216 |
Inventory and promotional merchandise | $ 2,087 | $ 2,006 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Jun. 30, 2019 | |
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | $ 5,042 | $ 5,042 | $ 4,831 | ||
Less accumulated depreciation and amortization | (2,950) | (2,950) | (2,763) | ||
Property, plant and equipment, net | 2,092 | 2,092 | 2,068 | ||
Cost of assets related to projects in progress | 509 | 509 | 474 | ||
Depreciation and amortization of property, plant and equipment | 131 | $ 121 | 383 | $ 358 | |
Land | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 33 | 33 | 29 | ||
Buildings and improvements | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 385 | $ 385 | 337 | ||
Buildings and improvements | Minimum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 10 years | ||||
Buildings and improvements | Maximum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 40 years | ||||
Machinery and equipment | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 840 | $ 840 | 811 | ||
Machinery and equipment | Minimum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 3 years | ||||
Machinery and equipment | Maximum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 10 years | ||||
Computer hardware and software | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 1,297 | $ 1,297 | 1,264 | ||
Computer hardware and software | Minimum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 4 years | ||||
Computer hardware and software | Maximum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 10 years | ||||
Furniture and fixtures | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 117 | $ 117 | 116 | ||
Furniture and fixtures | Minimum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 5 years | ||||
Furniture and fixtures | Maximum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 10 years | ||||
Leasehold improvements | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | $ 2,370 | $ 2,370 | $ 2,274 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Jun. 30, 2019 | |
Income Taxes | |||||
Effective tax rate (as a percent) | 105.00% | 23.40% | 30.00% | 22.40% | |
Gross unrecognized tax benefits | $ 69 | $ 69 | $ 67 | ||
Total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate | 52 | 52 | |||
Gross interest and penalty accrued | 1 | 3 | |||
Total gross accrued interest and penalties related to unrecognized tax benefits | $ 13 | $ 13 | $ 12 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Accrued Liabilities (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Jun. 30, 2019 |
Accounting Policies [Abstract] | ||
Advertising, merchandising and sampling | $ 405 | $ 352 |
Employee compensation | 379 | 574 |
Deferred revenue | 306 | 314 |
Other | 1,531 | 1,359 |
Total Other Accrued Liabilities | $ 2,621 | $ 2,599 |
ACQUISITION OF BUSINESS (Detail
ACQUISITION OF BUSINESS (Details) - USD ($) $ in Millions | Dec. 18, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Jun. 30, 2019 |
Acquisition of Business | ||||||
Gain on settlement of equity method investment, net | $ 553 | $ 0 | ||||
Assets acquired and liabilities assumed at the acquisition date | ||||||
Goodwill | $ 1,633 | 1,633 | $ 1,868 | |||
Net sales | 3,345 | $ 3,744 | 11,864 | 11,273 | ||
Net loss | 4 | $ (557) | (1,155) | $ (1,636) | ||
Have & Be | ||||||
Acquisition of Business | ||||||
Interest acquired (as a percent) | 66.66% | |||||
Cash consideration | $ 1,268 | |||||
Carrying value | 133 | |||||
Fair value | 682 | |||||
Gain on remeasurement of equity method investment | 549 | |||||
Unrealized foreign currency gain | 4 | |||||
Assets acquired and liabilities assumed at the acquisition date | ||||||
Cash | 228 | |||||
Accounts receivable | 13 | |||||
Inventory | 91 | |||||
Other current assets | 5 | |||||
Property, plant and equipment | 3 | |||||
Right-of-use assets | 3 | |||||
Intangible assets | 1,427 | |||||
Goodwill | 573 | |||||
Other long-term assets | 4 | |||||
Total assets acquired | 2,347 | |||||
Accounts payable | 15 | |||||
Other accrued liabilities | 25 | |||||
Deferred income taxes | 352 | |||||
Lease liability | 1 | |||||
Total liabilities assumed | 393 | |||||
Total consideration transferred | $ 1,954 | |||||
Net sales | 67 | 67 | ||||
Net loss | 11 | 11 | ||||
Have & Be | Other income, net | ||||||
Acquisition of Business | ||||||
Gain on settlement of equity method investment, net | 553 | |||||
Foreign currency gain recognized on cash transferred to foreign subsidiary | 23 | |||||
Have & Be | Selling, general and administrative expenses | ||||||
Assets acquired and liabilities assumed at the acquisition date | ||||||
Acquisition-related costs | $ 1 | $ 7 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Dec. 31, 2019 | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | Jun. 30, 2019 | |
Goodwill and Other Intangible Assets | ||||||||
Goodwill acquired during the period | $ 583 | |||||||
Goodwill, period increase (decrease) | (235) | |||||||
Goodwill impairment | $ 275 | $ 511 | $ 48 | 786 | $ 68 | |||
Changes in goodwill | ||||||||
Goodwill, gross, beginning balance | 2,028 | |||||||
Accumulated impairments | (944) | (944) | $ (160) | |||||
Goodwill, beginning balance | 1,868 | |||||||
Goodwill acquired during the period | 583 | |||||||
Impairment charges | (275) | (511) | (48) | (786) | $ (68) | |||
Translation adjustments, goodwill | (34) | |||||||
Translation adjustments, accumulated impairments | 2 | |||||||
Goodwill, period increase (decrease) | (235) | |||||||
Goodwill, gross, ending balance | 2,577 | 2,577 | ||||||
Goodwill, ending balance | 1,633 | 1,633 | ||||||
Smashbox | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Goodwill impairment | 26 | 48 | $ 20 | 72 | ||||
Changes in goodwill | ||||||||
Impairment charges | (26) | (48) | (20) | (72) | ||||
Trademarks | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Other intangible assets, net (trademark) | 58 | 266 | 324 | |||||
Trademarks | Smashbox | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Other intangible assets, net (trademark) | 1 | $ 4 | $ 18 | 23 | ||||
Skin Care | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Goodwill acquired during the period | 573 | |||||||
Goodwill, period increase (decrease) | 492 | |||||||
Goodwill impairment | 52 | |||||||
Changes in goodwill | ||||||||
Goodwill, gross, beginning balance | 185 | |||||||
Accumulated impairments | (87) | (87) | (36) | |||||
Goodwill, beginning balance | 149 | |||||||
Goodwill acquired during the period | 573 | |||||||
Impairment charges | (52) | |||||||
Translation adjustments, goodwill | (30) | |||||||
Translation adjustments, accumulated impairments | 1 | |||||||
Goodwill, period increase (decrease) | 492 | |||||||
Goodwill, gross, ending balance | 728 | 728 | ||||||
Goodwill, ending balance | 641 | 641 | ||||||
Makeup | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Goodwill acquired during the period | 10 | |||||||
Goodwill, period increase (decrease) | (724) | |||||||
Goodwill impairment | 734 | |||||||
Changes in goodwill | ||||||||
Goodwill, gross, beginning balance | 1,199 | |||||||
Accumulated impairments | (802) | (802) | (68) | |||||
Goodwill, beginning balance | 1,131 | |||||||
Goodwill acquired during the period | 10 | |||||||
Impairment charges | (734) | |||||||
Translation adjustments, goodwill | 0 | |||||||
Translation adjustments, accumulated impairments | 0 | |||||||
Goodwill, period increase (decrease) | (724) | |||||||
Goodwill, gross, ending balance | 1,209 | 1,209 | ||||||
Goodwill, ending balance | 407 | 407 | ||||||
Fragrance | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Goodwill acquired during the period | 0 | |||||||
Goodwill, period increase (decrease) | (2) | |||||||
Goodwill impairment | 0 | |||||||
Changes in goodwill | ||||||||
Goodwill, gross, beginning balance | 254 | |||||||
Accumulated impairments | (22) | (22) | (22) | |||||
Goodwill, beginning balance | 232 | |||||||
Goodwill acquired during the period | 0 | |||||||
Impairment charges | 0 | |||||||
Translation adjustments, goodwill | (2) | |||||||
Translation adjustments, accumulated impairments | 0 | |||||||
Goodwill, period increase (decrease) | (2) | |||||||
Goodwill, gross, ending balance | 252 | 252 | ||||||
Goodwill, ending balance | 230 | 230 | ||||||
Hair Care | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Goodwill acquired during the period | 0 | |||||||
Goodwill, period increase (decrease) | (1) | |||||||
Goodwill impairment | 0 | |||||||
Changes in goodwill | ||||||||
Goodwill, gross, beginning balance | 390 | |||||||
Accumulated impairments | (33) | (33) | $ (34) | |||||
Goodwill, beginning balance | 356 | |||||||
Goodwill acquired during the period | 0 | |||||||
Impairment charges | 0 | |||||||
Translation adjustments, goodwill | (2) | |||||||
Translation adjustments, accumulated impairments | 1 | |||||||
Goodwill, period increase (decrease) | (1) | |||||||
Goodwill, gross, ending balance | 388 | 388 | ||||||
Goodwill, ending balance | $ 355 | 355 | ||||||
Have & Be | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Goodwill acquired during the period | $ 573 | |||||||
Changes in goodwill | ||||||||
Goodwill acquired during the period | 573 | |||||||
Have & Be | Trademarks | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Non-amortizable intangible assets | 585 | 585 | ||||||
Have & Be | Customer lists | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Amortizable intangible assets | $ 842 | $ 842 | ||||||
Have & Be | Customer lists | Minimum | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Amortization period | 7 years 6 months | |||||||
Have & Be | Customer lists | Maximum | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Amortization period | 17 years 6 months | |||||||
Bobbi Brown brand | ||||||||
Goodwill and Other Intangible Assets | ||||||||
Goodwill, period increase (decrease) | 10 | |||||||
Changes in goodwill | ||||||||
Goodwill, period increase (decrease) | $ 10 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Other Intangible Assets (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||||
Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2020 | Mar. 31, 2019 | Jun. 30, 2019 | |
Amortizable intangible assets: | |||||||
Gross Carrying Value | $ 1,525 | $ 1,525 | $ 727 | ||||
Accumulated Amortization | 454 | 454 | 412 | ||||
Total Net Book Value | 1,071 | 1,071 | 315 | ||||
Non-amortizable intangible assets: | |||||||
Total intangible assets | 2,190 | 2,190 | 1,203 | ||||
Aggregate amortization expense for amortizable intangible assets | 23 | $ 13 | 45 | $ 38 | |||
Estimated aggregate amortization expense | |||||||
Estimated aggregate amortization expense for remainder of fiscal year 2020 | 30 | 30 | |||||
Estimated aggregate amortization expense for fiscal year 2021 | 104 | 104 | |||||
Estimated aggregate amortization expense for fiscal year 2022 | 103 | 103 | |||||
Estimated aggregate amortization expense for fiscal year 2023 | 103 | 103 | |||||
Estimated aggregate amortization expense for fiscal year 2024 | 101 | 101 | |||||
Trademark and goodwill carrying values | |||||||
Impairment charge, goodwill | 275 | $ 511 | 48 | 786 | $ 68 | ||
Carrying value, goodwill | 103 | 103 | |||||
Too Faced | |||||||
Trademark and goodwill carrying values | |||||||
Impairment charge, goodwill | 162 | 592 | |||||
Carrying value, goodwill | 13 | 13 | |||||
BECCA | |||||||
Trademark and goodwill carrying values | |||||||
Impairment charge, goodwill | 35 | 70 | |||||
Carrying value, goodwill | 28 | 28 | |||||
Smashbox | |||||||
Trademark and goodwill carrying values | |||||||
Impairment charge, goodwill | 26 | 48 | $ 20 | 72 | |||
Carrying value, goodwill | 0 | 0 | |||||
GLAMGLOW | |||||||
Trademark and goodwill carrying values | |||||||
Impairment charge, goodwill | 52 | 52 | |||||
Carrying value, goodwill | 62 | 62 | |||||
Trademarks | |||||||
Non-amortizable intangible assets: | |||||||
Trademarks | 1,119 | 1,119 | 888 | ||||
Trademark and goodwill carrying values | |||||||
Impairment charge, trademark | 58 | $ 266 | 324 | ||||
Carrying value, trademarks | 417 | 417 | |||||
Trademarks | Too Faced | |||||||
Trademark and goodwill carrying values | |||||||
Impairment charge, trademark | 42 | 253 | |||||
Carrying value, trademarks | 272 | 272 | |||||
Trademarks | BECCA | |||||||
Trademark and goodwill carrying values | |||||||
Impairment charge, trademark | 14 | 47 | |||||
Carrying value, trademarks | 51 | 51 | |||||
Trademarks | Smashbox | |||||||
Trademark and goodwill carrying values | |||||||
Impairment charge, trademark | 1 | $ 4 | $ 18 | 23 | |||
Carrying value, trademarks | 32 | 32 | |||||
Trademarks | GLAMGLOW | |||||||
Trademark and goodwill carrying values | |||||||
Impairment charge, trademark | 1 | 1 | |||||
Carrying value, trademarks | 62 | 62 | |||||
Customer lists and other | |||||||
Amortizable intangible assets: | |||||||
Gross Carrying Value | 1,482 | 1,482 | 684 | ||||
Accumulated Amortization | 411 | 411 | 369 | ||||
Total Net Book Value | 1,071 | 1,071 | 315 | ||||
License agreements | |||||||
Amortizable intangible assets: | |||||||
Gross Carrying Value | 43 | 43 | 43 | ||||
Accumulated Amortization | 43 | 43 | 43 | ||||
Total Net Book Value | $ 0 | $ 0 | $ 0 |
LEASES - General (Details)
LEASES - General (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2020 | Mar. 31, 2020 | Jul. 01, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | |
LEASES | |||||
Adjustment to retained earnings | $ (4,358) | $ (4,358) | $ (4,411) | $ (4,617) | |
Operating lease ROU assets | 2,446 | 2,446 | |||
Operating lease liabilities | 2,659 | $ 2,659 | |||
Leases, renewal term | 30 years | ||||
Leases, termination period | 25 years | ||||
Impairments of other intangible and long-lived assets | |||||
LEASES | |||||
Operating lease, impairment loss | 13 | $ 13 | |||
Minimum | |||||
LEASES | |||||
Leases, remaining lease term | 1 year | ||||
Maximum | |||||
LEASES | |||||
Leases, remaining lease term | 59 years | ||||
Accounting Standards Update 2016-02 | |||||
LEASES | |||||
Operating lease ROU assets | $ 2,598 | ||||
Operating lease liabilities | $ 2,764 | ||||
Accounting Standards Update 2016-02 | Cumulative Effect, Period of Adoption, Adjustment | |||||
LEASES | |||||
Adjustment to retained earnings | $ 29 | $ 29 |
LEASES - Total Lease Costs and
LEASES - Total Lease Costs and Other Information (Details) $ in Millions | 3 Months Ended | 9 Months Ended |
Mar. 31, 2020USD ($) | Mar. 31, 2020USD ($) | |
Finance lease cost: | ||
Amortization of right-of-use assets | $ 3 | $ 9 |
Interest on lease liabilities | 0 | 0 |
Operating lease cost | 150 | 383 |
Short-term lease cost | 5 | 20 |
Variable lease cost | 41 | 133 |
Total | $ 199 | 545 |
Cash paid for amounts included in the measurement of lease liabilities | ||
Operating cash flows from operating leases | 350 | |
Financing cash flows from finance leases | 10 | |
Right-of-use assets obtained in exchange for new operating lease liabilities | $ 216 | |
Weighted-average remaining lease term – finance leases | 2 years | 2 years |
Weighted-average remaining lease term – operating leases | 11 years | 11 years |
Weighted-average discount rate – finance leases | 2.70% | 2.70% |
Weighted-average discount rate – operating leases | 2.50% | 2.50% |
LEASES - Future Minimum Lease P
LEASES - Future Minimum Lease Payments (Details) $ in Millions | Mar. 31, 2020USD ($) |
Operating Leases | |
Remainder of fiscal 2020 | $ 113 |
Fiscal 2021 | 397 |
Fiscal 2022 | 364 |
Fiscal 2023 | 324 |
Fiscal 2024 | 291 |
Thereafter | 1,586 |
Total future minimum lease payments | 3,075 |
Less imputed interest | (416) |
Total | 2,659 |
Finance Leases | |
Remainder of fiscal 2020 | 4 |
Fiscal 2021 | 7 |
Fiscal 2022 | 3 |
Fiscal 2023 | 1 |
Fiscal 2024 | 0 |
Thereafter | 0 |
Total future minimum lease payments | 15 |
Less imputed interest | 0 |
Total | $ 15 |
LEASES - Operating Lease and Fi
LEASES - Operating Lease and Finance Lease Liabilities included in the Consolidated Balance Sheet (Details) $ in Millions | Mar. 31, 2020USD ($) |
Operating Leases | |
Total current liabilities | $ 371 |
Total noncurrent liabilities | 2,288 |
Total | 2,659 |
Finance Leases | |
Total current liabilities | 9 |
Total noncurrent liabilities | 6 |
Total | $ 15 |
LEASES - Maturities of Contract
LEASES - Maturities of Contractual Obligations (Details) $ in Millions | Jun. 30, 2019USD ($) |
Operating Leases | |
Fiscal 2020 | $ 421 |
Fiscal 2021 | 383 |
Fiscal 2022 | 348 |
Fiscal 2023 | 316 |
Fiscal 2024 | 289 |
Thereafter | 1,625 |
Total contractual obligations | $ 3,382 |
LEASES - Not Yet Commenced (Det
LEASES - Not Yet Commenced (Details) $ in Millions | Mar. 31, 2020USD ($) |
LEASES | |
Operating lease obligation not yet commenced | $ 98 |
Minimum | |
LEASES | |
Operating lease term not yet commenced | 1 year |
Maximum | |
LEASES | |
Operating lease term not yet commenced | 20 years |
CHARGES ASSOCIATED WITH RESTR_3
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Approved Restructuring Activities by Major Cost Type (Details) $ in Millions | Mar. 31, 2020USD ($) |
Restructuring and related costs | |
Restructuring and related costs, expected costs | $ 507 |
Leading Beauty Forward | |
Restructuring and related costs | |
Restructuring and related costs, expected costs | 967 |
Leading Beauty Forward | Sales Returns (included in Net Sales) | |
Restructuring and related costs | |
Restructuring and related costs, expected costs | 14 |
Leading Beauty Forward | Cost of Sales | |
Restructuring and related costs | |
Restructuring and related costs, expected costs | 88 |
Leading Beauty Forward | Restructuring Charges | |
Restructuring and related costs | |
Restructuring and related costs, expected costs | 507 |
Leading Beauty Forward | Restructuring Charges | Employee- Related Costs | |
Restructuring and related costs | |
Restructuring and related costs, expected costs | 461 |
Leading Beauty Forward | Restructuring Charges | Asset- Related Costs | |
Restructuring and related costs | |
Restructuring and related costs, expected costs | 7 |
Leading Beauty Forward | Restructuring Charges | Contract Terminations | |
Restructuring and related costs | |
Restructuring and related costs, expected costs | 25 |
Leading Beauty Forward | Restructuring Charges | Other Exit Costs | |
Restructuring and related costs | |
Restructuring and related costs, expected costs | 14 |
Leading Beauty Forward | Other Charges | |
Restructuring and related costs | |
Restructuring and related costs, expected costs | $ 358 |
CHARGES ASSOCIATED WITH RESTR_4
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Cumulative Restructuring Charges by Major Cost Type (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Restructuring and related costs | ||||
Nine months ended March 31, 2020 | $ 24 | $ 29 | $ 54 | $ 99 |
Charges (adjustments) | 25 | $ 35 | 63 | $ 117 |
Leading Beauty Forward | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2019 | 791 | |||
Nine months ended March 31, 2020 | 63 | |||
Cumulative through March 31, 2020 | 854 | 854 | ||
Charges (adjustments) | 20 | |||
Leading Beauty Forward | Employee- Related Costs | ||||
Restructuring and related costs | ||||
Charges (adjustments) | (5) | |||
Leading Beauty Forward | Asset- Related Costs | ||||
Restructuring and related costs | ||||
Charges (adjustments) | 19 | |||
Leading Beauty Forward | Contract Terminations | ||||
Restructuring and related costs | ||||
Charges (adjustments) | 5 | |||
Leading Beauty Forward | Other Exit Costs | ||||
Restructuring and related costs | ||||
Charges (adjustments) | 1 | |||
Leading Beauty Forward | Sales Returns (included in Net Sales) | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2019 | 14 | |||
Nine months ended March 31, 2020 | 0 | |||
Cumulative through March 31, 2020 | 14 | 14 | ||
Leading Beauty Forward | Cost of Sales | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2019 | 55 | |||
Nine months ended March 31, 2020 | 9 | |||
Cumulative through March 31, 2020 | 64 | 64 | ||
Leading Beauty Forward | Restructuring Charges | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2019 | 457 | |||
Nine months ended March 31, 2020 | 20 | |||
Cumulative through March 31, 2020 | 477 | 477 | ||
Leading Beauty Forward | Restructuring Charges | Employee- Related Costs | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2019 | 445 | |||
Nine months ended March 31, 2020 | (5) | |||
Cumulative through March 31, 2020 | 440 | 440 | ||
Leading Beauty Forward | Restructuring Charges | Asset- Related Costs | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2019 | 4 | |||
Nine months ended March 31, 2020 | 19 | |||
Cumulative through March 31, 2020 | 23 | 23 | ||
Charges (adjustments) | 18 | 18 | ||
Leading Beauty Forward | Restructuring Charges | Contract Terminations | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2019 | 3 | |||
Nine months ended March 31, 2020 | 5 | |||
Cumulative through March 31, 2020 | 8 | 8 | ||
Leading Beauty Forward | Restructuring Charges | Other Exit Costs | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2019 | 5 | |||
Nine months ended March 31, 2020 | 1 | |||
Cumulative through March 31, 2020 | 6 | 6 | ||
Leading Beauty Forward | Other Charges | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2019 | 265 | |||
Nine months ended March 31, 2020 | 34 | |||
Cumulative through March 31, 2020 | $ 299 | $ 299 |
CHARGES ASSOCIATED WITH RESTR_5
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Accrued Restructuring Charges (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Jun. 30, 2020 | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
Restructuring and Other Costs | ||||||||
Charges (adjustments) | $ 25 | $ 35 | $ 63 | $ 117 | ||||
Leading Beauty Forward | ||||||||
Restructuring and Other Costs | ||||||||
Beginning balance | $ 121 | 203 | ||||||
Charges (adjustments) | 20 | |||||||
Cash payments | (81) | |||||||
Translation adjustments | (2) | |||||||
Non-cash asset write-offs | (19) | |||||||
Ending balance | 121 | 121 | ||||||
Employee- Related Costs | Leading Beauty Forward | ||||||||
Restructuring and Other Costs | ||||||||
Beginning balance | 121 | 202 | ||||||
Charges (adjustments) | (5) | |||||||
Cash payments | (74) | |||||||
Translation adjustments | (2) | |||||||
Non-cash asset write-offs | 0 | |||||||
Ending balance | 121 | 121 | ||||||
Asset- Related Costs | Leading Beauty Forward | ||||||||
Restructuring and Other Costs | ||||||||
Beginning balance | 0 | 0 | ||||||
Charges (adjustments) | 19 | |||||||
Cash payments | 0 | |||||||
Translation adjustments | 0 | |||||||
Non-cash asset write-offs | (19) | |||||||
Ending balance | 0 | 0 | ||||||
Contract Terminations | Leading Beauty Forward | ||||||||
Restructuring and Other Costs | ||||||||
Beginning balance | 0 | 0 | ||||||
Charges (adjustments) | 5 | |||||||
Cash payments | (5) | |||||||
Translation adjustments | 0 | |||||||
Non-cash asset write-offs | 0 | |||||||
Ending balance | 0 | 0 | ||||||
Other Exit Costs | Leading Beauty Forward | ||||||||
Restructuring and Other Costs | ||||||||
Beginning balance | 0 | 1 | ||||||
Charges (adjustments) | 1 | |||||||
Cash payments | (2) | |||||||
Translation adjustments | 0 | |||||||
Non-cash asset write-offs | 0 | |||||||
Ending balance | $ 0 | $ 0 | ||||||
Forecast | Leading Beauty Forward | ||||||||
Restructuring and Other Costs | ||||||||
Accrued restructuring charges expected to result in cash expenditures funded from cash provided by operations | $ 35 | $ 3 | $ 20 | $ 63 |
DEBT (Details)
DEBT (Details) - USD ($) | 2 Months Ended | 3 Months Ended | 9 Months Ended | |||
May 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Nov. 30, 2019 | |
Debt | ||||||
Net cash flow hedge loss | $ 34,000,000 | $ (7,000,000) | $ 10,000,000 | $ 2,000,000 | ||
Line of credit | 1,300,000,000 | 1,300,000,000 | ||||
Commercial paper | 200,000,000 | 200,000,000 | ||||
Revolving Credit Facility | ||||||
Debt | ||||||
Line of credit facility, maximum borrowing capacity | $ 1,500,000,000 | $ 1,500,000,000 | ||||
2.000% Senior Notes due December 1, 2024 (the "2024 Senior Notes") | ||||||
Debt | ||||||
Aggregate principal amount | $ 500,000,000 | |||||
Interest rate, stated percentage | 2.00% | |||||
Price (as a percent) | 99.421% | 99.421% | ||||
Yield (as a percent) | 2.122% | 2.122% | ||||
Unamortized Debt Discount | $ 3,000,000 | $ 3,000,000 | ||||
Debt Issuance Costs | $ 3,000,000 | |||||
2.375% Senior Notes due December 1, 2029 (the "2029 Senior Notes") | ||||||
Debt | ||||||
Aggregate principal amount | $ 650,000,000 | |||||
Interest rate, stated percentage | 2.375% | |||||
Price (as a percent) | 99.046% | 99.046% | ||||
Yield (as a percent) | 2.483% | 2.483% | ||||
Unamortized Debt Discount | $ 6,000,000 | $ 6,000,000 | ||||
Debt Issuance Costs | $ 4,000,000 | |||||
2.375% Senior Notes due December 1, 2029 (the "2029 Senior Notes") | Treasury lock agreements | ||||||
Debt | ||||||
Yield (as a percent) | 3.15% | |||||
Notional amount | $ 500,000,000 | |||||
Weighted-average all-in rate | 2.50% | |||||
Net cash flow hedge loss | $ (33,000,000) | |||||
3.125% Senior Notes due December 1, 2049 (the "2049 Senior Notes") | ||||||
Debt | ||||||
Aggregate principal amount | $ 650,000,000 | |||||
Interest rate, stated percentage | 3.125% | |||||
Price (as a percent) | 98.769% | 98.769% | ||||
Yield (as a percent) | 3.189% | 3.189% | ||||
Unamortized Debt Discount | $ 8,000,000 | $ 8,000,000 | ||||
Debt Issuance Costs | $ 7,000,000 | |||||
2020 Senior Notes due February 7, 2020 | ||||||
Debt | ||||||
Aggregate principal amount | $ 500,000,000 | |||||
Interest rate, stated percentage | 1.80% |
DERIVATIVE FINANCIAL INSTRUME_3
DERIVATIVE FINANCIAL INSTRUMENTS - Derivative Instruments Included in the Consolidated Balance Sheets (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Jun. 30, 2019 |
Derivatives, Fair Value | ||
Derivative asset, total | $ 86 | $ 30 |
Derivative liability, total | 45 | 32 |
Derivatives Designated as Hedging Instruments | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 62 | 26 |
Derivatives Designated as Hedging Instruments | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | 21 | 30 |
Derivatives Designated as Hedging Instruments | Foreign currency cash flow hedges | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 48 | 23 |
Derivatives Designated as Hedging Instruments | Foreign currency cash flow hedges | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | 3 | 4 |
Derivatives Designated as Hedging Instruments | Net investment hedges | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 0 | 0 |
Derivatives Designated as Hedging Instruments | Net investment hedges | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | 17 | 0 |
Derivatives Designated as Hedging Instruments | Interest rate-related derivatives | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 14 | 3 |
Derivatives Designated as Hedging Instruments | Interest rate-related derivatives | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | 1 | 26 |
Derivatives Not Designated as Hedging Instruments | Foreign currency forward contracts | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 24 | 4 |
Derivatives Not Designated as Hedging Instruments | Foreign currency forward contracts | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | $ 24 | $ 2 |
DERIVATIVE FINANCIAL INSTRUME_4
DERIVATIVE FINANCIAL INSTRUMENTS - Gain (Loss) on Derivative Financial Instruments (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivatives | $ 24 | $ 2 | $ (15) | $ 18 |
Cash flow hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging | 44 | 2 | 39 | 18 |
Amount of Gain or (Loss) Reclassified from AOCI into Earnings | 10 | 9 | 29 | 16 |
Current debt | ||||
Gain (loss) on derivative financial instruments | ||||
Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability | 0 | |||
Current debt | Derivatives in fair value hedging relationships | ||||
Gain (loss) on derivative financial instruments | ||||
Carrying Amount of the Hedged Liabilities | 0 | 0 | ||
Long-term debt | ||||
Gain (loss) on derivative financial instruments | ||||
Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability | 14 | |||
Long-term debt | Derivatives in fair value hedging relationships | ||||
Gain (loss) on derivative financial instruments | ||||
Carrying Amount of the Hedged Liabilities | 713 | 713 | ||
Total debt | ||||
Gain (loss) on derivative financial instruments | ||||
Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability | 14 | |||
Total debt | Derivatives in fair value hedging relationships | ||||
Gain (loss) on derivative financial instruments | ||||
Carrying Amount of the Hedged Liabilities | 713 | 713 | ||
Net sales | ||||
Gain (loss) on derivative financial instruments | ||||
Total amounts of income and expense line items presented in the consolidated statements of earnings (loss) in which the effects of fair value and cash flow hedges are recorded | 3,345 | 3,744 | 11,864 | 11,273 |
Interest expense | ||||
Gain (loss) on derivative financial instruments | ||||
Total amounts of income and expense line items presented in the consolidated statements of earnings (loss) in which the effects of fair value and cash flow hedges are recorded | 42 | 32 | 112 | 101 |
Foreign currency forward contracts | Cash flow hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging | 46 | 2 | 50 | 18 |
Foreign currency forward contracts | Net investment hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Net Investment Hedging | (20) | 0 | (54) | 0 |
Foreign currency forward contracts | Net sales | Cash flow hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Earnings | 10 | 8 | 29 | 15 |
Interest rate-related derivatives | Cash flow hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging | (2) | 0 | (11) | 0 |
Interest rate-related derivatives | Interest expense | Cash flow hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Reclassified from AOCI into Earnings | 0 | 1 | 0 | 1 |
Interest rate-related derivatives | Interest expense | Derivatives in fair value hedging relationships | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in Earnings on Derivatives | (12) | (8) | (13) | (17) |
Net investment hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Gain recognized in earnings related to the amount excluded from effectiveness testing | 12 | 37 | ||
Derivatives Designated as Hedging Instruments | Interest rate-related derivatives | Interest expense | Derivatives in fair value hedging relationships | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in Earnings on Derivatives | 12 | 8 | 13 | 17 |
Amount of Gain or (Loss) Recognized in Earnings on Derivatives | 12 | 8 | 13 | 17 |
Derivatives Not Designated as Hedging Instruments | Foreign currency forward contracts | Selling, general and administrative | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in Earnings on Derivatives | $ 49 | $ (12) | $ 52 | $ (2) |
DERIVATIVE FINANCIAL INSTRUME_5
DERIVATIVE FINANCIAL INSTRUMENTS - Cash Flow Hedges, Fair Value Hedges, Credit Risk (Details) | Mar. 31, 2020USD ($)item | Jun. 30, 2019USD ($) |
Derivatives Not Designated as Hedging Instruments | ||
Derivative instruments | ||
Notional amount | $ 3,399,000,000 | |
Foreign Currency Cash-Flow Hedges | ||
Notional amount | $ 3,399,000,000 | |
Derivative | ||
Credit Risk | ||
Minimum number of nationally recognized rating agencies | item | 2 | |
Maximum exposure to credit risk in the event of non performance by counterparties, gross fair value of contracts in asset positions | $ 86,000,000 | |
Cash flow hedges | ||
Foreign Currency Cash-Flow Hedges | ||
Amount expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months | 22,000,000 | |
Accumulated net gain on derivative instruments in AOCI, before tax | 39,000,000 | $ 29,000,000 |
Cash flow hedges | Foreign currency forward contracts | ||
Derivative instruments | ||
Notional amount | 1,584,000,000 | |
Foreign Currency Cash-Flow Hedges | ||
Notional amount | 1,584,000,000 | |
Derivatives in fair value hedging relationships | Interest rate swap contracts | 1.70% Senior Notes, due May 10, 2021 ("2021 Senior Notes") | ||
Fair Value Hedges | ||
Notional amount | 450,000,000 | |
Derivatives in fair value hedging relationships | Interest rate swap contracts | 2.35% Senior Notes due August 15, 2022 ("2022 Senior Notes") | ||
Fair Value Hedges | ||
Notional amount | 250,000,000 | |
Net investment hedges | Foreign currency forward contracts | ||
Fair Value Hedges | ||
Notional amount | $ 1,759,000,000 |
FAIR VALUE MEASUREMENTS - Hiera
FAIR VALUE MEASUREMENTS - Hierarchy For Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Recurring basis - USD ($) $ in Millions | Mar. 31, 2020 | Jun. 30, 2019 |
Assets: | ||
Foreign currency forward contracts | $ 72 | $ 27 |
Interest rate-related derivatives | 14 | 3 |
Total | 86 | 30 |
Liabilities: | ||
Foreign currency forward contracts | 44 | 6 |
Interest rate-related derivatives | 1 | 26 |
Contingent consideration | 27 | 36 |
Total | 72 | 68 |
Level 2 | ||
Assets: | ||
Foreign currency forward contracts | 72 | 27 |
Interest rate-related derivatives | 14 | 3 |
Total | 86 | 30 |
Liabilities: | ||
Foreign currency forward contracts | 44 | 6 |
Interest rate-related derivatives | 1 | 26 |
Total | 45 | 32 |
Level 3 | ||
Liabilities: | ||
Contingent consideration | 27 | 36 |
Total | $ 27 | $ 36 |
FAIR VALUE MEASUREMENTS - Estim
FAIR VALUE MEASUREMENTS - Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Jun. 30, 2019 | |
Derivatives | ||||||
Derivative asset | $ 86 | $ 86 | $ 30 | |||
Derivative liability | (45) | (45) | (32) | |||
Impairment charges of certain non financial assets measured at fair value on a nonrecurring basis | ||||||
Goodwill impairment | 275 | $ 511 | $ 48 | 786 | $ 68 | |
Goodwill, fair value | 103 | 103 | ||||
Trademarks | ||||||
Impairment charges of certain non financial assets measured at fair value on a nonrecurring basis | ||||||
Other intangible assets, net (trademark) | 58 | $ 266 | 324 | |||
Other intangible assets, net (trademark), fair value | 417 | 417 | ||||
Level 3 | Non recurring basis | ||||||
Impairment charges of certain non financial assets measured at fair value on a nonrecurring basis | ||||||
Goodwill impairment | 786 | 68 | ||||
Long-lived assets | 13 | |||||
Total | 1,123 | 90 | ||||
Level 3 | Non recurring basis | Trademarks | ||||||
Impairment charges of certain non financial assets measured at fair value on a nonrecurring basis | ||||||
Other intangible assets, net (trademark) | 324 | 22 | ||||
Carrying Amount | ||||||
Nonderivatives | ||||||
Cash and cash equivalents | 4,876 | 4,876 | 2,987 | |||
Current and long-term debt | 6,201 | 6,201 | 3,412 | |||
Additional purchase price payable | 0 | 0 | 3 | |||
Contingent consideration | 27 | 27 | 36 | |||
Carrying Amount | Foreign currency forward contracts | ||||||
Derivatives | ||||||
Derivative asset | 28 | 28 | 21 | |||
Carrying Amount | Interest rate-related derivatives | ||||||
Derivatives | ||||||
Derivative asset | 13 | 13 | ||||
Derivative liability | (23) | |||||
Fair Value | ||||||
Nonderivatives | ||||||
Cash and cash equivalents | 4,876 | 4,876 | 2,987 | |||
Current and long-term debt | 6,454 | 6,454 | 3,706 | |||
Additional purchase price payable | 0 | 0 | 3 | |||
Contingent consideration | 27 | 27 | 36 | |||
Fair Value | Level 3 | Non recurring basis | ||||||
Impairment charges of certain non financial assets measured at fair value on a nonrecurring basis | ||||||
Goodwill, fair value | 103 | 72 | 103 | 72 | ||
Long-lived assets | 11 | 11 | ||||
Total | 531 | 127 | 531 | 127 | ||
Fair Value | Level 3 | Non recurring basis | Trademarks | ||||||
Impairment charges of certain non financial assets measured at fair value on a nonrecurring basis | ||||||
Other intangible assets, net (trademark), fair value | 417 | $ 55 | 417 | $ 55 | ||
Fair Value | Foreign currency forward contracts | ||||||
Derivatives | ||||||
Derivative asset | 28 | 28 | 21 | |||
Fair Value | Interest rate-related derivatives | ||||||
Derivatives | ||||||
Derivative asset | $ 13 | $ 13 | ||||
Derivative liability | $ (23) |
FAIR VALUE MEASUREMENTS - Forei
FAIR VALUE MEASUREMENTS - Foreign Currency Forward Contracts Maturity and Additional Purchase Price Payable (Narrative) (Details) | 9 Months Ended |
Mar. 31, 2020 | |
Maximum | LIBOR | Foreign currency forward contracts | |
Foreign currency forward contracts | |
Contract maturities | 12 months |
Minimum | Swap yield curve | Foreign currency forward contracts | |
Foreign currency forward contracts | |
Contract maturities | 12 months |
Additional Purchase Price Payable | Incremental borrowing rate | Level 2 | |
Fair value inputs | |
Additional purchase price payable measurement input | 0.01 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Changes in the Fair Value of the Contingent Consideration Obligations (Details) - USD ($) $ in Millions | 9 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Changes in the fair value of the contingent consideration obligations | ||
Changes in fair value | $ (9) | $ (18) |
Selling, general and administrative expenses | ||
Changes in the fair value of the contingent consideration obligations | ||
Contingent consideration at the beginning of the period | 36 | |
Changes in fair value | (9) | |
Contingent consideration at the end of the period | $ 27 |
REVENUE RECOGNITION - Additiona
REVENUE RECOGNITION - Additional Information (Details) - USD ($) $ in Millions | 9 Months Ended | |
Mar. 31, 2020 | Jun. 30, 2019 | |
Significant changes in deferred revenue | ||
Balance at the beginning of the period | $ 361 | |
Revenue recognized that was included in the deferred revenue balance at the beginning of the period | (268) | |
Revenue deferred during the period | 269 | |
Balance at the end of the period | 362 | |
ASU 2014-09 | ||
REVENUE RECOGNITION | ||
Allowance for doubtful accounts and customer deductions | $ 39 | $ 32 |
REVENUE RECOGNITION - Transacti
REVENUE RECOGNITION - Transaction price allocated to the remaining performance obligations (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-01 $ in Millions | Mar. 31, 2020USD ($) |
REVENUE RECOGNITION | |
Expected timing of revenue recognition | 12 months |
Estimated recognition of deferred revenue | $ 306 |
PENSION AND POST-RETIREMENT B_3
PENSION AND POST-RETIREMENT BENEFIT PLANS - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Pension Plans | U.S. | ||||
Components of net periodic benefit cost: | ||||
Service cost | $ 9 | $ 10 | $ 29 | $ 28 |
Interest cost | 9 | 10 | 26 | 28 |
Expected return on plan assets | (14) | (15) | (40) | (41) |
Amortization of: | ||||
Actuarial loss | 5 | 3 | 12 | 8 |
Special termination benefits | 0 | 0 | 0 | 0 |
Net periodic benefit cost | 9 | 8 | 27 | 23 |
Employer contributions | 30 | |||
Pension Plans | International | ||||
Components of net periodic benefit cost: | ||||
Service cost | 9 | 8 | 27 | 23 |
Interest cost | 3 | 3 | 8 | 9 |
Expected return on plan assets | (4) | (3) | (11) | (10) |
Amortization of: | ||||
Actuarial loss | 1 | 0 | 4 | 2 |
Special termination benefits | 1 | 0 | 1 | 0 |
Net periodic benefit cost | 10 | 8 | 29 | 24 |
Employer contributions | 11 | |||
Other than Pension Plans Post-retirement | ||||
Components of net periodic benefit cost: | ||||
Service cost | 0 | 1 | 2 | 2 |
Interest cost | 2 | 2 | 5 | 6 |
Expected return on plan assets | 0 | (1) | (1) | (2) |
Amortization of: | ||||
Actuarial loss | 0 | 0 | 0 | 0 |
Special termination benefits | 0 | 0 | 0 | 0 |
Net periodic benefit cost | $ 2 | $ 2 | $ 6 | $ 6 |
PENSION AND POST-RETIREMENT B_4
PENSION AND POST-RETIREMENT BENEFIT PLANS - Amounts Recognized in the Consolidated Balance Sheets (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Jun. 30, 2019 |
Amounts recognized in the consolidated balance sheets consist of: | ||
Other assets | $ 125 | $ 105 |
Other accrued liabilities | (27) | (27) |
Other noncurrent liabilities | (430) | (418) |
Funded status | (332) | (340) |
Accumulated other comprehensive loss | 319 | 334 |
Net amount recognized | $ (13) | $ (6) |
CONTINGENCIES (Details)
CONTINGENCIES (Details) | Mar. 31, 2020USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Loss contingency accrual related to product advertising claims | $ 0 |
STOCK PROGRAMS - Compensation E
STOCK PROGRAMS - Compensation Expense and Stock Options (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Compensation expense | $ 71 | $ 70 | $ 210 | $ 201 |
Income tax benefit | $ 13 | $ 13 | $ 39 | $ 38 |
Stock Options | Common Class A | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Grant at fair value (in shares) | 1.3 | |||
Exercise price (in dollars per share) | $ 199.24 | |||
Weighted-average grant date fair value (in dollars per share) | $ 51.44 | |||
Additional General Disclosures | ||||
Intrinsic value of stock options exercised (in dollars) | $ 252 |
STOCK PROGRAMS - Restricted Sto
STOCK PROGRAMS - Restricted Stock Units (Details) - Restricted Stock Units - Employee - Common Class A shares in Millions | 9 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Granted (in shares) | 0.8 |
Weighted-average grant date fair value (in dollars per share) | $ / shares | $ 199.25 |
RSU grants scheduled to vest in fiscal 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award | |
RSU grants scheduled to vest (in shares) | 0.3 |
RSU grants scheduled to vest in fiscal 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award | |
RSU grants scheduled to vest (in shares) | 0.3 |
RSU grants scheduled to vest in fiscal 2023 | |
Share-based Compensation Arrangement by Share-based Payment Award | |
RSU grants scheduled to vest (in shares) | 0.2 |
STOCK PROGRAMS - Performance Sh
STOCK PROGRAMS - Performance Share Units (Details) - Performance Share Units - Employee - $ / shares shares in Millions | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Jan. 31, 2020 | Sep. 30, 2019 | Mar. 31, 2020 | Jun. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award | |||||
Vested (in shares) | 0.3 | ||||
Common Class A | |||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||
Granted (in shares) | 0.1 | 0.1 | 0.1 | ||
Weighted-average grant date fair value (in dollars per share) | $ 162.15 | $ 162.15 | $ 199.18 | ||
Common Stock issued (in shares) | 0.4 |
NET EARNINGS (LOSS) ATTRIBUTA_3
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE - Reconciliation Between Numerator and Denominator of Basic and Diluted EPS Computations (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Numerator: | ||||
Net earnings (loss) attributable to The Estée Lauder Companies Inc. | $ (6) | $ 555 | $ 1,146 | $ 1,628 |
Denominator: | ||||
Weighted-average common shares outstanding – Basic | 360.2 | 361.9 | 360.6 | 364 |
Weighted-average common shares outstanding – Diluted | 360.2 | 368.3 | 367.1 | 370.9 |
Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share: | ||||
Basic (in dollars per share) | $ (0.02) | $ 1.53 | $ 3.18 | $ 4.47 |
Diluted (in dollars per share) | $ (0.02) | $ 1.51 | $ 3.12 | $ 4.39 |
Stock Options | ||||
Denominator: | ||||
Incremental common shares attributable to share-based payment arrangements | 0 | 4.6 | 4.6 | 4.8 |
Performance Share Units | ||||
Denominator: | ||||
Incremental common shares attributable to share-based payment arrangements | 0 | 0.3 | 0.3 | 0.3 |
Restricted Stock Units | ||||
Denominator: | ||||
Incremental common shares attributable to share-based payment arrangements | 0 | 1.5 | 1.6 | 1.8 |
NET EARNINGS (LOSS) ATTRIBUTA_4
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE - Antidilutive Securities Excluded from Computation of Earnings, Per Share (Details) - shares shares in Millions | 9 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Stock Options | ||
Antidilutive Securities Excluded from Computation of Earnings, Per Share | ||
Antidilutive shares excluded from the calculation of diluted earnings per share | 1.3 | 1.6 |
Contingently Issuable Shares | ||
Antidilutive Securities Excluded from Computation of Earnings, Per Share | ||
Antidilutive shares excluded from the calculation of diluted earnings per share | 1.2 | 1.3 |
EQUITY - Equity Roll forward (D
EQUITY - Equity Roll forward (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | $ 4,411 | |||
Net earnings (loss) attributable to The Estée Lauder Companies Inc. | $ (6) | $ 555 | 1,146 | $ 1,628 |
Net earnings attributable to noncontrolling interests | (2) | (2) | (9) | (8) |
Other comprehensive income (loss) | (143) | (68) | (150) | (65) |
End of the period | $ 4,358 | $ 4,617 | $ 4,358 | $ 4,617 |
Cash dividends declared per common share | $ 0.48 | $ 0.43 | $ 1.39 | $ 1.24 |
Total Stockholders' equity - The Estee Lauder Companies Inc. | ||||
Increase (Decrease) in Stockholders' Equity | ||||
End of the period | $ 4,329 | $ 4,588 | $ 4,329 | $ 4,588 |
Common Stock | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | 6 | 6 | 6 | 6 |
End of the period | 6 | 6 | 6 | 6 |
Paid-in Capital | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | 4,615 | 4,162 | 4,403 | 3,972 |
Common stock dividends | 1 | 3 | ||
Stock-based compensation | 144 | 169 | 354 | 359 |
End of the period | 4,760 | 4,331 | 4,760 | 4,331 |
Retained Earnings | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | 10,775 | 9,586 | 9,984 | 9,040 |
Common stock dividends | (174) | (157) | (506) | (455) |
Net earnings (loss) attributable to The Estée Lauder Companies Inc. | (6) | 555 | 1,146 | 1,628 |
End of the period | 10,595 | 9,984 | 10,595 | 9,984 |
Retained Earnings | Cumulative Effect, Period of Adoption, Adjustment | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | (29) | (229) | ||
Accumulated Other Comprehensive Loss | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | (569) | (430) | (563) | (434) |
Other comprehensive income (loss) | (143) | (68) | (149) | (64) |
End of the period | (712) | (498) | (712) | (498) |
Treasury Stock | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | (10,253) | (9,018) | (9,444) | (7,896) |
Acquisition of treasury stock | (65) | (215) | (768) | (1,248) |
Stock-based compensation | (2) | (2) | (108) | (91) |
End of the period | (10,320) | (9,235) | (10,320) | (9,235) |
Non-controlling Interests | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | 27 | 27 | 25 | 22 |
Net earnings attributable to noncontrolling interests | 2 | 2 | 9 | 8 |
Distribution to noncontrolling interest holders | (4) | |||
Other comprehensive income (loss) | (1) | (1) | ||
End of the period | $ 29 | $ 29 | $ 29 | $ 29 |
EQUITY - Class of Stock and Div
EQUITY - Class of Stock and Dividend Information (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | Feb. 05, 2020 | Oct. 30, 2019 | Aug. 16, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 |
Class of Stock | |||||||
Cash dividends declared per common share (in dollars per share) | $ 0.48 | $ 0.43 | $ 1.39 | $ 1.24 | |||
Conversion of Class B to Class A (in shares) | 4.3 | ||||||
Common Class A and Common Class B | |||||||
Class of Stock | |||||||
Cash dividends declared per common share (in dollars per share) | $ 0.48 | $ 0.48 | $ 0.43 | ||||
Common Class A | |||||||
Class of Stock | |||||||
Purchase of Class A Common Stock (in shares) | 4.6 | ||||||
Purchase of Class A Common Stock (in dollars) | $ 883 |
EQUITY - Changes in Accumulated
EQUITY - Changes in Accumulated Other Comprehensive Income (Loss) (Details) $ in Millions | 9 Months Ended |
Mar. 31, 2020USD ($) | |
Changes in AOCI, net of tax, by component | |
Balance, beginning of the period | $ 4,386 |
Balance, end of the period | 4,329 |
Accumulated Other Comprehensive Loss | |
Changes in AOCI, net of tax, by component | |
Balance, beginning of the period | (563) |
OCI before reclassifications | (142) |
Amounts reclassified to Net earnings (loss) | (7) |
Net current-period OCI | (149) |
Balance, end of the period | (712) |
Net Cash Flow Hedge Gain (Loss) | |
Changes in AOCI, net of tax, by component | |
Balance, beginning of the period | 21 |
OCI before reclassifications | 29 |
Amounts reclassified to Net earnings (loss) | (22) |
Net current-period OCI | 7 |
Balance, end of the period | 28 |
Amounts Included in Net Periodic Benefit Cost | |
Changes in AOCI, net of tax, by component | |
Balance, beginning of the period | (253) |
OCI before reclassifications | (1) |
Amounts reclassified to Net earnings (loss) | 13 |
Net current-period OCI | 12 |
Balance, end of the period | (241) |
Translation Adjustments | |
Changes in AOCI, net of tax, by component | |
Balance, beginning of the period | (331) |
OCI before reclassifications | (170) |
Amounts reclassified to Net earnings (loss) | 2 |
Net current-period OCI | (168) |
Balance, end of the period | $ (499) |
EQUITY - Reclassification Adjus
EQUITY - Reclassification Adjustments From Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | |
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Net sales | $ 3,345 | $ 3,744 | $ 11,864 | $ 11,273 |
Interest expense | 42 | 32 | 112 | 101 |
Earnings before income taxes | 80 | 727 | 1,651 | 2,108 |
Benefit (provision) for deferred taxes | (84) | (170) | (496) | (472) |
Net earnings (loss) | (4) | 557 | 1,155 | 1,636 |
Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Net earnings (loss) | 3 | 76 | 7 | 76 |
Gain (Loss) on Investments | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Gain (loss) on investments | 0 | (6) | 0 | (6) |
Benefit (provision) for deferred taxes | 0 | 0 | 0 | 0 |
Net earnings (loss) | 0 | (6) | 0 | (6) |
Gain (Loss) on Cash Flow Hedges | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Earnings before income taxes | 10 | 9 | 29 | 16 |
Benefit (provision) for deferred taxes | (2) | (2) | (7) | (4) |
Net earnings (loss) | 8 | 7 | 22 | 12 |
Gain (Loss) on Cash Flow Hedges | Foreign currency forward contracts | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Net sales | 10 | 8 | 29 | 15 |
Gain (Loss) on Cash Flow Hedges | Interest rate-related derivatives | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Interest expense | 0 | 1 | 0 | 1 |
Amounts Included in Net Periodic Benefit Cost | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Amortization of actuarial loss | (6) | (3) | (16) | (10) |
Benefit (provision) for deferred taxes | 1 | 1 | 3 | 3 |
Net earnings (loss) | (5) | (2) | (13) | (7) |
Cumulative Translation Adjustments | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Gain on previously held equity method investment | 0 | 0 | 4 | 0 |
Net earnings (loss) | 0 | 77 | (2) | 77 |
Cumulative Translation Adjustments | Amount Reclassified from AOCI | Restructuring and other charges | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Loss on liquidation of an investment in a foreign subsidiary | 0 | 0 | (6) | 0 |
Cumulative Translation Adjustments | Amount Reclassified from AOCI | Other income, net | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Loss on liquidation of an investment in a foreign subsidiary | $ 0 | $ 77 | $ 0 | $ 77 |
STATEMENT OF CASH FLOWS (Detail
STATEMENT OF CASH FLOWS (Details) - USD ($) $ in Millions | 9 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash: | ||
Cash paid during the period for interest | $ 94 | $ 99 |
Cash paid during the period for income taxes | 472 | 400 |
Non-cash investing and financing activities: | ||
Capital lease, capitalized interest and asset retirement obligations incurred | 0 | 8 |
Property, plant and equipment accrued but unpaid | $ 47 | $ 39 |
SEGMENT DATA AND RELATED INFO_3
SEGMENT DATA AND RELATED INFORMATION (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) | Mar. 31, 2020USD ($)segment | Mar. 31, 2019USD ($) | |
SEGMENT DATA AND RELATED INFORMATION | ||||
Number of operating segments | segment | 1 | |||
Net sales: | ||||
Net sales, before returns | $ 3,345 | $ 3,746 | $ 11,864 | $ 11,275 |
Returns associated with restructuring and other activities | 0 | (2) | 0 | (2) |
Net sales | 3,345 | 3,744 | 11,864 | 11,273 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 134 | 709 | 1,212 | 2,214 |
Operating income | 109 | 674 | 1,149 | 2,097 |
Reconciliation: | ||||
Charges associated with restructuring and other activities | (25) | (35) | (63) | (117) |
Interest expense | (42) | (32) | (112) | (101) |
Interest income and investment income, net | 14 | 15 | 41 | 42 |
Other components of net periodic benefit cost | (1) | (1) | (3) | (1) |
Other income, net | 0 | 71 | 576 | 71 |
Earnings before income taxes | 80 | 727 | 1,651 | 2,108 |
The Americas | ||||
SEGMENT DATA AND RELATED INFORMATION | ||||
Increase (decrease) in operating income (loss) | 229 | 640 | ||
Net sales: | ||||
Net sales | 892 | 1,155 | 3,278 | 3,609 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | (217) | 200 | (571) | 583 |
Europe, the Middle East & Africa | ||||
SEGMENT DATA AND RELATED INFORMATION | ||||
Increase (decrease) in operating income (loss) | (229) | (640) | ||
Net sales: | ||||
Net sales | 1,525 | 1,625 | 5,281 | 4,825 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 202 | 265 | 1,084 | 940 |
Asia/Pacific | ||||
Net sales: | ||||
Net sales | 928 | 966 | 3,305 | 2,841 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 149 | 244 | 699 | 691 |
Skin Care | ||||
Net sales: | ||||
Net sales | 1,723 | 1,744 | 5,770 | 4,962 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 418 | 593 | 1,822 | 1,624 |
Makeup | ||||
Net sales: | ||||
Net sales | 1,146 | 1,461 | 4,249 | 4,427 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | (283) | 99 | (790) | 398 |
Fragrance | ||||
Net sales: | ||||
Net sales | 349 | 392 | 1,392 | 1,401 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 0 | 17 | 163 | 156 |
Hair Care | ||||
Net sales: | ||||
Net sales | 119 | 136 | 417 | 433 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | (2) | (2) | 10 | 27 |
Other | ||||
Net sales: | ||||
Net sales | 8 | 13 | 36 | 52 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | $ 1 | $ 2 | $ 7 | $ 9 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) | 1 Months Ended | |
Apr. 30, 2020 | Mar. 31, 2020 | |
Subsequent Event [Line Items] | ||
Line of credit | $ 1,300,000,000 | |
Revolving Credit Facility | ||
Subsequent Event [Line Items] | ||
Line of credit facility, maximum borrowing capacity | $ 1,500,000,000 | |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Line of credit | $ 200,000,000 | |
Subsequent Event | Commercial Paper | ||
Subsequent Event [Line Items] | ||
Repayments of commercial paper | 200,000,000 | |
2.600% Senior Notes due April 15, 2030 (the "2030 Senior Notes") [Member] | Subsequent Event | ||
Subsequent Event [Line Items] | ||
Aggregate principal amount | $ 700,000,000 | |
Interest rate, stated percentage | 2.60% |