Cover
Cover - USD ($) $ in Billions | 12 Months Ended | ||
Jun. 30, 2020 | Aug. 20, 2020 | Dec. 31, 2019 | |
Entity Information [Line Items] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Jun. 30, 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 Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
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 | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 45 | ||
Entity Central Index Key | 0001001250 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Documents Incorporated by Reference | Documents Incorporated by Reference Document Where Incorporated Proxy Statement for Annual Meeting of Stockholders to be held November 10, 2020 Part III | ||
Common Class A | |||
Entity Information [Line Items] | |||
Entity Common Stock, Shares Outstanding | 225,569,212 | ||
Common Class B | |||
Entity Information [Line Items] | |||
Entity Common Stock, Shares Outstanding | 135,235,429 |
CONSOLIDATED STATEMENTS OF EARN
CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | |||
Net sales | $ 14,294 | $ 14,863 | $ 13,683 |
Cost of sales | 3,552 | 3,387 | 2,844 |
Gross profit | 10,742 | 11,476 | 10,839 |
Operating expenses | |||
Selling, general and administrative | 8,637 | 8,857 | 8,553 |
Restructuring and other charges | 73 | 216 | 231 |
Goodwill impairment | 812 | 68 | 0 |
Impairments of other intangible and long-lived assets | 614 | 22 | 0 |
Total operating expenses | 10,136 | 9,163 | 8,784 |
Operating income | 606 | 2,313 | 2,055 |
Interest expense | 161 | 133 | 128 |
Interest income and investment income, net | 48 | 58 | 56 |
Other components of net periodic benefit cost | 4 | 2 | 3 |
Other income, net | 557 | 71 | 0 |
Earnings before income taxes | 1,046 | 2,307 | 1,980 |
Provision for income taxes | 350 | 513 | 863 |
Net earnings | 696 | 1,794 | 1,117 |
Net earnings attributable to noncontrolling interests | (12) | (9) | (9) |
Net earnings attributable to The Estée Lauder Companies Inc. | $ 684 | $ 1,785 | $ 1,108 |
Net earnings attributable to The Estée Lauder Companies Inc. per common share | |||
Basic (in dollars per share) | $ 1.90 | $ 4.91 | $ 3.01 |
Diluted (in dollars per share) | $ 1.86 | $ 4.82 | $ 2.95 |
Weighted-average common shares outstanding | |||
Basic (in shares) | 360.6 | 363.5 | 368 |
Diluted (in shares) | 366.9 | 370.4 | 375.7 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | |||
Net earnings | $ 696 | $ 1,794 | $ 1,117 |
Other comprehensive income (loss): | |||
Net unrealized investment gain (loss) | 0 | 14 | (13) |
Net cash flow hedge gain (loss) | (9) | (24) | 57 |
Amounts included in net periodic benefit cost | 12 | (102) | 92 |
Translation adjustments | (108) | (57) | (20) |
Benefit (provision) for deferred income taxes on components of other comprehensive income | 3 | 40 | (34) |
Total other comprehensive income (loss) | (102) | (129) | 82 |
Comprehensive income | 594 | 1,665 | 1,199 |
Comprehensive income attributable to noncontrolling interests: | |||
Net earnings | (12) | (9) | (9) |
Comprehensive income attributable to The Estée Lauder Companies Inc. | $ 582 | $ 1,656 | $ 1,190 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Jun. 30, 2020 | Jun. 30, 2019 |
Current assets | ||
Cash and cash equivalents | $ 5,022 | $ 2,987 |
Accounts receivable, net | 1,194 | 1,831 |
Inventory and promotional merchandise | 2,062 | 2,006 |
Prepaid expenses and other current assets | 614 | 388 |
Total current assets | 8,892 | 7,212 |
Property, plant and equipment, net | 2,055 | 2,068 |
Other assets | ||
Operating lease right-of-use assets | 2,282 | |
Goodwill | 1,401 | 1,868 |
Other intangible assets, net | 2,338 | 1,203 |
Other assets | 813 | 805 |
Total other assets | 6,834 | 3,876 |
Total assets | 17,781 | 13,156 |
Current liabilities | ||
Current debt | 1,222 | 516 |
Accounts payable | 1,177 | 1,490 |
Operating lease liabilities | 375 | |
Other accrued liabilities | 2,405 | 2,599 |
Total current liabilities | 5,179 | 4,605 |
Noncurrent liabilities | ||
Long-term debt | 4,914 | 2,896 |
Long-term operating lease liabilities | 2,278 | |
Other noncurrent liabilities | 1,448 | 1,244 |
Total noncurrent liabilities | 8,640 | 4,140 |
Commitments and contingencies | ||
Equity | ||
Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at June 30, 2020 and June 30, 2019; shares issued: 451,927,441 at June 30, 2020 and 443,685,124 at June 30, 2019; Class B shares authorized: 304,000,000 at June 30, 2020 and June 30, 2019; shares issued and outstanding: 135,235,429 at June 30, 2020 and 139,537,814 at June 30, 2019 | 6 | 6 |
Paid-in capital | 4,790 | 4,403 |
Retained earnings | 10,134 | 9,984 |
Accumulated other comprehensive loss | (665) | (563) |
Stockholders' equity before treasury stock | 14,265 | 13,830 |
Less: Treasury stock, at cost; 226,637,238 Class A shares at June 30, 2020 and 222,120,630 Class A shares at June 30, 2019 | (10,330) | (9,444) |
Total stockholders’ equity – The Estée Lauder Companies Inc. | 3,935 | 4,386 |
Noncontrolling interests | 27 | 25 |
Total equity | 3,962 | 4,411 |
Total liabilities and equity | $ 17,781 | $ 13,156 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2020 | Jun. 30, 2019 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Class A | ||
Common stock, par value (in dollars per share) | $ 0.01 | |
Common stock, shares authorized | 1,300,000,000 | 1,300,000,000 |
Common stock, shares issued | 451,927,441 | 443,685,124 |
Common stock, shares outstanding | 225,290,200 | 221,564,500 |
Treasury stock, shares | 226,637,238 | 222,120,630 |
Common Class B | ||
Common stock, par value (in dollars per share) | $ 0.01 | |
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 EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Millions | Total | Total stockholders’ equity – The Estée Lauder Companies Inc. | Common stock | Paid-in capital | Retained earnings | Retained earningsCumulative effect of adoption of new accounting standards | Accumulated other comprehensive loss | Accumulated other comprehensive lossCumulative effect of adoption of new accounting standards | Treasury stock | Non-controlling interests |
Beginning of the period at Jun. 30, 2017 | $ 6 | $ 3,559 | $ 8,452 | $ 32 | $ (484) | $ (32) | $ (7,149) | $ 18 | ||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Stock-based compensation | 0 | 413 | (59) | |||||||
Common stock dividends | 0 | (552) | ||||||||
Net earnings attributable to The Estée Lauder Companies Inc. | $ 1,108 | 1,108 | ||||||||
Other comprehensive income (loss) | 82 | 82 | ||||||||
Acquisition of treasury stock | (688) | |||||||||
Net earnings attributable to noncontrolling interests | (9) | 9 | ||||||||
Distributions to noncontrolling interest holders | (5) | |||||||||
End of the period at Jun. 30, 2018 | $ 4,710 | $ 4,688 | 6 | 3,972 | 9,040 | (229) | (434) | (7,896) | 22 | |
Increase (Decrease) in Stockholders' Equity | ||||||||||
Cash dividends declared per common share (in dollars per share) | $ 1.48 | |||||||||
Stock-based compensation | 0 | 431 | (90) | |||||||
Common stock dividends | 0 | (612) | ||||||||
Net earnings attributable to The Estée Lauder Companies Inc. | $ 1,785 | 1,785 | ||||||||
Other comprehensive income (loss) | (129) | (129) | ||||||||
Acquisition of treasury stock | (1,458) | |||||||||
Net earnings attributable to noncontrolling interests | (9) | 9 | ||||||||
Distributions to noncontrolling interest holders | (6) | |||||||||
End of the period at Jun. 30, 2019 | $ 4,411 | 4,386 | 6 | 4,403 | 9,984 | $ (29) | (563) | (9,444) | 25 | |
Increase (Decrease) in Stockholders' Equity | ||||||||||
Cash dividends declared per common share (in dollars per share) | $ 1.67 | |||||||||
Stock-based compensation | 0 | 384 | (118) | |||||||
Common stock dividends | 3 | (505) | ||||||||
Net earnings attributable to The Estée Lauder Companies Inc. | $ 684 | 684 | ||||||||
Other comprehensive income (loss) | (102) | (102) | ||||||||
Acquisition of treasury stock | (768) | |||||||||
Net earnings attributable to noncontrolling interests | (12) | 12 | ||||||||
Distributions to noncontrolling interest holders | (10) | |||||||||
End of the period at Jun. 30, 2020 | $ 3,962 | $ 3,935 | $ 6 | $ 4,790 | $ 10,134 | $ (665) | $ (10,330) | $ 27 | ||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Cash dividends declared per common share (in dollars per share) | $ 1.39 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities | |||
Net earnings | $ 696 | $ 1,794 | $ 1,117 |
Adjustments to reconcile net earnings to net cash flows from operating activities: | |||
Depreciation and amortization | 611 | 557 | 531 |
Deferred income taxes | (143) | (66) | 175 |
Non-cash stock-based compensation | 213 | 243 | 236 |
Net loss on disposal of property, plant and equipment | 20 | 17 | 15 |
Non-cash restructuring and other charges | 20 | 0 | 1 |
Pension and post-retirement benefit expense | 82 | 72 | 73 |
Pension and post-retirement benefit contributions | (73) | (53) | (85) |
Goodwill, other intangible and long-lived asset impairments | 1,426 | 90 | 0 |
Changes in fair value of contingent consideration | (17) | (37) | (43) |
Gain on liquidation of an investment in a foreign subsidiary, net | 0 | (71) | 0 |
Gain on previously held equity method investment | (534) | 0 | 0 |
Other non-cash items | (10) | (27) | (22) |
Changes in operating assets and liabilities: | |||
Decrease (increase) in accounts receivable, net | 625 | (169) | (105) |
Increase in inventory and promotional merchandise | (3) | (375) | (147) |
Decrease (increase) in other assets, net | (212) | (62) | 1 |
Increase (decrease) in accounts payable | (308) | 319 | 349 |
Increase (decrease) in other accrued and noncurrent liabilities | (169) | 285 | 466 |
Increase in operating lease assets and liabilities, net | 56 | ||
Net cash flows provided by operating activities | 2,280 | 2,517 | 2,562 |
Cash flows from investing activities | |||
Capital expenditures | (623) | (744) | (629) |
Payments for acquired businesses, net of cash acquired | (1,047) | 0 | 0 |
Proceeds from the disposition of investments | 0 | 1,229 | 749 |
Purchases of investments | (5) | (14) | (478) |
Proceeds from sale of property, plant and equipment | 0 | 2 | 0 |
Settlement of net investment hedges | (23) | 0 | 0 |
Net cash flows provided by (used for) investing activities | (1,698) | 473 | (358) |
Cash flows from financing activities | |||
Proceeds (repayments) of current debt, net | 755 | (171) | (8) |
Proceeds from issuance of long-term debt, net | 2,481 | 0 | 0 |
Debt issuance costs | (18) | 0 | 0 |
Repayments and redemptions of long-term debt | (513) | (1) | (2) |
Net proceeds from stock-based compensation transactions | 180 | 192 | 182 |
Payments to acquire treasury stock | (893) | (1,555) | (759) |
Dividends paid to stockholders | (503) | (609) | (546) |
Payments to noncontrolling interest holders for dividends | (10) | (6) | (4) |
Payments of contingent consideration | (18) | (23) | (35) |
Net cash flows provided by (used for) financing activities | 1,461 | (2,173) | (1,172) |
Effect of exchange rate changes on Cash and cash equivalents | (8) | (11) | 13 |
Net increase in Cash and cash equivalents | 2,035 | 806 | 1,045 |
Cash and cash equivalents at beginning of year | 2,987 | 2,181 | 1,136 |
Cash and cash equivalents at end of year | $ 5,022 | $ 2,987 | $ 2,181 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 12 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | DESCRIPTION OF BUSINESS The Estée Lauder Companies Inc. manufactures, markets and sells skin care, makeup, fragrance and hair care products around the world. Products are marketed under brand names, including: Estée Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, M·A·C, Bobbi Brown , La Mer , Aveda, Jo Malone London, Bumble and bumble, Darphin, Smashbox, RODIN olio lusso, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, By Kilian, BECCA, Too Faced and Dr. Jart+. Certain subsidiaries of The Estée Lauder Companies Inc. are also the global licensee of the Tommy Hilfiger, Kiton, Donna Karan New York, DKNY, Michael Kors, Tom Ford, Ermenegildo Zegna and AERIN brand names for fragrances and/or cosmetics. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation 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. Certain amounts in the consolidated financial statements of prior years have been reclassified to conform to current year presentation. Management Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“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. Certain significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, inventory, pension and other post-retirement benefit costs, business combinations, goodwill, other intangible assets and long-lived assets, and income taxes. 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 year-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 $(106) million, $30 million and $(17) million, net of tax, in fiscal 2020, 2019 and 2018, 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 2020, 2019 and 2018. In fiscal 2019, the Company had an investment in a foreign subsidiary that owned the Company’s available-for-sale securities, and 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 statement of earnings. 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. In 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 12 – 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 include net exchange gains (losses) on foreign currency transactions of $51 million, $46 million and $(95) million in fiscal 2020, 2019 and 2018, respectively. Cash and Cash Equivalents Cash and cash equivalents include $775 million and $1,566 million of short-term time deposits at June 30, 2020 and 2019, respectively. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Investments Investments in the common stock of privately-held companies in which the Company has significant influence, but less than a controlling financial interest, are accounted for under the equity method of accounting. The Company accounts for its cost method investments at cost, less impairment, plus/minus subsequent observable price changes, and performs an assessment each quarter to determine whether or not a triggering event has occurred that results in changes in fair value. These investments were not material to the Company’s consolidated financial statements as of June 30, 2020 and 2019 and are included in Long-term investments in the accompanying consolidated balance sheets. Accounts Receivable Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions. 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. In addition, if the good/service is transferred and payment is received within one year, the Company does not determine significant financing components. See Note 14 – Revenue Recognition for additional information. Inventory and Promotional Merchandise Inventory and promotional merchandise only includes inventory considered saleable or usable in future periods, and is stated at the lower of cost or net realizable value, with cost being based on standard cost and production variances, which approximate actual cost on the first-in, first-out method. Cost components include raw materials, componentry, direct labor and overhead (e.g., indirect labor, utilities, depreciation, purchasing, receiving, inspection and warehousing) as well as inbound freight. Manufacturing overhead is allocated to the cost of inventory based on the normal production capacity. Unallocated overhead during periods of abnormally low production levels are recognized as cost of sales in the period in which they are incurred. Promotional merchandise is charged to expense at the time the merchandise is shipped to the Company’s customers. Included in inventory and promotional merchandise is an inventory obsolescence reserve, which represents the difference between the cost of the inventory and its estimated realizable value. This reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age and historical results. In addition, and as necessary, specific reserves for future known or anticipated events may be established. Derivative Financial Instruments The Company’s derivative financial instruments are recorded as either assets or liabilities on the balance sheet and measured at fair value. All derivatives are (i) designated as a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value” hedge), (ii) designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge), or (iii) not designated as a hedging instrument. Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge are recorded in current-period earnings, along with the loss or gain on the hedged asset or liability that is attributable to the hedged risk (including losses or gains on unrecognized firm commitments). Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge of a forecasted transaction are recorded in OCI. Gains and losses deferred in OCI are then recognized in current-period earnings when earnings are affected by the variability of cash flows of the hedged forecasted transaction (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). Changes in the fair value of derivative instruments not designated as hedging instruments are reported in current-period earnings. All derivative gains and losses relating to cash flow hedges and fair value hedges are recognized in the same income statement line as the hedged items. In 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 12 – Derivative Financial Instruments for further discussion. Property, Plant and Equipment Property, plant and equipment, including leasehold and other improvements that extend an asset’s useful life or productive capabilities, are carried at cost less accumulated depreciation and amortization. Costs incurred for computer software developed or obtained for internal use are capitalized during the application development stage and expensed as incurred during the preliminary project and post-implementation stages. For financial statement purposes, depreciation is provided principally on the straight-line method over the estimated useful lives of the assets ranging from 3 to 40 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lives of the respective leases or the expected useful lives of those improvements. Business Combinations The Company uses the acquisition method of accounting for acquired businesses. Under the acquisition method, the Company's consolidated financial statements reflect the operations of an acquired business starting from the closing date of the acquisition. The Company allocates the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. Any residual purchase price is recorded as goodwill. See Note 5 – Acquisition of Business for further information. Goodwill and Other Indefinite-lived Intangible Assets Goodwill is calculated as the excess of the cost of purchased businesses over the fair value of their underlying net assets. Other indefinite-lived intangible assets principally consist of trademarks. Goodwill and other indefinite-lived intangible assets are not amortized. The Company assesses goodwill and other indefinite-lived intangible assets at least annually for impairment as of the beginning of the fiscal fourth quarter or more frequently if certain events or circumstances exist. The Company tests goodwill for impairment at the reporting unit level, which is one level below the Company’s operating segments. The Company identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available and management of each operating segment regularly reviews the operating results of those components. The Company makes certain judgments and assumptions in allocating assets and liabilities to determine carrying values for its reporting units. When testing goodwill for impairment, the Company has the option of first performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. The Company uses a single quantitative step when determining the subsequent measurement of goodwill by comparing the fair value of a reporting unit with its carrying amount and recording an impairment charge for the amount that the carrying amount exceeds the fair value, up to the total amount of goodwill allocated to that reporting unit. When testing other indefinite-lived intangible assets for impairment, the Company also has the option of first performing a qualitative assessment to determine whether it is more-likely-than-not that the indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform a quantitative test. The quantitative impairment test for indefinite-lived intangible assets encompasses calculating the fair value of an indefinite-lived intangible asset and comparing the fair value to its carrying value. If the carrying value exceeds the fair value, an impairment charge is recorded. For fiscal 2020 and 2019, the Company elected to perform the qualitative assessment for certain of its reporting units and indefinite-lived intangible assets. This qualitative assessment included the review of certain macroeconomic factors and entity-specific qualitative factors to determine if it was more-likely-than-not that the fair values of its reporting units were below carrying value. The Company considered macroeconomic factors including the global economic growth, general macroeconomic trends for the markets in which the reporting units operate and the intangible assets are employed, and the growth of the global prestige beauty industry. In addition to these macroeconomic factors, among other things, the Company considered the reporting units’ current results and forecasts, any changes in the nature of the business, any significant legal, regulatory, contractual, political or other business climate factors, changes in the industry/competitive environment, changes in the composition or carrying amount of net assets and its intention to sell or dispose of a reporting unit or cease the use of a trademark. For the Company’s other reporting units and other indefinite-lived intangible assets, a quantitative assessment was performed. The Company engaged third-party valuation specialists and used industry accepted valuation models and criteria that were reviewed and approved by various levels of management. To determine the fair value of the reporting units, the Company used an equal weighting of the income and market approaches. Under the income approach, we determined fair value using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflected the relative risk of the cash flows. Under the market approach, we utilized market multiples from publicly traded companies with similar operating and investment characteristics as the reporting unit. The key estimates and factors used in these two approaches include revenue growth rates and profit margins based on internal forecasts, terminal value, the weighted-average cost of capital used to discount future cash flows and comparable market multiples. To determine the fair value of other indefinite-lived intangible assets, we use 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. See Note 6 – Goodwill and Other Intangible Assets for further information. Long-Lived Assets The Company reviews long-lived assets, primarily right-of-use assets and property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When such events or changes in circumstances occur, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be measured and recorded for the excess of the carrying value over the fair value. Specifically for right-of-use assets, fair value is based on discounting market rent using a real estate discount rate. Leases During the first quarter of fiscal 2020, the Company adopted the new lease accounting standard, Accounting Standards Codification ("ASC") Topic 842 – Leases (“ASC 842”). See Note 7 – Leases for discussion. 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. Revenue Recognition During fiscal 2019, the Company adopted the new revenue accounting standard, ASC 606, under the modified retrospective method to all contracts as of the date of adoption. Under this method, the consolidated financial statements for the fiscal period beginning July 1, 2018 are presented under the new revenue accounting standard, while the fiscal 2018 results reflect the revenue accounting standards in effect during that period. Changes in Accounting Policies As a result of the fiscal 2019 adoption of ASC 606, the Company changed its accounting policies for revenue recognition as follows: • For products sold that qualify for customer loyalty program awards, the Company defers a portion of revenue related to the product sales. Previously, the Company recognized revenue in full for product sales and accrued for the expected amounts of loyalty awards to be provided under the incremental cost approach. • A portion of revenue is deferred for shipments of saleable products with separate performance obligations to provide gift with purchase and purchase with purchase promotional products, and is recognized as control is transferred to a customer. Previously, the Company recognized revenue for saleable products and purchase with purchase products based upon invoice prices charged to customers and included the cost of gift with purchase products and/or purchase with purchase products in Cost of sales when risks and rewards of ownership transferred to the Company’s customer (i.e. a third-party retailer). • The cost of certain promotional products, including samples and testers, are classified within Cost of sales. Such costs were previously accounted for as a component of Selling, general and administrative expenses. • In conjunction with the adoption of ASC 606, the Company reassessed its contracts under the variable consideration guidance, including the payments to customer guidance, and as a result certain reclassifications were made related to the timing and classification of certain net demonstration payments to and from customers. • For product returns, the Company established a sales return accrual and a corresponding asset for the right to recover goods in Other accrued liabilities and Inventory and promotional merchandise, net, respectively, while previously the net liability for product returns was recorded as a reduction of Accounts receivable, net. In addition, the Company adopted the policy election to exclude from the transaction price all amounts collected from customers for sales and other taxes. As a result of the change in accounting policies noted above, the Company recorded a cumulative adjustment of $229 million, net of tax, as a reduction to its fiscal 2019 opening balance of retained earnings. See Note 14 – Revenue Recognition for further discussion . For revenue disaggregated by product category and geographic region, see Note 22 – Segment Data and Related Information . Advertising and Promotion Global net advertising, merchandising, sampling, promotion and product development expenses of $3,398 million, $3,440 million and $3,287 million in fiscal 2020, 2019 and 2018, respectively, are recorded in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and are expensed as incurred. In fiscal 2020 and 2019, as a result of the fiscal 2019 adoption of ASC 606, the cost of certain promotional products, including samples and testers, are classified within Cost of sales. Such costs in fiscal 2018 were classified within Selling, general and administrative expenses. Research and Development Research and development costs of $228 million, $202 million and $181 million in fiscal 2020, 2019 and 2018, respectively, are recorded in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and are expensed as incurred. Shipping and Handling Shipping and handling expenses of $583 million, $570 million and $507 million in fiscal 2020, 2019 and 2018, respectively, are recorded in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and include distribution center costs, promotional shipping costs, third-party logistics costs and outbound freight. License Arrangements The Company’s license agreements provide the Company with worldwide rights to manufacture, market and sell beauty and beauty-related products (or particular categories thereof) using the licensors’ trademarks. The current licenses have an initial term of approximately 5 years to 10 years, and are renewable subject to the Company’s compliance with the license agreement provisions. Most of our license agreements have renewal terms in 5 year increments. As of June 30, 2020, the remaining terms considering available renewal periods range from 3 years to approximately 16 years. Under each license, the Company is required to pay royalties to the licensor, at least annually, based on net sales to third parties. Most of the Company’s licenses were entered into to create new business. In some cases, the Company acquired, or entered into, a license where the licensor or another licensee was operating a pre-existing beauty products business. In those cases, other intangible assets are capitalized and amortized over their useful lives. Certain license agreements may require minimum royalty payments, incremental royalties based on net sales levels and minimum spending on advertising and promotional activities. Royalty expenses are accrued in the period in which net sales are recognized while advertising and promotional expenses are accrued at the time these costs are incurred. Stock-Based Compensation The Company records stock-based compensation, measured at the fair value of the awards that are ultimately expected to vest, as an expense in the consolidated financial statements and accrues for estimated forfeitures each quarter. All excess tax benefits and tax deficiencies related to share-based compensation awards are recorded as income tax expense or benefit in the accompanying consolidated statements of earnings. Income Taxes The Company calculates and provides for income taxes in each tax jurisdiction in which it operates. As the application of various tax laws relevant to the Company’s global business is often uncertain, significant judgment is required in determining the Company’s annual tax expense and in evaluating the Company’s tax positions. The provision for income taxes includes the amounts payable or refundable for the current year, the effect of deferred taxes and impacts from uncertain tax positions. The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis, net operating losses, tax credit and other carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates when the assets and liabilities are expected to be realized or settled. The Company regularly reviews deferred tax assets for realizability and establishes valuation allowances based on available evidence including historical operating losses, projected future taxable income, expected timing of the reversals of existing temporary differences, and appropriate tax planning strategies. If the Company’s assessment of the realizability of a deferred tax asset changes, an increase to a valuation allowance will result in a reduction of net earnings at that time, while the reduction of a valuation allowance will result in an increase of net earnings at that time. The Company provides tax reserves for U.S. federal, state, local and foreign tax exposures relating to periods subject to audit. The development of reserves for these exposures requires judgments about tax issues, potential outcomes and timing, and is a subjective critical estimate. The Company assesses its tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon settlement with a tax authority that has full knowledge of all relevant information. For those tax positions where it is more-likely-than-not that a tax benefit will not be sustained, no tax benefit has been recognized in the consolidated financial statements. The Company classifies applicable interest and penalties as a component of the provision for income taxes. Although the outcome relating to these exposures is uncertain, in management’s opinion adequate provisions for income taxes have been made for estimable potential liabilities emanating from these exposures. If actual outcomes differ materially from these estimates, they could have a material impact on the Company’s consolidated net earnings. Government Assistance The Company recognizes amounts received from government assistance programs as a reduction to cost of sales or operating expenses in the consolidated statements of earnings when there is reasonable assurance the Company will receive the amount and has met the conditions, if any, required by the government assistance program. During the second half of fiscal 2020, many governments in locations where the Company operates announced programs to assist employers whose businesses were impacted by the COVID-19 pandemic, including programs that provide rebates to incentivize employers to maintain employees on payroll who were unable to work for their usual number of hours. During the fourth quarter of fiscal 2020, the Company qualified for and recorded $99 million in government assistance, which reduced Selling, general and administrative expenses and Cost of sales by $87 million and $10 million, respectively. The remaining $2 million was deferred and will be recognized in fiscal 2021. Recently Adopted Accounting Standards 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 7 – Leases for further discussion . 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. I mpact on consolidated financial statements – The Company adopted this guidance prospectively to lease concessions related to COVID-19 in the fiscal 2020 fourth quarter. The Company elected to treat all COVID-19 lease concessions as if the contract contained enforceable rights, recorded as variable rent expense, and elected to not remeasure the lease liability and right-of-use asset for COVID-19 lease concessions that provided for the deferral of payments. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. Recently Issued Accounting Standards 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 |
INVENTORY AND PROMOTIONAL MERCH
INVENTORY AND PROMOTIONAL MERCHANDISE | 12 Months Ended |
Jun. 30, 2020 | |
Inventory Disclosure [Abstract] | |
INVENTORY AND PROMOTIONAL MERCHANDISE | INVENTORY AND PROMOTIONAL MERCHANDISE June 30 (In millions) 2020 2019 Inventory and promotional merchandise consists of: Raw materials $ 542 $ 541 Work in process 305 268 Finished goods 995 981 Promotional merchandise 220 216 $ 2,062 $ 2,006 |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | PROPERTY, PLANT AND EQUIPMENT June 30 (In millions) 2020 2019 Assets (Useful Life) Land $ 33 $ 29 Buildings and improvements (10 to 40 years) 400 337 Machinery and equipment (3 to 10 years) 865 811 Computer hardware and software (4 to 10 years) 1,335 1,264 Furniture and fixtures (5 to 10 years) 120 116 Leasehold improvements 2,381 2,274 5,134 4,831 Less accumulated depreciation and amortization (3,079) (2,763) $ 2,055 $ 2,068 The cost of assets related to projects in progress of $501 million and $474 million as of June 30, 2020 and 2019, respectively, is included in their respective asset categories above. Depreciation and amortization of property, plant and equipment was $514 million, $495 million and $469 million in fiscal 2020, 2019 and 2018, 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. See Note 7 – Leases for discussion of property, plant and equipment impairments. |
ACQUISITION OF BUSINESS
ACQUISITION OF BUSINESS | 12 Months Ended |
Jun. 30, 2020 | |
Business Combinations [Abstract] | |
ACQUISITION OF BUSINESS | 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. Based on the final purchase price and working capital adjustments, the Company estimated a refund receivable of $32 million that was still outstanding as of June 30, 2020. 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. The Company 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. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain, which was reclassified from accumulated OCI. The total gain on the Company’s previously held equity method investment is included in Other income, net in the consolidated statements of earnings. 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. The accounting for the Have & Be business combination was finalized as of June 30, 2020. 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, which is also included in Other income, net in the consolidated statements of earnings. A summary of the total purchase price and the total gain recognized in Other income, net in the consolidated statements of earnings is as follows: (In millions) December 18, 2019 Measurement Period Adjustments June 30, 2020 Purchase price Purchase price $ 1,268 $ (32) $ 1,236 Fair value of previously held equity method investment 682 (22) 660 Write-off of call option relating to previously held equity method investment 4 — 4 Total purchase price $ 1,954 $ (54) $ 1,900 For the Six Months Ended December 31, 2019 Measurement Period Adjustments For the Year Ended June 30, 2020 Gains recognized in the consolidated statement of earnings Gain on previously held equity method investment $ 549 $ (19) $ 530 Recognition of a previously unrealized foreign currency gain 4 — 4 Total gain on previously held equity method investment 553 (19) 534 Foreign currency gain on cash 23 — 23 Total Other income, net $ 576 $ (19) $ 557 The Company has recorded an 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 measurement period adjustments, which consist of changes in estimates from the preliminary purchase price allocation performed in December 2019, considered the final calculation of the purchase price, final opening balance sheet (working capital adjustments) and final valuation report. The excess of the total consideration transferred over the fair value of the net tangible and intangible assets acquired was recorded as goodwill. The rollforward of the final allocation of the total consideration transferred as of December 18, 2019 to allocation as of June 30, 2020 is as follows: (In millions, unaudited) December 18, 2019 Measurement Period Adjustments June 30, 2020 Cash $ 228 $ 1 $ 229 Accounts receivable 48 (35) 13 Inventory 83 5 88 Other current assets 5 (1) 4 Property, plant and equipment 3 — 3 Right-of-use assets 3 — 3 Intangible assets 1,427 232 1,659 Goodwill 556 (210) 346 Other long-term assets 3 1 4 Total assets acquired 2,356 (7) 2,349 Accounts payable 27 (13) 14 Other accrued liabilities 22 5 27 Deferred income taxes 352 55 407 Lease liability 1 — 1 Total liabilities assumed 402 47 449 Total consideration transferred $ 1,954 $ (54) $ 1,900 The results of operations of Have & Be are reported on a one-month lag to facilitate consolidated reporting. For the year ended June 30, 2020, the Company's consolidated statements of earnings included approximately $165 million of net sales and $40 million of net loss, net of tax, 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 $7 million are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings for the year ended June 30, 2020. 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 | 12 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND OTHER INTANGIBLE ASSETS As previously discussed in Note 5 – Acquisition of Business , in December 2019, the Company acquired Have & Be, which included the addition of goodwill of $346 million, amortizable intangible assets (customer lists) of $937 million with amortization periods of 7.5 years to 17.5 years, and non-amortizable intangible assets (trademarks) of $722 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. The accounting for the Have & Be business combination was finalized as of June 30, 2020. During the year ended June 30, 2020 and 2019, the Company recognized $11 million and $13 million, respectively, 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. Goodwill The Company assigns goodwill of a reporting unit to the product categories in which that reporting unit operates at the time of acquisition. 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, 2018 Goodwill $ 185 $ 1,186 $ 256 $ 391 $ 2,018 Accumulated impairments (36) — (22) (34) (92) 149 1,186 234 357 1,926 Goodwill acquired during the year — 13 — — 13 Impairment charges — (68) — — (68) Translation adjustments, goodwill — — (2) (1) (3) — (55) (2) (1) (58) 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 year 346 11 — — 357 Impairment charges (60) (749) (3) — (812) Translation adjustments, goodwill (12) — — (1) (13) Translation adjustments, accumulated impairments 1 — (1) 1 1 275 (738) (4) — (467) Balance as of June 30, 2020 Goodwill 519 1,210 254 389 2,372 Accumulated impairments (95) (817) (26) (33) (971) $ 424 $ 393 $ 228 $ 356 $ 1,401 Other Intangible Assets Other intangible assets include trademarks and patents, as well as license agreements and other intangible assets resulting from or related to businesses and assets purchased by the Company. Indefinite-lived intangible assets (e.g., trademarks) are not subject to amortization and are assessed at least annually for impairment during the fiscal fourth quarter or more frequently if certain events or circumstances exist. Other intangible assets (e.g., non-compete agreements, customer lists) are amortized on a straight-line basis over their expected period of benefit, approximately 5 years to 20 years. Intangible assets related to license agreements were amortized on a straight-line basis over their useful lives based on the terms of the respective agreements. The costs incurred and expensed by the Company to extend or renew the term of acquired intangible assets during fiscal 2020 and 2019 were not significant to the Company’s results of operations. Other intangible assets consist of the following: June 30, 2020 June 30, 2019 (In millions) Gross Accumulated Total Net Gross Accumulated Total Net Amortizable intangible assets: Customer lists and other $ 1,590 $ 475 $ 1,115 $ 684 $ 369 $ 315 License agreements 43 43 — 43 43 — $ 1,633 $ 518 1,115 $ 727 $ 412 315 Non-amortizable intangible assets: Trademarks and other 1,223 888 Total intangible assets $ 2,338 $ 1,203 The aggregate amortization expense related to amortizable intangible assets for fiscal 2020, 2019 and 2018 was $73 million, $51 million and $51 million, respectively. The estimated aggregate amortization expense for each of the next five fiscal years is as follows: Fiscal (In millions) 2021 2022 2023 2024 2025 Estimated aggregate amortization expense $ 105 $ 100 $ 100 $ 98 $ 97 Fiscal 2020 Impairment Testing The Company assesses goodwill and other indefinite-lived intangible assets at least annually for impairment or more frequently if certain events or circumstances exist. 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. 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 additional 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 December 31, 2019 and March 31, 2020. The Company concluded that the carrying amounts of the long-lived assets were recoverable. For December 31, 2019 and March 31, 2020, the Company also concluded that the carrying values of the trademarks exceeded their estimated fair values and recorded impairment charges. For December 31, 2019, the Company utilized the relief-from-royalty method to determine discounted projected future cash flows, and for March 31, 2020, the relief-from-royalty method was based on probability weighted cash flows. After adjusting the carrying values of the trademarks, the Company completed interim quantitative impairment tests for goodwill and recorded goodwill impairment charges for each of these reporting units. For 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. For March 31, 2020, 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. Based on the Company’s annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2020, the Company determined that the carrying value of the Editions de Parfums Frédéric Malle reporting unit exceeded its fair value. This determination was made based on updated internal forecasts, finalized and approved in June 2020, that reflected lower net sales growth projections due to a softer than expected retail environment for the brand, as well as the impacts relating to the uncertainty of the duration and severity of COVID-19. These changes in circumstances were also an indicator that the carrying amounts of its respective long-lived assets, including customer lists, may not be recoverable. The Company concluded that the carrying value of the trademarks exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded impairment charges. The Company concluded that the carrying amounts of the long-lived assets were recoverable. After adjusting the carrying value of the trademarks, the Company completed the quantitative impairment test for goodwill and recorded a goodwill impairment charge for this reporting unit. The fair value of this 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 June 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 further revisions to the internal forecasts relating to its BECCA 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 June 30, 2020. The Company concluded that the carrying values of the trademarks for BECCA and GLAMGLOW 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. In addition, the Company concluded that the carrying value of the BECCA customer lists intangible asset exceeded its estimated fair value, which was determined utilizing the multi-period excess earnings income approach by discounting the incremental after-tax cash flows over multiple periods, and recorded an impairment charge. The Company concluded that the carrying amounts of the long-lived assets of GLAMGLOW were recoverable. After adjusting the carrying values of the trademarks and the BECCA customer lists, 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 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 twelve months ended June 30, 2020 and the remaining trademark, customer lists and goodwill carrying values as of June 30, 2020, for each reporting unit, are as follows: Impairment Charge (In millions) Three Months Ended Twelve Months Ended Carrying Value Reporting Unit: Product Category Trademark Customer Lists Goodwill Trademark Customer Lists Goodwill Trademark Customer Lists Goodwill Too Faced Makeup $ — $ — $ — $ 253 $ — $ 592 $ 272 $ 217 $ 13 BECCA Makeup 24 35 15 71 35 85 27 7 13 Smashbox Makeup — — — 23 — 72 32 — — GLAMGLOW Skin care 5 — 8 6 — 60 57 6 54 Editions de Parfums Frédéric Malle Fragrance 11 — 3 11 — 3 21 2 3 Total $ 40 $ 35 $ 26 $ 364 $ 35 $ 812 $ 409 $ 232 $ 83 The impairment charges for the three and twelve months ended June 30, 2020 were reflected in the Americas region. Fiscal 2019 Impairment Testing |
LEASES
LEASES | 12 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Leases | 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 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 23 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) June 30, 2020 Total lease cost Finance lease cost: Amortization of right-of-use assets $ 11 Interest on lease liabilities 1 Operating lease cost 625 Short-term lease cost 24 Variable lease cost 158 Total $ 819 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 426 Financing cash flows from finance leases $ 12 Right-of-use assets obtained in exchange for new operating lease liabilities $ 266 Right-of-use assets obtained in exchange for new finance lease liabilities $ 1 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 each of the next five fiscal years and thereafter is as follows: (In millions) Operating Leases Finance Leases Fiscal 2021 $ 436 $ 8 Fiscal 2022 377 4 Fiscal 2023 335 1 Fiscal 2024 301 — Fiscal 2025 259 — Thereafter 1,349 — Total future minimum lease payments 3,057 13 Less imputed interest (404) — Total $ 2,653 $ 13 Operating lease and finance lease liabilities included in the consolidated balance sheet are as follows: June 30, 2020 (In millions) Operating Leases Finance Leases Total current liabilities $ 375 $ 8 Total noncurrent liabilities 2,278 5 Total $ 2,653 $ 13 The ROU assets and lease liabilities related to finance leases are included in Other assets Current debt Long-term debt As a result of the challenging retail environment due to the COVID-19 pandemic, certain of the Company’s freestanding stores experienced lower net sales and lower expectations of future cash flows. These changes were an indicator that the carrying amounts may not be recoverable. Accordingly, the Company performed a recoverability test by comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. For those freestanding stores that failed step one of this test, the Company then compared the assets carrying values to their estimated fair values. Specifically, for the related ROU assets, the fair value was based on discounting market rent using a real estate discount rate. As a result, the Company recognized $215 million of long-lived asset impairments, included in Impairments of other intangible and long-lived assets, in the accompanying consolidated statements of earnings for the year ended June 30, 2020, related to operating lease ROU assets of $131 million, as well as the related property, plant and equipment and other long-lived assets in certain freestanding stores of $84 million, combined. A summary of the impairment charge for the year ended June 30, 2020 is as follows: (In millions) Product Category Impairment Charge Skin care $ 22 Makeup 160 Fragrance 18 Hair care 14 Other 1 Total $ 215 Region Impairment Charge The Americas $ 103 Europe, the Middle East & Africa 104 Asia/Pacific 8 Total $ 215 As of June 30, 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 $103 million. In addition, the Company has additional finance lease obligations, relating to facilities to support the Company’s manufacturing operations, that have not yet commenced of $1 million. These leases will commence between fiscal 2021 and fiscal 2025 with lease terms of 1 year to 20 years. |
Leases | 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 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 23 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) June 30, 2020 Total lease cost Finance lease cost: Amortization of right-of-use assets $ 11 Interest on lease liabilities 1 Operating lease cost 625 Short-term lease cost 24 Variable lease cost 158 Total $ 819 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 426 Financing cash flows from finance leases $ 12 Right-of-use assets obtained in exchange for new operating lease liabilities $ 266 Right-of-use assets obtained in exchange for new finance lease liabilities $ 1 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 each of the next five fiscal years and thereafter is as follows: (In millions) Operating Leases Finance Leases Fiscal 2021 $ 436 $ 8 Fiscal 2022 377 4 Fiscal 2023 335 1 Fiscal 2024 301 — Fiscal 2025 259 — Thereafter 1,349 — Total future minimum lease payments 3,057 13 Less imputed interest (404) — Total $ 2,653 $ 13 Operating lease and finance lease liabilities included in the consolidated balance sheet are as follows: June 30, 2020 (In millions) Operating Leases Finance Leases Total current liabilities $ 375 $ 8 Total noncurrent liabilities 2,278 5 Total $ 2,653 $ 13 The ROU assets and lease liabilities related to finance leases are included in Other assets Current debt Long-term debt As a result of the challenging retail environment due to the COVID-19 pandemic, certain of the Company’s freestanding stores experienced lower net sales and lower expectations of future cash flows. These changes were an indicator that the carrying amounts may not be recoverable. Accordingly, the Company performed a recoverability test by comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. For those freestanding stores that failed step one of this test, the Company then compared the assets carrying values to their estimated fair values. Specifically, for the related ROU assets, the fair value was based on discounting market rent using a real estate discount rate. As a result, the Company recognized $215 million of long-lived asset impairments, included in Impairments of other intangible and long-lived assets, in the accompanying consolidated statements of earnings for the year ended June 30, 2020, related to operating lease ROU assets of $131 million, as well as the related property, plant and equipment and other long-lived assets in certain freestanding stores of $84 million, combined. A summary of the impairment charge for the year ended June 30, 2020 is as follows: (In millions) Product Category Impairment Charge Skin care $ 22 Makeup 160 Fragrance 18 Hair care 14 Other 1 Total $ 215 Region Impairment Charge The Americas $ 103 Europe, the Middle East & Africa 104 Asia/Pacific 8 Total $ 215 As of June 30, 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 $103 million. In addition, the Company has additional finance lease obligations, relating to facilities to support the Company’s manufacturing operations, that have not yet commenced of $1 million. These leases will commence between fiscal 2021 and fiscal 2025 with lease terms of 1 year to 20 years. |
CHARGES ASSOCIATED WITH RESTRUC
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES | 12 Months Ended |
Jun. 30, 2020 | |
Restructuring and Related Activities [Abstract] | |
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES | CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES During fiscal 2020, 2019 and 2018, the Company incurred charges associated with restructuring and other activities in connection with its Leading Beauty Forward initiative as follows: Operating Expenses (In millions) Sales Returns Cost of Sales Restructuring Other Total Fiscal 2020 $ — $ 10 $ 34 $ 39 $ 83 Fiscal 2019 $ 3 $ 22 $ 133 $ 83 $ 241 Fiscal 2018 $ 8 $ 18 $ 127 $ 104 $ 257 The types of activities included in restructuring and other charges, and the related accounting criteria, are described below. Background In May 2016, the Company announced a multi-year initiative (“Leading Beauty Forward,” “LBF” or the “LBF Program”) 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. Restructuring actions to be taken over the duration of LBF involve the redesigning, resizing and reorganization of select corporate functions and go-to-market structures to improve effectiveness and create cost efficiencies in support of increased investment in growth drivers. As the Company continues to grow, it is important to more efficiently support its diverse portfolio of brands, channels and geographies in the rapidly evolving prestige beauty environment. The Company also believes that decision-making in key areas of innovation, marketing and digital communications should be moved closer to the consumer to increase speed and local relevance. 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 Company previously estimated a net reduction over the duration of LBF in the range of approximately 1,800 to 2,000 positions globally. The Company revised these estimates based on the review of the LBF Program noted above. At this time, the Company estimates a net reduction over the duration of LBF in the range of 1,300 to 1,600 positions globally, excluding point-of-sale positions. This reduction takes into account the elimination of certain positions, inclusive of positions that are unfilled, as well as retraining and redeployment of certain employees and investment in new positions in key areas. LBF Program Approvals For the year ended June 30, 2020, the Company recognized $18 million of asset-related costs, approved under LBF, due to the impairment of operating lease ROU assets as a result of closed freestanding retail stores, 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. The approved restructuring and other charges expected to be incurred were: Sales Returns Operating Expenses (In millions) (included in Cost of Sales Restructuring Other Total Total Charges Approved Cumulative through June 30, 2019 $ 14 $ 88 $ 507 $ 358 $ 967 Fiscal 2020 (1) (3) 4 — — Cumulative through June 30, 2020 $ 13 $ 85 $ 511 $ 358 $ 967 (In millions) Employee- Asset-Related Contract Other Exit Total Restructuring Charges Approved Cumulative through June 30, 2019 $ 461 $ 7 $ 25 $ 14 $ 507 Fiscal 2020 (1) 21 (18) 2 4 Cumulative through June 30, 2020 $ 460 $ 28 $ 7 $ 16 $ 511 Specific actions approved under the LBF Program include: • Optimize Select Corporate Functions – The Company approved initiatives to realign and optimize its organization to better leverage scale, improve productivity, reduce complexity and achieve cost savings across various functions, including finance, information technology, research and development, and human resources. Such approvals included consulting and other professional services for the design, project management, implementation and integration of new processes and technologies and, to a lesser extent, costs for temporary labor backfill, training and recruiting related to new capabilities, as well as similar expenses for certain other corporate functions. These actions are resulting in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities. The Company also approved other charges to support the LBF Project Management Office (“PMO”), primarily consisting of internal and external resources that are intended to further drive project integration, organizational design capabilities and change management throughout the organization. The design of certain corporate functions included the creation of a shared-services structure, either using Company resources or through external service providers. As part of the service delivery model, the Company approved the organizational design of the management and governance platform of a shared-services structure using Company resources, as well as the transition of select transactional activities to an external service provider, which is resulting in other charges for implementation, project and consulting costs. • Optimize Supply Chain –The Company approved certain activities related to initiatives to centralize the Company’s supply chain management, redesign certain supply chain planning and transportation management activities, improve the organizational design of manufacturing and engineering processes related to certain product lines, and enable distribution capabilities and generate efficiencies through an external service provider. Collectively, these actions are resulting in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities, as well as consulting fees, implementation costs and temporary labor backfill. • Optimize Corporate and Region Market Support Structures – The Company approved initiatives to enhance its go-to-market support structures and achieve synergies across certain geographic regions, brands and channels. These initiatives are primarily intended to shift certain areas of focus from traditional to social and digital marketing strategies to provide enhanced consumer experience, as well as to support expanded omnichannel opportunities. These actions are resulting in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities. The Company also approved consulting and other professional services related to the design of future structures, processes and technologies and, to a lesser extent, other costs for recruitment and training related to new capabilities. In addition, the Company approved initiatives to enhance consumer engagement strategies across certain channels in Europe, which resulted in product returns. • Exit Underperforming Businesses – To further improve profitability in certain areas of the Company’s brands and regions, the Company approved initiatives to exit certain businesses in select markets and channels of distribution. The Company has also decided to close a number of underperforming freestanding retail stores and exit mid-tier department stores for certain brands in the United States to redirect resources to other retail locations and channels with potential for greater profitability. These activities resulted in product returns, inventory write-offs, reduction of workforce, accelerated depreciation and termination of contracts. As initiatives under LBF progress through implementation, the Company has identified certain costs that were initially approved but will not be incurred, as well as other changes to the prior estimates. These adjustments are included in their respective period presented above, and were primarily related to estimated employee-related costs for certain employees who either resigned or transferred to other existing positions within the Company. LBF Program-to-Date Restructuring and Other Charges Restructuring charges are comprised of the following: Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable. Employee-related costs are expensed when specific employees have been identified and when payment is probable and estimable, which generally occurs upon approval of the related initiative by management with authority delegated from the Company’s Board of Directors. Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative. The accelerated portion of depreciation expense will be expensed on a straight-line basis and be classified as restructuring charges, while the portion relating to the previous existing useful life will continue to be reported in Selling, general and administrative expenses. Contract Terminations – Costs related to contract terminations include continuing payments to a third party after the Company has ceased benefiting from the rights conveyed in the contract, or a payment made to terminate a contract prior to its expiration. These may include continuing operating lease payments (less estimated sublease payments) to a landlord after exiting a location prior to the lease-end date as a direct result of an approved restructuring initiative. Contract terminations also include minimum payments or fees related to the early termination of license or other personal service contracts. Costs related to contract terminations are expensed upon the cease-use date of a leased property or upon the notification date to the third party in the event of a license or personal service contract termination. Other Exit Costs – Other exit costs related to restructuring activities generally include costs to relocate facilities or employees, recruiting to fill positions as a result of relocation of operations, and employee outplacement for separated employees. Other exit costs are charged to expense as incurred. Other charges associated with restructuring activities are comprised of the following: Sales Returns and Cost of Sales – Product returns (offset by the related cost of sales) and inventory write-offs or write-downs as a direct result of an approved restructuring initiative to exit certain businesses or locations will be recorded as a component of Net sales and/or Cost of sales when estimable and reasonably assured. Consulting, other professional services and temporary labor backfill, primarily related to the design and implementation of supply chain activities, are expensed in Cost of sales as incurred. Other Charges – The Company approved other charges related to the design and implementation of approved initiatives, which are charged to Operating Expenses as incurred and primarily include the following: • Consulting and other professional services for organizational design of the future structures, processes and technologies, and implementation thereof, • Temporary labor backfill, • Costs to establish and maintain a PMO for the duration of Leading Beauty Forward, including internal costs for employees dedicated solely to project management activities, and other PMO-related expenses incremental to the Company’s ongoing operations (e.g., rent and utilities), and • Recruitment and training costs for new and reskilled employees to acquire and apply the capabilities needed to perform responsibilities as a direct result of an approved restructuring initiative. 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: Sales Returns Operating Expenses (In millions) (included in Cost of Sales Restructuring Other Total Cumulative through June 30, 2017 $ 3 $ 15 $ 197 $ 78 $ 293 Fiscal 2018 8 18 127 104 257 Fiscal 2019 3 22 133 83 241 Fiscal 2020 — 10 34 39 83 Cumulative through June 30, 2020 $ 14 $ 65 $ 491 $ 304 $ 874 The major cost types related to the cumulative restructuring charges set forth above were: (In millions) Employee- Asset- Contract Other Exit Total Cumulative through June 30, 2017 $ 190 $ 3 $ 2 $ 2 $ 197 Fiscal 2018 124 1 1 1 127 Fiscal 2019 131 — — 2 133 Fiscal 2020 6 23 3 2 34 Cumulative through June 30, 2020 $ 451 $ 27 $ 6 $ 7 $ 491 Accrued restructuring charges from the LBF Program inception through June 30, 2020 were: (In millions) Employee- Asset- Contract Other Exit Total Charges $ 74 $ 1 $ — $ — $ 75 Noncash asset write-offs — (1) — — (1) Translation adjustments (1) — — — (1) Balance at June 30, 2016 73 — — — 73 Charges 116 2 2 2 122 Cash payments (39) — (2) (2) (43) Noncash asset write-offs — (2) — — (2) Balance at June 30, 2017 150 — — — 150 Charges 124 1 1 1 127 Cash payments (92) — — (1) (93) Noncash asset write-offs — (1) — — (1) Translation adjustments (2) — — — (2) Balance at June 30, 2018 180 — 1 — 181 Charges 131 — — 2 133 Cash payments (107) — (1) (1) (109) Translation and other adjustments (2) — — — (2) Balance at June 30, 2019 202 — — 1 203 Charges 6 23 3 2 34 Cash payments (94) — (3) (3) (100) Translation adjustment (2) — — — (2) Non-cash write-offs — (23) — — (23) Balance at June 30, 2020 $ 112 $ — $ — $ — $ 112 Restructuring charges for employee-related costs are net of adjustments to the accrual estimate for certain employees who either resigned or transferred to other existing positions within the Company. These adjustments were not material for all periods presented. Accrued restructuring charges at June 30, 2020 are expected to result in cash expenditures funded from cash provided by operations of approximately $78 million, $29 million and $5 million for each of fiscal 2021, 2022, and 2023, respectively. See Note 24 – Subsequent Events for information relating to the new restructuring program announced subsequent to June 30, 2020. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The provision for income taxes is comprised of the following: Year Ended June 30 (In millions) 2020 2019 2018 Current: Federal $ 128 $ 180 $ 334 Foreign 368 383 357 State and local (3) 16 (3) 493 579 688 Deferred: Federal (93) (95) 135 Foreign (49) 27 35 State and local (1) 2 5 (143) (66) 175 $ 350 $ 513 $ 863 Earnings before income taxes include amounts contributed by the Company’s foreign operations of approximately $2,277 million, $2,021 million and $2,004 million for fiscal 2020, 2019 and 2018, respectively. A portion of these earnings is taxed in the United States. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”). The TCJA included broad and complex changes to the U.S. tax code that impacted the Company’s accounting and reporting for income taxes. Pursuant to Staff Accounting Bulletin No. 118 ("SAB 118"), in fiscal 2018, the Company recorded a provisional net charge of $450 million related to the enactment of the TCJA, and, in fiscal 2019, the Company recorded a charge of $5 million as an adjustment to the provisional net charge recorded in fiscal 2018. Although the accounting related to the income tax effects of the TCJA was completed pursuant to SAB 118, certain technical aspects of the TCJA remain subject to varying degrees of uncertainty as additional technical guidance and clarification from the U.S. government is being issued over an extended period. The issuance of additional guidance and clarification from the U.S. government may result in material changes to the provision for income taxes. On July 20, 2020, the U.S. government released final and proposed regulations under the global intangible low-taxed income (“GILTI”) provisions of the TCJA. The Company is currently evaluating the impact of the GILTI regulations. The potential impact of applying the GILTI regulations, along with any impact of other guidance that may be issued by the U.S. government, would be recognized in the provision for income taxes in the period that the Company’s evaluation of such guidance is completed. A reconciliation of the U.S. federal statutory income tax rate to the Company’s actual effective tax rate on earnings before income taxes is as follows: Year Ended June 30 2020 2019 2018 Provision for income taxes at statutory rate 21.0 % 21.0 % 28.1 % Increase (decrease) due to: State and local income taxes, net of federal tax benefit (0.1) 0.6 0.5 TCJA net income tax impact (1) — 0.2 22.8 Stock-based compensation arrangements – excess tax benefits (7.5) (2.7) (2.5) Taxation of foreign operations 11.0 1.9 (4.7) Income tax reserve adjustments 0.4 0.5 (0.5) Nondeductible goodwill impairment charges 8.0 0.6 — Other, net 0.7 0.1 (0.1) Effective tax rate (2) 33.5 % 22.2 % 43.6 % (1) Includes the mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries (the “Transition Tax”), the remeasurement of U.S. net deferred tax assets resulting from the statutory tax rate reduction, including the enactment date remeasurement, and the net deferred tax liability related to foreign withholding taxes on certain foreign earnings resulting from the TCJA. (2) The reconciling items between the Company's U.S. federal statutory income tax rate and the Company's actual effective tax rate were materially impacted by the decrease in earnings before income taxes from fiscal 2019 to fiscal 2020. Income tax reserve adjustments represent changes in the Company’s net liability for unrecognized tax benefits related to prior-year tax positions including the impact of tax settlements and lapses of the applicable statutes of limitations. In fiscal 2018, the Company adopted a new accounting standard that changes the way companies account for certain aspects of share-based payments to employees. This standard requires that all excess tax benefits and tax deficiencies related to share-based compensation awards be recorded as income tax expense or benefit in the income statement. As a result of the adoption of this new standard, the Company recognized $78 million, $63 million and $50 million of excess tax benefits as a reduction to the provision for income taxes in fiscal 2020, 2019 and 2018, respectively. The Company has approximately $5,259 million of undistributed earnings of foreign subsidiaries at June 30, 2020. Included in this amount is approximately $3,156 million of earnings considered permanently reinvested. There may be foreign tax ramifications associated with the distribution of such permanently reinvested earnings, which the Company is currently evaluating. Since the application of the relevant foreign tax laws to such distribution is largely uncertain at this time, it is not practicable to determine the amount of associated tax. Any state income taxes associated with the distribution of such earnings is not expected to be material. Significant components of the Company’s deferred income tax assets and liabilities were as follows: June 30 (In millions) 2020 2019 Deferred tax assets: Compensation-related expenses $ 142 $ 179 Inventory obsolescence and other inventory related reserves 75 64 Retirement benefit obligations 71 71 Various accruals not currently deductible 212 206 Net operating loss, credit and other carryforwards 98 41 Unrecognized state tax benefits and accrued interest 12 12 Lease liabilities 585 — Other differences between tax and financial statement values 217 125 1,412 698 Valuation allowance for deferred tax assets (107) (48) Total deferred tax assets 1,305 650 Deferred tax liabilities: Depreciation and amortization (1) (563) (286) ROU assets (504) — Other differences between tax and financial statement values (2) (194) (69) Total deferred tax liabilities (1,261) (355) Total net deferred tax assets $ 44 $ 295 (1) Includes deferred tax liabilities associated with book-to-tax basis differences related to the Company's non-taxable acquisitions. (2) Includes the deferred tax liability of $117 million associated with the gain on a previously held equity method investment. As of June 30, 2020 and 2019, the Company had net deferred tax assets of $44 million and $295 million, respectively, substantially all of which are included in Other assets in the accompanying consolidated balance sheets. As of June 30, 2020 and 2019, certain subsidiaries had net operating loss and other carryforwards for tax purposes of approximately $352 million and $162 million, respectively. With the exception of approximately $303 million of net operating loss and other carryforwards with an indefinite carryforward period as of June 30, 2020, these carryforwards expire at various dates through fiscal 2032. Deferred tax assets, net of valuation allowances, in the amount of $14 million and $3 million as of June 30, 2020 and 2019, respectively, have been recorded to reflect the tax benefits of the carryforwards not utilized to date. A full valuation allowance has been provided for those deferred tax assets for which, in the opinion of management, it is more-likely-than-not that the deferred tax assets will not be realized. As of June 30, 2020 and 2019, the Company had gross unrecognized tax benefits of $70 million and $67 million, respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $56 million. The Company classifies applicable interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. The total gross accrued interest and penalty expense recorded during fiscal 2020 and fiscal 2019 in the accompanying consolidated statement of earnings was $3 million and $4 million, respectively . The total gross accrued interest and penalties in the accompanying consolidated balance sheets at June 30, 2020 and 2019 were $13 million and $12 million, respectively. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows: June 30 (In millions) 2020 2019 Beginning of the year balance of gross unrecognized tax benefits $ 67 $ 60 Gross amounts of increases as a result of tax positions taken during a prior period 11 12 Gross amounts of decreases as a result of tax positions taken during a prior period (9) (6) Gross amounts of increases as a result of tax positions taken during the current period 7 9 Amounts of decreases in unrecognized tax benefits relating to settlements with taxing authorities (4) (7) Reductions to unrecognized tax benefits as a result of a lapse of the applicable statutes of limitations (2) (1) End of year balance of gross unrecognized tax benefits $ 70 $ 67 Earnings from the Company’s global operations are subject to tax in various jurisdictions both within and outside the United States. The Company participates in the U.S. Internal Revenue Service (the “IRS”) Compliance Assurance Program (“CAP”). The objective of CAP is to reduce taxpayer burden and uncertainty while assuring the IRS of the accuracy of income tax returns prior to filing, thereby reducing or eliminating the need for post-filing examinations. Subsequent to June 30, 2020, the Company formally concluded the compliance process with respect to fiscal 2019 under the IRS CAP, which did not impact the Company’s consolidated financial statements. As of June 30, 2020, the compliance process was ongoing with respect to fiscal 2020. The Company is currently undergoing income tax examinations and controversies in several state, local and foreign jurisdictions. These matters are in various stages of completion and involve complex multi-jurisdictional issues common among multinational enterprises, including transfer pricing, which may require an extended period of time for resolution. During fiscal 2020, the Company concluded various state, local and foreign income tax audits and examinations while several other matters, including those noted above, were initiated or remained pending. On the basis of the information available in this regard as of June 30, 2020 it is reasonably possible that the total amount of unrecognized tax benefits could decrease in a range of $5 million to $10 million within 12 months as a result of projected resolutions of global tax examinations and controversies and a potential lapse of the applicable statutes of limitations. The tax years subject to examination vary depending on the tax jurisdiction. As of June 30, 2020, the following tax years remain subject to examination by the major tax jurisdictions indicated: Major Jurisdiction Open Fiscal Years Belgium 2018 – 2020 Canada 2015 – 2020 China 2016 – 2020 France 2016 – 2020 Germany 2013 – 2020 Hong Kong 2014 – 2020 Italy 2016 – 2020 Japan 2020 Korea 2019 - 2020 Russia 2017 – 2020 Spain 2016 – 2020 Switzerland 2018 – 2020 United Kingdom 2019 – 2020 United States 2019 – 2020 State of California 2013 – 2020 State and City of New York 2015 – 2020 The Company is also subject to income tax examinations in numerous other state, local and foreign jurisdictions. The Company believes that its tax reserves are adequate for all years subject to examination. |
OTHER ACCRUED LIABILITIES
OTHER ACCRUED LIABILITIES | 12 Months Ended |
Jun. 30, 2020 | |
Other Liabilities Disclosure [Abstract] | |
OTHER ACCRUED LIABILITIES | OTHER ACCRUED LIABILITIES Other accrued liabilities consist of the following: June 30 (In millions) 2020 2019 Advertising, merchandising and sampling $ 256 $ 352 Employee compensation 424 574 Deferred revenue 222 314 Other 1,503 1,359 $ 2,405 $ 2,599 |
DEBT
DEBT | 12 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT The Company’s current and long-term debt and available financing consist of the following: Debt at June 30 Available financing at June 30, 2020 (In millions) 2020 2019 Committed Uncommitted 3.125% Senior Notes, due December 1, 2049 (“2049 Senior Notes”) $ 635 $ — $ — $ — 4.15% Senior Notes, due March 15, 2047 (“2047 Senior Notes”) 494 494 — — 4.375% Senior Notes, due June 15, 2045 (“2045 Senior Notes”) 456 455 — — 3.70% Senior Notes, due August 15, 2042 (“2042 Senior Notes”) 247 247 — — 6.00% Senior Notes, due May 15, 2037 (“2037 Senior Notes”) 294 294 — — 5.75% Senior Notes, due October 15, 2033 (“2033 Senior Notes”) 197 197 — — 2.600% Senior Notes, due April 15, 2030 ("2030 Senior Notes") 694 — — — 2.375% Senior Notes, due December 1, 2029 (“2029 Senior Notes”) 640 — — — 3.15% Senior Notes, due March 15, 2027 (“2027 Senior Notes”) 498 498 — — 2.00% Senior Notes, due December 1, 2024 (“2024 Senior Notes”) 495 — — — 2.35% Senior Notes, due August 15, 2022 (“2022 Senior Notes”) 259 252 — — 1.70% Senior Notes, due May 10, 2021 (“2021 Senior Notes”) 455 447 — — 1.80% Senior Notes, due February 7, 2020 (“2020 Senior Notes”) — 499 — — Commercial paper — — — 1,500 Other long-term borrowings 5 12 — — Other current borrowings 17 17 — 178 Revolving credit facility (1) 750 — 750 — 6,136 3,412 $ 750 $ 1,678 Less current debt including current maturities (1,222) (516) $ 4,914 $ 2,896 (1) See Note 24 – Subsequent Events for information relating to the repayment of the $750 million outstanding under the revolving credit facility made subsequent to June 30, 2020. As of June 30, 2020, the Company’s long-term debt consisted of the following: Notes Issue Date Price Yield Principal Unamortized Interest rate Debt Semi-annual interest ($ in millions) 2049 Senior Notes (9) November 2019 98.769 % 3.189 % $ 650 $ (8) $ — $ (7) June 1/December 1 2047 Senior Notes (1),(9) February 2017 99.739 4.165 500 (1) — (5) March 15/September 15 2045 Senior Notes (2),(9) June 2015 97.999 4.497 300 (5) — (3) June 15/December 15 2045 Senior Notes (2),(9) May 2016 110.847 3.753 150 15 — (1) June 15/December 15 2042 Senior Notes (9) August 2012 99.567 3.724 250 (1) — (2) February 15/August 15 2037 Senior Notes (3),(9) May 2007 98.722 6.093 300 (3) — (3) May 15/November 15 2033 Senior Notes (4) September 2003 98.645 5.846 200 (2) — (1) April 15/October 15 2030 Senior Notes (9) April 2020 99.816 2.621 700 (1) — (5) April 15/October 15 2029 Senior Notes (8),(9) November 2019 99.046 2.483 650 (6) — (4) June 1/December 1 2027 Senior Notes (5),(9) February 2017 99.963 3.154 500 — — (2) March 15/September 15 2024 Senior Notes (9) November 2019 99.421 2.122 500 (3) — (2) June 1/December 1 2022 Senior Notes (6),(9) August 2012 99.911 2.360 250 — 10 (1) February 15/August 15 2021 Senior Notes (6),(7),(9) May 2016 99.976 1.705 450 — 5 — May 10/November 10 (1) In November 2016, in anticipation of the issuance of the 2047 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $350 million at a weighted-average all-in rate of 3.01%. The treasury lock agreements were settled upon the issuance of the new debt, and the Company recognized a gain in OCI of $3 million that is being amortized against interest expense over the life of the 2047 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2047 Senior Notes will be 4.17% over the life of the debt. (2) In April and May 2015, in anticipation of the issuance of the 2045 Senior Notes in June 2015, the Company entered into a series of forward-starting interest rate swap agreements on a notional amount totaling $300 million at a weighted-average all-in rate of 2.38%. The forward-starting interest rate swap agreements were settled upon the issuance of the new debt and the Company recognized a gain in OCI of $18 million that will be amortized against interest expense over the life of the 2045 Senior Notes. As a result of the forward-starting interest rate swap agreements, the debt discount and debt issuance costs, the effective interest rate on the 2045 Senior Notes will be 4.216% over the life of the debt. In May 2016, the Company reopened this offering with the same terms and issued an additional $150 million for an aggregate amount outstanding of $450 million of 2045 Senior Notes. (3) In April 2007, in anticipation of the issuance of the 2037 Senior Notes, the Company entered into a series of forward-starting interest rate swap agreements on a notional amount totaling $210 million at a weighted-average all-in rate of 5.45%. The forward-starting interest rate swap agreements were settled upon the issuance of the new debt and the Company recognized a loss in OCI of $1 million that is being amortized to interest expense over the life of the 2037 Senior Notes. As a result of the forward-starting interest rate swap agreements, the debt discount and debt issuance costs, the effective interest rate on the 2037 Senior Notes will be 6.181% over the life of the debt. (4) In May 2003, in anticipation of the issuance of the 2033 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $195 million at a weighted-average all-in rate of 4.53%. The treasury lock agreements were settled upon the issuance of the new debt and the Company received a payment of $15 million that is being amortized against interest expense over the life of the 2033 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2033 Senior Notes will be 5.395% over the life of the debt. (5) In November 2016, in anticipation of the issuance of the 2027 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $450 million at a weighted-average all-in rate of 2.37%. The treasury lock agreements were settled upon the issuance of the new debt, and the Company recognized a gain in OCI of $2 million that is being amortized against interest expense over the life of the 2027 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2027 Senior Notes will be 3.18% over the life of the debt. (6) The Company entered into interest rate swap agreements with a notional amount totaling $450 million and $250 million to effectively convert the fixed rate interest on its outstanding 2021 Senior Notes and 2022 Senior Notes, respectively, to variable interest rates based on three months LIBOR plus a margin. (7) In April 2016, in anticipation of the issuance of the 2021 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $400 million at a weighted-average all-in rate of 1.27%. The treasury lock agreements were settled upon the issuance of the new debt and the Company made a payment of $1 million that is being amortized to interest expense over the life of the 2021 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2021 Senior Notes will be 1.844% over the life of the debt. (8) 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. (9) The Senior Notes contain certain customary incurrence-based covenants, including limitations on indebtedness secured by liens. In October 2018, the Company replaced its undrawn $1,500 million senior unsecured revolving credit facility that was set to expire in October 2021 with a new $1,500 million senior unsecured revolving credit facility (the “New Facility”). The New Facility expires on October 26, 2023 unless extended for up to two Note 24 – Subsequent Events for information relating to the repayment of the $750 million outstanding under the revolving credit facility made subsequent to June 30, 2020. In November 2019, the Company completed a public offering of $500 million aggregate principal amount of its 2024 Senior Notes, $650 million aggregate principal amount of its 2029 Senior Notes and $650 million aggregate principal amount of its 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. In April 2020, the Company completed a public offering of $700 million aggregate principal amount of its 2030 Senior Notes. The Company used the proceeds from this offering for general corporate purposes, which included operating expenses, working capital, capital expenditures and redemption and repayment of short-term or long-term borrowings, including outstanding commercial paper as it matured. The Company has a $1,500 million commercial paper program under which it may issue commercial paper in the United States. As of June 30, 2020, no amounts were outstanding. The Company maintains uncommitted credit facilities in various regions throughout the world. Interest rate terms for these facilities vary by region and reflect prevailing market rates for companies with strong credit ratings. During fiscal 2020 and 2019, the monthly average amount outstanding was approximately $12 million and $7 million, respectively, and the annualized monthly weighted-average interest rate incurred was approximately 10.3% and 13.9%, respectively. Refer to Note 16 – Commitments and Contingencies for the Company’s projected debt service payments, as of June 30, 2020, over the next five fiscal years. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 12 Months Ended |
Jun. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTSThe 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 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 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 consolidated balance sheets. At June 30, 2020, the notional amount of derivatives not designated as hedging instruments was $3,638 million. The Company does not utilize derivative financial instruments for trading or speculative purposes. Costs associated with entering into derivative financial instruments have not been 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 presented as follows: Asset Derivatives Liability Derivatives Fair Value (1) Fair Value (1) June 30 June 30 (In millions) Balance Sheet 2020 2019 Balance Sheet 2020 2019 Derivatives Designated as Hedging Instruments: Foreign currency cash flow hedges Prepaid expenses and other current assets $ 26 $ 23 Other accrued liabilities $ 3 $ 4 Net investment hedges Prepaid expenses and other current assets 21 — Other accrued liabilities 62 — Interest rate-related derivatives Prepaid expenses and other current assets 15 3 Other accrued liabilities 3 26 Total Derivatives Designated as Hedging Instruments 62 26 68 30 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Prepaid expenses and other current assets 40 4 Other accrued liabilities 15 2 Total derivatives $ 102 $ 30 $ 83 $ 32 (1) See Note 13 – 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) June 30 from AOCI into June 30 (In millions) 2020 2019 Earnings 2020 2019 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ 38 $ 29 Net sales $ 35 $ 28 Interest rate-related derivatives (12) (24) Interest expense — 1 Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) (68) — — — Total derivatives $ (42) $ 5 $ 35 $ 29 (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 fiscal 2020 the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $43 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) June 30 (In millions) Recognized in Earnings on Derivatives 2020 2019 Derivatives in Fair Value Hedging Interest rate swap contracts Interest expense $ 14 $ 27 (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 Carrying Amount of the Cumulative Amount of Fair June 30, 2020 June 30, 2020 Current debt $ 455 $ 5 Long-term debt 259 10 Total debt $ 714 $ 15 Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows: June 30, 2020 June 30, 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 in which the effects of fair value and cash flow hedges are recorded $ 14,294 $ 161 $ 14,863 $ 133 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable (14) Not applicable (27) Derivatives designated as hedging instruments Not applicable 14 Not applicable 27 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 35 Not applicable 28 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) June 30 (In millions) Recognized in Earnings on Derivatives 2020 2019 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Selling, general and administrative $ 56 $ 6 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 June 30, 2020, the Company had cash flow hedges outstanding with a notional amount totaling $1,297 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 June 30, 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 June 30, 2020 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $14 million. The accumulated net gain on derivative instruments in AOCI was $20 million and $29 million as of June 30, 2020 and 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 July 2020. Hedge effectiveness of the net investment hedge contracts is based on the spot method. At June 30, 2020, the Company had net investment hedges outstanding with a notional amount totaling $1,747 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 $102 million at June 30, 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 | 12 Months Ended |
Jun. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | 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 June 30, 2020: (In millions) Level 1 Level 2 Level 3 Total Assets: Foreign currency forward contracts $ — $ 87 $ — $ 87 Interest rate-related derivatives — 15 — 15 Total $ — $ 102 $ — $ 102 Liabilities: Foreign currency forward contracts $ — $ 80 $ — $ 80 Interest rate-related derivatives — 3 — 3 Contingent consideration — — 4 4 Total $ — $ 83 $ 4 $ 87 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: June 30 2020 2019 (In millions) Carrying Fair Carrying Fair Nonderivatives Cash and cash equivalents $ 5,022 $ 5,022 $ 2,987 $ 2,987 Current and long-term debt 6,136 6,902 3,412 3,706 Additional purchase price payable — — 3 3 Contingent consideration 4 4 36 36 Derivatives Foreign currency forward contracts – asset (liability), net 7 7 21 21 Interest rate-related derivatives – asset (liability), net 12 12 (23) (23) The following table presents the Company’s impairment charges for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, during fiscal 2020 and 2019: Fiscal 2020 (In millions) Impairment Date of Fair Value Fair Value (1) Goodwill Too Faced $ 592 March 31, 2020 $ 13 Smashbox 72 March 31, 2020 — Editions de Parfums Frédéric Malle 3 April 1, 2020 3 BECCA 85 June 30, 2020 13 GLAMGLOW 60 June 30, 2020 54 Total 812 83 Other intangible assets, net (trademark) Too Faced 253 March 31, 2020 272 Smashbox 23 March 31, 2020 32 Editions de Parfums Frédéric Malle 11 April 1, 2020 21 BECCA 71 June 30, 2020 27 GLAMGLOW 6 June 30, 2020 57 Total 364 409 Other intangible assets, net (customer lists) BECCA 35 June 30, 2020 7 Long-lived assets 215 June 30, 2020 200 Total impairments $ 1,426 $ 699 (1) See Note 6 – Goodwill and Other Intangible Assets and Note 7 – Leases for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs. Fiscal 2019 (In millions) Impairment Date of Fair Value Fair Value (1) Smashbox Goodwill $ 68 March 31, 2019 $ 72 Other intangible assets, net (trademarks) 22 March 31, 2019 55 Total $ 90 $ 127 (1) See Note 6 – 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 June 30, 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 year ended June 30, 2020 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows: (In millions) Fair Value Contingent consideration at June 30, 2019 $ 36 Payments (15) Changes in fair value (17) Contingent consideration at June 30, 2020 $ 4 |
REVENUE RECOGNITION
REVENUE RECOGNITION | 12 Months Ended |
Jun. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGNITION | REVENUE RECOGNITION For further information on the Company's policies relating to revenue recognition see Note 2 – Summary of Significant Accounting Policies. Performance Obligations The Company recognizes revenue at a point in time when it satisfies a performance obligation by transferring control over a product and other promised goods and services to a customer. The Company sells wholesale to customers in distribution channels that include department stores, travel retail, specialty-multi retailers, perfumeries, salons/spas and through various online sites operated by authorized retailers. The primary performance obligation related to these channels of distribution is product sales where revenue is recognized as control of the product transfers to the customer. In the Americas region, revenue is generally recognized at the time the product is made available and provided to the customer’s carrier at the Company’s location, and in the Europe, the Middle East & Africa and Asia/Pacific regions, revenue is generally recognized based upon the customer’s receipt. The Company also sells direct to consumers at Company-operated freestanding stores and online through Company-owned and operated e-commerce and m-commerce sites and through third-party online malls. At Company-operated freestanding stores, revenue is recognized when control of the product is transferred at the point of sale. Revenue from online sales is recognized when control of the product is transferred, generally based upon the consumer’s receipt. In connection with the sale of product, the Company may provide other promised goods and services that are deemed to be performance obligations. These are comprised of customer loyalty program obligations, gift with purchase and purchase with purchase promotions, gift cards and other promotional goods including samples and testers. The Company offers a number of different loyalty programs to its customers across regions, brands and distribution channels including points-based programs, tier-based programs and other programs. Revenue is allocated between the saleable product revenue and the material right loyalty obligations based on relative standalone selling prices when the consumer purchases the products that are earning them the right to the future benefits. Deferred revenue related to the Company’s loyalty programs is estimated based on the standalone selling price and is adjusted for an estimated breakage factor. Standalone selling price is determined primarily using the observable market price of the good or service benefit if it is sold by the Company or a cost plus margin approach for goods/services not directly sold by the Company. Breakage rates consider historical patterns of redemption and/or expiration. Revenue is recognized when the benefits are redeemed or expire. The Company provides gift with purchase promotional products to certain customers generally without additional charge and also provides purchase with purchase promotional products to certain customers at a discount in relation to prices charged for saleable product. Revenue is allocated between saleable product, gift with purchase product and purchase with purchase product based on the estimated relative standalone selling prices. Revenue is deferred and ultimately recognized based on the timing differences, if any, between when control of promotional goods and control of the related saleable products transfer to the Company’s customer (e.g., a third-party retailer), which is calculated based on the weighted-average number of days between promotional periods. The estimated standalone selling price allocated to promotional goods is based on a cost plus margin approach. In situations where promotional products are provided by the Company to its customers at the same time as the related saleable product, such as shipments of samples and testers, the cost of these promotional products are recognized as a cost of sales at the same time as the related revenue is recognized and no deferral of revenue is required. The Company also offers gift cards through Company-operated freestanding stores and Company-owned websites. The related deferred revenue is estimated based on expected breakage that considers historical patterns of redemption taking into consideration escheatment laws as applicable. Product Returns, Sales Incentives and Other Forms of Variable Consideration In measuring revenue and determining the consideration the Company is entitled to as part of a contract with a customer, the Company takes into account the related elements of variable consideration. Such elements of variable consideration include product returns and sales incentives, such as volume rebates and discounts, markdowns, margin adjustments and early-payment discounts. We also enter into arrangements containing other forms of variable consideration, including certain demonstration arrangements, for which the Company does not receive a distinct good or service or for which the Company cannot reasonably estimate the fair value of the good or service. For these types of arrangements, the adjustments to revenue are recorded at the later of when (i) the Company recognizes revenue for the transfer of the related goods or services to the customer, or (ii) the Company pays, or promises to pay, the consideration. For the sale of goods with a right of return, the Company only recognizes revenue for the consideration it expects to be entitled to (considering the products to be returned) and records a sales return accrual within Other accrued liabilities for the amount it expects to credit back its customers. In addition, the Company recognizes an asset included in Inventory and promotional merchandise and a corresponding adjustment to Cost of sales for the right to recover goods from customers associated with the estimated returns. The sales return accrual and corresponding asset include estimates that directly impact reported net sales. These estimates are calculated based on a history of actual returns, estimated future returns and information provided by retailers regarding their inventory levels. Consideration of these factors results in an estimate for anticipated sales returns that reflects increases or decreases related to seasonal fluctuations. In addition, as necessary, sales return accruals and the related assets may be established for significant future known or anticipated events. The types of known or anticipated events that are considered, and will continue to be considered, include the financial condition of the Company’s customers, store closings by retailers, changes in the retail environment and the Company’s decision to continue to support new and existing products. The Company estimates sales incentives and other variable consideration using the most likely amount method and records accruals within Other accrued liabilities when control of the related product is transferred to the customer. Under this method, certain forms of variable consideration are based on expected sell-through results, which requires subjective estimates. These estimates are supported by historical results as well as specific facts and circumstances related to the current period The Company also enters into transactions and makes payments to certain of its customers related to demonstration, advertising and counter construction, some of which involve cooperative relationships with customers. These activities may be arranged either with unrelated third parties or in conjunction with the customer. To the extent the Company receives a distinct good or service in exchange for consideration and the fair value of the benefit can be reasonably estimated, the Company’s share of the counter depreciation and the other costs of these transactions (regardless of to whom they were paid) are reflected in Selling, general and administrative expenses in the accompanying consolidated statements of earnings. Accounts Receivable Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $63 million and $32 million as of June 30, 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. In addition, if the good/service is transferred and payment is received within one year, the Company does not determine significant financing components. Deferred Revenue Significant changes in deferred revenue during the period are as follows: (In millions) June 30, 2020 Balance at June 30, 2019 $ 361 Revenue recognized that was included in the deferred revenue balance at the beginning of the period (271) Revenue deferred during the period 189 Balance at June 30, 2020 $ 279 Transaction Price Allocated to the Remaining Performance Obligations At June 30, 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 $222 million. The following tables summarize impacts of the adoption of ASC 606 on the Company's fiscal 2019 consolidated financial statements: Consolidated Statement of Earnings June 30, 2019 (In millions, except per share data) As Reported Impact Prior to the adoption of ASC 606 Net sales $ 14,863 $ 49 $ 14,912 Cost of sales 3,387 (300) 3,087 Gross profit 11,476 349 11,825 Selling, general and administrative 8,857 370 9,227 Operating income 2,313 (21) 2,292 Provision for income taxes 513 (5) 508 Net earnings attributable to The Estée Lauder Companies Inc. 1,785 (16) 1,769 Net earnings attributable to The Estée Lauder Companies Inc. per common share Basic $ 4.91 $ (.04) $ 4.87 Diluted $ 4.82 $ (.04) $ 4.78 Consolidated Balance Sheet June 30, 2019 (In millions) As Reported Impact Prior to the adoption of ASC 606 Accounts receivable, net $ 1,831 $ (202) $ 1,629 Inventory and promotional merchandise, net 2,006 (21) 1,985 Other assets 805 (65) 740 Total assets 13,156 (288) 12,868 Other accrued liabilities 2,599 (452) 2,147 Other noncurrent liabilities 1,244 (47) 1,197 Total liabilities 8,745 (499) 8,246 Retained earnings 9,984 213 10,197 Accumulated other comprehensive loss (563) (2) (565) Total stockholders' equity - The Estée Lauder Companies Inc. 4,386 211 4,597 Consolidated Statement of Cash Flows June 30, 2019 (In millions) As Reported Impact Prior to the adoption of ASC 606 Net earnings $ 1,794 $ (16) $ 1,778 Changes in operating assets and liabilities Increase in accounts receivable, net (169) 5 (164) Increase in inventory and promotional merchandise, net (375) (6) (381) Increase in other assets, net (62) (5) (67) Increase in other accrued and noncurrent liabilities 285 22 307 Net cash flows provided by operating activities 2,517 — 2,517 |
PENSION, DEFERRED COMPENSATION
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS | 12 Months Ended |
Jun. 30, 2020 | |
Retirement Benefits [Abstract] | |
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS | PENSION, DEFERRED COMPENSATION 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. Several plans provide pension benefits based primarily on years of service and employees’ earnings. In certain instances, the Company adjusts benefits in connection with international employee transfers. Retirement Growth Account Plan (U.S.) The Retirement Growth Account Plan is a trust-based, noncontributory qualified defined benefit pension plan. The Company seeks to maintain appropriate funded percentages. For contributions, the Company would seek to contribute an amount or amounts that would not be less than the minimum required by the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, and subsequent pension legislation, and would not be more than the maximum amount deductible for income tax purposes. Restoration Plan (U.S.) The Company also has an unfunded, non-qualified domestic noncontributory pension Restoration Plan to provide benefits in excess of Internal Revenue Code limitations. International Pension Plans The Company maintains international pension plans, the most significant of which are defined benefit pension plans. The Company’s funding policies for these plans are determined by local laws and regulations. The Company’s most significant defined benefit pension obligations are included in the plan summaries below. Post-retirement Benefit Plans The Company maintains a domestic post-retirement benefit plan which provides certain medical and dental benefits to eligible employees. Employees hired after January 1, 2002 are not eligible for retiree medical benefits when they retire. Certain retired employees who are receiving monthly pension benefits are eligible for participation in the plan. Contributions required and benefits received by retirees and eligible family members are dependent on the age of the retiree. It is the Company’s practice to fund a portion of these benefits as incurred and may provide discretionary funding for future liabilities up to the maximum amount deductible for income tax purposes. Certain of the Company’s international subsidiaries and affiliates have post-retirement plans, although most participants are covered by government-sponsored or administered programs. Plan Summaries The significant components of the above mentioned plans as of and for the years ended June 30 are summarized as follows: Pension Plans Other than U.S. International Post-retirement (In millions) 2020 2019 2020 2019 2020 2019 Change in benefit obligation: Benefit obligation at beginning of year $ 966 $ 896 $ 631 $ 588 $ 183 $ 170 Service cost 39 38 36 30 3 3 Interest cost 35 37 11 13 6 7 Plan participant contributions — — 6 5 — 1 Actuarial loss (gain) 101 68 (12) 51 6 10 Foreign currency exchange rate impact — — (1) (18) (1) (1) Benefits, expenses, taxes and premiums paid (59) (73) (32) (31) (7) (7) Settlements — — (3) (7) — — Benefit obligation at end of year $ 1,082 $ 966 $ 636 $ 631 $ 190 $ 183 Change in plan assets: Fair value of plan assets at beginning of year $ 832 $ 838 $ 577 $ 561 $ 31 $ 34 Actual return on plan assets 109 48 43 32 3 2 Foreign currency exchange rate impact — — (4) (16) — — Employer contributions 48 19 25 33 — 1 Plan participant contributions — — 6 5 — 1 Settlements — — (4) (7) — — Benefits, expenses, taxes and premiums paid from plan assets (59) (73) (32) (31) (7) (7) Fair value of plan assets at end of year $ 930 $ 832 $ 611 $ 577 $ 27 $ 31 Funded status $ (152) $ (134) $ (25) $ (54) $ (163) $ (152) Amounts recognized in the Balance Sheet consist of: Other assets $ — $ 2 $ 127 $ 103 $ — $ — Other accrued liabilities (23) (24) (4) (3) — — Other noncurrent liabilities (129) (112) (148) (154) (163) (152) Funded status (152) (134) (25) (54) (163) (152) Accumulated other comprehensive loss 283 253 24 68 17 13 Net amount recognized $ 131 $ 119 $ (1) $ 14 $ (146) $ (139) Pension Plans Other than U.S. International Post-retirement ($ in millions) 2020 2019 2018 2020 2019 2018 2020 2019 2018 Components of net periodic benefit cost: Service cost $ 39 $ 38 $ 37 $ 36 $ 30 $ 30 $ 3 $ 3 $ 3 Interest cost 35 37 33 11 13 13 6 7 7 Expected return on assets (53) (55) (53) (14) (14) (15) (2) (2) (3) Amortization of: Actuarial loss 15 11 14 6 3 5 — — — Prior service cost — 1 — — (1) — — — 1 Settlements — — — — 1 — — — — Special termination benefits — — — — — 1 — — — Net periodic benefit cost $ 36 $ 32 $ 31 $ 39 $ 32 $ 34 $ 7 $ 8 $ 8 Weighted-average assumptions used to determine benefit obligations at June 30: Discount rate 2.50 – 3.00% 3.40 – 3.80% 4.10 – 4.30% 0.50 – 7.00% 0.25 – 8.50% .50 – 7.50 2.70 – 9.00% 3.25 – 9.75% 3.75 – 9.75% Rate of compensation increase 2.50 – 8.00% 2.50 – 8.00% 2.50 – 8.00% 1.00 – 5.50% 1.00 – 5.50% 1.00– 5.50 N/A N/A N/A Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: Discount rate 3.40 – 3.80% 4.10 – 4.30% 3.40 – 3.90% .25 – 8.50% .50– 7.50% .50 – 6.75% 3.25 – 9.75% 3.75 – 9.75% 3.70 – 9.75% Expected return on assets 6.75 % 6.75 % 7.00 % 1.50 – 8.50% 1.50 – 7.50% 1.75 – 6.75% 6.75 % 6.75 % 7.00 % Rate of compensation increase 2.50 – 8.00% 2.50 – 8.00% 3.00– 7.00% 1.00 – 5.50% 1.00 – 5.50% 1.00 – 5.50% N/A N/A N/A The discount rate for each plan used for determining future net periodic benefit cost is based on a review of highly rated long-term bonds. The discount rate for the Company’s Domestic Plans is based on a bond portfolio that includes only long-term bonds with an Aa rating, or equivalent, from a major rating agency. The Company used an above-mean yield curve which represents an estimate of the effective settlement rate of the obligation, and the timing and amount of cash flows related to the bonds included in this portfolio are expected to match the estimated defined benefit payment streams of the Company’s Domestic Plans. For the Company’s international plans, the discount rate in a particular country was principally determined based on a yield curve constructed from high quality corporate bonds in each country, with the resulting portfolio having a duration matching that particular plan. In determining the long-term rate of return for a plan, the Company considers the historical rates of return, the nature of the plan’s investments and an expectation for the plan’s investment strategies. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. The assumed weighted-average health care cost trend rate for the coming year is 5.78% while the weighted-average ultimate trend rate of 4.40% is expected to be reached in approximately 18 years. A 100 basis-point change in assumed health care cost trend rates for fiscal 2020 would have had the following effects: (In millions) 100 Basis-Point 100 Basis-Point Effect on total service and interest costs $ 1 $ (1) Effect on post-retirement benefit obligations $ 13 $ (11) Amounts recognized in AOCI (before tax) as of June 30, 2020 are as follows: Pension Plans Other than (In millions) U.S. International Post-retirement Total Net actuarial losses, beginning of year $ 252 $ 74 $ 13 $ 339 Actuarial losses recognized 45 (40) 4 9 Amortization and settlements included in net periodic benefit cost (15) (6) — (21) Translation adjustments — 2 — 2 Net actuarial losses, end of year 282 30 17 329 Net prior service cost, beginning of year 1 (6) — (5) Amortization included in net periodic benefit cost — — — — Net prior service cost, end of year 1 (6) — (5) Total amounts recognized in AOCI $ 283 $ 24 $ 17 $ 324 Amounts in AOCI expected to be amortized as components of net periodic benefit cost during fiscal 2021 are as follows: Pension Plans Other than (In millions) U.S. International Post-retirement Net prior service cost (credit) $ — $ (1) $ — Net actuarial losses $ 20 $ 4 $ — The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the Company’s pension plans at June 30 are as follows: Pension Plans Retirement Growth Restoration International (In millions) 2020 2019 2020 2019 2020 2019 Projected benefit obligation $ 940 $ 830 $ 142 $ 136 $ 636 $ 631 Accumulated benefit obligation $ 887 $ 784 $ 124 $ 120 $ 576 $ 569 Fair value of plan assets $ 930 $ 832 $ — $ — $ 611 $ 577 International pension plans with projected benefit obligations in excess of the plans’ assets had aggregate projected benefit obligations of $330 million and $319 million and aggregate fair value of plan assets of $178 million and $162 million at June 30, 2020 and 2019, respectively. International pension plans with accumulated benefit obligations in excess of the plans’ assets had aggregate accumulated benefit obligations of $246 million and $241 million and aggregate fair value of plan assets of $128 million and $116 million at June 30, 2020 and 2019, respectively. The expected cash flows for the Company’s pension and post-retirement plans are as follows: Pension Plans Other than (In millions) U.S. International Post-retirement Expected employer contributions for year ending June 30, 2021 $ — $ 31 — Expected benefit payments for year ending June 30, 2021 67 25 8 2022 54 26 8 2023 52 28 9 2024 52 27 9 2025 53 29 10 Years 2026 – 2030 287 145 57 Plan Assets The Company’s investment strategy for its pension and post-retirement plan assets is to maintain a diversified portfolio of asset classes with the primary goal of meeting long-term cash requirements as they become due. Assets are primarily invested in diversified funds that hold equity or debt securities to maintain the security of the funds while maximizing the returns within each plan’s investment policy. The investment policy for each plan specifies the type of investment vehicles appropriate for the plan, asset allocation guidelines, criteria for selection of investment managers and procedures to monitor overall investment performance, as well as investment manager performance. The Company’s target asset allocation at June 30, 2020 is as follows: Pension Plans Other than U.S. International Post-retirement Equity 42 % 12 % 42 % Debt securities 47 % 65 % 47 % Other 11 % 23 % 11 % 100 % 100 % 100 % The following is a description of the valuation methodologies used for plan assets measured at fair 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. These assets are classified within Level 1 of the valuation hierarchy. Short-term investment funds – The fair values are determined using the Net Asset Value (“NAV”) provided by the administrator of the fund when the Company has the ability to redeem the assets at the measurement date. These assets are classified within Level 2 of the valuation hierarchy. For some assets the Company is utilizing the NAV as a practical expedient and those investments are not included in the valuation hierarchy. Government and agency securities – The fair values are determined using third-party pricing services using market prices or prices derived from observable market inputs such as benchmark curves, broker/dealer quotes, and other industry and economic factors. These investments are classified within Level 2 of the valuation hierarchy. Debt instruments – The fair values are determined using third-party pricing services using market prices or prices derived from observable market inputs such as credit spreads, broker/dealer quotes, benchmark curves and other industry and economic factors. These investments are classified within Level 2 of the valuation hierarchy. Commingled funds – The fair values of publicly traded funds are based upon market quotes and are classified within Level 1 of the valuation hierarchy. The fair values for non-publicly traded funds are determined using the NAV provided by the administrator of the fund when the Company has the ability to redeem the assets at the measurement date. These assets are classified within Level 2 of the valuation hierarchy. When the Company is utilizing the NAV as a practical expedient those investments are not included in the valuation hierarchy. These investments have monthly redemption frequencies with redemption notice periods ranging from 10 to 30 days. There are no unfunded commitments related to these investments. Insurance contracts – The fair values are based on negotiated value and the underlying investments held in separate account portfolios, as well as the consideration of the creditworthiness of the issuer. The underlying investments are primarily government, asset-backed and fixed income securities. Insurance contracts are generally classified as Level 3 as there are no quoted prices or other observable inputs for pricing. Interests in limited partnerships and hedge fund investments – The fair values are determined using the NAV provided by the administrator as a practical expedient, and therefore these investments are not included in the valuation hierarchy. These investments have monthly and quarterly redemption frequencies with redemption notice periods ranging from 30 to 90 days. Unfunded commitments related to these investments are de minimis. The following table presents the fair values of the Company’s pension and post-retirement plan assets by asset category as of June 30, 2020: (In millions) Level 1 Level 2 Level 3 Assets Total Cash and cash equivalents $ 2 $ — $ — $ — $ 2 Short term investment funds — 7 — 6 13 Government and agency securities — 152 — — 152 Commingled funds 386 666 — 207 1,259 Insurance contracts — — 49 — 49 Limited partnerships and hedge fund investments — — — 93 93 Total $ 388 $ 825 $ 49 $ 306 $ 1,568 The following table presents the fair values of the Company’s pension and post-retirement plan assets by asset category as of June 30, 2019: (In millions) Level 1 Level 2 Level 3 Assets Total Cash and cash equivalents $ 6 $ — $ — $ — $ 6 Short term investment funds — 19 — 5 24 Government and agency securities — 112 — — 112 Commingled funds 347 590 — 212 1,149 Insurance contracts — — 49 — 49 Limited partnerships and hedge fund investments — — — 100 100 Total $ 353 $ 721 $ 49 $ 317 $ 1,440 The following table presents the changes in Level 3 plan assets for fiscal 2020: (In millions) Insurance Contracts Balance as of June 30, 2019 $ 49 Actual return on plan assets: Relating to assets still held at the reporting date 2 Purchases, sales, issuances and settlements, net (2) Foreign exchange impact — Balance as of June 30, 2020 $ 49 401(k) Savings Plan (U.S.) The Company’s 401(k) Savings Plan (“Savings Plan”) is a contributory defined contribution plan covering substantially all regular U.S. employees who have completed the hours and service requirements, as defined by the plan document. Regular full-time employees are eligible to participate in the Savings Plan thirty days following their date of hire. The Savings Plan is subject to the applicable provisions of ERISA. The Company matches a portion of the participant’s contributions after one year of service under a predetermined formula based on the participant’s contribution level. The Company’s contributions were $37 million, $44 million and $41 million for fiscal 2020, 2019 and 2018, respectively. Shares of the Company’s Class A Common Stock are not an investment option in the Savings Plan and the Company does not use such shares to match participants’ contributions. Deferred Compensation The Company has agreements with certain employees and outside directors who defer compensation. The Company accrues for such compensation, and either interest thereon or for the change in the value of cash units. The amounts included in the accompanying consolidated balance sheets under these plans were $85 million and $93 million as of June 30, 2020 and 2019, respectively. The expense for fiscal 2020, 2019 and 2018 was $5 million, $8 million and $16 million, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Contractual Obligations The following table summarizes scheduled maturities of the Company’s contractual obligations for which cash flows are fixed and determinable as of June 30, 2020: Payments Due in Fiscal (In millions) Total 2021 2022 2023 2024 2025 Thereafter Debt service (1) $ 8,992 $ 1,386 $ 165 $ 412 $ 159 $ 654 $ 6,216 Unconditional purchase obligations (2) 3,768 1,403 522 557 459 494 333 Gross unrecognized tax benefits and interest – current (3) 3 3 — — — — — Transition Tax payable (4) 279 17 27 27 51 69 88 Total contractual obligations (5) $ 13,042 $ 2,809 $ 714 $ 996 $ 669 $ 1,217 $ 6,637 (1) Includes long-term and current debt and the related projected interest costs. Refer to Note 7 – Leases for information regarding future minimum lease payments relating to the Company’s finance leases. Interest costs on long-term and current debt in fiscal 2021, 2022, 2023, 2024, 2025 and thereafter are projected to be $177 million, $165 million, $162 million, $159 million, $154 million and $2,016 million, respectively. Projected interest costs on variable rate instruments were calculated using market rates at June 30, 2020. (2) Unconditional purchase obligations primarily include: royalty payments pursuant to license agreements, inventory commitments, third-party distribution commitments and advertising commitments. Future royalty and advertising commitments were estimated based on planned future sales for the term that was in effect at June 30, 2020, without consideration for potential renewal periods. (3) Refer to Note 9 – Income Taxes for information regarding unrecognized tax benefits. As of June 30, 2020, the noncurrent portion of the Company’s unrecognized tax benefits, including related accrued interest and penalties was $76 million. At this time, the settlement period for the noncurrent portion of the unrecognized tax benefits, including related accrued interest and penalties, cannot be determined and therefore was not included. (4) The Transition Tax may be paid over an eight-year period and this amount represents the remaining liability as of June 30, 2020. (5) Refer to Note 7 – Leases for information regarding future minimum lease payments relating to the Company’s operating leases. 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 As previously disclosed, 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 substantially completed, and modifications are being made to certain advertising claims. This was not a product safety issue and did not relate to the quality of the ingredients or the manufacturing of the Company’s products. The Company has determined that this matter is not material to the Company, and no accrual has been recorded. |
COMMON STOCK
COMMON STOCK | 12 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
COMMON STOCK | COMMON STOCKAs of June 30, 2020, the Company’s authorized common stock consists of 1,300 million shares of Class A Common Stock, par value $.01 per share, and 304 million shares of Class B Common Stock, par value $.01 per share. Class B Common Stock is convertible into Class A Common Stock, in whole or in part, at any time and from time to time at the option of the holder, on the basis of one share of Class A Common Stock for each share of Class B Common Stock converted. Holders of the Company’s Class A Common Stock are entitled to one vote per share and holders of the Company’s Class B Common Stock are entitled to ten votes per share. Information about the Company’s common stock outstanding is as follows: (Shares in thousands) Class A Class B Balance at June 30, 2017 224,341.2 143,762.3 Acquisition of treasury stock (6,045.4) — Conversion of Class B to Class A 710.6 (710.6) Stock-based compensation 5,087.4 — Balance at June 30, 2018 224,093.8 143,051.7 Acquisition of treasury stock (10,986.7) — Conversion of Class B to Class A 3,513.9 (3,513.9) Stock-based compensation 4,943.5 — Balance at June 30, 2019 221,564.5 139,537.8 Acquisition of treasury stock (4,665.0) — Conversion of Class B to Class A 4,302.4 (4,302.4) Stock-based compensation 4,088.3 — Balance at June 30, 2020 225,290.2 135,235.4 The Company is authorized by the Board of Directors to repurchase Class A Common Stock in the open market or in privately negotiated transactions, depending on market conditions and other factors. As of June 30, 2020, the remaining authorized share repurchase balance was 34.7 million shares. The following is a summary of cash dividends declared per share on the Company’s Class A and Class B Common Stock during the year ended June 30, 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 As part of the cost saving actions and cash conservation measures taken in response to the COVID-19 pandemic, the Company did not declare quarterly cash dividends that would have been paid in June 2020. On August 19, 2020, a dividend was declared in the amount of $.48 per share on our Class A and Class B Common Stock. The dividend is payable in cash on September 15, 2020 to stockholders of record at the close of business on August 31, 2020 |
STOCK PROGRAMS
STOCK PROGRAMS | 12 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
STOCK PROGRAMS | STOCK PROGRAMSAs of June 30, 2020, the Company has two active equity compensation plans which include the Amended and Restated Fiscal 2002 Share Incentive Plan (the “Fiscal 2002 Plan”) and the Amended and Restated Non-Employee Director Share Incentive Plan (collectively, the “Plans”). These Plans currently provide for the issuance of approximately 88.8 million shares of Class A Common Stock, which consist of shares originally provided for and shares transferred to the Fiscal 2002 Plan from other inactive plans and employment agreements, to be granted in the form of stock-based awards to key employees, consultants and non-employee directors of the Company. As of June 30, 2020, approximately 15.0 million shares of Class A Common Stock were reserved and available to be granted pursuant to these Plans. The Company may satisfy the obligation of its stock-based compensation awards with either new or treasury shares. The Company’s equity compensation awards include stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs and share units. Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, RSUs, PSUs, long-term PSUs and share units. Compensation expense attributable to net stock-based compensation is as follows: Year Ended June 30 (In millions) 2020 2019 2018 Compensation expense $ 213 $ 243 $ 236 Income tax benefit $ 41 $ 47 $ 49 As of June 30, 2020, the total unrecognized compensation cost related to unvested stock-based awards was $151 million and the related weighted-average period over which it is expected to be recognized is approximately two years. Stock Options The following is a summary of the Company’s stock option programs as of June 30, 2020 and changes during the fiscal year then ended: (Shares in thousands) Shares Weighted- Aggregate Intrinsic Value (1) (in millions) Weighted-Average Outstanding at June 30, 2019 9,848.0 $ 87.68 Granted at fair value 1,332.2 199.24 Exercised (2,454.5) 73.68 Expired (13.8) 99.14 Forfeited (66.9) 155.66 Outstanding at June 30, 2020 8,645.0 108.30 $ 709 6.0 Vested and expected to vest at June 30, 2020 8,595.9 107.86 $ 708 6.0 Exercisable at June 30, 2020 5,780.6 82.85 $ 612 4.9 (1) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The exercise period for all stock options generally may not exceed ten years from the date of grant. Stock option grants to individuals generally become exercisable in three substantively equal tranches over a service period of up to four years. The Company attributes the value of option awards on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. The following is a summary of the per-share weighted-average grant date fair value of stock options granted and total intrinsic value of stock options exercised: Year Ended June 30 (In millions, except per share data) 2020 2019 2018 Per-share weighted-average grant date fair value of stock options granted $ 51.46 $ 38.62 $ 27.76 Intrinsic value of stock options exercised $ 309 $ 283 $ 246 The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: Year Ended June 30 2020 2019 2018 Weighted-average expected stock-price volatility 25.1% 24.5% 25.6% Weighted-average expected option life 7 years 7 years 7 years Average risk-free interest rate 1.5% 2.8% 2.0% Average dividend yield 1.0% 1.1% 1.5% The Company uses a weighted-average expected stock-price volatility assumption that is a combination of both current and historical implied volatilities of the underlying stock. The implied volatilities were obtained from publicly available data sources. For the weighted-average expected option life assumption, the Company considers the exercise behavior for past grants and models the pattern of aggregate exercises. The average risk-free interest rate is based on the U.S. Treasury strip rate for the expected term of the options and the average dividend yield is based on historical experience. Restricted Stock Units The Company granted RSUs in respect of approximately 0.8 million shares of Class A Common Stock during fiscal 2020 which, 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 granted 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. The following is a summary of the status of the Company’s RSUs as of June 30, 2020 and activity during the fiscal year then ended: (Shares in thousands) Shares Weighted-Average Nonvested at June 30, 2019 2,441.9 $ 119.62 Granted 834.5 199.25 Dividend equivalents 13.7 178.63 Vested (1,233.3) 111.44 Forfeited (108.5) 145.42 Nonvested at June 30, 2020 1,948.3 157.89 Performance Share Units During fiscal 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 Settlement of all PSUs will be made pursuant to a range of opportunities relative to the target goals and, as such, the compensation cost of the PSU is subject to adjustment based upon the attainability of these target goals. No settlement will occur for results below the applicable minimum threshold of a target and additional shares shall be issued if performance exceeds the targeted performance goals. 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. These awards are subject to the provisions of the agreement under which the PSUs are granted. The PSUs generally vest at the end of the performance period. Approximately 0.2 million shares of Class A Common Stock are anticipated to be issued, relative to the target goals set at the time of issuance, in settlement of the 0.5 million PSUs that vested as of June 30, 2020. In September 2018 and 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 issuance, in settlement of 0.3 million PSUs which vested as of June 30, 2018 and June 30, 2019, respectively. The following is a summary of the status of the Company’s PSUs as of June 30, 2020 and activity during the fiscal year then ended: (Shares in thousands) Shares Weighted-Average Nonvested at June 30, 2019 1,009.8 105.92 Granted 198.5 187.10 Vested (512.1) 92.19 Forfeited (1.1) 132.73 Nonvested at June 30, 2020 695.1 139.17 Long-term Performance Share Units During September 2015, the Company granted PSUs to an executive of the Company with an aggregate target payout of 387,848 shares (in three tranches of approximately 129,283 each) of the Company’s Class A Common Stock, generally subject to continued employment through the end of relative performance periods, which end June 30, 2018, 2019, and 2020. Since the Company achieved positive Net Earnings, as defined in the PSU award agreement, for the fiscal year ended June 30, 2016, performance and vesting of each tranche will be based on the Company achieving positive Cumulative Operating Income, as defined in the PSU award agreement, during the relative performance period. Payment with respect to a tranche will be made on the third anniversary of the last day of the respective performance period. The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as the payment of shares of Class A Common Stock. The grant date fair value of these PSUs of $30 million was estimated using the closing stock price of the Company’s Class A Common Stock as of September 4, 2015, the date of grant. Through June 30, 2020, 387,848 shares are anticipated to be issued, and the related dividends to be paid, in accordance with the terms of the grant, related to the performance periods ended June 30, 2018, 2019, and 2020. During January 2016, the Company granted PSUs to an executive of the Company with an aggregate target payout of 71,694 shares (in three tranches of 23,898 each) of the Company’s Class A Common Stock. Since the Company achieved positive Net Earnings, as defined in the PSU award agreement, for the fiscal year ended June 30, 2017, the vesting of each tranche will generally be subject to continued employment through the end of relative service periods that end on January 29, 2018, 2019 and 2020. Payment with respect to a tranche will be made within 30 business days of the date on which the PSUs vest. The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as the payment of shares of the Company’s Class A Common Stock. The grant date fair value of these PSUs of $6 million was estimated using the closing stock price of the Company’s Class A Common Stock as of January 28, 2016, the date of grant. In January 2020, 23,898 shares of the Company’s Class A Common Stock were issued, and the related dividends were paid, in accordance with the terms of the grant related to the performance period of the award that ended January 29, 2020. Through June 30, 2020, 71,694 shares of the Company’s Class A Common Stock were issued, and the related dividends were paid, in accordance with the terms of the grant, related to the performance periods ended January 29, 2018, 2019 and 2020. In February 2018, the Company granted to an executive of the Company PSUs with an aggregate payout of 195,940 shares (in two tranches of 97,970 shares each) of the Company’s Class A Common Stock, generally subject to continued employment through the end of the respective performance periods ending June 30, 2021 and 2022. No portion of the award will generally vest unless the Company has achieved positive Cumulative Operating Income, as defined in the performance share unit award agreement, during the relevant performance period. Settlement, if any, with respect to both tranches will be made on September 3, 2024. The PSUs are accompanied by dividend equivalent rights that will be payable in cash at the same time as any payment of shares of Class A Common Stock. The grant date fair value of these PSUs of $27 million was estimated using the closing stock price of the Company’s Class A Common Stock as of the date of grant. Share Units The Company grants share units to certain non-employee directors under the Amended and Restated Non-Employee Director Share Incentive Plan. The share units are convertible into shares of the Company’s Class A Common Stock as provided for in that plan. Share units are accompanied by dividend equivalent rights that are converted to additional share units when such dividends are declared. The following is a summary of the status of the Company’s share units as of June 30, 2020 and activity during the fiscal year then ended: (Shares in thousands) Shares Weighted-Average Outstanding at June 30, 2019 131.2 $ 57.22 Granted 4.6 190.99 Dividend equivalents 1.0 177.86 Outstanding at June 30, 2020 136.8 62.46 Cash Units Certain non-employee directors defer cash compensation in the form of cash payout share units, which are not subject to the Plans. These share units are classified as liabilities and, as such, their fair value is adjusted to reflect the current market value of the Company’s Class A Common Stock. The Company recorded $2 million, $9 million and $12 million as compensation expense to reflect additional deferrals and the change in the market value for fiscal 2020, 2019 and 2018, respectively. |
NET EARNINGS ATTRIBUTABLE TO TH
NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE | 12 Months Ended |
Jun. 30, 2020 | |
Earnings Per Share [Abstract] | |
NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE | NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC. PER COMMON SHARENet earnings attributable to The Estée Lauder Companies Inc. per common share (“basic EPS”) is computed by dividing net earnings 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 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: Year Ended June 30 (In millions, except per share data) 2020 2019 2018 Numerator: Net earnings attributable to The Estée Lauder Companies Inc. $ 684 $ 1,785 $ 1,108 Denominator: Weighted-average common shares outstanding – Basic 360.6 363.5 368.0 Effect of dilutive stock options 4.4 4.7 5.2 Effect of PSUs 0.3 0.5 0.4 Effect of RSUs 1.6 1.7 2.1 Weighted-average common shares outstanding – Diluted 366.9 370.4 375.7 Net earnings attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.90 $ 4.91 $ 3.01 Diluted $ 1.86 $ 4.82 $ 2.95 As of June 30, 2020, 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. As of June 30, 2019 and 2018, there were no anti-dilutive shares of Class A Common Stock underlying options to be excluded in the computation of diluted EPS. As of June 30, 2020, 2019 and 2018, 1.2 million shares, 1.3 million shares and 1.0 million shares at target, 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 18 – Stock Programs . |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE LOSS | 12 Months Ended |
Jun. 30, 2020 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE LOSS | ACCUMULATED OTHER COMPREHENSIVE LOSS The components of AOCI included in the accompanying consolidated balance sheets consist of the following: Year Ended June 30 (In millions) 2020 2019 2018 Net unrealized investment losses, beginning of year $ — $ (14) $ (1) Unrealized investment gains (losses) — 14 (13) Net unrealized investment losses, end of year — — (14) Net derivative instruments, beginning of year 21 39 (3) Gain on derivative instruments 26 5 12 Provision for deferred income taxes (7) (2) (2) Reclassification to earnings during the year: Foreign currency forward contracts (1) (35) (28) 46 Interest rate-related derivatives (2) — (1) (1) Benefit (provision) for deferred income taxes on reclassification (3) 9 8 (15) Reclassification to retained earnings — — 2 Net derivative instruments, end of year 14 21 39 Net pension and post-retirement adjustments, beginning of year (253) (175) (213) Changes in plan assets and benefit obligations: Net actuarial gains (losses) recognized (9) (117) 67 Prior service credit recognized — — 5 Translation adjustments (2) 2 (1) Benefit (provision) for deferred income taxes 4 25 (15) Amortization and settlements included in net periodic benefit cost (4) : Net actuarial losses 21 15 19 Net prior service cost — — 1 Provision for deferred income taxes on reclassification (3) (5) (3) (4) Reclassification to retained earnings — — (34) Net pension and post-retirement adjustments, end of year (244) (253) (175) Cumulative translation adjustments, beginning of year (331) (284) (267) Reclassification to earnings during the year 2 (77) — Translation adjustments (108) 18 (19) Benefit for deferred income taxes 2 12 2 Cumulative translation adjustments, end of year (435) (331) (284) Accumulated other comprehensive loss $ (665) $ (563) $ (434) (1) For the year ended June 30, 2020 and 2019, $(35) million and $(28) million, respectively, was recorded in Net sales in the accompanying consolidated statements of earnings. For the year ended June 30, 2018, $22 million and $24 million were recorded in Cost of sales and Selling, general and administrative expenses, respectively, in the accompanying consolidated statements of earnings. (2) Amounts recorded in Interest expense in the accompanying consolidated statements of earnings. (3) Amounts recorded in Provision for income taxes in the accompanying consolidated statements of earnings. (4) See Note 15 – Pension, Deferred Compensation and Post-Retirement Benefit Plans for additional information . |
STATEMENT OF CASH FLOWS
STATEMENT OF CASH FLOWS | 12 Months Ended |
Jun. 30, 2020 | |
Supplemental Cash Flow Elements [Abstract] | |
STATEMENT OF CASH FLOWS | STATEMENT OF CASH FLOWS Supplemental cash flow information is as follows: Year Ended June 30 (In millions) 2020 2019 2018 Cash: Cash paid during the year for interest $ 153 $ 131 $ 128 Cash paid during the year for income taxes $ 537 $ 588 $ 351 Non-cash investing and financing activities: Purchase price refund receivable $ 32 $ — $ — Capital lease, capitalized interest and asset retirement obligations incurred $ 2 $ 15 $ 9 Non-cash purchases of short- and long-term investments, net $ — $ — $ 14 Property, plant and equipment accrued but unpaid $ 39 $ 52 $ 43 |
SEGMENT DATA AND RELATED INFORM
SEGMENT DATA AND RELATED INFORMATION | 12 Months Ended |
Jun. 30, 2020 | |
Segment Reporting [Abstract] | |
SEGMENT DATA AND RELATED INFORMATION | 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. As a result of the similarities in the manufacturing, marketing and distribution processes for all of the Company’s products, much of the information provided in the consolidated financial statements is similar to, or the same as, that reviewed on a regular basis by the Chief Executive. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis. While the Company’s results of operations are also reviewed on a consolidated basis, the Chief Executive reviews data segmented on a basis that facilitates comparison to industry statistics. Accordingly, net sales, depreciation and amortization, and operating income are available with respect to the manufacture and distribution of skin care, makeup, fragrance, hair care and other products. These product categories meet the definition of operating segments and, accordingly, additional financial data are provided below. The “other” segment includes the sales and related results of ancillary products and services that do not fit the definition of skin care, makeup, fragrance and hair care. 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 fiscal 2020, 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 and 2018 operating income of The Americas was increased, with a corresponding decrease in Europe, the Middle East & Africa, by $866 million and $661 million, 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 described in the summary of significant accounting policies, except for depreciation and amortization charges, which are allocated, primarily, based upon net sales. 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. Year Ended June 30 (In millions) 2020 2019 2018 PRODUCT CATEGORY DATA Net sales: Skin Care $ 7,382 $ 6,551 $ 5,595 Makeup 4,794 5,860 5,633 Fragrance 1,563 1,802 1,826 Hair Care 515 584 570 Other 40 69 67 14,294 14,866 13,691 Returns associated with restructuring and other activities — (3) (8) Net sales $ 14,294 $ 14,863 $ 13,683 Depreciation and amortization: Skin Care $ 268 $ 202 $ 185 Makeup 242 257 255 Fragrance 71 69 64 Hair Care 28 26 24 Other 2 3 3 $ 611 $ 557 $ 531 Operating income (loss) before charges associated with restructuring and other activities: Skin Care $ 2,125 $ 1,925 $ 1,514 Makeup (1,438) 438 549 Fragrance 17 140 176 Hair Care (19) 39 64 Other 4 12 9 689 2,554 2,312 Reconciliation: Charges associated with restructuring and other activities (83) (241) (257) Interest expense (161) (133) (128) Interest income and investment income, net 48 58 56 Other components of net periodic benefit cost (4) (2) (3) Other income, net 557 71 — Earnings before income taxes $ 1,046 $ 2,307 $ 1,980 Year Ended June 30 (In millions) 2020 2019 2018 GEOGRAPHIC DATA (1) Net sales: The Americas $ 3,794 $ 4,741 $ 5,015 Europe, the Middle East & Africa 6,262 6,452 5,634 Asia/Pacific 4,238 3,673 3,042 14,294 14,866 13,691 Returns associated with restructuring and other activities — (3) (8) Net sales $ 14,294 $ 14,863 $ 13,683 Operating income (loss): The Americas $ (1,044) $ 672 $ 872 Europe, the Middle East & Africa 997 1,153 865 Asia/Pacific 736 729 575 689 2,554 2,312 Charges associated with restructuring and other activities (83) (241) (257) Operating income $ 606 $ 2,313 $ 2,055 Total assets: The Americas $ 9,189 $ 7,661 $ 7,558 Europe, the Middle East & Africa 4,319 3,862 3,855 Asia/Pacific 4,273 1,633 1,154 $ 17,781 $ 13,156 $ 12,567 Long-lived assets (2) : The Americas $ 2,512 $ 1,230 $ 1,138 Europe, the Middle East & Africa 1,306 647 525 Asia/Pacific 519 191 160 $ 4,337 $ 2,068 $ 1,823 (1) The net sales and operating income from the Company's travel retail business are included in the Europe, the Middle East & Africa region, with the exception of the net sales of Dr. Jart+ products in the travel retail channel that are reflected in Korea in the Asia/Pacific region. (2) Includes property, plant and equipment, net . Fiscal 2020 also includes operating lease ROU assets, recognized as a result of the adoption of ASC 842. Refer to Note 7 – Leases for information. Net sales are predominantly attributed to a country within a geographic region based on the location of the customer. The Company is domiciled in the United States. Net sales in the United States, including net sales from travel retail locations, in fiscal 2020, 2019 and 2018 were $3,449 million, $4,295 million and $4,531 million, respectively. Net sales in mainland China, including net sales from travel retail locations, in fiscal 2020, 2019 and 2018 were approximately 24%, 17% and 13% of consolidated net sales, respectively, and no other country represented greater than 10% of the Company’s consolidated net sales. The Company’s long-lived assets in the United States at June 30, 2020, 2019 and 2018 were $2,192 million, $953 million and $912 million, respectively. |
UNAUDITED QUARTERLY FINANCIAL D
UNAUDITED QUARTERLY FINANCIAL DATA | 12 Months Ended |
Jun. 30, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
UNAUDITED QUARTERLY FINANCIAL DATA | UNAUDITED QUARTERLY FINANCIAL DATA The following summarizes the unaudited quarterly operating results of the Company for fiscal 2020 and 2019: Quarter Ended (In millions, except per share data) September 30 (1) December 31 (2) March 31 (3) June 30 (4) Total Year Fiscal 2020 Net sales $ 3,895 $ 4,624 $ 3,345 $ 2,430 $ 14,294 Gross profit 2,987 3,583 2,509 1,663 10,742 Operating income (loss) 779 261 109 (543) 606 Net earnings (loss) attributable to The Estée Lauder Companies Inc. 595 557 (6) (462) 684 Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.65 $ 1.55 $ (.02) $ (1.28) $ 1.90 Diluted $ 1.61 $ 1.52 $ (.02) $ (1.28) $ 1.86 Fiscal 2019 Net sales $ 3,524 $ 4,005 $ 3,744 $ 3,590 $ 14,863 Gross profit 2,701 3,095 2,925 2,755 11,476 Operating income 652 771 674 216 2,313 Net earnings attributable to The Estée Lauder Companies Inc. 500 573 555 157 1,785 Net earnings attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.36 $ 1.58 $ 1.53 $ .43 $ 4.91 Diluted $ 1.34 $ 1.55 $ 1.51 $ .43 $ 4.82 (1) Fiscal 2020 first quarter results include charges associated with restructuring and other activities of $(25) million ($(21) million after tax, or $(.06) per diluted common share). Fiscal 2019 first quarter results include charges associated with restructuring and other activities of $(47) million ($(37) million after tax, or $(.10) per diluted common share) and the changes in fair value of contingent consideration of $11 million ($9 million after tax, or $.02 per diluted common share). The fiscal 2019 first quarter results also include a net credit resulting from the TCJA of $1 million, or $(.01) per diluted common share, relating to the Transition Tax and the net deferred tax liability related to foreign withholding taxes on certain foreign earnings. (2) Fiscal 2020 second quarter results include goodwill and other intangible asset impairments of $(777) million ($(663) million after tax, or $(1.81) per diluted common share), charges associated with restructuring and other activities of $(13) million ($(10) million after tax, or $(.03) per diluted common share) and the changes in fair value of contingent consideration of $7 million ($6 million after tax, or $.02 per diluted common share). The fiscal 2020 second quarter results also include gains relating to the Company's previously held equity method investment in Have&Be of $576 million ($450 million after tax, or $1.23 per diluted common share). Fiscal 2019 second quarter results include goodwill and other intangible asset impairments of $(38) million ($(34) million after tax, or $(.09) per diluted common share), charges associated with restructuring and other activities of $(35) million ($(31) million after tax, or $(.08) per diluted common share) and the changes in fair value of contingent consideration of $(2) million ($(1) million after tax, which did not have an impact on diluted earnings per share). The fiscal 2019 second quarter results also include a net charge resulting from the TCJA of $(6) million, or $(.02) per diluted common share, relating to the remeasurement of U.S. net deferred tax assets and the Transition Tax. (3) Fiscal 2020 third quarter results include goodwill, other intangible and long-lived asset impairments of $(346) million ($(298) million after tax, or $(.83) per diluted common share), charges associated with restructuring and other activities of $(25) million ($(20) million after tax, or $(.05) per diluted common share) and the changes in fair value of contingent consideration of $2 million ($2 million after tax, or $.01 per diluted common share). Fiscal 2019 third quarter results include a gain on liquidation of an investment in a foreign subsidiary, net of $71 million ($57 million after tax, or $.15 per diluted common share). The fiscal 2019 third quarter results also include goodwill and other intangible asset impairments of $(52) million (before and after tax, or $(.14) per diluted common share), charges associated with restructuring and other activities of $(35) million ($(27) million after tax, or $(.07) per diluted common share) and the changes in fair value of contingent consideration of $9 million ($7 million after tax, or $.02 per diluted common share). |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Debt In August 2020, the Company repaid the remaining $750 million borrowed under its $1,500 million revolving credit facility that was outstanding at June 30, 2020. Charges Associated with Restructuring and Other Activities On August 20, 2020, the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “Restructuring Program”), designed to resize the Company's business against the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The Restructuring Program will help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. It will further strengthen the Company by building upon the foundational capabilities in which the Company has invested. The Restructuring Program’s main areas of focus include accelerating the shift to online with the realignment of the Company's distribution network reflecting freestanding store and certain department store closures, with a focus on North America and Europe, the Middle East & Africa; the reduction in brick-and-mortar point of sale employees and related support staff; and the redesign of the Company's regional branded marketing organizations, plus select opportunities in global brands and functions. The Company committed to this course of action on August 18, 2020. This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility. The Company plans to approve specific initiatives under the Restructuring Program through fiscal 2022 and expects to complete those initiatives through fiscal 2023. The Company expects that the Restructuring Program will result in related restructuring and other charges totaling between $400 million and $500 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs to implement these initiatives. |
SCHEDULE II - VALUATION AND QUA
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Jun. 30, 2020 | |
SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract] | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | THE ESTÉE LAUDER COMPANIES INC. SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS Three Years Ended June 30, 2020 (In millions) Additions Description Balance (1) (2) Deductions Balance Reserves deducted in the balance sheet from the assets to which they apply: Allowance for doubtful accounts and customer deductions: Year ended June 30, 2020 $ 32 $ 45 $ — $ 14 (a) $ 63 Year ended June 30, 2019 $ 29 $ 27 $ — $ 24 (a) $ 32 Year ended June 30, 2018 $ 30 $ 23 $ — $ 24 (a) $ 29 Sales return accrual: Year ended June 30, 2020 $ 108 $ 520 $ — $ 514 (b) $ 114 Year ended June 30, 2019 $ 105 $ 488 $ — $ 485 (b) $ 108 Year ended June 30, 2018 $ 109 $ 493 $ — $ 497 (b) $ 105 Deferred tax valuation allowance: Year ended June 30, 2020 $ 49 $ 32 $ 28 $ 2 $ 107 Year ended June 30, 2019 $ 45 $ 11 $ — $ 7 $ 49 Year ended June 30, 2018 $ 42 $ 6 $ — $ 3 $ 45 Accrued restructuring initiatives: Year ended June 30, 2020 $ 204 $ 34 $ — $ 125 $ 113 Year ended June 30, 2019 $ 182 $ 133 $ — $ 111 $ 204 Year ended June 30, 2018 $ 151 $ 127 $ — $ 96 $ 182 (a) Includes amounts written-off, net of recoveries. (b) Represents actual returns. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation 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. Certain amounts in the consolidated financial statements of prior years have been reclassified to conform to current year presentation. |
Management Estimates | Management Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“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. Certain significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, inventory, pension and other post-retirement benefit costs, business combinations, goodwill, other intangible assets and long-lived assets, and income taxes. 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 year-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 $(106) million, $30 million and $(17) million, net of tax, in fiscal 2020, 2019 and 2018, 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 2020, 2019 and 2018. In fiscal 2019, the Company had an investment in a foreign subsidiary that owned the Company’s available-for-sale securities, and 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 statement of earnings. 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. In 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 12 – Derivative Financial Instruments for further discussion . The Company categorizes these instruments as entered into for purposes other than trading. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include $775 million and $1,566 million of short-term time deposits at June 30, 2020 and 2019, respectively. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. |
Investments | Investments Investments in the common stock of privately-held companies in which the Company has significant influence, but less than a controlling financial interest, are accounted for under the equity method of accounting. The Company accounts for its cost method investments at cost, less impairment, plus/minus subsequent observable price changes, and performs an assessment each quarter to determine whether or not a triggering event has occurred that results in changes in fair value. These investments were not material to the Company’s consolidated financial statements as of June 30, 2020 and 2019 and are included in Long-term investments in the accompanying consolidated balance sheets. |
Accounts Receivable | Accounts Receivable Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions. 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. In addition, if the good/service is transferred and payment is received within one year, the Company does not determine significant financing components. See Note 14 – Revenue Recognition for additional information. |
Inventory and Promotional Merchandise | Inventory and Promotional Merchandise Inventory and promotional merchandise only includes inventory considered saleable or usable in future periods, and is stated at the lower of cost or net realizable value, with cost being based on standard cost and production variances, which approximate actual cost on the first-in, first-out method. Cost components include raw materials, componentry, direct labor and overhead (e.g., indirect labor, utilities, depreciation, purchasing, receiving, inspection and warehousing) as well as inbound freight. Manufacturing overhead is allocated to the cost of inventory based on the normal production capacity. Unallocated overhead during periods of abnormally low production levels are recognized as cost of sales in the period in which they are incurred. Promotional merchandise is charged to expense at the time the merchandise is shipped to the Company’s customers. Included in inventory and promotional merchandise is an inventory obsolescence reserve, which represents the difference between the cost of the inventory and its estimated realizable value. This reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age and historical results. In addition, and as necessary, specific reserves for future known or anticipated events may be established. |
Derivative Financial Instruments | Derivative Financial Instruments The Company’s derivative financial instruments are recorded as either assets or liabilities on the balance sheet and measured at fair value. All derivatives are (i) designated as a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value” hedge), (ii) designated as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge), or (iii) not designated as a hedging instrument. Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge are recorded in current-period earnings, along with the loss or gain on the hedged asset or liability that is attributable to the hedged risk (including losses or gains on unrecognized firm commitments). Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge of a forecasted transaction are recorded in OCI. Gains and losses deferred in OCI are then recognized in current-period earnings when earnings are affected by the variability of cash flows of the hedged forecasted transaction (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). Changes in the fair value of derivative instruments not designated as hedging instruments are reported in current-period earnings. All derivative gains and losses relating to cash flow hedges and fair value hedges are recognized in the same income statement line as the hedged items. In 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 12 – Derivative Financial Instruments for further discussion. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment, including leasehold and other improvements that extend an asset’s useful life or productive capabilities, are carried at cost less accumulated depreciation and amortization. Costs incurred for computer software developed or obtained for internal use are capitalized during the application development stage and expensed as incurred during the preliminary project and post-implementation stages. For financial statement purposes, depreciation is provided principally on the straight-line method over the estimated useful lives of the assets ranging from 3 to 40 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lives of the respective leases or the expected useful lives of those improvements. |
Business Combinations | Business Combinations The Company uses the acquisition method of accounting for acquired businesses. Under the acquisition method, the Company's consolidated financial statements reflect the operations of an acquired business starting from the closing date of the acquisition. The Company allocates the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. Any residual purchase price is recorded as goodwill. See Note 5 – Acquisition of Business for further information. |
Goodwill and Other Indefinite-lived Intangible Assets | Goodwill and Other Indefinite-lived Intangible Assets Goodwill is calculated as the excess of the cost of purchased businesses over the fair value of their underlying net assets. Other indefinite-lived intangible assets principally consist of trademarks. Goodwill and other indefinite-lived intangible assets are not amortized. The Company assesses goodwill and other indefinite-lived intangible assets at least annually for impairment as of the beginning of the fiscal fourth quarter or more frequently if certain events or circumstances exist. The Company tests goodwill for impairment at the reporting unit level, which is one level below the Company’s operating segments. The Company identifies its reporting units by assessing whether the components of its operating segments constitute businesses for which discrete financial information is available and management of each operating segment regularly reviews the operating results of those components. The Company makes certain judgments and assumptions in allocating assets and liabilities to determine carrying values for its reporting units. When testing goodwill for impairment, the Company has the option of first performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. The Company uses a single quantitative step when determining the subsequent measurement of goodwill by comparing the fair value of a reporting unit with its carrying amount and recording an impairment charge for the amount that the carrying amount exceeds the fair value, up to the total amount of goodwill allocated to that reporting unit. When testing other indefinite-lived intangible assets for impairment, the Company also has the option of first performing a qualitative assessment to determine whether it is more-likely-than-not that the indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform a quantitative test. The quantitative impairment test for indefinite-lived intangible assets encompasses calculating the fair value of an indefinite-lived intangible asset and comparing the fair value to its carrying value. If the carrying value exceeds the fair value, an impairment charge is recorded. For fiscal 2020 and 2019, the Company elected to perform the qualitative assessment for certain of its reporting units and indefinite-lived intangible assets. This qualitative assessment included the review of certain macroeconomic factors and entity-specific qualitative factors to determine if it was more-likely-than-not that the fair values of its reporting units were below carrying value. The Company considered macroeconomic factors including the global economic growth, general macroeconomic trends for the markets in which the reporting units operate and the intangible assets are employed, and the growth of the global prestige beauty industry. In addition to these macroeconomic factors, among other things, the Company considered the reporting units’ current results and forecasts, any changes in the nature of the business, any significant legal, regulatory, contractual, political or other business climate factors, changes in the industry/competitive environment, changes in the composition or carrying amount of net assets and its intention to sell or dispose of a reporting unit or cease the use of a trademark. For the Company’s other reporting units and other indefinite-lived intangible assets, a quantitative assessment was performed. The Company engaged third-party valuation specialists and used industry accepted valuation models and criteria that were reviewed and approved by various levels of management. To determine the fair value of the reporting units, the Company used an equal weighting of the income and market approaches. Under the income approach, we determined fair value using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflected the relative risk of the cash flows. Under the market approach, we utilized market multiples from publicly traded companies with similar operating and investment characteristics as the reporting unit. The key estimates and factors used in these two approaches include revenue growth rates and profit margins based on internal forecasts, terminal value, the weighted-average cost of capital used to discount future cash flows and comparable market multiples. To determine the fair value of other indefinite-lived intangible assets, we use 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. See Note 6 – Goodwill and Other Intangible Assets for further information. |
Long-Lived Assets | Long-Lived Assets The Company reviews long-lived assets, primarily right-of-use assets and property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When such events or changes in circumstances occur, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be measured and recorded for the excess of the carrying value over the fair value. Specifically for right-of-use assets, fair value is based on discounting market rent using a real estate discount rate. |
Concentration of Credit Risk | 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. |
Revenue Recognition, Changes in Accounting Policies and Shipping and Handling | Revenue Recognition During fiscal 2019, the Company adopted the new revenue accounting standard, ASC 606, under the modified retrospective method to all contracts as of the date of adoption. Under this method, the consolidated financial statements for the fiscal period beginning July 1, 2018 are presented under the new revenue accounting standard, while the fiscal 2018 results reflect the revenue accounting standards in effect during that period. Changes in Accounting Policies As a result of the fiscal 2019 adoption of ASC 606, the Company changed its accounting policies for revenue recognition as follows: • For products sold that qualify for customer loyalty program awards, the Company defers a portion of revenue related to the product sales. Previously, the Company recognized revenue in full for product sales and accrued for the expected amounts of loyalty awards to be provided under the incremental cost approach. • A portion of revenue is deferred for shipments of saleable products with separate performance obligations to provide gift with purchase and purchase with purchase promotional products, and is recognized as control is transferred to a customer. Previously, the Company recognized revenue for saleable products and purchase with purchase products based upon invoice prices charged to customers and included the cost of gift with purchase products and/or purchase with purchase products in Cost of sales when risks and rewards of ownership transferred to the Company’s customer (i.e. a third-party retailer). • The cost of certain promotional products, including samples and testers, are classified within Cost of sales. Such costs were previously accounted for as a component of Selling, general and administrative expenses. • In conjunction with the adoption of ASC 606, the Company reassessed its contracts under the variable consideration guidance, including the payments to customer guidance, and as a result certain reclassifications were made related to the timing and classification of certain net demonstration payments to and from customers. • For product returns, the Company established a sales return accrual and a corresponding asset for the right to recover goods in Other accrued liabilities and Inventory and promotional merchandise, net, respectively, while previously the net liability for product returns was recorded as a reduction of Accounts receivable, net. In addition, the Company adopted the policy election to exclude from the transaction price all amounts collected from customers for sales and other taxes. As a result of the change in accounting policies noted above, the Company recorded a cumulative adjustment of $229 million, net of tax, as a reduction to its fiscal 2019 opening balance of retained earnings. |
Advertising and Promotion | Advertising and Promotion Global net advertising, merchandising, sampling, promotion and product development expenses of $3,398 million, $3,440 million and $3,287 million in fiscal 2020, 2019 and 2018, respectively, are recorded in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and are expensed as incurred. In fiscal 2020 and 2019, as a result of the fiscal 2019 adoption of ASC 606, the cost of certain promotional products, including samples and testers, are classified within Cost of sales. Such costs in fiscal 2018 were classified within Selling, general and administrative expenses. |
Research and Development | Research and Development Research and development costs of $228 million, $202 million and $181 million in fiscal 2020, 2019 and 2018, respectively, are recorded in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and are expensed as incurred. |
Shipping and Handling | Shipping and Handling Shipping and handling expenses of $583 million, $570 million and $507 million in fiscal 2020, 2019 and 2018, respectively, are recorded in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and include distribution center costs, promotional shipping costs, third-party logistics costs and outbound freight. |
License Arrangements | License Arrangements The Company’s license agreements provide the Company with worldwide rights to manufacture, market and sell beauty and beauty-related products (or particular categories thereof) using the licensors’ trademarks. The current licenses have an initial term of approximately 5 years to 10 years, and are renewable subject to the Company’s compliance with the license agreement provisions. Most of our license agreements have renewal terms in 5 year increments. As of June 30, 2020, the remaining terms considering available renewal periods range from 3 years to approximately 16 years. Under each license, the Company is required to pay royalties to the licensor, at least annually, based on net sales to third parties. Most of the Company’s licenses were entered into to create new business. In some cases, the Company acquired, or entered into, a license where the licensor or another licensee was operating a pre-existing beauty products business. In those cases, other intangible assets are capitalized and amortized over their useful lives. Certain license agreements may require minimum royalty payments, incremental royalties based on net sales levels and minimum spending on advertising and promotional activities. Royalty expenses are accrued in the period in which net sales are recognized while advertising and promotional expenses are accrued at the time these costs are incurred. |
Stock-Based Compensation | Stock-Based Compensation The Company records stock-based compensation, measured at the fair value of the awards that are ultimately expected to vest, as an expense in the consolidated financial statements and accrues for estimated forfeitures each quarter. All excess tax benefits and tax deficiencies related to share-based compensation awards are recorded as income tax expense or benefit in the accompanying consolidated statements of earnings. |
Income Taxes | Income Taxes The Company calculates and provides for income taxes in each tax jurisdiction in which it operates. As the application of various tax laws relevant to the Company’s global business is often uncertain, significant judgment is required in determining the Company’s annual tax expense and in evaluating the Company’s tax positions. The provision for income taxes includes the amounts payable or refundable for the current year, the effect of deferred taxes and impacts from uncertain tax positions. The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis, net operating losses, tax credit and other carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates when the assets and liabilities are expected to be realized or settled. The Company regularly reviews deferred tax assets for realizability and establishes valuation allowances based on available evidence including historical operating losses, projected future taxable income, expected timing of the reversals of existing temporary differences, and appropriate tax planning strategies. If the Company’s assessment of the realizability of a deferred tax asset changes, an increase to a valuation allowance will result in a reduction of net earnings at that time, while the reduction of a valuation allowance will result in an increase of net earnings at that time. The Company provides tax reserves for U.S. federal, state, local and foreign tax exposures relating to periods subject to audit. The development of reserves for these exposures requires judgments about tax issues, potential outcomes and timing, and is a subjective critical estimate. The Company assesses its tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon settlement with a tax authority that has full knowledge of all relevant information. For those tax positions where it is more-likely-than-not that a tax benefit will not be sustained, no tax benefit has been recognized in the consolidated financial statements. The Company classifies applicable interest and penalties as a component of the provision for income taxes. Although the outcome relating to these exposures is uncertain, in management’s opinion adequate provisions for income taxes have been made for estimable potential liabilities emanating from these exposures. If actual outcomes differ materially from these estimates, they could have a material impact on the Company’s consolidated net earnings. |
Government Assistance | Government AssistanceThe Company recognizes amounts received from government assistance programs as a reduction to cost of sales or operating expenses in the consolidated statements of earnings when there is reasonable assurance the Company will receive the amount and has met the conditions, if any, required by the government assistance program. During the second half of fiscal 2020, many governments in locations where the Company operates announced programs to assist employers whose businesses were impacted by the COVID-19 pandemic, including programs that provide rebates to incentivize employers to maintain employees on payroll who were unable to work for their usual number of hours. |
Recently Adopted and Issued Accounting Standards | Recently Adopted Accounting Standards 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 7 – Leases for further discussion . 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. I mpact on consolidated financial statements – The Company adopted this guidance prospectively to lease concessions related to COVID-19 in the fiscal 2020 fourth quarter. The Company elected to treat all COVID-19 lease concessions as if the contract contained enforceable rights, recorded as variable rent expense, and elected to not remeasure the lease liability and right-of-use asset for COVID-19 lease concessions that provided for the deferral of payments. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. Recently Issued Accounting Standards 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 in the process of finalizing its implementation of this standard, including the impacts to its accounting policy, business processes and internal controls over financial reporting relating to its accounts receivable allowance. The impact to accounts receivable and the resulting cumulative adjustment, which will be recorded as an adjustment to the opening balance of the Company's fiscal 2021 retained earnings, is not expected to be material to the Company's 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 implementation costs incurred after the effective date (July 1, 2020). The Company evaluated the impact of applying this guidance to its business systems that operate on cloud technology and concluded that 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. |
Leases | 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. |
INVENTORY AND PROMOTIONAL MER_2
INVENTORY AND PROMOTIONAL MERCHANDISE (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory and promotional merchandise | June 30 (In millions) 2020 2019 Inventory and promotional merchandise consists of: Raw materials $ 542 $ 541 Work in process 305 268 Finished goods 995 981 Promotional merchandise 220 216 $ 2,062 $ 2,006 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property, plant and equipment | June 30 (In millions) 2020 2019 Assets (Useful Life) Land $ 33 $ 29 Buildings and improvements (10 to 40 years) 400 337 Machinery and equipment (3 to 10 years) 865 811 Computer hardware and software (4 to 10 years) 1,335 1,264 Furniture and fixtures (5 to 10 years) 120 116 Leasehold improvements 2,381 2,274 5,134 4,831 Less accumulated depreciation and amortization (3,079) (2,763) $ 2,055 $ 2,068 |
ACQUISITION OF BUSINESS (Tables
ACQUISITION OF BUSINESS (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Business Combinations [Abstract] | |
Summary of total purchase price and gain recognized | A summary of the total purchase price and the total gain recognized in Other income, net in the consolidated statements of earnings is as follows: (In millions) December 18, 2019 Measurement Period Adjustments June 30, 2020 Purchase price Purchase price $ 1,268 $ (32) $ 1,236 Fair value of previously held equity method investment 682 (22) 660 Write-off of call option relating to previously held equity method investment 4 — 4 Total purchase price $ 1,954 $ (54) $ 1,900 For the Six Months Ended December 31, 2019 Measurement Period Adjustments For the Year Ended June 30, 2020 Gains recognized in the consolidated statement of earnings Gain on previously held equity method investment $ 549 $ (19) $ 530 Recognition of a previously unrealized foreign currency gain 4 — 4 Total gain on previously held equity method investment 553 (19) 534 Foreign currency gain on cash 23 — 23 Total Other income, net $ 576 $ (19) $ 557 |
Rollforward of final allocation of total consideration | The rollforward of the final allocation of the total consideration transferred as of December 18, 2019 to allocation as of June 30, 2020 is as follows: (In millions, unaudited) December 18, 2019 Measurement Period Adjustments June 30, 2020 Cash $ 228 $ 1 $ 229 Accounts receivable 48 (35) 13 Inventory 83 5 88 Other current assets 5 (1) 4 Property, plant and equipment 3 — 3 Right-of-use assets 3 — 3 Intangible assets 1,427 232 1,659 Goodwill 556 (210) 346 Other long-term assets 3 1 4 Total assets acquired 2,356 (7) 2,349 Accounts payable 27 (13) 14 Other accrued liabilities 22 5 27 Deferred income taxes 352 55 407 Lease liability 1 — 1 Total liabilities assumed 402 47 449 Total consideration transferred $ 1,954 $ (54) $ 1,900 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Jun. 30, 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, 2018 Goodwill $ 185 $ 1,186 $ 256 $ 391 $ 2,018 Accumulated impairments (36) — (22) (34) (92) 149 1,186 234 357 1,926 Goodwill acquired during the year — 13 — — 13 Impairment charges — (68) — — (68) Translation adjustments, goodwill — — (2) (1) (3) — (55) (2) (1) (58) 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 year 346 11 — — 357 Impairment charges (60) (749) (3) — (812) Translation adjustments, goodwill (12) — — (1) (13) Translation adjustments, accumulated impairments 1 — (1) 1 1 275 (738) (4) — (467) Balance as of June 30, 2020 Goodwill 519 1,210 254 389 2,372 Accumulated impairments (95) (817) (26) (33) (971) $ 424 $ 393 $ 228 $ 356 $ 1,401 |
Schedule of other intangible assets, by type | Other intangible assets consist of the following: June 30, 2020 June 30, 2019 (In millions) Gross Accumulated Total Net Gross Accumulated Total Net Amortizable intangible assets: Customer lists and other $ 1,590 $ 475 $ 1,115 $ 684 $ 369 $ 315 License agreements 43 43 — 43 43 — $ 1,633 $ 518 1,115 $ 727 $ 412 315 Non-amortizable intangible assets: Trademarks and other 1,223 888 Total intangible assets $ 2,338 $ 1,203 |
Estimated aggregate amortization expense for the next five years | The estimated aggregate amortization expense for each of the next five fiscal years is as follows: Fiscal (In millions) 2021 2022 2023 2024 2025 Estimated aggregate amortization expense $ 105 $ 100 $ 100 $ 98 $ 97 |
Summary of impairment charges and carrying value of intangible assets | A summary of the impairment charges for the three and twelve months ended June 30, 2020 and the remaining trademark, customer lists and goodwill carrying values as of June 30, 2020, for each reporting unit, are as follows: Impairment Charge (In millions) Three Months Ended Twelve Months Ended Carrying Value Reporting Unit: Product Category Trademark Customer Lists Goodwill Trademark Customer Lists Goodwill Trademark Customer Lists Goodwill Too Faced Makeup $ — $ — $ — $ 253 $ — $ 592 $ 272 $ 217 $ 13 BECCA Makeup 24 35 15 71 35 85 27 7 13 Smashbox Makeup — — — 23 — 72 32 — — GLAMGLOW Skin care 5 — 8 6 — 60 57 6 54 Editions de Parfums Frédéric Malle Fragrance 11 — 3 11 — 3 21 2 3 Total $ 40 $ 35 $ 26 $ 364 $ 35 $ 812 $ 409 $ 232 $ 83 |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Lease, cost | 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) June 30, 2020 Total lease cost Finance lease cost: Amortization of right-of-use assets $ 11 Interest on lease liabilities 1 Operating lease cost 625 Short-term lease cost 24 Variable lease cost 158 Total $ 819 Other information Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 426 Financing cash flows from finance leases $ 12 Right-of-use assets obtained in exchange for new operating lease liabilities $ 266 Right-of-use assets obtained in exchange for new finance lease liabilities $ 1 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 % |
Operating lease liability, maturity schedule | The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating and finance leases for each of the next five fiscal years and thereafter is as follows: (In millions) Operating Leases Finance Leases Fiscal 2021 $ 436 $ 8 Fiscal 2022 377 4 Fiscal 2023 335 1 Fiscal 2024 301 — Fiscal 2025 259 — Thereafter 1,349 — Total future minimum lease payments 3,057 13 Less imputed interest (404) — Total $ 2,653 $ 13 |
Finance lease liability, maturity schedule | The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating and finance leases for each of the next five fiscal years and thereafter is as follows: (In millions) Operating Leases Finance Leases Fiscal 2021 $ 436 $ 8 Fiscal 2022 377 4 Fiscal 2023 335 1 Fiscal 2024 301 — Fiscal 2025 259 — Thereafter 1,349 — Total future minimum lease payments 3,057 13 Less imputed interest (404) — Total $ 2,653 $ 13 |
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: June 30, 2020 (In millions) Operating Leases Finance Leases Total current liabilities $ 375 $ 8 Total noncurrent liabilities 2,278 5 Total $ 2,653 $ 13 |
Details of impairment of lease assets by type and by region | A summary of the impairment charge for the year ended June 30, 2020 is as follows: (In millions) Product Category Impairment Charge Skin care $ 22 Makeup 160 Fragrance 18 Hair care 14 Other 1 Total $ 215 Region Impairment Charge The Americas $ 103 Europe, the Middle East & Africa 104 Asia/Pacific 8 Total $ 215 |
CHARGES ASSOCIATED WITH RESTR_2
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Restructuring and Related Activities [Abstract] | |
Schedule of aggregate restructuring and other activities | During fiscal 2020, 2019 and 2018, the Company incurred charges associated with restructuring and other activities in connection with its Leading Beauty Forward initiative as follows: Operating Expenses (In millions) Sales Returns Cost of Sales Restructuring Other Total Fiscal 2020 $ — $ 10 $ 34 $ 39 $ 83 Fiscal 2019 $ 3 $ 22 $ 133 $ 83 $ 241 Fiscal 2018 $ 8 $ 18 $ 127 $ 104 $ 257 |
Schedule of total cumulative charges expected to be incurred | The approved restructuring and other charges expected to be incurred were: Sales Returns Operating Expenses (In millions) (included in Cost of Sales Restructuring Other Total Total Charges Approved Cumulative through June 30, 2019 $ 14 $ 88 $ 507 $ 358 $ 967 Fiscal 2020 (1) (3) 4 — — Cumulative through June 30, 2020 $ 13 $ 85 $ 511 $ 358 $ 967 |
Schedule of total cumulative charges by type | (In millions) Employee- Asset-Related Contract Other Exit Total Restructuring Charges Approved Cumulative through June 30, 2019 $ 461 $ 7 $ 25 $ 14 $ 507 Fiscal 2020 (1) 21 (18) 2 4 Cumulative through June 30, 2020 $ 460 $ 28 $ 7 $ 16 $ 511 |
Schedule of total cumulative charges recorded | 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: Sales Returns Operating Expenses (In millions) (included in Cost of Sales Restructuring Other Total Cumulative through June 30, 2017 $ 3 $ 15 $ 197 $ 78 $ 293 Fiscal 2018 8 18 127 104 257 Fiscal 2019 3 22 133 83 241 Fiscal 2020 — 10 34 39 83 Cumulative through June 30, 2020 $ 14 $ 65 $ 491 $ 304 $ 874 |
Schedule of total cumulative charges by type | The major cost types related to the cumulative restructuring charges set forth above were: (In millions) Employee- Asset- Contract Other Exit Total Cumulative through June 30, 2017 $ 190 $ 3 $ 2 $ 2 $ 197 Fiscal 2018 124 1 1 1 127 Fiscal 2019 131 — — 2 133 Fiscal 2020 6 23 3 2 34 Cumulative through June 30, 2020 $ 451 $ 27 $ 6 $ 7 $ 491 |
Schedule of accrued restructuring charges | Accrued restructuring charges from the LBF Program inception through June 30, 2020 were: (In millions) Employee- Asset- Contract Other Exit Total Charges $ 74 $ 1 $ — $ — $ 75 Noncash asset write-offs — (1) — — (1) Translation adjustments (1) — — — (1) Balance at June 30, 2016 73 — — — 73 Charges 116 2 2 2 122 Cash payments (39) — (2) (2) (43) Noncash asset write-offs — (2) — — (2) Balance at June 30, 2017 150 — — — 150 Charges 124 1 1 1 127 Cash payments (92) — — (1) (93) Noncash asset write-offs — (1) — — (1) Translation adjustments (2) — — — (2) Balance at June 30, 2018 180 — 1 — 181 Charges 131 — — 2 133 Cash payments (107) — (1) (1) (109) Translation and other adjustments (2) — — — (2) Balance at June 30, 2019 202 — — 1 203 Charges 6 23 3 2 34 Cash payments (94) — (3) (3) (100) Translation adjustment (2) — — — (2) Non-cash write-offs — (23) — — (23) Balance at June 30, 2020 $ 112 $ — $ — $ — $ 112 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Provision for income taxes | The provision for income taxes is comprised of the following: Year Ended June 30 (In millions) 2020 2019 2018 Current: Federal $ 128 $ 180 $ 334 Foreign 368 383 357 State and local (3) 16 (3) 493 579 688 Deferred: Federal (93) (95) 135 Foreign (49) 27 35 State and local (1) 2 5 (143) (66) 175 $ 350 $ 513 $ 863 |
Reconciliation of the U.S. federal statutory income tax rate and actual effective tax rate on earnings before income taxes | A reconciliation of the U.S. federal statutory income tax rate to the Company’s actual effective tax rate on earnings before income taxes is as follows: Year Ended June 30 2020 2019 2018 Provision for income taxes at statutory rate 21.0 % 21.0 % 28.1 % Increase (decrease) due to: State and local income taxes, net of federal tax benefit (0.1) 0.6 0.5 TCJA net income tax impact (1) — 0.2 22.8 Stock-based compensation arrangements – excess tax benefits (7.5) (2.7) (2.5) Taxation of foreign operations 11.0 1.9 (4.7) Income tax reserve adjustments 0.4 0.5 (0.5) Nondeductible goodwill impairment charges 8.0 0.6 — Other, net 0.7 0.1 (0.1) Effective tax rate (2) 33.5 % 22.2 % 43.6 % (1) Includes the mandatory deemed repatriation tax on undistributed earnings of foreign subsidiaries (the “Transition Tax”), the remeasurement of U.S. net deferred tax assets resulting from the statutory tax rate reduction, including the enactment date remeasurement, and the net deferred tax liability related to foreign withholding taxes on certain foreign earnings resulting from the TCJA. (2) The reconciling items between the Company's U.S. federal statutory income tax rate and the Company's actual effective tax rate were materially impacted by the decrease in earnings before income taxes from fiscal 2019 to fiscal 2020. |
Significant components of deferred income tax assets and liabilities | Significant components of the Company’s deferred income tax assets and liabilities were as follows: June 30 (In millions) 2020 2019 Deferred tax assets: Compensation-related expenses $ 142 $ 179 Inventory obsolescence and other inventory related reserves 75 64 Retirement benefit obligations 71 71 Various accruals not currently deductible 212 206 Net operating loss, credit and other carryforwards 98 41 Unrecognized state tax benefits and accrued interest 12 12 Lease liabilities 585 — Other differences between tax and financial statement values 217 125 1,412 698 Valuation allowance for deferred tax assets (107) (48) Total deferred tax assets 1,305 650 Deferred tax liabilities: Depreciation and amortization (1) (563) (286) ROU assets (504) — Other differences between tax and financial statement values (2) (194) (69) Total deferred tax liabilities (1,261) (355) Total net deferred tax assets $ 44 $ 295 (1) Includes deferred tax liabilities associated with book-to-tax basis differences related to the Company's non-taxable acquisitions. (2) Includes the deferred tax liability of $117 million associated with the gain on a previously held equity method investment. |
Reconciliation of the beginning and ending amount of gross unrecognized tax benefits | A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows: June 30 (In millions) 2020 2019 Beginning of the year balance of gross unrecognized tax benefits $ 67 $ 60 Gross amounts of increases as a result of tax positions taken during a prior period 11 12 Gross amounts of decreases as a result of tax positions taken during a prior period (9) (6) Gross amounts of increases as a result of tax positions taken during the current period 7 9 Amounts of decreases in unrecognized tax benefits relating to settlements with taxing authorities (4) (7) Reductions to unrecognized tax benefits as a result of a lapse of the applicable statutes of limitations (2) (1) End of year balance of gross unrecognized tax benefits $ 70 $ 67 |
Tax years that remain subject to examination vary by the major tax jurisdictions | The tax years subject to examination vary depending on the tax jurisdiction. As of June 30, 2020, the following tax years remain subject to examination by the major tax jurisdictions indicated: Major Jurisdiction Open Fiscal Years Belgium 2018 – 2020 Canada 2015 – 2020 China 2016 – 2020 France 2016 – 2020 Germany 2013 – 2020 Hong Kong 2014 – 2020 Italy 2016 – 2020 Japan 2020 Korea 2019 - 2020 Russia 2017 – 2020 Spain 2016 – 2020 Switzerland 2018 – 2020 United Kingdom 2019 – 2020 United States 2019 – 2020 State of California 2013 – 2020 State and City of New York 2015 – 2020 |
OTHER ACCRUED LIABILITIES (Tabl
OTHER ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of other accrued liabilities | Other accrued liabilities consist of the following: June 30 (In millions) 2020 2019 Advertising, merchandising and sampling $ 256 $ 352 Employee compensation 424 574 Deferred revenue 222 314 Other 1,503 1,359 $ 2,405 $ 2,599 |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of current and long-term debt and available financing | The Company’s current and long-term debt and available financing consist of the following: Debt at June 30 Available financing at June 30, 2020 (In millions) 2020 2019 Committed Uncommitted 3.125% Senior Notes, due December 1, 2049 (“2049 Senior Notes”) $ 635 $ — $ — $ — 4.15% Senior Notes, due March 15, 2047 (“2047 Senior Notes”) 494 494 — — 4.375% Senior Notes, due June 15, 2045 (“2045 Senior Notes”) 456 455 — — 3.70% Senior Notes, due August 15, 2042 (“2042 Senior Notes”) 247 247 — — 6.00% Senior Notes, due May 15, 2037 (“2037 Senior Notes”) 294 294 — — 5.75% Senior Notes, due October 15, 2033 (“2033 Senior Notes”) 197 197 — — 2.600% Senior Notes, due April 15, 2030 ("2030 Senior Notes") 694 — — — 2.375% Senior Notes, due December 1, 2029 (“2029 Senior Notes”) 640 — — — 3.15% Senior Notes, due March 15, 2027 (“2027 Senior Notes”) 498 498 — — 2.00% Senior Notes, due December 1, 2024 (“2024 Senior Notes”) 495 — — — 2.35% Senior Notes, due August 15, 2022 (“2022 Senior Notes”) 259 252 — — 1.70% Senior Notes, due May 10, 2021 (“2021 Senior Notes”) 455 447 — — 1.80% Senior Notes, due February 7, 2020 (“2020 Senior Notes”) — 499 — — Commercial paper — — — 1,500 Other long-term borrowings 5 12 — — Other current borrowings 17 17 — 178 Revolving credit facility (1) 750 — 750 — 6,136 3,412 $ 750 $ 1,678 Less current debt including current maturities (1,222) (516) $ 4,914 $ 2,896 (1) See Note 24 – Subsequent Events |
Schedule of long-term debt | As of June 30, 2020, the Company’s long-term debt consisted of the following: Notes Issue Date Price Yield Principal Unamortized Interest rate Debt Semi-annual interest ($ in millions) 2049 Senior Notes (9) November 2019 98.769 % 3.189 % $ 650 $ (8) $ — $ (7) June 1/December 1 2047 Senior Notes (1),(9) February 2017 99.739 4.165 500 (1) — (5) March 15/September 15 2045 Senior Notes (2),(9) June 2015 97.999 4.497 300 (5) — (3) June 15/December 15 2045 Senior Notes (2),(9) May 2016 110.847 3.753 150 15 — (1) June 15/December 15 2042 Senior Notes (9) August 2012 99.567 3.724 250 (1) — (2) February 15/August 15 2037 Senior Notes (3),(9) May 2007 98.722 6.093 300 (3) — (3) May 15/November 15 2033 Senior Notes (4) September 2003 98.645 5.846 200 (2) — (1) April 15/October 15 2030 Senior Notes (9) April 2020 99.816 2.621 700 (1) — (5) April 15/October 15 2029 Senior Notes (8),(9) November 2019 99.046 2.483 650 (6) — (4) June 1/December 1 2027 Senior Notes (5),(9) February 2017 99.963 3.154 500 — — (2) March 15/September 15 2024 Senior Notes (9) November 2019 99.421 2.122 500 (3) — (2) June 1/December 1 2022 Senior Notes (6),(9) August 2012 99.911 2.360 250 — 10 (1) February 15/August 15 2021 Senior Notes (6),(7),(9) May 2016 99.976 1.705 450 — 5 — May 10/November 10 (1) In November 2016, in anticipation of the issuance of the 2047 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $350 million at a weighted-average all-in rate of 3.01%. The treasury lock agreements were settled upon the issuance of the new debt, and the Company recognized a gain in OCI of $3 million that is being amortized against interest expense over the life of the 2047 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2047 Senior Notes will be 4.17% over the life of the debt. (2) In April and May 2015, in anticipation of the issuance of the 2045 Senior Notes in June 2015, the Company entered into a series of forward-starting interest rate swap agreements on a notional amount totaling $300 million at a weighted-average all-in rate of 2.38%. The forward-starting interest rate swap agreements were settled upon the issuance of the new debt and the Company recognized a gain in OCI of $18 million that will be amortized against interest expense over the life of the 2045 Senior Notes. As a result of the forward-starting interest rate swap agreements, the debt discount and debt issuance costs, the effective interest rate on the 2045 Senior Notes will be 4.216% over the life of the debt. In May 2016, the Company reopened this offering with the same terms and issued an additional $150 million for an aggregate amount outstanding of $450 million of 2045 Senior Notes. (3) In April 2007, in anticipation of the issuance of the 2037 Senior Notes, the Company entered into a series of forward-starting interest rate swap agreements on a notional amount totaling $210 million at a weighted-average all-in rate of 5.45%. The forward-starting interest rate swap agreements were settled upon the issuance of the new debt and the Company recognized a loss in OCI of $1 million that is being amortized to interest expense over the life of the 2037 Senior Notes. As a result of the forward-starting interest rate swap agreements, the debt discount and debt issuance costs, the effective interest rate on the 2037 Senior Notes will be 6.181% over the life of the debt. (4) In May 2003, in anticipation of the issuance of the 2033 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $195 million at a weighted-average all-in rate of 4.53%. The treasury lock agreements were settled upon the issuance of the new debt and the Company received a payment of $15 million that is being amortized against interest expense over the life of the 2033 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2033 Senior Notes will be 5.395% over the life of the debt. (5) In November 2016, in anticipation of the issuance of the 2027 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $450 million at a weighted-average all-in rate of 2.37%. The treasury lock agreements were settled upon the issuance of the new debt, and the Company recognized a gain in OCI of $2 million that is being amortized against interest expense over the life of the 2027 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2027 Senior Notes will be 3.18% over the life of the debt. (6) The Company entered into interest rate swap agreements with a notional amount totaling $450 million and $250 million to effectively convert the fixed rate interest on its outstanding 2021 Senior Notes and 2022 Senior Notes, respectively, to variable interest rates based on three months LIBOR plus a margin. (7) In April 2016, in anticipation of the issuance of the 2021 Senior Notes, the Company entered into a series of treasury lock agreements on a notional amount totaling $400 million at a weighted-average all-in rate of 1.27%. The treasury lock agreements were settled upon the issuance of the new debt and the Company made a payment of $1 million that is being amortized to interest expense over the life of the 2021 Senior Notes. As a result of the treasury lock agreements, the debt discount and debt issuance costs, the effective interest rate on the 2021 Senior Notes will be 1.844% over the life of the debt. (8) 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. (9) The Senior Notes contain certain customary incurrence-based covenants, including limitations on indebtedness secured by liens. |
DERIVATIVE FINANCIAL INSTRUME_2
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Jun. 30, 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 presented as follows: Asset Derivatives Liability Derivatives Fair Value (1) Fair Value (1) June 30 June 30 (In millions) Balance Sheet 2020 2019 Balance Sheet 2020 2019 Derivatives Designated as Hedging Instruments: Foreign currency cash flow hedges Prepaid expenses and other current assets $ 26 $ 23 Other accrued liabilities $ 3 $ 4 Net investment hedges Prepaid expenses and other current assets 21 — Other accrued liabilities 62 — Interest rate-related derivatives Prepaid expenses and other current assets 15 3 Other accrued liabilities 3 26 Total Derivatives Designated as Hedging Instruments 62 26 68 30 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Prepaid expenses and other current assets 40 4 Other accrued liabilities 15 2 Total derivatives $ 102 $ 30 $ 83 $ 32 (1) See Note 13 – 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) June 30 from AOCI into June 30 (In millions) 2020 2019 Earnings 2020 2019 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ 38 $ 29 Net sales $ 35 $ 28 Interest rate-related derivatives (12) (24) Interest expense — 1 Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) (68) — — — Total derivatives $ (42) $ 5 $ 35 $ 29 (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 fiscal 2020 the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $43 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) June 30 (In millions) Recognized in Earnings on Derivatives 2020 2019 Derivatives in Fair Value Hedging Interest rate swap contracts Interest expense $ 14 $ 27 (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 Carrying Amount of the Cumulative Amount of Fair June 30, 2020 June 30, 2020 Current debt $ 455 $ 5 Long-term debt 259 10 Total debt $ 714 $ 15 |
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: June 30, 2020 June 30, 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 in which the effects of fair value and cash flow hedges are recorded $ 14,294 $ 161 $ 14,863 $ 133 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable (14) Not applicable (27) Derivatives designated as hedging instruments Not applicable 14 Not applicable 27 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 35 Not applicable 28 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) June 30 (In millions) Recognized in Earnings on Derivatives 2020 2019 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Selling, general and administrative $ 56 $ 6 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Jun. 30, 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 June 30, 2020: (In millions) Level 1 Level 2 Level 3 Total Assets: Foreign currency forward contracts $ — $ 87 $ — $ 87 Interest rate-related derivatives — 15 — 15 Total $ — $ 102 $ — $ 102 Liabilities: Foreign currency forward contracts $ — $ 80 $ — $ 80 Interest rate-related derivatives — 3 — 3 Contingent consideration — — 4 4 Total $ — $ 83 $ 4 $ 87 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: June 30 2020 2019 (In millions) Carrying Fair Carrying Fair Nonderivatives Cash and cash equivalents $ 5,022 $ 5,022 $ 2,987 $ 2,987 Current and long-term debt 6,136 6,902 3,412 3,706 Additional purchase price payable — — 3 3 Contingent consideration 4 4 36 36 Derivatives Foreign currency forward contracts – asset (liability), net 7 7 21 21 Interest rate-related derivatives – asset (liability), net 12 12 (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 certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, during fiscal 2020 and 2019: Fiscal 2020 (In millions) Impairment Date of Fair Value Fair Value (1) Goodwill Too Faced $ 592 March 31, 2020 $ 13 Smashbox 72 March 31, 2020 — Editions de Parfums Frédéric Malle 3 April 1, 2020 3 BECCA 85 June 30, 2020 13 GLAMGLOW 60 June 30, 2020 54 Total 812 83 Other intangible assets, net (trademark) Too Faced 253 March 31, 2020 272 Smashbox 23 March 31, 2020 32 Editions de Parfums Frédéric Malle 11 April 1, 2020 21 BECCA 71 June 30, 2020 27 GLAMGLOW 6 June 30, 2020 57 Total 364 409 Other intangible assets, net (customer lists) BECCA 35 June 30, 2020 7 Long-lived assets 215 June 30, 2020 200 Total impairments $ 1,426 $ 699 (1) See Note 6 – Goodwill and Other Intangible Assets and Note 7 – Leases for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs. Fiscal 2019 (In millions) Impairment Date of Fair Value Fair Value (1) Smashbox Goodwill $ 68 March 31, 2019 $ 72 Other intangible assets, net (trademarks) 22 March 31, 2019 55 Total $ 90 $ 127 (1) See Note 6 – 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 year ended June 30, 2020 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows: (In millions) Fair Value Contingent consideration at June 30, 2019 $ 36 Payments (15) Changes in fair value (17) Contingent consideration at June 30, 2020 $ 4 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 12 Months Ended |
Jun. 30, 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) June 30, 2020 Balance at June 30, 2019 $ 361 Revenue recognized that was included in the deferred revenue balance at the beginning of the period (271) Revenue deferred during the period 189 Balance at June 30, 2020 $ 279 |
Adoption of ASC 606 | The following tables summarize impacts of the adoption of ASC 606 on the Company's fiscal 2019 consolidated financial statements: Consolidated Statement of Earnings June 30, 2019 (In millions, except per share data) As Reported Impact Prior to the adoption of ASC 606 Net sales $ 14,863 $ 49 $ 14,912 Cost of sales 3,387 (300) 3,087 Gross profit 11,476 349 11,825 Selling, general and administrative 8,857 370 9,227 Operating income 2,313 (21) 2,292 Provision for income taxes 513 (5) 508 Net earnings attributable to The Estée Lauder Companies Inc. 1,785 (16) 1,769 Net earnings attributable to The Estée Lauder Companies Inc. per common share Basic $ 4.91 $ (.04) $ 4.87 Diluted $ 4.82 $ (.04) $ 4.78 Consolidated Balance Sheet June 30, 2019 (In millions) As Reported Impact Prior to the adoption of ASC 606 Accounts receivable, net $ 1,831 $ (202) $ 1,629 Inventory and promotional merchandise, net 2,006 (21) 1,985 Other assets 805 (65) 740 Total assets 13,156 (288) 12,868 Other accrued liabilities 2,599 (452) 2,147 Other noncurrent liabilities 1,244 (47) 1,197 Total liabilities 8,745 (499) 8,246 Retained earnings 9,984 213 10,197 Accumulated other comprehensive loss (563) (2) (565) Total stockholders' equity - The Estée Lauder Companies Inc. 4,386 211 4,597 Consolidated Statement of Cash Flows June 30, 2019 (In millions) As Reported Impact Prior to the adoption of ASC 606 Net earnings $ 1,794 $ (16) $ 1,778 Changes in operating assets and liabilities Increase in accounts receivable, net (169) 5 (164) Increase in inventory and promotional merchandise, net (375) (6) (381) Increase in other assets, net (62) (5) (67) Increase in other accrued and noncurrent liabilities 285 22 307 Net cash flows provided by operating activities 2,517 — 2,517 |
PENSION, DEFERRED COMPENSATIO_2
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Retirement Benefits [Abstract] | |
Schedule of components of net periodic benefit cost for pension and other post-retirement benefit plans | The significant components of the above mentioned plans as of and for the years ended June 30 are summarized as follows: Pension Plans Other than U.S. International Post-retirement (In millions) 2020 2019 2020 2019 2020 2019 Change in benefit obligation: Benefit obligation at beginning of year $ 966 $ 896 $ 631 $ 588 $ 183 $ 170 Service cost 39 38 36 30 3 3 Interest cost 35 37 11 13 6 7 Plan participant contributions — — 6 5 — 1 Actuarial loss (gain) 101 68 (12) 51 6 10 Foreign currency exchange rate impact — — (1) (18) (1) (1) Benefits, expenses, taxes and premiums paid (59) (73) (32) (31) (7) (7) Settlements — — (3) (7) — — Benefit obligation at end of year $ 1,082 $ 966 $ 636 $ 631 $ 190 $ 183 Change in plan assets: Fair value of plan assets at beginning of year $ 832 $ 838 $ 577 $ 561 $ 31 $ 34 Actual return on plan assets 109 48 43 32 3 2 Foreign currency exchange rate impact — — (4) (16) — — Employer contributions 48 19 25 33 — 1 Plan participant contributions — — 6 5 — 1 Settlements — — (4) (7) — — Benefits, expenses, taxes and premiums paid from plan assets (59) (73) (32) (31) (7) (7) Fair value of plan assets at end of year $ 930 $ 832 $ 611 $ 577 $ 27 $ 31 Funded status $ (152) $ (134) $ (25) $ (54) $ (163) $ (152) Amounts recognized in the Balance Sheet consist of: Other assets $ — $ 2 $ 127 $ 103 $ — $ — Other accrued liabilities (23) (24) (4) (3) — — Other noncurrent liabilities (129) (112) (148) (154) (163) (152) Funded status (152) (134) (25) (54) (163) (152) Accumulated other comprehensive loss 283 253 24 68 17 13 Net amount recognized $ 131 $ 119 $ (1) $ 14 $ (146) $ (139) |
Net periodic benefit costs and weighted-average assumptions | Pension Plans Other than U.S. International Post-retirement ($ in millions) 2020 2019 2018 2020 2019 2018 2020 2019 2018 Components of net periodic benefit cost: Service cost $ 39 $ 38 $ 37 $ 36 $ 30 $ 30 $ 3 $ 3 $ 3 Interest cost 35 37 33 11 13 13 6 7 7 Expected return on assets (53) (55) (53) (14) (14) (15) (2) (2) (3) Amortization of: Actuarial loss 15 11 14 6 3 5 — — — Prior service cost — 1 — — (1) — — — 1 Settlements — — — — 1 — — — — Special termination benefits — — — — — 1 — — — Net periodic benefit cost $ 36 $ 32 $ 31 $ 39 $ 32 $ 34 $ 7 $ 8 $ 8 Weighted-average assumptions used to determine benefit obligations at June 30: Discount rate 2.50 – 3.00% 3.40 – 3.80% 4.10 – 4.30% 0.50 – 7.00% 0.25 – 8.50% .50 – 7.50 2.70 – 9.00% 3.25 – 9.75% 3.75 – 9.75% Rate of compensation increase 2.50 – 8.00% 2.50 – 8.00% 2.50 – 8.00% 1.00 – 5.50% 1.00 – 5.50% 1.00– 5.50 N/A N/A N/A Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: Discount rate 3.40 – 3.80% 4.10 – 4.30% 3.40 – 3.90% .25 – 8.50% .50– 7.50% .50 – 6.75% 3.25 – 9.75% 3.75 – 9.75% 3.70 – 9.75% Expected return on assets 6.75 % 6.75 % 7.00 % 1.50 – 8.50% 1.50 – 7.50% 1.75 – 6.75% 6.75 % 6.75 % 7.00 % Rate of compensation increase 2.50 – 8.00% 2.50 – 8.00% 3.00– 7.00% 1.00 – 5.50% 1.00 – 5.50% 1.00 – 5.50% N/A N/A N/A |
Impact of one-percentage-point change in assumed health care cost trend rates | A 100 basis-point change in assumed health care cost trend rates for fiscal 2020 would have had the following effects: (In millions) 100 Basis-Point 100 Basis-Point Effect on total service and interest costs $ 1 $ (1) Effect on post-retirement benefit obligations $ 13 $ (11) |
Amounts recognized in AOCI (before tax) | Amounts recognized in AOCI (before tax) as of June 30, 2020 are as follows: Pension Plans Other than (In millions) U.S. International Post-retirement Total Net actuarial losses, beginning of year $ 252 $ 74 $ 13 $ 339 Actuarial losses recognized 45 (40) 4 9 Amortization and settlements included in net periodic benefit cost (15) (6) — (21) Translation adjustments — 2 — 2 Net actuarial losses, end of year 282 30 17 329 Net prior service cost, beginning of year 1 (6) — (5) Amortization included in net periodic benefit cost — — — — Net prior service cost, end of year 1 (6) — (5) Total amounts recognized in AOCI $ 283 $ 24 $ 17 $ 324 |
Amounts in AOCI expected to be amortized as components of net periodic benefit cost during next fiscal year | Amounts in AOCI expected to be amortized as components of net periodic benefit cost during fiscal 2021 are as follows: Pension Plans Other than (In millions) U.S. International Post-retirement Net prior service cost (credit) $ — $ (1) $ — Net actuarial losses $ 20 $ 4 $ — |
Projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the company's pension plans | The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the Company’s pension plans at June 30 are as follows: Pension Plans Retirement Growth Restoration International (In millions) 2020 2019 2020 2019 2020 2019 Projected benefit obligation $ 940 $ 830 $ 142 $ 136 $ 636 $ 631 Accumulated benefit obligation $ 887 $ 784 $ 124 $ 120 $ 576 $ 569 Fair value of plan assets $ 930 $ 832 $ — $ — $ 611 $ 577 |
Expected cash flows | The expected cash flows for the Company’s pension and post-retirement plans are as follows: Pension Plans Other than (In millions) U.S. International Post-retirement Expected employer contributions for year ending June 30, 2021 $ — $ 31 — Expected benefit payments for year ending June 30, 2021 67 25 8 2022 54 26 8 2023 52 28 9 2024 52 27 9 2025 53 29 10 Years 2026 – 2030 287 145 57 |
Target asset allocation | The Company’s target asset allocation at June 30, 2020 is as follows: Pension Plans Other than U.S. International Post-retirement Equity 42 % 12 % 42 % Debt securities 47 % 65 % 47 % Other 11 % 23 % 11 % 100 % 100 % 100 % |
Fair values of the company's pension and post-retirement plan assets by asset category | The following table presents the fair values of the Company’s pension and post-retirement plan assets by asset category as of June 30, 2020: (In millions) Level 1 Level 2 Level 3 Assets Total Cash and cash equivalents $ 2 $ — $ — $ — $ 2 Short term investment funds — 7 — 6 13 Government and agency securities — 152 — — 152 Commingled funds 386 666 — 207 1,259 Insurance contracts — — 49 — 49 Limited partnerships and hedge fund investments — — — 93 93 Total $ 388 $ 825 $ 49 $ 306 $ 1,568 The following table presents the fair values of the Company’s pension and post-retirement plan assets by asset category as of June 30, 2019: (In millions) Level 1 Level 2 Level 3 Assets Total Cash and cash equivalents $ 6 $ — $ — $ — $ 6 Short term investment funds — 19 — 5 24 Government and agency securities — 112 — — 112 Commingled funds 347 590 — 212 1,149 Insurance contracts — — 49 — 49 Limited partnerships and hedge fund investments — — — 100 100 Total $ 353 $ 721 $ 49 $ 317 $ 1,440 |
Changes in Level 3 plan assets | The following table presents the changes in Level 3 plan assets for fiscal 2020: (In millions) Insurance Contracts Balance as of June 30, 2019 $ 49 Actual return on plan assets: Relating to assets still held at the reporting date 2 Purchases, sales, issuances and settlements, net (2) Foreign exchange impact — Balance as of June 30, 2020 $ 49 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Summary of scheduled maturities of contractual obligations for which cash flows are fixed and determinable | The following table summarizes scheduled maturities of the Company’s contractual obligations for which cash flows are fixed and determinable as of June 30, 2020: Payments Due in Fiscal (In millions) Total 2021 2022 2023 2024 2025 Thereafter Debt service (1) $ 8,992 $ 1,386 $ 165 $ 412 $ 159 $ 654 $ 6,216 Unconditional purchase obligations (2) 3,768 1,403 522 557 459 494 333 Gross unrecognized tax benefits and interest – current (3) 3 3 — — — — — Transition Tax payable (4) 279 17 27 27 51 69 88 Total contractual obligations (5) $ 13,042 $ 2,809 $ 714 $ 996 $ 669 $ 1,217 $ 6,637 (1) Includes long-term and current debt and the related projected interest costs. Refer to Note 7 – Leases for information regarding future minimum lease payments relating to the Company’s finance leases. Interest costs on long-term and current debt in fiscal 2021, 2022, 2023, 2024, 2025 and thereafter are projected to be $177 million, $165 million, $162 million, $159 million, $154 million and $2,016 million, respectively. Projected interest costs on variable rate instruments were calculated using market rates at June 30, 2020. (2) Unconditional purchase obligations primarily include: royalty payments pursuant to license agreements, inventory commitments, third-party distribution commitments and advertising commitments. Future royalty and advertising commitments were estimated based on planned future sales for the term that was in effect at June 30, 2020, without consideration for potential renewal periods. (3) Refer to Note 9 – Income Taxes for information regarding unrecognized tax benefits. As of June 30, 2020, the noncurrent portion of the Company’s unrecognized tax benefits, including related accrued interest and penalties was $76 million. At this time, the settlement period for the noncurrent portion of the unrecognized tax benefits, including related accrued interest and penalties, cannot be determined and therefore was not included. (4) The Transition Tax may be paid over an eight-year period and this amount represents the remaining liability as of June 30, 2020. (5) Refer to Note 7 – Leases for information regarding future minimum lease payments relating to the Company’s operating leases. |
COMMON STOCK (Tables)
COMMON STOCK (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Equity [Abstract] | |
Common stock outstanding | Information about the Company’s common stock outstanding is as follows: (Shares in thousands) Class A Class B Balance at June 30, 2017 224,341.2 143,762.3 Acquisition of treasury stock (6,045.4) — Conversion of Class B to Class A 710.6 (710.6) Stock-based compensation 5,087.4 — Balance at June 30, 2018 224,093.8 143,051.7 Acquisition of treasury stock (10,986.7) — Conversion of Class B to Class A 3,513.9 (3,513.9) Stock-based compensation 4,943.5 — Balance at June 30, 2019 221,564.5 139,537.8 Acquisition of treasury stock (4,665.0) — Conversion of Class B to Class A 4,302.4 (4,302.4) Stock-based compensation 4,088.3 — Balance at June 30, 2020 225,290.2 135,235.4 |
Summary of cash dividends per share | The following is a summary of cash dividends declared per share on the Company’s Class A and Class B Common Stock during the year ended June 30, 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 |
STOCK PROGRAMS (Tables)
STOCK PROGRAMS (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of stock-based compensation expense | Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, RSUs, PSUs, long-term PSUs and share units. Compensation expense attributable to net stock-based compensation is as follows: Year Ended June 30 (In millions) 2020 2019 2018 Compensation expense $ 213 $ 243 $ 236 Income tax benefit $ 41 $ 47 $ 49 |
Summary of stock option programs | The following is a summary of the Company’s stock option programs as of June 30, 2020 and changes during the fiscal year then ended: (Shares in thousands) Shares Weighted- Aggregate Intrinsic Value (1) (in millions) Weighted-Average Outstanding at June 30, 2019 9,848.0 $ 87.68 Granted at fair value 1,332.2 199.24 Exercised (2,454.5) 73.68 Expired (13.8) 99.14 Forfeited (66.9) 155.66 Outstanding at June 30, 2020 8,645.0 108.30 $ 709 6.0 Vested and expected to vest at June 30, 2020 8,595.9 107.86 $ 708 6.0 Exercisable at June 30, 2020 5,780.6 82.85 $ 612 4.9 (1) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. |
Summary of weighted-average grant date fair value and intrinsic value of stock options exercised | The following is a summary of the per-share weighted-average grant date fair value of stock options granted and total intrinsic value of stock options exercised: Year Ended June 30 (In millions, except per share data) 2020 2019 2018 Per-share weighted-average grant date fair value of stock options granted $ 51.46 $ 38.62 $ 27.76 Intrinsic value of stock options exercised $ 309 $ 283 $ 246 |
Schedule of fair value option-pricing assumptions | The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: Year Ended June 30 2020 2019 2018 Weighted-average expected stock-price volatility 25.1% 24.5% 25.6% Weighted-average expected option life 7 years 7 years 7 years Average risk-free interest rate 1.5% 2.8% 2.0% Average dividend yield 1.0% 1.1% 1.5% |
Summary of restricted stock units (RSUs) | The following is a summary of the status of the Company’s RSUs as of June 30, 2020 and activity during the fiscal year then ended: (Shares in thousands) Shares Weighted-Average Nonvested at June 30, 2019 2,441.9 $ 119.62 Granted 834.5 199.25 Dividend equivalents 13.7 178.63 Vested (1,233.3) 111.44 Forfeited (108.5) 145.42 Nonvested at June 30, 2020 1,948.3 157.89 |
Summary of performance share units (PSUs) | The following is a summary of the status of the Company’s PSUs as of June 30, 2020 and activity during the fiscal year then ended: (Shares in thousands) Shares Weighted-Average Nonvested at June 30, 2019 1,009.8 105.92 Granted 198.5 187.10 Vested (512.1) 92.19 Forfeited (1.1) 132.73 Nonvested at June 30, 2020 695.1 139.17 |
Summary of status of share units | The following is a summary of the status of the Company’s share units as of June 30, 2020 and activity during the fiscal year then ended: (Shares in thousands) Shares Weighted-Average Outstanding at June 30, 2019 131.2 $ 57.22 Granted 4.6 190.99 Dividend equivalents 1.0 177.86 Outstanding at June 30, 2020 136.8 62.46 |
NET EARNINGS ATTRIBUTABLE TO _2
NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE (Tables) | 12 Months Ended |
Jun. 30, 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: Year Ended June 30 (In millions, except per share data) 2020 2019 2018 Numerator: Net earnings attributable to The Estée Lauder Companies Inc. $ 684 $ 1,785 $ 1,108 Denominator: Weighted-average common shares outstanding – Basic 360.6 363.5 368.0 Effect of dilutive stock options 4.4 4.7 5.2 Effect of PSUs 0.3 0.5 0.4 Effect of RSUs 1.6 1.7 2.1 Weighted-average common shares outstanding – Diluted 366.9 370.4 375.7 Net earnings attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.90 $ 4.91 $ 3.01 Diluted $ 1.86 $ 4.82 $ 2.95 |
ACCUMULATED OTHER COMPREHENSI_2
ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent [Abstract] | |
Schedule of components of AOCI, net of tax | The components of AOCI included in the accompanying consolidated balance sheets consist of the following: Year Ended June 30 (In millions) 2020 2019 2018 Net unrealized investment losses, beginning of year $ — $ (14) $ (1) Unrealized investment gains (losses) — 14 (13) Net unrealized investment losses, end of year — — (14) Net derivative instruments, beginning of year 21 39 (3) Gain on derivative instruments 26 5 12 Provision for deferred income taxes (7) (2) (2) Reclassification to earnings during the year: Foreign currency forward contracts (1) (35) (28) 46 Interest rate-related derivatives (2) — (1) (1) Benefit (provision) for deferred income taxes on reclassification (3) 9 8 (15) Reclassification to retained earnings — — 2 Net derivative instruments, end of year 14 21 39 Net pension and post-retirement adjustments, beginning of year (253) (175) (213) Changes in plan assets and benefit obligations: Net actuarial gains (losses) recognized (9) (117) 67 Prior service credit recognized — — 5 Translation adjustments (2) 2 (1) Benefit (provision) for deferred income taxes 4 25 (15) Amortization and settlements included in net periodic benefit cost (4) : Net actuarial losses 21 15 19 Net prior service cost — — 1 Provision for deferred income taxes on reclassification (3) (5) (3) (4) Reclassification to retained earnings — — (34) Net pension and post-retirement adjustments, end of year (244) (253) (175) Cumulative translation adjustments, beginning of year (331) (284) (267) Reclassification to earnings during the year 2 (77) — Translation adjustments (108) 18 (19) Benefit for deferred income taxes 2 12 2 Cumulative translation adjustments, end of year (435) (331) (284) Accumulated other comprehensive loss $ (665) $ (563) $ (434) (1) For the year ended June 30, 2020 and 2019, $(35) million and $(28) million, respectively, was recorded in Net sales in the accompanying consolidated statements of earnings. For the year ended June 30, 2018, $22 million and $24 million were recorded in Cost of sales and Selling, general and administrative expenses, respectively, in the accompanying consolidated statements of earnings. (2) Amounts recorded in Interest expense in the accompanying consolidated statements of earnings. (3) Amounts recorded in Provision for income taxes in the accompanying consolidated statements of earnings. (4) See Note 15 – Pension, Deferred Compensation and Post-Retirement Benefit Plans for additional information . |
STATEMENT OF CASH FLOWS (Tables
STATEMENT OF CASH FLOWS (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental cash flow information | Supplemental cash flow information is as follows: Year Ended June 30 (In millions) 2020 2019 2018 Cash: Cash paid during the year for interest $ 153 $ 131 $ 128 Cash paid during the year for income taxes $ 537 $ 588 $ 351 Non-cash investing and financing activities: Purchase price refund receivable $ 32 $ — $ — Capital lease, capitalized interest and asset retirement obligations incurred $ 2 $ 15 $ 9 Non-cash purchases of short- and long-term investments, net $ — $ — $ 14 Property, plant and equipment accrued but unpaid $ 39 $ 52 $ 43 |
SEGMENT DATA AND RELATED INFO_2
SEGMENT DATA AND RELATED INFORMATION (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Segment Reporting [Abstract] | |
Schedule of segment data and related information | Year Ended June 30 (In millions) 2020 2019 2018 PRODUCT CATEGORY DATA Net sales: Skin Care $ 7,382 $ 6,551 $ 5,595 Makeup 4,794 5,860 5,633 Fragrance 1,563 1,802 1,826 Hair Care 515 584 570 Other 40 69 67 14,294 14,866 13,691 Returns associated with restructuring and other activities — (3) (8) Net sales $ 14,294 $ 14,863 $ 13,683 Depreciation and amortization: Skin Care $ 268 $ 202 $ 185 Makeup 242 257 255 Fragrance 71 69 64 Hair Care 28 26 24 Other 2 3 3 $ 611 $ 557 $ 531 Operating income (loss) before charges associated with restructuring and other activities: Skin Care $ 2,125 $ 1,925 $ 1,514 Makeup (1,438) 438 549 Fragrance 17 140 176 Hair Care (19) 39 64 Other 4 12 9 689 2,554 2,312 Reconciliation: Charges associated with restructuring and other activities (83) (241) (257) Interest expense (161) (133) (128) Interest income and investment income, net 48 58 56 Other components of net periodic benefit cost (4) (2) (3) Other income, net 557 71 — Earnings before income taxes $ 1,046 $ 2,307 $ 1,980 Year Ended June 30 (In millions) 2020 2019 2018 GEOGRAPHIC DATA (1) Net sales: The Americas $ 3,794 $ 4,741 $ 5,015 Europe, the Middle East & Africa 6,262 6,452 5,634 Asia/Pacific 4,238 3,673 3,042 14,294 14,866 13,691 Returns associated with restructuring and other activities — (3) (8) Net sales $ 14,294 $ 14,863 $ 13,683 Operating income (loss): The Americas $ (1,044) $ 672 $ 872 Europe, the Middle East & Africa 997 1,153 865 Asia/Pacific 736 729 575 689 2,554 2,312 Charges associated with restructuring and other activities (83) (241) (257) Operating income $ 606 $ 2,313 $ 2,055 Total assets: The Americas $ 9,189 $ 7,661 $ 7,558 Europe, the Middle East & Africa 4,319 3,862 3,855 Asia/Pacific 4,273 1,633 1,154 $ 17,781 $ 13,156 $ 12,567 Long-lived assets (2) : The Americas $ 2,512 $ 1,230 $ 1,138 Europe, the Middle East & Africa 1,306 647 525 Asia/Pacific 519 191 160 $ 4,337 $ 2,068 $ 1,823 (1) The net sales and operating income from the Company's travel retail business are included in the Europe, the Middle East & Africa region, with the exception of the net sales of Dr. Jart+ products in the travel retail channel that are reflected in Korea in the Asia/Pacific region. (2) Includes property, plant and equipment, net . Fiscal 2020 also includes operating lease ROU assets, recognized as a result of the adoption of ASC 842. Refer to Note 7 – Leases for information. |
UNAUDITED QUARTERLY FINANCIAL_2
UNAUDITED QUARTERLY FINANCIAL DATA (Tables) | 12 Months Ended |
Jun. 30, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Summary of unaudited quarterly operating results | The following summarizes the unaudited quarterly operating results of the Company for fiscal 2020 and 2019: Quarter Ended (In millions, except per share data) September 30 (1) December 31 (2) March 31 (3) June 30 (4) Total Year Fiscal 2020 Net sales $ 3,895 $ 4,624 $ 3,345 $ 2,430 $ 14,294 Gross profit 2,987 3,583 2,509 1,663 10,742 Operating income (loss) 779 261 109 (543) 606 Net earnings (loss) attributable to The Estée Lauder Companies Inc. 595 557 (6) (462) 684 Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.65 $ 1.55 $ (.02) $ (1.28) $ 1.90 Diluted $ 1.61 $ 1.52 $ (.02) $ (1.28) $ 1.86 Fiscal 2019 Net sales $ 3,524 $ 4,005 $ 3,744 $ 3,590 $ 14,863 Gross profit 2,701 3,095 2,925 2,755 11,476 Operating income 652 771 674 216 2,313 Net earnings attributable to The Estée Lauder Companies Inc. 500 573 555 157 1,785 Net earnings attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.36 $ 1.58 $ 1.53 $ .43 $ 4.91 Diluted $ 1.34 $ 1.55 $ 1.51 $ .43 $ 4.82 (1) Fiscal 2020 first quarter results include charges associated with restructuring and other activities of $(25) million ($(21) million after tax, or $(.06) per diluted common share). Fiscal 2019 first quarter results include charges associated with restructuring and other activities of $(47) million ($(37) million after tax, or $(.10) per diluted common share) and the changes in fair value of contingent consideration of $11 million ($9 million after tax, or $.02 per diluted common share). The fiscal 2019 first quarter results also include a net credit resulting from the TCJA of $1 million, or $(.01) per diluted common share, relating to the Transition Tax and the net deferred tax liability related to foreign withholding taxes on certain foreign earnings. (2) Fiscal 2020 second quarter results include goodwill and other intangible asset impairments of $(777) million ($(663) million after tax, or $(1.81) per diluted common share), charges associated with restructuring and other activities of $(13) million ($(10) million after tax, or $(.03) per diluted common share) and the changes in fair value of contingent consideration of $7 million ($6 million after tax, or $.02 per diluted common share). The fiscal 2020 second quarter results also include gains relating to the Company's previously held equity method investment in Have&Be of $576 million ($450 million after tax, or $1.23 per diluted common share). Fiscal 2019 second quarter results include goodwill and other intangible asset impairments of $(38) million ($(34) million after tax, or $(.09) per diluted common share), charges associated with restructuring and other activities of $(35) million ($(31) million after tax, or $(.08) per diluted common share) and the changes in fair value of contingent consideration of $(2) million ($(1) million after tax, which did not have an impact on diluted earnings per share). The fiscal 2019 second quarter results also include a net charge resulting from the TCJA of $(6) million, or $(.02) per diluted common share, relating to the remeasurement of U.S. net deferred tax assets and the Transition Tax. (3) Fiscal 2020 third quarter results include goodwill, other intangible and long-lived asset impairments of $(346) million ($(298) million after tax, or $(.83) per diluted common share), charges associated with restructuring and other activities of $(25) million ($(20) million after tax, or $(.05) per diluted common share) and the changes in fair value of contingent consideration of $2 million ($2 million after tax, or $.01 per diluted common share). Fiscal 2019 third quarter results include a gain on liquidation of an investment in a foreign subsidiary, net of $71 million ($57 million after tax, or $.15 per diluted common share). The fiscal 2019 third quarter results also include goodwill and other intangible asset impairments of $(52) million (before and after tax, or $(.14) per diluted common share), charges associated with restructuring and other activities of $(35) million ($(27) million after tax, or $(.07) per diluted common share) and the changes in fair value of contingent consideration of $9 million ($7 million after tax, or $.02 per diluted common share). |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Currency Translation and Transactions (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Currency Translation and Transactions | |||
Unrealized translation gains (losses), net of tax | $ (106) | $ 30 | $ (17) |
Realized foreign currency gain on sale of foreign subsidiary reclassification from AOCI | 77 | ||
Gross realized loss on sale of securities reclassification from AOCI | 6 | ||
Net exchange gains (losses) on foreign currency transactions | $ 51 | $ 46 | $ (95) |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash and Cash Equivalents and Accounts Receivable (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Jun. 30, 2019 |
Cash and Cash Equivalents | ||
Short-term time deposits | $ 775 | $ 1,566 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) | 12 Months Ended |
Jun. 30, 2020 | |
Minimum | |
Property, Plant and Equipment | |
Property, plant and equipment, useful life | 3 years |
Maximum | |
Property, Plant and Equipment | |
Property, plant and equipment, useful life | 40 years |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Advertising and Promotion (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Product Information [Line Items] | |||
Selling, general and administrative | $ 8,637 | $ 8,857 | $ 8,553 |
Advertising and Promotion | |||
Product Information [Line Items] | |||
Selling, general and administrative | $ 3,398 | $ 3,440 | $ 3,287 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Research and Development (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Product Information [Line Items] | |||
Selling, general and administrative | $ 8,637 | $ 8,857 | $ 8,553 |
Research and Development | |||
Product Information [Line Items] | |||
Selling, general and administrative | $ 228 | $ 202 | $ 181 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Shipping and Handling (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Product Information [Line Items] | |||
Selling, general and administrative | $ 8,637 | $ 8,857 | $ 8,553 |
Shipping and Handling | |||
Product Information [Line Items] | |||
Selling, general and administrative | $ 583 | $ 570 | $ 507 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Licensing Arrangements (Details) - License agreements | 12 Months Ended |
Jun. 30, 2020 | |
Finite-lived intangible assets | |
License agreement, remaining or renewal term | 5 years |
Minimum | |
Finite-lived intangible assets | |
License initial term | 5 years |
License agreement, remaining or renewal term | 3 years |
Maximum | |
Finite-lived intangible assets | |
License initial term | 10 years |
License agreement, remaining or renewal term | 16 years |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Government Assistance (Details) - COVID-19 Pandemic $ in Millions | 3 Months Ended |
Jun. 30, 2020USD ($) | |
Unusual or Infrequent Item, or Both [Line Items] | |
Government assistance | $ 99 |
Government assistance, deferred | 2 |
Selling, general and administrative expenses | |
Unusual or Infrequent Item, or Both [Line Items] | |
Government assistance | 87 |
Cost of Sales | |
Unusual or Infrequent Item, or Both [Line Items] | |
Government assistance | $ 10 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Changes in Accounting Policies (Details) $ in Millions | 12 Months Ended |
Jun. 30, 2019USD ($) | |
Accounting Standards Update 2014-09 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative adjustment to retained earnings | $ (229) |
INVENTORY AND PROMOTIONAL MER_3
INVENTORY AND PROMOTIONAL MERCHANDISE (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Jun. 30, 2019 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 542 | $ 541 |
Work in process | 305 | 268 |
Finished goods | 995 | 981 |
Promotional merchandise | 220 | 216 |
Inventory and promotional merchandise, net | $ 2,062 | $ 2,006 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 5,134 | $ 4,831 | |
Less accumulated depreciation and amortization | (3,079) | (2,763) | |
Property, plant and equipment, net | 2,055 | 2,068 | |
Cost of assets related to projects in progress | 501 | 474 | |
Depreciation and amortization of property, plant and equipment | $ 514 | 495 | $ 469 |
Minimum | |||
Property, Plant and Equipment | |||
Property, plant and equipment, useful life | 3 years | ||
Maximum | |||
Property, Plant and Equipment | |||
Property, plant and equipment, useful life | 40 years | ||
Land | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 33 | 29 | |
Buildings and improvements | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 400 | 337 | |
Buildings and improvements | Minimum | |||
Property, Plant and Equipment | |||
Property, plant and equipment, useful life | 10 years | ||
Buildings and improvements | Maximum | |||
Property, Plant and Equipment | |||
Property, plant and equipment, useful life | 40 years | ||
Machinery and equipment | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 865 | 811 | |
Machinery and equipment | Minimum | |||
Property, Plant and Equipment | |||
Property, plant and equipment, useful life | 3 years | ||
Machinery and equipment | Maximum | |||
Property, Plant and Equipment | |||
Property, plant and equipment, useful life | 10 years | ||
Computer hardware and software | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 1,335 | 1,264 | |
Computer hardware and software | Minimum | |||
Property, Plant and Equipment | |||
Property, plant and equipment, useful life | 4 years | ||
Computer hardware and software | Maximum | |||
Property, Plant and Equipment | |||
Property, plant and equipment, useful life | 10 years | ||
Furniture and fixtures | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 120 | 116 | |
Furniture and fixtures | Minimum | |||
Property, Plant and Equipment | |||
Property, plant and equipment, useful life | 5 years | ||
Furniture and fixtures | Maximum | |||
Property, Plant and Equipment | |||
Property, plant and equipment, useful life | 10 years | ||
Leasehold improvements | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 2,381 | $ 2,274 |
ACQUISITION OF BUSINESS - Narra
ACQUISITION OF BUSINESS - Narrative (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 18, 2019 | Jun. 30, 2020 |
Have&Be Co. Ltd | |||
Business Acquisition [Line Items] | |||
Equity method investments | $ 133 | ||
Have&Be Co. Ltd | |||
Business Acquisition [Line Items] | |||
Acquisition, percentage of shares acquired | 66.66% | ||
Purchase price | $ 1,236 | $ 1,268 | |
Estimated refund outstanding | $ 32 | $ 32 | |
Revenue of acquiree recognized in statement of earnings | 165 | ||
Net loss of acquiree recognized in statement of earnings | 40 | ||
Acquisition related costs | $ 7 |
ACQUISITION OF BUSINESS - Sched
ACQUISITION OF BUSINESS - Schedule of Purchase Price and Gain Recognized (Details) - Have&Be Co. Ltd - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 18, 2019 | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 |
Purchase price | |||||
Purchase price | $ 1,236 | $ 1,268 | |||
Fair value of previously held equity method investment | 660 | 682 | |||
Write-off of call option relating to previously held equity method investment | 4 | 4 | |||
Total purchase price | $ 1,900 | $ 1,954 | |||
Gains recognized in the consolidated statement of earnings | |||||
Gain on previously held equity method investment | $ 549 | $ 530 | |||
Recognition of a previously unrealized foreign currency gain | 4 | 4 | |||
Total gain on previously held equity method investment | 553 | 534 | |||
Foreign currency gain on cash | 23 | 23 | |||
Total Other income, net | $ 576 | $ 557 | |||
Purchase price | |||||
Measurement period adjustments, purchase price | $ (32) | ||||
Measurement period adjustments, fair value of previously held equity method investment | (22) | ||||
Measurement period adjustments, write-off of call option relating to previously held equity method investment | 0 | ||||
Measurement period adjustment, total consideration transferred | (54) | ||||
Gains recognized in the consolidated statement of earnings | |||||
Measurement period adjustments, gain on previously held equity method investment | (19) | ||||
Measurement period adjustments, recognition of a previously unrealized foreign currency gain | 0 | ||||
Measurement period adjustments, total gain on previously held equity method investment | (19) | ||||
Measurement period adjustments, foreign currency gain on cash | 0 | ||||
Measurement period adjustments, total other income, net | $ (19) |
ACQUISITION OF BUSINESS - Finan
ACQUISITION OF BUSINESS - Financial Allocation Of Total Consideration (Details) - USD ($) $ in Millions | 6 Months Ended | |||
Jun. 30, 2020 | Dec. 18, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | |
Allocation of Consideration Transferred | ||||
Goodwill | $ 1,401 | $ 1,868 | $ 1,926 | |
Have&Be Co. Ltd | ||||
Allocation of Consideration Transferred | ||||
Cash | 229 | $ 228 | ||
Accounts receivable | 13 | 48 | ||
Inventory | 88 | 83 | ||
Other current assets | 4 | 5 | ||
Property, plant and equipment | 3 | 3 | ||
Right-of-use assets | 3 | 3 | ||
Intangible assets | 1,659 | 1,427 | ||
Goodwill | 346 | 556 | ||
Other long-term assets | 4 | 3 | ||
Total assets acquired | 2,349 | 2,356 | ||
Accounts payable | 14 | 27 | ||
Other accrued liabilities | 27 | 22 | ||
Deferred income taxes | 407 | 352 | ||
Lease liability | 1 | 1 | ||
Total liabilities assumed | 449 | 402 | ||
Total consideration transferred | 1,900 | $ 1,954 | ||
Measurement Period Adjustments | ||||
Cash | 1 | |||
Accounts receivable | (35) | |||
Inventory | 5 | |||
Other current assets | (1) | |||
Property, plant and equipment | 0 | |||
Right-of-use assets | 0 | |||
Intangible assets | 232 | |||
Goodwill | (210) | |||
Other long-term assets | 1 | |||
Total assets acquired | (7) | |||
Accounts payable | (13) | |||
Other accrued liabilities | 5 | |||
Deferred income taxes | 55 | |||
Lease liability | 0 | |||
Total liabilities assumed | 47 | |||
Total consideration transferred | $ (54) |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Goodwill and Other Intangible Assets | |||||
Goodwill acquired during the year | $ 357 | $ 13 | |||
Recognition of additional goodwill | (467) | (58) | |||
Amortization of intangible assets | 73 | 51 | $ 51 | ||
Goodwill impairment | 812 | 68 | $ 0 | ||
Smashbox | |||||
Goodwill and Other Intangible Assets | |||||
Impairment, trademark | $ 0 | 23 | 22 | ||
Goodwill impairment | $ 0 | $ 72 | 68 | ||
Other | Minimum | |||||
Goodwill and Other Intangible Assets | |||||
Useful life (in years) | 5 years | ||||
Other | Maximum | |||||
Goodwill and Other Intangible Assets | |||||
Useful life (in years) | 20 years | ||||
Have&Be Co. Ltd | |||||
Goodwill and Other Intangible Assets | |||||
Goodwill acquired during the year | $ 346 | ||||
Have&Be Co. Ltd | Trademark | |||||
Goodwill and Other Intangible Assets | |||||
Indefinite-lived intangible assets acquired | 722 | ||||
Have&Be Co. Ltd | Customer Lists | |||||
Goodwill and Other Intangible Assets | |||||
Finite-lived intangible assets acquired | $ 937 | ||||
Have&Be Co. Ltd | Customer Lists | Minimum | |||||
Goodwill and Other Intangible Assets | |||||
Useful life (in years) | 7 years 6 months | ||||
Have&Be Co. Ltd | Customer Lists | Maximum | |||||
Goodwill and Other Intangible Assets | |||||
Useful life (in years) | 17 years 6 months | ||||
Bobbi Brown brand | |||||
Goodwill and Other Intangible Assets | |||||
Recognition of additional goodwill | $ 11 | $ 13 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Changes in goodwill | |||
Goodwill, gross, beginning balance | $ 2,028 | $ 2,018 | |
Accumulated impairments, beginning balance | (160) | (92) | |
Goodwill, beginning balance | 1,868 | 1,926 | |
Goodwill acquired during the year | 357 | 13 | |
Impairment charges | (812) | (68) | $ 0 |
Translation adjustments, goodwill | (13) | (3) | |
Translation adjustments, accumulated impairments | 1 | ||
Goodwill, period increase (decrease) | (467) | (58) | |
Goodwill, gross, ending balance | 2,372 | 2,028 | 2,018 |
Accumulated impairments, ending balance | (971) | (160) | (92) |
Goodwill, ending balance | 1,401 | 1,868 | 1,926 |
Skin care | |||
Changes in goodwill | |||
Goodwill, gross, beginning balance | 185 | 185 | |
Accumulated impairments, beginning balance | (36) | (36) | |
Goodwill, beginning balance | 149 | 149 | |
Goodwill acquired during the year | 346 | 0 | |
Impairment charges | (60) | 0 | |
Translation adjustments, goodwill | (12) | 0 | |
Translation adjustments, accumulated impairments | 1 | ||
Goodwill, period increase (decrease) | 275 | 0 | |
Goodwill, gross, ending balance | 519 | 185 | 185 |
Accumulated impairments, ending balance | (95) | (36) | (36) |
Goodwill, ending balance | 424 | 149 | 149 |
Makeup | |||
Changes in goodwill | |||
Goodwill, gross, beginning balance | 1,199 | 1,186 | |
Accumulated impairments, beginning balance | (68) | 0 | |
Goodwill, beginning balance | 1,131 | 1,186 | |
Goodwill acquired during the year | 11 | 13 | |
Impairment charges | (749) | (68) | |
Translation adjustments, goodwill | 0 | 0 | |
Translation adjustments, accumulated impairments | 0 | ||
Goodwill, period increase (decrease) | (738) | (55) | |
Goodwill, gross, ending balance | 1,210 | 1,199 | 1,186 |
Accumulated impairments, ending balance | (817) | (68) | 0 |
Goodwill, ending balance | 393 | 1,131 | 1,186 |
Fragrance | |||
Changes in goodwill | |||
Goodwill, gross, beginning balance | 254 | 256 | |
Accumulated impairments, beginning balance | (22) | (22) | |
Goodwill, beginning balance | 232 | 234 | |
Goodwill acquired during the year | 0 | 0 | |
Impairment charges | (3) | 0 | |
Translation adjustments, goodwill | 0 | (2) | |
Translation adjustments, accumulated impairments | (1) | ||
Goodwill, period increase (decrease) | (4) | (2) | |
Goodwill, gross, ending balance | 254 | 254 | 256 |
Accumulated impairments, ending balance | (26) | (22) | (22) |
Goodwill, ending balance | 228 | 232 | 234 |
Hair care | |||
Changes in goodwill | |||
Goodwill, gross, beginning balance | 390 | 391 | |
Accumulated impairments, beginning balance | (34) | (34) | |
Goodwill, beginning balance | 356 | 357 | |
Goodwill acquired during the year | 0 | 0 | |
Impairment charges | 0 | 0 | |
Translation adjustments, goodwill | (1) | (1) | |
Translation adjustments, accumulated impairments | 1 | ||
Goodwill, period increase (decrease) | 0 | (1) | |
Goodwill, gross, ending balance | 389 | 390 | 391 |
Accumulated impairments, ending balance | (33) | (34) | (34) |
Goodwill, ending balance | $ 356 | $ 356 | $ 357 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS - Other Intangible Assets (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Jun. 30, 2019 |
Amortizable intangible assets: | ||
Gross Carrying Value | $ 1,633 | $ 727 |
Accumulated Amortization | 518 | 412 |
Total Net Book Value | 1,115 | 315 |
Non-amortizable intangible assets: | ||
Total intangible assets | 2,338 | 1,203 |
Estimated aggregate amortization expense | ||
2021 | 105 | |
2022 | 100 | |
2023 | 100 | |
2024 | 98 | |
2025 | 97 | |
Trademarks and other | ||
Non-amortizable intangible assets: | ||
Trademarks and other | 1,223 | 888 |
Customer lists and other | ||
Amortizable intangible assets: | ||
Gross Carrying Value | 1,590 | 684 |
Accumulated Amortization | 475 | 369 |
Total Net Book Value | 1,115 | 315 |
License agreements | ||
Amortizable intangible assets: | ||
Gross Carrying Value | 43 | 43 |
Accumulated Amortization | 43 | 43 |
Total Net Book Value | $ 0 | $ 0 |
GOODWILL AND OTHER INTANGIBLE_6
GOODWILL AND OTHER INTANGIBLE ASSETS - Impairment (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Intangible assets | ||||
Impairment, goodwill | $ 812 | $ 68 | $ 0 | |
Carrying Value, Goodwill | $ 1,401 | 1,401 | 1,868 | $ 1,926 |
Too Faced | ||||
Intangible assets | ||||
Impairment, trademark | 0 | 253 | ||
Impairment, customer lists | 0 | 0 | ||
Impairment, goodwill | 0 | 592 | ||
Carrying Value, Trademark | 272 | 272 | ||
Carrying Value, Customer Lists | 217 | 217 | ||
Carrying Value, Goodwill | 13 | 13 | ||
BECCA | ||||
Intangible assets | ||||
Impairment, trademark | 24 | 71 | ||
Impairment, customer lists | 35 | 35 | ||
Impairment, goodwill | 15 | 85 | ||
Carrying Value, Trademark | 27 | 27 | ||
Carrying Value, Customer Lists | 7 | 7 | ||
Carrying Value, Goodwill | 13 | 13 | ||
Smashbox | ||||
Intangible assets | ||||
Impairment, trademark | 0 | 23 | 22 | |
Impairment, customer lists | 0 | 0 | ||
Impairment, goodwill | 0 | 72 | $ 68 | |
Carrying Value, Trademark | 32 | 32 | ||
Carrying Value, Customer Lists | 0 | 0 | ||
Carrying Value, Goodwill | 0 | 0 | ||
GLAMGLOW | ||||
Intangible assets | ||||
Impairment, trademark | 5 | 6 | ||
Impairment, customer lists | 0 | 0 | ||
Impairment, goodwill | 8 | 60 | ||
Carrying Value, Trademark | 57 | 57 | ||
Carrying Value, Customer Lists | 6 | 6 | ||
Carrying Value, Goodwill | 54 | 54 | ||
Editions de Parfums Frédéric Malle | ||||
Intangible assets | ||||
Impairment, trademark | 11 | 11 | ||
Impairment, customer lists | 0 | 0 | ||
Impairment, goodwill | 3 | 3 | ||
Carrying Value, Trademark | 21 | 21 | ||
Carrying Value, Customer Lists | 2 | 2 | ||
Carrying Value, Goodwill | 3 | 3 | ||
Total | ||||
Intangible assets | ||||
Impairment, trademark | 40 | 364 | ||
Impairment, customer lists | 35 | 35 | ||
Impairment, goodwill | 26 | 812 | ||
Carrying Value, Trademark | 409 | 409 | ||
Carrying Value, Customer Lists | 232 | 232 | ||
Carrying Value, Goodwill | $ 83 | $ 83 |
LEASES - General (Details)
LEASES - General (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Jun. 30, 2020 | Jul. 01, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | |
Lessee, Lease, Description [Line Items] | ||||
Cumulative adjust, reduction of opening balance of retained earnings | $ (3,962) | $ (4,411) | $ (4,710) | |
Operating lease right-of-use assets | 2,282 | $ 2,598 | ||
Operating lease, liability | $ 2,653 | $ 2,764 | ||
Lease renewal term | 30 years | |||
Lease termination period | 23 years | |||
Impairment of long-lived assets | $ 215 | |||
Operating lease, impairment loss | 131 | |||
Operating lease obligation not yet commenced | 103 | |||
Finance lease obligation not yet commenced | 1 | |||
Property, Plant and Equipment, and Other Long-lived Assets | ||||
Lessee, Lease, Description [Line Items] | ||||
Impairment of long-lived assets | $ 84 | |||
Cumulative effect of adoption of new accounting standards | Accounting Standards Update 2016-02 | ||||
Lessee, Lease, Description [Line Items] | ||||
Cumulative adjust, reduction of opening balance of retained earnings | $ 29 | |||
Minimum | ||||
Lessee, Lease, Description [Line Items] | ||||
Remaining lease term | 1 year | |||
Operating lease term not yet commenced | 1 year | |||
Maximum | ||||
Lessee, Lease, Description [Line Items] | ||||
Remaining lease term | 59 years | |||
Operating lease term not yet commenced | 20 years |
LEASES - Total Lease Costs and
LEASES - Total Lease Costs and Other Information (Details) $ in Millions | 12 Months Ended |
Jun. 30, 2020USD ($) | |
Finance lease cost: | |
Amortization of right-of-use assets | $ 11 |
Interest on lease liabilities | 1 |
Operating lease cost | 625 |
Short-term lease cost | 24 |
Variable lease cost | 158 |
Total | 819 |
Cash paid for amounts included in the measurement of lease liabilities | |
Operating cash flows from operating leases | 426 |
Financing cash flows from finance leases | 12 |
Right-of-use assets obtained in exchange for new operating lease liabilities | 266 |
Right-of-use assets obtained in exchange for new finance lease liabilities | $ 1 |
Weighted-average remaining lease term – finance leases | 2 years |
Weighted-average remaining lease term – operating leases | 11 years |
Weighted-average discount rate – finance leases | 2.70% |
Weighted-average discount rate – operating leases | 2.50% |
LEASES - Future Minimum Lease P
LEASES - Future Minimum Lease Payments (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Jul. 01, 2019 |
Operating Leases | ||
Fiscal 2021 | $ 436 | |
Fiscal 2022 | 377 | |
Fiscal 2023 | 335 | |
Fiscal 2024 | 301 | |
Fiscal 2025 | 259 | |
Thereafter | 1,349 | |
Total future minimum lease payments | 3,057 | |
Less imputed interest | (404) | |
Total | 2,653 | $ 2,764 |
Finance Leases | ||
Fiscal 2021 | 8 | |
Fiscal 2022 | 4 | |
Fiscal 2023 | 1 | |
Fiscal 2024 | 0 | |
Fiscal 2025 | 0 | |
Thereafter | 0 | |
Total future minimum lease payments | 13 | |
Less imputed interest | 0 | |
Total | $ 13 |
LEASES - Operating Lease and Fi
LEASES - Operating Lease and Finance Lease Liabilities included in the Consolidated Balance Sheet (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Jul. 01, 2019 |
Operating Leases | ||
Total current liabilities | $ 375 | |
Total noncurrent liabilities | 2,278 | |
Total | 2,653 | $ 2,764 |
Finance Leases | ||
Total current liabilities | 8 | |
Total noncurrent liabilities | 5 | |
Total | $ 13 | |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssets | |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:DebtCurrent | |
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | us-gaap:LongTermDebtNoncurrent |
LEASES - Summary of Impairment
LEASES - Summary of Impairment Charges (Details) $ in Millions | 12 Months Ended |
Jun. 30, 2020USD ($) | |
Lessee, Lease, Description [Line Items] | |
Impairment of long-lived assets | $ 215 |
The Americas | |
Lessee, Lease, Description [Line Items] | |
Impairment of long-lived assets | 103 |
Europe, the Middle East & Africa | |
Lessee, Lease, Description [Line Items] | |
Impairment of long-lived assets | 104 |
Asia/Pacific | |
Lessee, Lease, Description [Line Items] | |
Impairment of long-lived assets | 8 |
Skin care | |
Lessee, Lease, Description [Line Items] | |
Impairment of long-lived assets | 22 |
Makeup | |
Lessee, Lease, Description [Line Items] | |
Impairment of long-lived assets | 160 |
Fragrance | |
Lessee, Lease, Description [Line Items] | |
Impairment of long-lived assets | 18 |
Hair care | |
Lessee, Lease, Description [Line Items] | |
Impairment of long-lived assets | 14 |
Other | |
Lessee, Lease, Description [Line Items] | |
Impairment of long-lived assets | $ 1 |
CHARGES ASSOCIATED WITH RESTR_3
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Aggregate Restructuring and Other Activities (Details) - Leading Beauty Forward - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Restructuring and related costs | |||
Restructuring and other charges | $ 83 | $ 241 | $ 257 |
Sales Returns (included in Net Sales) | |||
Restructuring and related costs | |||
Restructuring and other charges | 0 | 3 | 8 |
Cost of Sales | |||
Restructuring and related costs | |||
Restructuring and other charges | 10 | 22 | 18 |
Restructuring Charges | |||
Restructuring and related costs | |||
Restructuring and other charges | 34 | 133 | 127 |
Other Charges | |||
Restructuring and related costs | |||
Restructuring and other charges | $ 39 | $ 83 | $ 104 |
CHARGES ASSOCIATED WITH RESTR_4
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Narrative (Details) $ in Millions | Jun. 30, 2020position | May 31, 2016position | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) |
Restructuring Cost and Reserve [Line Items] | |||||||
Charges | $ 83 | $ 241 | $ 257 | ||||
Leading Beauty Forward | |||||||
Restructuring Cost and Reserve [Line Items] | |||||||
Charges | 34 | 133 | 127 | $ 122 | $ 75 | ||
Asset-Related Costs | Leading Beauty Forward | |||||||
Restructuring Cost and Reserve [Line Items] | |||||||
Charges | 23 | $ 0 | $ 1 | $ 2 | $ 1 | ||
Restructuring Charges | Asset-Related Costs | Leading Beauty Forward | |||||||
Restructuring Cost and Reserve [Line Items] | |||||||
Charges | $ 18 | ||||||
Minimum | |||||||
Restructuring Cost and Reserve [Line Items] | |||||||
Net reduction in global positions | position | 1,300 | 1,800 | |||||
Maximum | |||||||
Restructuring Cost and Reserve [Line Items] | |||||||
Net reduction in global positions | position | 1,600 | 2,000 |
CHARGES ASSOCIATED WITH RESTR_5
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Cumulative Charges Expected To Be Incurred (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Restructuring And Other Charges Expected To Be Incurred [Roll Forward] | |||
Fiscal 2020 | $ 73 | $ 216 | $ 231 |
Leading Beauty Forward | |||
Restructuring And Other Charges Expected To Be Incurred [Roll Forward] | |||
Cumulative through June 30, 2019 | 967 | ||
Fiscal 2020 | 0 | ||
Cumulative through June 30, 2020 | 967 | 967 | |
Sales Returns (included in Net Sales) | Leading Beauty Forward | |||
Restructuring And Other Charges Expected To Be Incurred [Roll Forward] | |||
Cumulative through June 30, 2019 | 14 | ||
Fiscal 2020 | (1) | ||
Cumulative through June 30, 2020 | 13 | 14 | |
Cost of Sales | Leading Beauty Forward | |||
Restructuring And Other Charges Expected To Be Incurred [Roll Forward] | |||
Cumulative through June 30, 2019 | 88 | ||
Fiscal 2020 | (3) | ||
Cumulative through June 30, 2020 | 85 | 88 | |
Restructuring Charges | Leading Beauty Forward | |||
Restructuring And Other Charges Expected To Be Incurred [Roll Forward] | |||
Cumulative through June 30, 2019 | 507 | ||
Fiscal 2020 | 4 | ||
Cumulative through June 30, 2020 | 511 | 507 | |
Restructuring Charges | Employee- Related Costs | Leading Beauty Forward | |||
Restructuring And Other Charges Expected To Be Incurred [Roll Forward] | |||
Cumulative through June 30, 2019 | 461 | ||
Fiscal 2020 | (1) | ||
Cumulative through June 30, 2020 | 460 | 461 | |
Restructuring Charges | Asset-Related Costs | Leading Beauty Forward | |||
Restructuring And Other Charges Expected To Be Incurred [Roll Forward] | |||
Cumulative through June 30, 2019 | 7 | ||
Fiscal 2020 | 21 | ||
Cumulative through June 30, 2020 | 28 | 7 | |
Restructuring Charges | Contract Terminations | Leading Beauty Forward | |||
Restructuring And Other Charges Expected To Be Incurred [Roll Forward] | |||
Cumulative through June 30, 2019 | 25 | ||
Fiscal 2020 | (18) | ||
Cumulative through June 30, 2020 | 7 | 25 | |
Restructuring Charges | Other Exit Costs | Leading Beauty Forward | |||
Restructuring And Other Charges Expected To Be Incurred [Roll Forward] | |||
Cumulative through June 30, 2019 | 14 | ||
Fiscal 2020 | 2 | ||
Cumulative through June 30, 2020 | 16 | 14 | |
Other Charges | Leading Beauty Forward | |||
Restructuring And Other Charges Expected To Be Incurred [Roll Forward] | |||
Cumulative through June 30, 2019 | 358 | ||
Fiscal 2020 | 0 | ||
Cumulative through June 30, 2020 | $ 358 | $ 358 |
CHARGES ASSOCIATED WITH RESTR_6
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Cumulative Restructuring Charges by Major Cost Type (Details) $ in Millions | Jun. 30, 2020USD ($) |
Restructuring Cost and Reserve [Line Items] | |
Cumulative through June 30, 2017 | $ 293 |
Fiscal 2018 | 257 |
Fiscal 2019 | 241 |
Fiscal 2020 | 83 |
Cumulative through June 30, 2020 | 874 |
Sales Returns (included in Net Sales) | |
Restructuring Cost and Reserve [Line Items] | |
Cumulative through June 30, 2017 | 3 |
Fiscal 2018 | 8 |
Fiscal 2019 | 3 |
Fiscal 2020 | 0 |
Cumulative through June 30, 2020 | 14 |
Cost of Sales | |
Restructuring Cost and Reserve [Line Items] | |
Cumulative through June 30, 2017 | 15 |
Fiscal 2018 | 18 |
Fiscal 2019 | 22 |
Fiscal 2020 | 10 |
Cumulative through June 30, 2020 | 65 |
Restructuring Charges | |
Restructuring Cost and Reserve [Line Items] | |
Cumulative through June 30, 2017 | 197 |
Fiscal 2018 | 127 |
Fiscal 2019 | 133 |
Fiscal 2020 | 34 |
Cumulative through June 30, 2020 | 491 |
Restructuring Charges | Employee- Related Costs | |
Restructuring Cost and Reserve [Line Items] | |
Cumulative through June 30, 2017 | 190 |
Fiscal 2018 | 124 |
Fiscal 2019 | 131 |
Fiscal 2020 | 6 |
Cumulative through June 30, 2020 | 451 |
Restructuring Charges | Asset-Related Costs | |
Restructuring Cost and Reserve [Line Items] | |
Cumulative through June 30, 2017 | 3 |
Fiscal 2018 | 1 |
Fiscal 2019 | 0 |
Fiscal 2020 | 23 |
Cumulative through June 30, 2020 | 27 |
Restructuring Charges | Contract Terminations | |
Restructuring Cost and Reserve [Line Items] | |
Cumulative through June 30, 2017 | 2 |
Fiscal 2018 | 1 |
Fiscal 2019 | 0 |
Fiscal 2020 | 3 |
Cumulative through June 30, 2020 | 6 |
Restructuring Charges | Other Exit Costs | |
Restructuring Cost and Reserve [Line Items] | |
Cumulative through June 30, 2017 | 2 |
Fiscal 2018 | 1 |
Fiscal 2019 | 2 |
Fiscal 2020 | 2 |
Cumulative through June 30, 2020 | 7 |
Other Charges | |
Restructuring Cost and Reserve [Line Items] | |
Cumulative through June 30, 2017 | 78 |
Fiscal 2018 | 104 |
Fiscal 2019 | 83 |
Fiscal 2020 | 39 |
Cumulative through June 30, 2020 | $ 304 |
CHARGES ASSOCIATED WITH RESTR_7
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Accrued Restructuring Charges (Details) - USD ($) $ in Millions | 12 Months Ended | |||||||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Restructuring Cost and Reserve [Line Items] | ||||||||
Charges | $ 83 | $ 241 | $ 257 | |||||
Leading Beauty Forward | ||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||
Beginning balance | $ 112 | 203 | 181 | 150 | $ 73 | |||
Charges | 34 | 133 | 127 | 122 | $ 75 | |||
Cash payments | (100) | (109) | (93) | (43) | ||||
Noncash asset write-offs | (23) | (1) | (2) | (1) | ||||
Translation adjustments | (2) | (2) | (2) | (1) | ||||
Ending balance | 112 | 203 | 181 | 150 | 73 | |||
Employee- Related Costs | Leading Beauty Forward | ||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||
Beginning balance | 112 | 202 | 180 | 150 | 73 | |||
Charges | 6 | 131 | 124 | 116 | 74 | |||
Cash payments | (94) | (107) | (92) | (39) | ||||
Noncash asset write-offs | 0 | 0 | 0 | 0 | ||||
Translation adjustments | (2) | (2) | (2) | (1) | ||||
Ending balance | 112 | 202 | 180 | 150 | 73 | |||
Asset-Related Costs | Leading Beauty Forward | ||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||
Beginning balance | 0 | 0 | 0 | 0 | 0 | |||
Charges | 23 | 0 | 1 | 2 | 1 | |||
Cash payments | 0 | 0 | 0 | 0 | ||||
Noncash asset write-offs | (23) | (1) | (2) | (1) | ||||
Translation adjustments | 0 | 0 | 0 | 0 | ||||
Ending balance | 0 | 0 | 0 | 0 | 0 | |||
Contract Terminations | Leading Beauty Forward | ||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||
Beginning balance | 0 | 0 | 1 | 0 | 0 | |||
Charges | 3 | 0 | 1 | 2 | 0 | |||
Cash payments | (3) | (1) | 0 | (2) | ||||
Noncash asset write-offs | 0 | 0 | 0 | 0 | ||||
Translation adjustments | 0 | 0 | 0 | 0 | ||||
Ending balance | 0 | 0 | 1 | 0 | 0 | |||
Other Exit Costs | Leading Beauty Forward | ||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||
Beginning balance | 0 | 1 | 0 | 0 | 0 | |||
Charges | 2 | 2 | 1 | 2 | 0 | |||
Cash payments | (3) | (1) | (1) | (2) | ||||
Noncash asset write-offs | 0 | 0 | 0 | 0 | ||||
Translation adjustments | 0 | 0 | 0 | 0 | ||||
Ending balance | $ 0 | $ 1 | $ 0 | $ 0 | $ 0 | |||
Forecast | Leading Beauty Forward | ||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||
Accrued restructuring charges expected to result in cash expenditures funded from cash provided by operations | $ 5 | $ 29 | $ 78 |
INCOME TAXES - PROVISION FOR IN
INCOME TAXES - PROVISION FOR INCOME TAXES (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Current: | |||
Federal | $ 128 | $ 180 | $ 334 |
Foreign | 368 | 383 | 357 |
State and local | (3) | 16 | (3) |
Total | 493 | 579 | 688 |
Deferred: | |||
Federal | (93) | (95) | 135 |
Foreign | (49) | 27 | 35 |
State and local | (1) | 2 | 5 |
Total | (143) | (66) | 175 |
Provision for income taxes | $ 350 | $ 513 | $ 863 |
INCOME TAXES - NARRATIVE (Detai
INCOME TAXES - NARRATIVE (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Contingency [Line Items] | |||
Amounts contributed by foreign operations | $ 2,277 | $ 2,021 | $ 2,004 |
Provisional charge for transition tax resulting from the TCJA | 450 | ||
Adjustment to provision net charge from tax cuts and jobs act | 5 | ||
Undistributed earnings of foreign subsidiaries | 5,259 | ||
Undistributed earnings of foreign subsidiaries considered permanently reinvested | 3,156 | ||
Net deferred tax assets | 44 | 295 | |
Net operating loss and other carryforwards | 352 | 162 | |
Portion of net operating loss and other carryforwards with indefinite carryforward period | 303 | ||
Deferred tax assets, net of valuation allowances recorded to reflect the tax benefits of the carryforwards not utilized to date | 14 | 3 | |
Gross unrecognized tax benefits | 70 | 67 | 60 |
Total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate | 56 | ||
Gross interest and penalty accrued | 3 | 4 | |
Total gross accrued interest and penalties related to unrecognized tax benefits | 13 | 12 | |
Accounting Standards Update 2016-09 | |||
Income Tax Contingency [Line Items] | |||
Provision for income taxes | (78) | $ (63) | $ (50) |
Minimum | |||
Income Tax Contingency [Line Items] | |||
Unrecognized tax benefits, decrease resulting from settlements with taxing authorities | 5 | ||
Maximum | |||
Income Tax Contingency [Line Items] | |||
Unrecognized tax benefits, decrease resulting from settlements with taxing authorities | $ 10 |
INCOME TAXES - EFFECTIVE INCOME
INCOME TAXES - EFFECTIVE INCOME TAX RATE RECONCILIATION (Details) | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |||
Provision for income taxes at statutory rate | 21.00% | 21.00% | 28.10% |
Increase (decrease) due to: | |||
State and local income taxes, net of federal tax benefit | (0.10%) | 0.60% | 0.50% |
TCJA net income tax impact | 0.00% | 0.20% | 22.80% |
Stock-based compensation arrangements – excess tax benefits | (7.50%) | (2.70%) | (2.50%) |
Taxation of foreign operations | 11.00% | 1.90% | (4.70%) |
Income tax reserve adjustments | 0.40% | 0.50% | (0.50%) |
Nondeductible goodwill impairment charges | 8.00% | 0.60% | 0.00% |
Other, net | 0.70% | 0.10% | (0.10%) |
Effective tax rate | 33.50% | 22.20% | 43.60% |
INCOME TAXES - SIGNIFICANT COMP
INCOME TAXES - SIGNIFICANT COMPONENTS OF DEFERRED INCOME TAX ASSETS AND LIABILITIES (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Jun. 30, 2019 |
Deferred tax assets: | ||
Compensation-related expenses | $ 142 | $ 179 |
Inventory obsolescence and other inventory related reserves | 75 | 64 |
Retirement benefit obligations | 71 | 71 |
Various accruals not currently deductible | 212 | 206 |
Net operating loss, credit and other carryforwards | 98 | 41 |
Unrecognized state tax benefits and accrued interest | 12 | 12 |
Lease liabilities | 585 | 0 |
Other differences between tax and financial statement values | 217 | 125 |
Deferred tax assets, gross | 1,412 | 698 |
Valuation allowance for deferred tax assets | (107) | (48) |
Total deferred tax assets | 1,305 | 650 |
Deferred tax liabilities: | ||
Depreciation and amortization | (563) | (286) |
ROU assets | (504) | 0 |
Other differences between tax and financial statement values | (194) | (69) |
Total deferred tax liabilities | (1,261) | (355) |
Total net deferred tax assets | 44 | $ 295 |
Deferred tax liability, gain on previously held equity method investment | $ 117 |
INCOME TAXES - Unrecognized Tax
INCOME TAXES - Unrecognized Tax Benefits (Details) - USD ($) $ in Millions | 12 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Reconciliation of the beginning and ending amount of gross unrecognized tax benefits [Roll Forward] | ||
Beginning of the year balance of gross unrecognized tax benefits | $ 67 | $ 60 |
Gross amounts of increases as a result of tax positions taken during a prior period | 11 | 12 |
Gross amounts of decreases as a result of tax positions taken during a prior period | (9) | (6) |
Gross amounts of increases as a result of tax positions taken during the current period | 7 | 9 |
Amounts of decreases in unrecognized tax benefits relating to settlements with taxing authorities | (4) | (7) |
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statutes of limitations | (2) | (1) |
End of year balance of gross unrecognized tax benefits | $ 70 | $ 67 |
OTHER ACCRUED LIABILITIES (Deta
OTHER ACCRUED LIABILITIES (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Jun. 30, 2019 |
Other Liabilities Disclosure [Abstract] | ||
Advertising, merchandising and sampling | $ 256 | $ 352 |
Employee compensation | 424 | 574 |
Deferred revenue | 222 | 314 |
Other | 1,503 | 1,359 |
Total Other Accrued Liabilities | $ 2,405 | $ 2,599 |
DEBT (Details)
DEBT (Details) - USD ($) | 1 Months Ended | 2 Months Ended | 12 Months Ended | |||||||||||
Aug. 31, 2020 | Nov. 30, 2016 | Apr. 30, 2016 | Apr. 30, 2007 | May 31, 2003 | May 31, 2019 | May 31, 2015 | Jun. 30, 2020 | Jun. 30, 2019 | Apr. 30, 2020 | Nov. 30, 2019 | Oct. 31, 2018 | Jun. 30, 2018 | May 31, 2016 | |
Current and long-term debt and available financing | ||||||||||||||
Current and long-term debt | $ 6,136,000,000 | $ 3,412,000,000 | ||||||||||||
Less current debt including current maturities | (1,222,000,000) | (516,000,000) | ||||||||||||
Long-term debt, excluding current maturities | 4,914,000,000 | 2,896,000,000 | ||||||||||||
Available financing, committed | 750,000,000 | |||||||||||||
Available financing, uncommitted | 1,678,000,000 | |||||||||||||
Gain (loss) on derivative instruments recognized in other comprehensive income | (42,000,000) | 5,000,000 | ||||||||||||
Commercial paper program | 1,500,000,000 | |||||||||||||
Revolving credit facility | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Current and long-term debt | $ 750,000,000 | 0 | ||||||||||||
3.125% Senior Notes, due December 1, 2049 (“2049 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 3.125% | |||||||||||||
Current and long-term debt | $ 635,000,000 | 0 | ||||||||||||
Price (as a percent) | 98.769% | |||||||||||||
Yield (as a percent) | 3.189% | |||||||||||||
Aggregate principal amount | $ 650,000,000 | $ 650,000,000 | ||||||||||||
Unamortized Debt (Discount) Premium | (8,000,000) | |||||||||||||
Debt Issuance Costs | $ (7,000,000) | |||||||||||||
4.15% Senior Notes, due March 15, 2047 (“2047 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 4.15% | |||||||||||||
Current and long-term debt | $ 494,000,000 | 494,000,000 | ||||||||||||
Price (as a percent) | 99.739% | |||||||||||||
Yield (as a percent) | 4.165% | |||||||||||||
Aggregate principal amount | $ 500,000,000 | |||||||||||||
Unamortized Debt (Discount) Premium | (1,000,000) | |||||||||||||
Debt Issuance Costs | $ (5,000,000) | |||||||||||||
4.15% Senior Notes, due March 15, 2047 (“2047 Senior Notes”) | Treasury lock agreements | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Yield (as a percent) | 4.17% | |||||||||||||
Notional amount | $ 350,000,000 | |||||||||||||
Weighted-average all-in rate (as a percent) | 3.01% | |||||||||||||
Gain (loss) on derivative instruments recognized in other comprehensive income | $ 3,000,000 | |||||||||||||
4.375% Senior Notes, due June 15, 2045 (“2045 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 4.375% | |||||||||||||
Current and long-term debt | $ 456,000,000 | 455,000,000 | ||||||||||||
Price (as a percent) | 97.999% | |||||||||||||
Yield (as a percent) | 4.497% | |||||||||||||
Aggregate principal amount | $ 300,000,000 | $ 150,000,000 | ||||||||||||
Aggregate amount outstanding of senior notes | $ 450,000,000 | |||||||||||||
Unamortized Debt (Discount) Premium | (5,000,000) | |||||||||||||
Debt Issuance Costs | $ (3,000,000) | |||||||||||||
4.375% Senior Notes, due June 15, 2045 (“2045 Senior Notes”) | Interest rate swap contracts | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Yield (as a percent) | 4.216% | |||||||||||||
Notional amount | $ 300,000,000 | |||||||||||||
Weighted-average all-in rate (as a percent) | 2.38% | |||||||||||||
Gain (loss) on derivative instruments recognized in other comprehensive income | $ 18,000,000 | |||||||||||||
3.70% Senior Notes, due August 15, 2042 (“2042 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 3.70% | |||||||||||||
Current and long-term debt | $ 247,000,000 | 247,000,000 | ||||||||||||
Price (as a percent) | 99.567% | |||||||||||||
Yield (as a percent) | 3.724% | |||||||||||||
Aggregate principal amount | $ 250,000,000 | |||||||||||||
Unamortized Debt (Discount) Premium | (1,000,000) | |||||||||||||
Debt Issuance Costs | $ (2,000,000) | |||||||||||||
6.00% Senior Notes, due May 15, 2037 (“2037 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 6.00% | |||||||||||||
Current and long-term debt | $ 294,000,000 | 294,000,000 | ||||||||||||
Price (as a percent) | 98.722% | |||||||||||||
Yield (as a percent) | 6.093% | |||||||||||||
Aggregate principal amount | $ 300,000,000 | |||||||||||||
Unamortized Debt (Discount) Premium | (3,000,000) | |||||||||||||
Debt Issuance Costs | $ (3,000,000) | |||||||||||||
6.00% Senior Notes, due May 15, 2037 (“2037 Senior Notes”) | Interest rate swap contracts | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Yield (as a percent) | 6.181% | |||||||||||||
Notional amount | $ 210,000,000 | |||||||||||||
Weighted-average all-in rate (as a percent) | 5.45% | |||||||||||||
Gain (loss) on derivative instruments recognized in other comprehensive income | $ (1,000,000) | |||||||||||||
5.75% Senior Notes, due October 15, 2033 (“2033 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 5.75% | |||||||||||||
Current and long-term debt | $ 197,000,000 | 197,000,000 | ||||||||||||
Price (as a percent) | 98.645% | |||||||||||||
Yield (as a percent) | 5.846% | |||||||||||||
Aggregate principal amount | $ 200,000,000 | |||||||||||||
Unamortized Debt (Discount) Premium | (2,000,000) | |||||||||||||
Debt Issuance Costs | $ (1,000,000) | |||||||||||||
5.75% Senior Notes, due October 15, 2033 (“2033 Senior Notes”) | Treasury lock agreements | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Yield (as a percent) | 5.395% | |||||||||||||
Notional amount | $ 195,000,000 | |||||||||||||
Weighted-average all-in rate (as a percent) | 4.53% | |||||||||||||
Cash paid / (received) on settlement of derivative | $ (15,000,000) | |||||||||||||
2.600% Senior Notes, due April 15, 2030 ("2030 Senior Notes") | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 2.60% | |||||||||||||
Current and long-term debt | $ 694,000,000 | 0 | ||||||||||||
Price (as a percent) | 99.816% | |||||||||||||
Yield (as a percent) | 2.621% | |||||||||||||
Aggregate principal amount | $ 700,000,000 | $ 700,000,000 | ||||||||||||
Unamortized Debt (Discount) Premium | (1,000,000) | |||||||||||||
Debt Issuance Costs | $ (5,000,000) | |||||||||||||
2.375% Senior Notes, due December 1, 2029 (“2029 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 2.375% | |||||||||||||
Current and long-term debt | $ 640,000,000 | 0 | ||||||||||||
Price (as a percent) | 99.046% | |||||||||||||
Yield (as a percent) | 2.483% | |||||||||||||
Aggregate principal amount | $ 650,000,000 | 650,000,000 | ||||||||||||
Unamortized Debt (Discount) Premium | (6,000,000) | |||||||||||||
Debt Issuance Costs | $ (4,000,000) | |||||||||||||
2.375% Senior Notes, due December 1, 2029 (“2029 Senior Notes”) | Treasury lock agreements | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Yield (as a percent) | 3.15% | |||||||||||||
Notional amount | $ 500,000,000 | |||||||||||||
Weighted-average all-in rate (as a percent) | 2.50% | |||||||||||||
Gain (loss) on derivative instruments recognized in other comprehensive income | $ (33,000,000) | |||||||||||||
3.15% Senior Notes, due March 15, 2027 (“2027 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 3.15% | |||||||||||||
Current and long-term debt | $ 498,000,000 | 498,000,000 | ||||||||||||
Price (as a percent) | 99.963% | |||||||||||||
Yield (as a percent) | 3.154% | |||||||||||||
Aggregate principal amount | $ 500,000,000 | |||||||||||||
Debt Issuance Costs | $ (2,000,000) | |||||||||||||
3.15% Senior Notes, due March 15, 2027 (“2027 Senior Notes”) | Treasury lock agreements | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Yield (as a percent) | 3.18% | |||||||||||||
Notional amount | $ 450,000,000 | |||||||||||||
Weighted-average all-in rate (as a percent) | 2.37% | |||||||||||||
Gain (loss) on derivative instruments recognized in other comprehensive income | $ 2,000,000 | |||||||||||||
2.00% Senior Notes, due December 1, 2024 (“2024 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 2.00% | |||||||||||||
Current and long-term debt | $ 495,000,000 | 0 | ||||||||||||
Price (as a percent) | 99.421% | |||||||||||||
Yield (as a percent) | 2.122% | |||||||||||||
Aggregate principal amount | $ 500,000,000 | $ 500,000,000 | ||||||||||||
Unamortized Debt (Discount) Premium | (3,000,000) | |||||||||||||
Debt Issuance Costs | $ (2,000,000) | |||||||||||||
2.35% Senior Notes, due August 15, 2022 (“2022 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 2.35% | |||||||||||||
Current and long-term debt | $ 259,000,000 | 252,000,000 | ||||||||||||
Price (as a percent) | 99.911% | |||||||||||||
Yield (as a percent) | 2.36% | |||||||||||||
Aggregate principal amount | $ 250,000,000 | |||||||||||||
Interest rate swap adjustments | 10,000,000 | |||||||||||||
Debt Issuance Costs | $ (1,000,000) | |||||||||||||
2.35% Senior Notes, due August 15, 2022 (“2022 Senior Notes”) | Interest rate swap contracts | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Notional amount | $ 250,000,000 | |||||||||||||
1.70% Senior Notes, due May 10, 2021 (“2021 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 1.70% | |||||||||||||
Current and long-term debt | $ 455,000,000 | 447,000,000 | ||||||||||||
Price (as a percent) | 99.976% | |||||||||||||
Yield (as a percent) | 1.705% | |||||||||||||
Aggregate principal amount | $ 450,000,000 | |||||||||||||
Interest rate swap adjustments | 5,000,000 | |||||||||||||
Debt Issuance Costs | $ 0 | |||||||||||||
1.70% Senior Notes, due May 10, 2021 (“2021 Senior Notes”) | Interest rate swap contracts | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Notional amount | $ 450,000,000 | |||||||||||||
1.70% Senior Notes, due May 10, 2021 (“2021 Senior Notes”) | Treasury lock agreements | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Yield (as a percent) | 1.844% | |||||||||||||
Notional amount | $ 400,000,000 | |||||||||||||
Weighted-average all-in rate (as a percent) | 1.27% | |||||||||||||
Cash paid / (received) on settlement of derivative | $ 1,000,000 | |||||||||||||
1.80% Senior Notes, due February 7, 2020 (“2020 Senior Notes”) | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Interest rate, stated percentage | 1.80% | 1.80% | ||||||||||||
Current and long-term debt | $ 0 | 499,000,000 | ||||||||||||
Aggregate principal amount | $ 500,000,000 | |||||||||||||
Commercial paper | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Current and long-term debt | 0 | 0 | ||||||||||||
Available financing, uncommitted | 1,500,000,000 | |||||||||||||
Other long-term borrowings | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Current and long-term debt | 5,000,000 | 12,000,000 | ||||||||||||
Other current borrowings | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Current and long-term debt | 17,000,000 | 17,000,000 | ||||||||||||
Available financing, uncommitted | 178,000,000 | |||||||||||||
Monthly average amount outstanding | $ 12,000,000 | $ 7,000,000 | ||||||||||||
Weighted-average interest rate (as a percent) | 10.30% | 13.90% | ||||||||||||
Line of Credit | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Available financing, committed | $ 750,000,000 | |||||||||||||
Revolving Credit Facility Expiring October 2023 | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Maximum borrowing capacity | $ 1,500,000,000 | $ 1,500,000,000 | ||||||||||||
Possible additional extended term (in years) | 2 years | |||||||||||||
Maximum borrowing capacity for multi-currency loans | $ 500,000,000 | |||||||||||||
Annual fee | $ 1,000,000 | |||||||||||||
Amount of cross-default provision | 175,000,000 | |||||||||||||
Revolving Credit Facility Expiring October 2023 | Subsequent Event | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Repayments of line of credit facility | $ 750,000,000 | |||||||||||||
4.375% Senior Notes, due June 15, 2045 ("2045 Senior Notes") | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Price (as a percent) | 110.847% | |||||||||||||
Yield (as a percent) | 3.753% | |||||||||||||
Aggregate principal amount | $ 150,000,000 | |||||||||||||
Unamortized Debt (Discount) Premium | 15,000,000 | |||||||||||||
Debt Issuance Costs | $ (1,000,000) | |||||||||||||
1.80% Senior Notes, due February 7, 2020 ("2020 Senior Notes") | LIBOR | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Number of months for LIBOR calculation | 3 months | |||||||||||||
Revolving Credit Facility Expiring October 2021 | ||||||||||||||
Current and long-term debt and available financing | ||||||||||||||
Maximum borrowing capacity | $ 1,500,000,000 |
DERIVATIVE FINANCIAL INSTRUME_3
DERIVATIVE FINANCIAL INSTRUMENTS - Narrative (Details) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020USD ($)Agency | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | |
Derivative | |||
Derivative instruments | |||
Minimum number of nationally recognized rating agencies | Agency | 2 | ||
Maximum exposure to credit risk in the event of non performance by counterparties, gross fair value of contracts in asset positions | $ 102 | ||
1.70% Senior Notes, due May 10, 2021 (“2021 Senior Notes”) | Interest rate swap contracts | |||
Derivative instruments | |||
Notional amount | $ 450 | ||
2.35% Senior Notes, due August 15, 2022 (“2022 Senior Notes”) | Interest rate swap contracts | |||
Derivative instruments | |||
Notional amount | $ 250 | ||
Derivatives in Cash Flow Hedging Relationships | |||
Derivative instruments | |||
Amount expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months | 14 | ||
Accumulated net gain on derivative instruments in AOCI, before tax | 20 | $ 29 | |
Derivatives in Fair Value Hedging Relationships | 1.70% Senior Notes, due May 10, 2021 (“2021 Senior Notes”) | Interest rate swap contracts | |||
Derivative instruments | |||
Notional amount | $ 450 | ||
Derivatives in Fair Value Hedging Relationships | 1.70% Senior Notes, due May 10, 2021 (“2021 Senior Notes”) | Interest rate swap contracts | LIBOR | |||
Derivative instruments | |||
Number of months for LIBOR calculation | 3 months | ||
Derivatives in Fair Value Hedging Relationships | 2.35% Senior Notes, due August 15, 2022 (“2022 Senior Notes”) | Interest rate swap contracts | |||
Derivative instruments | |||
Notional amount | $ 250 | ||
Derivatives in Fair Value Hedging Relationships | 2.35% Senior Notes, due August 15, 2022 (“2022 Senior Notes”) | Interest rate swap contracts | LIBOR | |||
Derivative instruments | |||
Number of months for LIBOR calculation | 3 months | ||
Net investment hedges | |||
Derivative instruments | |||
Notional amount | $ 1,747 | ||
Derivatives Not Designated as Hedging Instruments | Derivatives in Cash Flow Hedging Relationships | |||
Derivative instruments | |||
Notional amount | 3,638 | ||
Derivatives Designated as Hedging Instruments | Derivatives in Cash Flow Hedging Relationships | |||
Derivative instruments | |||
Notional amount | $ 1,297 |
DERIVATIVE FINANCIAL INSTRUME_4
DERIVATIVE FINANCIAL INSTRUMENTS - Derivative Instruments Included in the Consolidated Balance Sheets (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Jun. 30, 2019 |
Derivatives, Fair Value | ||
Derivative Asset, Total | $ 102 | $ 30 |
Derivative Liability, Total | 83 | 32 |
Derivatives Designated as Hedging Instruments | ||
Derivatives, Fair Value | ||
Derivative Asset, Total | 62 | 26 |
Derivative Liability, Total | 68 | 30 |
Derivatives Designated as Hedging Instruments | Prepaid expenses and other current assets | Net investment hedges | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 21 | 0 |
Derivatives Designated as Hedging Instruments | Other accrued liabilities | Net investment hedges | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | 62 | 0 |
Derivatives Designated as Hedging Instruments | Foreign currency cash flow hedges | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 26 | 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 | Interest rate-related derivatives | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 15 | 3 |
Derivatives Designated as Hedging Instruments | Interest rate-related derivatives | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | 3 | 26 |
Derivatives Not Designated as Hedging Instruments | Foreign currency cash flow hedges | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 40 | 4 |
Derivatives Not Designated as Hedging Instruments | Foreign currency cash flow hedges | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | $ 15 | $ 2 |
DERIVATIVE FINANCIAL INSTRUME_5
DERIVATIVE FINANCIAL INSTRUMENTS - Gain (Loss) on Derivative Financial Instruments (Details) - USD ($) $ in Millions | 12 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Gain (loss) on derivative financial instruments | ||
Amount of Gain or (Loss) Recognized in OCI on Derivatives | $ (42) | $ 5 |
Amounts reclassified to earnings during the year | 35 | 29 |
Derivatives in Cash Flow Hedging Relationships | Foreign currency forward contracts | ||
Gain (loss) on derivative financial instruments | ||
Amount of Gain or (Loss) Recognized in OCI on Derivatives | 38 | 29 |
Derivatives in Cash Flow Hedging Relationships | Foreign currency forward contracts | Net Sales | ||
Gain (loss) on derivative financial instruments | ||
Amounts reclassified to earnings during the year | 35 | 28 |
Derivatives in Cash Flow Hedging Relationships | Interest rate-related derivatives | ||
Gain (loss) on derivative financial instruments | ||
Amount of Gain or (Loss) Recognized in OCI on Derivatives | (12) | (24) |
Derivatives in Cash Flow Hedging Relationships | Interest rate-related derivatives | Interest expense | ||
Gain (loss) on derivative financial instruments | ||
Amounts reclassified to earnings during the year | 0 | 1 |
Derivatives in Net Hedging Relationships | ||
Gain (loss) on derivative financial instruments | ||
Gain from net investment hedges from amount excluded from effectiveness testing | 43 | |
Derivatives in Net Hedging Relationships | Foreign currency forward contracts | ||
Gain (loss) on derivative financial instruments | ||
Amount of Gain or (Loss) Recognized in OCI on Derivatives | (68) | 0 |
Amounts reclassified to earnings during the year | 0 | 0 |
Derivatives in Fair Value Hedging Relationships | Interest rate-related derivatives | Interest expense | ||
Gain (loss) on derivative financial instruments | ||
Amount of gain (loss) reclassified from AOCI to earnings | (14) | (27) |
Derivatives in Fair Value Hedging Relationships | Interest rate swap contracts | Interest expense | ||
Gain (loss) on derivative financial instruments | ||
Amount of gain (loss) reclassified from AOCI to earnings | $ 14 | $ 27 |
DERIVATIVE FINANCIAL INSTRUME_6
DERIVATIVE FINANCIAL INSTRUMENTS - Cumulative Amount of Fair Value Hedging Gain (Loss) (Details) $ in Millions | 12 Months Ended |
Jun. 30, 2020USD ($) | |
Derivative instruments | |
Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability | $ 15 |
Derivatives in Fair Value Hedging Relationships | |
Derivative instruments | |
Carrying Amount of the Hedged Liabilities | 714 |
Current debt | |
Derivative instruments | |
Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability | 5 |
Current debt | Derivatives in Fair Value Hedging Relationships | |
Derivative instruments | |
Carrying Amount of the Hedged Liabilities | 455 |
Long-term debt | |
Derivative instruments | |
Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability | 10 |
Long-term debt | Derivatives in Fair Value Hedging Relationships | |
Derivative instruments | |
Carrying Amount of the Hedged Liabilities | $ 259 |
DERIVATIVE FINANCIAL INSTRUME_7
DERIVATIVE FINANCIAL INSTRUMENTS - Effects of Fair Value and Cash Flow Hedging Relationships (Details) - USD ($) $ in Millions | 12 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Derivative instruments | ||
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: | $ 35 | $ 29 |
Net Sales | ||
Derivative instruments | ||
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded | 14,294 | 14,863 |
Net Sales | Foreign currency forward contracts | Derivatives in Cash Flow Hedging Relationships | ||
Derivative instruments | ||
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: | 35 | 28 |
Interest expense | ||
Derivative instruments | ||
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded | 161 | 133 |
Interest expense | Interest rate-related derivatives | Derivatives in Fair Value Hedging Relationships | ||
Derivative instruments | ||
Amount of gain (loss) reclassified from AOCI to earnings | (14) | (27) |
Interest expense | Interest rate-related derivatives | Derivatives in Fair Value Hedging Relationships | Derivatives Designated as Hedging Instruments | ||
Derivative instruments | ||
Amount of gain (loss) reclassified from AOCI to earnings | 14 | 27 |
Interest expense | Interest rate-related derivatives | Derivatives in Cash Flow Hedging Relationships | ||
Derivative instruments | ||
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: | $ 0 | $ 1 |
DERIVATIVE FINANCIAL INSTRUME_8
DERIVATIVE FINANCIAL INSTRUMENTS - Gains and Losses Related to Instruments Not Designated as Hedging Instruments (Details) - USD ($) $ in Millions | 12 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Foreign currency forward contracts | Derivatives Not Designated as Hedging Instruments | Selling, general and administrative expenses | ||
Derivative instruments | ||
Amount of Gain or (Loss) Recognized in Earnings on Derivatives | $ 56 | $ 6 |
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 | Jun. 30, 2020 | Jun. 30, 2019 |
Assets: | ||
Foreign currency forward contracts | $ 87 | $ 27 |
Interest rate-related derivatives | 15 | 3 |
Total | 102 | 30 |
Liabilities: | ||
Foreign currency forward contracts | 80 | 6 |
Interest rate-related derivatives | 3 | 26 |
Contingent consideration | 4 | 36 |
Total | 87 | 68 |
Level 1 | ||
Assets: | ||
Foreign currency forward contracts | 0 | 0 |
Interest rate-related derivatives | 0 | 0 |
Total | 0 | 0 |
Liabilities: | ||
Foreign currency forward contracts | 0 | 0 |
Interest rate-related derivatives | 0 | 0 |
Contingent consideration | 0 | 0 |
Total | 0 | 0 |
Level 2 | ||
Assets: | ||
Foreign currency forward contracts | 87 | 27 |
Interest rate-related derivatives | 15 | 3 |
Total | 102 | 30 |
Liabilities: | ||
Foreign currency forward contracts | 80 | 6 |
Interest rate-related derivatives | 3 | 26 |
Contingent consideration | 0 | 0 |
Total | 83 | 32 |
Level 3 | ||
Assets: | ||
Foreign currency forward contracts | 0 | 0 |
Interest rate-related derivatives | 0 | 0 |
Total | 0 | 0 |
Liabilities: | ||
Foreign currency forward contracts | 0 | 0 |
Interest rate-related derivatives | 0 | 0 |
Contingent consideration | 4 | 36 |
Total | $ 4 | $ 36 |
FAIR VALUE MEASUREMENTS - Estim
FAIR VALUE MEASUREMENTS - Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Jun. 30, 2019 |
Derivatives | ||
Derivative Asset | $ 102 | $ 30 |
Derivative liability | (83) | (32) |
Carrying Amount | ||
Non derivatives | ||
Cash and cash equivalents | 5,022 | 2,987 |
Current and long-term debt | 6,136 | 3,412 |
Additional purchase price payable | 0 | 3 |
Contingent consideration | 4 | 36 |
Carrying Amount | Foreign currency forward contracts | ||
Derivatives | ||
Derivative Asset | 7 | 21 |
Carrying Amount | Interest rate-related derivatives | ||
Derivatives | ||
Derivative Asset | 12 | |
Derivative liability | (23) | |
Fair Value | ||
Non derivatives | ||
Cash and cash equivalents | 5,022 | 2,987 |
Current and long-term debt | 6,902 | 3,706 |
Additional purchase price payable | 0 | 3 |
Contingent consideration | 4 | 36 |
Fair Value | Foreign currency forward contracts | ||
Derivatives | ||
Derivative Asset | 7 | 21 |
Fair Value | Interest rate-related derivatives | ||
Derivatives | ||
Derivative Asset | $ 12 | |
Derivative liability | $ (23) |
FAIR VALUE MEASUREMENTS - Impai
FAIR VALUE MEASUREMENTS - Impairment Charges (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Estimated fair values of financial instruments | ||||
Goodwill, impairment | $ 812 | $ 68 | $ 0 | |
Long-lived assets, impairment | 215 | |||
Non recurring basis | Level 3 | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 812 | |||
Long-lived assets, impairment | 215 | |||
Impairment Charges | 1,426 | |||
Non recurring basis | Level 3 | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, impairment | 364 | |||
Non recurring basis | Level 3 | Fair Value | ||||
Estimated fair values of financial instruments | ||||
Goodwill, fair value | $ 83 | 83 | ||
Long-lived assets, fair value | 200 | 200 | ||
Fair value | 699 | 699 | ||
Non recurring basis | Level 3 | Fair Value | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, fair value | 409 | 409 | ||
Too Faced | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 0 | 592 | ||
Trademark, impairment | 0 | 253 | ||
Customer lists, impairment | 0 | 0 | ||
Too Faced | Non recurring basis | Level 3 | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 592 | |||
Too Faced | Non recurring basis | Level 3 | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, impairment | 253 | |||
Too Faced | Non recurring basis | Level 3 | Fair Value | ||||
Estimated fair values of financial instruments | ||||
Goodwill, fair value | 13 | 13 | ||
Too Faced | Non recurring basis | Level 3 | Fair Value | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, fair value | 272 | 272 | ||
Smashbox | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 0 | 72 | 68 | |
Trademark, impairment | 0 | 23 | 22 | |
Customer lists, impairment | 0 | 0 | ||
Smashbox | Non recurring basis | Level 3 | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 72 | 68 | ||
Impairment Charges | 90 | |||
Smashbox | Non recurring basis | Level 3 | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, impairment | 23 | 22 | ||
Smashbox | Non recurring basis | Level 3 | Fair Value | ||||
Estimated fair values of financial instruments | ||||
Goodwill, fair value | 0 | 0 | 72 | |
Fair value | 127 | |||
Smashbox | Non recurring basis | Level 3 | Fair Value | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, fair value | 32 | 32 | $ 55 | |
Editions de Parfums Frédéric Malle | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 3 | 3 | ||
Trademark, impairment | 11 | 11 | ||
Customer lists, impairment | 0 | 0 | ||
Editions de Parfums Frédéric Malle | Non recurring basis | Level 3 | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 3 | |||
Editions de Parfums Frédéric Malle | Non recurring basis | Level 3 | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, impairment | 11 | |||
Editions de Parfums Frédéric Malle | Non recurring basis | Level 3 | Fair Value | ||||
Estimated fair values of financial instruments | ||||
Goodwill, fair value | 3 | 3 | ||
Editions de Parfums Frédéric Malle | Non recurring basis | Level 3 | Fair Value | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, fair value | 21 | 21 | ||
BECCA | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 15 | 85 | ||
Trademark, impairment | 24 | 71 | ||
Customer lists, impairment | 35 | 35 | ||
BECCA | Non recurring basis | Level 3 | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 85 | |||
Customer lists, impairment | 35 | |||
BECCA | Non recurring basis | Level 3 | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, impairment | 71 | |||
BECCA | Non recurring basis | Level 3 | Fair Value | ||||
Estimated fair values of financial instruments | ||||
Goodwill, fair value | 13 | 13 | ||
Customer lists, fair value | 7 | 7 | ||
BECCA | Non recurring basis | Level 3 | Fair Value | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, fair value | 27 | 27 | ||
GLAMGLOW | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 8 | 60 | ||
Trademark, impairment | 5 | 6 | ||
Customer lists, impairment | 0 | 0 | ||
GLAMGLOW | Non recurring basis | Level 3 | ||||
Estimated fair values of financial instruments | ||||
Goodwill, impairment | 60 | |||
GLAMGLOW | Non recurring basis | Level 3 | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, impairment | 6 | |||
GLAMGLOW | Non recurring basis | Level 3 | Fair Value | ||||
Estimated fair values of financial instruments | ||||
Goodwill, fair value | 54 | 54 | ||
GLAMGLOW | Non recurring basis | Level 3 | Fair Value | Trademark | ||||
Estimated fair values of financial instruments | ||||
Trademark, fair value | $ 57 | $ 57 |
FAIR VALUE MEASUREMENTS - Narra
FAIR VALUE MEASUREMENTS - Narrative (Details) | 12 Months Ended |
Jun. 30, 2020 | |
Level 2 | Additional Purchase Price Payable | Incremental borrowing rate | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Additional purchase price payable measurement input | 0.01 |
Foreign currency forward contracts | LIBOR | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Contract maturities | 12 months |
Foreign currency forward contracts | Swap yield curve | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Contract maturities | 12 months |
FAIR VALUE MEASUREMENTS - Conti
FAIR VALUE MEASUREMENTS - Contingent Consideration Roll forward (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||||||||
Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Business Combination, Contingent Consideration [Roll Forward] | ||||||||||
Changes in fair value | $ (8) | $ (2) | $ (7) | $ (19) | $ (9) | $ 2 | $ (11) | $ (17) | $ (37) | $ (43) |
Selling, general and administrative expenses | ||||||||||
Business Combination, Contingent Consideration [Roll Forward] | ||||||||||
Contingent consideration at June 30, 2019 | 36 | |||||||||
Payments | (15) | |||||||||
Changes in fair value | (17) | |||||||||
Contingent consideration at June 30, 2020 | $ 4 | $ 36 | $ 4 | $ 36 |
REVENUE RECOGNITION (Details)
REVENUE RECOGNITION (Details) - USD ($) $ in Millions | 12 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Revenue from Contract with Customer [Abstract] | ||
Allowance for doubtful accounts and customer deductions | $ 63 | $ 32 |
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 | (271) | |
Revenue deferred during the period | 189 | |
Balance at the end of the period | $ 279 |
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]: 2020-07-01 $ in Millions | Jun. 30, 2020USD ($) |
REVENUE RECOGNITION | |
Expected timing of revenue recognition | 12 months |
Estimated recognition of deferred revenue | $ 222 |
REVENUE RECOGNITION - Adoption
REVENUE RECOGNITION - Adoption of ASC 606 (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Consolidated Statement of Earnings | |||||||||||
Net sales | $ 2,430 | $ 3,345 | $ 4,624 | $ 3,895 | $ 3,590 | $ 3,744 | $ 4,005 | $ 3,524 | $ 14,294 | $ 14,863 | $ 13,683 |
Cost of sales | 3,552 | 3,387 | 2,844 | ||||||||
Gross profit | 1,663 | 2,509 | 3,583 | 2,987 | 2,755 | 2,925 | 3,095 | 2,701 | 10,742 | 11,476 | 10,839 |
Selling, general and administrative | 8,637 | 8,857 | 8,553 | ||||||||
Operating income | $ (543) | $ 109 | $ 261 | $ 779 | $ 216 | $ 674 | $ 771 | $ 652 | 606 | 2,313 | 2,055 |
Provision for income taxes | 350 | 513 | 863 | ||||||||
Net earnings attributable to The Estée Lauder Companies Inc. | $ 684 | $ 1,785 | $ 1,108 | ||||||||
Net earnings attributable to The Estee Lauder Companies Inc. per common share: | |||||||||||
Basic (in dollars per share) | $ (1.28) | $ (0.02) | $ 1.55 | $ 1.65 | $ 0.43 | $ 1.53 | $ 1.58 | $ 1.36 | $ 1.90 | $ 4.91 | $ 3.01 |
Diluted (in dollars per share) | $ (1.28) | $ (0.02) | $ 1.52 | $ 1.61 | $ 0.43 | $ 1.51 | $ 1.55 | $ 1.34 | $ 1.86 | $ 4.82 | $ 2.95 |
Consolidated Balance Sheet | |||||||||||
Accounts receivable, net | $ 1,194 | $ 1,831 | $ 1,194 | $ 1,831 | |||||||
Inventory and promotional merchandise | 2,062 | 2,006 | 2,062 | 2,006 | |||||||
Other assets | 813 | 805 | 813 | 805 | |||||||
Total assets | 17,781 | 13,156 | 17,781 | 13,156 | $ 12,567 | ||||||
Other accrued liabilities | 2,405 | 2,599 | 2,405 | 2,599 | |||||||
Other noncurrent liabilities | 1,448 | 1,244 | 1,448 | 1,244 | |||||||
Total liabilities | 8,745 | 8,745 | |||||||||
Retained earnings | 10,134 | 9,984 | 10,134 | 9,984 | |||||||
Accumulated other comprehensive loss | (665) | (563) | (665) | (563) | |||||||
Total stockholders' equity - The Estee Lauder Companies Inc. | $ 3,935 | 4,386 | 3,935 | 4,386 | |||||||
Consolidated Statement of Cash Flows | |||||||||||
Net earnings | 696 | 1,794 | 1,117 | ||||||||
Changes in operating assets and liabilities | |||||||||||
Decrease (increase) in accounts receivable, net | 625 | (169) | (105) | ||||||||
Increase in inventory and promotional merchandise | (3) | (375) | (147) | ||||||||
Increase in other assets, net | (212) | (62) | 1 | ||||||||
Increase (decrease) in other accrued and noncurrent liabilities | (169) | 285 | 466 | ||||||||
Net cash flows provided by operating activities | $ 2,280 | 2,517 | $ 2,562 | ||||||||
Impact | |||||||||||
Consolidated Statement of Earnings | |||||||||||
Net sales | 49 | ||||||||||
Cost of sales | (300) | ||||||||||
Gross profit | 349 | ||||||||||
Selling, general and administrative | 370 | ||||||||||
Operating income | (21) | ||||||||||
Provision for income taxes | (5) | ||||||||||
Net earnings attributable to The Estée Lauder Companies Inc. | $ (16) | ||||||||||
Net earnings attributable to The Estee Lauder Companies Inc. per common share: | |||||||||||
Basic (in dollars per share) | $ (0.04) | ||||||||||
Diluted (in dollars per share) | $ (0.04) | ||||||||||
Consolidated Balance Sheet | |||||||||||
Accounts receivable, net | (202) | $ (202) | |||||||||
Inventory and promotional merchandise | (21) | (21) | |||||||||
Other assets | (65) | (65) | |||||||||
Total assets | (288) | (288) | |||||||||
Other accrued liabilities | (452) | (452) | |||||||||
Other noncurrent liabilities | (47) | (47) | |||||||||
Total liabilities | (499) | (499) | |||||||||
Retained earnings | 213 | 213 | |||||||||
Accumulated other comprehensive loss | (2) | (2) | |||||||||
Total stockholders' equity - The Estee Lauder Companies Inc. | 211 | 211 | |||||||||
Consolidated Statement of Cash Flows | |||||||||||
Net earnings | (16) | ||||||||||
Changes in operating assets and liabilities | |||||||||||
Decrease (increase) in accounts receivable, net | 5 | ||||||||||
Increase in inventory and promotional merchandise | (6) | ||||||||||
Increase in other assets, net | (5) | ||||||||||
Increase (decrease) in other accrued and noncurrent liabilities | 22 | ||||||||||
Net cash flows provided by operating activities | 0 | ||||||||||
Prior to the adoption of ASC 606 | |||||||||||
Consolidated Statement of Earnings | |||||||||||
Net sales | 14,912 | ||||||||||
Cost of sales | 3,087 | ||||||||||
Gross profit | 11,825 | ||||||||||
Selling, general and administrative | 9,227 | ||||||||||
Operating income | 2,292 | ||||||||||
Provision for income taxes | 508 | ||||||||||
Net earnings attributable to The Estée Lauder Companies Inc. | $ 1,769 | ||||||||||
Net earnings attributable to The Estee Lauder Companies Inc. per common share: | |||||||||||
Basic (in dollars per share) | $ 4.87 | ||||||||||
Diluted (in dollars per share) | $ 4.78 | ||||||||||
Consolidated Balance Sheet | |||||||||||
Accounts receivable, net | 1,629 | $ 1,629 | |||||||||
Inventory and promotional merchandise | 1,985 | 1,985 | |||||||||
Other assets | 740 | 740 | |||||||||
Total assets | 12,868 | 12,868 | |||||||||
Other accrued liabilities | 2,147 | 2,147 | |||||||||
Other noncurrent liabilities | 1,197 | 1,197 | |||||||||
Total liabilities | 8,246 | 8,246 | |||||||||
Retained earnings | 10,197 | 10,197 | |||||||||
Accumulated other comprehensive loss | (565) | (565) | |||||||||
Total stockholders' equity - The Estee Lauder Companies Inc. | $ 4,597 | 4,597 | |||||||||
Consolidated Statement of Cash Flows | |||||||||||
Net earnings | 1,778 | ||||||||||
Changes in operating assets and liabilities | |||||||||||
Decrease (increase) in accounts receivable, net | (164) | ||||||||||
Increase in inventory and promotional merchandise | (381) | ||||||||||
Increase in other assets, net | (67) | ||||||||||
Increase (decrease) in other accrued and noncurrent liabilities | 307 | ||||||||||
Net cash flows provided by operating activities | $ 2,517 |
PENSION, DEFERRED COMPENSATIO_3
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Benefit Obligation, Plan Assets and Amounts Recognized in Balance Sheet (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Change in plan assets: | |||
Fair value of plan assets at beginning of year | $ 1,440 | ||
Fair value of plan assets at end of year | 1,568 | $ 1,440 | |
Amounts recognized in the Balance Sheet consist of: | |||
Accumulated other comprehensive loss | 324 | ||
Pension Plans | U.S. | |||
Change in benefit obligation: | |||
Benefit obligation at beginning of year | 966 | 896 | |
Service cost | 39 | 38 | $ 37 |
Interest cost | 35 | 37 | 33 |
Plan participant contributions | 0 | 0 | |
Actuarial loss (gain) | 101 | 68 | |
Foreign currency exchange rate impact | 0 | 0 | |
Benefits, expenses, taxes and premiums paid | (59) | (73) | |
Settlements | 0 | 0 | |
Benefit obligation at end of year | 1,082 | 966 | 896 |
Change in plan assets: | |||
Fair value of plan assets at beginning of year | 832 | 838 | |
Actual return on plan assets | 109 | 48 | |
Foreign exchange impact | 0 | 0 | |
Employer contributions | 48 | 19 | |
Plan participant contributions | 0 | 0 | |
Settlements | 0 | 0 | |
Benefits, expenses, taxes and premiums paid from plan assets | (59) | (73) | |
Fair value of plan assets at end of year | 930 | 832 | 838 |
Funded status | (152) | (134) | |
Amounts recognized in the Balance Sheet consist of: | |||
Other assets | 0 | 2 | |
Other accrued liabilities | (23) | (24) | |
Other noncurrent liabilities | (129) | (112) | |
Funded status | (152) | (134) | |
Accumulated other comprehensive loss | 283 | 253 | |
Net amount recognized | 131 | 119 | |
Pension Plans | International | |||
Change in benefit obligation: | |||
Benefit obligation at beginning of year | 631 | 588 | |
Service cost | 36 | 30 | 30 |
Interest cost | 11 | 13 | 13 |
Plan participant contributions | 6 | 5 | |
Actuarial loss (gain) | (12) | 51 | |
Foreign currency exchange rate impact | (1) | (18) | |
Benefits, expenses, taxes and premiums paid | (32) | (31) | |
Settlements | (3) | (7) | |
Benefit obligation at end of year | 636 | 631 | 588 |
Change in plan assets: | |||
Fair value of plan assets at beginning of year | 577 | 561 | |
Actual return on plan assets | 43 | 32 | |
Foreign exchange impact | (4) | (16) | |
Employer contributions | 25 | 33 | |
Plan participant contributions | 6 | 5 | |
Settlements | (4) | (7) | |
Benefits, expenses, taxes and premiums paid from plan assets | (32) | (31) | |
Fair value of plan assets at end of year | 611 | 577 | 561 |
Funded status | (25) | (54) | |
Amounts recognized in the Balance Sheet consist of: | |||
Other assets | 127 | 103 | |
Other accrued liabilities | (4) | (3) | |
Other noncurrent liabilities | (148) | (154) | |
Funded status | (25) | (54) | |
Accumulated other comprehensive loss | 24 | 68 | |
Net amount recognized | (1) | 14 | |
Other than Pension Plans Post-retirement | |||
Change in benefit obligation: | |||
Benefit obligation at beginning of year | 183 | 170 | |
Service cost | 3 | 3 | 3 |
Interest cost | 6 | 7 | 7 |
Plan participant contributions | 0 | 1 | |
Actuarial loss (gain) | 6 | 10 | |
Foreign currency exchange rate impact | (1) | (1) | |
Benefits, expenses, taxes and premiums paid | (7) | (7) | |
Settlements | 0 | 0 | |
Benefit obligation at end of year | 190 | 183 | 170 |
Change in plan assets: | |||
Fair value of plan assets at beginning of year | 31 | 34 | |
Actual return on plan assets | 3 | 2 | |
Foreign exchange impact | 0 | 0 | |
Employer contributions | 0 | 1 | |
Plan participant contributions | 0 | 1 | |
Settlements | 0 | 0 | |
Benefits, expenses, taxes and premiums paid from plan assets | (7) | (7) | |
Fair value of plan assets at end of year | 27 | 31 | $ 34 |
Funded status | (163) | (152) | |
Amounts recognized in the Balance Sheet consist of: | |||
Other assets | 0 | 0 | |
Other accrued liabilities | 0 | 0 | |
Other noncurrent liabilities | (163) | (152) | |
Funded status | (163) | (152) | |
Accumulated other comprehensive loss | 17 | 13 | |
Net amount recognized | $ (146) | $ (139) |
PENSION, DEFERRED COMPENSATIO_4
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Pension Plans | U.S. | |||
Components of net periodic benefit cost: | |||
Service cost | $ 39 | $ 38 | $ 37 |
Interest cost | 35 | 37 | 33 |
Expected return on assets | (53) | (55) | (53) |
Amortization of: | |||
Actuarial loss | 15 | 11 | 14 |
Prior service cost | 0 | 1 | 0 |
Settlements | 0 | 0 | 0 |
Special termination benefits | 0 | 0 | 0 |
Net periodic benefit cost | $ 36 | $ 32 | $ 31 |
Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: | |||
Expected return on assets (as a percent) | 6.75% | 6.75% | 7.00% |
Pension Plans | U.S. | Minimum | |||
Weighted-average assumptions used to determine benefit obligations at June 30: | |||
Discount rate (as a percent) | 2.50% | 3.40% | 4.10% |
Rate of compensation increase (as a percent) | 2.50% | 2.50% | 2.50% |
Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: | |||
Discount rate (as a percent) | 3.40% | 4.10% | 3.40% |
Rate of compensation increase (as a percent) | 2.50% | 2.50% | 3.00% |
Pension Plans | U.S. | Maximum | |||
Weighted-average assumptions used to determine benefit obligations at June 30: | |||
Discount rate (as a percent) | 3.00% | 3.80% | 4.30% |
Rate of compensation increase (as a percent) | 8.00% | 8.00% | 8.00% |
Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: | |||
Discount rate (as a percent) | 3.80% | 4.30% | 3.90% |
Rate of compensation increase (as a percent) | 8.00% | 8.00% | 7.00% |
Pension Plans | International | |||
Components of net periodic benefit cost: | |||
Service cost | $ 36 | $ 30 | $ 30 |
Interest cost | 11 | 13 | 13 |
Expected return on assets | (14) | (14) | (15) |
Amortization of: | |||
Actuarial loss | 6 | 3 | 5 |
Prior service cost | 0 | (1) | 0 |
Settlements | 0 | 1 | 0 |
Special termination benefits | 0 | 0 | 1 |
Net periodic benefit cost | $ 39 | $ 32 | $ 34 |
Pension Plans | International | Minimum | |||
Weighted-average assumptions used to determine benefit obligations at June 30: | |||
Discount rate (as a percent) | 0.50% | 0.25% | 0.50% |
Rate of compensation increase (as a percent) | 1.00% | 1.00% | 1.00% |
Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: | |||
Discount rate (as a percent) | 0.25% | 0.50% | 0.50% |
Expected return on assets (as a percent) | 1.50% | 1.50% | 1.75% |
Rate of compensation increase (as a percent) | 1.00% | 1.00% | 1.00% |
Pension Plans | International | Maximum | |||
Weighted-average assumptions used to determine benefit obligations at June 30: | |||
Discount rate (as a percent) | 7.00% | 8.50% | 7.50% |
Rate of compensation increase (as a percent) | 5.50% | 5.50% | 5.50% |
Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: | |||
Discount rate (as a percent) | 8.50% | 7.50% | 6.75% |
Expected return on assets (as a percent) | 8.50% | 7.50% | 6.75% |
Rate of compensation increase (as a percent) | 5.50% | 5.50% | 5.50% |
Other than Pension Plans Post-retirement | |||
Components of net periodic benefit cost: | |||
Service cost | $ 3 | $ 3 | $ 3 |
Interest cost | 6 | 7 | 7 |
Expected return on assets | (2) | (2) | (3) |
Amortization of: | |||
Actuarial loss | 0 | 0 | 0 |
Prior service cost | 0 | 0 | 1 |
Settlements | 0 | 0 | 0 |
Special termination benefits | 0 | 0 | 0 |
Net periodic benefit cost | $ 7 | $ 8 | $ 8 |
Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: | |||
Expected return on assets (as a percent) | 6.75% | 6.75% | 7.00% |
Other than Pension Plans Post-retirement | Minimum | |||
Weighted-average assumptions used to determine benefit obligations at June 30: | |||
Discount rate (as a percent) | 2.70% | 3.25% | 3.75% |
Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: | |||
Discount rate (as a percent) | 3.25% | 3.75% | 3.70% |
Other than Pension Plans Post-retirement | Maximum | |||
Weighted-average assumptions used to determine benefit obligations at June 30: | |||
Discount rate (as a percent) | 9.00% | 9.75% | 9.75% |
Weighted-average assumptions used to determine net periodic benefit cost for the year ended June 30: | |||
Discount rate (as a percent) | 9.75% | 9.75% | 9.75% |
PENSION, DEFERRED COMPENSATIO_5
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Assumed Health Care Cost Trend Rates (Details) - Other than Pension Plans Post-retirement | 12 Months Ended |
Jun. 30, 2020 | |
Assumed health care cost trend rates | |
Assumed weighted-average health care cost trend rate for the coming year (as a percent) | 5.78% |
Weighted-average ultimate trend rate (as a percent) | 4.40% |
Period after which ultimate trend rate is expected to be reached | 18 years |
PENSION, DEFERRED COMPENSATIO_6
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Impact of One-Percentage-Point Change in Assumed Health Care Cost Trend Rates (Details) - Other than Pension Plans Post-retirement $ in Millions | 12 Months Ended |
Jun. 30, 2020USD ($) | |
Effects of one-percentage-point change in assumed health care cost trend rates for fiscal 2018 | |
Effect of one-percentage-point increase on total service and interest costs | $ 1 |
Effect of one-percentage-point decrease on total service and interest costs | (1) |
Effect of one-percentage-point increase on post-retirement benefit obligations | 13 |
Effect of one-percentage-point decrease on post-retirement benefit obligations | $ (11) |
PENSION, DEFERRED COMPENSATIO_7
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Amounts Recognized in AOCI (Before Tax) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
AOCI (before tax) | |||
Balance, beginning of year | $ (4,386) | ||
Translation adjustments | 108 | $ 57 | $ 20 |
Balance, end of year | (3,935) | (4,386) | |
Total amounts recognized in AOCI | 324 | ||
Net actuarial (gains) losses recognized | |||
AOCI (before tax) | |||
Balance, beginning of year | 339 | ||
Actuarial losses recognized | 9 | ||
Amortization and settlements included in net periodic benefit cost | (21) | ||
Translation adjustments | 2 | ||
Balance, end of year | 329 | 339 | |
Net prior service cost (credit) recognized | |||
AOCI (before tax) | |||
Balance, beginning of year | (5) | ||
Amortization and settlements included in net periodic benefit cost | 0 | ||
Balance, end of year | (5) | (5) | |
Pension Plans | U.S. | |||
AOCI (before tax) | |||
Total amounts recognized in AOCI | 283 | 253 | |
Pension Plans | U.S. | Net actuarial (gains) losses recognized | |||
AOCI (before tax) | |||
Balance, beginning of year | 252 | ||
Actuarial losses recognized | 45 | ||
Amortization and settlements included in net periodic benefit cost | (15) | ||
Translation adjustments | 0 | ||
Balance, end of year | 282 | 252 | |
Pension Plans | U.S. | Net prior service cost (credit) recognized | |||
AOCI (before tax) | |||
Balance, beginning of year | 1 | ||
Amortization and settlements included in net periodic benefit cost | 0 | ||
Balance, end of year | 1 | 1 | |
Pension Plans | International | |||
AOCI (before tax) | |||
Total amounts recognized in AOCI | 24 | 68 | |
Pension Plans | International | Net actuarial (gains) losses recognized | |||
AOCI (before tax) | |||
Balance, beginning of year | 74 | ||
Actuarial losses recognized | (40) | ||
Amortization and settlements included in net periodic benefit cost | (6) | ||
Translation adjustments | 2 | ||
Balance, end of year | 30 | 74 | |
Pension Plans | International | Net prior service cost (credit) recognized | |||
AOCI (before tax) | |||
Balance, beginning of year | (6) | ||
Amortization and settlements included in net periodic benefit cost | 0 | ||
Balance, end of year | (6) | (6) | |
Other than Pension Plans Post-retirement | |||
AOCI (before tax) | |||
Total amounts recognized in AOCI | 17 | 13 | |
Other than Pension Plans Post-retirement | Net actuarial (gains) losses recognized | |||
AOCI (before tax) | |||
Balance, beginning of year | 13 | ||
Actuarial losses recognized | 4 | ||
Amortization and settlements included in net periodic benefit cost | 0 | ||
Translation adjustments | 0 | ||
Balance, end of year | 17 | 13 | |
Other than Pension Plans Post-retirement | Net prior service cost (credit) recognized | |||
AOCI (before tax) | |||
Balance, beginning of year | 0 | ||
Amortization and settlements included in net periodic benefit cost | 0 | ||
Balance, end of year | $ 0 | $ 0 |
PENSION, DEFERRED COMPENSATIO_8
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Amounts in AOCI expected to be amortized as components of net periodic benefit cost during fiscal 2019 (Details) $ in Millions | Jun. 30, 2020USD ($) |
Pension Plans | U.S. | |
Amounts in accumulated other comprehensive (income) loss expected to be amortized as components of net periodic benefit cost during fiscal 2020 | |
Net prior service cost (credit) | $ 0 |
Net actuarial losses | 20 |
Pension Plans | International | |
Amounts in accumulated other comprehensive (income) loss expected to be amortized as components of net periodic benefit cost during fiscal 2020 | |
Net prior service cost (credit) | (1) |
Net actuarial losses | 4 |
Other than Pension Plans Post-retirement | |
Amounts in accumulated other comprehensive (income) loss expected to be amortized as components of net periodic benefit cost during fiscal 2020 | |
Net prior service cost (credit) | 0 |
Net actuarial losses | $ 0 |
PENSION, DEFERRED COMPENSATIO_9
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Projected and Accumulated Benefit Obligation and Fair Value of Plan Assets (Details) - USD ($) $ in Millions | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 |
Defined Benefit Plan Disclosure | |||
Fair value of plan assets | $ 1,568 | $ 1,440 | |
Pension Plans | Retirement Growth Account | |||
Defined Benefit Plan Disclosure | |||
Projected benefit obligation | 940 | 830 | |
Accumulated benefit obligation | 887 | 784 | |
Fair value of plan assets | 930 | 832 | |
Pension Plans | Pension Plans Restoration | |||
Defined Benefit Plan Disclosure | |||
Projected benefit obligation | 142 | 136 | |
Accumulated benefit obligation | 124 | 120 | |
Fair value of plan assets | 0 | 0 | |
Pension Plans | International | |||
Defined Benefit Plan Disclosure | |||
Projected benefit obligation | 636 | 631 | $ 588 |
Accumulated benefit obligation | 576 | 569 | |
Fair value of plan assets | 611 | 577 | $ 561 |
Defined benefit plans with obligations in excess of plan assets: | |||
Pension plans with projected benefit obligations in excess of the plans' assets, aggregate projected benefit obligations | 330 | 319 | |
Pension plans with projected benefit obligations in excess of the plans' assets, aggregate fair value of plan assets | 178 | 162 | |
Defined benefit plans with accumulated benefit obligations in excess of plan assets: | |||
Pension plans with accumulated benefit obligations in excess of the plans' assets, aggregate accumulated benefit obligations | 246 | 241 | |
Pension plans with accumulated benefit obligations in excess of the plans' assets, aggregate fair value of plan assets | $ 128 | $ 116 |
PENSION, DEFERRED COMPENSATI_10
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Expected Cash Flows for the Company's Pension and Post-Retirement Plans (Details) $ in Millions | Jun. 30, 2020USD ($) |
Pension Plans | U.S. | |
Expected cash flows for the Company's pension and post-retirement plans | |
Expected employer contributions for year ending June 30, 2021 | $ 0 |
Expected benefit payments for year ending June 30, 2021 | 67 |
Expected benefit payments for year ending June 30, 2022 | 54 |
Expected benefit payments for year ending June 30, 2023 | 52 |
Expected benefit payments for year ending June 30, 2024 | 52 |
Expected benefit payments for year ending June 30, 2025 | 53 |
Expected benefit payments for year ending June 30, Years 2026-2030 | 287 |
Pension Plans | International | |
Expected cash flows for the Company's pension and post-retirement plans | |
Expected employer contributions for year ending June 30, 2021 | 31 |
Expected benefit payments for year ending June 30, 2021 | 25 |
Expected benefit payments for year ending June 30, 2022 | 26 |
Expected benefit payments for year ending June 30, 2023 | 28 |
Expected benefit payments for year ending June 30, 2024 | 27 |
Expected benefit payments for year ending June 30, 2025 | 29 |
Expected benefit payments for year ending June 30, Years 2026-2030 | 145 |
Other than Pension Plans Post-retirement | |
Expected cash flows for the Company's pension and post-retirement plans | |
Expected employer contributions for year ending June 30, 2021 | 0 |
Expected benefit payments for year ending June 30, 2021 | 8 |
Expected benefit payments for year ending June 30, 2022 | 8 |
Expected benefit payments for year ending June 30, 2023 | 9 |
Expected benefit payments for year ending June 30, 2024 | 9 |
Expected benefit payments for year ending June 30, 2025 | 10 |
Expected benefit payments for year ending June 30, Years 2026-2030 | $ 57 |
PENSION, DEFERRED COMPENSATI_11
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Company's Target Asset Allocation at June 30, 2018 (Details) | Jun. 30, 2020 |
Pension Plans | U.S. | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 100.00% |
Pension Plans | U.S. | Equity | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 42.00% |
Pension Plans | U.S. | Debt securities | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 47.00% |
Pension Plans | U.S. | Other | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 11.00% |
Pension Plans | International | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 100.00% |
Pension Plans | International | Equity | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 12.00% |
Pension Plans | International | Debt securities | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 65.00% |
Pension Plans | International | Other | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 23.00% |
Other than Pension Plans Post-retirement | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 100.00% |
Other than Pension Plans Post-retirement | Equity | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 42.00% |
Other than Pension Plans Post-retirement | Debt securities | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 47.00% |
Other than Pension Plans Post-retirement | Other | |
Company's target asset allocation at June 30, 2019 | |
Target asset allocation (as a percent) | 11.00% |
PENSION, DEFERRED COMPENSATI_12
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Fair values of the Company's pension and post-retirement plan assets by asset category (Details) - USD ($) $ in Millions | 12 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | $ 1,568 | $ 1,440 |
Level 1 | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 388 | 353 |
Level 2 | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 825 | 721 |
Level 3 | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 49 | 49 |
Assets Measured at NAV | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 306 | 317 |
Cash and cash equivalents | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 2 | 6 |
Cash and cash equivalents | Level 1 | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 2 | 6 |
Short term investment funds | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 13 | 24 |
Short term investment funds | Level 2 | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 7 | 19 |
Short term investment funds | Assets Measured at NAV | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 6 | 5 |
Government and agency securities | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 152 | 112 |
Government and agency securities | Level 2 | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 152 | 112 |
Commingled funds | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | $ 1,259 | 1,149 |
Commingled funds | Minimum | ||
Defined Benefit Plan Disclosure | ||
Monthly and quarterly redemption notice periods | 10 days | |
Commingled funds | Maximum | ||
Defined Benefit Plan Disclosure | ||
Monthly and quarterly redemption notice periods | 30 days | |
Commingled funds | Level 1 | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | $ 386 | 347 |
Commingled funds | Level 2 | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 666 | 590 |
Commingled funds | Assets Measured at NAV | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 207 | 212 |
Insurance contracts | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 49 | 49 |
Insurance contracts | Level 3 | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | 49 | 49 |
Limited partnerships and hedge fund investments | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | $ 93 | 100 |
Limited partnerships and hedge fund investments | Minimum | ||
Defined Benefit Plan Disclosure | ||
Monthly and quarterly redemption notice periods | 30 days | |
Limited partnerships and hedge fund investments | Maximum | ||
Defined Benefit Plan Disclosure | ||
Monthly and quarterly redemption notice periods | 90 days | |
Limited partnerships and hedge fund investments | Assets Measured at NAV | ||
Defined Benefit Plan Disclosure | ||
Fair value of plan assets | $ 93 | $ 100 |
PENSION, DEFERRED COMPENSATI_13
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - Changes in Level 3 Plan Assets (Details) $ in Millions | 12 Months Ended |
Jun. 30, 2020USD ($) | |
Changes in Level 3 plan assets | |
Fair value of plan assets at beginning of year | $ 1,440 |
Actual return on plan assets: | |
Fair value of plan assets at end of year | 1,568 |
Level 3 | |
Changes in Level 3 plan assets | |
Fair value of plan assets at beginning of year | 49 |
Actual return on plan assets: | |
Fair value of plan assets at end of year | 49 |
Insurance contracts | |
Changes in Level 3 plan assets | |
Fair value of plan assets at beginning of year | 49 |
Actual return on plan assets: | |
Fair value of plan assets at end of year | 49 |
Insurance contracts | Level 3 | |
Changes in Level 3 plan assets | |
Fair value of plan assets at beginning of year | 49 |
Actual return on plan assets: | |
Relating to assets still held at the reporting date | 2 |
Purchases, sales, issuances and settlements, net | (2) |
Foreign exchange impact | 0 |
Fair value of plan assets at end of year | $ 49 |
PENSION, DEFERRED COMPENSATI_14
PENSION, DEFERRED COMPENSATION AND POST-RETIREMENT BENEFIT PLANS - 401(k) Savings Plan (U.S.) and Deferred Compensation (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
401(k) Savings Plan (U.S.) | |||
Minimum period following date of hire after which full-time employees become eligible to participate in the savings plan | 30 days | ||
Minimum service period after which the Company matches a portion of the participant's contributions | 1 year | ||
Company's contribution to contributory defined contribution plan | $ 37 | $ 44 | $ 41 |
Deferred Compensation | |||
Accrued amount of deferred compensation and interest thereon | 85 | 93 | |
Deferred compensation expense (income) to reflect additional deferrals and change in market value (in dollars) | $ 5 | $ 8 | $ 16 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions | Jun. 30, 2020USD ($) | Jun. 30, 2020USD ($) |
Debt service, Payments Due in Fiscal | ||
Debt service | $ 8,992 | $ 8,992 |
Debt service, Payments Due in Fiscal 2021 | 1,386 | 1,386 |
Debt service, Payments Due in Fiscal 2022 | 165 | 165 |
Debt service, Payments Due in Fiscal 2023 | 412 | 412 |
Debt service, Payments Due in Fiscal 2024 | 159 | 159 |
Debt service, Payments Due in Fiscal 2025 | 654 | 654 |
Debt service, Payments Due in Fiscal Thereafter | 6,216 | 6,216 |
Unconditional purchase obligations, Payments Due in Fiscal | ||
Unconditional purchase obligations | 3,768 | 3,768 |
Unconditional purchase obligations, Payments Due in Fiscal 2021 | 1,403 | 1,403 |
Unconditional purchase obligations, Payments Due in Fiscal 2022 | 522 | 522 |
Unconditional purchase obligations, Payments Due in Fiscal 2023 | 557 | 557 |
Unconditional purchase obligations, Payments Due in Fiscal 2024 | 459 | 459 |
Unconditional purchase obligations, Payments Due in Fiscal 2025 | 494 | 494 |
Unconditional purchase obligations, Payments Due in Fiscal Thereafter | 333 | 333 |
Gross unrecognized tax benefits and interest - current, Payments Due in Fiscal | ||
Gross unrecognized tax benefits and interest - current | 3 | |
Gross unrecognized tax benefits and interest - current, Payments Due in Fiscal 2021 | 3 | |
Transition Tax payable, Payments Due in Fiscal | ||
Transition Tax payable | 279 | |
Transition Tax payable, Payments Due in Fiscal 2021 | 17 | |
Transition Tax payable, Payments Due in Fiscal 2022 | 27 | |
Transition Tax payable, Payments Due in Fiscal 2023 | 27 | |
Transition Tax payable, Payments Due in Fiscal 2024 | 51 | |
Transition Tax payable, Payments Due in Fiscal 2025 | 69 | |
Transition Tax payable, Payments Due in Fiscal Thereafter | 88 | |
Total contractual obligations, Payments Due in Fiscal | ||
Total contractual obligations | 13,042 | 13,042 |
Total contractual obligations, Payments Due in Fiscal 2021 | 2,809 | 2,809 |
Total contractual obligations, Payments Due in Fiscal 2022 | 714 | 714 |
Total contractual obligations, Payments Due in Fiscal 2023 | 996 | 996 |
Total contractual obligations, Payments Due in Fiscal 2024 | 669 | 669 |
Total contractual obligations, Payments Due in Fiscal 2025 | 1,217 | 1,217 |
Total contractual obligations, Payments Due in Fiscal Thereafter | 6,637 | 6,637 |
Projected interest costs on long-term and current debt, payments Due in fiscal | ||
Projected interest costs on long-term and current debt Due in fiscal 2021 | 177 | |
Projected interest costs on long-term and current debt Due in fiscal 2022 | 165 | |
Projected interest costs on long-term and current debt Due in fiscal 2023 | 162 | |
Projected interest costs on long-term and current debt Due in fiscal 2024 | 159 | |
Projected interest costs on long-term and current debt Due in fiscal 2025 | 154 | |
Projected interest costs on long-term and current debt Due in fiscal Thereafter | 2,016 | |
Noncurrent unrecognized tax benefits, accrued interest and penalties | $ 76 | $ 76 |
Transition tax repayment period (in years) | 8 years |
COMMON STOCK - Narrative (Detai
COMMON STOCK - Narrative (Details) | Aug. 19, 2020$ / shares | Feb. 05, 2020$ / shares | Oct. 30, 2019$ / shares | Aug. 16, 2019$ / shares | Jun. 30, 2020vote$ / sharesshares | Jun. 30, 2019$ / sharesshares | Jun. 30, 2018$ / shares |
Class of Stock | |||||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |||||
Cash dividends declared per common share (in dollars per share) | $ 1.39 | $ 1.67 | $ 1.48 | ||||
Common Class A | |||||||
Class of Stock | |||||||
Common stock, shares authorized | shares | 1,300,000,000 | 1,300,000,000 | |||||
Common stock, par value (in dollars per share) | $ 0.01 | ||||||
Common stock, votes per share | vote | 1 | ||||||
Remaining authorized share repurchase balance (in shares) | shares | 34,700,000 | ||||||
Cash dividends declared per common share (in dollars per share) | $ 0.48 | $ 0.48 | $ 0.43 | ||||
Common Class A | Subsequent Event | |||||||
Class of Stock | |||||||
Cash dividends declared per common share (in dollars per share) | $ 0.48 | ||||||
Common Class B | |||||||
Class of Stock | |||||||
Common stock, shares authorized | shares | 304,000,000 | 304,000,000 | |||||
Common stock, par value (in dollars per share) | $ 0.01 | ||||||
Common stock, votes per share | vote | 10 | ||||||
Cash dividends declared per common share (in dollars per share) | $ 0.48 | $ 0.48 | $ 0.43 | ||||
Common Class B | Subsequent Event | |||||||
Class of Stock | |||||||
Cash dividends declared per common share (in dollars per share) | $ 0.48 |
COMMON STOCK - Common stock out
COMMON STOCK - Common stock outstanding (Details) - shares | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Common Class A | |||
Increase (Decrease) in Stockholders' Equity | |||
Balance at the beginning of the period (in shares) | 221,564,500 | 224,093,800 | 224,341,200 |
Acquisition of treasury stock (in shares) | (4,665,000) | (10,986,700) | (6,045,400) |
Conversion of Class B to Class A (in shares) | 4,302,400 | 3,513,900 | 710,600 |
Stock-based compensation (in shares) | 4,088,300 | 4,943,500 | 5,087,400 |
Balance at the end of the period (in shares) | 225,290,200 | 221,564,500 | 224,093,800 |
Common Class B | |||
Increase (Decrease) in Stockholders' Equity | |||
Balance at the beginning of the period (in shares) | 139,537,814 | 143,051,700 | 143,762,300 |
Conversion of Class B to Class A (in shares) | (4,302,400) | (3,513,900) | (710,600) |
Balance at the end of the period (in shares) | 135,235,429 | 139,537,814 | 143,051,700 |
COMMON STOCK - Summary of cash
COMMON STOCK - Summary of cash dividends per share (Details) - $ / shares | Mar. 16, 2020 | Feb. 05, 2020 | Dec. 16, 2019 | Oct. 30, 2019 | Sep. 16, 2019 | Aug. 16, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 |
Class of Stock | |||||||||
Cash dividends declared per common share (in dollars per share) | $ 1.39 | $ 1.67 | $ 1.48 | ||||||
Common Class A | |||||||||
Class of Stock | |||||||||
Cash dividends declared per common share (in dollars per share) | $ 0.48 | $ 0.48 | $ 0.43 | ||||||
Cash dividends paid per common share (in dollars per share) | $ 0.48 | $ 0.48 | $ 0.43 | ||||||
Common Class B | |||||||||
Class of Stock | |||||||||
Cash dividends declared per common share (in dollars per share) | $ 0.48 | $ 0.48 | $ 0.43 | ||||||
Cash dividends paid per common share (in dollars per share) | $ 0.48 | $ 0.48 | $ 0.43 |
STOCK PROGRAMS - Narrative (Det
STOCK PROGRAMS - Narrative (Details) $ / shares in Units, $ in Millions | 1 Months Ended | 12 Months Ended | ||||||||||
Mar. 31, 2020$ / sharesshares | Jan. 31, 2020$ / sharesshares | Sep. 30, 2019shares | Sep. 30, 2018shares | Feb. 28, 2018USD ($)trancheshares | Jan. 31, 2016trancheshares | Sep. 30, 2015trancheshares | Jun. 30, 2020USD ($)trancheplan$ / sharesshares | Jun. 30, 2019USD ($)shares | Jun. 30, 2018USD ($)shares | Jan. 28, 2016USD ($) | Sep. 04, 2015USD ($) | |
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Number of active equity compensation plans | plan | 2 | |||||||||||
Total unrecognized compensation cost related to unvested stock-based awards | $ | $ 151 | |||||||||||
Weighted-average period over which compensation cost related to unvested stock-based awards is expected to be recognized | 2 years | |||||||||||
Deferred compensation expense (income) to reflect additional deferrals and change in market value (in dollars) | $ | $ 5 | $ 8 | $ 16 | |||||||||
Stock Options | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Maximum exercise period for all stock options from the date of grant | 10 years | |||||||||||
Number of substantively equal tranches in which stock options grants become exercisable | tranche | 3 | |||||||||||
Service period over which stock option grants generally become exercisable in substantively equal tranches | 4 years | |||||||||||
Restricted Stock Units (RSUs) | Employee | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Granted (in shares) | 834,500 | |||||||||||
Weighted-average grant date fair value (in dollars per share) | $ / shares | $ 199.25 | |||||||||||
Vested (in shares) | 1,233,300 | |||||||||||
Restricted Stock Units (RSUs) | Employee | RSU grants scheduled to vest in fiscal 2020 | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Granted (in shares) | 800,000 | |||||||||||
Vested (in shares) | 300,000 | |||||||||||
Restricted Stock Units (RSUs) | Employee | RSU grants scheduled to vest in fiscal 2021 | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Vested (in shares) | 300,000 | |||||||||||
Restricted Stock Units (RSUs) | Employee | RSU grants scheduled to vest in fiscal 2022 | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Vested (in shares) | 200,000 | |||||||||||
Performance Share Units | Employee | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Granted (in shares) | 198,500 | |||||||||||
Weighted-average grant date fair value (in dollars per share) | $ / shares | $ 187.10 | |||||||||||
Vesting period | 3 years | |||||||||||
Vested (in shares) | 512,100 | 300,000 | 300,000 | |||||||||
Long-term Performance Share Units | Performance periods ending June 30, 2018 and 2019 | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Common Stock issued (in shares) | 387,848 | |||||||||||
Cash Units | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Deferred compensation expense (income) to reflect additional deferrals and change in market value (in dollars) | $ | $ 2 | $ 9 | $ 12 | |||||||||
Common Class A | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Number of Class A Common Stock shares authorized under active equity compensation plans (in shares) | 88,800,000 | |||||||||||
Number of Class A Common Stock shares reserved and available to be granted pursuant to equity compensation plans (in shares) | 15,000,000 | |||||||||||
Common Stock issued (in shares) | 4,088,300 | 4,943,500 | 5,087,400 | |||||||||
Common Class A | Performance Share Units | Employee | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Common Stock issued (in shares) | 400,000 | 400,000 | 200,000 | |||||||||
Common Class A | Performance Share Units | Employee | PSU settled June 30, 2020 | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Granted (in shares) | 100,000 | 100,000 | 100,000 | |||||||||
Weighted-average grant date fair value (in dollars per share) | $ / shares | $ 162.16 | $ 162.16 | $ 199.18 | |||||||||
Common Class A | Long-term Performance Share Units | Performance period ending January 29, 2019 | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Common Stock issued (in shares) | 23,898 | 71,694 | ||||||||||
Common Class A | Long-term Performance Share Units | Employee | Executive | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Payout for performance share units in Class A Common Stock (in shares) | 195,940 | 71,694 | 387,848 | |||||||||
Number of tranches | tranche | 2 | 3 | ||||||||||
Grant date fair value (in USD) | $ | $ 27 | $ 6 | $ 30 | |||||||||
Business days to make tranche payment | 30 days | |||||||||||
Common Class A | Long-term Performance Share Units | Employee | Performance period ending June 30, 2018 | Executive | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Payout for performance share units in Class A Common Stock (in shares) | 129,283 | |||||||||||
Common Class A | Long-term Performance Share Units | Employee | Performance period ending January 29, 2018 | Executive | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Payout for performance share units in Class A Common Stock (in shares) | 23,898 | |||||||||||
Number of tranches | tranche | 3 | |||||||||||
Common Class A | Long-term Performance Share Units | Employee | Share Based Compensation Award Performance Period 2022 | Executive | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||||||||||
Payout for performance share units in Class A Common Stock (in shares) | 97,970 |
STOCK PROGRAMS - Schedule of st
STOCK PROGRAMS - Schedule of stock-based compensation expense (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Share-based Payment Arrangement [Abstract] | |||
Compensation expense | $ 213 | $ 243 | $ 236 |
Income tax benefit | $ 41 | $ 47 | $ 49 |
STOCK PROGRAMS - Summary of sto
STOCK PROGRAMS - Summary of stock option programs (Details) - Stock Options $ / shares in Units, $ in Millions | 12 Months Ended |
Jun. 30, 2020USD ($)$ / sharesshares | |
Shares | |
Outstanding at the beginning of the year (in shares) | shares | 9,848,000 |
Grant at fair value (in shares) | shares | 1,332,200 |
Exercised (in shares) | shares | (2,454,500) |
Expired (in shares) | shares | (13,800) |
Forfeited (in shares) | shares | (66,900) |
Outstanding at the end of the period (in shares) | shares | 8,645,000 |
Vested and expected to vest (in shares) | shares | 8,595,900 |
Exercisable (in shares) | shares | 5,780,600 |
Weighted-Average Exercise Price Per Share | |
Outstanding at the beginning of the year (in dollars per share) | $ / shares | $ 87.68 |
Weighted-average grant date fair value (in dollars per share) | $ / shares | 199.24 |
Exercise price (in dollars per share) | $ / shares | 73.68 |
Expired (in dollars per share) | $ / shares | 99.14 |
Forfeited (in dollars per share) | $ / shares | 155.66 |
Outstanding at the end of the period (in dollars per share) | $ / shares | 108.30 |
Vested and expected to vest Weighted-Average Exercise Price (in dollars per share) | $ / shares | 107.86 |
Exercisable Weighted-Average Exercise Price (in dollars per share) | $ / shares | $ 82.85 |
Additional General Disclosures | |
Outstanding Aggregate Intrinsic Value (in dollars) | $ | $ 709 |
Outstanding, Weighted-Average Contractual Life Remaining | 6 years |
Vested and expected to vest, Aggregate Intrinsic Value (in dollars) | $ | $ 708 |
Vested and expected to vest, Weighted-Average Contractual Life Remaining | 6 years |
Exercisable, Aggregate Intrinsic Value (in dollars) | $ | $ 612 |
Exercisable, Weighted-Average Contractual Life Remaining | 4 years 10 months 24 days |
STOCK PROGRAMS - Summary of wei
STOCK PROGRAMS - Summary of weighted-average grant date fair value and intrinsic value of stock options exercised (Details) - Stock Options - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award | |||
Per-share weighted-average grant date fair value of stock options granted (in dollars per share) | $ 51.46 | $ 38.62 | $ 27.76 |
Intrinsic value of stock options exercised | $ 309 | $ 283 | $ 246 |
STOCK PROGRAMS - Schedule of fa
STOCK PROGRAMS - Schedule of fair value option-pricing assumptions (Details) - Stock Options | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award | |||
Weighted-average expected stock-price volatility (as a percent) | 25.10% | 24.50% | 25.60% |
Weighted-average expected option life | 7 years | 7 years | 7 years |
Average risk-free interest rate (as a percent) | 1.50% | 2.80% | 2.00% |
Average dividend yield (as a percent) | 1.00% | 1.10% | 1.50% |
STOCK PROGRAMS - Summary of res
STOCK PROGRAMS - Summary of restricted stock units (RSUs) (Details) - Restricted Stock Units (RSUs) - Employee | 12 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Shares | |
Nonvested at the beginning of the period (in shares) | shares | 2,441,900 |
Granted (in shares) | shares | 834,500 |
Dividend equivalents (in shares) | shares | 13,700 |
Vested (in shares) | shares | (1,233,300) |
Forfeited (in shares) | shares | (108,500) |
Nonvested at the end of the period (in shares) | shares | 1,948,300 |
Weighted-Average Grant Date Fair Value | |
Nonvested at the beginning of the period (in dollars per share) | $ / shares | $ 119.62 |
Granted (in dollars per share) | $ / shares | 199.25 |
Dividend equivalents (in dollars per share) | $ / shares | 178.63 |
Vested (in dollars per share) | $ / shares | 111.44 |
Forfeited (in dollars per share) | $ / shares | 145.42 |
Nonvested at the end of the period (in dollars per share) | $ / shares | $ 157.89 |
STOCK PROGRAMS - Summary of per
STOCK PROGRAMS - Summary of performance share units (PSUs) (Details) - Performance Share Units - Employee - $ / shares | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Other Equity Compensation Plans | |||
Nonvested at the beginning of the period (in shares) | 1,009,800 | ||
Granted (in shares) | 198,500 | ||
Vested (in shares) | (512,100) | (300,000) | (300,000) |
Forfeited (in shares) | (1,100) | ||
Nonvested at the end of the period (in shares) | 695,100 | 1,009,800 | |
Weighted-Average Grant Date Fair Value | |||
Nonvested at the beginning of the period (in dollars per share) | $ 105.92 | ||
Weighted-average grant date fair value (in dollars per share) | 187.10 | ||
Vested (in dollars per share) | 92.19 | ||
Forfeited (in dollars per share) | 132.73 | ||
Nonvested at the end of the period (in dollars per share) | $ 139.17 | $ 105.92 |
STOCK PROGRAMS - Summary of sta
STOCK PROGRAMS - Summary of status of share units (Details) - Share Units - Non-employee | 12 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Shares | |
Outstanding at the beginning of the period (in shares) | shares | 131,200 |
Granted (in shares) | shares | 4,600 |
Dividend equivalents (in shares) | shares | 1,000 |
Outstanding at the end of the period (in shares) | shares | 136,800 |
Weighted-Average Grant Date Fair Value Per Share | |
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 57.22 |
Weighted-average grant date fair value (in dollars per share) | $ / shares | 190.99 |
Dividend equivalents (in dollars per share) | $ / shares | 177.86 |
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 62.46 |
NET EARNINGS ATTRIBUTABLE TO _3
NET EARNINGS 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 | 12 Months Ended | |||||||||
Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Numerator: | |||||||||||
Net earnings attributable to The Estée Lauder Companies Inc. | $ 684 | $ 1,785 | $ 1,108 | ||||||||
Denominator: | |||||||||||
Weighted-average common shares outstanding- Basic (in shares) | 360.6 | 363.5 | 368 | ||||||||
Weighted-average common shares outstanding - Diluted (in shares) | 366.9 | 370.4 | 375.7 | ||||||||
Net earnings attributable to The Estee Lauder Companies Inc. per common share: | |||||||||||
Basic (in dollars per share) | $ (1.28) | $ (0.02) | $ 1.55 | $ 1.65 | $ 0.43 | $ 1.53 | $ 1.58 | $ 1.36 | $ 1.90 | $ 4.91 | $ 3.01 |
Diluted (in dollars per share) | $ (1.28) | $ (0.02) | $ 1.52 | $ 1.61 | $ 0.43 | $ 1.51 | $ 1.55 | $ 1.34 | $ 1.86 | $ 4.82 | $ 2.95 |
Stock Options | |||||||||||
Denominator: | |||||||||||
Effect (in shares) | 4.4 | 4.7 | 5.2 | ||||||||
Performance Share Units | |||||||||||
Denominator: | |||||||||||
Effect (in shares) | 0.3 | 0.5 | 0.4 | ||||||||
Restricted Stock Units | |||||||||||
Denominator: | |||||||||||
Effect (in shares) | 1.6 | 1.7 | 2.1 |
NET EARNINGS ATTRIBUTABLE TO _4
NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE - Antidilutive Securities Excluded from Computation of Earnings, Per Share (Details) - shares | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Stock Options | |||
Antidilutive Securities Excluded from Computation of Earnings, Per Share | |||
Antidilutive shares excluded from the calculation of diluted earnings per share | 1,300,000 | 0 | 0 |
Contingently Issuable Shares | |||
Antidilutive Securities Excluded from Computation of Earnings, Per Share | |||
Antidilutive shares excluded from the calculation of diluted earnings per share | 1,200,000 | 1,300,000 | 1,000,000 |
ACCUMULATED OTHER COMPREHENSI_3
ACCUMULATED OTHER COMPREHENSIVE LOSS - Changes in AOCI by Component (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Changes in AOCI, net of tax by component | |||
Beginning of the period | $ 4,411 | $ 4,710 | |
Amounts reclassified to earnings during the year | 35 | 29 | |
Benefit for deferred income taxes | 3 | 40 | $ (34) |
Other comprehensive income (loss) | (102) | (129) | 82 |
End of the period | 3,962 | 4,411 | 4,710 |
Accumulated other comprehensive loss | (665) | (563) | |
AOCI | |||
Changes in AOCI, net of tax by component | |||
Beginning of the period | (563) | (434) | (484) |
Other comprehensive income (loss) | (102) | (129) | 82 |
End of the period | (665) | (563) | (434) |
Accumulated other comprehensive loss | (665) | (563) | (434) |
Net unrealized investment gains (losses) | |||
Changes in AOCI, net of tax by component | |||
Beginning of the period | 0 | (14) | (1) |
Other comprehensive income (loss) | 0 | 14 | (13) |
End of the period | 0 | 0 | (14) |
Net derivative instruments | |||
Changes in AOCI, net of tax by component | |||
Beginning of the period | 21 | 39 | (3) |
Other comprehensive income (loss), before reclassifications, before tax | 26 | 5 | 12 |
Benefit (provision) for deferred income taxes | (7) | (2) | (2) |
Reclassification to earnings, tax | 9 | 8 | (15) |
Reclassification to retained earnings | 0 | 0 | 2 |
End of the period | 14 | 21 | 39 |
Net derivative instruments | Foreign currency cash flow hedges | |||
Changes in AOCI, net of tax by component | |||
Amounts reclassified to earnings during the year | (35) | (28) | 46 |
Net derivative instruments | Interest rate-related derivatives | |||
Changes in AOCI, net of tax by component | |||
Amounts reclassified to earnings during the year | 0 | (1) | (1) |
Amounts Included in Net Periodic Benefit Cost | |||
Changes in AOCI, net of tax by component | |||
Beginning of the period | (253) | (175) | (213) |
Other comprehensive income (loss), before reclassifications, before tax | (2) | 2 | (1) |
Benefit (provision) for deferred income taxes | 4 | 25 | (15) |
Reclassification to earnings, tax | (5) | (3) | (4) |
Reclassification to retained earnings | 0 | 0 | (34) |
End of the period | (244) | (253) | (175) |
Net actuarial (gains) losses recognized | |||
Changes in AOCI, net of tax by component | |||
Other comprehensive income (loss), before reclassifications, before tax | (9) | (117) | 67 |
Amounts reclassified to earnings during the year | 21 | 15 | 19 |
Net prior service cost (credit) recognized | |||
Changes in AOCI, net of tax by component | |||
Other comprehensive income (loss), before reclassifications, before tax | 0 | 0 | 5 |
Amounts reclassified to earnings during the year | 0 | 0 | 1 |
Translation adjustments | |||
Changes in AOCI, net of tax by component | |||
Beginning of the period | (331) | (284) | (267) |
Other comprehensive income (loss), before reclassifications, before tax | (108) | 18 | (19) |
Amounts reclassified to earnings during the year | 2 | (77) | 0 |
Benefit for deferred income taxes | 2 | 12 | 2 |
End of the period | $ (435) | $ (331) | $ (284) |
ACCUMULATED OTHER COMPREHENSI_4
ACCUMULATED OTHER COMPREHENSIVE LOSS - Schedule of Components of AOCI - Footnotes (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Reclassification adjustments from accumulated other comprehensive income (loss) | |||||||||||
Net sales | $ 2,430 | $ 3,345 | $ 4,624 | $ 3,895 | $ 3,590 | $ 3,744 | $ 4,005 | $ 3,524 | $ 14,294 | $ 14,863 | $ 13,683 |
Cost of sales | 3,552 | 3,387 | 2,844 | ||||||||
Selling, general and administrative | 8,637 | 8,857 | 8,553 | ||||||||
Net derivative instruments | Foreign currency cash flow hedges | Amount Reclassified from AOCI | |||||||||||
Reclassification adjustments from accumulated other comprehensive income (loss) | |||||||||||
Net sales | $ (35) | $ (28) | |||||||||
Cost of sales | 22 | ||||||||||
Selling, general and administrative | $ 24 |
STATEMENT OF CASH FLOWS (Detail
STATEMENT OF CASH FLOWS (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Cash: | |||
Cash paid during the year for interest | $ 153 | $ 131 | $ 128 |
Cash paid during the year for income taxes | 537 | 588 | 351 |
Non-cash investing and financing activities: | |||
Purchase price refund receivable | 32 | 0 | 0 |
Capital lease, capitalized interest and asset retirement obligations incurred | 2 | 15 | 9 |
Non-cash purchases of short- and long-term investments, net | 0 | 0 | 14 |
Property, plant and equipment accrued but unpaid | $ 39 | $ 52 | $ 43 |
SEGMENT DATA AND RELATED INFO_3
SEGMENT DATA AND RELATED INFORMATION - Narrative (Details) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2020USD ($)segment | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | |
SEGMENT DATA AND RELATED INFORMATION | |||||||||||
Number of operating segments | segment | 1 | ||||||||||
Net sales | $ 2,430 | $ 3,345 | $ 4,624 | $ 3,895 | $ 3,590 | $ 3,744 | $ 4,005 | $ 3,524 | $ 14,294 | $ 14,863 | $ 13,683 |
Long-lived assets | 2,055 | 2,068 | 2,055 | 2,068 | |||||||
Europe, the Middle East & Africa | |||||||||||
SEGMENT DATA AND RELATED INFORMATION | |||||||||||
Increase (decrease) in operating income | (866) | (661) | |||||||||
The Americas | |||||||||||
SEGMENT DATA AND RELATED INFORMATION | |||||||||||
Increase (decrease) in operating income | 866 | 661 | |||||||||
U.S. | |||||||||||
SEGMENT DATA AND RELATED INFORMATION | |||||||||||
Net sales | 3,449 | 4,295 | 4,531 | ||||||||
Long-lived assets | $ 2,192 | $ 953 | $ 2,192 | $ 953 | $ 912 | ||||||
China | Net sales | |||||||||||
SEGMENT DATA AND RELATED INFORMATION | |||||||||||
Percentage of net sales (as a percent) | 24.00% | 17.00% | 13.00% |
SEGMENT DATA AND RELATED INFO_4
SEGMENT DATA AND RELATED INFORMATION (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Net sales: | |||||||||||
Net sales before returns associated with restructuring and other activities | $ 14,294 | $ 14,866 | $ 13,691 | ||||||||
Charges associated with restructuring and other activities | (83) | (241) | (257) | ||||||||
Net sales | $ 2,430 | $ 3,345 | $ 4,624 | $ 3,895 | $ 3,590 | $ 3,744 | $ 4,005 | $ 3,524 | 14,294 | 14,863 | 13,683 |
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 611 | 557 | 531 | ||||||||
Operating income (loss) before charges associated with restructuring and other activities: | |||||||||||
Operating income (loss) before charges associated with restructuring activities | 689 | 2,554 | 2,312 | ||||||||
Operating income | (543) | $ 109 | $ 261 | $ 779 | 216 | $ 674 | $ 771 | $ 652 | 606 | 2,313 | 2,055 |
Reconciliation: | |||||||||||
Interest expense | (161) | (133) | (128) | ||||||||
Interest income and investment income, net | 48 | 58 | 56 | ||||||||
Other components of net periodic benefit cost | (4) | (2) | (3) | ||||||||
Other income, net | 557 | 71 | 0 | ||||||||
Earnings before income taxes | 1,046 | 2,307 | 1,980 | ||||||||
ASSETS | |||||||||||
Total assets | 17,781 | 13,156 | 17,781 | 13,156 | 12,567 | ||||||
Long-lived assets | |||||||||||
Long-lived assets | 4,337 | 2,068 | 4,337 | 2,068 | 1,823 | ||||||
Sales Returns (included in Net Sales) | |||||||||||
Net sales: | |||||||||||
Charges associated with restructuring and other activities | 0 | (3) | (8) | ||||||||
The Americas | |||||||||||
Net sales: | |||||||||||
Net sales before returns associated with restructuring and other activities | 3,794 | 4,741 | 5,015 | ||||||||
Operating income (loss) before charges associated with restructuring and other activities: | |||||||||||
Operating income (loss) before charges associated with restructuring activities | (1,044) | 672 | 872 | ||||||||
ASSETS | |||||||||||
Total assets | 9,189 | 7,661 | 9,189 | 7,661 | 7,558 | ||||||
Long-lived assets | |||||||||||
Long-lived assets | 2,512 | 1,230 | 2,512 | 1,230 | 1,138 | ||||||
Europe, the Middle East & Africa | |||||||||||
Net sales: | |||||||||||
Net sales before returns associated with restructuring and other activities | 6,262 | 6,452 | 5,634 | ||||||||
Operating income (loss) before charges associated with restructuring and other activities: | |||||||||||
Operating income (loss) before charges associated with restructuring activities | 997 | 1,153 | 865 | ||||||||
ASSETS | |||||||||||
Total assets | 4,319 | 3,862 | 4,319 | 3,862 | 3,855 | ||||||
Long-lived assets | |||||||||||
Long-lived assets | 1,306 | 647 | 1,306 | 647 | 525 | ||||||
Asia/Pacific | |||||||||||
Net sales: | |||||||||||
Net sales before returns associated with restructuring and other activities | 4,238 | 3,673 | 3,042 | ||||||||
Operating income (loss) before charges associated with restructuring and other activities: | |||||||||||
Operating income (loss) before charges associated with restructuring activities | 736 | 729 | 575 | ||||||||
ASSETS | |||||||||||
Total assets | 4,273 | 1,633 | 4,273 | 1,633 | 1,154 | ||||||
Long-lived assets | |||||||||||
Long-lived assets | $ 519 | $ 191 | 519 | 191 | 160 | ||||||
Skin care | |||||||||||
Net sales: | |||||||||||
Net sales before returns associated with restructuring and other activities | 7,382 | 6,551 | 5,595 | ||||||||
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 268 | 202 | 185 | ||||||||
Operating income (loss) before charges associated with restructuring and other activities: | |||||||||||
Operating income (loss) before charges associated with restructuring activities | 2,125 | 1,925 | 1,514 | ||||||||
Makeup | |||||||||||
Net sales: | |||||||||||
Net sales before returns associated with restructuring and other activities | 4,794 | 5,860 | 5,633 | ||||||||
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 242 | 257 | 255 | ||||||||
Operating income (loss) before charges associated with restructuring and other activities: | |||||||||||
Operating income (loss) before charges associated with restructuring activities | (1,438) | 438 | 549 | ||||||||
Fragrance | |||||||||||
Net sales: | |||||||||||
Net sales before returns associated with restructuring and other activities | 1,563 | 1,802 | 1,826 | ||||||||
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 71 | 69 | 64 | ||||||||
Operating income (loss) before charges associated with restructuring and other activities: | |||||||||||
Operating income (loss) before charges associated with restructuring activities | 17 | 140 | 176 | ||||||||
Hair care | |||||||||||
Net sales: | |||||||||||
Net sales before returns associated with restructuring and other activities | 515 | 584 | 570 | ||||||||
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 28 | 26 | 24 | ||||||||
Operating income (loss) before charges associated with restructuring and other activities: | |||||||||||
Operating income (loss) before charges associated with restructuring activities | (19) | 39 | 64 | ||||||||
Other | |||||||||||
Net sales: | |||||||||||
Net sales before returns associated with restructuring and other activities | 40 | 69 | 67 | ||||||||
Depreciation and amortization: | |||||||||||
Depreciation and amortization | 2 | 3 | 3 | ||||||||
Operating income (loss) before charges associated with restructuring and other activities: | |||||||||||
Operating income (loss) before charges associated with restructuring activities | $ 4 | $ 12 | $ 9 |
UNAUDITED QUARTERLY FINANCIAL_3
UNAUDITED QUARTERLY FINANCIAL DATA (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
UNAUDITED QUARTERLY FINANCIAL DATA | |||||||||||
Net sales | $ 2,430 | $ 3,345 | $ 4,624 | $ 3,895 | $ 3,590 | $ 3,744 | $ 4,005 | $ 3,524 | $ 14,294 | $ 14,863 | $ 13,683 |
Gross profit | 1,663 | 2,509 | 3,583 | 2,987 | 2,755 | 2,925 | 3,095 | 2,701 | 10,742 | 11,476 | 10,839 |
Operating income (loss) | (543) | 109 | 261 | 779 | 216 | 674 | 771 | 652 | 606 | 2,313 | 2,055 |
Net earnings (loss) attributable to The Estée Lauder Companies Inc. | $ (462) | $ (6) | $ 557 | $ 595 | $ 157 | $ 555 | $ 573 | $ 500 | $ 684 | $ 1,785 | $ 1,108 |
Net earnings (loss) attributable to The Estée Lauder Companies Inc. per common share: | |||||||||||
Basic (in dollars per share) | $ (1.28) | $ (0.02) | $ 1.55 | $ 1.65 | $ 0.43 | $ 1.53 | $ 1.58 | $ 1.36 | $ 1.90 | $ 4.91 | $ 3.01 |
Diluted (in dollars per share) | $ (1.28) | $ (0.02) | $ 1.52 | $ 1.61 | $ 0.43 | $ 1.51 | $ 1.55 | $ 1.34 | $ 1.86 | $ 4.82 | $ 2.95 |
Schedule of Equity Method Investments [Line Items] | |||||||||||
Charges associated with restructuring and other activities | $ (20) | $ (25) | $ (13) | $ (25) | $ (124) | $ (35) | $ (35) | $ (47) | |||
Charges associated with restructuring and other activities, net of tax | $ (17) | $ (20) | $ (10) | $ (21) | $ (95) | $ (27) | $ (31) | $ (37) | |||
Charges associated with restructuring and other activities net of tax, per diluted common share (in dollars per share) | $ (0.05) | $ (0.05) | $ (0.03) | $ (0.06) | $ (0.25) | $ (0.07) | $ (0.08) | $ (0.10) | |||
Changes in fair value of contingent consideration | $ 8 | $ 2 | $ 7 | $ 19 | $ 9 | $ (2) | $ 11 | $ 17 | $ 37 | $ 43 | |
Change in fair value of contingent consideration net of tax | $ 8 | $ 2 | $ 6 | $ 16 | $ 7 | (1) | $ 9 | ||||
Change in fair value of contingent consideration net of tax per diluted common share (in dollars per share) | $ 0.02 | $ 0.01 | $ 0.02 | $ 0.04 | $ 0.02 | $ 0.02 | |||||
Impacts and charges resulting from the TCJA | $ (6) | $ 1 | |||||||||
Impacts and charges resulting from the TCJA, per diluted common share (in dollars per share) | $ (0.02) | $ (0.01) | |||||||||
Goodwill, other intangible and long-lived asset impairments | $ (303) | $ (346) | $ (777) | $ (52) | $ (38) | (1,426) | (90) | 0 | |||
Goodwill, other intangible and long-lived asset impairments net of tax | $ (254) | $ (298) | $ (663) | $ (52) | $ (34) | ||||||
Goodwill and other intangible asset impairments net of tax per diluted common share (in dollars per share) | $ (0.70) | $ (0.83) | $ (1.81) | $ (0.14) | $ (0.09) | ||||||
Gain on liquidation of an investment in a foreign subsidiary, net | $ 71 | $ 0 | $ 71 | $ 0 | |||||||
Gain on liquidation of an investment in a foreign subsidiary, net of tax | $ 57 | ||||||||||
Gain on liquidation of an investment in a foreign subsidiary, net of tax per diluted common share (in dollars per share) | $ 0.15 | ||||||||||
Have&Be Co. Ltd | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Other income, net | $ 19 | $ 576 | |||||||||
Other income, net, net of tax | $ 9 | $ 450 | |||||||||
Other income, net, net of tax, diluted common share (in dollars per share) | $ (0.02) | $ 1.23 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) | Aug. 20, 2020 | Aug. 18, 2020 | Aug. 31, 2020 | Jun. 30, 2020 | Oct. 31, 2018 |
Subsequent Event | |||||
Subsequent Event [Line Items] | |||||
Debt instrument, repayment date | Aug. 31, 2020 | ||||
Subsequent Event | Restructuring Program | |||||
Subsequent Event [Line Items] | |||||
Restructuring program, period (in years) | 2 years | ||||
Restructuring and related activities, initiation date | Aug. 18, 2020 | ||||
Restructuring and related activities, restructuring program announcement date | Aug. 20, 2020 | ||||
Subsequent Event | Restructuring Program | Minimum | |||||
Subsequent Event [Line Items] | |||||
Restructuring and related cost, expected cost | $ 400,000,000 | ||||
Subsequent Event | Restructuring Program | Maximum | |||||
Subsequent Event [Line Items] | |||||
Restructuring and related cost, expected cost | $ 500,000,000 | ||||
Revolving Credit Facility Expiring October 2023 | |||||
Subsequent Event [Line Items] | |||||
Maximum borrowing capacity | $ 1,500,000,000 | $ 1,500,000,000 | |||
Revolving Credit Facility Expiring October 2023 | Subsequent Event | |||||
Subsequent Event [Line Items] | |||||
Repayments of line of credit facility | $ 750,000,000 |
SCHEDULE II - VALUATION AND Q_2
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2018 | |
Allowance for doubtful accounts and customer deductions: | |||
Reserves deducted in the balance sheet from the assets to which they apply: | |||
Balance at Beginning of Period | $ 32 | $ 29 | $ 30 |
Additions Charged to Costs and Expenses | 45 | 27 | 23 |
Additions Charged to Other Accounts | 0 | 0 | 0 |
Deductions | 14 | 24 | 24 |
Balance at End of Period | 63 | 32 | 29 |
Sales return accrual: | |||
Reserves deducted in the balance sheet from the assets to which they apply: | |||
Balance at Beginning of Period | 108 | 105 | 109 |
Additions Charged to Costs and Expenses | 520 | 488 | 493 |
Additions Charged to Other Accounts | 0 | 0 | 0 |
Deductions | 514 | 485 | 497 |
Balance at End of Period | 114 | 108 | 105 |
Deferred tax valuation allowance: | |||
Reserves deducted in the balance sheet from the assets to which they apply: | |||
Balance at Beginning of Period | 49 | 45 | 42 |
Additions Charged to Costs and Expenses | 32 | 11 | 6 |
Additions Charged to Other Accounts | 28 | 0 | 0 |
Deductions | 2 | 7 | 3 |
Balance at End of Period | 107 | 49 | 45 |
Accrued restructuring initiatives: | |||
Reserves deducted in the balance sheet from the assets to which they apply: | |||
Balance at Beginning of Period | 204 | 182 | 151 |
Additions Charged to Costs and Expenses | 34 | 133 | 127 |
Additions Charged to Other Accounts | 0 | 0 | 0 |
Deductions | 125 | 111 | 96 |
Balance at End of Period | $ 113 | $ 204 | $ 182 |