COVER PAGE
COVER PAGE - shares | 6 Months Ended | |
Dec. 31, 2022 | Jan. 26, 2023 | |
Entity Information [Line Items] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Dec. 31, 2022 | |
Document Transition Report | false | |
Entity File Number | 1-14064 | |
Entity Registrant Name | Estée Lauder Companies Inc | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 11-2408943 | |
Entity Address, Address Line One | 767 Fifth Avenue | |
Entity Address, City or Town | New York | |
Entity Address, State or Province | NY | |
Entity Address, Postal Zip Code | 10153 | |
City Area Code | 212 | |
Local Phone Number | 572-4200 | |
Title of 12(b) Security | Class A Common Stock, $.01 par value | |
Trading Symbol | EL | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Current Fiscal Year End Date | --06-30 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0001001250 | |
Amendment Flag | false | |
Common Class A | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 231,678,169 | |
Common Class B | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 125,542,029 |
CONSOLIDATED STATEMENTS OF EARN
CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Income Statement [Abstract] | ||||
Net sales | $ 4,620 | $ 5,539 | $ 8,550 | $ 9,931 |
Cost of sales | 1,219 | 1,223 | 2,242 | 2,280 |
Gross profit | 3,401 | 4,316 | 6,308 | 7,651 |
Operating expenses | ||||
Selling, general and administrative | 2,630 | 2,885 | 4,874 | 5,279 |
Restructuring and other charges | 8 | 13 | 10 | 19 |
Impairment of other intangible assets | 207 | 0 | 207 | 0 |
Total operating expenses | 2,845 | 2,898 | 5,091 | 5,298 |
Operating income | 556 | 1,418 | 1,217 | 2,353 |
Interest expense | 52 | 42 | 98 | 84 |
Interest income and investment income, net | 26 | 10 | 41 | 14 |
Other components of net periodic benefit cost | (2) | (2) | (5) | (1) |
Other income | 0 | 0 | 0 | 1 |
Earnings before income taxes | 532 | 1,388 | 1,165 | 2,285 |
Provision for income taxes | 135 | 298 | 278 | 500 |
Net earnings | 397 | 1,090 | 887 | 1,785 |
Net earnings attributable to noncontrolling interests | 0 | (4) | 0 | (5) |
Net loss (earnings) attributable to redeemable noncontrolling interest | (3) | 2 | (4) | 0 |
Net earnings attributable to The Estée Lauder Companies Inc. | $ 394 | $ 1,088 | $ 883 | $ 1,780 |
Net earnings attributable to The Estée Lauder Companies Inc. per common share | ||||
Basic (in dollars per share) | $ 1.10 | $ 3.02 | $ 2.47 | $ 4.93 |
Diluted (in dollars per share) | $ 1.09 | $ 2.97 | $ 2.45 | $ 4.85 |
Weighted-average common shares outstanding | ||||
Basic (in shares) | 357.7 | 360.6 | 357.8 | 361.4 |
Diluted (in shares) | 360.4 | 366 | 360.9 | 367 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 397 | $ 1,090 | $ 887 | $ 1,785 |
Other comprehensive income (loss): | ||||
Net cash flow hedge gain (loss) | (56) | (5) | (7) | 16 |
Retirement plan and other retiree benefit adjustments | 0 | 4 | 0 | 8 |
Translation adjustments | 287 | (15) | (94) | (201) |
Benefit (provision) for income taxes on components of other comprehensive income | 26 | (6) | 7 | (18) |
Total other comprehensive income (loss), net of tax | 257 | (22) | (94) | (195) |
Comprehensive income | 654 | 1,068 | 793 | 1,590 |
Comprehensive income attributable to noncontrolling interests: | ||||
Net earnings | 0 | (4) | 0 | (5) |
Translation adjustments | 0 | 1 | 0 | 2 |
Total comprehensive income attributable to noncontrolling interests | 0 | (3) | 0 | (3) |
Comprehensive loss (income) attributable to redeemable noncontrolling interest: | ||||
Net loss (earnings) | (3) | 2 | (4) | 0 |
Translation adjustments | (8) | 0 | 27 | 17 |
Total comprehensive loss (income) attributable to redeemable noncontrolling interest | (11) | 2 | 23 | 17 |
Comprehensive income attributable to The Estée Lauder Companies Inc. | $ 643 | $ 1,067 | $ 816 | $ 1,604 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 |
Current assets | ||
Cash and cash equivalents | $ 3,725 | $ 3,957 |
Accounts receivable, net | 1,932 | 1,629 |
Inventory and promotional merchandise | 3,069 | 2,920 |
Prepaid expenses and other current assets | 641 | 792 |
Total current assets | 9,367 | 9,298 |
Property, plant and equipment, net | 2,908 | 2,650 |
Other assets | ||
Operating lease right-of-use assets | 1,847 | 1,949 |
Goodwill | 2,473 | 2,521 |
Other intangible assets, net | 3,097 | 3,428 |
Other assets | 1,039 | 1,064 |
Total other assets | 8,456 | 8,962 |
Total assets | 20,731 | 20,910 |
Current liabilities | ||
Current debt | 260 | 268 |
Accounts payable | 1,507 | 1,822 |
Operating lease liabilities | 349 | 365 |
Other accrued liabilities | 3,539 | 3,360 |
Total current liabilities | 5,655 | 5,815 |
Noncurrent liabilities | ||
Long-term debt | 5,111 | 5,144 |
Long-term operating lease liabilities | 1,757 | 1,868 |
Other noncurrent liabilities | 1,487 | 1,651 |
Total noncurrent liabilities | 8,355 | 8,663 |
Commitments and Contingencies | ||
Redeemable Noncontrolling Interest | 819 | 842 |
Equity | ||
Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at December 31, 2022 and June 30, 2022; shares issued: 469,124,426 at December 31, 2022 and 467,949,351 at June 30, 2022; Class B shares authorized: 304,000,000 at December 31, 2022 and June 30, 2022; shares issued and outstanding: 125,542,029 at December 31, 2022 and 125,542,029 at June 30, 2022 | 6 | 6 |
Paid-in capital | 6,000 | 5,796 |
Retained earnings | 14,342 | 13,912 |
Accumulated other comprehensive loss | (829) | (762) |
Stockholders' equity before treasury stock | 19,519 | 18,952 |
Less: Treasury stock, at cost; 237,534,951 Class A shares at December 31, 2022 and 236,435,830 Class A shares at June 30, 2022 | (13,617) | (13,362) |
Total stockholders’ equity – The Estée Lauder Companies Inc. | 5,902 | 5,590 |
Total liabilities, redeemable noncontrolling interest and equity | $ 20,731 | $ 20,910 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2022 | Jun. 30, 2022 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Treasury stock, shares | 237,534,951 | 236,435,830 |
Common Class A | ||
Common stock, shares authorized | 1,300,000,000 | 1,300,000,000 |
Common stock, shares issued | 469,124,426 | 467,949,351 |
Common Class B | ||
Common stock, shares authorized | 304,000,000 | 304,000,000 |
Common stock, shares issued | 125,542,029 | 125,542,029 |
Common stock, shares outstanding | 125,542,029 | 125,542,029 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 6 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Cash flows from operating activities | ||
Net earnings | $ 887 | $ 1,785 |
Adjustments to reconcile net earnings to net cash flows from operating activities: | ||
Depreciation and amortization | 359 | 364 |
Deferred income taxes | (31) | (43) |
Non-cash stock-based compensation | 165 | 192 |
Net loss on disposal of property, plant and equipment | 4 | 3 |
Non-cash restructuring and other charges | 14 | 1 |
Pension and post-retirement benefit expense | 26 | 39 |
Pension and post-retirement benefit contributions | (12) | (18) |
Impairment of other intangible assets | 207 | 0 |
Gain on previously held equity method investment | 0 | (1) |
Other non-cash items | (5) | (4) |
Changes in operating assets and liabilities: | ||
Increase in accounts receivable, net | (295) | (407) |
Increase in inventory and promotional merchandise | (156) | (164) |
Decrease (increase) in other assets, net | 33 | (57) |
Decrease in accounts payable | (310) | (40) |
Increase (decrease) in other accrued and noncurrent liabilities | (106) | 213 |
Decrease in operating lease assets and liabilities, net | (29) | (17) |
Net cash flows provided by operating activities | 751 | 1,846 |
Cash flows from investing activities | ||
Capital expenditures | (419) | (459) |
Payment for acquired business | 0 | (3) |
Purchases of investments | (4) | (10) |
Settlement of net investment hedges | 138 | 58 |
Net cash flows used for investing activities | (285) | (414) |
Cash flows from financing activities | ||
Proceeds (repayments) of current debt, net | 244 | (4) |
Debt issuance costs | 0 | (1) |
Repayments and redemptions of long-term debt | (258) | (10) |
Net proceeds from stock-based compensation transactions | 37 | 77 |
Payments to acquire treasury stock | (257) | (1,428) |
Dividends paid to stockholders | (451) | (409) |
Net cash flows used for financing activities | (685) | (1,775) |
Effect of exchange rate changes on Cash and cash equivalents | (13) | (12) |
Net decrease in Cash and cash equivalents | (232) | (355) |
Cash and cash equivalents at beginning of period | 3,957 | 4,958 |
Cash and cash equivalents at end of period | $ 3,725 | $ 4,603 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated. The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. Certain prior year amounts in the notes to the consolidated financial statements have been reclassified to conform to current year presentation. Management Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods. Currency Translation and Transactions All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $291 million and $(20) million, net of tax, during the three months ended December 31, 2022 and 2021, respectively, and $(61) million and $(195) million, net of tax, during the six months ended December 31, 2022 and 2021, 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. 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. The Company also enters 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 4 – 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 $20 million and $(6) million during the three months ended December 31, 2022 and 2021, respectively, and $34 million and $(18) million during the six months ended December 31, 2022 and 2021, respectively. Concentration of Credit Risk The Company is a worldwide manufacturer, marketer and seller of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to retailers in its travel retail business, department stores, specialty multi-brand retailers and perfumeries. The Company grants credit to qualified customers. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor its customers' abilities, individually and collectively, to make timely payments. The Company’s largest customer during the three and six months ended December 31, 2022 sells products primarily in China travel retail. This customer accounted for $242 million, or 12%, and $399 million, or 24%, of the Company's accounts receivable at December 31, 2022 and June 30, 2022, respectively. Inventory and Promotional Merchandise Inventory and promotional merchandise consists of the following: (In millions) December 31, 2022 June 30, 2022 Raw materials $ 918 $ 791 Work in process 318 366 Finished goods 1,519 1,449 Promotional merchandise 314 314 $ 3,069 $ 2,920 Property, Plant and Equipment Property, plant and equipment consists of the following: (In millions) December 31, 2022 June 30, 2022 Assets (Useful Life) Land $ 54 $ 53 Buildings and improvements (10 to 40 years) 504 491 Machinery and equipment (3 to 10 years) 1,027 994 Computer hardware and software (4 to 10 years) 1,587 1,468 Furniture and fixtures (5 to 10 years) 134 129 Leasehold improvements 2,266 2,246 Construction in progress 1,008 759 6,580 6,140 Less accumulated depreciation and amortization (3,672) (3,490) $ 2,908 $ 2,650 Depreciation and amortization of property, plant and equipment was $138 million and $136 million during the three months ended December 31, 2022 and 2021, respectively, and $274 million and $266 million during the six months ended December 31, 2022 and 2021, 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. Income Taxes The effective rate for income taxes for the three and six months ended December 31, 2022 and 2021 are as follows: Three Months Ended Six Months Ended 2022 2021 2022 2021 Effective rate for income taxes 25.4 % 21.5 % 23.9 % 21.9 % Basis-point change from the prior-year period 390 200 For the three and six months ended December 31, 2022, the increase in the effective tax rate was primarily attributable to a decrease in excess tax benefits associated with stock-based compensation arrangements and a higher effective tax rate on the Company's foreign operations, partially offset by a reduction in income tax reserve adjustments. On August 16, 2022, the U.S. federal government enacted the Inflation Reduction Act, with tax provisions primarily focused on implementing a 1% excise tax on share repurchases and a 15% corporate alternative minimum tax based on global adjusted financial statement income. The excise tax is effective beginning with the Company’s third quarter of fiscal 2023 and is not expected to have a material impact on the Company’s results of operations or financial position. The corporate alternative minimum tax will be effective beginning with the Company's first quarter of fiscal 2024. The Company continues to monitor developments and evaluate projected impacts, if any, of this provision to its consolidated financial statements. As of December 31, 2022 and June 30, 2022, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $58 million and $61 million, respectively. The total amount of unrecognized tax benefits at December 31, 2022 that, if recognized, would affect the effective tax rate was $49 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and six months ended December 31, 2022 in the accompanying consolidated statements of earnings was $1 million and $2 million, respectively. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at each of December 31, 2022 and June 30, 2022, was $15 million and $14 million, respectively. On the basis of the information available as of December 31, 2022, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months. During the fiscal 2023 first quarter, the Company formally concluded the compliance process with respect to its fiscal 2021 income tax return under the U.S. Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three and six months ended December 31, 2022. Other Accrued and Noncurrent Liabilities Other accrued liabilities consist of the following: (In millions) December 31, 2022 June 30, 2022 Advertising, merchandising and sampling $ 284 $ 250 Employee compensation 473 693 Deferred revenue 344 312 Payroll and other non-income taxes 308 345 Accrued income taxes 343 267 Sales return accrual 293 252 Other 1,494 1,241 $ 3,539 $ 3,360 At December 31, 2022 and June 30, 2022, total Other noncurrent liabilities of $1,487 million and $1,651 million included $636 million and $692 million of deferred tax liabilities, respectively. Recently Issued Accounting Standards FASB ASU No. 2022-04 – Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations In September 2022, the FASB issued authoritative guidance which is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated rollforward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. Effective for the Company – The guidance becomes effective for the Company’s first quarter fiscal 2024 and is applied on a retrospective basis, except for the requirement to disclose rollforward information which is effective prospectively for the Company’s first quarter fiscal 2025. Early adoption is permitted. Annual disclosures need to be provided in interim periods within the initial year of adoption. Impact on consolidated financial statements – The Company has a supplier financing arrangement and will apply the disclosure requirements as required by the amendments. Reference Rate Reform (ASC Topic 848 “ ASC 848 ” ) In March 2020, t he FAS B issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”) and applies to lease and other contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that reference LIBOR or another rate that is expected to be discontinued as a result of reference rate reform. In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clar ify that for all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC 848. In December 2022, the FASB issued authoritative guidance to defer the sunset date of ASC 848 from December 31, 2022 to December 31, 2024. Effective for the Company – This guidance can only be applied for a limited time through December 31, 2024. Impact on consolidated financial statements – The Company currently has an implementation team in place that has performed a comprehensive evaluation and is assessing the impact of applying this guidance, which includes assessing the impact to business processes and internal controls over financial reporting and the related disclosure requirements. For treasury related arrangements, the Company references LIBOR in its interest rate swap agreements and LIBOR is also used for purposes of discounting certain foreign currency and interest rate forward contracts. The Company is currently evaluating the potential impact of modifying treasury related arrangements and applying the relevant ASC 848 optional practical expedients, as needed. For existing lease, debt arrangements and other contracts, the Company will not adopt any ASC 848 optional practical expedients as it relates to these arrangements. The Company will continue to monitor new contracts that could potentially be eligible for contract modification relief through December 31, 2024. No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 6 Months Ended |
Dec. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill 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, 2022 Goodwill $ 1,702 $ 1,116 $ 249 $ 353 $ 3,420 Accumulated impairments (138) (732) (29) — (899) 1,564 384 220 353 2,521 Translation and other adjustments, goodwill (50) — 3 — (47) Translation and other adjustments, accumulated impairments — — (1) — (1) (50) — 2 — (48) Balance as of December 31, 2022 Goodwill 1,652 1,116 252 353 3,373 Accumulated impairments (138) (732) (30) — (900) $ 1,514 $ 384 $ 222 $ 353 $ 2,473 Other Intangible Assets Other intangible assets consist of the following: December 31, 2022 June 30, 2022 (In millions) Gross Accumulated Total Net Gross Accumulated Total Net Amortizable intangible assets: Customer lists, license agreements and other $ 2,057 $ 702 $ 1,355 $ 2,064 $ 628 $ 1,436 Non-amortizable intangible assets: Trademarks and other 1,742 1,992 Total intangible assets $ 3,097 $ 3,428 The aggregate amortization expense related to amortizable intangible assets was $37 million and $39 million for the three months ended December 31, 2022 and 2021, respectively, and $73 million and $84 million for the six months ended December 31, 2022 and 2021, respectively. The estimated aggregate amortization expense for the remainder of fiscal 2023 and for each of the next four fiscal years is as follows: Fiscal (In millions) 2023 2024 2025 2026 2027 Estimated aggregate amortization expense $ 75 $ 147 $ 147 $ 147 $ 130 Impairment Testing During the Six Months Ended December 31, 2022 During the fiscal 2023 second quarter, given the lower-than-expected results in the overall business, the Company made revisions to the internal forecasts relating to its Smashbox reporting unit. The Company concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset. The remaining carrying value of the trademark intangible asset was not recoverable and the Company recorded an impairment charge of $21 million reducing the carrying value to zero. During the fiscal 2023 second quarter, the Dr.Jart+ reporting unit experienced lower-than-expected growth within key geographic regions and channels that continue to be impacted by the spread of COVID-19 variants, resurgence in cases, and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the reporting unit. In addition, due to macro-economic factors, Dr.Jart+ has experienced lower-than-expected growth within key geographic regions. The Too Faced reporting unit experienced lower-than-expected results in key geographic regions and channels coupled with delays in future international expansion to areas that continue to be impacted by COVID-19. As a result, the Company made revisions to the internal forecasts relating to its Dr.Jart+ and Too Faced reporting units. Additionally, there were increases in the weighted average cost of capital for both reporting units as compared to the prior year annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2022. The Company concluded that the changes in circumstances in the reporting units, along with increases in the weighted average cost of capital, triggered the need for interim impairment reviews of their trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of November 30, 2022. The Company concluded that the carrying value of the trademark intangible assets exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows and recorded an impairment charge of $100 million for Dr.Jart+ and $86 million for Too Faced. The Company concluded that the carrying amounts of the long-lived assets were recoverable. After adjusting the carrying values of the trademarks, the Company completed interim quantitative impairment tests for goodwill. As the estimated fair value of the Dr.Jart+ and Too Faced reporting units were in excess of their carrying values, the Company concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units. The fair values of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks. The most significant unobservable input used to estimate the fair values of the Dr.Jart+ and Too Faced trademark intangible assets was the weighted-average cost of capital, which was 11% and 13%, respectively. A summary of the impairment charges for the three and six months ended December 31, 2022 and the remaining trademark and goodwill carrying values as of December 31, 2022, for each reporting unit, are as follows: Impairment Charge Carrying Value (In millions) Three and Six Months Ended December 31, 2022 As of December 31, 2022 Reporting Unit: Geographic Region Trademarks Goodwill Trademarks Goodwill Smashbox The Americas $ 21 $ — $ — $ — Dr. Jart+ Asia/Pacific 100 — 339 318 Too Faced The Americas 86 — 186 13 Total $ 207 $ — $ 525 $ 331 The impairment charges for the three and six months ended December 31, 2022 were reflected in the skin care product category for Dr.Jart+ and the makeup product category for Smashbox and Too Faced. |
CHARGES ASSOCIATED WITH RESTRUC
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES | 6 Months Ended |
Dec. 31, 2022 | |
Restructuring and Related Activities [Abstract] | |
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES | CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES Charges associated with the Post-COVID Business Acceleration Program for the three and six months ended December 31, 2022 were as follows: Sales Cost of Sales Operating Expenses Total (In millions) Restructuring Other Three months ended December 31, 2022 $ 1 $ — $ 4 $ 3 $ 8 Six months ended December 31, 2022 $ 6 $ (1) $ 6 $ 3 $ 14 The types of activities included in restructuring and other charges, and the related accounting criteria, are described below. Charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business. Post-COVID Business Acceleration Program On August 20, 2020, the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “PCBA Program”), designed to realign the Company's business to address the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The PCBA Program is designed to help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. It is expected to further strengthen the Company by building upon the foundational capabilities in which the Company has invested. The PCBA 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. This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility. As of December 31, 2022, the Company estimated a net reduction over the duration of the PCBA Program in the range of 2,500 to 3,000 positions globally, including temporary and part-time employees. This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees and investment in new positions in key areas. The Company also estimated the closure over the duration of the PCBA Program of approximately 10% to 15% of its freestanding stores globally, primarily in Europe, the Middle East & Africa and in North America. As of June 30, 2022, the Company approved specific initiatives under the PCBA Program and expects to substantially complete those initiatives through fiscal 2023. Inclusive of approvals from inception through June 30, 2022, the Company estimates that the PCBA Program may result in related restructuring and other charges totaling between $500 million and $515 million, before taxes. Additional information about the PCBA Program approvals is included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. Specific actions taken since the PCBA Program inception include: • Optimize Digital Organization and Other Go-To-Market Organizations – The Company approved initiatives to enhance its go-to-market capabilities and shift more resources to support online growth. These actions will result in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities. • Optimize Select Marketing, Brand and Global Functions – The Company has started to reduce its corporate and certain of its brand office footprints and is moving toward the future of work in a post-COVID environment, by restructuring where and how its employees work and collaborate. In addition, the Company has approved initiatives to reduce organizational complexity and leverage scale across various Global functions. These actions will result in asset write-offs, employee severance, lease termination fees, and consulting and other professional services for the design and implementation of the future structures and processes. • Optimize Distribution Network – To help restore profitability to pre-COVID-19 pandemic levels in certain areas of its distribution network and, as part of a broader initiative to be completed in phases, the Company has approved initiatives to close a number of underperforming freestanding stores, counters and other retail locations, mainly in certain affiliates across all geographic regions, including the Company's travel retail network. These anticipated closures reflect changing consumer behaviors including higher demand for online and omnichannel capabilities. These activities will result in termination of contracts, a net reduction in workforce, product returns, and inventory and other asset write-offs. • Exit of the Global Distribution of BECCA Products – In reviewing the Company's brand portfolio to improve efficiency and the sustainability of long-term investments, the decision was made to exit the global distribution of BECCA products due to its limited distribution, the ongoing decline in product demand and the challenging environment caused by the COVID-19 pandemic. These activities resulted in charges for the impairment of goodwill and other intangible assets, product returns, termination of contracts, and employee severance. The Company completed these initiatives during fiscal 2022. • Exit of Certain Designer Fragrance Licenses – In reviewing the Company’s brand portfolio of fragrances and to focus on investing its resources on alternative opportunities for long-term growth and value creation globally, the Company announced that it would not be renewing its existing license agreements for the Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna product lines when their respective terms expire in June 2023. The Company has since negotiated early termination agreements with each of the licensors effective June 30, 2022 and continued to sell products under these licenses until such time. These actions resulted in asset write-offs, including charges for the impairment of goodwill, employee-related costs, and consulting and legal fees. • Brand Transformation – In reviewing the Company’s brand portfolio to accelerate growth within the makeup product category and to support long-term investments, the decision was made to strategically reposition Smashbox to capitalize on changing consumer preferences and to mitigate the impact caused by the COVID-19 pandemic on the brand. These actions will result primarily in product returns and inventory write-offs. PCBA Program 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. Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets in certain freestanding stores (including rights associated with commercial operating leases and operating lease right-of-use assets) that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative. These costs also include goodwill and other intangible asset impairment charges relating to the exit of the global distribution of BECCA products. 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. 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 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. 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 and processes as well as the implementation thereof; • Temporary labor backfill; • Costs to establish and maintain a PMO for the duration of the PCBA Program, 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 the PCBA Program were: Sales Cost of Sales Operating Expenses Total (In millions) Restructuring Other Total Charges (Adjustments) Cumulative through June 30, 2022 $ 18 $ 7 $ 310 $ 13 $ 348 Six months ended December 31, 2022 6 (1) 6 3 14 Cumulative through December 31, 2022 $ 24 $ 6 $ 316 $ 16 $ 362 (In millions) Employee- Asset- Contract Other Exit Total Restructuring Charges (Adjustments) Cumulative through June 30, 2022 $ 203 $ 86 $ 19 $ 2 $ 310 Six months ended December 31, 2022 (3) 14 (6) 1 6 Cumulative through December 31, 2022 $ 200 $ 100 $ 13 $ 3 $ 316 Changes in accrued restructuring charges for the six months ended December 31, 2022 relating to the PCBA Program were: (In millions) Employee- Asset- Contract Other Exit Total Balance at June 30, 2022 $ 125 $ — $ — $ — $ 125 Charges (3) 14 (6) 1 6 Cash payments (17) — (1) (1) (19) Non-cash asset write-offs — (14) — — (14) Translation and other adjustments (6) — 7 — 1 Balance at December 31, 2022 $ 99 $ — $ — $ — $ 99 Accrued restructuring charges at December 31, 2022 relating to the PCBA Program are expected to result in cash expenditures funded from cash provided by operations of approximately $51 million, $36 million and $12 million for the remainder of fiscal 2023 and for fiscal 2024 and 2025, respectively. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended |
Dec. 31, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE FINANCIAL INSTRUMENTS | DERIVATIVE FINANCIAL INSTRUMENTS The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. The Company enters into foreign currency forward contracts, and may enter into option contracts, to reduce the effects of fluctuating foreign currency exchange rates. In addition, the Company enters into interest rate derivatives to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances. The Company also enters 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 enters into the net investment hedges to offset the risk of changes in the U.S. dollar value of the Company’s investment in these foreign operations due to fluctuating foreign exchange rates. Time value is excluded from the effectiveness assessment and is recognized under a systematic and rational method over the life of the hedging instrument in Selling, general and administrative expenses. The net gain or loss on net investment hedges is recorded within translation adjustments, as a component of accumulated OCI (“AOCI”) on the Company’s consolidated balance sheets, until the sale or substantially complete liquidation of the underlying assets of the Company’s investment. The Company also enters into foreign currency forward contracts, and may use option contracts, not designated as hedging instruments, to mitigate the change in fair value of specific assets and liabilities on the consolidated balance sheets. At December 31, 2022, the notional amount of derivatives not designated as hedging instruments was $4,005 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) (In millions) Balance Sheet December 31, 2022 June 30, 2022 Balance Sheet December 31, 2022 June 30, 2022 Derivatives Designated as Hedging Instruments: Foreign currency cash flow hedges Prepaid expenses and other current assets $ 35 $ 57 Other accrued liabilities $ 13 $ 1 Net investment hedges Prepaid expenses and other current assets — 107 Other accrued liabilities 40 — Interest rate-related derivatives Prepaid expenses and other current assets 5 24 Other accrued liabilities 150 115 Total Derivatives Designated as Hedging Instruments 40 188 203 116 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Prepaid expenses and other current assets 44 27 Other accrued liabilities 10 104 Total derivatives $ 84 $ 215 $ 213 $ 220 (1) See Note 5 – 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 (Loss) Location of Gain (Loss) Reclassified Amount of Gain (Loss) Reclassified from AOCI into Earnings (1) Three Months Ended Three Months Ended (In millions) 2022 2021 2022 2021 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ (39) $ (8) Net sales $ 22 $ (2) Interest rate-related derivatives 5 — Interest expense — (1) (34) (8) 22 (3) Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) (86) 34 — — Total derivatives $ (120) $ 26 $ 22 $ (3) (1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material. (2) During the three months ended December 31, 2022 and 2021, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $7 million and $3 million, respectively. (3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets. Amount of Gain (Loss) Location of Gain (Loss) Reclassified Amount of Gain (Loss) Reclassified from AOCI into Earnings (1) Six Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ 18 $ 7 Net sales $ 37 $ (8) Interest rate-related derivatives 12 — Interest expense — (1) 30 7 37 (9) Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) (15) 70 — — Total derivatives $ 15 $ 77 $ 37 $ (9) (1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material. (2) During the six months ended December 31, 2022 and 2021, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $13 million and $5 million, respectively. (3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets. Amount of Gain (Loss) Recognized in Earnings on Derivatives (1) Location of Gain (Loss) Recognized in Earnings on Derivatives Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Derivatives in Fair Value Hedging Relationships: Interest rate swap contracts Interest expense $ 4 $ (6) $ (35) $ (16) (1) Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt. Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows: (In millions) Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included Carrying Amount of the Cumulative Amount of Fair December 31, 2022 December 31, 2022 Long-term debt $ 842 $ (150) Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows: Three Months Ended December 31 2022 2021 (In millions) Net Sales Interest Net Sales Interest 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 $ 4,620 $ 52 $ 5,539 $ 42 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable (4) Not applicable 6 Derivatives designated as hedging instruments Not applicable 4 Not applicable (6) Gain (loss) on cash flow hedge relationships – interest rate contracts: Amount of loss reclassified from AOCI into earnings Not applicable — Not applicable (1) Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: Amount of gain (loss) reclassified from AOCI into earnings 22 Not applicable (2) Not applicable Six Months Ended December 31 2022 2021 (In millions) Net Sales Interest Net Sales Interest 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 $ 8,550 $ 98 $ 9,931 $ 84 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable 35 Not applicable 16 Derivatives designated as hedging instruments Not applicable (35) Not applicable (16) Gain (loss) on cash flow hedge relationships – interest rate contracts: Amount of loss reclassified from AOCI into earnings Not applicable — Not applicable (1) Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: Amount of gain (loss) reclassified from AOCI into earnings 37 Not applicable (8) Not applicable The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows: Amount of Gain (Loss) Location of Gain (Loss) Recognized in Earnings on Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Selling, general and administrative $ 6 $ (38) $ 17 $ (49) 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 September 2024. Hedge effectiveness of the foreign currency forward contracts is based on the forward method, which includes time value in the effectiveness assessment. At December 31, 2022, the Company had cash flow hedges outstanding with a notional amount totaling $1,774 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 foreign currency hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued and gains and losses in AOCI are reclassified to Net 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 Net sales. As of December 31, 2022, 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 December 31, 2022 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $28 million. The accumulated net gain on derivative instruments in AOCI was $83 million and $90 million as of December 31, 2022 and June 30, 2022, 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 $700 million and $300 million to effectively convert the fixed rate interest on its 2030 Senior Notes and 2031 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 May 2023. Hedge effectiveness of the net investment hedge contracts is based on the spot method. At December 31, 2022, the Company had net investment hedges outstanding with a notional amount totaling $1,037 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 $84 million at December 31, 2022. 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 | 6 Months Ended |
Dec. 31, 2022 | |
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 December 31, 2022: (In millions) Level 1 Level 2 Level 3 Total Assets: Money market funds $ 989 $ — $ — $ 989 Foreign currency forward contracts — 79 — 79 Interest rate-related derivatives — 5 — 5 Total $ 989 $ 84 $ — $ 1,073 Liabilities: Foreign currency forward contracts $ — $ 63 $ — $ 63 Interest rate-related derivatives — 150 — 150 DECIEM stock options — — 71 71 Total $ — $ 213 $ 71 $ 284 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, 2022: (In millions) Level 1 Level 2 Level 3 Total Assets: Money market funds $ 961 $ — $ — $ 961 Foreign currency forward contracts — 191 — 191 Interest rate-related derivatives — 24 — 24 Total $ 961 $ 215 $ — $ 1,176 Liabilities: Foreign currency forward contracts $ — $ 105 $ — $ 105 Interest rate-related derivatives — 115 — 115 DECIEM stock options — — 74 74 Total $ — $ 220 $ 74 $ 294 The estimated fair values of the Company’s financial instruments are as follows: December 31, 2022 June 30, 2022 (In millions) Carrying Fair Carrying Fair Nonderivatives Cash and cash equivalents $ 3,725 $ 3,725 $ 3,957 $ 3,957 Current and long-term debt 5,371 4,884 5,412 5,139 DECIEM stock options 71 71 74 74 Derivatives Foreign currency forward contracts – asset, net 16 16 86 86 Interest rate-related derivatives – liability, net (145) (145) (91) (91) The following table presents the Company’s impairment charges for the three and six months ended December 31, 2022 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test: (In millions) Impairment charges Date of Fair Value Measurement Fair Value (1) Other intangible assets, net (trademarks) Dr.Jart+ $ 100 November 30, 2022 $ 339 Too Faced 86 November 30, 2022 186 Smashbox 21 December 31, 2022 — Total $ 207 $ 525 (1) See Note 2 - 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). Cash deposits in interest bearing accounts and time deposits are carried at cost, which approximates fair value, 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 - related derivatives – 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. DECIEM stock options – The stock option liability represents the employee stock options issued by DECIEM in replacement and exchange for certain vested and unvested DECIEM employee stock options previously issued by DECIEM, in connection with the Company's acquisition of DECIEM. The DECIEM stock options are subject to the terms and conditions of DECIEM's 2021 Stock Option Plan. The DECIEM stock option liability is measured using the Monte Carlo Method, which requires certain assumptions. Significant changes in the projected future operating results would result in a higher or lower fair value measurement. Changes to the discount rates or volatilities would have a lesser effect. These inputs are categorized as Level 3 of the valuation hierarchy. The DECIEM stock options are remeasured to fair value at each reporting date through the period when the options are exercised or repurchased (i.e., when they are settled), with an offsetting entry to compensation expense. See Note 9 – Stock Programs for discussion . Changes in the DECIEM stock option liability for the six months ended December 31, 2022 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows: (In millions) Fair Value DECIEM stock option liability as of June 30, 2022 $ 74 Changes in fair value, net of foreign currency remeasurements (1) (3) Translation adjustments and other, net — DECIEM stock option liability as of December 31, 2022 $ 71 (1) Amount includes expense attributable to graded vesting of stock options which is not material for the six months ended December 31, 2022. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 6 Months Ended |
Dec. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGNITION | REVENUE RECOGNITION The Company’s revenue recognition accounting policies are described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. Accounts Receivable Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $26 million and $27 million as of December 31, 2022 and June 30, 2022, respectively. Payment terms are short-term in nature and are generally less than one year. Changes in the allowance for credit losses are as follows: (In millions) December 31, 2022 Balance at June 30, 2022 $ 10 Provision for expected credit losses 2 Balance at December 31, 2022 $ 12 The remaining balance of the allowance for doubtful accounts of $14 million and $17 million as of December 31, 2022 and June 30, 2022, respectively, relates to non-credit losses, which are primarily due to customer deductions. Deferred Revenue Changes in deferred revenue during the period are as follows: Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Deferred revenue, beginning of period $ 362 $ 426 $ 362 $ 371 Revenue recognized that was included in the deferred revenue balance at the beginning of the period (131) (78) (280) (248) Revenue deferred during the period 119 75 276 298 Other 3 (2) (5) — Deferred revenue, end of period $ 353 $ 421 $ 353 $ 421 Transaction Price Allocated to the Remaining Performance Obligations At December 31, 2022, 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 $344 million. The remaining balance of deferred revenue at December 31, 2022 will be recognized beyond the next twelve months. |
PENSION AND POST-RETIREMENT BEN
PENSION AND POST-RETIREMENT BENEFIT PLANS | 6 Months Ended |
Dec. 31, 2022 | |
Retirement Benefits [Abstract] | |
PENSION AND POST-RETIREMENT BENEFIT PLANS | PENSION AND POST-RETIREMENT BENEFIT PLANS The Company maintains pension plans covering substantially all of its full-time employees for its U.S. operations and a majority of its international operations. The Company also maintains post-retirement benefit plans that provide certain medical and dental benefits to eligible employees. Descriptions of these plans are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. The components of net periodic benefit cost for the three months ended December 31, 2022 and 2021 consisted of the following: Pension Plans Other than U.S. International Post-retirement (In millions) 2022 2021 2022 2021 2022 2021 Service cost $ 9 $ 11 $ 6 $ 8 $ — $ — Interest cost 10 7 4 2 2 2 Expected return on plan assets (14) (13) (4) (3) — (1) Amortization of: Actuarial loss 1 3 (1) 1 — 1 Prior service cost — — — (1) — — Special termination benefits — — — 1 — — Net periodic benefit cost $ 6 $ 8 $ 5 $ 8 $ 2 $ 2 The components of net periodic benefit cost for the six months ended December 31, 2022 and 2021 consisted of the following: Pension Plans Other than U.S. International Post-retirement (In millions) 2022 2021 2022 2021 2022 2021 Service cost $ 18 $ 23 $ 13 $ 16 $ — $ 1 Interest cost 20 15 7 5 4 3 Expected return on plan assets (28) (27) (8) (7) — (1) Amortization of: Actuarial loss 2 7 (2) 1 — 1 Prior service cost — — — (1) — — Special termination benefits — — — 3 — — Net periodic benefit cost $ 12 $ 18 $ 10 $ 17 $ 4 $ 4 During the six months ended December 31, 2022, the Company made contributions to its international pension plans totaling $7 million. The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following: (In millions) December 31, 2022 June 30, 2022 Other assets $ 137 $ 151 Other accrued liabilities (24) (24) Other noncurrent liabilities (359) (357) Funded status (246) (230) Accumulated other comprehensive loss 157 155 Net amount recognized $ (89) $ (75) |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Commitments In November 2022, the Company signed an agreement to acquire the TOM FORD brand. The amount to be paid by the Company for the acquisition is approximately $2,300 million, net of a $250 million payment to the Company at closing from Marcolin S.p.A. and expects to close in the second half of fiscal 2023. The Company expects to fund this transaction through a combination of cash, debt and $300 million in deferred payments to the sellers that become due beginning in July 2025. In addition, the acquisition will result in the elimination of the existing license royalty payments on the Company's beauty business upon closing. In January 2023, the Company entered into a $2,000 million senior unsecured revolving credit facility that expires on January 2, 2024 (the “New Facility”) for liquidity support for the Company's commercial paper program and general corporate purposes, of which the entire amount is currently undrawn and available. Interest rates on borrowings under the New Facility will be based on prevailing market interest rates in accordance with the agreement. In January 2023, the Company increased its commercial paper program under which it may issue commercial paper in the United States from $2,500 million to $4,500 million. Legal Proceedings The Company is involved, from time to time, in litigation and other legal proceedings incidental to its business, including product liability matters (including asbestos-related claims), advertising, regulatory, employment, intellectual property, real estate, environmental, trade relations, tax, and privacy. 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. |
STOCK PROGRAMS
STOCK PROGRAMS | 6 Months Ended |
Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
STOCK PROGRAMS | STOCK PROGRAMSAdditional information relating to the Company's stock programs and the DECIEM stock options are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. The Company's Stock Programs Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs, including long-term price-vested units and share units. Compensation expense attributable to net stock-based compensation was $112 million and $113 million for the three months ended December 31, 2022 and 2021, respectively, and was $165 million and $192 million for the six months ended December 31, 2022 and 2021, respectively. Stock Options During the six months ended December 31, 2022, the Company granted stock options in respect of approximately 1.2 million shares of Class A Common Stock with an exercise price per share of $246.01 and a weighted-average grant date fair value per share of $79.09. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The aggregate intrinsic value of stock options exercised during the six months ended December 31, 2022 was $52 million. Restricted Stock Units During the six months ended December 31, 2022, the Company granted RSUs in respect of approximately 1.1 million shares of Class A Common Stock with a weighted-average grant date fair value per share of $246.16 that, at the time of grant, are scheduled to vest at 0.4 million, 0.4 million, and 0.3 million shares per year, in fiscal 2024, fiscal 2025 and fiscal 2026, respectively. Vesting of RSUs is generally subject to the continued employment or the retirement of the grantees. The RSUs are generally 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 generally valued at the closing market price of the Company’s Class A Common Stock on the date of grant. Performance Share Units During the six months ended December 31, 2022, 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 $246.15, which will be settled in stock subject to the achievement of the Company’s net sales, diluted net earnings per common share and return on invested capital goals for the three fiscal years ending June 30, 2025, all subject to continued employment or the retirement of the grantees. For PSUs granted, no settlement will occur for results below the applicable minimum threshold. PSUs are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSUs and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant. In September 2022, approximately 0.2 million shares of the Company’s Class A Common Stock were issued, and related accrued dividends were paid, relative to the target goals set at the time of the issuance, in settlement of 0.1 million PSUs with a performance period ended June 30, 2022. DECIEM Stock Options The DECIEM stock options are liability-classified awards as they are expected to be settled in cash and are remeasured to fair value at each reporting date through date of settlement. Total stock-based compensation expense is attributable to the exchange or replacement of and the remaining requisite service period of stock options. The total stock option expense for the three and six months ended December 31, 2022 and 2021 was not material. There were no DECIEM stock options exercised during the six months ended December 31, 2022. The DECIEM stock options are reported as a stock option liability of $71 million and $74 million in Other noncurrent liabilities in the accompanying consolidated balance sheets at December 31, 2022 and June 30, 2022, respectively. The fair value of the stock options were calculated using the following key assumptions in the Monte Carlo Method: December 31, 2022 June 30, 2022 Risk-free rate 4.40% 3.20% Term to mid of last twelve-month period 0.92 years 1.42 years Operating leverage adjustment 0.45 0.45 Net sales discount rate 7.10% 6.00% EBITDA discount rate 10.50% 9.40% EBITDA volatility 34.90% 33.90% Net sales volatility 15.70% 15.30% |
NET EARNINGS ATTRIBUTABLE TO TH
NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE | 6 Months Ended |
Dec. 31, 2022 | |
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 SHARE Net 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 shares underlying PSUs and RSUs where the vesting conditions have been met. 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: Three Months Ended Six Months Ended (In millions, except per share data) 2022 2021 2022 2021 Numerator: Net earnings attributable to The Estée Lauder Companies Inc. $ 394 $ 1,088 $ 883 $ 1,780 Denominator: Weighted-average common shares outstanding – Basic 357.7 360.6 357.8 361.4 Effect of dilutive stock options 2.1 4.1 2.4 4.2 Effect of PSUs 0.1 0.2 0.1 0.2 Effect of RSUs 0.5 1.1 0.6 1.2 Weighted-average common shares outstanding – Diluted 360.4 366.0 360.9 367.0 Net earnings attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.10 $ 3.02 $ 2.47 $ 4.93 Diluted $ 1.09 $ 2.97 $ 2.45 $ 4.85 The shares of Class A Common Stock underlying stock options, RSUs and PSUs that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive were as follows: Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Stock options 2.9 1.1 2.1 0.7 RSUs and PSUs 0.1 — 0.1 0.1 As of December 31, 2022 and 2021, 0.4 million and 0.7 million shares, respectively, of Class A Common Stock underlying PSUs have been excluded from the calculation of diluted EPS because the number of shares ultimately issued is contingent on the achievement of certain performance targets of the Company, as discussed in Note 9 – Stock Programs . |
EQUITY AND REDEEMABLE NONCONTRO
EQUITY AND REDEEMABLE NONCONTROLLING INTEREST | 6 Months Ended |
Dec. 31, 2022 | |
Equity [Abstract] | |
EQUITY AND REDEEMABLE NONCONTROLLING INTEREST | EQUITY AND REDEEMABLE NONCONTROLLING INTEREST Total Stockholders’ Equity – The Estée Lauder Companies Inc. Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Common stock, beginning of the period $ 6 $ 6 $ 6 $ 6 Stock-based compensation — — — — Common stock, end of the period 6 6 6 6 Paid-in capital, beginning of the period 5,875 5,450 5,796 5,335 Common stock dividends 1 — 2 1 Stock-based compensation 124 155 202 269 Paid-in capital, end of the period 6,000 5,605 6,000 5,605 Retained earnings, beginning of the period 14,185 12,864 13,912 12,244 Common stock dividends (237) (217) (453) (410) Net earnings attributable to The Estée Lauder Companies Inc. 394 1,088 883 1,780 Cumulative effect of adoption of new accounting standards — — — 121 Retained earnings, end of the period 14,342 13,735 14,342 13,735 Accumulated other comprehensive loss, beginning of the period (1,078) (625) (762) (470) Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc. 249 (21) (67) (176) Accumulated other comprehensive loss, end of the period (829) (646) (829) (646) Treasury stock, beginning of the period (13,471) (11,614) (13,362) (11,058) Acquisition of treasury stock (92) (763) (184) (1,282) Stock-based compensation (54) (105) (71) (142) Treasury stock, end of the period (13,617) (12,482) (13,617) (12,482) Total stockholders’ equity – The Estée Lauder Companies Inc. 5,902 6,218 5,902 6,218 Noncontrolling interests, beginning of the period — 34 — 34 Net earnings attributable to noncontrolling interests — 4 — 5 Translation adjustments and other, net — (4) — (5) Noncontrolling interests, end of the period — 34 — 34 Total equity $ 5,902 $ 6,252 $ 5,902 $ 6,252 Redeemable noncontrolling interest, beginning of the period $ 808 $ 842 $ 842 $ 857 Net earnings (loss) attributable to redeemable noncontrolling interest 3 (2) 4 — Translation adjustments 8 — (27) (17) Redeemable noncontrolling interest, end of the period $ 819 $ 840 $ 819 $ 840 Cash dividends declared per common share $ .66 $ .60 $ 1.26 $ 1.13 The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the six months ended December 31, 2022: Date Declared Record Date Payable Date Amount per Share August 17, 2022 August 31, 2022 September 15, 2022 $ .60 November 1, 2022 November 30, 2022 December 15, 2022 $ .66 On February 1, 2023, a dividend was declared in the amount of $.66 per share on the Company’s Class A and Class B Common Stock. The dividend is payable in cash on March 15, 2023 to stockholders of record at the close of business on February 28, 2023. Common Stock During the six months ended December 31, 2022, the Company purchased approximately 1.1 million shares of its Class A Common Stock for $257 million. Accumulated Other Comprehensive Income The following table represents changes in AOCI, net of tax, by component for the six months ended December 31, 2022: (In millions) Net Cash Amounts Translation Total Balance at June 30, 2022 $ 68 $ (114) $ (716) $ (762) OCI before reclassifications 23 (1) (1) (61) (2) (39) Amounts reclassified to Net earnings (28) — — (28) Net current-period OCI (5) (1) (61) (67) Balance at December 31, 2022 $ 63 $ (115) $ (777) $ (829) (1) Consists of foreign currency translation losses. (2) See Note 4 – Derivative Financial Instruments for gains (losses) relating to net investment hedges. The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and six months ended December 31, 2022 and 2021: Amount Reclassified from AOCI Affected Line Item in Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Gain (Loss) on Cash Flow Hedges Foreign currency forward contracts $ 22 $ (2) $ 37 $ (8) Net sales Interest rate-related derivatives — (1) — (1) Interest expense 22 (3) 37 (9) Benefit (provision) for deferred taxes (5) — (9) 2 Provision for income taxes 17 (3) 28 (7) Net earnings Retirement Plan and Other Retiree Benefit Adjustments Amortization of prior service cost — 1 — 1 Other components of net periodic benefit cost (1) Amortization of actuarial loss — (5) — (9) Other components of net periodic benefit cost (1) — (4) — (8) Benefit for deferred taxes — 1 — 2 Provision for income taxes — (3) — (6) Net earnings Total reclassification adjustments, net $ 17 $ (6) $ 28 $ (13) Net earnings (1) See Note 7 – Pension and Post-Retirement Benefit Plans for additional information. |
STATEMENT OF CASH FLOWS
STATEMENT OF CASH FLOWS | 6 Months Ended |
Dec. 31, 2022 | |
Supplemental Cash Flow Elements [Abstract] | |
STATEMENT OF CASH FLOWS | STATEMENT OF CASH FLOWS Supplemental cash flow information for the six months ended December 31, 2022 and 2021 is as follows: (In millions) 2022 2021 Cash: Cash paid during the period for interest $ 94 $ 80 Cash paid during the period for income taxes $ 249 $ 317 Non-cash investing and financing activities: Property, plant and equipment accrued but unpaid $ 216 $ 108 Financing lease modifications $ — $ (14) Right-of-use assets obtained in exchange for new/modified operating lease liabilities $ 107 $ 139 |
SEGMENT DATA AND RELATED INFORM
SEGMENT DATA AND RELATED INFORMATION | 6 Months Ended |
Dec. 31, 2022 | |
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. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis. Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and operating income (loss) before charges associated with restructuring and other activities. Returns and charges associated with restructuring and other activities are not allocated to the Company's product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business. The accounting policies for the Company’s reportable segments are substantially the same as those for the consolidated financial statements, as described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced for the Chief Executive or included herein. There has been no significant variance in the total or long-lived asset values associated with the Company’s segment data since June 30, 2022. Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 PRODUCT CATEGORY DATA Net sales: Skin Care $ 2,382 $ 3,159 $ 4,486 $ 5,608 Makeup 1,268 1,386 2,320 2,560 Fragrance 775 799 1,382 1,408 Hair Care 182 180 340 328 Other 14 16 28 29 4,621 5,540 8,556 9,933 Returns associated with restructuring and other activities (1) (1) (6) (2) Net sales $ 4,620 $ 5,539 $ 8,550 $ 9,931 Operating income (loss) before charges associated with restructuring and other activities: Skin Care $ 421 $ 1,082 $ 951 $ 1,799 Makeup (37) 130 (21) 221 Fragrance 177 210 310 341 Hair Care 5 8 (7) 10 Other (1) 3 (1) 3 565 1,433 1,232 2,374 Reconciliation: Charges associated with restructuring and other activities (9) (15) (15) (21) Interest expense (52) (42) (98) (84) Interest income and investment income, net 26 10 41 14 Other components of net periodic benefit cost 2 2 5 1 Other income — — — 1 Earnings before income taxes $ 532 $ 1,388 $ 1,165 $ 2,285 GEOGRAPHIC DATA (1) Net sales: The Americas $ 1,235 $ 1,300 $ 2,358 $ 2,494 Europe, the Middle East & Africa 1,816 2,338 3,498 4,211 Asia/Pacific 1,570 1,902 2,700 3,228 4,621 5,540 8,556 9,933 Returns associated with restructuring and other activities (1) (1) (6) (2) Net sales $ 4,620 $ 5,539 $ 8,550 $ 9,931 Operating income (loss): The Americas $ (85) $ 382 $ 40 $ 636 Europe, the Middle East & Africa 409 620 743 1,085 Asia/Pacific 241 431 449 653 565 1,433 1,232 2,374 Charges associated with restructuring and other activities (9) (15) (15) (21) Operating income $ 556 $ 1,418 $ 1,217 $ 2,353 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated. The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. Certain prior year amounts in the notes to the consolidated financial statements 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. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods. |
Currency Translation and Transactions | Currency Translation and Transactions All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains (losses), net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $291 million and $(20) million, net of tax, during the three months ended December 31, 2022 and 2021, respectively, and $(61) million and $(195) million, net of tax, during the six months ended December 31, 2022 and 2021, 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. 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. The Company also enters 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 4 – 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 $20 million and $(6) million during the three months ended December 31, 2022 and 2021, respectively, and $34 million and $(18) million during the six months ended December 31, 2022 and 2021, respectively. |
Concentration of Credit Risk | Concentration of Credit RiskThe Company is a worldwide manufacturer, marketer and seller of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to retailers in its travel retail business, department stores, specialty multi-brand retailers and perfumeries. The Company grants credit to qualified customers. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor its customers' abilities, individually and collectively, to make timely payments. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment consists of the following: (In millions) December 31, 2022 June 30, 2022 Assets (Useful Life) Land $ 54 $ 53 Buildings and improvements (10 to 40 years) 504 491 Machinery and equipment (3 to 10 years) 1,027 994 Computer hardware and software (4 to 10 years) 1,587 1,468 Furniture and fixtures (5 to 10 years) 134 129 Leasehold improvements 2,266 2,246 Construction in progress 1,008 759 6,580 6,140 Less accumulated depreciation and amortization (3,672) (3,490) $ 2,908 $ 2,650 Depreciation and amortization of property, plant and equipment was $138 million and $136 million during the three months ended December 31, 2022 and 2021, respectively, and $274 million and $266 million during the six months ended December 31, 2022 and 2021, 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. |
Income Taxes | Income Taxes The effective rate for income taxes for the three and six months ended December 31, 2022 and 2021 are as follows: Three Months Ended Six Months Ended 2022 2021 2022 2021 Effective rate for income taxes 25.4 % 21.5 % 23.9 % 21.9 % Basis-point change from the prior-year period 390 200 For the three and six months ended December 31, 2022, the increase in the effective tax rate was primarily attributable to a decrease in excess tax benefits associated with stock-based compensation arrangements and a higher effective tax rate on the Company's foreign operations, partially offset by a reduction in income tax reserve adjustments. On August 16, 2022, the U.S. federal government enacted the Inflation Reduction Act, with tax provisions primarily focused on implementing a 1% excise tax on share repurchases and a 15% corporate alternative minimum tax based on global adjusted financial statement income. The excise tax is effective beginning with the Company’s third quarter of fiscal 2023 and is not expected to have a material impact on the Company’s results of operations or financial position. The corporate alternative minimum tax will be effective beginning with the Company's first quarter of fiscal 2024. The Company continues to monitor developments and evaluate projected impacts, if any, of this provision to its consolidated financial statements. As of December 31, 2022 and June 30, 2022, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $58 million and $61 million, respectively. The total amount of unrecognized tax benefits at December 31, 2022 that, if recognized, would affect the effective tax rate was $49 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and six months ended December 31, 2022 in the accompanying consolidated statements of earnings was $1 million and $2 million, respectively. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at each of December 31, 2022 and June 30, 2022, was $15 million and $14 million, respectively. On the basis of the information available as of December 31, 2022, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months. During the fiscal 2023 first quarter, the Company formally concluded the compliance process with respect to its fiscal 2021 income tax return under the U.S. Internal Revenue Service (“IRS”) Compliance Assurance Program (“CAP”), which had no impact on the Company’s consolidated financial statements for the three and six months ended December 31, 2022. |
Recently Adopted and Issued Accounting Standards | Recently Issued Accounting Standards FASB ASU No. 2022-04 – Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations In September 2022, the FASB issued authoritative guidance which is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated rollforward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. Effective for the Company – The guidance becomes effective for the Company’s first quarter fiscal 2024 and is applied on a retrospective basis, except for the requirement to disclose rollforward information which is effective prospectively for the Company’s first quarter fiscal 2025. Early adoption is permitted. Annual disclosures need to be provided in interim periods within the initial year of adoption. Impact on consolidated financial statements – The Company has a supplier financing arrangement and will apply the disclosure requirements as required by the amendments. Reference Rate Reform (ASC Topic 848 “ ASC 848 ” ) In March 2020, t he FAS B issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”) and applies to lease and other contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that reference LIBOR or another rate that is expected to be discontinued as a result of reference rate reform. In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clar ify that for all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC 848. In December 2022, the FASB issued authoritative guidance to defer the sunset date of ASC 848 from December 31, 2022 to December 31, 2024. Effective for the Company – This guidance can only be applied for a limited time through December 31, 2024. Impact on consolidated financial statements – The Company currently has an implementation team in place that has performed a comprehensive evaluation and is assessing the impact of applying this guidance, which includes assessing the impact to business processes and internal controls over financial reporting and the related disclosure requirements. For treasury related arrangements, the Company references LIBOR in its interest rate swap agreements and LIBOR is also used for purposes of discounting certain foreign currency and interest rate forward contracts. The Company is currently evaluating the potential impact of modifying treasury related arrangements and applying the relevant ASC 848 optional practical expedients, as needed. For existing lease, debt arrangements and other contracts, the Company will not adopt any ASC 848 optional practical expedients as it relates to these arrangements. The Company will continue to monitor new contracts that could potentially be eligible for contract modification relief through December 31, 2024. No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Schedule of inventory and promotional merchandise | Inventory and promotional merchandise consists of the following: (In millions) December 31, 2022 June 30, 2022 Raw materials $ 918 $ 791 Work in process 318 366 Finished goods 1,519 1,449 Promotional merchandise 314 314 $ 3,069 $ 2,920 |
Schedule of property, plant and equipment | Property, plant and equipment consists of the following: (In millions) December 31, 2022 June 30, 2022 Assets (Useful Life) Land $ 54 $ 53 Buildings and improvements (10 to 40 years) 504 491 Machinery and equipment (3 to 10 years) 1,027 994 Computer hardware and software (4 to 10 years) 1,587 1,468 Furniture and fixtures (5 to 10 years) 134 129 Leasehold improvements 2,266 2,246 Construction in progress 1,008 759 6,580 6,140 Less accumulated depreciation and amortization (3,672) (3,490) $ 2,908 $ 2,650 |
Schedule of effective rate for income taxes | The effective rate for income taxes for the three and six months ended December 31, 2022 and 2021 are as follows: Three Months Ended Six Months Ended 2022 2021 2022 2021 Effective rate for income taxes 25.4 % 21.5 % 23.9 % 21.9 % Basis-point change from the prior-year period 390 200 |
Schedule of other accrued liabilities | Other accrued liabilities consist of the following: (In millions) December 31, 2022 June 30, 2022 Advertising, merchandising and sampling $ 284 $ 250 Employee compensation 473 693 Deferred revenue 344 312 Payroll and other non-income taxes 308 345 Accrued income taxes 343 267 Sales return accrual 293 252 Other 1,494 1,241 $ 3,539 $ 3,360 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
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, 2022 Goodwill $ 1,702 $ 1,116 $ 249 $ 353 $ 3,420 Accumulated impairments (138) (732) (29) — (899) 1,564 384 220 353 2,521 Translation and other adjustments, goodwill (50) — 3 — (47) Translation and other adjustments, accumulated impairments — — (1) — (1) (50) — 2 — (48) Balance as of December 31, 2022 Goodwill 1,652 1,116 252 353 3,373 Accumulated impairments (138) (732) (30) — (900) $ 1,514 $ 384 $ 222 $ 353 $ 2,473 |
Schedule of other intangible assets, by type | Other intangible assets consist of the following: December 31, 2022 June 30, 2022 (In millions) Gross Accumulated Total Net Gross Accumulated Total Net Amortizable intangible assets: Customer lists, license agreements and other $ 2,057 $ 702 $ 1,355 $ 2,064 $ 628 $ 1,436 Non-amortizable intangible assets: Trademarks and other 1,742 1,992 Total intangible assets $ 3,097 $ 3,428 |
Estimated aggregate amortization expense for the remainder of the current fiscal year and the next four years | The estimated aggregate amortization expense for the remainder of fiscal 2023 and for each of the next four fiscal years is as follows: Fiscal (In millions) 2023 2024 2025 2026 2027 Estimated aggregate amortization expense $ 75 $ 147 $ 147 $ 147 $ 130 |
Summary of impairment charges and carrying value of intangible assets | A summary of the impairment charges for the three and six months ended December 31, 2022 and the remaining trademark and goodwill carrying values as of December 31, 2022, for each reporting unit, are as follows: Impairment Charge Carrying Value (In millions) Three and Six Months Ended December 31, 2022 As of December 31, 2022 Reporting Unit: Geographic Region Trademarks Goodwill Trademarks Goodwill Smashbox The Americas $ 21 $ — $ — $ — Dr. Jart+ Asia/Pacific 100 — 339 318 Too Faced The Americas 86 — 186 13 Total $ 207 $ — $ 525 $ 331 |
CHARGES ASSOCIATED WITH RESTR_2
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Restructuring and Related Activities [Abstract] | |
Schedule of aggregate restructuring and other activities | Charges associated with the Post-COVID Business Acceleration Program for the three and six months ended December 31, 2022 were as follows: Sales Cost of Sales Operating Expenses Total (In millions) Restructuring Other Three months ended December 31, 2022 $ 1 $ — $ 4 $ 3 $ 8 Six months ended December 31, 2022 $ 6 $ (1) $ 6 $ 3 $ 14 |
Schedule of total cumulative charges recorded associated with restructuring and other activities | Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were: Sales Cost of Sales Operating Expenses Total (In millions) Restructuring Other Total Charges (Adjustments) Cumulative through June 30, 2022 $ 18 $ 7 $ 310 $ 13 $ 348 Six months ended December 31, 2022 6 (1) 6 3 14 Cumulative through December 31, 2022 $ 24 $ 6 $ 316 $ 16 $ 362 |
Schedule of total cumulative charges by type recorded associated with restructuring and other activities | (In millions) Employee- Asset- Contract Other Exit Total Restructuring Charges (Adjustments) Cumulative through June 30, 2022 $ 203 $ 86 $ 19 $ 2 $ 310 Six months ended December 31, 2022 (3) 14 (6) 1 6 Cumulative through December 31, 2022 $ 200 $ 100 $ 13 $ 3 $ 316 |
Schedule of changes in accrued restructuring charges | Changes in accrued restructuring charges for the six months ended December 31, 2022 relating to the PCBA Program were: (In millions) Employee- Asset- Contract Other Exit Total Balance at June 30, 2022 $ 125 $ — $ — $ — $ 125 Charges (3) 14 (6) 1 6 Cash payments (17) — (1) (1) (19) Non-cash asset write-offs — (14) — — (14) Translation and other adjustments (6) — 7 — 1 Balance at December 31, 2022 $ 99 $ — $ — $ — $ 99 |
DERIVATIVE FINANCIAL INSTRUME_2
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
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) (In millions) Balance Sheet December 31, 2022 June 30, 2022 Balance Sheet December 31, 2022 June 30, 2022 Derivatives Designated as Hedging Instruments: Foreign currency cash flow hedges Prepaid expenses and other current assets $ 35 $ 57 Other accrued liabilities $ 13 $ 1 Net investment hedges Prepaid expenses and other current assets — 107 Other accrued liabilities 40 — Interest rate-related derivatives Prepaid expenses and other current assets 5 24 Other accrued liabilities 150 115 Total Derivatives Designated as Hedging Instruments 40 188 203 116 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Prepaid expenses and other current assets 44 27 Other accrued liabilities 10 104 Total derivatives $ 84 $ 215 $ 213 $ 220 (1) See Note 5 – 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 (Loss) Location of Gain (Loss) Reclassified Amount of Gain (Loss) Reclassified from AOCI into Earnings (1) Three Months Ended Three Months Ended (In millions) 2022 2021 2022 2021 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ (39) $ (8) Net sales $ 22 $ (2) Interest rate-related derivatives 5 — Interest expense — (1) (34) (8) 22 (3) Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) (86) 34 — — Total derivatives $ (120) $ 26 $ 22 $ (3) (1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material. (2) During the three months ended December 31, 2022 and 2021, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $7 million and $3 million, respectively. (3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets. Amount of Gain (Loss) Location of Gain (Loss) Reclassified Amount of Gain (Loss) Reclassified from AOCI into Earnings (1) Six Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Derivatives in Cash Flow Hedging Relationships: Foreign currency forward contracts $ 18 $ 7 Net sales $ 37 $ (8) Interest rate-related derivatives 12 — Interest expense — (1) 30 7 37 (9) Derivatives in Net Investment Hedging Relationships (2) : Foreign currency forward contracts (3) (15) 70 — — Total derivatives $ 15 $ 77 $ 37 $ (9) (1) The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material. (2) During the six months ended December 31, 2022 and 2021, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $13 million and $5 million, respectively. (3) Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets. Amount of Gain (Loss) Recognized in Earnings on Derivatives (1) Location of Gain (Loss) Recognized in Earnings on Derivatives Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Derivatives in Fair Value Hedging Relationships: Interest rate swap contracts Interest expense $ 4 $ (6) $ (35) $ (16) (1) Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt. |
Schedule of cumulative amount of fair value hedging adjustments for designated and qualifying hedged items | Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows: (In millions) Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included Carrying Amount of the Cumulative Amount of Fair December 31, 2022 December 31, 2022 Long-term debt $ 842 $ (150) |
Schedule of effects of fair value and cash flow hedging relationships for designated and qualified hedging instruments | Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows: Three Months Ended December 31 2022 2021 (In millions) Net Sales Interest Net Sales Interest 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 $ 4,620 $ 52 $ 5,539 $ 42 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable (4) Not applicable 6 Derivatives designated as hedging instruments Not applicable 4 Not applicable (6) Gain (loss) on cash flow hedge relationships – interest rate contracts: Amount of loss reclassified from AOCI into earnings Not applicable — Not applicable (1) Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: Amount of gain (loss) reclassified from AOCI into earnings 22 Not applicable (2) Not applicable Six Months Ended December 31 2022 2021 (In millions) Net Sales Interest Net Sales Interest 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 $ 8,550 $ 98 $ 9,931 $ 84 The effects of fair value and cash flow hedging relationships: Gain (loss) on fair value hedge relationships – interest rate contracts: Hedged item Not applicable 35 Not applicable 16 Derivatives designated as hedging instruments Not applicable (35) Not applicable (16) Gain (loss) on cash flow hedge relationships – interest rate contracts: Amount of loss reclassified from AOCI into earnings Not applicable — Not applicable (1) Gain (loss) on cash flow hedge relationships – foreign currency forward contracts: Amount of gain (loss) reclassified from AOCI into earnings 37 Not applicable (8) Not applicable |
Schedule of gains and losses related to derivative financial instruments not designated as hedging instruments | The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows: Amount of Gain (Loss) Location of Gain (Loss) Recognized in Earnings on Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Derivatives Not Designated as Hedging Instruments: Foreign currency forward contracts Selling, general and administrative $ 6 $ (38) $ 17 $ (49) |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
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 December 31, 2022: (In millions) Level 1 Level 2 Level 3 Total Assets: Money market funds $ 989 $ — $ — $ 989 Foreign currency forward contracts — 79 — 79 Interest rate-related derivatives — 5 — 5 Total $ 989 $ 84 $ — $ 1,073 Liabilities: Foreign currency forward contracts $ — $ 63 $ — $ 63 Interest rate-related derivatives — 150 — 150 DECIEM stock options — — 71 71 Total $ — $ 213 $ 71 $ 284 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, 2022: (In millions) Level 1 Level 2 Level 3 Total Assets: Money market funds $ 961 $ — $ — $ 961 Foreign currency forward contracts — 191 — 191 Interest rate-related derivatives — 24 — 24 Total $ 961 $ 215 $ — $ 1,176 Liabilities: Foreign currency forward contracts $ — $ 105 $ — $ 105 Interest rate-related derivatives — 115 — 115 DECIEM stock options — — 74 74 Total $ — $ 220 $ 74 $ 294 |
Schedule of estimated fair values of financial instruments | The estimated fair values of the Company’s financial instruments are as follows: December 31, 2022 June 30, 2022 (In millions) Carrying Fair Carrying Fair Nonderivatives Cash and cash equivalents $ 3,725 $ 3,725 $ 3,957 $ 3,957 Current and long-term debt 5,371 4,884 5,412 5,139 DECIEM stock options 71 71 74 74 Derivatives Foreign currency forward contracts – asset, net 16 16 86 86 Interest rate-related derivatives – liability, net (145) (145) (91) (91) |
Impairment charges measured at fair value on a nonrecurring basis, classified as Level 3 | The following table presents the Company’s impairment charges for the three and six months ended December 31, 2022 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test: (In millions) Impairment charges Date of Fair Value Measurement Fair Value (1) Other intangible assets, net (trademarks) Dr.Jart+ $ 100 November 30, 2022 $ 339 Too Faced 86 November 30, 2022 186 Smashbox 21 December 31, 2022 — Total $ 207 $ 525 (1) See Note 2 - 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 DECEIM stock option liability | Changes in the DECIEM stock option liability for the six months ended December 31, 2022 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows: (In millions) Fair Value DECIEM stock option liability as of June 30, 2022 $ 74 Changes in fair value, net of foreign currency remeasurements (1) (3) Translation adjustments and other, net — DECIEM stock option liability as of December 31, 2022 $ 71 (1) Amount includes expense attributable to graded vesting of stock options which is not material for the six months ended December 31, 2022. |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of changes in allowance for credit losses | Changes in the allowance for credit losses are as follows: (In millions) December 31, 2022 Balance at June 30, 2022 $ 10 Provision for expected credit losses 2 Balance at December 31, 2022 $ 12 |
Schedule of significant changes in deferred revenue | Changes in deferred revenue during the period are as follows: Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Deferred revenue, beginning of period $ 362 $ 426 $ 362 $ 371 Revenue recognized that was included in the deferred revenue balance at the beginning of the period (131) (78) (280) (248) Revenue deferred during the period 119 75 276 298 Other 3 (2) (5) — Deferred revenue, end of period $ 353 $ 421 $ 353 $ 421 |
PENSION AND POST-RETIREMENT B_2
PENSION AND POST-RETIREMENT BENEFIT PLANS (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Retirement Benefits [Abstract] | |
Schedule of components of net periodic benefit cost for pension and other post-retirement benefit plans | The components of net periodic benefit cost for the three months ended December 31, 2022 and 2021 consisted of the following: Pension Plans Other than U.S. International Post-retirement (In millions) 2022 2021 2022 2021 2022 2021 Service cost $ 9 $ 11 $ 6 $ 8 $ — $ — Interest cost 10 7 4 2 2 2 Expected return on plan assets (14) (13) (4) (3) — (1) Amortization of: Actuarial loss 1 3 (1) 1 — 1 Prior service cost — — — (1) — — Special termination benefits — — — 1 — — Net periodic benefit cost $ 6 $ 8 $ 5 $ 8 $ 2 $ 2 The components of net periodic benefit cost for the six months ended December 31, 2022 and 2021 consisted of the following: Pension Plans Other than U.S. International Post-retirement (In millions) 2022 2021 2022 2021 2022 2021 Service cost $ 18 $ 23 $ 13 $ 16 $ — $ 1 Interest cost 20 15 7 5 4 3 Expected return on plan assets (28) (27) (8) (7) — (1) Amortization of: Actuarial loss 2 7 (2) 1 — 1 Prior service cost — — — (1) — — Special termination benefits — — — 3 — — Net periodic benefit cost $ 12 $ 18 $ 10 $ 17 $ 4 $ 4 |
Schedule of amounts recognized in the consolidated balance sheets related to the Company's pension and post-retirement benefit plans | The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following: (In millions) December 31, 2022 June 30, 2022 Other assets $ 137 $ 151 Other accrued liabilities (24) (24) Other noncurrent liabilities (359) (357) Funded status (246) (230) Accumulated other comprehensive loss 157 155 Net amount recognized $ (89) $ (75) |
STOCK PROGRAMS (Tables)
STOCK PROGRAMS (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of key assumptions used for fair value | The fair value of the stock options were calculated using the following key assumptions in the Monte Carlo Method: December 31, 2022 June 30, 2022 Risk-free rate 4.40% 3.20% Term to mid of last twelve-month period 0.92 years 1.42 years Operating leverage adjustment 0.45 0.45 Net sales discount rate 7.10% 6.00% EBITDA discount rate 10.50% 9.40% EBITDA volatility 34.90% 33.90% Net sales volatility 15.70% 15.30% |
NET EARNINGS ATTRIBUTABLE TO _2
NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of reconciliation between the numerator and denominator of the basic and diluted EPS computations | A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows: Three Months Ended Six Months Ended (In millions, except per share data) 2022 2021 2022 2021 Numerator: Net earnings attributable to The Estée Lauder Companies Inc. $ 394 $ 1,088 $ 883 $ 1,780 Denominator: Weighted-average common shares outstanding – Basic 357.7 360.6 357.8 361.4 Effect of dilutive stock options 2.1 4.1 2.4 4.2 Effect of PSUs 0.1 0.2 0.1 0.2 Effect of RSUs 0.5 1.1 0.6 1.2 Weighted-average common shares outstanding – Diluted 360.4 366.0 360.9 367.0 Net earnings attributable to The Estée Lauder Companies Inc. per common share: Basic $ 1.10 $ 3.02 $ 2.47 $ 4.93 Diluted $ 1.09 $ 2.97 $ 2.45 $ 4.85 |
Schedule of antidilutive securities excluded from computation of earnings per share | The shares of Class A Common Stock underlying stock options, RSUs and PSUs that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive were as follows: Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Stock options 2.9 1.1 2.1 0.7 RSUs and PSUs 0.1 — 0.1 0.1 |
EQUITY AND REDEEMABLE NONCONT_2
EQUITY AND REDEEMABLE NONCONTROLLING INTEREST (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Equity [Abstract] | |
Schedule of equity | Total Stockholders’ Equity – The Estée Lauder Companies Inc. Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Common stock, beginning of the period $ 6 $ 6 $ 6 $ 6 Stock-based compensation — — — — Common stock, end of the period 6 6 6 6 Paid-in capital, beginning of the period 5,875 5,450 5,796 5,335 Common stock dividends 1 — 2 1 Stock-based compensation 124 155 202 269 Paid-in capital, end of the period 6,000 5,605 6,000 5,605 Retained earnings, beginning of the period 14,185 12,864 13,912 12,244 Common stock dividends (237) (217) (453) (410) Net earnings attributable to The Estée Lauder Companies Inc. 394 1,088 883 1,780 Cumulative effect of adoption of new accounting standards — — — 121 Retained earnings, end of the period 14,342 13,735 14,342 13,735 Accumulated other comprehensive loss, beginning of the period (1,078) (625) (762) (470) Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc. 249 (21) (67) (176) Accumulated other comprehensive loss, end of the period (829) (646) (829) (646) Treasury stock, beginning of the period (13,471) (11,614) (13,362) (11,058) Acquisition of treasury stock (92) (763) (184) (1,282) Stock-based compensation (54) (105) (71) (142) Treasury stock, end of the period (13,617) (12,482) (13,617) (12,482) Total stockholders’ equity – The Estée Lauder Companies Inc. 5,902 6,218 5,902 6,218 Noncontrolling interests, beginning of the period — 34 — 34 Net earnings attributable to noncontrolling interests — 4 — 5 Translation adjustments and other, net — (4) — (5) Noncontrolling interests, end of the period — 34 — 34 Total equity $ 5,902 $ 6,252 $ 5,902 $ 6,252 Redeemable noncontrolling interest, beginning of the period $ 808 $ 842 $ 842 $ 857 Net earnings (loss) attributable to redeemable noncontrolling interest 3 (2) 4 — Translation adjustments 8 — (27) (17) Redeemable noncontrolling interest, end of the period $ 819 $ 840 $ 819 $ 840 Cash dividends declared per common share $ .66 $ .60 $ 1.26 $ 1.13 |
Summary of cash dividends declared per share on the Company's Class A and Class B Common Stock | The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the six months ended December 31, 2022: Date Declared Record Date Payable Date Amount per Share August 17, 2022 August 31, 2022 September 15, 2022 $ .60 November 1, 2022 November 30, 2022 December 15, 2022 $ .66 |
Schedule of components of AOCI, net of tax | The following table represents changes in AOCI, net of tax, by component for the six months ended December 31, 2022: (In millions) Net Cash Amounts Translation Total Balance at June 30, 2022 $ 68 $ (114) $ (716) $ (762) OCI before reclassifications 23 (1) (1) (61) (2) (39) Amounts reclassified to Net earnings (28) — — (28) Net current-period OCI (5) (1) (61) (67) Balance at December 31, 2022 $ 63 $ (115) $ (777) $ (829) (1) Consists of foreign currency translation losses. (2) See Note 4 – Derivative Financial Instruments for gains (losses) relating to net investment hedges. |
Schedule of effects of reclassification adjustments from AOCI into net earnings | The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and six months ended December 31, 2022 and 2021: Amount Reclassified from AOCI Affected Line Item in Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 Gain (Loss) on Cash Flow Hedges Foreign currency forward contracts $ 22 $ (2) $ 37 $ (8) Net sales Interest rate-related derivatives — (1) — (1) Interest expense 22 (3) 37 (9) Benefit (provision) for deferred taxes (5) — (9) 2 Provision for income taxes 17 (3) 28 (7) Net earnings Retirement Plan and Other Retiree Benefit Adjustments Amortization of prior service cost — 1 — 1 Other components of net periodic benefit cost (1) Amortization of actuarial loss — (5) — (9) Other components of net periodic benefit cost (1) — (4) — (8) Benefit for deferred taxes — 1 — 2 Provision for income taxes — (3) — (6) Net earnings Total reclassification adjustments, net $ 17 $ (6) $ 28 $ (13) Net earnings (1) See Note 7 – Pension and Post-Retirement Benefit Plans for additional information. |
STATEMENT OF CASH FLOWS (Tables
STATEMENT OF CASH FLOWS (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental cash flow information | Supplemental cash flow information for the six months ended December 31, 2022 and 2021 is as follows: (In millions) 2022 2021 Cash: Cash paid during the period for interest $ 94 $ 80 Cash paid during the period for income taxes $ 249 $ 317 Non-cash investing and financing activities: Property, plant and equipment accrued but unpaid $ 216 $ 108 Financing lease modifications $ — $ (14) Right-of-use assets obtained in exchange for new/modified operating lease liabilities $ 107 $ 139 |
SEGMENT DATA AND RELATED INFO_2
SEGMENT DATA AND RELATED INFORMATION (Tables) | 6 Months Ended |
Dec. 31, 2022 | |
Segment Reporting [Abstract] | |
Schedule of segment data and related information | Three Months Ended Six Months Ended (In millions) 2022 2021 2022 2021 PRODUCT CATEGORY DATA Net sales: Skin Care $ 2,382 $ 3,159 $ 4,486 $ 5,608 Makeup 1,268 1,386 2,320 2,560 Fragrance 775 799 1,382 1,408 Hair Care 182 180 340 328 Other 14 16 28 29 4,621 5,540 8,556 9,933 Returns associated with restructuring and other activities (1) (1) (6) (2) Net sales $ 4,620 $ 5,539 $ 8,550 $ 9,931 Operating income (loss) before charges associated with restructuring and other activities: Skin Care $ 421 $ 1,082 $ 951 $ 1,799 Makeup (37) 130 (21) 221 Fragrance 177 210 310 341 Hair Care 5 8 (7) 10 Other (1) 3 (1) 3 565 1,433 1,232 2,374 Reconciliation: Charges associated with restructuring and other activities (9) (15) (15) (21) Interest expense (52) (42) (98) (84) Interest income and investment income, net 26 10 41 14 Other components of net periodic benefit cost 2 2 5 1 Other income — — — 1 Earnings before income taxes $ 532 $ 1,388 $ 1,165 $ 2,285 GEOGRAPHIC DATA (1) Net sales: The Americas $ 1,235 $ 1,300 $ 2,358 $ 2,494 Europe, the Middle East & Africa 1,816 2,338 3,498 4,211 Asia/Pacific 1,570 1,902 2,700 3,228 4,621 5,540 8,556 9,933 Returns associated with restructuring and other activities (1) (1) (6) (2) Net sales $ 4,620 $ 5,539 $ 8,550 $ 9,931 Operating income (loss): The Americas $ (85) $ 382 $ 40 $ 636 Europe, the Middle East & Africa 409 620 743 1,085 Asia/Pacific 241 431 449 653 565 1,433 1,232 2,374 Charges associated with restructuring and other activities (9) (15) (15) (21) Operating income $ 556 $ 1,418 $ 1,217 $ 2,353 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Currency Translation and Transactions (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Currency Translation and Transactions | ||||
Unrealized translation gains (losses), net of tax | $ 291 | $ (20) | $ (61) | $ (195) |
Net exchange gains (losses) on foreign currency transactions | $ 20 | $ (6) | $ 34 | $ (18) |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration of Credit Risk (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | |
Concentration Risk [Line Items] | |||||
Net sales | $ 4,620 | $ 5,539 | $ 8,550 | $ 9,931 | |
Accounts receivable, net | 1,932 | $ 1,932 | $ 1,629 | ||
Largest Customer | Accounts Receivable | Customer Concentration Risk | |||||
Concentration Risk [Line Items] | |||||
Concentration risk (as a percent) | 12% | 24% | |||
Accounts receivable, net | $ 242 | $ 242 | $ 399 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventory and Promotional Merchandise (Details) - USD ($) $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 |
Accounting Policies [Abstract] | ||
Raw materials | $ 918 | $ 791 |
Work in process | 318 | 366 |
Finished goods | 1,519 | 1,449 |
Promotional merchandise | 314 | 314 |
Inventory and promotional merchandise | $ 3,069 | $ 2,920 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | |
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | $ 6,580 | $ 6,580 | $ 6,140 | ||
Less accumulated depreciation and amortization | (3,672) | (3,672) | (3,490) | ||
Property, plant and equipment, net | 2,908 | 2,908 | 2,650 | ||
Depreciation and amortization of property, plant and equipment | 138 | $ 136 | 274 | $ 266 | |
Land | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 54 | 54 | 53 | ||
Buildings and improvements | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 504 | $ 504 | 491 | ||
Buildings and improvements | Minimum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 10 years | ||||
Buildings and improvements | Maximum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 40 years | ||||
Machinery and equipment | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 1,027 | $ 1,027 | 994 | ||
Machinery and equipment | Minimum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 3 years | ||||
Machinery and equipment | Maximum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 10 years | ||||
Computer hardware and software | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 1,587 | $ 1,587 | 1,468 | ||
Computer hardware and software | Minimum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 4 years | ||||
Computer hardware and software | Maximum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 10 years | ||||
Furniture and fixtures | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 134 | $ 134 | 129 | ||
Furniture and fixtures | Minimum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 5 years | ||||
Furniture and fixtures | Maximum | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, useful life (in years) | 10 years | ||||
Leasehold improvements | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | 2,266 | $ 2,266 | 2,246 | ||
Construction in progress | |||||
Property, Plant and Equipment | |||||
Property, plant and equipment, gross | $ 1,008 | $ 1,008 | $ 759 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | |
Income Tax Contingency [Line Items] | |||||
Effective rate for income taxes (as a percent) | 25.40% | 21.50% | 23.90% | 21.90% | |
Basis-point change from the prior-year period (as a percent) | 3.90% | 2% | |||
Gross unrecognized tax benefits | $ 58 | $ 58 | $ 61 | ||
Total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate | 49 | 49 | |||
Gross interest and penalty accrued | 1 | 2 | |||
Total gross accrued interest and penalties related to unrecognized tax benefits | $ 15 | $ 15 | $ 14 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Other Accrued Liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 |
Accounting Policies [Abstract] | ||
Advertising, merchandising and sampling | $ 284 | $ 250 |
Employee compensation | 473 | 693 |
Deferred revenue | 344 | 312 |
Payroll and other non-income taxes | 308 | 345 |
Accrued income taxes | 343 | 267 |
Sales return accrual | 293 | 252 |
Other | 1,494 | 1,241 |
Other accrued liabilities | $ 3,539 | $ 3,360 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Accrued Liabilities Narrative (Details) - USD ($) $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 |
Other Liabilities [Line Items] | ||
Other noncurrent liabilities | $ 1,487 | $ 1,651 |
Other Noncurrent Liabilities | ||
Other Liabilities [Line Items] | ||
Deferred tax liabilities | $ 636 | $ 692 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) - USD ($) $ in Millions | 6 Months Ended | |
Dec. 31, 2022 | Jun. 30, 2022 | |
Changes in goodwill | ||
Goodwill, gross, beginning balance | $ 3,420 | |
Accumulated impairments | (900) | $ (899) |
Goodwill, beginning balance | 2,521 | |
Translation and other adjustments, goodwill | (47) | |
Translation and other adjustments, accumulated impairments | (1) | |
Goodwill, period increase (decrease) | (48) | |
Goodwill, gross, ending balance | 3,373 | |
Goodwill, ending balance | 2,473 | |
Skin Care | ||
Changes in goodwill | ||
Goodwill, gross, beginning balance | 1,702 | |
Accumulated impairments | (138) | (138) |
Goodwill, beginning balance | 1,564 | |
Translation and other adjustments, goodwill | (50) | |
Translation and other adjustments, accumulated impairments | 0 | |
Goodwill, period increase (decrease) | (50) | |
Goodwill, gross, ending balance | 1,652 | |
Goodwill, ending balance | 1,514 | |
Makeup | ||
Changes in goodwill | ||
Goodwill, gross, beginning balance | 1,116 | |
Accumulated impairments | (732) | (732) |
Goodwill, beginning balance | 384 | |
Translation and other adjustments, goodwill | 0 | |
Translation and other adjustments, accumulated impairments | 0 | |
Goodwill, period increase (decrease) | 0 | |
Goodwill, gross, ending balance | 1,116 | |
Goodwill, ending balance | 384 | |
Fragrance | ||
Changes in goodwill | ||
Goodwill, gross, beginning balance | 249 | |
Accumulated impairments | (30) | (29) |
Goodwill, beginning balance | 220 | |
Translation and other adjustments, goodwill | 3 | |
Translation and other adjustments, accumulated impairments | (1) | |
Goodwill, period increase (decrease) | 2 | |
Goodwill, gross, ending balance | 252 | |
Goodwill, ending balance | 222 | |
Hair Care | ||
Changes in goodwill | ||
Goodwill, gross, beginning balance | 353 | |
Accumulated impairments | 0 | $ 0 |
Goodwill, beginning balance | 353 | |
Translation and other adjustments, goodwill | 0 | |
Translation and other adjustments, accumulated impairments | 0 | |
Goodwill, period increase (decrease) | 0 | |
Goodwill, gross, ending balance | 353 | |
Goodwill, ending balance | $ 353 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Other Intangible Assets (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | |
Non-amortizable intangible assets: | |||||
Total intangible assets | $ 3,097 | $ 3,097 | $ 3,428 | ||
Aggregate amortization expense for amortizable intangible assets | 37 | $ 39 | 73 | $ 84 | |
Estimated aggregate amortization expense | |||||
Estimated aggregate amortization expense for remainder of fiscal year 2023 | 75 | 75 | |||
Estimated aggregate amortization expense for fiscal year 2024 | 147 | 147 | |||
Estimated aggregate amortization expense for fiscal year 2025 | 147 | 147 | |||
Estimated aggregate amortization expense for fiscal year 2026 | 147 | 147 | |||
Estimated aggregate amortization expense for fiscal year 2027 | 130 | 130 | |||
Trademarks and other | |||||
Non-amortizable intangible assets: | |||||
Trademarks and other | 1,742 | 1,742 | 1,992 | ||
Customer lists, license agreements and other | |||||
Amortizable intangible assets: | |||||
Gross Carrying Value | 2,057 | 2,057 | 2,064 | ||
Accumulated Amortization | 702 | 702 | 628 | ||
Total Net Book Value | $ 1,355 | $ 1,355 | $ 1,436 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - Trademarks and other $ in Millions | 3 Months Ended | 6 Months Ended | |
Dec. 31, 2022 USD ($) | Dec. 31, 2022 USD ($) | Jun. 30, 2022 USD ($) | |
Intangible assets | |||
Carrying value | $ 1,742 | $ 1,742 | $ 1,992 |
Smashbox | Makeup | |||
Intangible assets | |||
Impairment charges of indefinite-lived intangible assets | 21 | 21 | |
Carrying value | 0 | 0 | |
Dr. Jart+ | Skin Care | |||
Intangible assets | |||
Impairment charges of indefinite-lived intangible assets | $ 100 | $ 100 | |
Dr. Jart+ | Weighted-Average Cost Of Capital | Skin Care | |||
Intangible assets | |||
Weighted-average cost of capital | 0.11 | 0.11 | |
Too Faced | Makeup | |||
Intangible assets | |||
Impairment charges of indefinite-lived intangible assets | $ 86 | $ 86 | |
Too Faced | Weighted-Average Cost Of Capital | Makeup | |||
Intangible assets | |||
Weighted-average cost of capital | 0.13 | 0.13 |
GOODWILL AND OTHER INTANGIBLE_6
GOODWILL AND OTHER INTANGIBLE ASSETS - Impairment (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2022 | Jun. 30, 2022 | |
Intangible assets | |||
Carrying Value, Goodwill | $ 2,473 | $ 2,473 | $ 2,521 |
Makeup | |||
Intangible assets | |||
Carrying Value, Goodwill | 384 | 384 | 384 |
Skin Care | |||
Intangible assets | |||
Carrying Value, Goodwill | 1,514 | 1,514 | $ 1,564 |
Smashbox | The Americas | Makeup | |||
Intangible assets | |||
Impairment, trademarks | 21 | 21 | |
Impairment, goodwill | 0 | 0 | |
Carrying Value, Trademarks | 0 | 0 | |
Carrying Value, Goodwill | 0 | 0 | |
Dr. Jart+ | Asia/Pacific | Skin Care | |||
Intangible assets | |||
Impairment, trademarks | 100 | 100 | |
Impairment, goodwill | 0 | 0 | |
Carrying Value, Trademarks | 339 | 339 | |
Carrying Value, Goodwill | 318 | 318 | |
Too Faced | The Americas | Makeup | |||
Intangible assets | |||
Impairment, trademarks | 86 | 86 | |
Impairment, goodwill | 0 | 0 | |
Carrying Value, Trademarks | 186 | 186 | |
Carrying Value, Goodwill | 13 | 13 | |
Smashbox, Dr. Jart+ and Too Faced | |||
Intangible assets | |||
Impairment, trademarks | 207 | 207 | |
Impairment, goodwill | 0 | 0 | |
Carrying Value, Trademarks | 525 | 525 | |
Carrying Value, Goodwill | $ 331 | $ 331 |
CHARGES ASSOCIATED WITH RESTR_3
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Charges Associated With Restructuring Activities (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Restructuring and Other Costs | ||||
Restructuring charges | $ 9 | $ 15 | $ 15 | $ 21 |
PCBA Program | ||||
Restructuring and Other Costs | ||||
Restructuring charges | 8 | 14 | ||
Sales Returns (included in Net Sales) | ||||
Restructuring and Other Costs | ||||
Restructuring charges | 1 | $ 1 | 6 | $ 2 |
Sales Returns (included in Net Sales) | PCBA Program | ||||
Restructuring and Other Costs | ||||
Restructuring charges | 1 | 6 | ||
Cost of Sales | PCBA Program | ||||
Restructuring and Other Costs | ||||
Restructuring charges | 0 | (1) | ||
Restructuring Charges | PCBA Program | ||||
Restructuring and Other Costs | ||||
Restructuring charges | 4 | 6 | ||
Other Charges | PCBA Program | ||||
Restructuring and Other Costs | ||||
Restructuring charges | $ 3 | $ 3 |
CHARGES ASSOCIATED WITH RESTR_4
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Narrative (Details) - PCBA Program $ in Millions | 6 Months Ended | 12 Months Ended | ||||
Aug. 20, 2020 | Jun. 30, 2023 USD ($) | Dec. 31, 2022 position | Jun. 30, 2025 USD ($) | Jun. 30, 2024 USD ($) | Jun. 30, 2022 USD ($) | |
Restructuring and Other Costs | ||||||
Restructuring program, period | 2 years | |||||
Forecast | ||||||
Restructuring and Other Costs | ||||||
Accrued restructuring charges expected to result in cash expenditures funded from cash provided by operations | $ 51 | $ 12 | $ 36 | |||
Minimum | ||||||
Restructuring and Other Costs | ||||||
Net reduction in global positions | position | 2,500 | |||||
Closure of freestanding stores (as a percent) | 10% | |||||
Restructuring and related costs, expected costs | $ 500 | |||||
Maximum | ||||||
Restructuring and Other Costs | ||||||
Net reduction in global positions | position | 3,000 | |||||
Closure of freestanding stores (as a percent) | 15% | |||||
Restructuring and related costs, expected costs | $ 515 |
CHARGES ASSOCIATED WITH RESTR_5
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Cumulative Restructuring Charges by Major Cost Type (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Restructuring and related costs | ||||
Charges | $ 9 | $ 15 | $ 15 | $ 21 |
Sales Returns (included in Net Sales) | ||||
Restructuring and related costs | ||||
Charges | 1 | $ 1 | 6 | $ 2 |
PCBA Program | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2022 | 348 | |||
Charges | 8 | 14 | ||
Cumulative through December 31, 2022 | 362 | 362 | ||
PCBA Program | Sales Returns (included in Net Sales) | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2022 | 18 | |||
Charges | 1 | 6 | ||
Cumulative through December 31, 2022 | 24 | 24 | ||
PCBA Program | Cost of Sales | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2022 | 7 | |||
Charges | 0 | (1) | ||
Cumulative through December 31, 2022 | 6 | 6 | ||
PCBA Program | Restructuring Charges | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2022 | 310 | |||
Charges | 4 | 6 | ||
Cumulative through December 31, 2022 | 316 | 316 | ||
PCBA Program | Restructuring Charges | Employee- Related Costs | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2022 | 203 | |||
Charges | (3) | |||
Cumulative through December 31, 2022 | 200 | 200 | ||
PCBA Program | Restructuring Charges | Asset- Related Costs | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2022 | 86 | |||
Charges | 14 | |||
Cumulative through December 31, 2022 | 100 | 100 | ||
PCBA Program | Restructuring Charges | Contract Terminations | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2022 | 19 | |||
Charges | (6) | |||
Cumulative through December 31, 2022 | 13 | 13 | ||
PCBA Program | Restructuring Charges | Other Exit Costs | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2022 | 2 | |||
Charges | 1 | |||
Cumulative through December 31, 2022 | 3 | 3 | ||
PCBA Program | Other Charges | ||||
Restructuring and related costs | ||||
Cumulative through June 30, 2022 | 13 | |||
Charges | 3 | 3 | ||
Cumulative through December 31, 2022 | $ 16 | $ 16 |
CHARGES ASSOCIATED WITH RESTR_6
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Accrued Restructuring Charges (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Restructuring Cost and Reserve [Roll Forward] | ||||
Charges | $ 9 | $ 15 | $ 15 | $ 21 |
PCBA Program | ||||
Restructuring Cost and Reserve [Roll Forward] | ||||
Charges | 8 | 14 | ||
PCBA Program | Restructuring And Other Charges | ||||
Restructuring Cost and Reserve [Roll Forward] | ||||
Beginning balance | 125 | |||
Charges | 6 | |||
Cash payments | (19) | |||
Non-cash asset write-offs | (14) | |||
Translation and other adjustments | 1 | |||
Ending balance | 99 | 99 | ||
Employee- Related Costs | PCBA Program | Restructuring And Other Charges | ||||
Restructuring Cost and Reserve [Roll Forward] | ||||
Beginning balance | 125 | |||
Charges | (3) | |||
Cash payments | (17) | |||
Non-cash asset write-offs | 0 | |||
Translation and other adjustments | (6) | |||
Ending balance | 99 | 99 | ||
Asset- Related Costs | PCBA Program | Restructuring And Other Charges | ||||
Restructuring Cost and Reserve [Roll Forward] | ||||
Beginning balance | 0 | |||
Charges | 14 | |||
Cash payments | 0 | |||
Non-cash asset write-offs | (14) | |||
Translation and other adjustments | 0 | |||
Ending balance | 0 | 0 | ||
Contract Terminations | PCBA Program | Restructuring And Other Charges | ||||
Restructuring Cost and Reserve [Roll Forward] | ||||
Beginning balance | 0 | |||
Charges | (6) | |||
Cash payments | (1) | |||
Non-cash asset write-offs | 0 | |||
Translation and other adjustments | 7 | |||
Ending balance | 0 | 0 | ||
Other Exit Costs | PCBA Program | Restructuring And Other Charges | ||||
Restructuring Cost and Reserve [Roll Forward] | ||||
Beginning balance | 0 | |||
Charges | 1 | |||
Cash payments | (1) | |||
Non-cash asset write-offs | 0 | |||
Translation and other adjustments | 0 | |||
Ending balance | $ 0 | $ 0 |
DERIVATIVE FINANCIAL INSTRUME_3
DERIVATIVE FINANCIAL INSTRUMENTS - Derivative Instruments Included in the Consolidated Balance Sheets (Details) - USD ($) $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 |
Derivatives, Fair Value | ||
Derivative asset, total | $ 84 | $ 215 |
Derivative liability, total | 213 | 220 |
Derivatives Designated as Hedging Instruments: | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 40 | 188 |
Derivatives Designated as Hedging Instruments: | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | 203 | 116 |
Derivatives Designated as Hedging Instruments: | Foreign currency cash flow hedges | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 35 | 57 |
Derivatives Designated as Hedging Instruments: | Foreign currency cash flow hedges | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | 13 | 1 |
Derivatives Designated as Hedging Instruments: | Net investment hedges | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 0 | 107 |
Derivatives Designated as Hedging Instruments: | Net investment hedges | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | 40 | 0 |
Derivatives Designated as Hedging Instruments: | Interest rate-related derivatives | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 5 | 24 |
Derivatives Designated as Hedging Instruments: | Interest rate-related derivatives | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | 150 | 115 |
Derivatives Not Designated as Hedging Instruments: | Foreign currency forward contracts | Prepaid expenses and other current assets | ||
Derivatives, Fair Value | ||
Derivative asset, fair value | 44 | 27 |
Derivatives Not Designated as Hedging Instruments: | Foreign currency forward contracts | Other accrued liabilities | ||
Derivatives, Fair Value | ||
Derivative liability, fair value | $ 10 | $ 104 |
DERIVATIVE FINANCIAL INSTRUME_4
DERIVATIVE FINANCIAL INSTRUMENTS - Gain (Loss) on Derivative Financial Instruments (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging | $ (120) | $ 26 | $ 15 | $ 77 |
Amounts reclassified to earnings during the year | 22 | (3) | 37 | (9) |
Cash flow hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging | (34) | (8) | 30 | 7 |
Amounts reclassified to earnings during the year | 22 | (3) | 37 | (9) |
Net sales | ||||
Gain (loss) on derivative financial 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 | 4,620 | 5,539 | 8,550 | 9,931 |
Interest expense | ||||
Gain (loss) on derivative financial 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 | 52 | 42 | 98 | 84 |
Foreign currency forward contracts | Cash flow hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging | (39) | (8) | 18 | 7 |
Foreign currency forward contracts | Net investment hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging | (86) | 34 | (15) | 70 |
Amounts reclassified to earnings during the year | 0 | 0 | 0 | 0 |
Foreign currency forward contracts | Net sales | Cash flow hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amounts reclassified to earnings during the year | 22 | (2) | 37 | (8) |
Interest rate-related derivatives | Cash flow hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging | 5 | 0 | 12 | 0 |
Interest rate-related derivatives | Interest expense | Cash flow hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Amounts reclassified to earnings during the year | 0 | (1) | 0 | (1) |
Interest rate-related derivatives | Interest expense | Derivatives in fair value hedging relationships | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of gain (loss) reclassified from AOCI to earnings | (4) | 6 | 35 | 16 |
Net investment hedges | ||||
Gain (loss) on derivative financial instruments | ||||
Gain recognized in earnings related to the amount excluded from effectiveness testing | 7 | 3 | 13 | 5 |
Derivatives Designated as Hedging Instruments: | Interest rate-related derivatives | Interest expense | Derivatives in fair value hedging relationships | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of gain (loss) reclassified from AOCI to earnings | 4 | (6) | (35) | (16) |
Derivatives Not Designated as Hedging Instruments: | Foreign currency forward contracts | Selling, general and administrative | ||||
Gain (loss) on derivative financial instruments | ||||
Amount of gain (loss) reclassified from AOCI to earnings | $ 6 | $ (38) | $ 17 | $ (49) |
DERIVATIVE FINANCIAL INSTRUME_5
DERIVATIVE FINANCIAL INSTRUMENTS - Cumulative Amount of Fair Value Hedging Gain (Loss) (Details) - Long-term debt $ in Millions | 6 Months Ended |
Dec. 31, 2022 USD ($) | |
Derivative instruments | |
Cumulative Amount of Fair Value Hedging Gain (Loss) Included in the Carrying Amount of the Hedged Liability | $ (150) |
Derivatives in fair value hedging relationships | |
Derivative instruments | |
Carrying Amount of the Hedged Liabilities | $ 842 |
DERIVATIVE FINANCIAL INSTRUME_6
DERIVATIVE FINANCIAL INSTRUMENTS - Cash Flow Hedges, Fair Value Hedges, Credit Risk (Details) | 6 Months Ended | |
Dec. 31, 2022 USD ($) agency | Jun. 30, 2022 USD ($) | |
Derivatives Not Designated as Hedging Instruments: | ||
Derivative instruments | ||
Notional amount | $ 4,005,000,000 | |
Foreign Currency Cash-Flow Hedges | ||
Notional amount | $ 4,005,000,000 | |
Derivative | ||
Credit Risk | ||
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 | $ 84,000,000 | |
Cash flow hedges | ||
Foreign Currency Cash-Flow Hedges | ||
Amount expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months | 28,000,000 | |
Accumulated net gain (loss) on derivative instruments in AOCI, before tax | 83,000,000 | $ 90,000,000 |
Cash flow hedges | Foreign currency forward contracts | ||
Derivative instruments | ||
Notional amount | 1,774,000,000 | |
Foreign Currency Cash-Flow Hedges | ||
Notional amount | 1,774,000,000 | |
Derivatives in fair value hedging relationships | Interest rate swap contracts | Senior Notes Due April 2030 | ||
Fair Value Hedges | ||
Notional amount | $ 700,000,000 | |
Derivatives in fair value hedging relationships | Interest rate swap contracts | Senior Notes Due April 2030 | LIBOR | ||
Fair Value Hedges | ||
Number of months for LIBOR calculation | 3 months | |
Derivatives in fair value hedging relationships | Interest rate swap contracts | Senior Notes One Ninety Five Percent Due 2031 | ||
Fair Value Hedges | ||
Notional amount | $ 300,000,000 | |
Derivatives in fair value hedging relationships | Interest rate swap contracts | Senior Notes One Ninety Five Percent Due 2031 | LIBOR | ||
Fair Value Hedges | ||
Number of months for LIBOR calculation | 3 months | |
Net investment hedges | Foreign currency forward contracts | ||
Fair Value Hedges | ||
Notional amount | $ 1,037,000,000 |
FAIR VALUE MEASUREMENTS - Hiera
FAIR VALUE MEASUREMENTS - Hierarchy For Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Recurring basis - USD ($) $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 |
Assets: | ||
Money market funds | $ 989 | $ 961 |
Foreign currency forward contracts | 79 | 191 |
Interest rate-related derivatives | 5 | 24 |
Total | 1,073 | 1,176 |
Liabilities: | ||
Foreign currency forward contracts | 63 | 105 |
Interest rate-related derivatives | 150 | 115 |
DECIEM stock options | 71 | 74 |
Total | 284 | 294 |
Level 1 | ||
Assets: | ||
Money market funds | 989 | 961 |
Foreign currency forward contracts | 0 | 0 |
Interest rate-related derivatives | 0 | 0 |
Total | 989 | 961 |
Liabilities: | ||
Foreign currency forward contracts | 0 | 0 |
Interest rate-related derivatives | 0 | 0 |
DECIEM stock options | 0 | 0 |
Total | 0 | 0 |
Level 2 | ||
Assets: | ||
Money market funds | 0 | 0 |
Foreign currency forward contracts | 79 | 191 |
Interest rate-related derivatives | 5 | 24 |
Total | 84 | 215 |
Liabilities: | ||
Foreign currency forward contracts | 63 | 105 |
Interest rate-related derivatives | 150 | 115 |
DECIEM stock options | 0 | 0 |
Total | 213 | 220 |
Level 3 | ||
Assets: | ||
Money market funds | 0 | 0 |
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 |
DECIEM stock options | 71 | 74 |
Total | $ 71 | $ 74 |
FAIR VALUE MEASUREMENTS - Estim
FAIR VALUE MEASUREMENTS - Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 |
Carrying Amount | ||
Nonderivatives | ||
Cash and cash equivalents | $ 3,725 | $ 3,957 |
Current and long-term debt | 5,371 | 5,412 |
DECIEM stock options | 71 | 74 |
Carrying Amount | Foreign currency forward contracts | ||
Derivatives | ||
Derivative assets (liabilities) | 16 | 86 |
Carrying Amount | Interest rate-related derivatives | ||
Derivatives | ||
Derivative assets (liabilities) | (145) | (91) |
Fair Value | ||
Nonderivatives | ||
Cash and cash equivalents | 3,725 | 3,957 |
Current and long-term debt | 4,884 | 5,139 |
DECIEM stock options | 71 | 74 |
Fair Value | Foreign currency forward contracts | ||
Derivatives | ||
Derivative assets (liabilities) | 16 | 86 |
Fair Value | Interest rate-related derivatives | ||
Derivatives | ||
Derivative assets (liabilities) | $ (145) | $ (91) |
FAIR VALUE MEASUREMENTS - Addit
FAIR VALUE MEASUREMENTS - Additional Information (Details) - Foreign currency forward contracts | 6 Months Ended |
Dec. 31, 2022 | |
LIBOR | |
Foreign currency forward contracts | |
Contract maturities | 12 months |
Swap yield curve | |
Foreign currency forward contracts | |
Contract maturities | 12 months |
FAIR VALUE MEASUREMENTS - Impai
FAIR VALUE MEASUREMENTS - Impairment Charges (Details) $ in Millions | 3 Months Ended | 6 Months Ended |
Dec. 31, 2022 USD ($) | Dec. 31, 2022 USD ($) | |
Smashbox, Dr. Jart+ and Too Faced | ||
Estimated fair values of financial instruments | ||
Impairment charges of indefinite-lived intangible assets | $ 207 | $ 207 |
Level 3 | Fair Value, Nonrecurring | Trademarks and other | Dr. Jart+ | ||
Estimated fair values of financial instruments | ||
Impairment charges of indefinite-lived intangible assets | 100 | 100 |
Level 3 | Fair Value, Nonrecurring | Trademarks and other | Dr. Jart+ | Fair Value | ||
Estimated fair values of financial instruments | ||
Trademark, fair value | 339 | 339 |
Level 3 | Fair Value, Nonrecurring | Trademarks and other | Too Faced | ||
Estimated fair values of financial instruments | ||
Impairment charges of indefinite-lived intangible assets | 86 | 86 |
Level 3 | Fair Value, Nonrecurring | Trademarks and other | Too Faced | Fair Value | ||
Estimated fair values of financial instruments | ||
Trademark, fair value | 186 | 186 |
Level 3 | Fair Value, Nonrecurring | Trademarks and other | Smashbox | ||
Estimated fair values of financial instruments | ||
Impairment charges of indefinite-lived intangible assets | 21 | 21 |
Level 3 | Fair Value, Nonrecurring | Trademarks and other | Smashbox | Fair Value | ||
Estimated fair values of financial instruments | ||
Trademark, fair value | 0 | 0 |
Level 3 | Fair Value, Nonrecurring | Trademarks and other | Smashbox, Dr. Jart+ and Too Faced | ||
Estimated fair values of financial instruments | ||
Impairment charges of indefinite-lived intangible assets | 207 | 207 |
Level 3 | Fair Value, Nonrecurring | Trademarks and other | Smashbox, Dr. Jart+ and Too Faced | Fair Value | ||
Estimated fair values of financial instruments | ||
Trademark, fair value | $ 525 | $ 525 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Changes in DECEIM Stock Option Liability (Details) - Level 3 - Recurring basis - DECIEM Stock Option $ in Millions | 6 Months Ended |
Dec. 31, 2022 USD ($) | |
Fair Value Measurement Inputs and Valuation Techniques [Roll Forward] | |
DECIEM stock option liability as of June 30, 2022 | $ 74 |
Changes in fair value, net of foreign currency remeasurements | (3) |
Translation adjustments and other, net | 0 |
DECIEM stock option liability as of December 31, 2022 | $ 71 |
REVENUE RECOGNITION - Narrative
REVENUE RECOGNITION - Narrative (Details) - USD ($) $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 |
Revenue from Contract with Customer [Abstract] | ||
Allowance for doubtful accounts and customer deductions | $ 26 | $ 27 |
Allowance for non-credit losses | $ 14 | $ 17 |
REVENUE RECOGNITION - Changes i
REVENUE RECOGNITION - Changes in Allowance for Credit Losses (Details) $ in Millions | 6 Months Ended |
Dec. 31, 2022 USD ($) | |
Accounts Receivable, Allowance for Credit Loss [Roll Forward] | |
Balance at June 30, 2022 | $ 10 |
Provision for expected credit losses | 2 |
Balance at December 31, 2022 | $ 12 |
REVENUE RECOGNITION - Changes_2
REVENUE RECOGNITION - Changes in Deferred Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Change in Contract with Customer, Liability [Roll Forward] | ||||
Balance at the beginning of the period | $ 362 | $ 426 | $ 362 | $ 371 |
Revenue recognized that was included in the deferred revenue balance at the beginning of the period | (131) | (78) | (280) | (248) |
Revenue deferred during the period | 119 | 75 | 276 | 298 |
Other | 3 | (2) | (5) | 0 |
Balance at the end of the period | $ 353 | $ 421 | $ 353 | $ 421 |
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]: 2023-01-01 $ in Millions | Dec. 31, 2022 USD ($) |
REVENUE RECOGNITION | |
Expected timing of revenue recognition | 12 months |
Estimated recognition of deferred revenue | $ 344 |
PENSION AND POST-RETIREMENT B_3
PENSION AND POST-RETIREMENT BENEFIT PLANS - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Pension Plans | U.S. | ||||
Components of net periodic benefit cost: | ||||
Service cost | $ 9 | $ 11 | $ 18 | $ 23 |
Interest cost | 10 | 7 | 20 | 15 |
Expected return on plan assets | (14) | (13) | (28) | (27) |
Amortization of: | ||||
Actuarial loss | 1 | 3 | 2 | 7 |
Prior service cost | 0 | 0 | 0 | 0 |
Special termination benefits | 0 | 0 | 0 | 0 |
Net periodic benefit cost | 6 | 8 | 12 | 18 |
Pension Plans | International | ||||
Components of net periodic benefit cost: | ||||
Service cost | 6 | 8 | 13 | 16 |
Interest cost | 4 | 2 | 7 | 5 |
Expected return on plan assets | (4) | (3) | (8) | (7) |
Amortization of: | ||||
Actuarial loss | (1) | 1 | (2) | 1 |
Prior service cost | 0 | (1) | 0 | (1) |
Special termination benefits | 0 | 1 | 0 | 3 |
Net periodic benefit cost | 5 | 8 | 10 | 17 |
Employer contributions | 7 | |||
Other than Pension Plans Post-retirement | ||||
Components of net periodic benefit cost: | ||||
Service cost | 0 | 0 | 0 | 1 |
Interest cost | 2 | 2 | 4 | 3 |
Expected return on plan assets | 0 | (1) | 0 | (1) |
Amortization of: | ||||
Actuarial loss | 0 | 1 | 0 | 1 |
Prior service cost | 0 | 0 | 0 | 0 |
Special termination benefits | 0 | 0 | 0 | 0 |
Net periodic benefit cost | $ 2 | $ 2 | $ 4 | $ 4 |
PENSION AND POST-RETIREMENT B_4
PENSION AND POST-RETIREMENT BENEFIT PLANS - Amounts Recognized in the Consolidated Balance Sheets (Details) - USD ($) $ in Millions | Dec. 31, 2022 | Jun. 30, 2022 |
Amounts recognized in the consolidated balance sheets consist of: | ||
Other assets | $ 137 | $ 151 |
Other accrued liabilities | (24) | (24) |
Other noncurrent liabilities | (359) | (357) |
Funded status | (246) | (230) |
Accumulated other comprehensive loss | 157 | 155 |
Net amount recognized | $ (89) | $ (75) |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | 1 Months Ended | ||
Nov. 30, 2022 | Jan. 31, 2023 | Dec. 31, 2022 | |
Other Commitments [Line Items] | |||
Deferred payment to be paid to seller | $ 300 | ||
Commercial paper program | $ 2,500 | ||
Subsequent Event | |||
Other Commitments [Line Items] | |||
Commercial paper program | $ 4,500 | ||
Unsecured Revolving Credit Facility | Line of Credit | Subsequent Event | |||
Other Commitments [Line Items] | |||
Line of credit facility, maximum borrowing capacity | $ 2,000 | ||
TOM FORD | |||
Other Commitments [Line Items] | |||
Amount to be paid for acquisition | 2,300 | ||
TOM FORD | Marcolin S.p.A. | |||
Other Commitments [Line Items] | |||
Payment due to Company at closing | $ 250 |
STOCK PROGRAMS - Compensation E
STOCK PROGRAMS - Compensation Expense and Stock Options (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Non-cash stock-based compensation | $ 112 | $ 113 | $ 165 | $ 192 |
Common Class A | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Grant at fair value (in shares) | 1.2 | |||
Exercise price (in dollars per share) | $ 246.01 | |||
Weighted-average grant date fair value (in dollars per share) | $ 79.09 | |||
Additional General Disclosures | ||||
Intrinsic value of stock options exercised (in dollars) | $ 52 |
STOCK PROGRAMS - Restricted Sto
STOCK PROGRAMS - Restricted Stock Units (Details) - Restricted Stock Units - Employee - Common Class A shares in Millions | 6 Months Ended |
Dec. 31, 2022 $ / shares shares | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Granted (in shares) | 1.1 |
Weighted-average grant date fair value (in dollars per share) | $ / shares | $ 246.16 |
RSU grants scheduled to vest in fiscal 2024 | |
Share-based Compensation Arrangement by Share-based Payment Award | |
RSU grants scheduled to vest (in shares) | 0.4 |
RSU grants scheduled to vest in fiscal 2025 | |
Share-based Compensation Arrangement by Share-based Payment Award | |
RSU grants scheduled to vest (in shares) | 0.4 |
RSU grants scheduled to vest in fiscal 2026 | |
Share-based Compensation Arrangement by Share-based Payment Award | |
RSU grants scheduled to vest (in shares) | 0.3 |
STOCK PROGRAMS - Performance Sh
STOCK PROGRAMS - Performance Share Units (Details) - Performance Share Units - Employee - $ / shares shares in Millions | 1 Months Ended | 6 Months Ended |
Sep. 30, 2022 | Dec. 31, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award | ||
Vested (in shares) | 0.1 | |
Common Class A | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Granted (in shares) | 0.1 | |
Weighted-average grant date fair value (in dollars per share) | $ 246.15 | |
Common Stock issued (in shares) | 0.2 |
STOCK PROGRAMS - DECIEM Stock O
STOCK PROGRAMS - DECIEM Stock Options (Details) - USD ($) $ in Millions | 6 Months Ended | |
Dec. 31, 2022 | Jun. 30, 2022 | |
Recurring basis | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Stock option liability | $ 71 | $ 74 |
Level 3 | Recurring basis | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Stock option liability | $ 71 | 74 |
DECIEM 2021 Stock Option Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Exercised in period (in shares) | 0 | |
DECIEM 2021 Stock Option Plan | Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Stock option liability | $ 71 | $ 74 |
STOCK PROGRAMS - Schedule of Ke
STOCK PROGRAMS - Schedule of Key Assumptions Used For Award (Details) - Stock Options - DECIEM - DECIEM 2021 Stock Option Plan | 6 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Jun. 30, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award | ||
Risk-free rate (as a percent) | 4.40% | 3.20% |
Term to mid of last twelve-month period | 11 months 1 day | 1 year 5 months 1 day |
Operating leverage adjustment | 0.45 | 0.45 |
Net sales discount rate (as a percent) | 7.10% | 6% |
EBITDA discount rate (as a percent) | 10.50% | 9.40% |
EBITDA volatility (as a percent) | 34.90% | 33.90% |
Net sales volatility (as a percent) | 15.70% | 15.30% |
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 | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Numerator: | ||||
Net earnings attributable to The Estée Lauder Companies Inc. | $ 394 | $ 1,088 | $ 883 | $ 1,780 |
Denominator: | ||||
Weighted-average common shares outstanding - Basic (in shares) | 357.7 | 360.6 | 357.8 | 361.4 |
Weighted-average common shares outstanding - Diluted (in shares) | 360.4 | 366 | 360.9 | 367 |
Net earnings attributable to The Estée Lauder Companies Inc. per common share: | ||||
Basic (in dollars per share) | $ 1.10 | $ 3.02 | $ 2.47 | $ 4.93 |
Diluted (in dollars per share) | $ 1.09 | $ 2.97 | $ 2.45 | $ 4.85 |
Stock Options | ||||
Denominator: | ||||
Incremental common shares attributable to share-based payment arrangements (in shares) | 2.1 | 4.1 | 2.4 | 4.2 |
Performance Share Units | ||||
Denominator: | ||||
Incremental common shares attributable to share-based payment arrangements (in shares) | 0.1 | 0.2 | 0.1 | 0.2 |
Restricted Stock Units | ||||
Denominator: | ||||
Incremental common shares attributable to share-based payment arrangements (in shares) | 0.5 | 1.1 | 0.6 | 1.2 |
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 shares in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Stock Options | ||||
Antidilutive Securities Excluded from Computation of Earnings, Per Share | ||||
Antidilutive shares excluded from the calculation of diluted earnings per share | 2.9 | 1.1 | 2.1 | 0.7 |
Restricted Stock Units and Performance Shares | ||||
Antidilutive Securities Excluded from Computation of Earnings, Per Share | ||||
Antidilutive shares excluded from the calculation of diluted earnings per share | 0.1 | 0 | 0.1 | 0.1 |
Contingently Issuable Shares | ||||
Antidilutive Securities Excluded from Computation of Earnings, Per Share | ||||
Antidilutive shares excluded from the calculation of diluted earnings per share | 0.4 | 0.7 |
EQUITY AND REDEEMABLE NONCONT_3
EQUITY AND REDEEMABLE NONCONTROLLING INTEREST - Equity Roll forward (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Increase (Decrease) in Stockholders' Equity | ||||
Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc. | $ 257 | $ (22) | $ (94) | $ (195) |
Net earnings attributable to noncontrolling interests | 0 | (4) | 0 | (5) |
End of the period | 5,902 | 6,252 | 5,902 | 6,252 |
Increase (Decrease) in Redeemable Noncontrolling Interest | ||||
Beginning of the period | 842 | |||
Net loss (earnings) attributable to redeemable noncontrolling interest | (3) | 2 | (4) | 0 |
Translation adjustments | (8) | $ 0 | 27 | $ 17 |
End of the period | $ 819 | $ 819 | ||
Cash dividends declared per common share (in dollars per share) | $ 0.66 | $ 0.60 | $ 1.26 | $ 1.13 |
Total Stockholders' equity - The Estee Lauder Companies Inc. | ||||
Increase (Decrease) in Stockholders' Equity | ||||
End of the period | $ 5,902 | $ 6,218 | $ 5,902 | $ 6,218 |
Common Stock | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | 6 | 6 | 6 | 6 |
Stock-based compensation | 0 | 0 | 0 | 0 |
End of the period | 6 | 6 | 6 | 6 |
Paid-in Capital | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | 5,875 | 5,450 | 5,796 | 5,335 |
Common stock dividends | 1 | 0 | 2 | 1 |
Stock-based compensation | 124 | 155 | 202 | 269 |
End of the period | 6,000 | 5,605 | 6,000 | 5,605 |
Retained Earnings | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | 14,185 | 12,864 | 13,912 | 12,244 |
Common stock dividends | (237) | (217) | (453) | (410) |
Net earnings attributable to The Estée Lauder Companies Inc. | 394 | 1,088 | 883 | 1,780 |
End of the period | 14,342 | 13,735 | 14,342 | 13,735 |
Retained Earnings | Cumulative Effect, Period of Adoption, Adjustment | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | 0 | 0 | 0 | 121 |
Accumulated Other Comprehensive Loss | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | (1,078) | (625) | (762) | (470) |
Other comprehensive income (loss) attributable to The Estée Lauder Companies Inc. | 249 | (21) | (67) | (176) |
End of the period | (829) | (646) | (829) | (646) |
Treasury Stock | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | (13,471) | (11,614) | (13,362) | (11,058) |
Stock-based compensation | (54) | (105) | (71) | (142) |
Acquisition of treasury stock | (92) | (763) | (184) | (1,282) |
End of the period | (13,617) | (12,482) | (13,617) | (12,482) |
Non-controlling Interests | ||||
Increase (Decrease) in Stockholders' Equity | ||||
Beginning of the period | 0 | 34 | 0 | 34 |
Net earnings attributable to noncontrolling interests | 0 | 4 | 0 | 5 |
Translation adjustments and other, net | 0 | (4) | 0 | (5) |
End of the period | 0 | 34 | 0 | 34 |
Redeemable Noncontrolling Interest | ||||
Increase (Decrease) in Redeemable Noncontrolling Interest | ||||
Beginning of the period | 808 | 842 | 842 | 857 |
Net loss (earnings) attributable to redeemable noncontrolling interest | 3 | (2) | 4 | 0 |
Translation adjustments | 8 | 0 | (27) | (17) |
End of the period | $ 819 | $ 840 | $ 819 | $ 840 |
EQUITY AND REDEEMABLE NONCONT_4
EQUITY AND REDEEMABLE NONCONTROLLING INTEREST - Class of Stock and Dividend Information (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | |||||||
Feb. 01, 2023 | Dec. 15, 2022 | Nov. 01, 2022 | Sep. 15, 2022 | Aug. 17, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Class of Stock | |||||||||
Cash dividends declared per common share (in dollars per share) | $ 0.66 | $ 0.60 | $ 1.26 | $ 1.13 | |||||
Common Class A | |||||||||
Class of Stock | |||||||||
Cash dividends declared per common share (in dollars per share) | $ 0.66 | $ 0.60 | |||||||
Cash dividends paid per common share (in dollars per share) | $ 0.66 | $ 0.60 | |||||||
Stock repurchased during period (in shares) | 1.1 | ||||||||
Stock repurchased during period | $ 257 | ||||||||
Common Class A | Subsequent Event | |||||||||
Class of Stock | |||||||||
Cash dividends declared per common share (in dollars per share) | $ 0.66 | ||||||||
Common Class B | |||||||||
Class of Stock | |||||||||
Cash dividends declared per common share (in dollars per share) | $ 0.66 | $ 0.60 | |||||||
Cash dividends paid per common share (in dollars per share) | $ 0.66 | $ 0.60 | |||||||
Common Class B | Subsequent Event | |||||||||
Class of Stock | |||||||||
Cash dividends declared per common share (in dollars per share) | $ 0.66 |
EQUITY AND REDEEMABLE NONCONT_5
EQUITY AND REDEEMABLE NONCONTROLLING INTEREST - Changes in Accumulated Other Comprehensive Income (Loss) (Details) $ in Millions | 6 Months Ended |
Dec. 31, 2022 USD ($) | |
Changes in AOCI, net of tax, by component | |
Balance, beginning of the period | $ 5,590 |
OCI before reclassifications | (39) |
Amounts reclassified to Net earnings | (28) |
Net current-period OCI | (67) |
Balance, end of the period | 5,902 |
Accumulated Other Comprehensive Loss | |
Changes in AOCI, net of tax, by component | |
Balance, beginning of the period | (762) |
Balance, end of the period | (829) |
Net Cash Flow Hedge Gain (Loss) | |
Changes in AOCI, net of tax, by component | |
Balance, beginning of the period | 68 |
OCI before reclassifications | 23 |
Amounts reclassified to Net earnings | (28) |
Net current-period OCI | (5) |
Balance, end of the period | 63 |
Amounts Included in Net Periodic Benefit Cost | |
Changes in AOCI, net of tax, by component | |
Balance, beginning of the period | (114) |
OCI before reclassifications | (1) |
Amounts reclassified to Net earnings | 0 |
Net current-period OCI | (1) |
Balance, end of the period | (115) |
Translation Adjustments | |
Changes in AOCI, net of tax, by component | |
Balance, beginning of the period | (716) |
OCI before reclassifications | (61) |
Amounts reclassified to Net earnings | 0 |
Net current-period OCI | (61) |
Balance, end of the period | $ (777) |
EQUITY AND REDEEMABLE NONCONT_6
EQUITY AND REDEEMABLE NONCONTROLLING INTEREST - Reclassification Adjustments From Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Net sales | $ 4,620 | $ 5,539 | $ 8,550 | $ 9,931 |
Interest expense | 52 | 42 | 98 | 84 |
Earnings before income taxes | 532 | 1,388 | 1,165 | 2,285 |
Provision for income taxes | (135) | (298) | (278) | (500) |
Other components of net periodic benefit cost | 2 | 2 | 5 | 1 |
Net earnings | 397 | 1,090 | 887 | 1,785 |
Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Other components of net periodic benefit cost | 0 | (4) | 0 | (8) |
Net earnings | 17 | (6) | 28 | (13) |
Gain (Loss) on Cash Flow Hedges | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Earnings before income taxes | 22 | (3) | 37 | (9) |
Provision for income taxes | (5) | 0 | (9) | 2 |
Net earnings | 17 | (3) | 28 | (7) |
Gain (Loss) on Cash Flow Hedges | Foreign currency forward contracts | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Net sales | 22 | (2) | 37 | (8) |
Gain (Loss) on Cash Flow Hedges | Interest rate-related derivatives | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Interest expense | 0 | (1) | 0 | (1) |
Amortization of actuarial loss | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Other components of net periodic benefit cost | 0 | (5) | 0 | (9) |
Amounts Included in Net Periodic Benefit Cost | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Provision for income taxes | 0 | 1 | 0 | 2 |
Net earnings | 0 | (3) | 0 | (6) |
Amortization of prior service cost | Amount Reclassified from AOCI | ||||
Reclassification adjustments from accumulated other comprehensive income (loss) | ||||
Other components of net periodic benefit cost | $ 0 | $ 1 | $ 0 | $ 1 |
STATEMENT OF CASH FLOWS (Detail
STATEMENT OF CASH FLOWS (Details) - USD ($) $ in Millions | 6 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Cash: | ||
Cash paid during the period for interest | $ 94 | $ 80 |
Cash paid during the period for income taxes | 249 | 317 |
Non-cash investing and financing activities: | ||
Property, plant and equipment accrued but unpaid | 216 | 108 |
Financing lease modifications | 0 | (14) |
Right-of-use assets obtained in exchange for new/modified operating lease liabilities | $ 107 | $ 139 |
SEGMENT DATA AND RELATED INFO_3
SEGMENT DATA AND RELATED INFORMATION - Narrative (Details) | 6 Months Ended |
Dec. 31, 2022 segment | |
Segment Reporting [Abstract] | |
Number of operating segments | 1 |
SEGMENT DATA AND RELATED INFO_4
SEGMENT DATA AND RELATED INFORMATION - Schedule of Segment Data and Related Information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Net sales: | ||||
Net sales before returns associated with restructuring and other activities | $ 4,621 | $ 5,540 | $ 8,556 | $ 9,933 |
Charges associated with restructuring and other activities | (9) | (15) | (15) | (21) |
Net sales | 4,620 | 5,539 | 8,550 | 9,931 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 565 | 1,433 | 1,232 | 2,374 |
Operating income | 556 | 1,418 | 1,217 | 2,353 |
Reconciliation: | ||||
Interest expense | (52) | (42) | (98) | (84) |
Interest income and investment income, net | 26 | 10 | 41 | 14 |
Other components of net periodic benefit cost | 2 | 2 | 5 | 1 |
Other income | 0 | 0 | 0 | 1 |
Earnings before income taxes | 532 | 1,388 | 1,165 | 2,285 |
Sales Returns (included in Net Sales) | ||||
Net sales: | ||||
Charges associated with restructuring and other activities | (1) | (1) | (6) | (2) |
The Americas | ||||
Net sales: | ||||
Net sales before returns associated with restructuring and other activities | 1,235 | 1,300 | 2,358 | 2,494 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | (85) | 382 | 40 | 636 |
Europe, the Middle East & Africa | ||||
Net sales: | ||||
Net sales before returns associated with restructuring and other activities | 1,816 | 2,338 | 3,498 | 4,211 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 409 | 620 | 743 | 1,085 |
Asia/Pacific | ||||
Net sales: | ||||
Net sales before returns associated with restructuring and other activities | 1,570 | 1,902 | 2,700 | 3,228 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 241 | 431 | 449 | 653 |
Skin Care | ||||
Net sales: | ||||
Net sales before returns associated with restructuring and other activities | 2,382 | 3,159 | 4,486 | 5,608 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 421 | 1,082 | 951 | 1,799 |
Makeup | ||||
Net sales: | ||||
Net sales before returns associated with restructuring and other activities | 1,268 | 1,386 | 2,320 | 2,560 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | (37) | 130 | (21) | 221 |
Fragrance | ||||
Net sales: | ||||
Net sales before returns associated with restructuring and other activities | 775 | 799 | 1,382 | 1,408 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 177 | 210 | 310 | 341 |
Hair Care | ||||
Net sales: | ||||
Net sales before returns associated with restructuring and other activities | 182 | 180 | 340 | 328 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | 5 | 8 | (7) | 10 |
Other | ||||
Net sales: | ||||
Net sales before returns associated with restructuring and other activities | 14 | 16 | 28 | 29 |
Operating income (loss) before charges associated with restructuring and other activities: | ||||
Operating income (loss) before charges associated with restructuring activities | $ (1) | $ 3 | $ (1) | $ 3 |