SEGMENT DATA AND RELATED INFORMATION

9 Months Ended

Mar. 31, 2020

NOTE 16 – SEGMENT DATA AND RELATED INFORMATION

Reportable operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “Chief Executive”) in deciding how to allocate resources and in assessing performance. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis. Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and earnings before income taxes, other components of net periodic benefit cost, interest expense, interest income and investment income, net, other income, net, and charges associated with restructuring and other activities. Returns and charges associated with restructuring and other activities are not allocated to the product categories because they result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select corporate functions and go-to-market structures.

During the fiscal 2020 first quarter, changes were made to reflect certain Leading Beauty Forward enhancements made to the capabilities and cost structure of the Company’s travel retail business, which are primarily centralized in The Americas region, and resulted in a change to the royalty structure of the travel retail business to reflect the value created in The Americas region. Accordingly, the fiscal 2019 operating income of The Americas was increased, with a corresponding decrease in Europe, the Middle East & Africa, by $229 million and $640 million for the three and nine months ended March 31, 2019, respectively, to conform with the current year methodology and presentation.

The accounting policies for the Company’s reportable segments are substantially the same as those for the consolidated financial statements, as described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced for the Chief Executive or included herein. Other than the changes in total assets as a result of the acquisition discussed in Note 2 - Acquisition of Business, which impacted the Asia/Pacific region, and the goodwill and other intangible asset impairments discussed in Note 3 – Goodwill and Other Intangible Assets, which impacted The Americas region, there has been no significant variance in the total or long-lived asset values associated with the Company’s segment data since June 30, 2019.


	Three Months Ended March 31						Nine Months Ended March 31
(In millions)	2020		2019		2020		2019
PRODUCT CATEGORY DATA
Net sales:
Skin Care	$	1,723	$	1,744	$	5,770	$	4,962
Makeup	1,146		1,461		4,249		4,427
Fragrance	349		392		1,392		1,401
Hair Care	119		136		417		433
Other	8		13		36		52
	3,345		3,746		11,864		11,275
Returns associated with restructuring and other activities	—		(2)		—		(2)
Net sales	$	3,345	$	3,744	$	11,864	$	11,273

Operating income (loss) before charges associated with restructuring and other activities:
Skin Care	$	418	$	593	$	1,822	$	1,624
Makeup	(283)		99		(790)		398
Fragrance	—		17		163		156
Hair Care	(2)		(2)		10		27
Other	1		2		7		9
	134		709		1,212		2,214
Reconciliation:
Charges associated with restructuring and other activities	(25)		(35)		(63)		(117)
Interest expense	(42)		(32)		(112)		(101)
Interest income and investment income, net	14		15		41		42
Other components of net periodic benefit cost	(1)		(1)		(3)		(1)
Other income, net	—		71		576		71
Earnings before income taxes	$	80	$	727	$	1,651	$	2,108

GEOGRAPHIC DATA⁽¹⁾
Net sales:
The Americas	$	892	$	1,155	$	3,278	$	3,609
Europe, the Middle East & Africa	1,525		1,625		5,281		4,825
Asia/Pacific	928		966		3,305		2,841
	3,345		3,746		11,864		11,275
Returns associated with restructuring and other activities	—		(2)		—		(2)
Net sales	$	3,345	$	3,744	$	11,864	$	11,273

Operating income (loss):
The Americas	$	(217)	$	200	$	(571)	$	583
Europe, the Middle East & Africa	202		265		1,084		940
Asia/Pacific	149		244		699		691
	134		709		1,212		2,214
Charges associated with restructuring and other activities	(25)		(35)		(63)		(117)
Operating income	$	109	$	674	$	1,149	$	2,097

______________________________________________

⁽¹⁾The net sales and operating income from the Company’s travel retail business are included in the Europe, the Middle East & Africa region.