SEGMENT DATA AND RELATED INFORMATION

12 Months Ended

Jun. 30, 2020

Reportable operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “Chief Executive”) in deciding how to allocate resources and in assessing performance. As a result of the similarities in the manufacturing, marketing and distribution processes for all of the Company’s products, much of the information provided in the consolidated financial statements is similar to, or the same as, that reviewed on a regular basis by the Chief Executive. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis.

While the Company’s results of operations are also reviewed on a consolidated basis, the Chief Executive reviews data segmented on a basis that facilitates comparison to industry statistics. Accordingly, net sales, depreciation and amortization, and operating income are available with respect to the manufacture and distribution of skin care, makeup, fragrance, hair care and other products. These product categories meet the definition of operating segments and, accordingly, additional financial data are provided below. The “other” segment includes the sales and related results of ancillary products and services that do not fit the definition of skin care, makeup, fragrance and hair care.

Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and earnings before income taxes, other components of net periodic benefit cost, interest expense, interest income and investment income, net, other income, net and charges associated with restructuring and other activities. Returns and charges associated with restructuring and other activities are not allocated to the product categories because they result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select corporate functions and go-to-market structures.

During fiscal 2020, changes were made to reflect certain Leading Beauty Forward enhancements made to the capabilities and cost structure of the Company’s travel retail business, which are primarily centralized in The Americas region, and resulted in a change to the royalty structure of the travel retail business to reflect the value created in The Americas region. Accordingly, the fiscal 2019 and 2018 operating income of The Americas was increased, with a corresponding decrease in Europe, the Middle East & Africa, by $866 million and $661 million, respectively, to conform with the current year methodology and presentation.

The accounting policies for the Company’s reportable segments are substantially the same as those described in the summary of significant accounting policies, except for depreciation and amortization charges, which are allocated, primarily, based upon net sales. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced for the Chief Executive or included herein.


	Year Ended June 30
(In millions)	2020		2019		2018
PRODUCT CATEGORY DATA
Net sales:
Skin Care	$	7,382	$	6,551	$	5,595
Makeup	4,794		5,860		5,633
Fragrance	1,563		1,802		1,826
Hair Care	515		584		570
Other	40		69		67
	14,294		14,866		13,691
Returns associated with restructuring and other activities	—		(3)		(8)
Net sales	$	14,294	$	14,863	$	13,683

Depreciation and amortization:
Skin Care	$	268	$	202	$	185
Makeup	242		257		255
Fragrance	71		69		64
Hair Care	28		26		24
Other	2		3		3
	$	611	$	557	$	531

Operating income (loss) before charges associated with restructuring and other activities:
Skin Care	$	2,125	$	1,925	$	1,514
Makeup	(1,438)		438		549
Fragrance	17		140		176
Hair Care	(19)		39		64
Other	4		12		9
	689		2,554		2,312
Reconciliation:
Charges associated with restructuring and other activities	(83)		(241)		(257)
Interest expense	(161)		(133)		(128)
Interest income and investment income, net	48		58		56
Other components of net periodic benefit cost	(4)		(2)		(3)
Other income, net	557		71		—
Earnings before income taxes	$	1,046	$	2,307	$	1,980


	Year Ended June 30
(In millions)	2020		2019		2018
GEOGRAPHIC DATA⁽¹⁾
Net sales:
The Americas	$	3,794	$	4,741	$	5,015
Europe, the Middle East & Africa	6,262		6,452		5,634
Asia/Pacific	4,238		3,673		3,042
	14,294		14,866		13,691
Returns associated with restructuring and other activities	—		(3)		(8)
Net sales	$	14,294	$	14,863	$	13,683
Operating income (loss):
The Americas	$	(1,044)	$	672	$	872
Europe, the Middle East & Africa	997		1,153		865
Asia/Pacific	736		729		575
	689		2,554		2,312
Charges associated with restructuring and other activities	(83)		(241)		(257)
Operating income	$	606	$	2,313	$	2,055


Total assets:
The Americas	$	9,189	$	7,661	$	7,558
Europe, the Middle East & Africa	4,319		3,862		3,855
Asia/Pacific	4,273		1,633		1,154
	$	17,781	$	13,156	$	12,567

Long-lived assets⁽²⁾:
The Americas	$	2,512	$	1,230	$	1,138
Europe, the Middle East & Africa	1,306		647		525
Asia/Pacific	519		191		160
	$	4,337	$	2,068	$	1,823

⁽¹⁾The net sales and operating income from the Company's travel retail business are included in the Europe, the Middle East & Africa region, with the exception of the net sales of Dr. Jart+ products in the travel retail channel that are reflected in Korea in the Asia/Pacific region.

⁽²⁾Includes property, plant and equipment, net. Fiscal 2020 also includes operating lease ROU assets, recognized as a result of the adoption of ASC 842. Refer to Note 7 – Leases for information.

Net sales are predominantly attributed to a country within a geographic region based on the location of the customer. The Company is domiciled in the United States. Net sales in the United States, including net sales from travel retail locations, in fiscal 2020, 2019 and 2018 were $3,449 million, $4,295 million and $4,531 million, respectively. Net sales in mainland China, including net sales from travel retail locations, in fiscal 2020, 2019 and 2018 were approximately 24%, 17% and 13% of consolidated net sales, respectively, and no other country represented greater than 10% of the Company’s consolidated net sales. The Company’s long-lived assets in the United States at June 30, 2020, 2019 and 2018 were $2,192 million, $953 million and $912 million, respectively.