CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

9 Months Ended

Mar. 31, 2020

Restructuring and Related Activities [Abstract]

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

NOTE 5 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

In May 2016, the Company announced a multi-year initiative (“Leading Beauty Forward” or “LBF”) to build on its strengths and better leverage its cost structure to free resources for investment to continue its growth momentum. LBF is designed to enhance the Company’s go-to-market capabilities, reinforce its leadership in global prestige beauty and continue creating sustainable value. As of June 30, 2019, the Company concluded the approvals of all major initiatives under LBF related to the optimization of select corporate functions, supply chain activities, and corporate and regional market support structures, as well as the exit of underperforming businesses, and expects to substantially complete those initiatives through fiscal 2021. The approved restructuring and other charges expected to be incurred were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges Approved
Cumulative through March 31, 2020	$	14	$	88	$	507	$	358	$	967

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges Approved
Cumulative through March 31, 2020	$	461	$	7	$	25	$	14	$	507

The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for LBF were:

(In millions)	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
					Restructuring Charges		Other Charges
Total Charges
Cumulative through June 30, 2019	$	14	$	55	$	457	$	265	$	791
Nine months ended March 31, 2020	—		9		20		34		63
Cumulative through March 31, 2020	$	14	$	64	$	477	$	299	$	854

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments)
Cumulative through June 30, 2019	$	445	$	4	$	3	$	5	$	457
Nine months ended March 31, 2020	(5)		19		5		1		20
Cumulative through March 31, 2020	$	440	$	23	$	8	$	6	$	477

For the three and nine months ended March 31, 2020, the Company recognized $18 million of asset-related costs due to the impairment of operating lease ROU assets as a result of closed freestanding retail stores, approved under LBF, whereby the ability to sublease the locations was negatively impacted by the COVID-19 pandemic. These charges were initially approved under LBF prior to fiscal 2020 as contract terminations related to continuing lease payments to landlords after exiting the location.

Employee-related costs reflect adjustments to the accrual estimate for certain employees who either resigned or transferred to other existing positions within the Company.

Changes in accrued restructuring charges for the nine months ended March 31, 2020 were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Balance at June 30, 2019	$	202	$	—	$	—	$	1	$	203
Charges (adjustments)	(5)		19		5		1		20
Cash payments	(74)		—		(5)		(2)		(81)
Translation adjustments	(2)		—		—		—		(2)
Non-cash asset write-offs	—		(19)		—		—		(19)
Balance at March 31, 2020	$	121	$	—	$	—	$	—	$	121

Accrued restructuring charges at March 31, 2020 are expected to result in cash expenditures funded from cash provided by operations of approximately $35 million, $63 million, $20 million and $3 million for the remainder of fiscal 2020 and for fiscal 2021, 2022 and 2023, respectively.

Additional information about LBF is included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019.