Delaware | 001-35964 | 13-3823358 | ||
(State or other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
350 Fifth Avenue New York, NY | 10118 | |
(Address of Principal Executive Offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits: |
Exhibit No. | Description | |
Coty Inc. | |||
(Registrant) | |||
Date: May 9, 2018 | By: | /s/Patrice de Talhouët | |
Patrice de Talhouët | |||
Chief Financial Officer |
Exhibit No. | Description | |
Results at a glance | Three Months Ended March 31, 2018 | Nine Months Ended March 31, 2018 | |||||||||||||||||||||
Change YoY | Change YoY | ||||||||||||||||||||||
(in millions, except per share data) | Reported Basis | Constant Currency | Reported Basis | Combined Company * | Combined Company Constant Currency * | ||||||||||||||||||
Net revenues | $ | 2,222.7 | 9 | % | 3 | % | $ | 7,098.6 | 31 | % | 10 | % | 6 | % | |||||||||
Operating income - reported | 19.9 | >100% | 223.0 | >100% | |||||||||||||||||||
Operating income - adjusted* | 227.8 | 9 | % | 770.4 | 13 | % | |||||||||||||||||
Net income - reported | (77.0 | ) | 53 | % | 12.5 | >100% | |||||||||||||||||
Net income - adjusted* | 96.2 | (13 | %) | 409.7 | (1 | %) | |||||||||||||||||
EPS (diluted) - reported | $ | (0.10 | ) | 55 | % | $ | 0.02 | >100% | |||||||||||||||
EPS (diluted) - adjusted* | $ | 0.13 | (13 | %) | $ | 0.54 | (19 | %) |
• | Net revenues of $2,222.7 million increased 9.4% as reported compared to the prior year and increased 3.4% at constant currency |
• | Excluding the contribution from the acquisitions of Burberry and one month of Younique, organic net revenues increased 0.2% on a constant currency basis |
• | Reported operating income of $19.9 million increased from a loss of $(192.5) million |
• | Adjusted operating income of $227.8 million increased 9.4% from $208.3 million |
• | Reported net loss of $(77.0) million decreased from $(164.2) million, and adjusted net income of $96.2 million decreased from $110.3 million |
• | Reported earnings per diluted share of $(0.10) increased from $(0.22) and adjusted earnings per diluted share of $0.13 decreased from $0.15 |
• | Net cash from operating activities was $(118.9) million compared to $43.3 million in the prior year |
• | Net revenues of $7,098.6 million increased 31.2% as reported compared to the prior year net revenues, and increased 6.3% for the combined company at constant currency |
• | Excluding the contribution from the acquisitions of Burberry, seven months of Younique and five months of ghd, organic net revenues increased 0.3% on a constant currency basis |
• | Reported operating income of $223.0 million increased from $(158.8) million |
• | Adjusted operating income of $770.4 million increased from $682.7 million |
• | Reported net income of $12.5 million increased from $(117.4) million, and adjusted net income of $409.7 million was in line with the prior period of $411.9 million |
• | Reported earnings per diluted share of $0.02 increased from $(0.19), and adjusted earnings per diluted share of $0.54 decreased from $0.67 |
• | Net cash provided by operating activities was $188.9 million compared to $706.7 million in the prior year |
• | Net cash from operating activities in the quarter was $(118.9) million, compared to $43.3 million in the prior year, driven by higher working capital requirements due, in part, to the Burberry Beauty acquisition and build-up of inventory in preparation for consolidation of certain distribution centers. |
• | Negative free cash flow of $(205.4) million in the quarter compared to $(82.5) million in the prior year reflects higher cash used in operating activities partially offset by lower capital expenditures. |
• | On March 15, 2018, the Company paid a quarterly dividend of $0.125 per share for a total of $93.8 million. |
• | Cash and cash equivalents of $460.8 million decreased by $74.6 million compared to June 30, 2017. |
Three Months Ended March 31, | ||||||||||||||||||||||||||||
Net Revenues | Change | Reported Operating Income | Adjusted Operating Income | |||||||||||||||||||||||||
(in millions) | 2018 | 2017 | Reported Basis | Constant Currency | 2018 | Change | 2018 | Change | ||||||||||||||||||||
Luxury | $ | 752.5 | $ | 634.6 | 19 | % | 12 | % | $ | 59.4 | (2 | %) | $ | 100.4 | 17 | % | ||||||||||||
Consumer Beauty | 1,021.7 | 988.6 | 3 | % | (1 | %) | 64.2 | 2 | % | 97.3 | (20 | %) | ||||||||||||||||
Professional | 448.5 | 408.9 | 10 | % | 2 | % | 11.4 | >100% | 30.1 | >100% | ||||||||||||||||||
Corporate | — | — | N/A | N/A | (115.1 | ) | 61 | % | — | N/A | ||||||||||||||||||
Total | $ | 2,222.7 | $ | 2,032.1 | 9 | % | 3 | % | $ | 19.9 | >100% | $ | 227.8 | 9 | % |
• | Reported net revenues of $752.5 million increased 18.6% compared to the prior year and 11.8% on a constant currency basis. The increase in constant currency reflects 6.1% organic growth driven by the on-going success of Tiffany & Co. and Gucci Bloom fragrances as well as CK One and Chloe Nomade, and a 5.7% contribution from Burberry. |
• | Adjusted operating income of $100.4 million increased 16.6% from $86.1 million in the prior year. |
• | Net revenues of $1,021.7 million increased 3.3% compared to the prior year and decreased (1.2)% on a constant currency basis. The decrease in constant currency reflects a (4.4)% decline in organic growth, which includes two months of Younique. The decline in our organic net revenue growth was driven by certain U.S. brands not yet fully benefiting from relaunch efforts and the impact of pricing actions to improve profitability in our Brazil business, partially offset by growth in the rest of ALMEA. |
• | Adjusted operating income decreased 19.9% to $97.3 million from $121.5 million in the prior year. |
• | Net revenues of $448.5 million increased 9.7% compared to the prior year and 1.9% on a constant currency basis. The 1.9% growth in the underlying business reflects higher net revenues from OPI due to on-going success of the gel restage as well as strength in lacquers. Wella Professionals also continues to benefit from the successful Wellaplex product launch. |
• | Adjusted operating income increased >100% to $30.1 million from $0.7 million in the prior year. |
Three Months Ended March 31, | ||||||||||||||
Net Revenues | Change | |||||||||||||
(in millions) | 2018 | 2017 | Reported Basis | Constant Currency | ||||||||||
North America | $ | 712.8 | $ | 685.1 | 4 | % | 4 | % | ||||||
Europe | 976.5 | 848.4 | 15 | % | 3 | % | ||||||||
ALMEA | 533.4 | 498.6 | 7 | % | 5 | % | ||||||||
Total | $ | 2,222.7 | $ | 2,032.1 | 9 | % | 3 | % |
• | Reported net revenues increased 4.0% compared to the prior year and increased 3.5% on a constant currency basis, driven primarily by the contributions from Younique and Burberry, the on-going success of Tiffany & Co. and Gucci Bloom and certain mass fragrances, partially offset by declines in U.S. color cosmetics. OPI was also a contributor. |
• | Reported net revenues increased 15.1% compared to the prior year and increased 2.7% on a constant currency basis driven primarily by incremental revenues from the success of fragrances including Tiffany & Co. and Gucci Bloom as well as Max Factor. |
• | Reported net revenues increased 7.0% compared to the prior year and increased 4.8% on a constant currency basis reflecting incremental revenues from fragrances driven by the launches of Tiffany & Co. and Gucci Bloom, and higher revenues from color cosmetics driven by Max Factor in China, partially offset by lower revenues in Brazil. |
• | On April 5, 2018, Coty completed its previously announced offering of three series of U.S. dollar denominated and euro denominated senior unsecured notes in an aggregate principal amount of $550 million and €800 million, in a private offering. |
• | On April 5, 2018, Coty entered into a credit agreement which amended and restated the existing credit agreements. The credit agreement provides for senior secured credit facilities comprised of (i) a five year revolving credit facility in an aggregate principal amount up to $3.25 billion, (ii) a five year term loan A facility consisting of (a) $1.0 billion denominated in U.S. dollars and (b) €2.035 billion denominated in Euros and (iii) a seven year term loan B facility consisting of (a) $1.4 billion denominated in U.S. dollars and (b) €850 million denominated in Euros. |
• | On April 25, 2018, Coty announced the appointment of Esra Erkal-Paler as Chief Global Corporate Affairs Officer and member of the Executive Committee. |
• | On May 9, 2018, Coty announced a dividend of $0.125 per share, payable June 14, 2018 to holders of record on May 31, 2018. |
• | After the quarter close, Coty has completed the previously announced portfolio rationalization program. |
• | the Company’s ability to achieve its global business strategies, compete effectively in the beauty industry and achieve the benefits contemplated by its strategic initiatives (including sell-through of its relaunched brands and reduction in discounts in certain markets) within the expected time frame or at all; |
• | the Company’s ability to anticipate, gauge and respond to market trends and consumer preferences, which may change rapidly, and the market acceptance of new products, including any relaunched or rebranded products, execution of new launches, and the anticipated costs and discounting associated with such relaunches and rebrands; |
• | use of estimates and assumptions in preparing the Company’s financial statements, including with regard to revenue recognition, stock compensation expense, income taxes, purchase price allocations, the assessment of goodwill, other intangible assets and long-lived assets for impairment, the market value of inventory, pension expense and the fair value of acquired assets and liabilities associated with acquisitions; |
• | managerial, integration, operational, regulatory, legal and financial risks, including diversion of management attention to and management of, cash flows, and expenses and costs (including operating costs and capital expenses) associated with multiple strategic initiatives and internal reorganizations, including current and future business realignment or restructuring activities; |
• | the continued integration of the P&G Beauty Business and other recent acquisitions with the Company’s business, operations, systems, financial data and culture and the ability to realize synergies, reduce costs and realize other potential efficiencies and benefits (including through the Company’s restructuring and business realignment programs to simplify processes and improve organizational agility) at the levels and at the costs and within the time frames currently contemplated or at all; |
• | increased competition, consolidation among retailers, shifts in consumers’ preferred distribution and marketing channels (including to digital and luxury channels), shelf-space resets, compression of go-to-market cycles, changes in product and marketing requirements by retailers, and other changes in the retail, e-commerce and wholesale environment in which the Company does business and sell its products; |
• | changes in law (including the Tax Act), regulations and policies and/or the enforcement thereof that affect its business, financial performance, operations or its products; |
• | the Company and its business partners' and licensors' abilities to obtain, maintain and protect the intellectual property used in its and their respective businesses, protect its and their respective reputations (including those of its and their executives), public goodwill, and defend claims by third parties for infringement of intellectual property rights; |
• | the effect of the divestiture and discontinuation of the Company’s non-core brands (including associated post-closing cost reduction programs) and rationalizing wholesale distribution by reducing the amount of product diversion to the value and mass channels; |
• | any unanticipated problems, liabilities or other challenges associated with an acquired business which could result in increased risk or new, unanticipated or unknown liabilities, including with respect to environmental, competition and other regulatory, compliance or legal matters; |
• | the Company’s international operations and joint ventures, including enforceability and effectiveness of its joint venture agreements and reputational, compliance, regulatory, economic and foreign political risks, including difficulties and costs associated with maintaining compliance with a broad variety of complex domestic and international regulations; |
• | the Company’s dependence on certain licenses (especially in its Luxury division), entities performing outsourced functions and third-party suppliers, including third party software providers; |
• | administrative, development and other difficulties in meeting the expected timing of market expansions, product launches and marketing efforts; |
• | global political and/or economic uncertainties, disruptions or major regulatory changes, including the impact of Brexit, the current U.S. administration and recent changes in tariffs and other international trade regulations and the U.S. tax code; |
• | the number, type, outcomes (by judgment, order or settlement) and costs of legal, compliance, tax, regulatory or administrative proceedings, and/or litigation; |
• | the Company’s ability to manage seasonal and other variability and to anticipate future business trends and needs; |
• | disruptions in operations, including due to disruptions in supply chain, restructurings and other business realignment activities, manufacturing or information technology systems, labor disputes, and natural disasters; |
• | restrictions imposed on the Company through its license agreements, credit facilities and senior unsecured bonds, its ability to refinance or recapitalize debt, and changes in the manner in which the Company finances its debt and future capital needs, including potential acquisitions; |
• | increasing dependency on information technology and the Company’s ability to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, costs and timing of implementation and effectiveness of any upgrades or other changes to information technology systems, and its failure to comply with any privacy or data security laws (including the EU General Data Protection Regulation) or to protect against theft of customer, employee and corporate sensitive information; |
• | the Company’s ability to attract and retain key personnel, including during times of integration, transition and restructurings; |
• | the distribution and sale by third parties of counterfeit and/or gray market versions of the Company’s products; and |
• | other factors described elsewhere in this document and from time to time in documents that the Company file with the SEC. |
• | Costs related to acquisition activities: The Company excludes acquisition-related costs and acquisition accounting impacts such as those related to transaction costs and costs associated with the revaluation of acquired inventory in connection with business combinations because these costs are unique to each transaction. The nature and amount of such costs vary significantly based on the size and timing of the acquisitions and the maturities of the businesses being acquired. Also, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of any future acquisitions. |
• | Restructuring and other business realignment costs: The Company excludes costs associated with restructuring and business structure realignment programs to allow for comparable financial results to historical operations and forward-looking guidance. In addition, the nature and amount of such charges vary significantly based on the size and timing of the programs. By excluding the above referenced expenses from the non-GAAP financial measures, management is able to evaluate the Company’s ability to utilize existing assets and estimate their long-term value. Furthermore, management believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of the Company’s operating performance. |
• | Amortization expense: The Company excludes the impact of amortization of finite-lived intangible assets, as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Management believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of the Company’s operating performance. Although the Company excludes amortization of intangible assets from the non-GAAP expenses, management believes that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets. |
• | Interest and other (income) expense: The Company excludes foreign currency impacts associated with acquisition-related and debt financing related forward contracts as the nature and amount of such charges are not consistent and are significantly impacted by the timing and size of such transactions. |
• | Noncontrolling interest: This adjustment represents the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interests based on the relevant non-controlling interest percentage. |
• | Tax: This adjustment represents the impact of the tax effect of the pretax items excluded from Adjusted net income. The tax impact of the non-GAAP adjustments are based on the tax rates related to the jurisdiction in which the adjusted items are received or incurred. |
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
(in millions, except per share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net revenues | $ | 2,222.7 | $ | 2,032.1 | $ | 7,098.6 | $ | 5,409.0 | ||||||||
Cost of sales | 812.4 | 816.1 | 2,711.7 | 2,153.2 | ||||||||||||
as % of Net revenues | 36.6 | % | 40.2 | % | 38.2 | % | 39.8 | % | ||||||||
Gross profit | 1,410.3 | 1,216.0 | 4,386.9 | 3,255.8 | ||||||||||||
Gross margin | 63.4 | % | 59.8 | % | 61.8 | % | 60.2 | % | ||||||||
Selling, general and administrative expenses | 1,252.3 | 1,092.4 | 3,764.0 | 2,741.5 | ||||||||||||
as % of Net revenues | 56.3 | % | 53.8 | % | 53.0 | % | 50.7 | % | ||||||||
Amortization expense | 92.8 | 102.6 | 260.6 | 219.0 | ||||||||||||
Restructuring costs | 42.7 | 155.8 | 75.6 | 179.0 | ||||||||||||
Acquisition-related costs | 2.6 | 57.7 | 63.7 | 275.1 | ||||||||||||
Operating income (loss) | 19.9 | (192.5 | ) | 223.0 | (158.8 | ) | ||||||||||
as % of Net revenues | 0.9 | % | (9.5 | %) | 3.1 | % | (2.9 | %) | ||||||||
Interest expense, net | 72.6 | 60.8 | 199.3 | 159.1 | ||||||||||||
Other expense (income), net | 3.0 | (0.5 | ) | 10.1 | 0.2 | |||||||||||
(Loss) income before income taxes | (55.7 | ) | (252.8 | ) | 13.6 | (318.1 | ) | |||||||||
as % of Net revenues | (2.5 | %) | (12.4 | %) | 0.2 | % | (5.9 | %) | ||||||||
Provision (benefit) for income taxes | 4.4 | (93.4 | ) | (28.8 | ) | (220.6 | ) | |||||||||
Net (loss) income | (60.1 | ) | (159.4 | ) | 42.4 | (97.5 | ) | |||||||||
as % of Net revenues | (2.7 | %) | (7.8 | %) | 0.6 | % | (1.8 | %) | ||||||||
Net income (loss) income attributable to noncontrolling interests | 1.1 | 3.5 | (3.0 | ) | 14.2 | |||||||||||
Net income attributable to redeemable noncontrolling interests | 15.8 | 1.3 | 32.9 | 5.7 | ||||||||||||
Net (loss) income attributable to Coty Inc. | $ | (77.0 | ) | $ | (164.2 | ) | $ | 12.5 | $ | (117.4 | ) | |||||
as % of Net revenues | (3.5 | %) | (8.1 | %) | 0.2 | % | (2.2 | %) | ||||||||
Net (loss) income attributable to Coty Inc. per common share: | ||||||||||||||||
Basic | $ | (0.10 | ) | $ | (0.22 | ) | $ | 0.02 | $ | (0.19 | ) | |||||
Diluted | $ | (0.10 | ) | $ | (0.22 | ) | $ | 0.02 | $ | (0.19 | ) | |||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 750.1 | 747.3 | 749.4 | 607.9 | ||||||||||||
Diluted | 750.1 | 747.3 | 753.1 | 607.9 | ||||||||||||
Cash dividend declared per common share | $ | 0.125 | $ | 0.125 | $ | 0.375 | $ | 0.525 |
Three Months Ended March 31, 2018 | ||||||||||||||||||||
(in millions) | Reported (GAAP) | Adjustments(a) | Adjusted (Non-GAAP) | Foreign Currency Translation | Adjusted Results at Constant Currency | |||||||||||||||
Net revenues | $ | 2,222.7 | $ | 2,222.7 | $ | (120.1 | ) | $ | 2,102.6 | |||||||||||
Gross profit | 1,410.3 | 18.0 | 1,428.3 | (77.5 | ) | 1,350.8 | ||||||||||||||
Gross margin | 63.4 | % | 64.3 | % | 64.2 | % | ||||||||||||||
Operating income | 19.9 | 207.9 | 227.8 | (1.6 | ) | 226.2 | ||||||||||||||
as % of Net revenues | 0.9 | % | 10.2 | % | 10.8 | % | ||||||||||||||
Net income attributable to Coty Inc. | $ | (77.0 | ) | $ | 173.2 | $ | 96.2 | |||||||||||||
as % of Net revenues | (3.5 | %) | 4.3 | % | ||||||||||||||||
EPS (diluted) | $ | (0.10 | ) | $ | 0.13 | |||||||||||||||
Three Months Ended March 31, 2017 | ||||||||||||||||||||
(in millions) | Reported (GAAP) | Adjustments(a) | Adjusted (Non-GAAP) | |||||||||||||||||
Net revenues | $ | 2,032.1 | $ | 2,032.1 | ||||||||||||||||
Gross profit | 1,216.0 | 71.2 | 1,287.2 | |||||||||||||||||
Gross margin | 59.8 | % | 63.3 | % | ||||||||||||||||
Operating (loss) income | (192.5 | ) | 400.8 | 208.3 | ||||||||||||||||
as % of Net revenues | (9.5 | %) | 10.3 | % | ||||||||||||||||
Net income attributable to Coty Inc. | $ | (164.2 | ) | $ | 274.5 | $ | 110.3 | |||||||||||||
as % of Net revenues | (8.1 | %) | 5.4 | % | ||||||||||||||||
EPS (diluted) | $ | (0.22 | ) | $ | 0.15 | |||||||||||||||
Nine Months Ended March 31, 2018 | ||||||||||||||||||||
(in millions) | Reported (GAAP) | Adjustments(a) | Adjusted (Non-GAAP) | Foreign Currency Translation | Adjusted Results at Constant Currency | |||||||||||||||
Net revenues | $ | 7,098.6 | $ | — | $ | 7,098.6 | $ | (266.9 | ) | $ | 6,831.7 | |||||||||
Gross profit | 4,386.9 | 43.3 | 4,430.2 | (166.5 | ) | 4,263.7 | ||||||||||||||
Gross margin | 61.8 | % | 62.4 | % | 62.4 | % | ||||||||||||||
Operating income | 223.0 | 547.4 | 770.4 | (13.7 | ) | 756.7 | ||||||||||||||
as % of Net revenues | 3.1 | % | 10.9 | % | 11.1 | % | ||||||||||||||
Net income attributable to Coty Inc. | $ | 12.5 | $ | 397.2 | $ | 409.7 | ||||||||||||||
as % of Net revenues | 0.2 | % | 5.8 | % | ||||||||||||||||
EPS (diluted) | $ | 0.02 | $ | 0.54 | ||||||||||||||||
Nine Months Ended March 31, 2017 | ||||||||||||||||||||
(in millions) | Reported (GAAP) | Adjustments(a) | Adjusted (Non-GAAP) | |||||||||||||||||
Net revenues | $ | 5,409.0 | $ | 5,409.0 | ||||||||||||||||
Gross profit | 3,255.8 | 126.9 | 3,382.7 | |||||||||||||||||
Gross margin | 60.2 | % | 62.5 | % | ||||||||||||||||
Operating income | (158.8 | ) | 841.5 | 682.7 | ||||||||||||||||
as % of Net revenues | (2.9 | %) | 12.6 | % | ||||||||||||||||
Net income attributable to Coty Inc. | $ | (117.4 | ) | $ | 529.3 | $ | 411.9 | |||||||||||||
as % of Net revenues | (2.2 | %) | 7.6 | % | ||||||||||||||||
EPS (diluted) | $ | (0.19 | ) | $ | 0.67 |
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||
(in millions) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||
Reported Operating Income (Loss) | 19.9 | (192.5 | ) | >100% | 223.0 | (158.8 | ) | >100% | ||||||||||
% of Net revenues | 0.9 | % | (9.5 | %) | 3.1 | % | (2.9 | %) | ||||||||||
Amortization expense (a) | 92.8 | 102.6 | (10 | %) | 260.6 | 219.0 | 19 | % | ||||||||||
Restructuring and other business realignment costs (b) | 111.0 | 175.9 | (37 | %) | 217.2 | 210.9 | 3 | % | ||||||||||
Costs related to acquisition activities (c) | 4.1 | 122.3 | (97 | %) | 69.6 | 395.7 | (82 | %) | ||||||||||
Pension settlement charge (d) | — | — | N/A | — | 15.9 | (100 | %) | |||||||||||
Total adjustments to Reported Operating Income | 207.9 | 400.8 | (48 | %) | 547.4 | 841.5 | (35 | %) | ||||||||||
Adjusted Operating Income | 227.8 | 208.3 | 9 | % | 770.4 | 682.7 | 13 | % | ||||||||||
% of Net revenues | 10.2 | % | 10.3 | % | 10.9 | % | 12.6 | % |
Three Months Ended March 31, 2018 | Three Months Ended March 31, 2017 | |||||||||||||||||||||
(in millions) | Income Before Income Taxes | (Benefit) Provision for Taxes | Effective Tax Rate | (Loss) Income Before Income Taxes | (Benefit) Provision for Taxes | Effective Tax Rate | ||||||||||||||||
Reported Income (Loss) Before Taxes | $ | (55.7 | ) | $ | 4.4 | (7.9 | )% | $ | (252.8 | ) | $ | (93.4 | ) | 36.9 | % | |||||||
Adjustments to Reported Operating Income (a) (b) | 207.9 | 31.8 | 400.8 | 126.3 | ||||||||||||||||||
Adjusted Income Before Taxes | $ | 152.2 | $ | 36.2 | 23.8 | % | $ | 148.0 | $ | 32.9 | 22.2 | % |
Nine Months Ended March 31, 2018 | Nine Months Ended March 31, 2017 | ||||||||||||||||||||
(in millions) | Income Before Income Taxes | (Benefit) Provision for Income Taxes | Effective Tax Rate | (Loss) Income Before Income Taxes | (Benefit) Provision for Income Taxes | Effective Tax Rate | |||||||||||||||
Reported income (loss) before income taxes | $ | 13.6 | $ | (28.8 | ) | (211.8 | )% | $ | (318.1 | ) | $ | (220.6 | ) | 69.3 | % | ||||||
Adjustments to reported operating income (a)(b) | 547.4 | 128.6 | 841.5 | 313.0 | |||||||||||||||||
Adjustments to interest expense (b)(c) | — | — | 1.4 | 0.6 | |||||||||||||||||
Adjusted income before income taxes | $ | 561.0 | $ | 99.8 | 17.8 | % | $ | 524.8 | $ | 93.0 | 17.7 | % |
(a) | See a description of adjustments under “Adjusted Operating Income for Coty Inc.”. |
(b) | The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability. |
(c) | See “Reconciliation of Reported Net (Loss) Income Attributable to Coty Inc. to Adjusted Net Income Attributable to Coty Inc.” |
Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||
(in millions) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||
Reported Net Income Attributable to Coty Inc. | $ | (77.0 | ) | $ | (164.2 | ) | 53 | % | $ | 12.5 | $ | (117.4 | ) | >100% | ||||||||
% of Net revenues | (3.5 | %) | (8.1 | %) | 0.2 | % | (2.2 | %) | ||||||||||||||
Adjustments to Reported Operating Income (a) | 207.9 | 400.8 | (48 | %) | 547.4 | 841.5 | (35 | %) | ||||||||||||||
Adjustments to Interest Expense (b) | — | — | N/A | — | 1.4 | (100 | %) | |||||||||||||||
Adjustments to noncontrolling interests (c) | (2.9 | ) | — | NM | (21.6 | ) | — | NM | ||||||||||||||
Change in tax provision due to adjustments to Reported Net Income Attributable to Coty Inc. | (31.8 | ) | (126.3 | ) | 75 | % | (128.6 | ) | (313.6 | ) | 59 | % | ||||||||||
Adjusted Net Income Attributable to Coty Inc. | $ | 96.2 | $ | 110.3 | (13 | %) | $ | 409.7 | $ | 411.9 | (1 | %) | ||||||||||
% of Net revenues | 4.3 | % | 5.4 | % | 5.8 | % | 7.6 | % | ||||||||||||||
Per Share Data | ||||||||||||||||||||||
Adjusted weighted-average common shares | ||||||||||||||||||||||
Basic | 750.1 | 747.3 | 749.4 | 607.9 | ||||||||||||||||||
Diluted | 754.0 | 751.5 | 753.1 | 613.4 | ||||||||||||||||||
Adjusted Net Income Attributable to Coty Inc. per Common Share | ||||||||||||||||||||||
Basic | $ | 0.13 | $ | 0.15 | $ | 0.55 | $ | 0.68 | ||||||||||||||
Diluted | $ | 0.13 | $ | 0.15 | $ | 0.54 | $ | 0.67 |
Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net cash provided by operating activities | $ | (118.9 | ) | $ | 43.3 | $ | 188.9 | $ | 706.7 | ||||||
Capital expenditures | (86.5 | ) | (125.8 | ) | (318.7 | ) | (324.0 | ) | |||||||
Free cash flow | $ | (205.4 | ) | $ | (82.5 | ) | $ | (129.8 | ) | $ | 382.7 |
Three Months Ended March 31, | ||||||||||||||||||||||||||||
Net Revenues | Change | Reported Operating Income | Adjusted Operating Income | |||||||||||||||||||||||||
(in millions) | 2018 | 2017 | Reported Basis | Constant Currency | 2018 | Change | 2018 | Change | ||||||||||||||||||||
Luxury | $ | 752.5 | $ | 634.6 | 19 | % | 12 | % | $ | 59.4 | (2 | %) | $ | 100.4 | 17 | % | ||||||||||||
Consumer Beauty | 1,021.7 | 988.6 | 3 | % | (1 | %) | 64.2 | 2 | % | 97.3 | (20 | %) | ||||||||||||||||
Professional | 448.5 | 408.9 | 10 | % | 2 | % | 11.4 | >100% | 30.1 | >100% | ||||||||||||||||||
Corporate | — | — | N/A | N/A | (115.1 | ) | 61 | % | — | N/A | ||||||||||||||||||
Total | $ | 2,222.7 | $ | 2,032.1 | 9 | % | 3 | % | $ | 19.9 | >100% | $ | 227.8 | 9 | % |
Nine Months Ended March 31, | |||||||||||||||||||||||||||||||
Net Revenues | Change | Reported Operating Income | Adjusted Operating Income | ||||||||||||||||||||||||||||
(in millions) | 2018 | 2017 | Reported Basis | Combined Company Year-Over-Year | Combined Company Constant Currency | 2018 | Change | 2018 | Change | ||||||||||||||||||||||
Luxury | $ | 2,468.1 | $ | 1,918.6 | 29 | % | 13 | % | 8 | % | $ | 201.2 | (1 | %) | $ | 315.7 | 15 | % | |||||||||||||
Consumer Beauty | 3,203.7 | 2,562.2 | 25 | % | 7 | % | 3 | % | 225.4 | 26 | % | 317.5 | 10 | % | |||||||||||||||||
Professional | 1,426.8 | 928.2 | 54 | % | 15 | % | 10 | % | 83.2 | 2 | % | 137.2 | 15 | % | |||||||||||||||||
Corporate | — | — | N/A | N/A | N/A | (286.8 | ) | (54 | %) | — | N/A | ||||||||||||||||||||
Total | $ | 7,098.6 | $ | 5,409.0 | 31 | % | 10 | % | 6 | % | $ | 223.0 | >100% | $ | 770.4 | 13 | % |
Three Months Ended March 31, | ||||||||||||||
Net Revenues | Change | |||||||||||||
(in millions) | 2018 | 2017 | Reported Basis | Constant Currency | ||||||||||
North America | $ | 712.8 | $ | 685.1 | 4 | % | 4 | % | ||||||
Europe | 976.5 | 848.4 | 15 | % | 3 | % | ||||||||
ALMEA | 533.4 | 498.6 | 7 | % | 5 | % | ||||||||
Total | $ | 2,222.7 | $ | 2,032.1 | 9 | % | 3 | % |
Nine Months Ended March 31, | |||||||||||||||||
Net Revenues | Change | ||||||||||||||||
(in millions) | 2018 | 2017 | Reported Basis | Combined Company Year-over-Year | Combined Company Constant Currency | ||||||||||||
North America | $ | 2,205.2 | $ | 1,727.4 | 28 | % | 7 | % | 6 | % | |||||||
Europe | 3,242.5 | 2,429.4 | 33 | % | 12 | % | 4 | % | |||||||||
ALMEA | 1,650.9 | 1,252.2 | 32 | % | 13 | % | 11 | % | |||||||||
Total | $ | 7,098.6 | $ | 5,409.0 | 31 | % | 10 | % | 6 | % |
Three Months Ended March 31, 2018 | ||||||||||||||||||||
(in millions) | Reported (GAAP) | Adjustments (a) | Adjusted (Non-GAAP) | Foreign Currency Translation | Adjusted Results at Constant Currency | |||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||
Luxury | $ | 59.4 | $ | (41.0 | ) | $ | 100.4 | $ | 1.9 | $ | 102.3 | |||||||||
Consumer Beauty | 64.2 | (33.1 | ) | 97.3 | (2.7 | ) | 94.6 | |||||||||||||
Professional Beauty | 11.4 | (18.7 | ) | 30.1 | (0.7 | ) | 29.4 | |||||||||||||
Corporate | (115.1 | ) | (115.1 | ) | — | — | — | |||||||||||||
Total | $ | 19.9 | $ | (207.9 | ) | $ | 227.8 | $ | (1.5 | ) | $ | 226.3 | ||||||||
OPERATING MARGIN | ||||||||||||||||||||
Luxury | 7.9 | % | 13.3 | % | 14.4 | % | ||||||||||||||
Consumer Beauty | 6.3 | % | 9.5 | % | 9.7 | % | ||||||||||||||
Professional Beauty | 2.5 | % | 6.7 | % | 7.1 | % | ||||||||||||||
Corporate | N/A | N/A | N/A | |||||||||||||||||
Total | 0.9 | % | 10.2 | % | 10.8 | % | ||||||||||||||
Three Months Ended March 31, 2017 | ||||||||||||||||||||
(in millions) | Reported (GAAP) | Adjustments (a) | Adjusted (Non-GAAP) | |||||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||
Luxury | $ | 60.9 | $ | (25.2 | ) | $ | 86.1 | |||||||||||||
Consumer Beauty | 63.0 | (58.5 | ) | 121.5 | ||||||||||||||||
Professional Beauty | (18.2 | ) | (18.9 | ) | 0.7 | |||||||||||||||
Corporate | (298.2 | ) | (298.2 | ) | — | |||||||||||||||
Total | $ | (192.5 | ) | $ | (400.8 | ) | $ | 208.3 | ||||||||||||
OPERATING MARGIN | ||||||||||||||||||||
Luxury | 9.6 | % | 13.6 | % | ||||||||||||||||
Consumer Beauty | 6.4 | % | 12.3 | % | ||||||||||||||||
Professional Beauty | (4.5 | %) | 0.2 | % | ||||||||||||||||
Corporate | N/A | N/A | ||||||||||||||||||
Total | (9.5 | %) | 10.3 | % |
Nine Months Ended March 31, 2018 | ||||||||||||||||||||
(in millions) | Reported (GAAP) | Adjustments (a) | Adjusted (Non-GAAP) | Foreign Currency Translation | Adjusted Results at Constant Currency | |||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||
Luxury | $ | 201.2 | $ | (114.5 | ) | $ | 315.7 | $ | (1.7 | ) | $ | 314.0 | ||||||||
Consumer Beauty | 225.4 | (92.1 | ) | 317.5 | (7.8 | ) | 309.7 | |||||||||||||
Professional Beauty | 83.2 | (54.0 | ) | 137.2 | (4.1 | ) | 133.1 | |||||||||||||
Corporate | (286.8 | ) | (286.8 | ) | — | — | — | |||||||||||||
Total | $ | 223.0 | $ | (547.4 | ) | $ | 770.4 | $ | (13.6 | ) | $ | 756.8 | ||||||||
OPERATING MARGIN | ||||||||||||||||||||
Luxury | 8.2 | % | 12.8 | % | 13.3 | % | ||||||||||||||
Consumer Beauty | 7.0 | % | 9.9 | % | 10.0 | % | ||||||||||||||
Professional Beauty | 5.8 | % | 9.6 | % | 9.8 | % | ||||||||||||||
Corporate | N/A | N/A | N/A | |||||||||||||||||
Total | 3.1 | % | 10.9 | % | 11.1 | % | ||||||||||||||
Nine Months Ended March 31, 2017 | ||||||||||||||||||||
(in millions) | Reported (GAAP) | Adjustments (a) | Adjusted (Non-GAAP) | |||||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||
Luxury | $ | 203.6 | $ | (70.6 | ) | $ | 274.2 | |||||||||||||
Consumer Beauty | 178.6 | (110.9 | ) | 289.5 | ||||||||||||||||
Professional Beauty | 81.5 | (37.5 | ) | 119.0 | ||||||||||||||||
Corporate | (622.5 | ) | (622.5 | ) | — | |||||||||||||||
Total | $ | (158.8 | ) | $ | (841.5 | ) | $ | 682.7 | ||||||||||||
OPERATING MARGIN | ||||||||||||||||||||
Luxury | 10.6 | % | 14.3 | % | ||||||||||||||||
Consumer Beauty | 7.0 | % | 11.3 | % | ||||||||||||||||
Professional Beauty | 8.8 | % | 12.8 | % | ||||||||||||||||
Corporate | N/A | N/A | ||||||||||||||||||
Total | (2.9 | %) | 12.6 | % |
Three Months Ended March 31, 2018 vs. Three Months Ended March 31, 2017 Net Revenue Change | |||||||||||||||
of which | |||||||||||||||
Net Revenues Change YoY | Reported Basis | Constant Currency | Impact from Acquisitions1 | Organic (LFL) | |||||||||||
Luxury | 19 | % | 12 | % | 6 | % | 6 | % | |||||||
Consumer Beauty | 3 | % | (1 | )% | 3 | % | (4 | )% | |||||||
Professional Beauty | 10 | % | 2 | % | — | % | 2 | % | |||||||
Total Company | 9 | % | 3 | % | 3 | % | — | % |
Nine Months Ended March 31, 2018 vs. Nine Months Ended March 31, 2017 Net Revenue Change | |||||||||||||||||
of which | |||||||||||||||||
Net Revenues Change YoY | Reported Basis vs Legacy Coty | Combined Company Reported 1 | Combined Company Reported at Constant Currency | Impact from Acquisitions 2 | Combined Company Organic (LFL) | ||||||||||||
Luxury | 29 | % | 13 | % | 8 | % | 2 | % | 6 | % | |||||||
Consumer Beauty | 25 | % | 7 | % | 3 | % | 8 | % | (5 | )% | |||||||
Professional Beauty | 54 | % | 15 | % | 10 | % | 8 | % | 2 | % | |||||||
Total Company | 31 | % | 10 | % | 6 | % | 6 | % | — | % |
(in millions) | March 31, 2018 | June 30, 2017 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 460.8 | $ | 535.4 | ||||
Restricted cash | 25.7 | 35.3 | ||||||
Trade receivables—less allowances of $93.6 and $58.5, respectively | 1,555.4 | 1,470.3 | ||||||
Inventories | 1,258.5 | 1,052.6 | ||||||
Prepaid expenses and other current assets | 610.2 | 487.9 | ||||||
Total current assets | 3,910.6 | 3,581.5 | ||||||
Property and equipment, net | 1,689.2 | 1,632.1 | ||||||
Goodwill | 8,972.8 | 8,555.5 | ||||||
Other intangible assets, net | 8,662.1 | 8,425.2 | ||||||
Deferred income taxes | 226.5 | 72.6 | ||||||
Other noncurrent assets | 303.8 | 281.3 | ||||||
TOTAL ASSETS | $ | 23,765.0 | $ | 22,548.2 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,709.3 | $ | 1,732.1 | ||||
Accrued expenses and other current liabilities | 1,882.2 | 1,796.4 | ||||||
Short-term debt and current portion of long-term debt | 231.6 | 209.1 | ||||||
Income and other taxes payable | 118.7 | 66.0 | ||||||
Total current liabilities | 3,941.8 | 3,803.6 | ||||||
Long-term debt, net | 7,628.6 | 6,928.3 | ||||||
Pension and other post-employment benefits | 588.7 | 549.2 | ||||||
Deferred income taxes | 941.3 | 924.9 | ||||||
Other noncurrent liabilities | 499.6 | 473.4 | ||||||
Total liabilities | 13,600.0 | 12,679.4 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
REDEEMABLE NONCONTROLLING INTERESTS | 665.4 | 551.1 | ||||||
EQUITY: | ||||||||
Preferred Stock | — | — | ||||||
Common Stock | 8.1 | 8.1 | ||||||
Additional paid-in capital | 10,835.3 | 11,203.2 | ||||||
Accumulated deficit | (438.4 | ) | (459.2 | ) | ||||
Accumulated other comprehensive income | 536.1 | 4.4 | ||||||
Treasury stock | (1,441.8 | ) | (1,441.8 | ) | ||||
Total Coty Inc. stockholders’ equity | 9,499.3 | 9,314.7 | ||||||
Noncontrolling interests | 0.3 | 3.0 | ||||||
Total equity | 9,499.6 | 9,317.7 | ||||||
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | $ | 23,765.0 | $ | 22,548.2 |
Nine Months Ended March 31, | |||||||
(in millions) | 2018 | 2017 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income (loss) | $ | 42.4 | $ | (97.5 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 543.5 | 414.9 | |||||
Deferred income taxes | (157.7 | ) | (298.3 | ) | |||
Provision for bad debts | 15.4 | 23.3 | |||||
Provision for pension and other post-employment benefits | 33.3 | 44.7 | |||||
Share-based compensation | 26.1 | 19.1 | |||||
Other | 16.2 | (0.6 | ) | ||||
Change in operating assets and liabilities, net of effects from purchase of acquired companies: | |||||||
Trade receivables | (33.5 | ) | (216.2 | ) | |||
Inventories | (101.3 | ) | 172.6 | ||||
Prepaid expenses and other current assets | (76.2 | ) | (6.5 | ) | |||
Accounts payable | (80.2 | ) | 339.3 | ||||
Accrued expenses and other current liabilities | (27.4 | ) | 345.4 | ||||
Income and other taxes payable | 64.6 | 3.1 | |||||
Other noncurrent assets | (7.2 | ) | 9.9 | ||||
Other noncurrent liabilities | (69.1 | ) | (46.5 | ) | |||
Net cash provided by operating activities | 188.9 | 706.7 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Capital expenditures | (318.7 | ) | (324.0 | ) | |||
Payment for business combinations, net of cash acquired | (265.5 | ) | (742.6 | ) | |||
Proceeds from sale of asset | 3.5 | 10.5 | |||||
Net cash used in investing activities | (580.7 | ) | (1,056.1 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from short-term debt, original maturity more than three months | — | 9.5 | |||||
Repayments of short-term debt, original maturity more than three months | — | (9.7 | ) | ||||
Net proceeds (repayments) of short-term debt, original maturity less than three months | 5.1 | (48.7 | ) | ||||
Proceeds from revolving loan facilities | 2,298.1 | 1,809.4 | |||||
Repayments of revolving loan facilities | (1,535.8 | ) | (1,624.4 | ) | |||
Proceeds from term loans | — | 1,075.0 | |||||
Repayments of term loans | (150.6 | ) | (95.7 | ) | |||
Dividend payment | (281.9 | ) | (279.2 | ) | |||
Net proceeds from issuance of Class A Common Stock and Series A Preferred Stock | 20.0 | 19.5 | |||||
Payments for employee taxes related to net settlement of equity awards | (3.5 | ) | — | ||||
Payments for purchases of Class A Common Stock held as Treasury Stock | — | (36.3 | ) | ||||
Net (payments) proceeds from foreign currency contracts | (2.7 | ) | 3.8 | ||||
Purchase of additional noncontrolling interests | — | (9.8 | ) | ||||
Proceeds from noncontrolling interests | 0.2 | — | |||||
Distributions to noncontrolling interests, redeemable noncontrolling interests and mandatorily redeemable financial instruments | (54.0 | ) | (7.5 | ) | |||
Payment of deferred financing fees | (4.0 | ) | (24.8 | ) | |||
Net cash provided by financing activities | 290.9 | 781.1 | |||||
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS | 16.7 | (12.1 | ) | ||||
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (84.2 | ) | 419.6 | ||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period | 570.7 | 372.4 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period | $ | 486.5 | $ | 792.0 | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | |||||||
Cash paid during the period for interest | $ | 194.2 | $ | 132.9 | |||
Cash paid during the period for income taxes, net of refunds received | 83.9 | 63.6 | |||||
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES: | |||||||
Accrued capital expenditure additions | $ | 104.3 | $ | 70.8 | |||
Non-cash Common Stock issued for business combination | — | 9,628.6 | |||||
Non-cash debt assumed for business combination | — | 1,943.0 | |||||
Non-cash redeemable noncontrolling interest for business combinations | — | 410.9 | |||||
Non-cash contingent consideration for business combination | 5.0 | — |