BUSINESS COMBINATIONS

P&G Beauty Business Acquisition

On October 1, 2016, the Company acquired the P&G Beauty Business in order to further strengthen the Company’s position in the global beauty industry. The purchase price was $11,570.4 and consisted of $9,628.6 of total equity consideration and $1,941.8 of assumed debt.

The Company issued 409.7 million shares of common stock to the former holders of Galleria Co. (“Galleria”) (which held the assets of the P&G Beauty Business) common stock, together with cash in lieu of fractional shares. Coty Inc. is considered to be the acquiring company for accounting purposes.

The Company has finalized the valuation of assets acquired and liabilities assumed for the P&G Beauty Business acquisition. The Company recognized certain measurement period adjustments as disclosed below during the quarter ended September 30, 2017. The measurement period for the P&G Beauty Business acquisition closed at the end of the first quarter of fiscal 2018.

The following table summarizes the allocation of the purchase price to the net assets of the P&G Beauty Business as of the October 1, 2016 acquisition date:



	Estimated fair value as previously reported^(a)			Measurement period adjustments ^(b)			Final fair value as adjusted			Estimated useful life (in years)
Cash and cash equivalents	$	387.6		$	—		$	387.6
Inventories	465.5			—			465.5
Property, plant and equipment	742.9			(16.9		)	726.0			3 - 40
Goodwill	5,528.4			35.5			5,563.9			Indefinite
Trademarks — indefinite	1,575.0			—			1,575.0			Indefinite
Trademarks — finite	747.7			—			747.7			10 - 30
Customer relationships	1,074.2			18.8			1,093.0			2 - 26
License agreements	2,299.0			12.0			2,311.0			4 - 30
Product formulations	183.8			(10.0		)	173.8			5 - 28
Other net working capital	(23.2		)	—			(23.2		)
Net other assets (liabilities)	64.6			(33.7		)	30.9
Unfavorable contract liabilities	(130.0		)	—			(130.0		)
Pension liabilities	(404.1		)	—			(404.1		)
Deferred tax liability, net	(941.0		)	(5.7		)	(946.7		)
Total purchase price	$	11,570.4		$	—		$	11,570.4

^(a)As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The business combination was completed in fiscal 2017.

^(b)The Company recorded measurement period adjustments in the first quarter of fiscal 2018. The measurement period adjustments related to Customer relationships, License agreements and Product formulations, collectively, of $20.8, were a result of changes in assumptions that were used at the date of acquisition for valuation purposes including allocation of costs and synergies. The measurement period adjustments related to Property, plant and equipment and Net other assets of ($16.9) and ($33.7), respectively, primarily related to obtaining new facts and circumstances about acquired assets and liabilities that existed at the acquisition date. The increase to Deferred tax liability, net was primarily a result of the change of the jurisdictional allocation of the tangible and intangible assets. All measurement period adjustments were offset against Goodwill.

Goodwill is primarily attributable to the anticipated company-specific synergies and economies of scale expected from the operations of the combined company. The synergies include certain cost savings, operating efficiencies, and leverage of the acquired brand recognition to be achieved as a result of the P&G Beauty Business acquisition. Goodwill is not expected to be deductible for tax purposes. Goodwill of $1,889.8, $3,188.1 and $486.0 is allocated to the Luxury, Consumer Beauty and Professional Beauty segments, respectively. The allocation of goodwill to segments was based on the relative fair values of expected future cash flows.

ghd Acquisition

On November 21, 2016, the Company completed the acquisition of 100% of the equity interest of Lion/Gloria Topco Limited which held the net assets of ghd (“ghd”) which stands for “Good Hair Day,” a premium brand in high-end hair styling appliances. The ghd acquisition further strengthens the Company’s professional hair category and is included in the Professional Beauty segment’s results after the acquisition date. The total cash consideration paid net of acquired cash and cash equivalents was £430.2 million, the equivalent of $531.5, at the time of closing.

The Company has finalized the valuation of assets acquired and liabilities assumed for the ghd acquisition. The Company recognized certain measurement period adjustments as disclosed below during the six months ended December 31, 2017. The measurement period for the ghd acquisition closed on November 21, 2017.

The following table summarizes the allocation of the purchase price to the net assets of ghd as of the November 21, 2016 acquisition date:



	Estimated fair value as previously reported ^(a)			Measurement period adjustments ^(b)			Final fair value as adjusted			Estimated useful life (in years)
Cash and cash equivalents	$	7.1		$	—		$	7.1
Inventories	79.6			—			79.6
Property, plant and equipment	10.0			—			10.0			3 - 10
Goodwill	174.4			24.6			199.0			Indefinite
Indefinite-lived other intangible assets	163.8			(14.8		)	149.0			Indefinite
Customer relationships	36.6			(2.3		)	34.3			11 - 25
Technology	146.6			(17.2		)	129.4			11 - 17
Other net working capital	(16.6		)	4.7			(11.9		)
Net other assets	0.9			(0.9		)	—
Deferred tax liability, net	(63.9		)	5.9			(58.0		)
Total purchase price	$	538.5		$	—		$	538.5

^(a)As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The business combination was completed in fiscal 2017.

^(b)The Company recorded measurement period adjustments in the first and second quarters of fiscal 2018. The measurement period adjustments related to decreases to Technology, Indefinite-lived other intangible assets and Customer relationships of $17.2, $14.8 and $2.3, respectively, and a decrease to the deferred tax liability of $5.9 were a result of changes in assumptions that were used at the date of acquisition for valuation purposes. The measurement period adjustments related to Other net working capital of $4.7 were a result of obtaining new facts and circumstances about acquired accrued expenses that existed as of the acquisition date. All measurement period adjustments were offset against Goodwill.

Goodwill is not expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating ghd’s products into the Company’s existing sales channels. Goodwill of $49.0, $42.0 and $108.0 is allocated to the Luxury, Consumer Beauty and Professional Beauty segments, respectively. The allocation of goodwill to the segments was due to the reduction in corporate and regional overhead allocated to these segments due to the addition of the ghd acquisition.

Younique Acquisition

On February 1, 2017, the Company completed its acquisition of 60% of the membership interest in Foundation, LLC (“Foundation”) which held the net assets of Younique, LLC, a Utah limited liability company (“Younique”), for cash consideration of $600.0, net of acquired cash and assumed debt, and an additional payment of $7.5 for working capital adjustments paid in the nine months ended March 31, 2018. The existing Younique membership holders contributed their 100% membership interest in Younique to Foundation in exchange for a 40% membership interest in Foundation and $607.5 of cash consideration. Younique strengthens the Consumer Beauty segment’s product offerings. The Company accounts for the noncontrolling interest portion of the acquisition as a redeemable noncontrolling interest.

The Company has finalized the valuation of assets acquired and liabilities assumed for the Younique acquisition. The Company recognized certain measurement period adjustments as disclosed below during the nine months ended March 31, 2018. The measurement period for the Younique acquisition closed on February 1, 2018.

The following table summarizes the allocation of the purchase price to the net assets of Younique as of the February 1, 2017 acquisition date:



	Estimated fair value as previously reported ^(a)			Measurement period adjustments ^(b)			Final fair value as adjusted			Estimated useful life (in years)
Cash and cash equivalents	$	17.5		$	—		$	17.5
Inventories	88.1			—			88.1
Property, plant and equipment	67.1			—			67.1			3 - 8
Goodwill	575.3			(0.3		)	575.0			Indefinite
Trademark — finite	123.0			—			123.0			20
Product formulations	0.6			—			0.6			5
Customer relationships	197.0			—			197.0			7 - 10
Other net working capital	(27.7		)	0.3			(27.4		)
Short-term and long-term debt	(1.2		)	—			(1.2		)
Total equity value	1,039.7			—			1,039.7

Redeemable noncontrolling interest	415.9			—			415.9
Net cash and debt acquired	16.3			—			16.3
Total purchase price	$	607.5		$	—		$	607.5

^(a)As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The business combination was completed in fiscal 2017.

^(b)The Company recorded measurement period adjustments in the nine months ended March 31, 2018 to account for an increase in the estimated other net working capital of $0.3 as of the February 1, 2017 acquisition date. This adjustment is offset against Goodwill.

Goodwill is expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from certain manufacturing and supply chain cost savings. Goodwill of $95.0, $420.0 and $60.0 is allocated to the Luxury, Consumer Beauty and Professional Beauty segments, respectively. The allocation of goodwill to the segments was due to the reduction in corporate and regional overhead allocated to these segments due to the addition of the Younique acquisition.

Burberry Beauty Business Acquisition

On October 2, 2017, the Company acquired the exclusive global license rights and other related assets for the Burberry Limited (“Burberry”) luxury fragrances, cosmetics and skincare business (the “Burberry Beauty Business”). The Burberry Beauty Business acquisition is expected to further strengthen the Company’s position in the global beauty industry. Total purchase consideration, after post-closing adjustments, was £187.1 million, the equivalent of $250.1, at the time of closing. Included in the purchase price was cash consideration of £183.3 million, the equivalent of $245.1, at the time of closing, in addition to £3.8 million, the equivalent of $5.0, of estimated contingent consideration, at the time of closing.

The future contingent consideration payments will range from zero to £16.7 million and will be payable on a quarterly basis to Burberry as certain items of inventory transferred to the Company at the acquisition date are subsequently used or sold. The amount of the contingent consideration recorded was estimated as of the acquisition date and is subject to change based on the related inventory usage. The fair value of the contingent consideration was determined by estimating the future inventory usage and corresponding payments over a four-year period, with the contingent payments being made in each of the respective years. The estimate of the contingent consideration payable is recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheet.

The Company estimated the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. The Company is still evaluating the fair value of the assets and liabilities assumed from the Burberry Beauty Business acquisition. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized.

The following table summarizes the estimated allocation of the purchase price to the net assets of the Burberry Beauty Business as of the October 2, 2017 acquisition date:



	Estimated fair value as previously reported^(a)			Measurement period adjustments^(b)			Estimated fair value as adjusted			Estimated useful life (in years)
Inventories	$	55.1		$	(1.7	)	$	53.4
Property, plant and equipment	5.8			—			$	5.8		1 - 3
License and distribution rights	129.7			48.1			$	177.8		3 - 15
Goodwill	68.2			(45.0		)	$	23.2		Indefinite
Net other liabilities	(8.7		)	(1.4		)	$	(10.1	)
Total purchase price	$	250.1		$	—		$	250.1

^(a)As previously reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2017.

^(b)The Company recorded measurement period adjustments in the third quarter of fiscal 2018. The measurement period adjustments related to an increase in the value of the License and distribution rights and a decrease in the Inventory value were due to changes in assumptions that were used at the date of acquisition for valuation purposes. The measurement period adjustment related to an increase in Net other liabilities acquired was a result of obtaining new facts and circumstances about acquired accrued expenses that existed as of the acquisition date. All measurement period adjustments were offset against Goodwill.

Goodwill is expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating the Burberry Beauty Business products into the Company’s existing sales channels. Goodwill of $11.7, $6.2 and $5.3 is allocated to the Luxury, Consumer Beauty and Professional Beauty segments, respectively. The allocation of goodwill to the segments were due to the reduction in corporate and regional overhead allocated to these segments due to the addition of the Burberry Beauty Business acquisition.

For the three months ended March 31, 2018, Net revenues and Net income of the Burberry Beauty Business included in the Company’s Condensed Consolidated Statements of Operations were $36.0 and $1.7, respectively. For the nine months ended March 31, 2018, net revenues and net (loss) of the Burberry Beauty Business included in the Company’s Condensed Consolidated Statements of Operations from the date of acquisition were $44.2 and $(7.4), respectively. Net income (loss) for the three and nine months ended March 31, 2018 was impacted by the amortization of certain asset values based on the estimated fair values of the acquired assets as determined during the initial purchase accounting, such as the amortization of inventory step-up and finite-lived intangibles. This amortization impacted net income (loss) for the three and nine months ended March 31, 2018 by $5.8 and $11.2, respectively, net of tax.

Unaudited Pro Forma Information

The unaudited pro forma financial information in the table below summarizes the combined results of the Company and the P&G Beauty Business and Younique (the “Pro Forma Acquisitions”) as though the companies had been combined on July 1, 2015. The three and nine months ended March 31, 2017 include pro forma adjustments for all of the Pro Forma Acquisitions.

The pro forma adjustments include incremental amortization of intangible assets and depreciation of property, plant and equipment, based on allocated fair values of each asset as well as costs related to financing the Pro Forma Acquisitions. The unaudited pro forma information also includes non-recurring acquisition-related costs. Pro forma adjustments were tax-effected at the Company’s statutory rates. For the pro forma basic and diluted earnings per share calculation, 409.7 million shares issued in connection with the P&G Beauty Business acquisition were considered as if issued on July 1, 2015. The pro forma information is presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if the Pro Forma Acquisitions had taken place on July 1, 2015 or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings. The pro forma information for the three and nine months ended March 31, 2017 is as follows:



	Three Months Ended March 31,			Nine Months Ended March 31,
	2017 ^(a)			2017 ^(a)
Pro forma Net revenues	$	2,063.7		$	6,647.9
Pro forma Net income (loss)	(76.5		)	63.1
Pro forma Net income (loss) attributable to Coty Inc.	(92.2		)	33.0
Pro forma Net income (loss) attributable to Coty Inc. per common share:
Basic	$	(0.12	)	$	0.04
Diluted	$	(0.12	)	$	0.04

^(a) The pro forma information for the three months ended March 31, 2017 excluded $62.2 of non-recurring acquisition-related costs and excluded $54.5 of amortization of inventory step up. The pro forma information for the nine months ended March 31, 2017 excluded $378.8 of non-recurring acquisition-related costs and excluded $109.3 of amortization of inventory step up.