DESCRIPTION OF BUSINESS

9 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

DESCRIPTION OF BUSINESS

DESCRIPTION OF BUSINESS

Coty Inc. and its subsidiaries (collectively, the “Company” or “Coty”) manufacture, market, sell and distribute branded beauty products, including fragrances, color cosmetics, hair care products and skin & body related products throughout the world. Coty is a global beauty company with a rich entrepreneurial history and an iconic portfolio of brands.

The Company operates on a fiscal year basis with a year-end of June 30. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year. For example, references to “fiscal 2020” refer to the fiscal year ending June 30, 2020. When used in this Quarterly Report on Form 10-Q, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation.

The Company’s sales generally increase during the second fiscal quarter as a result of increased demand associated with the winter holiday season. Financial performance, working capital requirements, sales, cash flows and borrowings generally experience variability during the three to six months preceding the holiday season. Product innovations, new product launches and the size and timing of orders from the Company’s customers may also result in variability. The Company also generally experiences an increase in sales during its fourth fiscal quarter in its Professional Beauty segment as a result of higher demand prior to the summer holiday season.

During the three months ended March 31, 2020, the Company’s chief operating decision maker (“CODM”) changed the reporting structure used to allocate resources amongst its regional commercial business units, and accordingly, the Company recast its segment results. See Note 4—Segment Reporting for information on the Company’s segments.

On October 21, 2019, the Company announced that as part of its ongoing strategic review of its business, management and the Board of Directors have determined that the Company will focus on its fragrance, cosmetics and skin care businesses. As a result, Coty initiated a process to explore strategic alternatives, including divestiture, for its Professional Beauty business and retail hair brands, as well as the Company’s Brazilian operations. On May 11, 2020, the Company announced that it signed a Memorandum of Understanding ("MOU") with KKR Rainbow Aggregator (Asset) GP LLC (along with KKR Rainbow Aggregator L.P., "KKR") for the sale of a 60% interest in its Professional Beauty business and retail hair brands, including OPI and ghd ("the PB Sale"), at an enterprise value of $4,300.0. Under the terms of the MOU, the Company agreed to exclusively negotiate a definitive agreement with respect to the PB Sale with KKR. Upon reaching such agreement, Coty will carve out such business into a standalone company in which KKR will acquire a 60% stake and Coty will retain the remaining 40% interest. The Company expects that the proceeds from any potential transaction during the next year will be used to pay down debt, other than a maximum of $500.0 that will be used to fund operations.