UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED		MARCH 31, 2021
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                    TO
COMMISSION FILE NUMBER		001-35964

COTY INC.

(Exact name of registrant as specified in its charter)

Delaware		13-3823358
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
350 Fifth Avenue,
New York,	NY	10118
(Address of principal executive offices)		(Zip Code)

(212) 389-7300

Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes ý      No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes ý      No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes ☐     No ý

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value	COTY	New York Stock Exchange

At May 3, 2021, 766,107,084 shares of the registrant’s Class A Common Stock, $0.01 par value, were outstanding.

COTY INC.

INDEX TO FORM 10-Q

		Page
Part I:	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2021 and 2020	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2021 and 2020	2
	Condensed Consolidated Balance Sheets as of March 31, 2021 and June 30, 2020	3
	Condensed Consolidated Statements of Equity for the three and nine months ended March 31, 2021 and 2020	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2021 and 2020	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66
Item 4.	Controls and Procedures	66
Part II:	OTHER INFORMATION
Item 1.	Legal Proceedings	67
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 6.	Exhibits	69
Signatures		70

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

	Three Months Ended March 31,				Nine Months Ended March 31,
	2021		2020		2021		2020
Net revenues	$	1,027.8	$	1,062.5	$	3,567.5	$	4,157.4
Cost of sales	391.7		460.8		1,440.6		1,655.0
Gross profit	636.1		601.7		2,126.9		2,502.4
Selling, general and administrative expenses	545.6		757.9		1,770.5		2,481.0
Amortization expense	62.2		61.6		189.4		170.7
Restructuring costs	—		(8.0)		89.7		125.5
Acquisition and divestiture-related costs	29.7		49.3		127.7		85.3
Asset impairment charges	—		40.4		—		40.4
Gain on divestitures and sale of brand assets	—		—		—		(84.5)
Operating (loss)	(1.4)		(299.5)		(50.4)		(316.0)
Interest expense, net	50.3		63.8		171.6		185.3
Other (income) expense, net	(62.5)		0.3		(50.7)		4.0
Income (loss) from continuing operations before income taxes	10.8		(363.6)		(171.3)		(505.3)
Benefit for income taxes on continuing operations	(19.2)		(59.8)		(304.9)		(117.0)
Net income (loss) from continuing operations	30.0		(303.8)		133.6		(388.3)
Net (loss) income from discontinued operations	(17.3)		39.4		(148.2)		163.8
Net income (loss)	12.7		(264.4)		(14.6)		(224.5)
Net (loss) income attributable to noncontrolling interests	(9.4)		6.2		(11.5)		9.5
Net income attributable to redeemable noncontrolling interests	6.5		1.0		12.2		6.4
Net income (loss) attributable to Coty Inc.	$	15.6	$	(271.6)	$	(15.3)	$	(240.4)
Amounts attributable to Coty Inc.
Net income (loss) from continuing operations	32.9		(311.0)		132.9		(404.2)
Convertible Series B Preferred Stock dividends	(34.1)		—		(78.1)		—
Net (loss) income from continuing operations attributable to common stockholders	(1.2)		(311.0)		54.8		(404.2)
Net (loss) income from discontinued operations	(17.3)		39.4		(148.2)		163.8
Net loss attributable to common stockholders	$	(18.5)	$	(271.6)	$	(93.4)	$	(240.4)
Earnings (loss) per common share:
Earnings (loss) from continuing operations per common share - basic	$	—	$	(0.41)	$	0.07	$	(0.53)
Earnings (loss) from continuing operations per common share - diluted	—		(0.41)		0.07		(0.53)
(Loss) earnings from discontinued operations - basic	(0.02)		0.05		(0.19)		0.21
(Loss) earnings from discontinued operations - diluted	(0.02)		0.05		(0.19)		0.21
Loss per common share - basic	(0.02)		(0.36)		(0.12)		(0.32)
Loss per common share - diluted	(0.02)		(0.36)		(0.12)		(0.32)
Weighted-average common shares outstanding:
Basic	765.4		760.8		764.6		757.7
Diluted	765.4		760.8		932.1		757.7

See notes to Condensed Consolidated Financial Statements.

1

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)

	Three Months Ended March 31,				Nine Months Ended March 31,
	2021		2020		2021		2020
Net income (loss)	$	12.7	$	(264.4)	$	(14.6)	$	(224.5)
Other comprehensive income (loss):
Foreign currency translation adjustment	(107.1)		(364.6)		22.0		(385.2)
Net unrealized derivative gain (loss) on cash flow hedges, net of taxes of $(2.4) and $11.0, and $(7.2) and $9.4 during the three and nine months ended, respectively	7.8		(35.0)		23.2		(29.9)
Pension and other post-employment benefits adjustment, net of tax of $0.2 and $0.0, and $4.5 and $0.0 during the three and nine months ended, respectively	(0.4)		(1.5)		(15.1)		(4.6)
Total other comprehensive (loss) income, net of tax	(99.7)		(401.1)		30.1		(419.7)
Comprehensive (loss) income	(87.0)		(665.5)		15.5		(644.2)
Comprehensive income attributable to noncontrolling interests:
Net (loss) income	(9.4)		6.2		(11.5)		9.5
Foreign currency translation adjustment	(0.2)		(0.1)		(0.1)		—
Total comprehensive (loss) income attributable to noncontrolling interests	(9.6)		6.1		(11.6)		9.5
Comprehensive income attributable to redeemable noncontrolling interests:
Net income	6.5		1.0		12.2		6.4
Comprehensive (loss) income attributable to Coty Inc.	$	(83.9)	$	(672.6)	$	14.9	$	(660.1)

See notes to Condensed Consolidated Financial Statements.

2

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

(Unaudited)

	March 31, 2021		June 30, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	315.3	$	308.3
Restricted cash	42.7		43.7
Trade receivables—less allowances of $51.2 and $57.3, respectively	398.1		440.1
Inventories	604.7		678.2
Prepaid expenses and other current assets	457.4		411.6
Current assets held for sale	—		4,613.1
Total current assets	1,818.2		6,495.0
Property and equipment, net	942.6		1,081.6
Goodwill	4,026.6		3,973.9
Other intangible assets, net	4,474.9		4,372.1
Equity investments	1,266.8		—
Operating lease right-of-use assets	331.4		371.4
Deferred income taxes	702.2		362.4
Other noncurrent assets	59.6		72.4
TOTAL ASSETS	$	13,622.3	$	16,728.8
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,051.8	$	1,190.3
Accrued expenses and other current liabilities	1,174.7		1,111.6
Short-term debt and current portion of long-term debt	193.7		188.3
Current operating lease liabilities	79.3		105.0
Income and other taxes payable	66.4		33.8
Current liabilities held for sale	—		956.7
Total current liabilities	2,565.9		3,585.7
Long-term debt, net	5,182.4		7,892.1
Long-term operating lease liabilities	280.4		317.4
Pension and other post-employment benefits	393.8		400.3
Deferred income taxes	534.1		175.1
Other noncurrent liabilities	371.5		334.5
Total liabilities	9,328.1		12,705.1
COMMITMENTS AND CONTINGENCIES (See Note 20)
CONVERTIBLE SERIES B PREFERRED STOCK, $0.01 par value; 1.0 shares authorized; 1.0 and 0.8 issued and 1.0 and 0.8 and outstanding, respectively, at March 31, 2021 and June 30, 2020	1,036.3		715.8
REDEEMABLE NONCONTROLLING INTERESTS	87.4		79.1
EQUITY:
Preferred Stock, $0.01 par value; 20.0 shares authorized, 1.5 issued and outstanding at March 31, 2021 and June 30, 2020	—		—
Class A Common Stock, $0.01 par value; 1,250.0 shares authorized, 832.3 and 830.6 issued and 766.1 and 765.1 outstanding, respectively, at March 31, 2021 and June 30, 2020	8.3		8.3
Additional paid-in capital	10,395.8		10,447.4
Accumulated deficit	(5,569.6)		(5,548.6)
Accumulated other comprehensive income	(426.0)		(456.2)
Treasury stock—at cost, shares: 66.2 at March 31, 2021 and 65.5 at June 30, 2020	(1,446.3)		(1,446.3)
Total Coty Inc. stockholders’ equity	2,962.2		3,004.6
Noncontrolling interests	208.3		224.2
Total equity	3,170.5		3,228.8
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY	$	13,622.3	$	16,728.8

See notes to Condensed Consolidated Financial Statements.

3

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three and Nine Months Ended March 31, 2021

(In millions, except per share data)

(Unaudited)

	Preferred Stock			Class A Common Stock			Additional Paid-in Capital		(Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Treasury Stock			Total Coty Inc. Stockholders’ Equity		Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests		Convertible Series B Preferred Stock
	Shares	Amount		Shares	Amount								Shares	Amount
BALANCE as previously reported—July 1, 2020	1.5	$	—	830.6	$	8.3	$	10,447.4	$	(5,548.6)	$	(456.2)	65.5	$	(1,446.3)	$	3,004.6	$	224.2	$	3,228.8	$	79.1	$	715.8
Adjustment due to the adoption of ASU No. 2016-13									(5.7)							(5.7)				(5.7)
BALANCE as adjusted—July 1, 2020	1.5	$	—	830.6	$	8.3	$	10,447.4	$	(5,554.3)	$	(456.2)	65.5	$	(1,446.3)	$	2,998.9	$	224.2	$	3,223.1	$	79.1	$	715.8
Issuance of Preferred Stock																—				—				242.4
Exercise of employee stock options and restricted stock units				0.6			—									—				—
Shares withheld for employee taxes							(1.0)									(1.0)				(1.0)
Share-based compensation expense							6.2									6.2				6.2
Changes in dividends accrued				—			0.8									0.8				0.8
Dividends accrued- Convertible Series B Preferred Stock							(20.8)									(20.8)				(20.8)				20.8
Net income									221.4							221.4		0.4		221.8		5.5
Other comprehensive loss											(5.9)					(5.9)		(0.1)		(6.0)
Distribution to noncontrolling interests, net																—				—		—
Adjustment of redeemable noncontrolling interests to redemption value							1.5									1.5				1.5		(1.5)
BALANCE—September 30, 2020	1.5	$	—	831.2	$	8.3	$	10,434.1	$	(5,332.9)	$	(462.1)	65.5	$	(1,446.3)	$	3,201.1	$	224.5	$	3,425.6	$	83.1	$	979.0
Exercise of employee stock options and restricted stock units				0.4			—									—				—
Shares withheld for employee taxes							(0.9)									(0.9)				(0.9)
Share-based compensation expense							14.4									14.4				14.4
Changes in dividends accrued							0.4									0.4				0.4
Dividends accrued- Convertible Series B Preferred Stock							(23.2)									(23.2)				(23.2)				23.2
Net income (loss)									(252.3)							(252.3)		(2.5)		(254.8)		0.3
Other comprehensive loss											135.6					135.6		0.2		135.8
Distribution to noncontrolling interests, net																—		(4.3)		(4.3)		(2.1)
Adjustment of redeemable noncontrolling interests to redemption value							1.8									1.8				1.8		(1.8)
Equity Investment contribution for share-based compensation							0.5									0.5				0.5
BALANCE—December 31, 2020	1.5	$	—	831.6	$	8.3	$	10,427.1	$	(5,585.2)	$	(326.5)	65.5	$	(1,446.3)	$	3,077.4	$	217.9	$	3,295.3	$	79.5	$	1,002.2
Cancellation of Restricted Stock							—						0.7	—		—				—
Exercise of employee stock options and restricted stock units				0.7			—									—				—
Shares withheld for employee taxes							(2.3)									(2.3)				(2.3)
Share-based compensation expense							6.0									6.0				6.0

4

Changes in dividends accrued							0.5									0.5				0.5
Dividends accrued- Convertible Series B Preferred Stock							(23.6)									(23.6)				(23.6)				23.6
Deemed Dividends- Convertible Series B Preferred Stock							(10.5)									(10.5)				(10.5)				10.5
Net income (loss)									15.6							15.6		(9.4)		6.2		6.5
Other comprehensive loss											(99.5)					(99.5)		(0.2)		(99.7)
Adjustment of redeemable noncontrolling interests to redemption value							(1.4)									(1.4)				(1.4)		1.4
BALANCE—March 31, 2021	1.5	$	—	832.3	$	8.3	$	10,395.8	$	(5,569.6)	$	(426.0)	66.2	$	(1,446.3)	$	2,962.2	$	208.3	$	3,170.5	$	87.4	$	1,036.3

See notes to Condensed Consolidated Financial Statements.

5

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three and Nine Months Ended March 31, 2020

(In millions, except per share data)

(Unaudited)

	Preferred Stock			Class A Common Stock			Additional Paid-in Capital		(Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Treasury Stock			Total Coty Inc. Stockholders’ Equity		Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests		Convertible Series B Preferred Stock
	Shares	Amount		Shares	Amount								Shares	Amount
BALANCE as previously reported—July 1, 2019	9.4	$	0.1	819.2	$	8.1	$	10,620.5	$	(4,541.2)	$	(58.8)	65.0	$	(1,441.8)	$	4,586.9	$	6.5	$	4,593.4	$	451.8	$	—
Adjustment due to the adoption of ASU No. 2016-16									(0.7)							(0.7)				(0.7)
BALANCE as adjusted—July 1, 2019	9.4	$	0.1	819.2	$	8.1	$	10,620.5	$	(4,541.9)	$	(58.8)	65.0	$	(1,441.8)	$	4,586.2	$	6.5	$	4,592.7	$	451.8	$	—
Purchase of Class A Common Stock													0.5	(4.5)		(4.5)				(4.5)
Exercise of employee stock options and restricted stock units				0.1	—		0.6									0.6				0.6
Share-based compensation expense							6.2									6.2				6.2
Dividends declared - Cash and Other ($0.125 per common share)							(63.5)									(63.5)				(63.5)
Dividends declared - Stock ($0.125 per common share)							(