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, 2022
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 April 29, 2022, 839,191,079 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, 2022 and 2021	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2022 and 2021	2
	Condensed Consolidated Balance Sheets as of March 31, 2022 and June 30, 2021	3
	Condensed Consolidated Statements of Equity for the three and nine months ended March 31, 2022 and 2021	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2022 and 2021	8
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 4.	Controls and Procedures	65
Part II:	OTHER INFORMATION
Item 1.	Legal Proceedings	66
Item 1A.	Risk Factors	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 6.	Exhibits	67
Signatures		68

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,
	2022		2021		2022		2021
Net revenues	$	1,186.2	$	1,027.8	$	4,136.1	$	3,567.5
Cost of sales	423.1		391.7		1,489.0		1,440.6
Gross profit	763.1		636.1		2,647.1		2,126.9
Selling, general and administrative expenses	659.3		545.6		2,154.5		1,770.5
Amortization expense	50.2		62.2		158.6		189.4
Restructuring costs	(6.8)		—		1.5		89.7
Acquisition- and divestiture-related costs	3.3		29.7		14.2		127.7
Operating income (loss)	57.1		(1.4)		318.3		(50.4)
Interest expense, net	62.9		50.3		183.6		171.6
Other income, net	(60.6)		(62.5)		(572.9)		(50.7)
Income (loss) from continuing operations before income taxes	54.8		10.8		707.6		(171.3)
Provision (benefit) for income taxes on continuing operations	0.5		(19.2)		164.5		(304.9)
Net income from continuing operations	54.3		30.0		543.1		133.6
Net income (loss) from discontinued operations	0.7		(17.3)		4.5		(148.2)
Net income (loss)	55.0		12.7		547.6		(14.6)
Net loss attributable to noncontrolling interests	(0.9)		(9.4)		(2.3)		(11.5)
Net income attributable to redeemable noncontrolling interests	2.3		6.5		8.9		12.2
Net income (loss) attributable to Coty Inc.	$	53.6	$	15.6	$	541.0	$	(15.3)
Amounts attributable to Coty Inc.
Net income from continuing operations	52.9		32.9		536.5		132.9
Convertible Series B Preferred Stock dividends	(3.3)		(34.1)		(195.0)		(78.1)
Net income (loss) from continuing operations attributable to common stockholders	49.6		(1.2)		341.5		54.8
Net income (loss) from discontinued operations	0.7		(17.3)		4.5		(148.2)
Net income (loss) attributable to common stockholders	$	50.3	$	(18.5)	$	346.0	$	(93.4)
Earnings per common share:
Earnings from continuing operations per common share - basic	$	0.06	$	—	$	0.42	$	0.07
Earnings from continuing operations per common share - diluted	0.06		—		0.42		0.07
Losses from discontinued operations - basic	—		(0.02)		—		(0.19)
Losses from discontinued operations - diluted	—		(0.02)		—		(0.19)
Earnings (losses) per common share - basic	0.06		(0.02)		0.42		(0.12)
Earnings (losses) per common share - diluted	0.06		(0.02)		0.42		(0.12)
Weighted-average common shares outstanding:
Basic	838.4		765.4		814.8		764.6
Diluted	852.9		765.4		827.5		932.1

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,
	2022		2021		2022		2021
Net income (loss)	$	55.0	$	12.7	$	547.6	$	(14.6)
Other comprehensive income (loss):
Foreign currency translation adjustment	35.4		(107.1)		(215.4)		22.0
Net unrealized derivative gain (loss) on cash flow hedges, net of taxes of $(0.8) and $(2.4), and $(4.2) and $(7.2) during the three and nine months ended, respectively	4.6		7.8		14.5		23.2
Pension and other post-employment benefits adjustment, net of tax of $(0.6) and $0.2, and $(0.6) and $4.5 during the three and nine months ended, respectively	(0.2)		(0.4)		2.1		(15.1)
Total other comprehensive income (loss), net of tax	39.8		(99.7)		(198.8)		30.1
Comprehensive income (loss)	94.8		(87.0)		348.8		15.5
Comprehensive income attributable to noncontrolling interests:
Net loss	(0.9)		(9.4)		(2.3)		(11.5)
Foreign currency translation adjustment	(0.1)		(0.2)		(0.4)		(0.1)
Total comprehensive loss attributable to noncontrolling interests	(1.0)		(9.6)		(2.7)		(11.6)
Comprehensive income attributable to redeemable noncontrolling interests:
Net income	2.3		6.5		8.9		12.2
Comprehensive income (loss) attributable to Coty Inc.	$	93.5	$	(83.9)	$	342.6	$	14.9

See notes to Condensed Consolidated Financial Statements.

2

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

(Unaudited)

	March 31, 2022		June 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	668.6	$	253.5
Restricted cash	31.6		56.9
Trade receivables—less allowances of $38.8 and $47.7, respectively	479.2		348.0
Inventories	643.1		650.8
Prepaid expenses and other current assets	381.7		473.9
Total current assets	2,204.2		1,783.1
Property and equipment, net	740.3		918.1
Goodwill	4,025.2		4,118.1
Other intangible assets, net	4,139.2		4,463.0
Equity investments	1,038.9		1,276.2
Operating lease right-of-use assets	351.4		318.5
Deferred income taxes	709.4		758.5
Other noncurrent assets	60.5		55.9
TOTAL ASSETS	$	13,269.1	$	13,691.4
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,280.5	$	1,166.1
Accrued expenses and other current liabilities	1,226.0		1,096.0
Short-term debt and current portion of long-term debt	516.5		24.2
Current operating lease liabilities	68.5		75.7
Income and other taxes payable	104.7		53.4
Total current liabilities	3,196.2		2,415.4
Long-term debt, net	4,316.9		5,401.0
Long-term operating lease liabilities	307.3		269.3
Pension and other post-employment benefits	394.1		420.6
Deferred income taxes	713.6		674.9
Other noncurrent liabilities	333.8		327.6
Total liabilities	9,261.9		9,508.8
COMMITMENTS AND CONTINGENCIES (See Note 20)
CONVERTIBLE SERIES B PREFERRED STOCK, $0.01 par value; 1.0 shares authorized; 0.1 and 1.0 issued and 0.1 and 1.0 and outstanding, respectively, at March 31, 2022 and June 30, 2021	142.4		1,036.3
REDEEMABLE NONCONTROLLING INTERESTS	71.9		84.1
EQUITY:
Preferred Stock, $0.01 par value; 20.0 shares authorized, 1.5 issued and outstanding at March 31, 2022 and June 30, 2021	—		—
Class A Common Stock, $0.01 par value; 1,250.0 shares authorized, 905.5 and 832.3 issued and 839.2 and 766.0 outstanding, respectively, at March 31, 2022 and June 30, 2021	9.0		8.3
Additional paid-in capital	10,770.9		10,376.2
Accumulated deficit	(5,214.6)		(5,755.6)
Accumulated other comprehensive income	(520.3)		(321.9)
Treasury stock—at cost, shares: 66.3 at March 31, 2022 and at June 30, 2021	(1,446.3)		(1,446.3)
Total Coty Inc. stockholders’ equity	3,598.7		2,860.7
Noncontrolling interests	194.2		201.5
Total equity	3,792.9		3,062.2
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY	$	13,269.1	$	13,691.4

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, 2022

(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—July 1, 2021	1.5	$	—	832.3	$	8.3	$	10,376.2	$	(5,755.6)	$	(321.9)	66.3	$	(1,446.3)	$	2,860.7	$	201.5	$	3,062.2	$	84.1	$	1,036.3
Exercise of employee stock options and restricted stock units				51.0	—		—									—				—
Shares withheld for employee taxes							(4.2)									(4.2)				(4.2)
Share-based compensation expense							107.8									107.8				107.8
Equity Investment contribution for share-based compensation							1.6									1.6				1.6
Changes in dividends accrued							0.5									0.5				0.5
Conversion of Convertible Series B Preferred Stock					0.5		307.4									307.9				307.9				(307.9)
Reclassification to Mandatorily redeemable Convertible Series B Preferred Stock							—									—				—				(394.2)
Dividends Accrued - Convertible Series B Preferred Stock							(22.7)									(22.7)				(22.7)				22.7
Deemed Dividends - Conversion of Convertible Series B Preferred Stock							(6.7)									(6.7)				(6.7)				6.7
Deemed Dividends - Exchange Agreement							(93.6)									(93.6)				(93.6)				93.6
Dividends Paid - Convertible Series B Preferred Stock																—				—				(3.5)
Net income (loss)									226.0							226.0		(0.5)		225.5		3.4
Other comprehensive loss											(138.0)					(138.0)		(0.2)		(138.2)
Adjustment of redeemable noncontrolling interests to redemption value							4.1									4.1				4.1		(4.1)
BALANCE—September 30, 2021	1.5	$	—	883.3	$	8.8	$	10,670.4	$	(5,529.6)	$	(459.9)	66.3	$	(1,446.3)	$	3,243.4	$	200.8	$	3,444.2	$	83.4	$	453.7
Exercise of employee stock options and restricted stock units				(48.2)												—				—
Shares withheld for employee taxes							(7.1)									(7.1)				(7.1)
Share-based compensation expense							26.9									26.9				26.9
Equity Investment contribution for share-based compensation							(3.0)									(3.0)				(3.0)
Changes in dividends accrued							0.2									0.2				0.2
Conversion of Convertible Series B Preferred Stock				69.9	0.2		121.4									121.6				121.6				(121.6)
Exchange Transaction																—				—				(212.7)
Dividends Accrued - Convertible Series B Preferred Stock							(5.9)									(5.9)				(5.9)				5.9
Deemed Dividends - Conversion of Convertible Series B Preferred Stock							(0.8)									(0.8)				(0.8)				0.8
Deemed Dividends - Redemption of Convertible Series B Preferred Stock							(66.4)									(66.4)				(66.4)				66.4
Deemed Contributions - Convertible Series B Preferred Stock							4.4									4.4				4.4				(4.4)
Dividends Paid - Convertible Series B Preferred Stock																—				—				(45.7)
Net income (loss)									261.4							261.4		(0.9)		260.5		3.2
Other comprehensive income											(100.3)					(100.3)		(0.1)		(100.4)

4

	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
Distribution to noncontrolling interests, net																—		(2.7)		(2.7)		(5.8)
Adjustment of redeemable noncontrolling interests to redemption value							(2.9)									(2.9)				(2.9)		2.9
BALANCE—December 31, 2021	1.5	$	—	905.0	$	9.0	$	10,737.2	$	(5,268.2)	$	(560.2)	66.3	$	(1,446.3)	$	3,471.5	$	197.1	$	3,668.6	$	83.7	$	142.4
Exercise of employee stock options and restricted stock units				0.5	—		—									—				—
Shares withheld for employee taxes							(0.7)									(0.7)				(0.7)
Share-based compensation expense							29.1									29.1				29.1
Equity Investment contribution for share-based compensation							1.0									1.0				1.0
Changes in dividends accrued							0.1									0.1				0.1
Dividends Accrued - Convertible Series B Preferred Stock							(3.3)									(3.3)				(3.3)				3.3
Dividends Paid - Convertible Series B Preferred Stock							—									—				—				(3.3)
Net income (loss)									53.6							53.6		(0.9)		52.7		2.3
Other comprehensive income											39.9					39.9		(0.1)		39.8
Distribution to noncontrolling interests, net																—		(1.9)		(1.9)		(6.6)
Adjustment of redeemable noncontrolling interests to redemption value							7.5									7.5				7.5		(7.5)
BALANCE—March 31, 2022	1.5	$	—	905.5	$	9.0	$	10,770.9	$	(5,214.6)	$	(520.3)	66.3	$	(1,446.3)	$	3,598.7	$	194.2	$	3,792.9	$	71.9	$	142.4

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, 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