QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
FOR THE QUARTERLY PERIOD ENDED | ||||||||
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 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| |||||||||||
(Address of principal executive offices) | (Zip Code) |
☒ | 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. ¨ |
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
Page | ||||||||
Three Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Net revenues | $ | $ | |||||||||
Cost of sales | |||||||||||
Gross profit | |||||||||||
Selling, general and administrative expenses | |||||||||||
Amortization expense | |||||||||||
Restructuring costs | ( | ||||||||||
Acquisition- and divestiture-related costs | |||||||||||
Operating income | |||||||||||
Interest expense, net | |||||||||||
Other income, net | ( | ( | |||||||||
Income from continuing operations before income taxes | |||||||||||
Provision for income taxes on continuing operations | |||||||||||
Net income from continuing operations | |||||||||||
Net income | |||||||||||
Net income (loss) attributable to noncontrolling interests | ( | ||||||||||
Net income attributable to redeemable noncontrolling interests | |||||||||||
Net income attributable to Coty Inc. | $ | $ | |||||||||
Amounts attributable to Coty Inc. | |||||||||||
Net income from continuing operations | |||||||||||
Convertible Series B Preferred Stock dividends | ( | ( | |||||||||
Net income from continuing operations attributable to common stockholders | |||||||||||
Net income attributable to common stockholders | $ | $ | |||||||||
Earnings per common share: | |||||||||||
Earnings from continuing operations per common share - basic | $ | $ | |||||||||
Earnings from continuing operations per common share - diluted | |||||||||||
Earnings per common share - basic | |||||||||||
Earnings per common share - diluted | |||||||||||
Weighted-average common shares outstanding: | |||||||||||
Basic | |||||||||||
Diluted |
Three Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Net income | $ | $ | |||||||||
Other comprehensive income (loss): | |||||||||||
Foreign currency translation adjustment | ( | ( | |||||||||
Net unrealized derivative gain (loss) on cash flow hedges, net of taxes of $( | |||||||||||
Pension and other post-employment benefits adjustment, net of tax of $ | ( | ||||||||||
Total other comprehensive (loss) income, net of tax | ( | ( | |||||||||
Comprehensive (loss) income | ( | ||||||||||
Comprehensive income attributable to noncontrolling interests: | |||||||||||
Net income (loss) | ( | ||||||||||
Foreign currency translation adjustment | ( | ||||||||||
Total comprehensive income (loss) attributable to noncontrolling interests | ( | ||||||||||
Comprehensive income attributable to redeemable noncontrolling interests: | |||||||||||
Net income | |||||||||||
Foreign currency translation adjustment | ( | ||||||||||
Total comprehensive income attributable to noncontrolling interests | |||||||||||
Comprehensive (loss) income attributable to Coty Inc. | $ | ( | $ |
September 30, 2022 | June 30, 2022 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Trade receivables—less allowances of $ | |||||||||||
Inventories | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Property and equipment, net | |||||||||||
Goodwill | |||||||||||
Other intangible assets, net | |||||||||||
Equity investments | |||||||||||
Operating lease right-of-use assets | |||||||||||
Deferred income taxes | |||||||||||
Other noncurrent assets | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses and other current liabilities | |||||||||||
Short-term debt and current portion of long-term debt | |||||||||||
Current operating lease liabilities | |||||||||||
Income and other taxes payable | |||||||||||
Total current liabilities | |||||||||||
Long-term debt, net | |||||||||||
Long-term operating lease liabilities | |||||||||||
Pension and other post-employment benefits | |||||||||||
Deferred income taxes | |||||||||||
Other noncurrent liabilities | |||||||||||
Total liabilities | |||||||||||
COMMITMENTS AND CONTINGENCIES (See Note 18) | |||||||||||
CONVERTIBLE SERIES B PREFERRED STOCK, $ | |||||||||||
REDEEMABLE NONCONTROLLING INTERESTS | |||||||||||
EQUITY: | |||||||||||
Preferred Stock, $ | |||||||||||
Class A Common Stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock—at cost, shares: | ( | ( | |||||||||
Total Coty Inc. stockholders’ equity | |||||||||||
Noncontrolling interests | |||||||||||
Total equity | |||||||||||
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY | $ | $ |
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, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reacquired Class A Common Stock for employee taxes | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of employee stock options and restricted stock units | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares withheld for employee taxes | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends accrued- Convertible Series B Preferred Stock | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid - Convertible Series B Preferred Stock | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) income | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | ( | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment of redeemable noncontrolling interests to redemption value | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity investment contribution for share-based compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE—September 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of employee stock options and restricted stock units | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares withheld for employee taxes | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Investment contribution for share-based compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in dividends accrued | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of Convertible Series B Preferred Stock | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification to Mandatorily redeemable Convertible Series B Preferred Stock | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends Accrued - Convertible Series B Preferred Stock | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deemed Dividends - Conversion of Convertible Series B Preferred Stock | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deemed Dividends - Exchange Agreement | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends Paid - Convertible Series B Preferred Stock | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment of redeemable noncontrolling interests to redemption value | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE—September 30, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Non-cash lease expense | |||||||||||
Deferred income taxes | |||||||||||
(Releases) provision for bad debts | ( | ||||||||||
Provision for pension and other post-employment benefits | |||||||||||
Share-based compensation | |||||||||||
Losses on disposals of long-term assets, net | |||||||||||
Realized and unrealized gains from equity investments, net | ( | ( | |||||||||
Foreign exchange effects | ( | ||||||||||
Unrealized losses on forward repurchase contracts, net | |||||||||||
Other | |||||||||||
Change in operating assets and liabilities | |||||||||||
Trade receivables | ( | ( | |||||||||
Inventories | ( | ( | |||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Accounts payable | |||||||||||
Accrued expenses and other current liabilities | |||||||||||
Operating lease liabilities | ( | ( | |||||||||
Income and other taxes payable | |||||||||||
Other noncurrent assets | ( | ||||||||||
Other noncurrent liabilities | ( | ( | |||||||||
Net cash provided by operating activities | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Capital expenditures | ( | ( | |||||||||
Net cash used in investing activities | ( | ( | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Proceeds from revolving loan facilities | |||||||||||
Repayments of revolving loan facilities | ( | ( | |||||||||
Repayments of term loans and other long-term debt | ( | ( | |||||||||
Dividend payments on Class A Common Stock and Class B Preferred Stock | ( | ( | |||||||||
Net payments of foreign currency contracts | ( | ( | |||||||||
Purchase of remaining mandatorily redeemable noncontrolling interest | ( | ||||||||||
Payment of deferred financing fees | ( | ||||||||||
All other | ( | ( | |||||||||
Net cash used in financing activities | ( | ( | |||||||||
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ( | |||||||||
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period | |||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period | $ | $ | |||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | |||||||||||
Cash paid during the period for interest | $ | $ | |||||||||
Net cash payments for income taxes | |||||||||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||
Accrued capital expenditure additions | $ | $ | |||||||||
Non-cash Series B Preferred Stock dividends and deemed dividends |
Three Months Ended September 30, | |||||||||||
SEGMENT DATA | 2022 | 2021 | |||||||||
Net revenues: | |||||||||||
Prestige | $ | $ | |||||||||
Consumer Beauty | |||||||||||
Total | $ | $ | |||||||||
Operating income (loss): | |||||||||||
Prestige | |||||||||||
Consumer Beauty | |||||||||||
Corporate | ( | ( | |||||||||
Total | $ | $ | |||||||||
Reconciliation: | |||||||||||
Operating income | |||||||||||
Interest expense, net | |||||||||||
Other income, net | ( | ( | |||||||||
Income from continuing operations before income taxes | $ | $ |
Three Months Ended September 30, | |||||||||||
PRODUCT CATEGORY | 2022 | 2021 | |||||||||
Fragrance | % | % | |||||||||
Color Cosmetics | |||||||||||
Body Care & Other | |||||||||||
Skincare | |||||||||||
Total | % | % |
Three Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Transformation Plan | $ | ( | $ | ||||||||
Total | $ | ( | $ |
Severance and Employee Benefits | Fixed Asset Write-offs | Other Exit Costs | Total | ||||||||||||||||||||
Fiscal 2020 | $ | $ | ( | $ | $ | ||||||||||||||||||
Fiscal 2021 | ( | ||||||||||||||||||||||
Fiscal 2022 | ( | ( | ( | ||||||||||||||||||||
Fiscal 2023 | ( | ( | |||||||||||||||||||||
Cumulative through September 30, 2022 | $ | $ | ( | $ | $ |
Severance and Employee Benefits | Total | ||||||||||
Balance—July 1, 2022 | $ | $ | |||||||||
Restructuring charges | |||||||||||
Payments | ( | ( | |||||||||
Changes in estimates | ( | ( | |||||||||
Effect of exchange rates | ( | ( | |||||||||
Balance—September 30, 2022 | $ | $ | |||||||||
September 30, 2022 | June 30, 2022 | ||||||||||
Raw materials | $ | $ | |||||||||
Work-in-process | |||||||||||
Finished goods | |||||||||||
Total inventories | $ | $ |
September 30, 2022 | June 30, 2022 | ||||||||||
Equity method investments: | |||||||||||
KKW Holdings (a) | $ | $ | |||||||||
Equity investments at fair value: | |||||||||||
Wella (b) | $ | ||||||||||
Total equity investments | $ | ||||||||||
Three Months Ended September 30, | ||||||||||||||
2022 | 2021 | |||||||||||||
Summarized Statements of Operations information: | ||||||||||||||
Net revenues | $ | $ | ||||||||||||
Gross profit | ||||||||||||||
Operating income | ||||||||||||||
Income before income taxes | ||||||||||||||
Net income | ||||||||||||||
Equity investments at fair value: | |||||
Balance as of June 30, 2022 | $ | ||||
Total gains included in earnings | |||||
Balance as of September 30, 2022 | $ |
Fair value | Valuation technique | Unobservable input | Range | ||||||||||||||||||||
Equity investments at fair value | $ | Discounted cash flows | Discount rate | ||||||||||||||||||||
Growth rate | |||||||||||||||||||||||
Market multiple | Revenue multiple | ||||||||||||||||||||||
EBITDA multiple |
Prestige | Consumer Beauty | Total | |||||||||||||||
Gross balance at June 30, 2022 | $ | $ | $ | ||||||||||||||
Accumulated impairments | ( | ( | ( | ||||||||||||||
Net balance at June 30, 2022 | $ | $ | $ | ||||||||||||||
Changes during the period ended September 30, 2022 | |||||||||||||||||
Foreign currency translation | ( | ( | ( | ||||||||||||||
Gross balance at September 30, 2022 | $ | $ | $ | ||||||||||||||
Accumulated impairments | ( | ( | ( | ||||||||||||||
Net balance at September 30, 2022 | $ | $ | $ |
September 30, 2022 | June 30, 2022 | ||||||||||
Indefinite-lived other intangible assets | $ | $ | |||||||||
Finite-lived other intangible assets, net | |||||||||||
Total Other intangible assets, net | $ | $ |
Trademarks | Total | ||||||||||
Gross balance at June 30, 2022 | $ | $ | |||||||||
Accumulated impairments | ( | ( | |||||||||
Net balance at June 30, 2022 | $ | $ | |||||||||
Changes during the period ended September 30, 2022 | |||||||||||
Foreign currency translation | ( | ( | |||||||||
Gross balance at September 30, 2022 | $ | $ | |||||||||
Accumulated impairments | ( | ( | |||||||||
Net balance at September 30, 2022 | $ | $ |
Cost | Accumulated Amortization | Accumulated Impairment | Net | ||||||||||||||||||||
June 30, 2022 | |||||||||||||||||||||||
License agreements and collaboration agreements | $ | $ | ( | $ | ( | $ | |||||||||||||||||
Customer relationships | ( | ( | |||||||||||||||||||||
Trademarks | ( | ( | |||||||||||||||||||||
Product formulations and technology | ( | ||||||||||||||||||||||
Total | $ | $ | ( | $ | ( | $ | |||||||||||||||||
September 30, 2022 | |||||||||||||||||||||||
License agreements and collaboration agreements | $ | $ | ( | $ | ( | $ | |||||||||||||||||
Customer relationships | ( | ( | |||||||||||||||||||||
Trademarks | ( | ( | |||||||||||||||||||||
Product formulations and technology | ( | ||||||||||||||||||||||
Total | $ | $ | ( | $ | ( | $ |
Three Months Ended September 30, | |||||||||||
Lease Cost: | 2022 | 2021 | |||||||||
Operating lease cost | $ | $ | |||||||||
Short-term lease cost | |||||||||||
Variable lease cost | |||||||||||
Sublease income | ( | ( | |||||||||
Net lease cost | $ | $ | |||||||||
Other information: | |||||||||||
Operating cash outflows from operating leases | $ | ( | $ | ( | |||||||
Right-of-use assets obtained in exchange for lease obligations | $ | $ | |||||||||
Weighted-average remaining lease term - real estate | |||||||||||
Weighted-average discount rate - real estate leases | % | % |
Fiscal Year Ending June 30, | |||||
2023, remaining | $ | ||||
2024 | |||||
2025 | |||||
2026 | |||||
2027 | |||||
Thereafter | |||||
Total future lease payments | |||||
Less: imputed interest | ( | ||||
Total present value of lease liabilities | |||||
Current operating lease liabilities | |||||
Long-term operating lease liabilities | |||||
Total operating lease liabilities | $ |
September 30, 2022 | June 30, 2022 | ||||||||||
Short-term debt | $ | $ | |||||||||
Senior Secured Notes | |||||||||||
2026 Dollar Senior Secured Notes due April 2026 | |||||||||||
2026 Euro Senior Secured Notes due April 2026 | |||||||||||
2029 Dollar Senior Secured Notes due January 2029 | |||||||||||
2018 Coty Credit Agreement | |||||||||||
2021 Coty Revolving Credit Facility due April 2025 | |||||||||||
2018 Coty Term B Facility due April 2025 | |||||||||||
Senior Unsecured Notes | |||||||||||
2026 Dollar Notes due April 2026 | |||||||||||
2026 Euro Notes due April 2026 | |||||||||||
Brazilian Credit Facilities | |||||||||||
Other long-term debt and capital lease obligations | |||||||||||
Total debt | |||||||||||
Less: Short-term debt and current portion of long-term debt | ( | ( | |||||||||
Total Long-term debt | |||||||||||
Less: Unamortized financing fees | ( | ( | |||||||||
Less: Discount on long-term debt | ( | ( | |||||||||
Total Long-term debt, net | $ | $ |
Price | |||||||||||||||||
For the period beginning | 2026 Dollar Senior Secured Notes | 2026 Euro Senior Secured Notes | 2029 Dollar Senior Secured Notes | ||||||||||||||
Year | April 15, | January 15, | |||||||||||||||
2023 | N/A | ||||||||||||||||
2024 | N/A | ||||||||||||||||
2025 | |||||||||||||||||
2026 | N/A | N/A | |||||||||||||||
2027 and thereafter | N/A | N/A |
Pricing Tier | Total Net Leverage Ratio: | LIBOR plus: | Alternative Base Rate Margin: | |||||||||||||||||
1.0 | Greater than or equal to | |||||||||||||||||||
2.0 | Less than | |||||||||||||||||||
3.0 | Less than | |||||||||||||||||||
4.0 | Less than | |||||||||||||||||||
5.0 | Less than | |||||||||||||||||||
6.0 | Less than |
Pricing Tier | Debt Ratings S&P/Moody’s: | LIBOR plus: | Alternative Base Rate Margin: | |||||||||||||||||
5.0 | Less than BB+/Ba1 | |||||||||||||||||||
4.0 | BB+/Ba1 | |||||||||||||||||||
3.0 | BBB-/Baa3 | |||||||||||||||||||
2.0 | BBB/Baa2 | |||||||||||||||||||
1.0 | BBB+/Baa1 or higher |
September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||
Senior Secured Notes | $ | $ | $ | $ | |||||||||||||||||||
2018 Coty Credit Agreement | |||||||||||||||||||||||
Senior Unsecured Notes | |||||||||||||||||||||||
Brazilian Credit Facilities |
Fiscal Year Ending June 30, | |||||
2023, remaining | $ | ||||
2024 | |||||
2025 | |||||
2026 | |||||
2027 | |||||
Thereafter | |||||
Total | $ |
Quarterly Test Period Ending | Total Net Leverage Ratio (a) | ||||
September 30, 2022 | |||||
December 31, 2022 | |||||
March 31, 2023 through April 5, 2025 |
Three Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Interest expense | $ | $ | |||||||||
Foreign exchange losses (gains), net of derivative contracts | ( | ||||||||||
Interest income | ( | ( | |||||||||
Total interest expense, net | $ | $ |
Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||
Pension Plans | Other Post- Employment Benefits | ||||||||||||||||||||||||||||||||||||||||||||||
U.S. | International | Total | |||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||
Service cost | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Interest cost | |||||||||||||||||||||||||||||||||||||||||||||||
Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Amortization of prior service credit | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Amortization of net loss | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Settlement loss recognized | |||||||||||||||||||||||||||||||||||||||||||||||
Net periodic benefit cost (credit) | $ | ( | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
Gain (Loss) Recognized in OCI | Three Months Ended September 30, | ||||||||||
2022 | 2021 | ||||||||||
Foreign exchange forward contracts | $ | $ | |||||||||
Interest rate swap contracts | ( | ||||||||||
Net investment hedges | ( |
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow Hedging Relationships | Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||||||||||||||
Net revenues | Cost of sales | Interest expense, net | Net revenues | Cost of sales | Interest expense, net | ||||||||||||||||||||||||||||||
Foreign exchange forward contracts: | |||||||||||||||||||||||||||||||||||
Amount of gain (loss) reclassified from AOCI into income | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||
Interest rate swap contracts: | |||||||||||||||||||||||||||||||||||
Amount of gain (loss) reclassified from AOCI into income | ( |
Condensed Consolidated Statements of Operations Classification of Gain (Loss) Recognized in Operations | Three Months Ended September 30, | |||||||||||||
2022 | 2021 | |||||||||||||
Foreign exchange contracts | Interest expense, net | ( | ||||||||||||
Foreign exchange and forward repurchase contracts | Other (expense) income, net | ( | ( |
Foreign Currency Translation Adjustments | |||||||||||||||||||||||||||||
Gain on Cash Flow Hedges | Gain (loss) on Net Investment Hedge | Other Foreign Currency Translation Adjustments | Pension and Other Post-Employment Benefit Plans (a) | Total | |||||||||||||||||||||||||
Balance—July 1, 2022 | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | ( | ( | ( | ( | |||||||||||||||||||||||||
Net amounts reclassified from AOCI/(L) | ( | ( | ( | ||||||||||||||||||||||||||
Net current-period other comprehensive income (loss) | ( | ( | ( | ( | |||||||||||||||||||||||||
Balance—September 30, 2022 | $ | $ | ( | $ | ( | $ | $ | ( |
Foreign Currency Translation Adjustments | |||||||||||||||||||||||||||||
Loss on Cash Flow Hedges | (Loss) gain on Net Investment Hedge | Other Foreign Currency Translation Adjustments | Pension and Other Post-Employment Benefit Plans | Total | |||||||||||||||||||||||||
Balance—July 1, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||||||||
Net amounts reclassified from AOCI/(L) | |||||||||||||||||||||||||||||
Net current-period other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||
Balance—September 30, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( |
Three Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Equity plan expense (a) | $ | $ | |||||||||
Liability plan (income) expense | ( | ||||||||||
Fringe expense | |||||||||||
Total share-based compensation expense | $ | $ |
Three Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Amounts attributable to Coty Inc.: | |||||||||||
Net income from continuing operations | $ | $ | |||||||||
Convertible Series B Preferred Stock dividends | ( | ( | |||||||||
Net income from continuing operations attributable to common stockholders | |||||||||||
Net income attributable to common stockholders | $ | $ | |||||||||
Weighted-average common shares outstanding: | |||||||||||
Weighted-average common shares outstanding—Basic | |||||||||||
Effect of dilutive stock options and Series A Preferred Stock (a) | |||||||||||
Effect of restricted stock and RSUs (b) | |||||||||||
Effect of Convertible Series B Preferred Stock (c) | |||||||||||
Effect of Forward Repurchase Contracts (d) | |||||||||||
Weighted-average common shares outstanding—Diluted | |||||||||||
Earnings per common share: | |||||||||||
Earnings from continuing operations per common share - basic | $ | $ | |||||||||
Earnings from continuing operations per common share - diluted (e) | |||||||||||
Earnings per common share - basic | |||||||||||
Earnings per common share - diluted (e) |
Assessment received | Type of assessment | Type of Tax | Tax period impacted | Estimated amount, including interest and penalties as of September 30, 2022 | ||||||||||
Mar-18 | State sales tax credits, which the Treasury Office of the State of Goiás considers as improperly registered | ICMS | 2016-2017 | R$ | ||||||||||
Aug-20 | ICMS | 2017-2019 | R$ | |||||||||||
Oct-20 | Federal excise taxes, which the Treasury Office of the Brazil’s Internal Revenue Service considers as improperly calculated | IPI | 2016-2017 | R$ | ||||||||||
Nov-20 | State sales taxes, which the Treasury Office of the State of Minas Gerais considers as improperly calculated | ICMS | 2016-2019 | R$ | ||||||||||
Jun-21 | State sales tax, which the Treasury Office of the State of Goiás considers as improperly calculated | ICMS | 2016-2020 | R$ |
Three Months Ended September 30, | |||||||||||||||||
(in millions) | 2022 | 2021 | Change % | ||||||||||||||
NET REVENUES | |||||||||||||||||
Prestige | $ | 863.4 | $ | 870.7 | (1) | % | |||||||||||
Consumer Beauty | 526.6 | 501.0 | 5 | % | |||||||||||||
Total | $ | 1,390.0 | $ | 1,371.7 | 1 | % |
Three Months Ended September 30, | |||||||||||||||||
(in millions) | 2022 | 2021 | Change % | ||||||||||||||
Operating income (loss) | |||||||||||||||||
Prestige | $ | 170.3 | $ | 132.1 | 29 | % | |||||||||||
Consumer Beauty | 32.0 | 11.4 | >100% | ||||||||||||||
Corporate | (30.4) | (126.3) | 76 | % | |||||||||||||
Total | $ | 171.9 | $ | 17.2 | >100% |
Three Months Ended September 30, 2022 | |||||||||||||||||
(in millions) | Reported (GAAP) | Adjustments (a) | Adjusted (Non-GAAP) | ||||||||||||||
Operating income (loss) | |||||||||||||||||
Prestige | $ | 170.3 | $ | 37.0 | $ | 207.3 | |||||||||||
Consumer Beauty | 32.0 | 10.3 | 42.3 | ||||||||||||||
Corporate | (30.4) | 30.4 | — | ||||||||||||||
Total | $ | 171.9 | $ | 77.7 | $ | 249.6 | |||||||||||
Three Months Ended September 30, 2021 | |||||||||||||||||
(in millions) | Reported (GAAP) | Adjustments (a) | Adjusted (Non-GAAP) | ||||||||||||||
Operating income (loss) | |||||||||||||||||
Prestige | $ | 132.1 | $ | 44.9 | $ | 177.0 | |||||||||||
Consumer Beauty | 11.4 | 12.1 | 23.5 | ||||||||||||||
Corporate | (126.3) | 126.3 | — | ||||||||||||||
Total | $ | 17.2 | $ | 183.3 | $ | 200.5 |
Three Months Ended September 30, | |||||||||||||||||
(in millions) | 2022 | 2021 | Change % | ||||||||||||||
Reported operating income | $ | 171.9 | $ | 17.2 | >100% | ||||||||||||
% of net revenues | 12.4 | % | 1.3 | % | |||||||||||||
Amortization expense | 47.3 | 57.0 | (17) | % | |||||||||||||
Restructuring and other business realignment costs | (0.8) | 15.1 | <(100%) | ||||||||||||||
Stock-based compensation | 31.1 | 108.2 | (71) | % | |||||||||||||
Costs related to acquisition and divestiture activities | — | 4.0 | (100) | % | |||||||||||||
Gain on sale of real estate | (1.0) | (1.0) | — | % | |||||||||||||
Costs related to market exit | 1.1 | — | N/A | ||||||||||||||
Total adjustments to reported operating income | $ | 77.7 | $ | 183.3 | (58) | % | |||||||||||
Adjusted operating income | $ | 249.6 | $ | 200.5 | 24 | % | |||||||||||
% of net revenues | 18.0 | % | 14.6 | % | |||||||||||||
Adjusted depreciation | 58.3 | 78.0 | (25) | % | |||||||||||||
Adjusted EBITDA | $ | 307.9 | $ | 278.5 | 11 | % | |||||||||||
% of net revenues | 22.2 | % | 20.3 | % |
Three Months Ended September 30, 2022 | Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||||
(in millions) | Income Before Income Taxes | Provision for Income Taxes | Effective Tax Rate | Income Before Income Taxes | Provision for Income Taxes | Effective Tax Rate | |||||||||||||||||||||||||||||
Reported income before income taxes | $ | 204.2 | $ | 69.7 | 34.1 | % | $ | 343.5 | $ | 114.6 | 33.4 | % | |||||||||||||||||||||||
Adjustments to reported operating income (a) | 77.7 | 183.3 | |||||||||||||||||||||||||||||||||
Change in fair value of investment in Wella Business (c) | (135.0) | (390.0) | |||||||||||||||||||||||||||||||||
Other adjustments (d) | 0.2 | 0.2 | |||||||||||||||||||||||||||||||||
Total Adjustments (b) | (57.1) | (26.2) | (206.5) | (74.8) | |||||||||||||||||||||||||||||||
Adjusted income before income taxes | $ | 147.1 | $ | 43.5 | 29.6 | % | $ | 137.0 | $ | 39.8 | 29.1 | % |
Three Months Ended September 30, | |||||||||||||||||
(in millions) | 2022 | 2021 | Change % | ||||||||||||||
Net income from Coty Inc. net of noncontrolling interests | $ | 128.6 | $ | 226.0 | (43) | % | |||||||||||
Convertible Series B Preferred Stock dividends (a) | (3.3) | (123.0) | 97 | % | |||||||||||||
Reported net income attributable to Coty Inc. | $ | 125.3 | $ | 103.0 | 22 | % | |||||||||||
% of net revenues | 9.0 | % | 7.5 | % | |||||||||||||
Adjustments to reported operating income (b) | 77.7 | 183.3 | (58) | % | |||||||||||||
Change in fair value of investment in Wella Company (c) | (135.0) | (390.0) | 65 | % | |||||||||||||
Adjustment to other expense (d) | 0.2 | 0.2 | — | % | |||||||||||||
Adjustments to noncontrolling interests (e) | (1.7) | (1.8) | 6 | % | |||||||||||||
Change in tax provision due to adjustments to reported net income attributable to Coty Inc. | 26.2 | 74.8 | (65) | % | |||||||||||||
Adjustment for deemed Series B Preferred Stock dividends related to the First and Second Exchanges (f) | — | 93.6 | (100) | % | |||||||||||||
Adjusted net income attributable to Coty Inc. | $ | 92.7 | $ | 63.1 | 47 | % | |||||||||||
% of net revenues | 6.7 | % | 4.6 | % | |||||||||||||
Per Share Data | |||||||||||||||||
Adjusted weighted-average common shares | |||||||||||||||||
Basic | 842.0 | 777.6 | |||||||||||||||
Diluted (a) | 858.5 | 787.7 | |||||||||||||||
Adjusted net income attributable to Coty Inc. per common share | |||||||||||||||||
Basic | $ | 0.11 | $ | 0.08 | |||||||||||||
Diluted (a) | $ | 0.11 | $ | 0.08 |
Three Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Condensed Consolidated Statements of Cash Flows Data: (in millions) | |||||||||||
Net cash provided by operating activities | $ | 163.2 | $ | 285.7 | |||||||
Net cash used in investing activities | (75.0) | (45.0) | |||||||||
Net cash used in financing activities | (87.8) | (122.7) |
Exhibit Number | Description | |||||||
101.INS | Inline XBRL Instance Document. | |||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document. | |||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). |
COTY INC. | |||||||||||
Date: November 8, 2022 | By: | /s/Sue Nabi | |||||||||
Name: Sue Nabi | |||||||||||
Title: Chief Executive Officer | |||||||||||
(Principal Executive Officer) | |||||||||||
/s/Laurent Mercier | |||||||||||
Name: Laurent Mercier | |||||||||||
Title: Chief Financial Officer | |||||||||||
(Principal Financial Officer) |
/s/Sue Nabi | ||||||||
Sue Nabi | ||||||||
Chief Executive Officer |
/s/Laurent Mercier | ||||||||
Laurent Mercier | ||||||||
Chief Financial Officer |
Date: November 8, 2022 | /s/ Sue Nabi | |||||||
Sue Nabi | ||||||||
Chief Executive Officer |
Date: November 8, 2022 | /s/Laurent Mercier | |||||||
Laurent Mercier | ||||||||
Chief Financial Officer |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parentheticals) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Statement of Comprehensive Income [Abstract] | ||
Change in derivative gains on cash flow hedges, tax expense (benefit) | $ (0.5) | $ (1.6) |
Pension and other post-employment benefits (losses), tax expense (benefit) | $ 0.8 | $ 0.0 |
DESCRIPTION OF BUSINESS |
3 Months Ended |
---|---|
Sep. 30, 2022 | |
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 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 2023” refer to the fiscal year ending June 30, 2023. 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.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended |
---|---|
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The unaudited interim Condensed Consolidated Financial Statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and include the Company’s consolidated domestic and international subsidiaries. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements and accompanying footnotes should be read in conjunction with the Company’s Consolidated Financial Statements as of and for the year ended June 30, 2022. In the opinion of management, all adjustments, of a normal recurring nature, considered necessary for a fair presentation have been included in the Condensed Consolidated Financial Statements. The results of operations for the three months ended September 30, 2022 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending June 30, 2023. All dollar amounts (other than per share amounts) in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated. Restricted Cash Restricted cash represents funds that are not readily available for general purpose cash needs due to contractual limitations. Restricted cash is classified as a current or long-term asset based on the timing and nature of when or how the cash is expected to be used or when the restrictions are expected to lapse. As of September 30, 2022 and June 30, 2022, the Company had restricted cash of $35.4 and $30.5, respectively, included in Restricted cash in the Condensed Consolidated Balance Sheets. The Restricted cash balance as of September 30, 2022 primarily provides collateral for certain bank guarantees on rent, customs and duty accounts and also consists of collections on factored receivables that remain unremitted to the factor as of September 30, 2022. Restricted cash is included as a component of Cash, cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows. Equity Investments The Company elected the fair value option to account for its investment in Rainbow JVCO LTD and subsidiaries (together, "Wella" or the “Wella Company”) to align with the Company’s strategy for this investment. The fair value is updated on a quarterly basis. The investment is classified within Level 3 in the fair value hierarchy because the Company estimates the fair value of the investment using a combination of the income approach, the market approach and private transactions, when applicable. Changes in the fair value of equity investment under the fair value option are recorded in Other income, net within the Condensed Consolidated Statements of Operations (see Note 7—Equity Investments). Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, the net realizable value of inventory, the fair value of acquired assets and liabilities associated with acquisitions, the fair value of equity investments, the assessment of goodwill, other intangible assets and long-lived assets for impairment and income taxes. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the Condensed Consolidated Financial Statements in future periods. Tax Information The effective income tax rate for the three months ended September 30, 2022 and 2021 was 34.1% and 33.4%, respectively. The change in the effective tax rate for the three months ended September 30, 2022, as compared with the three months ended September 30, 2021, is primarily due to larger fair value gains related to the investment in Wella recorded in the prior period. The effective income tax rates vary from the U.S. federal statutory rate of 21% due to the effect of (i) jurisdictions with different statutory rates, (ii) adjustments to the Company’s unrealized tax benefits (“UTBs”) and accrued interest, (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes. As of September 30, 2022 and June 30, 2022, the gross amount of UTBs was $250.9 and $251.6, respectively. As of September 30, 2022, the total amount of UTBs that, if recognized, would impact the effective income tax rate is $169.8. As of September 30, 2022 and June 30, 2022, the liability associated with UTBs, including accrued interest and penalties, was $197.4 and $191.8, respectively, which was recorded in Income and other taxes payable and Other noncurrent liabilities in the Condensed Consolidated Balance Sheets. The total interest and penalties recorded in the Condensed Consolidated Statements of Operations related to UTBs was $1.3 and $0.7 for the three months ended September 30, 2022 and 2021, respectively. The total gross accrued interest and penalties recorded in the Condensed Consolidated Balance Sheets as of September 30, 2022 and June 30, 2022 was $27.7 and $26.4, respectively. On the basis of the information available as of September 30, 2022, it is reasonably possible that a decrease of up to $13.5 in UTBs may occur within twelve months as a result of projected resolutions of global tax examinations and a potential lapse of the applicable statutes of limitations. Recently Adopted Accounting Pronouncements In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments, which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease on the commencement date of the lease if specified criteria are met. The Company adopted this guidance in the first quarter of fiscal year 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. Recently Issued Accounting Pronouncements The FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting in March 2020 and ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope in January 2021. The new guidance under these ASUs provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. As of September 30, 2022, the Company has not applied any of the optional expedients or exceptions allowed under these ASUs. The Company does not believe that these ASUs will have a material impact on its consolidated financial position, results of operations or cash flows.
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SEGMENT REPORTING |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING | SEGMENT REPORTINGOperating and reportable segments (referred to as “segments”) reflect the way the Company is managed and for which separate financial information is available and evaluated regularly by the Company's chief operating decision maker ("CODM") in deciding how to allocate resources and assess performance. The Company has designated its Chief Executive Officer ("CEO") as the CODM. Certain income and shared costs and the results of corporate initiatives are managed by Corporate. Corporate primarily includes stock compensation expense, restructuring and realignment costs, costs related to acquisition and divestiture activities, and impairments of long-lived assets, goodwill and intangibles that are not attributable to ongoing operating activities of the segments. Corporate costs are not used by the CODM to measure the underlying performance of the segments. With the exception of goodwill, the Company does not identify or monitor assets by segment. The Company does not present assets by reportable segment since various assets are shared between reportable segments. The allocation of goodwill by segment is presented in Note 8—Goodwill and Other Intangible Assets, net.
Presented below are the percentage of revenues associated with the Company’s product categories:
|
ACQUISITION AND DIVESTITURE-RELATED COSTS |
3 Months Ended |
---|---|
Sep. 30, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
ACQUISITION AND DIVESTITURE-RELATED COSTS | ACQUISITION- AND DIVESTITURE-RELATED COSTS Acquisition-related costs, which are expensed as incurred, represent non-restructuring costs directly related to acquiring and integrating an entity, for both completed and contemplated acquisitions and can include finder’s fees, legal, accounting, valuation, other professional or consulting fees, and other internal costs, which can include compensation related expenses for dedicated internal resources. The Company recognized no acquisition-related costs for the three months ended September 30, 2022 and 2021. Divestiture-related costs, which are expensed as incurred, represent non-restructuring costs directly related to divesting and selling an entity, including partial sales, for both completed and contemplated divestitures. These costs can include legal, accounting, information technology, other professional or consulting fees and other internal costs. Internal costs can include compensation related expenses for dedicated internal resources. Additionally, for divestitures, the Company includes write-offs of assets that are no longer recoverable and contract related costs due to the divestiture. The Company recognized divestiture-related costs of $0.0 and $4.0 for the three months ended September 30, 2022 and 2021, respectively. Divestiture-related costs incurred during the three months ended September 30, 2021 were primarily related to the strategic transaction with Rainbow UK Bidco Limited (“KKR Bidco”) (an affiliate of funds and/or separately managed accounts (“KKR Funds”) advised and/or managed by Kohlberg Kravis Roberts & Co. L.P. and its affiliates (“KKR”)), for the sale of a majority stake in Coty’s Professional and Retail Hair businesses, including the Wella, Clairol, OPI and ghd brands, (together, the “Wella Business”).
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RESTRUCTURING COSTS |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESTRUCTURING COSTS | RESTRUCTURING COSTS Restructuring costs for the three months ended September 30, 2022 and 2021 are presented below:
Transformation Plan In connection with the four-year plan announced on July 1, 2019 to drive substantial improvement and optimization in the Company's businesses (the “Turnaround Plan”), the Company has and expects to continue to incur restructuring and related costs. On May 11, 2020, the Company announced an expansion of the Turnaround Plan to further reduce fixed costs, (the “Transformation Plan”). Of the expected costs, the Company has incurred cumulative restructuring charges of $222.1 related to approved initiatives through September 30, 2022, which have been recorded in Corporate. Over the next fiscal year, the Company expects to incur approximately $8.0 of additional restructuring charges pertaining to the approved actions, primarily related to employee termination benefits. The following table presents aggregate restructuring charges for the program:
The related liability balance and activity of restructuring costs for the Transformation Plan restructuring costs are presented below:
The Company currently estimates that the total remaining accrual of $29.7 will result in cash expenditures of approximately $27.8, $1.7 and $0.2 in fiscal 2023, 2024 and thereafter, respectively.
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INVENTORIES |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES | INVENTORIESInventories as of September 30, 2022 and June 30, 2022 are presented below:
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EQUITY INVESTMENTS |
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Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY INVESTMENTS | EQUITY INVESTMENTS The Company's equity investments, classified as Equity investments in the Condensed Consolidated Balance Sheets are represented by the following:
(a)On January 4, 2021, the Company completed its purchase of 20% of the outstanding equity of KKW Holdings. The Company accounts for this minority investment under the equity method, given it has the ability to exercise significant influence over, but not control, the investee. The carrying value of the Company’s investment includes basis differences allocated to amortizable intangible assets. During the three months ended September 30, 2022 and 2021, the Company recognized $(0.9) and $(0.6), respectively, representing its share of the investee’s net loss in Other income, net within the Condensed Consolidated Statements of Operations. (b)On November 30, 2020, the Company completed the previously announced strategic transaction with KKR for the sale of a 60% stake in Coty’s Wella Business. As of September 30, 2022 and June 30, 2022, the Company's stake in Wella was 25.9%. On October 20, 2021, the Company completed the sale of a 9.4% stake in Wella to an affiliate of KKR, KKR Rainbow Aggregator L.P. ("KKR Aggregator”) in exchange for the redemption of 290,465 shares of KKR Aggregator's Series B Convertible Preferred Stock shares in Coty and a portion of unpaid dividends (the "First Exchange"). On November 30, 2021, Coty completed the sale of an additional 4.7% stake in Wella to KKR Aggregator in exchange for the redemption of KKR Aggregator's remaining convertible preferred shares in Coty (the "Second Exchange"), reducing the Company’s total shareholding in Wella to 25.9%. Refer to Note 14—Equity and Convertible Preferred Stock. On March 3, 2022, Wella approved an interim distribution to its shareholders. As part of the transaction, Wella refinanced its third party debt and used $210.7 of such funds to make a distribution to the Company, which the Company has accounted for as a return of capital. In addition, on June 16, 2022, Wella approved an additional distribution to its shareholders. As part of the transaction, Wella made a distribution of $19.9 to the Company, which the Company has accounted for as a return of capital. In May 2022, the Wella Company divested its Russian operations. The impact of the divestiture was included for valuation purposes. For the three months ended September 30, 2022, the impact of the Briogeo acquisition was included for valuation purposes. The following table presents summarized financial information of the Company’s equity method investees for the period ending September 30, 2022. Amounts presented represent combined totals at the investee level and not the Company’s proportionate share:
The following table summarizes movements in equity investments with fair value option that are classified within Level 3 for the period ended September 30, 2022. There were no internal movements to or from Level 3 and Level 1 or Level 2 for the period ended September 30, 2022.
Level 3 significant unobservable inputs sensitivity The following table summarizes the significant unobservable inputs used in Level 3 valuation of the Company's investments carried at fair value as of September 30, 2022. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.
(a)The primary unobservable inputs used in the fair value measurement of the Company's equity investments with fair value option, when using a discounted cash flow method, are the discount rate and revenue growth rate. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. The Company estimates the discount rate based on the investees' projected cost of equity and debt. The revenue growth rate is forecasted for future years by the investee based on their best estimates. Significant increases (decreases) in the revenue growth rate in isolation would result in a significantly higher (lower) fair value measurement. (b)The primary unobservable inputs used in the fair value measurement of the Company's equity investments with fair value option, when using a market multiple method, are the revenue multiple and EBITDA multiple. Significant increases (decreases) in the revenue multiple or EBITDA multiple in isolation would result in a significantly higher (lower) fair value measurement. The market multiples are derived from a group of guideline public companies.
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GOODWILL AND OTHER INTANGIBLE ASSETS, NET |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS, NET | GOODWILL AND OTHER INTANGIBLE ASSETS, NET Goodwill Goodwill as of September 30, 2022 and June 30, 2022 is presented below:
Other Intangible Assets, net Other intangible assets, net as of September 30, 2022 and June 30, 2022 are presented below:
The changes in the carrying amount of indefinite-lived other intangible assets are presented below:
Intangible assets subject to amortization are presented below:
Amortization expense was $47.3 and $57.0 for the three months ended September 30, 2022 and 2021, respectively.
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LEASES |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES | LEASES The Company leases office facilities under non-cancelable operating leases with terms generally ranging between 5 and 25 years. The Company utilizes these leased office facilities for use by its employees in countries in which the Company conducts its business. Leases are negotiated with third parties and, in some instances contain renewal, expansion and termination options. The Company also subleases certain office facilities to third parties when the Company no longer intends to utilize the space. None of the Company’s leases restricts the payment of dividends or the incurrence of debt or additional lease obligations, or contain significant purchase options. The following chart provides additional information about the Company’s operating leases:
Future minimum lease payments for the Company’s operating leases are as follows:
Table excludes obligations for leases with original terms of twelve months or less, which have not been recognized as ROU assets or liabilities in the Condensed Consolidated Balance Sheets.
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT The Company’s debt balances consisted of the following as of September 30, 2022 and June 30, 2022, respectively:
Short-Term Debt The Company maintains short-term lines of credit and other short-term debt with financial institutions around the world. As of September 30, 2022, total short-term debt remained constant at nil from June 30, 2022. In addition, the Company had undrawn letters of credit of $13.6 and $14.3, and bank guarantees of $16.1 and $17.2 as of September 30, 2022 and June 30, 2022, respectively. Long-Term Debt Senior Secured Notes On November 30, 2021, the Company issued an aggregate principal amount of $500.0 of 4.75% senior secured notes due 2029 ("2029 Dollar Senior Secured Notes"). Coty received gross proceeds of $500.0 in connection with the offering of the 2029 Dollar Senior Secured Notes. On June 16, 2021, the Company issued an aggregate principal amount of €700.0 million of 3.875% senior secured notes due 2026 (the “2026 Euro Senior Secured Notes”) in a private offering. Coty received gross proceeds of €700.0 million in connection with the offering of the 2026 Euro Senior Secured Notes. On April 21, 2021, the Company issued an aggregate principal amount of $900.0 of 5.00% senior secured notes due 2026 (the “2026 Dollar Senior Secured Notes” and, together with the 2026 Euro Senior Secured Notes and 2029 Dollar Senior Secured Notes, the “Senior Secured Notes”). Coty received gross proceeds of $900.0 in connection with the offering of the 2026 Dollar Senior Secured Notes. Coty used the gross proceeds of the offerings of the Senior Secured Notes to repay a portion of the term loans outstanding under the existing credit facilities and to pay related fees and expenses thereto. The Senior Secured Notes are senior secured obligations of Coty and are guaranteed on a senior secured basis by each of Coty’s wholly-owned domestic subsidiaries that guarantees Coty’s obligations under its existing senior secured credit facilities and are secured by first priority liens on the same collateral that secures Coty’s obligations under its existing senior secured credit facilities, as described below. The Senior Secured Notes and the guarantees are equal in right of payment with all of Coty’s and the guarantors’ respective existing and future senior indebtedness and are pari passu with all of Coty’s and the guarantors’ respective existing and future indebtedness that is secured by a first priority lien on the collateral, including the existing senior secured credit facilities, to the extent of the value of such collateral. Optional Redemption Applicable Premium The indentures governing the Senior Secured Notes specify the Applicable Premium (as defined in the respective indentures) to be paid upon early redemption of some or all of the Senior Secured Notes prior to, and on or after, April 15, 2023 for the 2026 Euro Senior Secured Notes and 2026 Dollar Senior Secured Notes, and January 15, 2025 for the 2029 Dollar Senior Secured Notes (the "Early Redemption Dates"). The Applicable Premium related to the respective Senior Secured Notes on any redemption date and as calculated by the Company is the greater of: (1)1.0% of the then outstanding principal amount of the respective Senior Secured Notes; and (2)the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of such respective Senior Secured Notes that would apply if such respective notes were redeemed on the respective Early Redemption Dates, (such redemption price is expressed as a percentage of the principal amount being set forth in the table appearing in the Redemption Pricing section below), plus (ii) all remaining scheduled payments of interest due on the respective Senior Secured Notes to and including the respective Early Redemption Dates, (excluding accrued but unpaid interest, if any, to, but excluding, the redemption date), with respect to each of subclause (i) and (ii), computed using a discount rate equal to the Treasury Rate in the case of the 2026 Dollar Senior Secured Notes and 2029 Dollar Senior Secured Notes, or Bund Rate in the case of the 2026 Euro Senior Secured Notes (both Treasury Rate and Bund Rate as defined in the respective indentures) as of such redemption date plus 50 basis points; over (b) the principal amount of the respective Senior Secured Notes. Redemption Pricing At any time and from time to time prior to the Early Redemption Dates, the Company may redeem some or all of the respective notes at redemption prices equal to 100% of the respective principal amounts being redeemed plus the Applicable Premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates. At any time on or after the Early Redemption Dates, the Company may redeem some or all of the respective notes at the redemption prices (expressed in percentage of principal amount) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates, if redeemed during the twelve-month period beginning on respective dates of each of the years indicated below:
2018 Coty Credit Agreement On April 5, 2018, the Company entered into a new credit agreement (the "2018 Coty Credit Agreement"), which amended and restated the prior Coty credit agreement. The 2018 Coty Credit Agreement provided for (a) the incurrence by the Company of (1) a senior secured term A facility in an aggregate principal amount of (i) $1,000.0 denominated in U.S. dollars and (ii) €2,035.0 million denominated in euros (the “2018 Coty Term A Facility”) and (2) a senior secured term B facility in an aggregate principal amount of (i) $1,400.0 denominated in U.S. dollars and (ii) €850.0 million denominated in euros (the “2018 Coty Term B Facility”) and (b) the incurrence by the Company and Coty B.V., a Dutch subsidiary of the Company (the “Dutch Borrower” and, together with the Company, the “Borrowers”), of a senior secured revolving facility in an aggregate principal amount of $3,250.0 denominated in U.S. dollars, specified alternative currencies or other currencies freely convertible into U.S. dollars and readily available in the London interbank market (the “2018 Coty Revolving Credit Facility”) (the 2018 Coty Term A Facility, together with the 2018 Coty Term B Facility and the 2018 Coty Revolving Credit Facility, the “2018 Coty Credit Facilities”). The 2018 Coty Credit Agreement provides that with respect to the 2018 Coty Revolving Credit Facility, up to $150.0 is available for letters of credit and up to $150.0 is available for swing line loans. The 2018 Coty Credit Agreement also permits, subject to certain terms and conditions, the incurrence of incremental facilities thereunder in an aggregate amount of (i) $1,700.0 plus (ii) an unlimited amount if the First Lien Net Leverage Ratio (as defined in the 2018 Coty Credit Agreement), at the time of incurrence of such incremental facilities and after giving effect thereto on a pro forma basis, is less than or equal to 3.00 to 1.00. The obligations of the Company under the 2018 Coty Credit Agreement are guaranteed by the material wholly-owned subsidiaries of the Company organized in the U.S., subject to certain exceptions (the “Guarantors”) and the obligations of the Company and the Guarantors under the 2018 Coty Credit Agreement are secured by a perfected first priority lien (subject to permitted liens) on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. The Dutch Borrower does not guarantee the obligations of the Company under the 2018 Coty Credit Agreement or grant any liens on its assets to secure any obligations under the 2018 Coty Credit Agreement. On June 27, 2019, the Company entered into an amendment (“2019 Amendment”) to the 2018 Coty Credit Agreement. The 2019 Amendment modified the 2018 Coty Credit Agreement by amending the financial covenants to (i) delay until March 31, 2022 the total net leverage ratio step down from 5.25 to 5.0 (as further described in the Covenants section below), (ii) extend the applicable window for certain cost savings add-backs in the calculation of Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) for purpose of determining the total net leverage ratio, and (iii) amend the determination of the exchange rate to be used for purposes of calculating “Total Indebtedness” (as defined in the 2018 Coty Credit Agreement) for purposes of the total net leverage ratio, and decreasing the total commitments under the revolving credit facility by $500.0 to $2,750.0. On November 30, 2020, the Company completed the strategic transaction with KKR for the sale of a majority stake in the Wella Business. As part of the transaction, Coty received initial cash proceeds of $2,451.7 for the sale of its 60% stake in the Wella Business and its pro rata share of Wella's return of capital distribution of $448.0, and retained a 40% stake in Wella. In accordance with the 2018 Coty Credit Agreement, as amended, the Company utilized $2,015.5 of the net proceeds to pay down its 2018 Coty Term A and B Facilities on a pro rata basis and reserved a maximum of $500.0 for reinvestment in the business, as defined in the 2018 Coty Credit Agreement, as amended, ("the Reinvestment Balance"). As a result of the prepayments, the outstanding balances of the 2018 Coty Term A and B Facilities were reduced by $1,135.7 and $879.8, respectively. On September 30, 2021, the Company entered into an amendment to the 2018 Coty Credit Agreement to permanently reduce the existing 2018 Coty Revolving Credit Facility by $700.0 and add a new class of incremental revolving facilities in an aggregate principal amount of $700.0 that matures on April 5, 2025 (the "September 2021 Coty Revolving Credit Facility"). On November 30, 2021, the Company entered into an amendment to the 2018 Coty Credit Agreement that established a new class of senior secured revolving credit facility of $2,000.0 maturing on April 5, 2025 (the "2021 Coty Revolving Credit Facility"), which refinanced and replaced the 2018 Coty Revolving Credit Facility due April 5, 2023 and the September 2021 Coty Revolving Credit Facility due April 5, 2025 (the "2021 Revolver Refinancing"). In connection with the November 30, 2021 amendment to the 2018 Coty Credit Agreement, the Company received consent from the participating banks to eliminate the requirements to utilize or repay the Reinvestment Balance. In October 2021 and January 2022, the Company completed the sale of certain real estate holdings, and in accordance with the 2018 Coty Credit Agreement, as amended, the Company utilized the proceeds from the sale to pay down a portion of the outstanding balances of the 2018 Coty Term A Facility and 2018 Coty Term B Facility. As a result of the October 2021 prepayments, the outstanding principal balances of the 2018 Coty Term A Facility and the U.S. dollar portion of the 2018 Coty Term B Facility were reduced by €6.2 million (approximately $7.2) and $91.9, respectively. As a result of the January 2022 prepayments, the outstanding principal balances of the euro and U.S. dollar portions of the 2018 Coty Term B Facility were reduced by €13.9 million (approximately $15.7) and $22.3, respectively. Senior Unsecured Notes On April 5, 2018 the Company issued, at par, $550.0 of 6.50% senior unsecured notes due 2026 (the “2026 Dollar Notes”), €550.0 million of 4.00% senior unsecured notes due 2023 (the “2023 Euro Notes”) and €250.0 million of 4.75% senior unsecured notes due 2026 (the “2026 Euro Notes” and, together with the 2023 Euro Notes, the “Euro Notes,” and the Euro Notes together with the 2026 Dollar Notes, the “Senior Unsecured Notes”) in a private offering. The Senior Unsecured Notes are senior unsecured debt obligations of the Company and will be pari passu in right of payment with all of the Company’s existing and future senior indebtedness (including the 2018 Coty Credit Facilities). The Senior Unsecured Notes are guaranteed, jointly and severally, on a senior basis by the Guarantors. The Senior Unsecured Notes are senior unsecured obligations of the Company and are effectively junior to all existing and future secured indebtedness of the Company to the extent of the value of the collateral securing such secured indebtedness. The related guarantees are senior unsecured obligations of each Guarantor and are effectively junior to all existing and future secured indebtedness of such Guarantor to the extent of the value of the collateral securing such indebtedness. The 2026 Dollar and Euro Notes will mature on April 15, 2026. The 2026 Dollar Notes will bear interest at a rate of 6.50% per annum. The 2026 Euro Notes will bear interest at a rate of 4.75% per annum. Interest on the 2026 Dollar and Euro Notes is payable semi-annually in arrears on April 15 and October 15 of each year. The Company redeemed the 2023 Euro Notes on April 15, 2022. Upon the occurrence of certain change of control triggering events with respect to a series of Senior Unsecured Notes, the Company will be required to offer to repurchase all or part of the Senior Unsecured Notes of such series at 101% of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date applicable to such Senior Unsecured Notes. The Senior Unsecured Notes contain customary covenants that place restrictions in certain circumstances on, among other things, incurrence of liens, entry into sale or leaseback transactions, sales of all or substantially all of the Company’s assets and certain merger or consolidation transactions. The Senior Unsecured Notes also provide for customary events of default. Deferred Financing Costs and Write-offs During the three months ended September 30, 2021, the Company capitalized original issue debt discounts of $7.0 and deferred issuance fees of $0.1, and wrote off unamortized deferred issuance fees of $0.6, which were recorded in Other income, net in the Condensed Consolidated Statement of Operations. Scheduled Amortization The Company makes quarterly payments of 0.25%, of the initial aggregate principal amounts of the 2018 Coty Term B Facility. The remaining balance of the initial aggregate principal amount of the 2018 Coty Term B Facility will be payable on the maturity date of the facility. Interest The 2018 Coty Credit Agreement facilities will bear interest at rates equal to, at the Company’s option, either: (1)LIBOR of the applicable qualified currency, of which the Company can elect the applicable one, two, three, six or twelve month rate, plus the applicable margin; or (2)Alternate base rate (“ABR”) plus the applicable margin. In the case of the 2021 Coty Revolving Credit Facility, the applicable margin means the lesser of a percentage per annum to be determined in accordance with the leverage-based pricing grid and the debt rating-based grid below:
In the case of the U.S. dollar portion of the 2018 Coty Term B Facility, the applicable margin means 2.25% per annum, in the case of LIBOR loans, and 1.25% per annum, in the case of ABR loans. In the case of the Euro portion of the 2018 Coty Term B Facility, the applicable margin means 2.50% per annum, in the case of EURIBOR loans. In no event will LIBOR be deemed to be less than 0.00% per annum. Fair Value of Debt
The Company uses the market approach to value its debt instruments. The Company obtains fair values from independent pricing services or utilizes the USD LIBOR curve to determine the fair value of these debt instruments. Based on the assumptions used to value these liabilities at fair value, these debt instruments are categorized as Level 2 in the fair value hierarchy. Debt Maturities Schedule Aggregate maturities of the Company’s long-term debt, including the current portion of long-term debt and excluding capital lease obligations as of September 30, 2022, are presented below:
Covenants The 2018 Coty Credit Agreement contains affirmative and negative covenants. The negative covenants include, among other things, limitations on debt, liens, dispositions, investments, fundamental changes, restricted payments and affiliate transactions. With certain exceptions as described below, the 2018 Coty Credit Agreement, as amended, includes a financial covenant that requires us to maintain a Total Net Leverage Ratio (as defined below), equal to or less than the ratios shown below for each respective test period.
(a) Total Net Leverage Ratio means, as of any date of determination, the ratio of: (a) (i) Total Indebtedness minus (ii) unrestricted and Cash Equivalents of the Parent Borrower and its Restricted Subsidiaries as determined in accordance with GAAP to (b) Adjusted EBITDA for the most recently ended Test Period (each of the defined terms, including Adjusted EBITDA, used within the definition of Total Net Leverage Ratio have the meanings ascribed to them within the 2018 Coty Credit Agreement, as amended). Adjusted EBITDA, as defined in the 2018 Coty Credit Agreement, as amended, includes certain add backs related to cost savings, unusual events such as COVID-19, operating expense reductions and future unrealized synergies subject to certain limits and conditions as specified in the 2018 Coty Credit Agreement, as amended. In the four fiscal quarters following the closing of any Material Acquisition (as defined in the 2018 Coty Credit Agreement, as amended), including the fiscal quarter in which such Material Acquisition occurs, the maximum Total Net Leverage Ratio shall be the lesser of (i) 5.95 to 1.00 and (ii) 1.00 higher than the otherwise applicable maximum Total Net Leverage Ratio for such quarter (as set forth in the table above). Immediately after any such four fiscal quarter period, there shall be at least two consecutive fiscal quarters during which the Company's Total Net Leverage Ratio is no greater than the maximum Total Net Leverage Ratio that would otherwise have been required in the absence of such Material Acquisition, regardless of whether any additional Material Acquisitions are consummated during such period. As of September 30, 2022, the Company was in compliance with all covenants contained within the 2018 Coty Credit Agreement, as amended.
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INTEREST EXPENSE, NET | INTEREST EXPENSE, NET Interest expense, net for the three months ended September 30, 2022 and 2021, respectively, is presented below:
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Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANSThe components of net periodic benefit cost for pension plans and other post-employment benefit plans recognized in the Condensed Consolidated Statements of Operations are presented below:
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DERIVATIVE INSTRUMENTS |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS Foreign Exchange Risk The Company is exposed to foreign currency exchange fluctuations through its global operations. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in foreign exchange rates by creating offsetting positions through the use of derivative instruments and also by designating foreign currency denominated borrowings and cross-currency swaps as hedges of net investments in foreign subsidiaries. The Company expects that through hedging, any gain or loss on the derivative instruments would generally offset the expected increase or decrease in the value of the underlying forecasted transactions. In September 2019, the Company entered into cross-currency swap contracts in the notional amount of $550.0 and designated these cross-currency swaps as hedges of its net investment in certain foreign subsidiaries. In September 2020, the Company terminated its existing net investment cross currency swap derivatives in exchange for cash payment of $37.6. The related loss from this termination is included in accumulated other comprehensive income (loss) (“AOCI/(L)”) until the sale or substantial liquidation of the underlying net investments. As of September 30, 2022 and June 30, 2022, the notional amount of the outstanding forward foreign exchange contracts designated as cash flow hedges were $25.5 and $30.0, respectively. The Company also uses certain derivatives not designated as hedging instruments consisting primarily of foreign currency forward contracts and cross currency swaps to hedge intercompany transactions and foreign currency denominated external debt. Although these derivatives were not designated for hedge accounting, the overall objective of mitigating foreign currency exposure is the same for all derivative instruments. For derivatives not designated as hedging instruments, changes in fair value are recorded in the line item in the Consolidated Statements of Operations to which the derivative relates. As of September 30, 2022 and June 30, 2022, the notional amounts of these outstanding non-designated foreign currency forward and cross currency forward contracts were $2,645.5 and $2,403.8, respectively. Interest Rate Risk The Company is exposed to interest rate fluctuations related to its variable rate debt instruments. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in the variable interest rates by entering into offsetting positions through the use of derivative instruments, such as interest rate swap contracts. The interest rate swap contracts result in recognizing a fixed interest rate for the portion of the Company’s variable rate debt that was hedged. This will reduce the negative and positive impact of increases in the variable rates over the term of the contracts. Hedge effectiveness of interest rate swap contracts is based on a long-haul hypothetical derivative methodology and includes all changes in value. As of September 30, 2022 and June 30, 2022, the Company had interest rate swap contracts designated as effective hedges in the notional amount of $800.0. These interest rate swaps are designated and qualify as cash flow hedges and were highly effective. Net Investment Hedge Foreign currency gains and losses on borrowings designated as a net investment hedge, except ineffective portions, are reported in the cumulative translation adjustment (“CTA”) component of AOCI/(L), along with the foreign currency translation adjustments on those investments. As of September 30, 2022 and June 30, 2022, the nominal exposures of foreign currency denominated borrowings designated as net investment hedges were €484.4 million and €289.0 million, respectively. The designated hedge amounts were considered highly effective. Forward Repurchase Contracts In June 2022, the Company entered into certain forward repurchase contracts to start hedging for a potential $200.0 share buyback program in 2024. These forward repurchase contracts are accounted for at fair value, with changes in the fair value recorded in Other expense (income), net in the Consolidated Statements of Operations. Refer to Note 14—Equity and Convertible Preferred Stock. Derivative and non-derivative financial instruments which are designated as hedging instruments: The accumulated gain on foreign currency borrowings classified as net investment hedges in the foreign currency translation adjustment component of AOCI/(L) was $36.4 and $41.7 as of September 30, 2022 and June 30, 2022, respectively. The accumulated loss on derivative instruments classified as net investment hedges in the foreign currency translation adjustment component of AOCI/(L) was $(37.6) as of September 30, 2022 and June 30, 2022. The amount of gains and losses recognized in Other comprehensive income (loss) (“OCI”) in the Condensed Consolidated Balance Sheets related to the Company’s derivative and non-derivative financial instruments which are designated as hedging instruments is presented below:
The accumulated gain on derivative instruments classified as cash flow hedges in AOCI/(L), net of tax, was $5.2 and $4.3 as of September 30, 2022 and June 30, 2022, respectively. The estimated net gain related to these effective hedges that is expected to be reclassified from AOCI/(L) into earnings, net of tax, within the next twelve months is $6.8. As of September 30, 2022, all of the Company's remaining foreign currency forward contracts designated as hedges were highly effective. The amount of gains and losses reclassified from AOCI/(L) to the Condensed Consolidated Statements of Operations related to the Company’s derivative financial instruments which are designated as hedging instruments is presented below:
Derivatives not designated as hedging: The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments is presented below:
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EQUITY AND CONVERTIBLE PREFERRED STOCK |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY AND CONVERTIBLE PREFERRED STOCK | EQUITY AND CONVERTIBLE PREFERRED STOCK Common Stock As of September 30, 2022, the Company’s common stock consisted of Class A Common Stock with a par value of $0.01 per share. The holders of Class A Common Stock are entitled to one vote per share. As of September 30, 2022, total authorized shares of Class A Common Stock was 1,250.0 million and total outstanding shares of Class A Common Stock was 849.3 million. As of September 30, 2022, the Company’s largest stockholder was Cottage Holdco B.V., which owned approximately 53% of Coty’s outstanding Class A Common Stock. Cottage Holdco B.V., a wholly-owned subsidiary of JAB Cosmetics B.V. (“JABC”), is indirectly controlled by Lucresca SE, Agnaten SE and JAB Holdings B.V. (“JAB”). The Company’s CEO, Sue Nabi, was granted a one-time sign-on award of restricted stock units (the “Award”) on June 30, 2021. On October 29, 2021, Cottage Holdco B.V. completed the transfer of 10.0 million shares of Common Stock to Ms. Nabi in connection with her sign-on award of restricted stock units. See Note 15—Share-Based Compensation Plans for additional information. Series A and A-1 Preferred Stock As of September 30, 2022, total authorized shares of preferred stock are 20.0 million. There are two classes of Preferred Stock, Series A Preferred Stock and Series A-1 Preferred Stock, both with a par value of $0.01 per share. As of September 30, 2022, there were 1.5 million shares of Series A and no shares of Series A-1 Preferred Stock authorized, issued and outstanding. Series A Preferred Stock and Series A-1 Preferred Stock are not entitled to receive any dividends and have no voting rights except as required by law. As of September 30, 2022, the Company has $0.2 Series A Preferred Stock classified as a liability recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheet. Convertible Series B Preferred Stock On May 11, 2020, the Company entered into an Investment Agreement with KKR Aggregator, relating to the issuance and sale by the Company to KKR Aggregator of up to 1,000,000 shares of the Company’s new Convertible Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), for an aggregate purchase price of up to $1,000.0, or $1,000 per share (the “Issuance”). The Issuance was proposed to be issued in two tranches: (i) an initial issuance of 750,000 shares of Series B Preferred Stock (the “Initial Issuance”) and (ii) a subsequent issuance of 250,000 shares of Series B Preferred Stock (the “Second Issuance”), which was subject to the execution and delivery of a definitive purchase agreement between the Company and KKR Aggregator or certain of its affiliates in respect of the Wella Business. On May 26, 2020 (the “Closing Date”), the Company and KKR Aggregator completed the issuance and sale of 750,000 shares of Series B Preferred Stock for an aggregate purchase price of $750.0. On July 31, 2020, the Company completed the sale of 250,000 shares of the Company’s Series B Preferred Stock to KKR Aggregator for an aggregate purchase price of $250.0. On November 16, 2020, KKR Aggregator and affiliated investment funds agreed to sell 146,057 shares of Series B Preferred Stock, to HFS Holdings S.à r.l, that is beneficially owned by Peter Harf, a director of the Company. The transaction, which was subject to customary closing conditions, closed on August 27, 2021. On September 10, 2021, KKR Aggregator converted 285,576 shares of Series B Preferred Stock, and $26.4 of unpaid dividends into 50,000,088 shares of Class A common stock. Immediately after the conversion, KKR Aggregator completed the public secondary offering of 50,000,088 shares of Class A common stock. The Company did not receive any proceeds from the sale of the shares of Class A Common Stock by KKR Aggregator. As a result of the conversion, the Company measured the accrued dividends at fair value, which resulted in an increase of $6.7. Such adjustment is considered a deemed dividend for purposes of calculating basic and diluted EPS. On September 30, 2021, the Company entered into a definitive agreement to sell a 9.4% stake in Wella to KKR Aggregator in exchange for the redemption of 290,465 shares of Series B Preferred Stock and $22.5 of unpaid dividends, as previously defined as the First Exchange. As a result, the Series B Preferred Stock, net of issuance costs, and related accrued dividends were reclassified from temporary equity to a liability as Mandatorily redeemable Convertible Series B Preferred Stock as of September 30, 2021. Upon reclassification, the Company measured the Series B Preferred Stock and accrued dividends at fair value, which resulted in an increase of $93.6. The excess in fair value is considered a deemed dividend for purposes of calculating basic and diluted EPS. The First Exchange was completed on October 20, 2021. Upon closing, the Company re-measured the Series B Preferred Stock and accrued dividends at fair value, which resulted in a decrease of $6.5. Such adjustment is considered a gain on extinguishment and is included in Other (income) expense, net in the Consolidated Statements of Operations. A key input in determining the fair value of the liability was based on the Company's share price as of the measurement date. As this liability is not actively traded, it is classified as a Level 2 fair value measurements. Upon closing of the First Exchange, the Company recognized a non-monetary loss of $2.9 and is included in Other income, net in the Consolidated Statements of Operations. See Note 7—Equity Investments for additional information. On November 10, 2021, KKR Aggregator converted 123,219 shares of Series B Preferred Stock, and $1.2 of unpaid dividends into 19,944,701 shares of Class A common stock. Immediately after the conversion, KKR Aggregator completed a sale of 19,944,701 shares of Class A common stock. The Company did not receive any proceeds from the sale of the shares of Class A Common Stock by KKR Aggregator. As a result of the conversion, the Company measured the accrued dividends at fair value, which resulted in an increase of $0.8. Such adjustment is considered a deemed dividend for purposes of calculating basic and diluted EPS. On November 6, 2021, the Company entered into a definitive agreement to sell an additional 4.7% stake in Wella to KKR Aggregator in exchange for the redemption or conversion of 154,683 shares of Series B Preferred Stock, as previously defined as the Second Exchange. The Second Exchange closed on November 30, 2021. Upon closing, the Company recognized $66.4 in excess of the fair value of the consideration transferred in exchange for the redemption of the Series B Preferred Stock. The excess in fair value is considered a deemed dividend for purposes of calculating basic and diluted EPS. As of December 31, 2021, KKR has fully redeemed/exchanged all of their Series B Preferred Stock. See Note 7—Equity Investments for additional information. In October 2021, the Company paid the remaining accrued dividends on the Series B Preferred Stock that were outstanding as of June 30, 2021, totaling $25.1. As a result, $4.4 of previously recorded fair value adjustments for unpaid dividends were reversed through additional paid-in capital (“APIC”) and is considered a deemed contribution. Cumulative preferred dividends accrue daily on the Series B Preferred Stock at a rate of 9.0% per year. During the three months ended September 30, 2022 and 2021, the Board of Directors declared dividends on the Series B Preferred Stock of $3.3 and $22.7, respectively, of which $0.0 and $3.5, respectively, were paid. Additionally, the Company paid previously accrued dividends that were outstanding as of June 30, 2022, totaling $3.3. As of September 30, 2022 and June 30, 2022, the Series B Preferred Stock had outstanding accrued dividends of $3.3 and $3.3, respectively. Treasury Stock Share Repurchase Program Since February 2014, the Board has authorized the Company to repurchase its Class A Common Stock under approved repurchase programs. On February 3, 2016, the Board authorized the Company to repurchase up to $500.0 of its Class A Common Stock (the “Incremental Repurchase Program”). Repurchases may be made from time to time at the Company’s discretion, based on ongoing assessments of the capital needs of the business, the market price of its Class A Common Stock, and general market conditions. For the three months ended September 30, 2022, the Company did not repurchase any shares of its Class A Common Stock under the Incremental Repurchase Program. As of September 30, 2022, the Company had authority for $396.8 remaining under the Incremental Repurchase Program. In June 2022, the Company entered into forward repurchase contracts (the “Forward” and together the “Forwards”) with three large financial institutions (“Counterparties”) to start hedging for a potential $200.0 share buyback program in 2024. In connection with the Forward transactions, the Company incurred certain execution fees of $2.0, which was recognized as a premium to the forward price recorded at inception and amortized ratably over the contract period. As part of the Forward agreements, the Company will pay interest on the outstanding underlying notional amount of the Forwards held by the Counterparties during the contract period. The interest rates are variable, based on the United States secured overnight funding rate (“SOFR”) plus a spread. The weighted average interest rate plus applicable spread was 6.8% as of September 30, 2022. The Forward agreements with two of the Counterparties, which purchased approximately 13.7 million and 6.2 million shares of the Company’s Class A Common Stock during June and July 2022, require the Company to: (i) repurchase the shares on or before June 6, 2024 at a price based on the weighted average of the daily volume weighted average price (“VWAP”) during the initial acquisition period (“Initial Price”); or (ii) at the Company’s option, pay or receive the difference between the Final Price, defined as the weighted average of the daily VWAP during the unwind period as defined in the agreement, and Initial Price of the Forwards. Simultaneously, the remaining Counterparty purchased approximately 7.1 million shares of the Company’s Class A Common Stock during June 2022. This Forward requires the Company to pay or receive the difference between the Final Price and Initial Price established at inception of the Forward on or before June 6, 2024. In addition, the Forwards include a provision for a potential true-up in cash upon specified changes in the price of the Company’s Class A Common Stock relative to the Initial Price (“Hedge Valuation Adjustment”). Such Hedge Valuation Adjustment shall not result in a termination date or any adjustment of the number of Coty’s Class A Common Stock shares purchased by the Counterparties at inception. In the event the Company declares and pays any cash dividends on its Class A Common Stock, the Forward Counterparties will be entitled to such dividend payments and payable at termination of the Forwards. Since the Forwards permit a net cash settlement alternative in addition to the physical settlement, the Company accounted for the Forwards initially and subsequently at their fair value, with changes in the fair value recorded in Other income, net in the Consolidated Statement of Operations. Dividends On April 29, 2020, the Board of Directors suspended the payment of dividends. During fiscal 2020, prior to the Board’s decision to suspend the payment of dividends, the Company maintained a Stock Dividend Reinvestment Program and had registered a total of 19.3 million shares of Class A Common Stock for purchase under the program. All holders of records of Class A Common Stock had the opportunity to participate in the program; if a holder elected to participate in the program fifty percent (50%) of their cash dividends were reinvested in additional shares of Class A Common Stock. For the three months ended September 30, 2022, the Company made a payment of $0.4, of which $0.1 related to employee taxes, for the previously accrued dividends on RSUs that vested during the three months ended September 30, 2022 Total accrued dividends on unvested RSUs and phantom units of $1.3 and $0.2 are included in Accrued expenses and other current liabilities and Other noncurrent liabilities, respectively, in the Condensed Consolidated Balance Sheet as of September 30, 2022. Accumulated Other Comprehensive Income (Loss)
(a) For the three months ended September 30, 2022, other comprehensive loss before reclassifications of $2.5 and net amounts reclassified from AOCI/(L) related to pensions and other post-employment benefit plans included amortization of prior service credits and actuarial losses of $1.5, net of tax of $0.8.
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SHARE-BASED COMPENSATION PLANS |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION PLANS | SHARE-BASED COMPENSATION PLANS Share-based compensation expense is recognized on a straight-line basis over the requisite service period. Total share-based compensation is shown in the table below:
(a) Equity plan share-based compensation expense of $31.4 and $107.8 were recorded to additional paid in capital and presented in the Condensed Consolidated Statements of Equity for the three months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, the total unrecognized share-based compensation expense related to stock options, Series A Preferred Stock, restricted stock, and restricted stock units and other share awards is $1.9, $0.0, $2.6 and $124.5, respectively. The unrecognized share-based compensation expense related to stock options, Series A Preferred stock, restricted stock, and restricted stock units and other share awards is expected to be recognized over a weighted-average period of 0.92, 0.00, 1.17 and 1.09 years, respectively. Restricted Stock Units and Other Share Awards The Company granted no shares of RSUs and other share awards during the three months ended September 30, 2022. The Company recognized share-based compensation expense of $30.7 and $106.9 for the three months ended September 30, 2022 and 2021, respectively, of which $23.5 and $100.8, respectively, related to Ms. Nabi's award, as described below. The Company’s CEO, Sue Nabi, was granted a one-time sign-on award of restricted stock units (the “Award”) on June 30, 2021. The Award will vest and settle in 10,000,000 shares of the Company’s Class A Common Stock, par value $0.01 per share, on each of August 31, 2021, August 31, 2022 and August 31, 2023, subject to her continued employment through each such date. The Company will recognize the share-based compensation expense, on a straight-line basis over the vesting period, based on the fair value on the grant date. The amount of compensation cost recognized at each vesting date must at least equal the portion of the award legally vested. In connection with this Award, Cottage Holdco B.V., the Company’s largest stockholder and a wholly-owned subsidiary of JAB Holding Company S.à r.l., agreed, pursuant to an equity transfer agreement, to transfer to Ms. Nabi (either directly or through contributing to the Company) 10,000,000 shares of Class A Common Stock no later than sixty days following the first vesting date. On October 29, 2021, Cottage Holdco B.V. completed the transfer of 10,000,000 shares of Class A Common Stock to Ms. Nabi. If, however, Ms. Nabi is terminated without cause or due to death or disability on or following the first vesting date but prior to the second vesting date, the Company has agreed to issue to Cottage Holdco B.V. the number of shares of Class A Common Stock determined on pro-rata basis in accordance with the equity transfer agreement. In the event Ms. Nabi remains employed through the third vesting date, Cottage Holdco B.V. has agreed to transfer an additional 5,000,000 shares of Class A Common Stock to Ms. Nabi. On August 31, 2022, the Company issued 10,000,000 shares of Class A Common Stock to Ms. Nabi in connection with the second vesting of the Award. Restricted Stock The Company granted no shares of restricted stock, during the three months ended September 30, 2022. The Company recognized share-based compensation expense of $0.5 and $0.2 for the three months ended September 30, 2022 and 2021, respectively. Series A Preferred Stock and Series A-1 Preferred Stock The Company granted no shares of Series A Preferred Stock and no shares of Series A-1 Preferred Stock during the three months ended September 30, 2022. The Company recognized share-based compensation (income) expense of $(0.4) and $0.4 for the three months ended September 30, 2022 and 2021, respectively. Non-Qualified Stock Options The Company granted no non-qualified stock options during the three months ended September 30, 2022. The Company recognized share-based compensation expense of $0.3 and $0.8 for the three months ended September 30, 2022 and 2021, respectively.
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NET INCOME ATTRIBUTABLE TO COTY INC. PER COMMON SHARE |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NET INCOME ATTRIBUTABLE TO COTY INC. PER COMMON SHARE | NET INCOME ATTRIBUTABLE TO COTY INC. PER COMMON SHARE Reconciliation between the numerators and denominators of the basic and diluted income per share (“EPS”) computations is presented below:
(a) For the three months ended September 30, 2022 and 2021, outstanding stock options and Series A Preferred Stock with purchase or conversion rights to purchase 6.2 million and 11.4 million shares of Common Stock, respectively, were anti-dilutive and excluded from the computation of diluted EPS. (b) For the three months ended September 30, 2021, there were 5.0 million weighted average anti-dilutive RSUs excluded from the computation of diluted EPS. (c) For the three months ended September 30, 2021, 163.1 million weighted average dilutive shares of Convertible Series B Preferred Stock were excluded from the computation of diluted EPS as their inclusion would be anti-dilutive. (d) For the three months ended September 30, 2022, 3.1 million weighted average dilutive shares for the Forward Repurchase Contracts were excluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. (e) Diluted EPS is adjusted by the effect of dilutive securities, including awards under the Company's equity compensation plans, the convertible Series B Preferred Stock, and the Forward Repurchase Contracts. When calculating any potential dilutive effect of stock options, Series A Preferred Stock, restricted stock and RSUs, the Company uses the treasury method and the if-converted method for the Convertible Series B Preferred Stock and the Forward Repurchase Contracts. The treasury method typically does not adjust the net income attributable to Coty Inc., while the if-converted method requires an adjustment to reverse the impact of the preferred stock dividends of $3.3 and $123.0, and fair market value adjustments of $27.7 and $0.0, respectively, if dilutive, for the three months ended September 30, 2022 and 2021 on net income applicable to common stockholders during the period.
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MANDATORILY REDEEMABLE FINANCIAL INTERESTS AND REDEEMABLE NONCONTROLLING INTERESTS |
3 Months Ended |
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Sep. 30, 2022 | |
Noncontrolling Interest [Abstract] | |
MANDATORILY REDEEMABLE FINANCIAL INTERESTS AND REDEEMABLE NONCONTROLLING INTERESTS | MANDATORILY REDEEMABLE FINANCIAL INTERESTS AND REDEEMABLE NONCONTROLLING INTERESTS Mandatorily Redeemable Financial Interest United Arab Emirates subsidiary In July 2021, the Company purchased the remaining 25% noncontrolling interest of a certain subsidiary in the United Arab Emirates from the noncontrolling interest holder for $7.1, pursuant to the related U.A.E. Shareholders Agreement. The termination was effective on December 31, 2020 and immediately prior to the cash payment, the noncontrolling interest balance was recorded as a mandatorily redeemable financial instrument liability. Redeemable Noncontrolling Interests Subsidiary in the Middle East As of September 30, 2022, the noncontrolling interest holder in the Company’s subsidiary in the Middle East had a 25% ownership share. The Company adjusts the redeemable noncontrolling interests (“RNCI”) to redemption value at the end of each reporting period with changes recognized as adjustments to APIC. The Company recognized $69.3 and $69.8 as the RNCI balances as of September 30, 2022 and June 30, 2022, respectively.
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COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Legal Matters The Company is involved, from time to time, in various litigation, administrative and other legal proceedings, including regulatory actions, incidental or related to its business, including consumer class or collective actions, personal injury (including asbestos claims related to the Company’s talc-based cosmetic products), intellectual property, competition, compliance and advertising claims litigation and disputes, among others (collectively, “Legal Proceedings”). While the Company cannot predict any final outcomes relating thereto, management believes that the outcome of current Legal Proceedings will not have a material effect upon its business, prospects, financial condition, results of operations, cash flows or the trading price of the Company’s securities. However, management’s assessment of the Company’s current Legal Proceedings is ongoing, and could change in light of the discovery of additional facts with respect to Legal Proceedings not presently known to the Company, further legal analysis, or determinations by judges, arbitrators, juries or other finders of fact or deciders of law which are not in accord with management’s evaluation of the probable liability or outcome of such Legal Proceedings. From time to time, the Company is in discussions with regulators, including discussions initiated by the Company, about actual or potential violations of law in order to remediate or mitigate associated legal or compliance risks and liabilities or penalties. As the outcomes of such proceedings are unpredictable, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, prospects, financial condition, results of operations, cash flows or the trading price of its securities. Certain Litigation. A consolidated stockholder class and derivative action (the “Tender Offer Litigation”) concerning the tender offer by Cottage Holdco B.V. (the “Cottage Tender Offer”) and the Schedule 14D-9 is pending against certain current and former directors of the Company, JAB Holding Company S.à r.l., JAB Holdings B.V., JAB Cosmetics B.V., and Cottage Holdco B.V. in the Court of Chancery of the State of Delaware. The Company was named as a nominal defendant. The case, which was filed on May 6, 2019, was captioned Massachusetts Laborers’ Pension Fund v. Harf et al., Case No. 2019-0336-AGB. On June 14, 2019, plaintiffs in the consolidated action filed a Verified Amended Class Action and Derivative Complaint (“Amended Complaint”). After defendants responded to the Amended Complaint, on October 21, 2019, plaintiffs filed a Verified Second Amended Class Action and Derivative Complaint (the “Second Amended Complaint”), alleging that the directors and JAB Holding Company S.à r.l., JAB Holdings B.V., JAB Cosmetics B.V., and Cottage Holdco B.V. breached their fiduciary duties to the Company’s stockholders and breached the Stockholders Agreement. The Second Amended Complaint seeks, among other things, monetary relief. On November 21, 2019, the defendants moved to dismiss certain claims asserted in the Second Amended Complaint, and certain of the director defendants also answered the complaint. On May 7, 2020, plaintiffs stipulated to the dismissal without prejudice of JAB Holding Company S.à r.l. from the action. On August 17, 2020, the court denied the remaining motions to dismiss. As of October 17, 2022, the parties to the Tender Offer Litigation have reached an agreement in principle to resolve the matter, which is not expected to have a material impact on the Company’s financial results. A purported stockholder class action complaint, alleging violations of the U.S. securities laws in connection with the P&G beauty brands acquisition is pending against the Company as well as certain current and former officers of the Company in the U.S. District Court for the Southern District of New York. The case, which was filed on September 4, 2020, is captioned Crystal Garrett-Evans v. Coty Inc. et al., Case No. 1:20-cv-07277 (the “Evans Action”). On November 23, 2020, the court appointed the individual Susan Nock as lead plaintiff and the Rosen Firm as lead counsel. The plaintiff filed an amended complaint on January 22, 2021. The Amended Complaint asserts claims under the federal securities laws and seeks, among other things, monetary relief. On March 8, 2021, the Company filed a motion to dismiss the amended complaint, and on August 4, 2021, the court dismissed the amended complaint, holding that it failed to set forth a valid claim. There has been no appeal of the dismissal and the Evans Action has been concluded. A second purported stockholder class action and derivative complaint, alleging violations of the U.S. securities laws in connection with the P&G beauty brands acquisition and the Kylie Brands transaction as well as claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets by certain current and former officers and directors of the Company, is pending in the U.S. District Court for the Southern District of New York. The case, which was filed on November 17, 2020, is captioned Chris Lewis v. Becht et al., Case No. 1:20-cv-09685 (the “Lewis Action”). The Company was named as a nominal defendant. The plaintiff seeks, among other things, injunctive and/or monetary relief. This action was voluntarily stayed during the pendency of the motion to dismiss the Evans Action. Following the dismissal of the Evans Action, counsel for the plaintiff in the Lewis Action agreed to dismiss the case and the court has approved the dismissal of the action as of October 2021. At this time, the Company cannot reasonably estimate a range of loss, if any, not covered by available insurance, that may result given the current status of these lawsuits. Brazilian Tax Assessments The Company’s Brazilian subsidiaries receive tax assessments from local, state and federal tax authorities in Brazil from time to time. Current open tax assessments as of September 30, 2022 are:
All cases are currently in the administrative process. The Company is seeking favorable administrative decisions on the tax enforcement actions filed by the tax authorities for these assessments. The Company believes it has meritorious defenses and it has not recognized a loss for these assessments as the Company does not believe a loss is probable. Due to the fiscal environment in Brazil, the possibility of further tax assessments related to the same or similar matters cannot be ruled out.
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RELATED PARTY TRANSACTIONS |
3 Months Ended |
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Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS Relationship with KKR On September 10, 2021, KKR Aggregator converted a portion of its Series B Preferred Stock into Class A common stock of the Company and completed a secondary public offering of the converted shares of Class A common stock. Refer to Note 14—Equity and Convertible Preferred Stock. On October 20, 2021, the Company completed the sale of a 9.4% stake in Wella to KKR Aggregator in the First Exchange. On November 10, 2021, KKR Aggregator converted 123,219 shares of Series B Preferred Stock, and $1.2 of unpaid dividends into 19,944,701 shares of Class A common stock. Immediately after the conversion, KKR Aggregator completed a sale of 19,944,701 shares of Class A common stock. On November 30, 2021, Coty completed the sale of an additional 4.7% stake in Wella to KKR Aggregator in the Second Exchange, reducing the Company’s total shareholding in Wella to 25.9%. Refer to Note 14—Equity and Convertible Preferred Stock. Following the Second Exchange, KKR no longer holds any preferred stock of the Company and no longer has the right to designate any directors to the Company's Board of Directors. On December 22, 2021, the Company entered into an agreement with KKR Bidco related to post-closing adjustments to the purchase consideration for the Wella Business. As part of this agreement, the Company received future contingent proceeds of $34.0. Earning the contingent proceeds is based on the future recovery of certain tax credits of the Wella Company. During fiscal 2023 and 2022, certain recovery targets were achieved, and the Company recognized gains of $13.9 and $0.7, respectively, which are reported in Other income, net. The unearned portion of amounts advanced to the Company as of September 30, 2022 is $19.4 and is reflected in Other noncurrent liabilities in the Condensed Consolidated Balance Sheet. The Company also entered into agreements with KKR Bidco to provide management, consulting and financial services to KKR Bidco and its direct and indirect divisions, subsidiaries, parent entities and controlled affiliates (in assisting it in the management of its business). Amounts due to the Company pursuant to this arrangement as of September 30, 2022 is $1.9. Wella As of September 30, 2022, Coty owned 25.9% of the Wella Company as an equity investment and performs certain services to Wella. Refer to Note 7— Equity Investments. In connection with the sale of the Wella Business, the Company and Wella entered into a Transitional Services Agreement (“TSA”). Subject to the terms of this TSA, the Company will perform services for Wella in exchange for related service fees. Such services include billing and collecting from Wella customers, certain logistics and warehouse services, as well as other administrative and systems support. The Company and Wella have mutually agreed to end the contracted TSA services on January 31, 2022. The Company and Wella have also entered into other manufacturing and distribution arrangements to facilitate the Wella Business transition in the U.S. and Brazil. TSA fees and other fees earned were $0.8 and $2.1, respectively, for the three months ended September 30, 2022 and $33.2 and $1.5, respectively, for the three months ended September 30, 2021. The TSA fees are principally invoiced on a cost plus basis. The TSA fees and other fees were included in Selling, general and administrative expenses and Cost of sales, respectively, in the Company's Condensed Consolidated Statement of Operations. As of September 30, 2022, accounts receivable from and accounts payable to Wella of $71.5 and $3.0, respectively, were included in Prepaid expenses and other current assets and Accrued expenses and other current liabilities, respectively, in the Company's Condensed Consolidated Balance Sheets. Additionally, as of September 30, 2022, the Company has accrued $58.5 related to long-term payables due to Wella included in Other noncurrent liabilities in the Company's Condensed Consolidated Balance Sheet. In accordance with the separation agreement with Wella, Coty shall retain and be solely responsible for any amounts payable to former Coty employees transferred to Wella (“Wella employees”), who participated in the Coty Long-Term Incentive Plan. The Wella employees will continue to participate and vest on the current terms for the remaining vesting period after the separation. As such, Coty will continue to recognize the share-based compensation expense for Wella employees until the existing equity awards reach their vesting date. For the three months ended September 30, 2022 and 2021, Coty recorded $1.7 and $1.6, respectively, of share-based compensation expense related to Wella employees, which was presented as part of Other income, net in the Condensed Consolidated Statements of Operations. The Company has certain sublease arrangements with Wella after the sale. The Company reported sublease income from Wella of $2.4 for the three months ended September 30, 2022 and 2021.
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SUBSEQUENT EVENTS |
3 Months Ended |
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Sep. 30, 2022 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTSThe Company evaluated the effect of events and transactions subsequent to the condensed consolidated balance sheet date of September 30, 2022 through the date of issuance of the Condensed Consolidated Financial Statements and determined that no subsequent events have occurred that require recognition in the Condensed Consolidated Financial Statements or disclosure in the notes to the Condensed Consolidated Financial Statements. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
3 Months Ended |
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Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Fiscal Period | 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 2023” refer to the fiscal year ending June 30, 2023. |
Basis of Presentation | Basis of Presentation The unaudited interim Condensed Consolidated Financial Statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and include the Company’s consolidated domestic and international subsidiaries. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements and accompanying footnotes should be read in conjunction with the Company’s Consolidated Financial Statements as of and for the year ended June 30, 2022. In the opinion of management, all adjustments, of a normal recurring nature, considered necessary for a fair presentation have been included in the Condensed Consolidated Financial Statements. The results of operations for the three months ended September 30, 2022 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending June 30, 2023. All dollar amounts (other than per share amounts) in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.
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Restricted Cash | Restricted CashRestricted cash represents funds that are not readily available for general purpose cash needs due to contractual limitations. Restricted cash is classified as a current or long-term asset based on the timing and nature of when or how the cash is expected to be used or when the restrictions are expected to lapse.Restricted cash is included as a component of Cash, cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows. |
Equity Investments | Equity Investments The Company elected the fair value option to account for its investment in Rainbow JVCO LTD and subsidiaries (together, "Wella" or the “Wella Company”) to align with the Company’s strategy for this investment. The fair value is updated on a quarterly basis. The investment is classified within Level 3 in the fair value hierarchy because the Company estimates the fair value of the investment using a combination of the income approach, the market approach and private transactions, when applicable. Changes in the fair value of equity investment under the fair value option are recorded in Other income, net within the Condensed Consolidated Statements of Operations (see Note 7—Equity Investments).
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, the net realizable value of inventory, the fair value of acquired assets and liabilities associated with acquisitions, the fair value of equity investments, the assessment of goodwill, other intangible assets and long-lived assets for impairment and income taxes. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the Condensed Consolidated Financial Statements in future periods.
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Tax Information | Tax Information The effective income tax rate for the three months ended September 30, 2022 and 2021 was 34.1% and 33.4%, respectively. The change in the effective tax rate for the three months ended September 30, 2022, as compared with the three months ended September 30, 2021, is primarily due to larger fair value gains related to the investment in Wella recorded in the prior period. The effective income tax rates vary from the U.S. federal statutory rate of 21% due to the effect of (i) jurisdictions with different statutory rates, (ii) adjustments to the Company’s unrealized tax benefits (“UTBs”) and accrued interest, (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes.
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Recently Adopted Accounting Pronouncements and Recently Issued Accounting Pronouncements | Recently Adopted Accounting Pronouncements In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments, which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease on the commencement date of the lease if specified criteria are met. The Company adopted this guidance in the first quarter of fiscal year 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. Recently Issued Accounting Pronouncements The FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting in March 2020 and ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope in January 2021. The new guidance under these ASUs provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. As of September 30, 2022, the Company has not applied any of the optional expedients or exceptions allowed under these ASUs. The Company does not believe that these ASUs will have a material impact on its consolidated financial position, results of operations or cash flows.
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Derivative Instruments | Foreign Exchange Risk The Company is exposed to foreign currency exchange fluctuations through its global operations. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in foreign exchange rates by creating offsetting positions through the use of derivative instruments and also by designating foreign currency denominated borrowings and cross-currency swaps as hedges of net investments in foreign subsidiaries. The Company expects that through hedging, any gain or loss on the derivative instruments would generally offset the expected increase or decrease in the value of the underlying forecasted transactions. In September 2019, the Company entered into cross-currency swap contracts in the notional amount of $550.0 and designated these cross-currency swaps as hedges of its net investment in certain foreign subsidiaries. Interest Rate RiskThe Company is exposed to interest rate fluctuations related to its variable rate debt instruments. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in the variable interest rates by entering into offsetting positions through the use of derivative instruments, such as interest rate swap contracts. The interest rate swap contracts result in recognizing a fixed interest rate for the portion of the Company’s variable rate debt that was hedged. This will reduce the negative and positive impact of increases in the variable rates over the term of the contracts. Hedge effectiveness of interest rate swap contracts is based on a long-haul hypothetical derivative methodology and includes all changes in value.
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SEGMENT REPORTING (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reportable segments |
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Schedule of percentage of revenues associated with product categories | Presented below are the percentage of revenues associated with the Company’s product categories:
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RESTRUCTURING COSTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of restructuring costs | Restructuring costs for the three months ended September 30, 2022 and 2021 are presented below:
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Schedule of related liability balance and restructuring costs | The related liability balance and activity of restructuring costs for the Transformation Plan restructuring costs are presented below:
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INVENTORIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventory | Inventories as of September 30, 2022 and June 30, 2022 are presented below:
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EQUITY INVESTMENTS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of equity investments | The Company's equity investments, classified as Equity investments in the Condensed Consolidated Balance Sheets are represented by the following:
(a)On January 4, 2021, the Company completed its purchase of 20% of the outstanding equity of KKW Holdings. The Company accounts for this minority investment under the equity method, given it has the ability to exercise significant influence over, but not control, the investee. The carrying value of the Company’s investment includes basis differences allocated to amortizable intangible assets. During the three months ended September 30, 2022 and 2021, the Company recognized $(0.9) and $(0.6), respectively, representing its share of the investee’s net loss in Other income, net within the Condensed Consolidated Statements of Operations. (b)On November 30, 2020, the Company completed the previously announced strategic transaction with KKR for the sale of a 60% stake in Coty’s Wella Business. As of September 30, 2022 and June 30, 2022, the Company's stake in Wella was 25.9%. The following table presents summarized financial information of the Company’s equity method investees for the period ending September 30, 2022. Amounts presented represent combined totals at the investee level and not the Company’s proportionate share:
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Summary of movement in equity investments | The following table summarizes movements in equity investments with fair value option that are classified within Level 3 for the period ended September 30, 2022. There were no internal movements to or from Level 3 and Level 1 or Level 2 for the period ended September 30, 2022.
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Summary of significant unobservable inputs used in Level 3 valuation | The following table summarizes the significant unobservable inputs used in Level 3 valuation of the Company's investments carried at fair value as of September 30, 2022. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.
(a)The primary unobservable inputs used in the fair value measurement of the Company's equity investments with fair value option, when using a discounted cash flow method, are the discount rate and revenue growth rate. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. The Company estimates the discount rate based on the investees' projected cost of equity and debt. The revenue growth rate is forecasted for future years by the investee based on their best estimates. Significant increases (decreases) in the revenue growth rate in isolation would result in a significantly higher (lower) fair value measurement. (b)The primary unobservable inputs used in the fair value measurement of the Company's equity investments with fair value option, when using a market multiple method, are the revenue multiple and EBITDA multiple. Significant increases (decreases) in the revenue multiple or EBITDA multiple in isolation would result in a significantly higher (lower) fair value measurement. The market multiples are derived from a group of guideline public companies.
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GOODWILL AND OTHER INTANGIBLE ASSETS, NET (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of goodwill | Goodwill as of September 30, 2022 and June 30, 2022 is presented below:
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Schedule of indefinite-lived intangible assets | Other intangible assets, net as of September 30, 2022 and June 30, 2022 are presented below:
The changes in the carrying amount of indefinite-lived other intangible assets are presented below:
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Schedule of finite-lived intangible assets | Other intangible assets, net as of September 30, 2022 and June 30, 2022 are presented below:
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LEASES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of lease cost | The following chart provides additional information about the Company’s operating leases:
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Schedule of future minimum lease payments for operating leases | Future minimum lease payments for the Company’s operating leases are as follows:
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DEBT (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt | The Company’s debt balances consisted of the following as of September 30, 2022 and June 30, 2022, respectively:
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Schedule of debt instrument redemption | At any time on or after the Early Redemption Dates, the Company may redeem some or all of the respective notes at the redemption prices (expressed in percentage of principal amount) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates, if redeemed during the twelve-month period beginning on respective dates of each of the years indicated below:
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Summary total net leverage ratio requirement | In the case of the 2021 Coty Revolving Credit Facility, the applicable margin means the lesser of a percentage per annum to be determined in accordance with the leverage-based pricing grid and the debt rating-based grid below:
The 2018 Coty Credit Agreement contains affirmative and negative covenants. The negative covenants include, among other things, limitations on debt, liens, dispositions, investments, fundamental changes, restricted payments and affiliate transactions. With certain exceptions as described below, the 2018 Coty Credit Agreement, as amended, includes a financial covenant that requires us to maintain a Total Net Leverage Ratio (as defined below), equal to or less than the ratios shown below for each respective test period.
(a) Total Net Leverage Ratio means, as of any date of determination, the ratio of: (a) (i) Total Indebtedness minus (ii) unrestricted and Cash Equivalents of the Parent Borrower and its Restricted Subsidiaries as determined in accordance with GAAP to (b) Adjusted EBITDA for the most recently ended Test Period (each of the defined terms, including Adjusted EBITDA, used within the definition of Total Net Leverage Ratio have the meanings ascribed to them within the 2018 Coty Credit Agreement, as amended). Adjusted EBITDA, as defined in the 2018 Coty Credit Agreement, as amended, includes certain add backs related to cost savings, unusual events such as COVID-19, operating expense reductions and future unrealized synergies subject to certain limits and conditions as specified in the 2018 Coty Credit Agreement, as amended.
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Schedule of line of credit facilities | Fair Value of Debt
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Schedule of maturities of long-term debt | Aggregate maturities of the Company’s long-term debt, including the current portion of long-term debt and excluding capital lease obligations as of September 30, 2022, are presented below:
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INTEREST EXPENSE, NET (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest Income (Expense), Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of interest expense, net | Interest expense, net for the three months ended September 30, 2022 and 2021, respectively, is presented below:
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EMPLOYEE BENEFIT PLANS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of net benefit costs | The components of net periodic benefit cost for pension plans and other post-employment benefit plans recognized in the Condensed Consolidated Statements of Operations are presented below:
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DERIVATIVE INSTRUMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of amount of gains and losses recognized in Other comprehensive income (loss) | The amount of gains and losses recognized in Other comprehensive income (loss) (“OCI”) in the Condensed Consolidated Balance Sheets related to the Company’s derivative and non-derivative financial instruments which are designated as hedging instruments is presented below:
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Schedule of amount of gains and losses recognized in other comprehensive income (loss) | The amount of gains and losses recognized in Other comprehensive income (loss) (“OCI”) in the Condensed Consolidated Balance Sheets related to the Company’s derivative and non-derivative financial instruments which are designated as hedging instruments is presented below:
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Schedule of amount of gains and losses reclassified from AOCI(L) | The amount of gains and losses reclassified from AOCI/(L) to the Condensed Consolidated Statements of Operations related to the Company’s derivative financial instruments which are designated as hedging instruments is presented below:
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Schedule of derivatives not designated as hedging | The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments is presented below:
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EQUITY AND CONVERTIBLE PREFERRED STOCK (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accumulated other comprehensive income (loss) | Accumulated Other Comprehensive Income (Loss)
(a) For the three months ended September 30, 2022, other comprehensive loss before reclassifications of $2.5 and net amounts reclassified from AOCI/(L) related to pensions and other post-employment benefit plans included amortization of prior service credits and actuarial losses of $1.5, net of tax of $0.8.
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SHARE-BASED COMPENSATION PLANS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of share-based compensation expense | Share-based compensation expense is recognized on a straight-line basis over the requisite service period. Total share-based compensation is shown in the table below:
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NET INCOME ATTRIBUTABLE TO COTY INC. PER COMMON SHARE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of numerators and denominators of basic and diluted EPS computations | Reconciliation between the numerators and denominators of the basic and diluted income per share (“EPS”) computations is presented below:
(a) For the three months ended September 30, 2022 and 2021, outstanding stock options and Series A Preferred Stock with purchase or conversion rights to purchase 6.2 million and 11.4 million shares of Common Stock, respectively, were anti-dilutive and excluded from the computation of diluted EPS. (b) For the three months ended September 30, 2021, there were 5.0 million weighted average anti-dilutive RSUs excluded from the computation of diluted EPS. (c) For the three months ended September 30, 2021, 163.1 million weighted average dilutive shares of Convertible Series B Preferred Stock were excluded from the computation of diluted EPS as their inclusion would be anti-dilutive. (d) For the three months ended September 30, 2022, 3.1 million weighted average dilutive shares for the Forward Repurchase Contracts were excluded from the computation of diluted EPS as their inclusion would have been anti-dilutive. (e) Diluted EPS is adjusted by the effect of dilutive securities, including awards under the Company's equity compensation plans, the convertible Series B Preferred Stock, and the Forward Repurchase Contracts. When calculating any potential dilutive effect of stock options, Series A Preferred Stock, restricted stock and RSUs, the Company uses the treasury method and the if-converted method for the Convertible Series B Preferred Stock and the Forward Repurchase Contracts. The treasury method typically does not adjust the net income attributable to Coty Inc., while the if-converted method requires an adjustment to reverse the impact of the preferred stock dividends of $3.3 and $123.0, and fair market value adjustments of $27.7 and $0.0, respectively, if dilutive, for the three months ended September 30, 2022 and 2021 on net income applicable to common stockholders during the period.
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COMMITMENT AND CONTINGENCIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of income tax contingencies | The Company’s Brazilian subsidiaries receive tax assessments from local, state and federal tax authorities in Brazil from time to time. Current open tax assessments as of September 30, 2022 are:
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Jun. 30, 2022 |
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Accounting Policies [Abstract] | |||
Restricted cash | $ 35.4 | $ 30.5 | |
Effective income tax rate, percentage | 34.10% | 33.40% | |
Gross unrecognized tax benefits | $ 250.9 | 251.6 | |
Unrecognized tax benefits that would impact effective tax rate | 169.8 | ||
Unrecognized tax benefits, net | 197.4 | 191.8 | |
Interest and penalties expense | 1.3 | $ 0.7 | |
Gross accrued interest and penalties | 27.7 | $ 26.4 | |
Reasonably possible decrease in UTBs (up to) | $ 13.5 |
SEGMENT REPORTING - Reporting Segments (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Segment Reporting Information [Line Items] | ||
Net revenues | $ 1,390.0 | $ 1,371.7 |
Operating income | 171.9 | 17.2 |
Interest expense, net | 65.9 | 59.8 |
Other income, net | (98.2) | (386.1) |
Income from continuing operations before income taxes | 204.2 | 343.5 |
Operating Segments | Prestige | ||
Segment Reporting Information [Line Items] | ||
Net revenues | 863.4 | 870.7 |
Operating income | 170.3 | 132.1 |
Operating Segments | Consumer Beauty | ||
Segment Reporting Information [Line Items] | ||
Net revenues | 526.6 | 501.0 |
Operating income | 32.0 | 11.4 |
Operating Segments | Corporate | ||
Segment Reporting Information [Line Items] | ||
Operating income | $ (30.4) | $ (126.3) |
SEGMENT REPORTING - Reportable Segments, Revenue by Product Category (Details) - Product Concentration Risk - Sales Revenue |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Segment Reporting Information [Line Items] | ||
Percentage of consolidated revenues | 100.00% | 100.00% |
Fragrance | ||
Segment Reporting Information [Line Items] | ||
Percentage of consolidated revenues | 59.30% | 59.70% |
Color Cosmetics | ||
Segment Reporting Information [Line Items] | ||
Percentage of consolidated revenues | 27.70% | 28.40% |
Body Care & Other | ||
Segment Reporting Information [Line Items] | ||
Percentage of consolidated revenues | 7.70% | 6.60% |
Skincare | ||
Segment Reporting Information [Line Items] | ||
Percentage of consolidated revenues | 5.30% | 5.30% |
ACQUISITION AND DIVESTITURE-RELATED COSTS (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
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Business Combination and Asset Acquisition [Abstract] | ||
Acquisition- and divestiture-related costs | $ 0 | $ 0 |
Divestiture-related costs | $ 0.0 | $ 4,000,000.0 |
RESTRUCTURING COSTS - Restructuring Costs by Program (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2020 |
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Restructuring Cost and Reserve [Line Items] | |||||
Restructuring costs | $ (1.2) | $ 12.4 | |||
Transformation Plan | |||||
Restructuring Cost and Reserve [Line Items] | |||||
Restructuring costs | $ (1.2) | $ 12.4 | $ (6.5) | $ 73.2 | $ 156.6 |
RESTRUCTURING COSTS - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Jul. 01, 2019 |
Sep. 30, 2025 |
Sep. 30, 2022 |
Jun. 30, 2024 |
Jun. 30, 2023 |
Jun. 30, 2022 |
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Turnaround Plan | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Restructuring and related activities, plan term (in years) | 4 years | |||||
Expected cost remaining | $ 8.0 | |||||
Transformation Plan | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Restructuring costs incurred to date | 222.1 | |||||
Restructuring reserve | 29.7 | $ 55.2 | ||||
Payments for restructuring | $ 21.8 | |||||
Transformation Plan | Forecast | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Payments for restructuring | $ 0.2 | $ 1.7 | $ 27.8 |
RESTRUCTURING COSTS - Restructuring Roll Forward (Details) - Transformation Plan $ in Millions |
3 Months Ended |
---|---|
Sep. 30, 2022
USD ($)
| |
Restructuring Reserve [Roll Forward] | |
Beginning balance | $ 55.2 |
Restructuring charges | 1.0 |
Payments | (21.8) |
Changes in estimates | (2.2) |
Effect of exchange rates | (2.5) |
Ending balance | 29.7 |
Severance and Employee Benefits | |
Restructuring Reserve [Roll Forward] | |
Beginning balance | 55.2 |
Restructuring charges | 1.0 |
Payments | (21.8) |
Changes in estimates | (2.2) |
Effect of exchange rates | (2.5) |
Ending balance | $ 29.7 |
INVENTORIES (Details) - USD ($) $ in Millions |
Sep. 30, 2022 |
Jun. 30, 2022 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 180.9 | $ 171.5 |
Work-in-process | 14.2 | 13.2 |
Finished goods | 481.3 | 476.8 |
Total inventories | $ 676.4 | $ 661.5 |
EQUITY INVESTMENTS - Schedule of Equity Investments (Details) - USD ($) $ in Millions |
3 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Nov. 30, 2021 |
Nov. 06, 2021 |
Oct. 20, 2021 |
Sep. 30, 2021 |
Nov. 30, 2020 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Jun. 30, 2022 |
Jan. 04, 2021 |
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Debt and Equity Securities, FV-NI [Line Items] | |||||||||
Total equity investments | $ 976.7 | $ 842.6 | |||||||
KKW Beauty | |||||||||
Debt and Equity Securities, FV-NI [Line Items] | |||||||||
Percentage of equity interests acquired | 20.00% | ||||||||
KKW Beauty | |||||||||
Debt and Equity Securities, FV-NI [Line Items] | |||||||||
Equity method investments | 11.7 | 12.6 | |||||||
Loss from equity method investments | (0.9) | $ (0.6) | |||||||
Wella Company | |||||||||
Debt and Equity Securities, FV-NI [Line Items] | |||||||||
Equity investments at fair value | $ 965.0 | $ 830.0 | |||||||
Equity method investment, amount sold (percentage) | 4.70% | 4.70% | 9.40% | 9.40% | |||||
Equity securities, FV-NI, ownership percentage | 40.00% | 25.90% | 25.90% | ||||||
Wella Business | |||||||||
Debt and Equity Securities, FV-NI [Line Items] | |||||||||
Equity method investment, amount sold (percentage) | 60.00% |
EQUITY INVESTMENTS - Narrative (Details) - Wella Company - USD ($) $ in Millions |
Jun. 16, 2022 |
Mar. 03, 2022 |
Nov. 30, 2021 |
Nov. 06, 2021 |
Oct. 20, 2021 |
Sep. 30, 2021 |
Sep. 30, 2022 |
---|---|---|---|---|---|---|---|
Schedule of Equity Method Investments [Line Items] | |||||||
Equity method investment, amount sold (percentage) | 4.70% | 4.70% | 9.40% | 9.40% | |||
Convertible Series B preferred stock redeemed for sale of ownership interest (in shares) | 290,465 | ||||||
Ownership percentage | 25.90% | ||||||
Return of capital from equity investments | $ 19.9 | $ 210.7 |
EQUITY INVESTMENTS - Summarized Statements of Operations Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Debt and Equity Securities, FV-NI [Line Items] | ||
Net revenues | $ 1,390.0 | $ 1,371.7 |
Gross profit | 888.7 | 866.9 |
Operating income | 171.9 | 17.2 |
Income before income taxes | 204.2 | 343.5 |
Net income | 134.5 | 228.9 |
KKW Beauty And Wella | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Gross profit | 394.6 | 429.7 |
Net income | 16.0 | 5.5 |
KKW Beauty And Wella | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Net revenues | 596.6 | 619.2 |
Operating income | 61.0 | 25.6 |
Income before income taxes | $ 20.0 | $ 7.5 |
EQUITY INVESTMENTS - Summary of Movement in Equity Investments (Details) - Wella Company $ in Millions |
3 Months Ended |
---|---|
Sep. 30, 2022
USD ($)
| |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Balance as of June 30, 2022 | $ 830.0 |
Total gains included in earnings | 135.0 |
Balance as of September 30, 2022 | $ 965.0 |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Changes in Goodwill (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Jun. 30, 2022 |
|
Goodwill [Roll Forward] | ||
Gross beginning balance | $ 7,954.8 | |
Accumulated impairments | (4,040.1) | $ (4,040.1) |
Net beginning balance | 3,914.7 | |
Foreign currency translation | (118.3) | |
Gross ending balance | 7,836.5 | |
Accumulated impairments | (4,040.1) | (4,040.1) |
Net ending balance | 3,796.4 | |
Prestige | ||
Goodwill [Roll Forward] | ||
Gross beginning balance | 6,220.7 | |
Accumulated impairments | (3,110.3) | (3,110.3) |
Net beginning balance | 3,110.4 | |
Foreign currency translation | (94.4) | |
Gross ending balance | 6,126.3 | |
Accumulated impairments | (3,110.3) | (3,110.3) |
Net ending balance | 3,016.0 | |
Consumer Beauty | ||
Goodwill [Roll Forward] | ||
Gross beginning balance | 1,734.1 | |
Accumulated impairments | (929.8) | (929.8) |
Net beginning balance | 804.3 | |
Foreign currency translation | (23.9) | |
Gross ending balance | 1,710.2 | |
Accumulated impairments | (929.8) | $ (929.8) |
Net ending balance | $ 780.4 |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Other Intangible Assets, Net (Details) - USD ($) $ in Millions |
Sep. 30, 2022 |
Jun. 30, 2022 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Indefinite-lived other intangible assets | $ 914.5 | $ 936.6 |
Finite-lived other intangible assets, net | 2,800.1 | 2,966.2 |
Total Other intangible assets, net | $ 3,714.6 | $ 3,902.8 |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Schedule of Indefinite Lived Intangible Assets (Details) $ in Millions |
3 Months Ended |
---|---|
Sep. 30, 2022
USD ($)
| |
Indefinite-lived Intangible Assets [Roll Forward] | |
Gross beginning balance | $ 1,881.5 |
Accumulated impairments beginning balance | (944.9) |
Net beginning balance | 936.6 |
Foreign currency translation | (22.1) |
Gross ending balance | 1,859.4 |
Accumulated impairments ending balance | (944.9) |
Net ending balance | 914.5 |
Trademarks | |
Indefinite-lived Intangible Assets [Roll Forward] | |
Gross beginning balance | 1,881.5 |
Accumulated impairments beginning balance | (944.9) |
Net beginning balance | 936.6 |
Foreign currency translation | (22.1) |
Gross ending balance | 1,859.4 |
Accumulated impairments ending balance | (944.9) |
Net ending balance | $ 914.5 |
GOODWILL AND OTHER INTANGIBLE ASSETS, NET - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 47.3 | $ 57.0 |
LEASES - Narrative (Details) |
Sep. 30, 2022 |
---|---|
Minimum | |
Lessee, Lease, Description [Line Items] | |
Lessee, operating lease, term of contract | 5 years |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Lessee, operating lease, term of contract | 25 years |
LEASES - Lease cost (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Lease Cost: | ||
Operating lease cost | $ 19.2 | $ 20.9 |
Short-term lease cost | 0.2 | 0.3 |
Variable lease cost | 8.6 | 8.9 |
Sublease income | (3.8) | (5.3) |
Net lease cost | 24.2 | 24.8 |
Other information: | ||
Operating cash outflows from operating leases | (21.7) | (22.5) |
Right-of-use assets obtained in exchange for lease obligations | $ 7.6 | $ 8.4 |
Weighted-average remaining lease term - real estate | 7 years 7 months 6 days | 6 years 4 months 24 days |
Weighted-average discount rate - real estate leases | 4.02% | 3.53% |
LEASES - Minimum lease payments (Details) - USD ($) $ in Millions |
Sep. 30, 2022 |
Jun. 30, 2022 |
---|---|---|
Minimum lease payments | ||
2023, remaining | $ 55.5 | |
2024 | 63.0 | |
2025 | 53.3 | |
2026 | 43.6 | |
2027 | 37.1 | |
Thereafter | 130.6 | |
Total future lease payments | 383.1 | |
Less: imputed interest | (58.9) | |
Total present value of lease liabilities | 324.2 | |
Current operating lease liabilities | 59.2 | $ 67.8 |
Long-term operating lease liabilities | 265.0 | $ 282.2 |
Total operating lease liabilities | $ 324.2 |
DEBT - Schedule of Fair Value of Debt (Details) - USD ($) $ in Millions |
Sep. 30, 2022 |
Jun. 30, 2022 |
---|---|---|
2018 Coty Credit Agreement | Carrying Amount | ||
Debt Instrument [Line Items] | ||
Fair value of debt | $ 1,483.2 | $ 1,512.8 |
2018 Coty Credit Agreement | Fair Value | ||
Debt Instrument [Line Items] | ||
Fair value of debt | 1,430.7 | 1,451.5 |
Senior Secured Notes | Carrying Amount | ||
Debt Instrument [Line Items] | ||
Fair value of debt | 2,086.4 | 2,131.8 |
Senior Secured Notes | Fair Value | ||
Debt Instrument [Line Items] | ||
Fair value of debt | 1,868.9 | 1,914.1 |
Senior Unsecured Notes | Carrying Amount | ||
Debt Instrument [Line Items] | ||
Fair value of debt | 795.1 | 811.4 |
Senior Unsecured Notes | Fair Value | ||
Debt Instrument [Line Items] | ||
Fair value of debt | 719.0 | 733.5 |
Brazilian Credit Facilities | Carrying Amount | ||
Debt Instrument [Line Items] | ||
Fair value of debt | 42.4 | 42.4 |
Brazilian Credit Facilities | Fair Value | ||
Debt Instrument [Line Items] | ||
Fair value of debt | $ 45.9 | $ 48.2 |
DEBT - Schedule of Maturities of Long-Term Debt (Details) $ in Millions |
Sep. 30, 2022
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2023, remaining | $ 16.7 |
2024 | 64.7 |
2025 | 1,444.2 |
2026 | 2,381.5 |
2027 | 0.0 |
Thereafter | 500.0 |
Total | $ 4,407.1 |
DEBT - Total Net Leverage Ratio (Details) |
3 Months Ended |
---|---|
Sep. 30, 2021 | |
September 30, 2022 | |
Debt Instrument [Line Items] | |
Net leverage ratio | 4.50 |
December 31, 2022 | |
Debt Instrument [Line Items] | |
Net leverage ratio | 4.25 |
March 31, 2023 through April 5, 2025 | |
Debt Instrument [Line Items] | |
Net leverage ratio | 4.00 |
INTEREST EXPENSE, NET (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Interest Income (Expense), Net [Abstract] | ||
Interest expense | $ 57.6 | $ 62.8 |
Foreign exchange losses (gains), net of derivative contracts | 11.9 | (2.3) |
Interest income | (3.6) | (0.7) |
Total interest expense, net | $ 65.9 | $ 59.8 |
DERIVATIVE INSTRUMENTS - Gains and Losses Recognized in OCI (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Derivative [Line Items] | ||
Net investment hedges | $ (5.3) | $ 16.7 |
Foreign exchange forward contracts | ||
Derivative [Line Items] | ||
Gain (Loss) Recognized in OCI | 1.7 | 1.7 |
Interest rate swap contracts | ||
Derivative [Line Items] | ||
Gain (Loss) Recognized in OCI | $ 1.7 | $ (0.6) |
DERIVATIVE INSTRUMENTS - Derivatives Not Designated as Hedging (Details) - Foreign exchange forward contracts - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Interest expense, net | ||
Derivative [Line Items] | ||
Gain (loss) recognized in operations | $ (34.2) | $ 7.3 |
Other (expense) income, net | ||
Derivative [Line Items] | ||
Gain (loss) recognized in operations | $ (52.0) | $ (0.2) |
MANDATORILY REDEEMABLE FINANCIAL INTERESTS AND REDEEMABLE NONCONTROLLING INTERESTS - Mandatorily Redeemable Financial Interest (Details) - United Arab Emirates Joint Venture $ in Millions |
1 Months Ended |
---|---|
Jul. 31, 2021
USD ($)
| |
Noncontrolling Interest [Line Items] | |
Additional ownership percentage purchased | 25.00% |
Payments to acquire additional interest in subsidiaries | $ 7.1 |
MANDATORILY REDEEMABLE FINANCIAL INTERESTS AND REDEEMABLE NONCONTROLLING INTERESTS - Redeemable Noncontrolling Interests (Details) - USD ($) $ in Millions |
Sep. 30, 2022 |
Jun. 30, 2022 |
Sep. 30, 2021 |
Jun. 30, 2021 |
---|---|---|---|---|
Redeemable Noncontrolling Interest [Line Items] | ||||
Non-cash redeemable noncontrolling interest for business combinations | $ 69.3 | $ 69.8 | $ 83.4 | $ 84.1 |
Middle East Subsidiary | ||||
Redeemable Noncontrolling Interest [Line Items] | ||||
Ownership percentage by noncontrolling owners | 25.00% |
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