coty-20221231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED		DECEMBER 31, 2022
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER		001-35964

COTY INC.

(Exact name of registrant as specified in its charter)


Delaware		13-3823358
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

350 Fifth Avenue,
New York,	NY	10118
(Address of principal executive offices)		(Zip Code)

(212) 389-7300

Registrant’s telephone number, including area code

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

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


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

At January 31, 2023, 852,595,821 shares of the registrant’s Class A Common Stock, $0.01 par value, were outstanding.

COTY INC.

INDEX TO FORM 10-Q


		Page
Part I:	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Statements of Operations for the three and six months ended Dec ember 3 1 , 2022 and 2021	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended Dec ember 3 1 , 2022 and 2021	2
	Condensed Consolidated Balance Sheets as of Dec ember 3 1 , 2022 and June 30, 2022	3
	Condensed Consolidated Statements of Equity for the t hree and six months ended Dec ember 3 1 , 2022 and 2021	4
	Condensed Consolidated Statements of Cash Flows for the six months ended Dec ember 3 1 , 2022 and 2021	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	59

Part II:	OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 6.	Exhibits	60

Signatures		61

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)


	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Net revenues	$	1,523.6	$	1,578.2	$	2,913.6	$	2,949.9
Cost of sales	525.3		561.1		1,026.6		1,065.9
Gross profit	998.3		1,017.1		1,887.0		1,884.0
Selling, general and administrative expenses	754.3		718.9		1,425.0		1,495.2
Amortization expense	47.6		51.4		94.9		108.4
Restructuring costs	(2.9)		(4.1)		(4.1)		8.3
Acquisition- and divestiture-related costs	—		6.9		—		10.9


Operating income	199.3		244.0		371.2		261.2
Interest expense, net	61.0		60.9		126.9		120.7
Other income, net	(141.9)		(126.2)		(240.1)		(512.3)
Income from continuing operations before income taxes	280.2		309.3		484.4		652.8
Provision for income taxes on continuing operations	38.8		49.4		108.5		164.0
Net income from continuing operations	241.4		259.9		375.9		488.8
Net income from discontinued operations	—		3.8		—		3.8
Net income	241.4		263.7		375.9		492.6
Net loss attributable to noncontrolling interests	(1.4)		(0.9)		(1.4)		(1.4)
Net income attributable to redeemable noncontrolling interests	4.5		3.2		10.4		6.6
Net income attributable to Coty Inc.	$	238.3	$	261.4	$	366.9	$	487.4
Amounts attributable to Coty Inc.
Net income from continuing operations	238.3		257.6		366.9		483.6
Convertible Series B Preferred Stock dividends	(3.3)		(68.7)		(6.6)		(191.7)
Net income from continuing operations attributable to common stockholders	235.0		188.9		360.3		291.9
Net income from discontinued operations	—		3.8		—		3.8
Net income attributable to common stockholders	$	235.0	$	192.7	$	360.3	$	295.7

Earnings per common share:
Earnings from continuing operations per common share - basic	$	0.28	$	0.23	$	0.43	$	0.36
Earnings from continuing operations per common share - diluted	0.27		0.23		0.42		0.36


Earnings per common share - basic	0.28		0.23		0.43		0.36
Earnings per common share - diluted	0.27		0.23		0.42		0.36
Weighted-average common shares outstanding:
Basic	850.8		829.1		846.4		803.3
Diluted	886.8		842.7		884.5		815.1

See notes to Condensed Consolidated Financial Statements.

Table of Contents

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)


	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Net income	$	241.4	$	263.7	$	375.9	$	492.6
Other comprehensive income (loss):
Foreign currency translation adjustment	219.0		(107.7)		(45.1)		(250.8)
Net unrealized derivative gain (loss) on cash flow hedges, net of taxes of $1.2 and $(1.8), and $0.7 and $(3.4) during the three and six months ended, respectively	(3.9)		5.5		(3.0)		9.9
Pension and other post-employment benefits adjustment, net of tax of $(0.8) and $0.0, and $0.0 and $0.0 during the three and six months ended, respectively	1.5		1.8		(1.7)		2.3
Total other comprehensive income (loss), net of tax	216.6		(100.4)		(49.8)		(238.6)
Comprehensive income	458.0		163.3		326.1		254.0
Comprehensive income attributable to noncontrolling interests:
Net loss	(1.4)		(0.9)		(1.4)		(1.4)
Foreign currency translation adjustment	0.3		(0.1)		0.3		(0.3)
Total comprehensive loss attributable to noncontrolling interests	(1.1)		(1.0)		(1.1)		(1.7)
Comprehensive income attributable to redeemable noncontrolling interests:
Net income	4.5		3.2		10.4		6.6
Foreign currency translation adjustment	0.3		—		0.1		—
Total comprehensive income attributable to noncontrolling interests	4.8		3.2		10.5		6.6
Comprehensive income attributable to Coty Inc.	$	454.3	$	161.1	$	316.7	$	249.1

See notes to Condensed Consolidated Financial Statements.

Table of Contents

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

(Unaudited)


	December 31, 2022		June 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	280.8	$	233.3
Restricted cash	31.5		30.5
Trade receivables—less allowances of $30.9 and $53.4, respectively	433.8		364.6
Inventories	718.2		661.5
Prepaid expenses and other current assets	442.0		392.0


Total current assets	1,906.3		1,681.9
Property and equipment, net	688.7		715.5
Goodwill	3,920.3		3,914.7
Other intangible assets, net	3,848.0		3,902.8
Equity investments	1,050.6		842.6
Operating lease right-of-use assets	301.5		320.9
Deferred income taxes	622.5		651.8
Other noncurrent assets	116.7		85.9
TOTAL ASSETS	$	12,454.6	$	12,116.1
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,489.7	$	1,268.3
Accrued expenses and other current liabilities	1,179.7		1,097.1

Short-term debt and current portion of long-term debt	68.1		23.0
Current operating lease liabilities	61.0		67.8
Income and other taxes payable	117.1		109.4


Total current liabilities	2,915.6		2,565.6
Long-term debt, net	4,014.0		4,409.1
Long-term operating lease liabilities	265.2		282.2
Pension and other post-employment benefits	295.7		292.2
Deferred income taxes	723.7		669.0
Other noncurrent liabilities	306.7		340.0
Total liabilities	8,520.9		8,558.1
COMMITMENTS AND CONTINGENCIES (See Note 19)
CONVERTIBLE SERIES B PREFERRED STOCK, $0.01 par value; 1.0 shares authorized; 0.1 and 0.1 issued and outstanding at December 31, 2022 and June 30, 2022, respectively	142.4		142.4
REDEEMABLE NONCONTROLLING INTERESTS	69.7		69.8
EQUITY:
Preferred Stock, $0.01 par value; 20.0 shares authorized, 1.5 issued and outstanding at December 31, 2022 and June 30, 2022	—		—
Class A Common Stock, $0.01 par value; 1,250.0 shares authorized, 918.9 and 905.5 issued and 852.5 and 839.2 outstanding at December 31, 2022 and June 30, 2022, respectively	9.1		9.0
Additional paid-in capital	10,865.9		10,805.8
Accumulated deficit	(5,129.2)		(5,496.1)
Accumulated other comprehensive loss	(768.1)		(717.9)
Treasury stock—at cost, shares: 66.4 and 66.3 at December 31, 2022 and June 30, 2022, respectively	(1,446.3)		(1,446.3)
Total Coty Inc. stockholders’ equity	3,531.4		3,154.5
Noncontrolling interests	190.2		191.3
Total equity	3,721.6		3,345.8
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY	$	12,454.6	$	12,116.1

See notes to Condensed Consolidated Financial Statements.

Table of Contents

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three and Six Months Ended December 31, 2022

(In millions, except per share data)

(Unaudited)


	Preferred Stock			Class A Common Stock			Additional Paid-in Capital		(Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Treasury Stock			Total Coty Inc. Stockholders’ Equity		Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests		Convertible Series B Preferred Stock
	Shares	Amount		Shares	Amount								Shares	Amount


BALANCE—July 1, 2022	1.5	$	—	905.5	$	9.0	$	10,805.8	$	(5,496.1)	$	(717.9)	66.3	$	(1,446.3)	$	3,154.5	$	191.3	$	3,345.8	$	69.8	$	142.4

Reacquired Class A Common Stock for employee taxes													0.1			—				—
Exercise of employee stock options and restricted stock units				10.2	—											—				—
Shares withheld for employee taxes							(1.1)									(1.1)				(1.1)
Share-based compensation expense							31.4									31.4				31.4

Dividends accrued- Convertible Series B Preferred Stock							(3.3)									(3.3)				(3.3)				3.3
Dividends paid - Convertible Series B Preferred Stock																—				—				(3.3)
Net (loss) income									128.6							128.6		—		128.6		5.9
Other comprehensive loss											(266.2)					(266.2)		—		(266.2)		(0.2)

Adjustment of redeemable noncontrolling interests to redemption value							6.2									6.2				6.2		(6.2)
Equity investment contribution for share-based compensation							1.7									1.7				1.7
BALANCE—September 30, 2022	1.5	$	—	915.7	$	9.0	$	10,840.7	$	(5,367.5)	$	(984.1)	66.4	$	(1,446.3)	$	3,051.8	$	191.3	$	3,243.1	$	69.3	$	142.4

Exercise of employee stock options and restricted stock units				3.2	0.1		(0.1)									—				—
Shares withheld for employee taxes							(10.5)									(10.5)				(10.5)
Share-based compensation expense							33.6									33.6				33.6
Changes in dividends accrued							0.1									0.1				0.1
Dividends accrued- Convertible Series B Preferred Stock							(3.3)									(3.3)				(3.3)				3.3
Dividends paid - Convertible Series B Preferred Stock																—				—				(3.3)
Net income (loss)									238.3							238.3		(1.4)		236.9		4.5
Other comprehensive loss											216.0					216.0		0.3		216.3		0.3

Adjustment of redeemable noncontrolling interests to redemption value							4.4									4.4				4.4		(4.4)
Equity investment contribution for share-based compensation							1.0									1.0				1.0
BALANCE—December 31, 2022	1.5	$	—	918.9	$	9.1	$	10,865.9	$	(5,129.2)	$	(768.1)	66.4	$	(1,446.3)	$	3,531.4	$	190.2	$	3,721.6	$	69.7	$	142.4

See notes to Condensed Consolidated Financial Statements.

Table of Contents

COTY INC. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three and Six Months Ended December 31, 2021

(In millions, except per share data)

(Unaudited)


	Preferred Stock			Class A Common Stock			Additional Paid-in Capital		(Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Treasury Stock			Total Coty Inc. Stockholders’ Equity		Noncontrolling Interests		Total Equity		Redeemable Noncontrolling Interests		Convertible Series B Preferred Stock
	Shares	Amount		Shares	Amount								Shares	Amount
BALANCE—July 1, 2021	1.5	$	—	832.3	$	8.3	$	10,376.2	$	(5,755.6)	$	(321.9)	66.3	$	(1,446.3)	$	2,860.7	$	201.5	$	3,062.2	$	84.1	$	1,036.3



Exercise of employee stock options and restricted stock units				51.0	—		—									—				—
Shares withheld for employee taxes							(4.2)									(4.2)				(4.2)
Share-based compensation expense							107.8									107.8				107.8
Equity Investment contribution for share-based compensation							1.6									1.6				1.6
Changes in dividends accrued							0.5									0.5				0.5


Conversion of Convertible Series B Preferred Stock					0.5		307.4									307.9				307.9				(307.9)
Reclassification to Mandatorily redeemable Convertible Series B Preferred Stock							—									—				—				(394.2)
Dividends Accrued - Convertible Series B Preferred Stock							(22.7)									(22.7)				(22.7)				22.7
Deemed Dividends - Conversion of Convertible Series B Preferred Stock							(6.7)									(6.7)				(6.7)				6.7
Deemed Dividends - Exchange Agreement							(93.6)									(93.6)				(93.6)				93.6
Dividends Paid - Convertible Series B Preferred Stock																—				—				(3.5)
Net income (loss)									226.0							226.0		(0.5)		225.5		3.4
Other comprehensive loss											(138.0)					(138.0)		(0.2)		(138.2)



Adjustment of redeemable noncontrolling interests to redemption value							4.1									4.1				4.1		(4.1)
BALANCE—September 30, 2021	1.5	$	—	883.3	$	8.8	$	10,670.4	$	(5,529.6)	$	(459.9)	66.3	$	(1,446.3)	$	3,243.4	$	200.8	$	3,444.2	$	83.4	$	453.7

Table of Contents


	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
Exercise of employee stock options and restricted stock units			(48.2)							—		—
Shares withheld for employee taxes					(7.1)					(7.1)		(7.1)
Share-based compensation expense					26.9					26.9		26.9
Equity Investment contribution for share-based compensation					(3.0)					(3.0)		(3.0)
Changes in dividends accrued					0.2					0.2		0.2
Dividends declared - Cash and Other					—					—		—
Dividends ($0.125 per common share)					—					—