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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
☒
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023
OR
☐
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                    TO          
COMMISSION FILE NUMBER 001-35964
COTY INC.
(Exact name of registrant as specified in its charter)
Delaware
 13-3823358
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
350 Fifth Avenue,
 New York, NY 10118
(Address of principal executive offices) (Zip Code)
(212) 389-7300
Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes ý      No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes ý      No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer    ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes ☐     No ý
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s) Name of each exchange on which registered
Class A Common Stock, $0.01 par value COTY New York Stock Exchange
At April 30, 2023, 852,796,812 shares of the registrant’s Class A Common Stock, $0.01 par value, were outstanding.



COTY INC.
INDEX TO FORM 10-Q
Page
1
1
2
3
4
8


PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
  Three Months Ended
March 31,		 Nine Months Ended
March 31,
  2023 2022 2023 2022
Net revenues $ 1,288.9  $ 1,186.2  $ 4,202.5  $ 4,136.1 
Cost of sales 478.1  423.1  1,504.7  1,489.0 
Gross profit 810.8  763.1  2,697.8  2,647.1 
Selling, general and administrative expenses 720.4  659.3  2,145.4  2,154.5 
Amortization expense 48.2  50.2  143.1  158.6 
Restructuring costs (1.3) (6.8) (5.4) 1.5 
Acquisition- and divestiture-related costs —  3.3  —  14.2 
Operating income 43.5  57.1  414.7  318.3 
Interest expense, net 58.8  62.9  185.7  183.6 
Other income, net (156.9) (60.6) (397.0) (572.9)
Income from continuing operations before income taxes 141.6  54.8  626.0  707.6 
Provision for income taxes on continuing operations 29.8  0.5  138.3  164.5 
Net income from continuing operations 111.8  54.3  487.7  543.1 
Net income from discontinued operations —  0.7  —  4.5 
Net income 111.8  55.0  487.7  547.6 
Net income (loss) attributable to noncontrolling interests 1.0  (0.9) (0.4) (2.3)
Net income attributable to redeemable noncontrolling interests 2.4  2.3  12.8  8.9 
Net income attributable to Coty Inc. $ 108.4  $ 53.6  $ 475.3  $ 541.0 
Amounts attributable to Coty Inc.
Net income from continuing operations 108.4  52.9  475.3  536.5 
Convertible Series B Preferred Stock dividends (3.3) (3.3) (9.9) (195.0)
Net income from continuing operations attributable to common stockholders 105.1  49.6  465.4  341.5 
Net income from discontinued operations —  0.7  —  4.5 
Net income attributable to common stockholders $ 105.1  $ 50.3  $ 465.4  $ 346.0 
Earnings per common share:    
Earnings from continuing operations per common share - basic $ 0.12  $ 0.06  $ 0.55  $ 0.42 
Earnings from continuing operations per common share - diluted 0.12  0.06  0.54  0.42 
Earnings per common share - basic 0.12  0.06  0.55  0.42 
Earnings per common share - diluted 0.12  0.06  0.54  0.42 
Weighted-average common shares outstanding:        
Basic 851.6  838.4  848.1  814.8 
Diluted 865.2  852.9  885.8  827.5 
See notes to Condensed Consolidated Financial Statements.
1
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)
Three Months Ended
March 31,		 Nine Months Ended
March 31,
  2023 2022 2023 2022
Net income $ 111.8  $ 55.0  $ 487.7  $ 547.6 
Other comprehensive income (loss):        
Foreign currency translation adjustment 80.8  35.4  35.7  (215.4)
Net unrealized derivative gain (loss) on cash flow hedges, net of taxes of $0.9 and $(0.8), and $1.6 and $(4.2) during the three and nine months ended, respectively
 (2.1) 4.6  (5.1) 14.5 
Pension and other post-employment benefits adjustment, net of tax of $0.4 and $(0.6), and $0.4 and $(0.6) during the three and nine months ended, respectively
 (0.6) (0.2) (2.3) 2.1 
Total other comprehensive income (loss), net of tax 78.1  39.8  28.3  (198.8)
Comprehensive income 189.9  94.8  516.0  348.8 
Comprehensive income attributable to noncontrolling interests:        
Net income (loss) 1.0  (0.9) (0.4) (2.3)
Foreign currency translation adjustment (0.2) (0.1) 0.1  (0.4)
Total comprehensive income (loss) attributable to noncontrolling interests 0.8  (1.0) (0.3) (2.7)
Comprehensive income attributable to redeemable noncontrolling interests:
Net income 2.4  2.3  12.8  8.9 
Foreign currency translation adjustment —  —  0.1  — 
Total comprehensive income attributable to noncontrolling interests 2.4  2.3  12.9  8.9 
Comprehensive income attributable to Coty Inc. $ 186.7  $ 93.5  $ 503.4  $ 342.6 
See notes to Condensed Consolidated Financial Statements.
2
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
  March 31,
2023		 June 30,
2022
ASSETS    
Current assets:    
Cash and cash equivalents $ 245.0  $ 233.3 
Restricted cash 32.0  30.5 
Trade receivables—less allowances of $32.7 and $53.4, respectively
 400.8  364.6 
Inventories 798.1  661.5 
Prepaid expenses and other current assets 438.6  392.0 
Total current assets 1,914.5  1,681.9 
Property and equipment, net 697.2  715.5 
Goodwill 3,974.4  3,914.7 
Other intangible assets, net 3,853.1  3,902.8 
Equity investments 1,049.8  842.6 
Operating lease right-of-use assets 289.6  320.9 
Deferred income taxes 638.2  651.8 
Other noncurrent assets 288.7  85.9 
TOTAL ASSETS $ 12,705.5  $ 12,116.1 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY    
Current liabilities:
Accounts payable $ 1,407.7  $ 1,268.3 
Accrued expenses and other current liabilities 1,105.4  1,097.1 
Short-term debt and current portion of long-term debt 68.3  23.0 
Current operating lease liabilities 61.1  67.8 
Income and other taxes payable 114.8  109.4 
Total current liabilities 2,757.3  2,565.6 
Long-term debt, net 4,225.0  4,409.1 
Long-term operating lease liabilities 254.4  282.2 
Pension and other post-employment benefits 300.5  292.2 
Deferred income taxes 730.7  669.0 
Other noncurrent liabilities 301.1  340.0 
Total liabilities 8,569.0  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 March 31, 2023 and June 30, 2022, respectively
 142.4  142.4 
REDEEMABLE NONCONTROLLING INTERESTS 69.1  69.8 
EQUITY:    
Preferred Stock, $0.01 par value; 20.0 shares authorized, 1.5 issued and outstanding at March 31, 2023 and June 30, 2022
 —  — 
Class A Common Stock, $0.01 par value; 1,250.0 shares authorized, 919.1 and 905.5 issued and 852.7 and 839.2 outstanding at March 31, 2023 and June 30, 2022, respectively
 9.1  9.0 
Additional paid-in capital 10,885.4  10,805.8 
Accumulated deficit (5,020.8) (5,496.1)
Accumulated other comprehensive loss (689.8) (717.9)
Treasury stock—at cost, shares: 66.4 and 66.3 at March 31, 2023 and June 30, 2022, respectively
 (1,446.3) (1,446.3)
Total Coty Inc. stockholders’ equity 3,737.6  3,154.5 
Noncontrolling interests 187.4  191.3 
Total equity 3,925.0  3,345.8 
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY $ 12,705.5  $ 12,116.1 
See notes to Condensed Consolidated Financial Statements.
3
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three and Nine Months Ended March 31, 2023
(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 
Exercise of employee stock options and restricted stock units 0.2  —  —  —  — 
Shares withheld for employee taxes (0.2) (0.2) (0.2)
Share-based compensation expense 32.7  32.7  32.7 
Dividends accrued- Convertible Series B Preferred Stock (3.3) (3.3) (3.3) 3.3 
Dividends paid - Convertible Series B Preferred Stock —  —  —  (3.3)
4
  Preferred Stock Class A
Common Stock		 Additional
Paid-in Capital		 (Accumulated Deficit) Accumulated Other Comprehensive (Loss) Income Treasury Stock Total Coty Inc.
Stockholders’ Equity		 Noncontrolling Interests Total Equity Redeemable
Noncontrolling Interests		 Convertible Series B Preferred Stock
  Shares Amount Shares Amount Shares Amount
Net income (loss) 108.4  108.4  1.0  109.4  2.4 
Other comprehensive loss 78.3  78.3  (0.2) 78.1  — 
Distribution to noncontrolling interests, net —  (3.6) (3.6) (13.8)
Adjustment of redeemable noncontrolling interests to redemption value (10.8) (10.8) (10.8) 10.8 
Equity investment contribution for share-based compensation 1.1  1.1  1.1 
BALANCE—March 31, 2023 1.5  $ —  919.1  $ 9.1  $ 10,885.4  $ (5,020.8) $ (689.8) 66.4  $ (1,446.3) $ 3,737.6  $ 187.4  $ 3,925.0  $ 69.1  $ 142.4 
See notes to Condensed Consolidated Financial Statements.
5
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three and Nine Months Ended March 31, 2022
(In millions, except per share data)
(Unaudited)
  Preferred Stock
Class A
Common Stock
Additional
Paid-in Capital
 (Accumulated Deficit) Accumulated Other Comprehensive (Loss) Income Treasury Stock
Total Coty Inc.
Stockholders’ Equity
 Noncontrolling Interests Total Equity
Redeemable
Noncontrolling Interests
 Convertible Series B Preferred Stock
  Shares Amount Shares Amount Shares Amount
BALANCE—July 1, 2021 1.5  $ —  832.3  $ 8.3  $ 10,376.2  $ (5,755.6) $ (321.9) 66.3  $ (1,446.3) $ 2,860.7  $ 201.5  $ 3,062.2  $ 84.1  $ 1,036.3 
Exercise of employee stock options and restricted stock units 51.0  —  —  —  — 
Shares withheld for employee taxes (4.2) (4.2) (4.2)
Share-based compensation expense 107.8  107.8  107.8 
Equity Investment contribution for share-based compensation 1.6  1.6  1.6 
Changes in dividends accrued 0.5  0.5  0.5 
Conversion of Convertible Series B Preferred Stock 0.5  307.4  307.9  307.9  (307.9)
Reclassification to Mandatorily redeemable Convertible Series B Preferred Stock —  —  —  (394.2)
Dividends Accrued - Convertible Series B Preferred Stock (22.7) (22.7) (22.7) 22.7 
Deemed Dividends - Conversion of Convertible Series B Preferred Stock (6.7) (6.7) (6.7) 6.7 
Deemed Dividends - Exchange Agreement (93.6) (93.6) (93.6) 93.6 
Dividends Paid - Convertible Series B Preferred Stock —  —  (3.5)
Net income (loss) 226.0  226.0  (0.5) 225.5  3.4 
Other comprehensive loss (138.0) (138.0) (0.2) (138.2)
Adjustment of redeemable noncontrolling interests to redemption value 4.1  4.1  4.1  (4.1)
BALANCE—September 30, 2021 1.5  $ —  883.3  $ 8.8  $ 10,670.4  $ (5,529.6) $ (459.9) 66.3  $ (1,446.3) $ 3,243.4  $ 200.8  $ 3,444.2  $ 83.4  $ 453.7 
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  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)
 —  —  — 
Conversion of Convertible Series B Preferred Stock 69.9  0.2  121.4  121.6  121.6  (121.6)
Exchange Transaction —  —  (212.7)
Dividends Accrued - Convertible Series B Preferred Stock (5.9) (5.9) (5.9) 5.9 
Deemed Dividends - Conversion of Convertible Series B Preferred Stock (0.8) (0.8) (0.8) 0.8 
Deemed Dividends - Redemption of Convertible Series B Preferred Stock (66.4) (66.4) (66.4) 66.4 
Deemed Contributions - Convertible Series B Preferred Stock 4.4  4.4  4.4  (4.4)
Dividends Paid - Convertible Series B Preferred Stock —  —  (45.7)
Net income (loss) 261.4  261.4  (0.9) 260.5  3.2 
Other comprehensive income (100.3) (100.3) (0.1) (100.4)
Distribution to noncontrolling interests, net —  (2.7) (2.7) (5.8)
Adjustment of redeemable noncontrolling interests to redemption value (2.9) (2.9) (2.9) 2.9 
BALANCE—December 31, 2021 1.5  $ —  905.0  $ 9.0  $ 10,737.2  $ (5,268.2) $ (560.2) 66.3  $ (1,446.3) $ 3,471.5  $ 197.1  $ 3,668.6  $ 83.7  $ 142.4 
Exercise of employee stock options and restricted stock units 0.5  —  —  —  — 
Shares withheld for employee taxes (0.7) (0.7) (0.7)
Share-based compensation expense 29.1  29.1  29.1 
Equity Investment contribution for share-based compensation 1.0  1.0  1.0 
Changes in dividends accrued 0.1  0.1  0.1 
Dividends Accrued - Convertible Series B Preferred Stock (3.3) (3.3) (3.3) 3.3 
Dividends Paid - Convertible Series B Preferred Stock —  —  —  (3.3)
Net income (loss) 53.6  53.6  (0.9) 52.7  2.3 
Other comprehensive income 39.9  39.9  (0.1) 39.8 
Distribution to noncontrolling interests, net —  (1.9) (1.9) (6.6)
Adjustment of redeemable noncontrolling interests to redemption value 7.5  7.5  7.5  (7.5)
BALANCE—March 31, 2022 1.5  $ —  905.5  $ 9.0  $ 10,770.9  $ (5,214.6) $ (520.3) 66.3  $ (1,446.3) $ 3,598.7  $ 194.2  $ 3,792.9  $ 71.9  $ 142.4 
See notes to Condensed Consolidated Financial Statements.
7
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine Months Ended
March 31,
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income $ 487.7  $ 547.6 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 317.8  389.5 
Non-cash lease expense 48.0  55.6 
Deferred income taxes 89.3  48.6 
(Releases) provision for bad debts (12.8) 2.6 
Provision for pension and other post-employment benefits 6.9  11.9 
Share-based compensation 98.9  164.3 
Losses (gains) on disposals of long-term assets, net 4.9  (111.1)
Gain on sale of business in discontinued operations —  (6.1)
Realized and unrealized gains from equity investments, net (207.2) (576.7)
Foreign exchange effects 27.5  1.0 
Deferred financing fees write-offs 0.8  3.8 
Unrealized gains on forward repurchase contracts, net (185.5) — 
Other 27.7  11.5 
Change in operating assets and liabilities    
Trade receivables (10.5) (161.4)
Inventories (123.9) (10.1)
Prepaid expenses and other current assets (51.1) 23.0 
Accounts payable 114.9  137.3 
Accrued expenses and other current liabilities (9.8) 246.4 
Operating lease liabilities (47.3) (54.8)
Income and other taxes payable 12.4  59.9 
Other noncurrent assets (9.6) (8.5)
Other noncurrent liabilities (58.3) (14.8)
Net cash provided by operating activities 520.8  759.5 
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (156.0) (133.0)
Proceeds from sale of long-term assets and license terminations 58.3  169.7 
Proceeds from contingent consideration from sale of discontinued business —  34.0 
Return of capital from equity investments —  210.7 
Net cash (used in) provided by investing activities (97.7) 281.4 
CASH FLOWS FROM FINANCING ACTIVITIES:    
Net proceeds from short-term debt, original maturity less than three months —  4.8 
Proceeds from revolving loan facilities 1,109.7  444.3 
Repayments of revolving loan facilities (1,129.6) (1,114.7)
Proceeds from issuance of other long-term debt —  500.0 
Repayments of term loans and other long-term debt (194.5) (256.1)
Dividend payments on Class A Common Stock and Class B Preferred Stock (10.4) (53.8)
Net payments of foreign currency contracts (139.3) (94.1)
Purchase of remaining mandatorily redeemable noncontrolling interest —  (7.1)
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Distributions to noncontrolling interests, redeemable noncontrolling interests and mandatorily redeemable financial instruments (17.4) (15.1)
Payment of deferred financing fees —  (39.3)
All other (16.1) (11.6)
Net cash used in financing activities (397.6) (642.7)
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH (12.3) (8.4)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 13.2  389.8 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 263.8  310.4 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period $ 277.0  $ 700.2 
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:    
Cash paid during the period for interest $ 157.9  $ 120.7 
Net cash paid for income taxes 45.8  68.1 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:    
Accrued capital expenditure additions $ 93.1  $ 65.4 
Redemption of Series B Preferred Stock in exchange for Wella Equity Investment —  603.3 
Conversion of Series B Preferred Stock into Class A Common Stock —  429.5 
Non-cash Series B Preferred Stock dividends and deemed dividends (contributions) —  (1.1)
See notes to Condensed Consolidated Financial Statements.
9
COTY INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in millions, except per share data)
(Unaudited)

1. 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.
2. 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 and nine months ended March 31, 2023 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 March 31, 2023 and June 30, 2022, the Company had restricted cash of $32.0 and $30.5, respectively, included in Restricted cash in the Condensed Consolidated Balance Sheets. The Restricted cash balance as of March 31, 2023 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 March 31, 2023. 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 8—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
10
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 and nine months ended March 31, 2023 and 2022 was 21.0% and 0.9%, respectively, and 22.1% and 23.2%, respectively. The change in the effective tax rate for the three months ended March 31, 2023, as compared with the three months ended March 31, 2022, was primarily due to fair value gains related to the investment in the Wella business in the prior period. The change in the effective tax rate for the nine months ended March 31, 2023, as compared with the nine months ended March 31, 2022, was primarily due to foreign exchange loss recognized on the current year repatriation of funds that were previously taxed as part of the Tax Cuts and Job Acts of 2017.
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 March 31, 2023 and June 30, 2022, the gross amount of UTBs was $237.1 and $251.6, respectively. As of March 31, 2023, the total amount of UTBs that, if recognized, would impact the effective income tax rate is $158.5. As of March 31, 2023 and June 30, 2022, the liability associated with UTBs, including accrued interest and penalties, was $189.8 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 $3.5 and $1.3 for the three months ended March 31, 2023 and 2022, respectively, and $4.9 and $1.0 for the nine months ended March 31, 2023 and 2022, respectively. The total gross accrued interest and penalties recorded in the Condensed Consolidated Balance Sheets as of March 31, 2023 and June 30, 2022 was $31.3 and $26.4, respectively. On the basis of the information available as of March 31, 2023, it is reasonably possible that a decrease of up to $18.3 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.
Russia Market Exit
In connection with the Company’s Board of Director’s decision to wind down operations in Russia, the Company recognized total pre-tax gains in the Condensed Consolidated Statements of Operations of $1.3 and $17.0, respectively, in the three and nine months ended March 31, 2023. These amounts are primarily related to a bad debt accrual release due to better than expected collections.
The Company recognized $0.3 of income tax benefits associated with the decision to exit Russia in the three and nine months ended March 31, 2023.
The Company anticipates incurring up to $7.5 of additional costs through completion of the wind down. Additionally, management anticipates derecognizing the cumulative translation adjustment balance pertaining to the Russian subsidiary. The Company has substantially completed its commercial activities in Russia. However, the Company anticipates that the process related to the liquidation of the Russian legal entity will take an extended period of time.
Lacoste Fragrances License Termination
On December 19, 2022, the Company entered into an agreement with Lacoste S.A.S, Sporloisirs S.A., and Lacoste Alligator S.A., (collectively, “Lacoste”) to early terminate the existing Lacoste fragrances licensing agreement, effective June 30, 2023. In exchange, Lacoste has agreed to make termination payments to the Company. During the second quarter of fiscal 2023, Lacoste advanced to the Company a portion of the termination payment totaling €52.5 million (approximately $55.6). The amount advanced to the Company has been reflected as deferred income, within Accrued expenses and other current liabilities, until the termination effective date, June 30, 2023.
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.
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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. On December 21, 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extended the period of time entities can utilize the reference rate reform relief guidance under ASU No. 2020-04 from December 31, 2022 to December 31, 2024. As of March 31, 2023, the Company has not applied any of the optional expedients or exceptions allowed under these ASUs, but will continue to monitor the effects of reference rate reform, if any, on any new or amended contracts through December 31, 2024. The Company does not believe that these ASUs will have a material impact on its consolidated financial position, results of operations or cash flows.
The FASB issued ASU No. 2023-01, Leases (Topic 842) - Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with common control leases. The guidance will be effective for the Company in fiscal 2025 with early adoption permitted. The Company does not expect this ASU will have a material effect on its consolidated financial position, results of operations or cash flows.
3. DISCONTINUED OPERATIONS
On June 1, 2020, the Company entered into a definitive agreement 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”), regarding a strategic transaction for the sale of the Wella Business. The transaction was completed on November 30, 2020 and Coty retained an initial ownership of 40% of the Wella Business. As of March 31, 2023, the Company owned a 25.9% stake in Wella. See Note 8—Equity Investments for additional information.
In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of the Wella Business are presented as discontinued operations and have been excluded from both continuing operations and segment results for all periods presented.
For the three and nine months ended March 31, 2022, the Company recognized gains of $1.3 and $6.1 reflecting certain working capital adjustments and provisions of $0.6 and $1.6 in related income tax impact, which are presented as components of Net income from discontinued operations within the Condensed Consolidated Statements of Operation.
4. SEGMENT REPORTING
Operating 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, divestiture and license termination 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 9—Goodwill and Other Intangible Assets, net.
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Three Months Ended
March 31,		 Nine Months Ended
March 31,
SEGMENT DATA 2023 2022 2023 2022
Net revenues:
Prestige $ 799.7  $ 726.4  $ 2,620.9  $ 2,605.1 
Consumer Beauty 489.2  459.8  1,581.6  1,531.0 
Total $ 1,288.9  $ 1,186.2  $ 4,202.5  $ 4,136.1 
Operating income (loss):
Prestige 102.4  83.8  437.3  357.5 
Consumer Beauty (27.9) (20.4) 53.3  34.3 
Corporate (31.0) (6.3) (75.9) (73.5)
Total $ 43.5  $ 57.1  $ 414.7  $ 318.3 
Reconciliation:
Operating income 43.5  57.1  414.7  318.3 
Interest expense, net 58.8  62.9  185.7  183.6 
Other income, net (156.9) (60.6) (397.0) (572.9)
Income from continuing operations before income taxes $ 141.6  $ 54.8  $ 626.0  $ 707.6 
Presented below are the percentage of revenues associated with the Company’s product categories:
Three Months Ended
March 31,		 Nine Months Ended
March 31,
PRODUCT CATEGORY 2023 2022 2023 2022
Fragrance 59.2  % 57.6  % 60.3  % 60.3  %
Color Cosmetics 29.2  29.6  27.4  27.8 
Body Care & Other 6.7  7.3  7.5  7.0 
Skincare 4.9  5.5  4.8  4.9 
Total 100.0  % 100.0  % 100.0  % 100.0  %
5. 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 and nine months ended March 31, 2023 and 2022.
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 $3.3 for the three months ended March 31, 2023 and 2022, respectively, and $0.0 and $14.2 for the nine months ended March 31, 2023 and 2022, respectively. Divestiture-related costs incurred during the three and nine months ended March 31, 2022 were primarily related to the strategic transaction with KKR Bidco, for the sale of a majority stake in the Wella Business.
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6. RESTRUCTURING COSTS
Restructuring costs for the three and nine months ended March 31, 2023 and 2022 are presented below:
Three Months Ended
March 31,		 Nine Months Ended
March 31,
2023 2022 2023 2022
Transformation Plan $ (1.3) $ (6.8) $ (5.4) $ 1.5 
Total $ (1.3) $ (6.8) $ (5.4) $ 1.5 
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 $217.9 related to approved initiatives through March 31, 2023, which have been recorded in Corporate.
Over the next fiscal year, the Company expects to incur approximately $2.0 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:
Severance and Employee Benefits Fixed Asset Write-offs Other Exit Costs Total
Fiscal 2020 $ 151.2  $ (1.1) $ 6.5  $ 156.6 
Fiscal 2021 73.4  (0.5) 0.3  73.2 
Fiscal 2022 (6.2) —  (0.3) (6.5)
Fiscal 2023 (5.4) —  —  (5.4)
Cumulative through March 31, 2023 $ 213.0  $ (1.6) $ 6.5  $ 217.9 
The related liability balance and activity of restructuring costs for the Transformation Plan restructuring costs are presented below:
Severance and Employee Benefits Total
Balance—July 1, 2022 $ 55.2  $ 55.2 
Restructuring charges 3.3  3.3 
Payments (35.9) (35.9)
Changes in estimates (8.7) (8.7)
Effect of exchange rates (1.1) (1.1)
Balance—March 31, 2023 $ 12.8  $ 12.8 
The Company currently estimates that the total remaining accrual of $12.8 will result in cash expenditures of approximately $5.6, $6.0 and $1.2 in fiscal 2023, 2024 and thereafter, respectively.
7. INVENTORIES
Inventories as of March 31, 2023 and June 30, 2022 are presented below:
March 31,
2023		 June 30,
2022
Raw materials $ 213.9  $ 171.5 
Work-in-process 10.4  13.2 
Finished goods 573.8  476.8 
Total inventories $ 798.1  $ 661.5 

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8. EQUITY INVESTMENTS
The Company's equity investments, classified as Equity investments in the Condensed Consolidated Balance Sheets are represented by the following:
March 31,
2023		 June 30,
2022
Equity method investments:
KKW Holdings (a)
 $ 9.8  $ 12.6 
Equity investments at fair value:
Wella (b)
 $ 1,040.0  $ 830.0 
Total equity investments 1,049.8  $ 842.6 
(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.
The Company recognized $0.8 and $0.9, respectively, during the three months ended March 31, 2023 and 2022 and $2.8 and $2.3, respectively, during the nine months ended March 31, 2023 and 2022 representing its share of the investee’s net loss in Other income, net within the Condensed Consolidated Statements of Operations.
(b)As of March 31, 2023 and June 30, 2022, the Company's stake in Wella was 25.9%.
For the nine months ended March 31, 2023, the impact of Wella's 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 March 31, 2023. Amounts presented represent combined totals at the investee level and not the Company’s proportionate share:
Three Months Ended
March 31,		 Nine Months Ended
March 31,
2023 2022 2023 2022
Summarized Statements of Operations information:
Net revenues $ 587.0  $ 552.8  $ 1,844.2  $ 1,916.3 
Gross profit 382.7  376.4  1,197.6  1,314.5 
Operating income 16.5  18.1  133.0  119.9 
Income before income taxes (33.5) (50.6) (13.2) 6.3 
Net (loss) income (27.5) (31.5) (13.0) 10.5 
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The following table summarizes movements in equity investments with fair value option that are classified within Level 3 for the period ended March 31, 2023. There were no internal movements to or from Level 3 and Level 1 or Level 2 for the period ended March 31, 2023.
Equity investments at fair value:
Balance as of June 30, 2022 $ 830.0 
Total gains included in earnings 210.0 
Balance as of March 31, 2023 $ 1,040.0 
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 March 31, 2023. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.
Fair value Valuation technique Unobservable
input		 Range
Equity investments at fair value $ 1,040.0  Discounted cash flows Discount rate
10.75% (a)
Growth rate
1.8% - 7.2% (a)
Market multiple Revenue multiple
2.7x – 3.0x (b)
EBITDA multiple
12.1x – 14.5x (b)
(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.
9. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
Goodwill as of March 31, 2023 and June 30, 2022 is presented below:
Prestige Consumer Beauty Total
Gross balance at June 30, 2022 $ 6,220.7  $ 1,734.1  $ 7,954.8 
Accumulated impairments (3,110.3) (929.8) (4,040.1)
Net balance at June 30, 2022 $ 3,110.4  $ 804.3  $ 3,914.7 
Changes during the period ended March 31, 2023
Foreign currency translation 48.1  11.6  59.7 
Gross balance at March 31, 2023 $ 6,268.8  $ 1,745.7  $ 8,014.5 
Accumulated impairments (3,110.3) (929.8) (4,040.1)
Net balance at March 31, 2023 $ 3,158.5  $ 815.9  $ 3,974.4 
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Other Intangible Assets, net
Other intangible assets, net as of March 31, 2023 and June 30, 2022 are presented below:
March 31,
2023		 June 30,
2022
Indefinite-lived other intangible assets $ 952.0  $ 936.6 
Finite-lived other intangible assets, net 2,901.1  2,966.2 
Total Other intangible assets, net $ 3,853.1  $ 3,902.8 
The changes in the carrying amount of indefinite-lived other intangible assets are presented below:
Trademarks Total
Gross balance at June 30, 2022 $ 1,881.5  $ 1,881.5 
Accumulated impairments (944.9) (944.9)
Net balance at June 30, 2022 $ 936.6  $ 936.6 
Changes during the period ended March 31, 2023
Foreign currency translation 15.4  15.4 
Gross balance at March 31, 2023 $ 1,896.9  $ 1,896.9 
Accumulated impairments (944.9) (944.9)
Net balance at March 31, 2023 $ 952.0  $ 952.0 
Intangible assets subject to amortization are presented below:
Cost Accumulated Amortization Accumulated Impairment Net
June 30, 2022
License agreements and collaboration agreements $ 3,861.9  $ (1,302.2) $ (19.6) $ 2,540.1 
Customer relationships 740.0  (473.5) (5.5) 261.0 
Trademarks 320.5  (177.1) (0.5) 142.9 
Product formulations and technology 83.9  (61.7) —  22.2 
Total $ 5,006.3  $ (2,014.5) $ (25.6) $ 2,966.2 
March 31, 2023
License agreements and collaboration agreements $ 3,965.2  $ (1,447.4) $ (19.6) $ 2,498.2 
Customer relationships 750.5  (499.5) (5.5) 245.5 
Trademarks 322.6  (187.1) (0.5) 135.0 
Product formulations and technology 85.6  (63.2) —  22.4 
Total $ 5,123.9  $ (2,197.2) $ (25.6) $ 2,901.1 
Amortization expense was $48.2 and $50.2 for the three months ended March 31, 2023 and 2022, respectively and $143.1 and $158.6 for the nine months ended March 31, 2023 and 2022, respectively.
10. 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.
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The following chart provides additional information about the Company’s operating leases:
Three Months Ended
March 31,		 Nine Months Ended
March 31,
Lease Cost: 2023 2022 2023 2022
Operating lease cost $ 19.0  $ 22.1  $ 57.5  $ 64.2 
Short-term lease cost 0.1  0.4  0.6  1.0 
Variable lease cost 10.8  9.9  27.6  28.8 
Sublease income (4.3) (5.1) (12.0) (15.8)
Net lease cost $ 25.6  $ 27.3  $ 73.7  $ 78.2 
Other information:
Operating cash outflows from operating leases $ (16.8) $ (18.7) $ (57.2) $ (64.0)
Right-of-use assets obtained in exchange for lease obligations $ 0.4  $ 73.1