Market Overview

Coty Inc. Reports Fiscal 2018 Fourth Quarter and Full Year Results

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Strong FY18 progress on operating performance and business integration

Coty Inc. (NYSE:COTY) today announced financial results for the fourth
quarter and fiscal year ended June 30, 2018.

       
Results at a glance Three Months Ended June 30, 2018 Year Ended June 30, 2018
    Change YoY     Change YoY
(in millions, except per share data)    

Reported
Basis

    Organic (LFL)  

Reported
Basis

   

Combined
Company
Reported
At
Constant
Currency

   

Combined
Company
Organic
(LFL)

Net revenues $ 2,299.4 3 %   0.3 % $ 9,398.0 23 %   5 % 0.4 %
Operating (loss) income - reported (61.8 ) 78 % 161.2

>100

%

Operating income - adjusted* 229.4

>100

%

999.8 29 %
Net (loss) income - reported (181.3 ) 41 % (168.8 ) 60 %
Net income - adjusted* 106.6

>100

%

516.3 26 %
EPS (diluted) - reported $ (0.24 ) 41

%

$ (0.23 ) 65 %
EPS (diluted) - adjusted*     $ 0.14       NM             $ 0.69       10 %            

* Please refer to footnote below

Highlights

Revenues:

  • FY18 reported net revenues of $9,398.0 million increased by 22.8% with
    like-for-like (LFL) revenue growth of 0.4% driven by a very strong
    performance in the Luxury division, which delivered 6.0% LFL growth, a
    solid 1.7% LFL growth by the Professional Beauty division, offset by a
    4.0% LFL decline in the Consumer Beauty division revenues.
  • Reported 4Q18 net revenues of $2,299.4 million grew by 2.6% and
    increased by 0.3% on a LFL basis, driven by very good 5.3% growth in
    Luxury, 2.1% growth in Professional Beauty, offset by a 3.4% decline
    in Consumer Beauty. 4Q18 growth for Consumer and Professional Beauty
    was impacted by the Brazilian trucker strike and short term supply
    chain disruptions resulting from the consolidation of warehouses and
    planning centers in North America and Europe, as the ex P&G business
    is integrated into Coty.

Gross Margin

  • FY18 reported gross margin of 61.6% increased by 120 bps from 60.4% in
    the prior-year. Our FY18 adjusted gross margin of 62.3% decreased by
    10bps as solid improvement in the Luxury and Professional Beauty
    divisions, together with the capture of synergies, was offset by
    operating de-leverage in the Consumer Beauty division.
  • 4Q18 reported gross margin of 61.0% increased by 10bps versus the
    prior year, while the adjusted gross margin of 61.9% decreased by
    20bps from 4Q17, primarily driven by the supply chain disruptions.

Operating Income:

  • FY18 reported operating income of $161.2 million improved from a
    reported loss of $(437.8) million, and the 4Q18 operating loss of
    $(61.8) million improved from $(279.0) million in the prior year
    period as our restructuring and acquisition-related costs decreased.
  • FY18 adjusted operating income of $999.8 million grew by 29% from
    $772.8 million in the prior year, with the adjusted operating margin
    expanding 50 bps to 10.6% in FY18.
  • The 4Q18 adjusted operating income of $229.4 million more than doubled
    from $90.1 million in the prior-year period, with 600bps of adjusted
    operating margin expansion to 10.0%.

Net Income:

  • FY18 reported net loss of $(168.8) million improved from $(422.2)
    million in the prior-year, and the 4Q18 reported net loss of $(181.3)
    million improved from $(304.8) million in the prior period.
  • The FY18 adjusted net income of $516.3 million grew 26% from $408.5
    million in the prior year driven by operating income improvement.
  • 4Q18 adjusted net income of $106.6 million improved from a loss of
    $(3.4) million in the prior year period.

Earnings Per Share (EPS):

  • Our FY18 reported earnings per share of $(0.23) improved from $(0.66)
    in the prior-year, the 4Q18 reported EPS of $(0.24) improved from
    $(0.41) in the prior-year period. The FY18 adjusted EPS of $0.69 grew
    from $0.63 in the prior year, and the 4Q18 adjusted EPS of $0.14
    improved from $0.00 in the prior year period.

Operating Cash Flow & Net Debt:

  • In FY18, net cash provided by operating activities was $413.7 million,
    down from $757.5 million in FY17 which benefited from over $400
    million related to the timing lag between one-time costs accruals and
    the associated cash outlay. 4Q18 cash from operations totaled $224.8
    million, up $174.0 million from $50.8 million in the prior year
    period. Net debt of $7,291.6 million on June 30, 2018 increased by
    $611.4 million from the balance of $6,680.2 million on June 30, 2017.

Outlook and Management Comments

Commenting on the financial results, Camillo Pane, CEO, said: "Coty made
good progress in fiscal year 2018 although much remains to be done. We
delivered our target of modest like-for-like net revenue growth and,
importantly, a very healthy improvement in adjusted operating margin in
the second half of the year.

Transformation after an immensely complex merger takes time. After
exiting the Transitional Services Agreement with P&G in calendar 2017,
we are building and streamlining back office processes, upgrading
systems, optimizing our manufacturing and logistics, and overall,
simplifying our operations. In parallel, we are investing in our brands
and starting to transform our digital capabilities to fuel sustainable
growth.

While we work on the full turnaround of the new Coty, we are pleased
with the significant progress we have made in under two years and expect
the integration to be largely completed by the end of FY19. The first
half of our synergies commitment has been delivered as planned by FY18
and we are now focused on enhancing operating income growth by
delivering the remaining synergies and returning the business to low
single digit LFL net revenue growth. This level of top line growth,
combined with our ongoing focus on reducing costs even after the
synergies are fully delivered, underpins our medium term target of
achieving a high teens adjusted operating margin.

Against this backdrop, we view FY19 as an important step in the right
direction to achieve our medium term ambitions. For FY19, we are
targeting well over 100 bps of adjusted operating margin expansion,
which, combined with our target of flat to modest LFL net revenue growth
would deliver mid-teens adjusted operating income growth. Our FY19 EPS
target of $0.74 - 0.78 is fully consistent with this level of adjusted
operating income growth. Financial performance across quarters in FY19
will not be linear. The peak of the impact of the supply chain
disruptions due to our logistics and manufacturing consolidation will
come in 1Q19, with a smaller tail end in 2Q19. This will have a
significant impact on both top and bottom line, and together with the
impact of our brand rationalization program, is expected to drive a low
teens decline in our 1Q19 adjusted operating income year over year.
Having said that, we do expect that these business integration related
impacts will be largely over by the end of first half 2019 and our FY19
targets take these disruptions into consideration.

With respect to integration costs, we continue to expect total costs of
approximately $1.3 billion, and as of FY18, we have accrued $1.15
billion of these costs, with the remaining costs expected in FY19-20. To
further boost our net revenue growth and operating margins, we are now
announcing a new cost savings program, which is fully independent from
our P&G integration efforts. This new program will add $250 million in
restructuring charges and is expected to deliver up to $150 million of
gross savings over a 3 year period. Part of the gross savings will be
used to fuel strategic investments such as those in the digital and
e-commerce areas. After re-investments, this will result in expected
total net savings of approximately $60 million over the next 3 years.

Now that the merger integration is nearing completion, we are also
turning our attention to enhancing our cash flow and reducing Coty's
leverage. In this regard, we have set ourselves a target of achieving
below 4.0x Net Debt/ Adjusted EBITDA ratio by the end of calendar 2020,
down from our current ratio of 5.27x.

As we complete the final stages of our integration and deliver the
associated synergies, we are focused on rejuvenating our core business
and amplifying our growth potential, by supporting and strengthening our
brands, developing a stronger innovation pipeline, advancing our
end-to-end digital transformation, and expanding our presence in the
faster-growing emerging markets.

The strategic and financial improvements we are making to our business
reaffirm our confidence in Coty's potential to be a leader and
challenger in the beauty industry while delivering meaningful short and
long term financial results."

* As compared to combined Coty and P&G Beauty Business net revenues
(herein defined as "Combined Company"). These measures, as well as
"adjusted gross margin", "adjusted operating income", "Net Debt /
Adjusted EBITDA ratio", and "free cash flow," are Non-GAAP Financial
Measures. Refer to "Non-GAAP Financial Measures" for discussion of these
measures. Reconciliations from reported to adjusted results can be found
at the end of this release. "NM" indicates calculation not meaningful.

Fiscal 2018 Divisional Business Review

Luxury Division

           
Three Months Ended June 30, 2018 Year Ended June 30, 2018

(in millions)

Actual    

Reported Basis
YoY

    Organic (LFL) Actual    

Reported Basis
YoY

   

Organic (LFL)
Constant Currency

Net Revenues $742.4     14.6%     5.3% $3,210.5     25.1%     6.0%
 
Reported     Adjusted Reported     Adjusted
Operating Income $47.5 $78.1 $248.7 $393.8
Operating Margin 6.4% 10.5% 7.7% 12.3%

In FY18, reported Luxury net revenues of $3,210.5 million increased by
25.1% versus the prior year. On a LFL basis, Luxury net revenues grew by
6.0% in FY18 fueled by strong momentum in all regions and Travel Retail.
Luxury's growth in FY18 was powered by the success of Gucci Bloom and
Tiffany, strong performance in Calvin Klein and philosophy, and
excellent innovation execution across other global brands including
Chloe Nomade and Marc Jacob's Daisy Love, each of which gained share in
4Q18. Growth in emerging markets was particularly strong during FY18,
with Luxury brands growing low double digits in ALMEA driven by both
fragrance and skin care. We also had a great performance in Luxury
e-commerce revenues in FY18 led by excellent growth in the US, Germany,
the UK and China, where we have forged successful partnerships with key
local players.

In 4Q18, reported Luxury revenues increased by 14.6% versus the prior
year, while LFL growth was 5.3% during the same period. Our brands were
particularly strong in Europe and North America in the fourth quarter
with great performances in the U.S., U.K., China, France, Latin America
and Travel Retail. Growth was led by the Gucci, Tiffany, philosophy,
Chloe and Marc Jacobs brands.

The Luxury division delivered reported operating income of $248.7
million in FY18, an increase of 57% versus FY17, while adjusted
operating income was $393.8 million, a growth of 39% from the
prior-year. The adjusted operating margin was 12.3%, growing 130 bps
versus FY17, driven by gross margin expansion, synergy delivery, and
fixed cost reductions. In 4Q18, reported operating income grew from
$(43.8) million to $47.5 million, while adjusted operating income
increased from $10.0 million to $78.1 million, again supported by net
revenue growth and fixed cost management. The adjusted operating margin
in 4Q18 was 10.5%.

We remain excited about the prospects for the Burberry brand. While not
fully finished, we have made significant progress in reducing Burberry
trade inventory since acquiring the business in October 2017.

Consumer Beauty

           
Three Months Ended June 30, 2018 Year Ended June 30, 2018

(in millions)

Actual    

Reported Basis
YoY

    Organic (LFL) Actual    

Reported Basis
YoY

    Organic (LFL)
Net Revenues $1,064.4     (5.5%)     (3.4)% $4,268.1     15.7%     (4.0)%
 
Reported Adjusted Reported Adjusted
Operating Income $53.5 $93.6 $278.9 $411.1
Operating Margin 5.0% 8.8% 6.5% 9.6%

In FY18, our Consumer Beauty reported net revenues totaled $4,268.1
million, growing 15.7%, but declining 4.0% on a LFL basis. Since the
completion of the P&G Beauty transaction, we have made progress towards
stabilizing the Consumer Beauty business, with LFL performance improving
from (10%) in FY17 to (4%) in FY18. The (3.4%) LFL Consumer Beauty
performance in 4Q18 reflected a moderate sequential improvement compared
to the (4.5%) LFL performance in the prior nine months. However, it is
clear that the recovery is taking longer than expected. Contributing to
this delay are external conditions including the decline of the mass
beauty market in Europe and North America, increasingly strong
competition, and an evolving retail environment that has shifted towards
specialty retailers and e-commerce. Performance has also been impacted
by internal factors such as short term supply chain disruption and the
longer time required to rejuvenate global brands that have sustained
multi-year declines. While FY18 was a step in the right direction, we
are not satisfied with our results, and we will continue to drive for a
better outcome in FY19 in particular by targeting revenue growth in
ALMEA, overall e-commerce, and Younique.

In FY18, our Consumer Beauty Europe and North America regions - which
together account for over 70% of the division's net revenues - declined
mid to high single digits. This decline occurred against the backdrop of
a weak underlying mass beauty market, which declined in the low single
digits in Europe and North America across our key color cosmetics,
retail hair, body care, and mass fragrance brands. Our emerging markets
ALMEA region was stable for Consumer Beauty, as strong double digit
growth in most ALMEA markets was offset by decline in Brazil, following
our strategic intervention on inventory and pricing, and the recent
trucker strike. However Brazil in-market performance continues to be
very strong as we are gaining share and growing well ahead of the
market. We also saw very strong e-commerce growth in the Consumer Beauty
division, even excluding Younique.

As previously mentioned, the short-term supply chain disruptions
pressured 4Q18 results. This has primarily impacted our Consumer Beauty
division, and has resulted in our inability to meet all of the demand
from our customers, with particular impact on the Rimmel, Max Factor and
CoverGirl brands. The combination of this supply disruption and the
Brazil trucker strike impacted the Consumer Beauty LFL trend in 4Q18.
Nevertheless during the fourth quarter, net revenues for the Consumer
Beauty North America division grew as we cycled favorable comparables in
the prior year related to our 4Q17 TSA exit, while net revenues in ALMEA
were flat as declines in Brazil offset strong momentum in the rest of
the region, and Europe net revenues remained under pressure.

From a brand perspective, FY18 marked an important milestone for several
of our color cosmetics brands, with color cosmetics in total accounting
for close to half of the Consumer Beauty net revenues. As we execute our
multi-year brand turnaround strategy for CoverGirl in North America,
which accounts for a low teens percentage of total Consumer Beauty net
revenues, FY18 saw the introduction of a new brand positioning, look,
and communication in 2Q18, new in store displays and signage in 3Q18,
and the ongoing roll-out of new packaging and innovation, beginning in
2H18 and continuing into 1H19. We continue to have great conviction in
the new positioning of CoverGirl and our ability to support this iconic,
beloved brand across the most relevant consumer touchpoints. Max Factor,
whose key markets include Europe and ALMEA, benefited from a smaller
scale relaunch in the second half of the year, resulting in modest
growth for the Max Factor brand in FY18. Rimmel, which is present in all
of our regions, declined in FY18 and 4Q18, as pockets of growth in
certain European countries did not offset declines in the U.K. and U.S.

Within our retail hair brands, which in total account for less than 20%
of our Consumer Beauty business, our leading brands Wella and Clairol
were affected by different headwinds during the year. Our larger brand,
Wella, was pressured by more limited innovation in FY18 but benefited
from the brand's disproportionate exposure to faster growing emerging
markets. Clairol, whose core geographies are the U.S. and the U.K., was
pressured in FY18 but benefited from the 2Q18 relaunch of the
Nice'N'Easy franchise, on the back of a breakthrough new formula, with
the relaunch now largely implemented on shelf.

Younique, our online peer-to-peer social selling platform, accounts for
just over 10% of Consumer Beauty net revenues and delivered strong
growth in FY18 on a full year basis. We remain very excited about the
role that Younique plays within Coty and are pleased with the
performance of this partnership, although 4Q18 was a challenging quarter
for Younique as we lapped one of the highest presenter quarters in 4Q17.

From a profit perspective, Consumer Beauty FY18 reported operating
income grew 7% to $278.9 million and the adjusted operating income grew
16% to $411.1 million. The adjusted operating margin remained stable at
9.6%, as operating pressure on the core business and higher logistics
costs were offset by the full year contribution from the higher-margin
Younique brand. The 4Q18 reported operating income of $53.5 million
declined 34%, while the adjusted operating income for the quarter of
$93.6 million grew 44%. This resulted in an adjusted operating margin of
8.8%, a 300 bps increase versus the prior year period, which was driven
by a strong effort in fixed cost control.

Professional Beauty

         
Three Months Ended June 30, 2018 Year Ended June 30, 2018

(in millions)

Actual    

Reported Basis
YoY

    Organic (LFL) Actual    

Reported Basis
YoY

    Organic (LFL)
Net Revenues 492.6     5.4%     2.1% 1,919.4 37.5% 1.7%
 
Reported     Adjusted Reported     Adjusted
Operating Income 36.2 57.7 119.4 194.9
Operating Margin 7.3% 11.7% 6.2% 10.2%

Professional Beauty FY18 net revenues of $1,919.4 million increased by
37.5% from $1,395.5 million in the prior year, with LFL growth of 1.7%.
FY18 was a solid year for the Professional Beauty division, driven by
good growth by our hair brands and mid-single digit growth of our OPI
nail brand. We were particularly pleased with the high single digit
growth of our business in ALMEA where OPI and Wella performed
particularly well. Our ghd business had solid growth in FY18, on the
back of good performance in Europe, with the business ending with a
positive 4Q18. The Wella Professionals brand had a great year in FY18
and 4Q18, as we saw solid growth from both our Color and Care
franchises, and an encouraging result for innovations such as WellaPlex.
Our OPI sales were driven by a very strong performance from our OPI Gel
Color portfolio which is performing well in both developed and emerging
markets.

4Q18 reported revenues of $492.6 million grew by 5.4% on a reported
basis and 2.1% LFL, a strong end to the year and the fifth consecutive
quarter of growth. Our hair brands delivered good growth in North
America in 4Q18, while ALMEA growth was low double digits in the same
period, driven by great performances in Japan, Latin America, India and
China. OPI grew mid-single digits in 4Q18, including robust growth in
Europe and ALMEA.

Professional Beauty reported operating income was $119.4 million in
FY18, a growth of 52% versus the prior year, while adjusted operating
income grew 45% to $194.9 million. In 4Q18, reported operating income
was $36.2 million while adjusted operating income was $57.7 million. The
Professional Beauty Adjusted Operating margin of 10.2% grew 60 bps
during FY18 driven by good fixed cost reduction.

Fiscal 2018 Business Review by Geographic Region

    Year Ended June 30,
Net Revenues     Change
(in millions) 2018     2017

Reported
Basis

   

Combined
Company
Year-Over-
Year

   

Combined
Company
Organic
(LFL)

North America $ 2,966.0 $ 2,506.9 18 % 4 % (4 %)
Europe 4,201.6 3,325.7 26 % 11 % (1 %)
ALMEA 2,230.4   1,817.7   23 % 10 % 8 %
Total $ 9,398.0   $ 7,650.3   23 % 8 % %

North America

  • North America net revenues of $2,966.0 million, or approximately 31%
    of total net revenues, increased 18% as reported but declined 4% LFL
    as solid growth in Luxury driven by Tiffany and Gucci, and
    Professional Beauty could not offset pressure in Consumer Beauty
    amidst the relaunches of CoverGirl, Rimmel, and Clairol in our efforts
    to reconnect these brands with consumers.

Europe

  • Europe net revenues of $4,201.6 million, or approximately 45% of the
    total, increased 26% as reported and declined 1% LFL with growth in
    Luxury, driven by the impact of our robust innovations, and stable
    performance in Professional Beauty, largely offsetting declines in
    Consumer Beauty connected to market pressure, gradual relaunch
    progress, and the recent supply chain disruption.

ALMEA

  • We are very pleased with our ALMEA results in FY18 and will continue
    to invest for outperformance in FY19. ALMEA net revenues of $2,230.4
    million, or approximately 24% of the total, increased 23% as reported
    and grew 8% LFL fueled by strong momentum in Luxury and Professional
    Beauty, and flat performance in Consumer Beauty reflecting declines in
    Brazil which were offset by strong growth in all other markets.

Cash Flows

  • In FY18, net cash provided by operating activities was $413.7 million,
    down from $757.5 million in FY17 which benefited from over $400
    million related to the timing lag between one-time costs accruals and
    the associated cash outlay. The FY18 result reflects the improvement
    in profitability which was partially offset by a deterioration of our
    operating working capital of approximately $100 million. 4Q18 cash
    from operations totaled $224.8 million, up $174.0 million from $50.8
    million in the prior year period.
  • Our FY18 free cash flow of $(32.7) million decreased from $325.2
    million in the prior year driven by the reduction in operating cash
    flow. 4Q18 free cash flow of $97.1 million increased from $(57.5)
    million in the prior year period.
  • In FY18, we distributed $375.8 million in quarterly dividends,
    including a distribution of $94 million paid on June 14, 2018.
  • Cash and cash equivalents of $331.6 million decreased by $203.8
    million compared to June 30, 2017, as we moved cash from foreign
    subsidiaries to Coty Inc. Total debt of $7,623.2 million increased by
    $407.6 million, with net debt of $7,291.6 million up $611.4 million
    from the balance of $6,680.2 million on June 30, 2017. This net debt
    increase reflects the acquisition of the Burberry Beauty business in
    October 2017 for $245.1 million, the annual dividend outflow of $376
    million, negative free cash flow of $(32.7) million, which was
    partially offset by proceeds of $33 million from the sale of Playboy
    and Cerruti in 4Q18.

P&G Integration Update

Update on Progress

FY18 was an important year in the integration of the P&G Beauty
business. Since the closing of the transaction, we have embarked on an
incredibly ambitious and complex transformation which involved
fundamental changes to and simplification of our business processes; a
full organizational redesign; a comprehensive upgrade of our information
systems to allow Coty to run on a single platform; a full Supply Chain
reorganization agenda, and multiple route-to-market conversions. All of
these changes have enabled the simplification of our expanded footprint
and processes and have underpinned the delivery of our committed
synergies. In the last 18 months, we have accomplished a huge amount as
we substantially optimized and restructured our supply and logistics
footprint and exited TSAs with P&G in all 3 regions. We did this
unprecedented level of transformation in a relatively short period of
time and with solid results.

The last step of our integration includes the completion of the one
order, one shipment, one invoice program which will make Coty a fully
integrated company, able to sell, ship and invoice all of our brands in
a seamless way for our customers. It will allow significant
simplification for our employees and customers and increase our
scalability potential. With this final step, Coty will complete the most
complex integration in the beauty industry. We expect this "one order,
one shipment, one invoice" integration process to be complete by the end
of FY19.

Synergies

We continue to expect cost synergies of approximately $750 million via
procurement and supply chain savings as well as SG&A reductions. We are
confirming our progress in achieving 50% of the $750 million of
synergies by FY18, with $225 million having been achieved in FY18. We
expect to realize the balance of the $375 million by the end of fiscal
2020 with $225 million expected to be achieved in FY19.

Additionally, we continue to target a working capital benefit of $500
million through FY20 and we have achieved approximately $470 million of
working capital benefits over the course of FY17 and FY18.

Global Integration Costs

As we noted last quarter, we have fine-tuned our original estimate made
2 years ago and have broadened the scope of our global integration cost
program, including further go-to-market changes, systems enhancements
and costs connected to our one order, one shipment, one invoice program.
We continue to expect to incur integration costs of approximately $1.3
billion, of which approximately $1.2 billion are expected to be cash
costs. These are integration and acquisition related costs and are
excluded from adjusted results. It is important to highlight that these
costs are first accrued and then paid, such that the cash impact can lag
the P&L impact. As of FY18, we have accrued approximately $1.15 billion
of costs, with the remaining still to come in FY19-20. Of the expected
$1.2 billion of cash costs, approximately $860 million has been paid
through FY18.

One-time capex will remain in line with the original estimate of
approximately $500 million, and as of FY18, we have incurred
approximately $370 million, with the remainder expected to be deployed
in FY19.

Noteworthy Company Developments

Other noteworthy company developments include:

  • With the contraction of the business in FY17 and flattish results in
    FY18, we need to right-size our Fixed Cost base to align with our
    current top line reality and are thus announcing a new $250 million
    cost savings program. This program is being run independently from our
    P&G integration efforts and the previously communicated one-off cost
    program. This restructuring program, together with our other synergy
    commitments, is meant to drive simplicity and generate flexibility in
    our P&L to be able to fuel strategic investments such as those in the
    digital and e-commerce areas. We expect to deliver up to $150 million
    of total gross savings in the next 3 years as a result of this program
    which will help to drive operating margin improvement, while also
    positioning Coty to succeed in a new business reality. We plan to
    reinvest a significant portion of these savings in our digital
    transformation agenda, which includes significant multi-year
    investments in talent acquisition, in-house content creation
    capabilities and product management systems that will fuel our
    e-commerce efforts. As a result of these investments, we would expect
    incremental net savings connected to the new cost restructuring
    program to be approximately $60 million in total over the next 3
    years. Connected to this new program, we have already accrued $79
    million of costs in FY18 and expect the majority of the remaining
    approximately $170 million to be recorded in FY19. In 4Q18 we had cash
    outflows of approximately $16 million in connection with this program
    and would expect the remaining cash flows to impact FY19 and FY20.
  • On August 21, 2018 Coty announced a dividend of $0.125, payable on
    September 14, 2018 to stockholders of record at the close of business
    on August 31, 2018.

Conference Call

Coty Inc. will host a conference call at 8:00 a.m. (ET) today, August
21, 2018 to discuss its results. The dial-in number for the call is
(855) 889-8783 in the U.S. or (720) 634-2929 internationally (conference
passcode number: 8891589). The call will also be webcast live at http://investors.coty.com.
The conference call will be available for replay. The replay dial-in
number is (855) 859-2056 in the U.S. or (404) 537-3406 outside the U.S.
(conference passcode number: 8891589).

About Coty Inc.

Coty is one of the world's largest beauty companies with approximately
$9 billion in revenue, an iconic portfolio of brands and a purpose to
celebrate and liberate the diversity of consumers' beauty. We believe
the beauty of humanity lies in the individuality of its people; beauty
is at its best when authentic; and beauty should make you feel happy,
never sad. As the global leader in fragrance, a strong number two in
professional salon hair color & styling, and number three in color
cosmetics, Coty operates three divisions: Consumer Beauty, which is
focused on mass color cosmetics, mass retail hair coloring and styling
products, body care and mass fragrances with brands such as COVERGIRL,
Max Factor and Rimmel; Luxury, which is focused on prestige fragrances
and skincare with brands such as Calvin Klein, Burberry, Marc Jacobs,
Hugo Boss, Gucci and philosophy; and Professional Beauty, which is
focused on servicing salon owners and professionals in both hair and
nail, with brands such as Wella Professionals, Sebastian Professional,
OPI and ghd. Coty has over 20,000 colleagues globally and its products
are sold in over 150 countries. Coty and its brands are committed to a
range of social causes as well as seeking to minimize its impact on the
environment.

For additional information about Coty Inc., please visit www.coty.com.

Forward Looking Statements

Certain statements in this release are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect Coty's current views with
respect to, among other things,Coty's targets, outlook and/or guidance
for FY19 and beyond (including extent and timing of revenue and profit
trends, the Consumer Beauty division's stabilization, and Net Debt /
Adjusted EBITDA ratio), establishing Coty as a global leader and
challenger in beauty, its future operations and strategy (including
brand relaunches and performance in emerging markets and channels),
synergies, savings, performance and integration relating to its recent
acquisitions (including the P&G Beauty Business) and its ongoing and
future cost efficiency and restructuring initiatives and programs,
strategic transactions (including mergers and acquisitions, joint
ventures, investments, divestitures, licenses and portfolio
rationalizations), future cash flows and liquidity, future performance
in digital and e-commerce and the expected impact of its digital
transformation agenda, future effective tax rates , timing and size of
cash outflows and debt deleveraging, and impact and timing of supply
chain disruptions. These forward-looking statements are generally
identified by words or phrases, such as "anticipate", "are going to",
"estimate", "plan", "project", "expect", "believe", "intend", "foresee",
"forecast", "will", "may", "should", "outlook", "continue", "target",
"aim", "potential" and similar words or phrases. These statements are
based on certain assumptions and estimates that Coty considers
reasonable, but are subject to a number of risks and uncertainties, many
of which are beyond Coty's control, which could cause actual events or
results (including our financial condition, results of operations, cash
flows and prospects) to differ materially from such statements,
including risks and uncertainties relating to:

  • Coty's ability to achieve its global business strategies, compete
    effectively in the beauty industry and achieve the benefits
    contemplated by its strategic initiatives (including sell-through of
    its relaunched brands, enhancement of its innovation pipeline, focus
    on emerging markets and channels, improvement of in-store execution
    and reduction of discounts in certain markets) within the expected
    time frame or at all;
  • Coty's ability to anticipate, gauge and respond to market trends and
    consumer preferences, which may change rapidly, and the market
    acceptance of new products, including any launches or relaunches and
    their anticipated costs and discounting, and consumer receptiveness to
    its marketing and consumer engagement activities (including digital
    marketing and media);
  • use of estimates and assumptions in preparing Coty's financial
    statements, including with regard to revenue recognition, stock
    compensation expense, income taxes, the assessment of goodwill, other
    intangible assets and long-lived assets for impairment, the market
    value of inventory, pension expense and the fair value of acquired
    assets and liabilities associated with acquisitions;
  • managerial, integration, operational, regulatory, legal and financial
    risks, including diversion of management attention to and management
    of cash flows, costs and expenses associated with Coty's multiple
    ongoing and future strategic initiatives and internal reorganizations
    and restructuring activities;
  • the continued integration of the P&G Beauty Business and other recent
    acquisitions with the Company's business, operations, systems,
    financial data and culture and the ability to realize synergies, avoid
    future supply chain and other business disruptions, reduce costs and
    realize other potential efficiencies and benefits (including through
    Coty's restructuring initiatives) at the levels and costs and within
    the time frames contemplated or at all;
  • increased competition, consolidation among retailers, shifts in
    consumers' preferred distribution and marketing channels (including to
    digital and luxury channels), shelf-space resets, compression of
    go-to-market cycles, changes in product and marketing requirements by
    retailers, and other changes in the retail, e-commerce and wholesale
    environment in which Coty does business and sells its products and its
    ability to respond to such changes;
  • Coty and its brand partners' and licensors' ability to obtain,
    maintain and protect the intellectual property rights, including
    trademarks, brand names and other intellectual property used in its
    and their respective businesses, protect its and their respective
    reputations (including those of its and their executives), public
    goodwill, and defend claims by third parties for infringement of
    intellectual property rights;
  • the effect of the divestiture and/or discontinuation of its non-core
    brands (including associated post-closing cost reduction programs) and
    rationalization of wholesale distribution by reducing the amount of
    product diversion to the value and mass channels;
  • any change to Coty's capital allocation and/or cash management
    priorities;
  • any unanticipated problems, liabilities or other challenges associated
    with an acquired business which could result in increased risk or new,
    unanticipated or unknown liabilities, including with respect to
    environmental, competition and other regulatory, compliance or legal
    matters;
  • Coty's international operations and joint ventures, including
    enforceability and effectiveness of its joint venture agreements and
    reputational, compliance, regulatory, economic and foreign political
    risks, including difficulties and costs associated with maintaining
    compliance with a broad variety of complex domestic and international
    regulations;
  • Coty's dependence on certain licenses (especially in its Luxury
    division) and its ability to renew expiring licenses on favorable
    terms;
  • Coty's dependence on entities performing outsourced functions and
    third-party suppliers, including third party software providers;
  • administrative, development and other difficulties in meeting the
    expected timing of market expansions, product launches and marketing
    efforts;
  • global political and/or economic uncertainties, disruptions or major
    legal, regulatory or policy changes and/or the enforcement thereof
    that affect Coty's business, financial performance, operations or its
    products, including the impact of Brexit, the current U.S.
    administration, the results of elections in European countries and
    future elections in Brazil, changes in the U.S. tax code, and recent
    changes and future changes in tariffs, retaliatory and trade
    protection measures, trade policies and other international trade
    regulations in the U.S. and in other regions where Coty operates
    including the European Union;
  • the number, type, outcomes (by judgment, order or settlement) and
    costs of legal, tax, regulatory or administrative proceedings,
    investigations and/or litigation;
  • Coty's ability to manage seasonal and other variability and to
    anticipate future business trends and business needs;
  • disruptions in operations, including due to disruptions in supply
    chain, restructurings and other business alignment activities,
    manufacturing or information technology systems, labor disputes and
    natural disasters;
  • restrictions imposed on Coty through its license agreements, credit
    facilities and senior unsecured bonds, Coty's ability to repay,
    refinance or recapitalize debt, and changes in the manner in which
    Coty finances its debt and future capital needs;
  • increasing dependency on information technology and Coty's ability to
    protect against service interruptions, data corruption, cyber-based
    attacks or network security breaches, costs and timing of
    implementation and effectiveness of any upgrades or other changes to
    information technology systems, including Coty's digital
    transformation initiatives, and its failure to comply with any privacy
    or data security laws (including the European Union General Data
    Protection Regulation) or to protect against theft of customer,
    employee and corporate sensitive information;
  • the Company's ability to attract and retain key personnel;
  • the distribution and sale by third parties of counterfeit and/or gray
    market versions of the Coty's products; and
  • other factors described elsewhere in this document and from time to
    time in documents that Coty files with the SEC.

When used herein, the term "includes" and "including" means, unless the
context otherwise indicates, including without limitation. More
information about potential risks and uncertainties that could affect
Coty's business and financial results is included under the heading
"Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Coty's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 2018 and other periodic
reports Coty has filed and may file with the SEC from time to time.

All forward-looking statements made in this release are qualified by
these cautionary statements. These forward-looking statements are made
only as of the date of this release, and Coty does not undertake any
obligation, other than as may be required by law, to update or revise
any forward-looking or cautionary statements to reflect changes in
assumptions, the occurrence of events, unanticipated or otherwise, or
changes in future operating results over time or otherwise.

Comparisons of results for current and any prior periods are not
intended to express any future trends or indications of future
performance unless expressed as such, and should only be viewed as
historical data.

Non-GAAP Financial Measures

The Company operates on a global basis, with the majority of net
revenues generated outside of the U.S. Accordingly, fluctuations in
foreign currency exchange rates can affect results of operations.
Therefore, to supplement financial results presented in accordance with
GAAP, certain financial information is presented excluding the impact of
foreign currency exchange translations to provide a framework for
assessing how the underlying businesses performed excluding the impact
of foreign currency exchange translations ("constant currency").
Constant currency information compares results between periods as if
exchange rates had remained constant period-over-period, with the
current period's results calculated at the prior-year period's rates.
The Company calculates constant currency information by translating
current and prior-period results for entities reporting in currencies
other than U.S. dollars into U.S. dollars using constant foreign
currency exchange rates. The constant currency calculations do not
adjust for the impact of revaluing specific transactions denominated in
a currency that is different to the functional currency of that entity
when exchange rates fluctuate. The constant currency information
presented may not be comparable to similarly titled measures reported by
other companies. The Company discloses the following constant currency
financial measures: net revenues, organic like-for-like (LFL) net
revenues, combined company net revenues, combined company organic (LFL)
net revenues, adjusted gross profit and adjusted operating income.

The Company presents period-over-period comparisons of net revenues on a
constant currency basis, as well as on an organic (LFL), combined
company, combined company constant currency, and combined company
organic (LFL) basis. The Company believes that organic (LFL)
period-over-period, combined company period-over-period, combined
company constant currency period-over-period and combined company (LFL)
period-over-period better enable management and investors to analyze and
compare the Company's net revenues performance from period to period, as
the total business and individual divisions are being managed on a
combined company basis. For the periods described in this release, the
term "like-for-like" describes the Company's core operating performance,
excluding the financial impact of (i) acquired brands or businesses in
the current year period until we have twelve months of comparable
financial results, (ii) divested brands or businesses or early
terminated brands in the prior year period to maintain comparable
financial results with the current fiscal year period and (iii) foreign
currency exchange translations to the extent applicable. In the periods
described in this release, combined company period-over-period, combined
company constant currency period-over-period and combined company
organic (LFL) period-over-period give effect to the completion of the
Merger for purposes of the year ended June 30, 2018, as compared to the
year ended June 30, 2017, as if it has been completed on July 1, 2016.
Combined company growth and combined company constant currency growth do
not include any adjustments related to potential profit improvements,
potential cost savings or adjustments to fully conform to the accounting
policies of Coty. For a reconciliation of organic (LFL)
period-over-period, combined company period-over-period, combined
company constant currency period-over-period, and combined company
organic (LFL) period-over-period, see the table entitled "Reconciliation
of Reported Net Revenues to Like-For-Like Net Revenues". For a
reconciliation of the Company's organic (LFL) period-over-period,
combined company period-over-period, combined company constant currency
period-over-period and combined company organic (LFL) by segment and
geographic region, see the tables entitled "Net Revenues and Adjusted
Operating Income by Segment" and "Net Revenues by Geographic Region."

The Company presents operating income, operating income margin, gross
profit, gross margin, effective tax rate, net income, net income margin,
net revenues and EPS (diluted) on a non-GAAP basis and specifies that
these measures are non-GAAP by using the term "adjusted". The Company
believes these non-GAAP financial measures better enable management and
investors to analyze and compare operating performance from period to
period. In calculating adjusted operating income, operating income
margin, gross profit, gross margin, effective tax rate, net income, net
income margin and EPS (diluted), the Company excludes the following
items:

  • Costs related to acquisition activities: The Company excludes
    acquisition-related costs and acquisition accounting impacts such as
    those related to transaction costs and costs associated with the
    revaluation of acquired inventory in connection with business
    combinations because these costs are unique to each transaction. The
    nature and amount of such costs vary significantly based on the size
    and timing of the acquisitions and the maturities of the businesses
    being acquired. Also, the size, complexity and/or volume of past
    acquisitions, which often drives the magnitude of such expenses, may
    not be indicative of the size, complexity and/or volume of any future
    acquisitions.
  • Restructuring and other business realignment costs: The Company
    excludes costs associated with restructuring and business structure
    realignment programs to allow for comparable financial results to
    historical operations and forward-looking guidance. In addition, the
    nature and amount of such charges vary significantly based on the size
    and timing of the programs. By excluding the above referenced expenses
    from the non-GAAP financial measures, management is able to evaluate
    the Company's ability to utilize existing assets and estimate their
    long-term value. Furthermore, management believes that the adjustment
    of these items supplement the GAAP information with a measure that can
    be used to assess the sustainability of the Company's operating
    performance.
  • Amortization expense: The Company excludes the impact of amortization
    of finite-lived intangible assets, as such non-cash amounts are
    inconsistent in amount and frequency and are significantly impacted by
    the timing and/or size of acquisitions. Management believes that the
    adjustment of these items supplement the GAAP information with a
    measure that can be used to assess the sustainability of the Company's
    operating performance. Although the Company excludes amortization of
    intangible assets from the non-GAAP expenses, management believes that
    it is important for investors to understand that such intangible
    assets contribute to revenue generation. Amortization of intangible
    assets that relate to past acquisitions will recur in future periods
    until such intangible assets have been fully amortized. Any future
    acquisitions may result in the amortization of additional intangible
    assets.
  • Interest and other (income) expense: The Company excludes foreign
    currency impacts associated with acquisition-related and debt
    financing related forward contracts, as well as debt financing
    transaction costs as the nature and amount of such charges are not
    consistent and are significantly impacted by the timing and size of
    such transactions.
  • Loss on early extinguishment of debt: We have excluded loss on
    extinguishment of debt as this represents a non-cash charge, and the
    amount and frequency of such charges is not consistent and is
    significantly impacted by the timing and size of debt financing
    transactions.
  • Noncontrolling interest: This adjustment represents the after-tax
    impact of the non-GAAP adjustments included in Net income attributable
    to noncontrolling interests based on the relevant non-controlling
    interest percentage.
  • Tax: This adjustment represents the impact of the tax effect of the
    pretax items excluded from Adjusted net income. The tax impact of the
    non-GAAP adjustments are based on the tax rates related to the
    jurisdiction in which the adjusted items are received or incurred.

The Company has provided a quantitative reconciliation of the difference
between the non-GAAP financial measures and the financial measures
calculated and reported in accordance with GAAP. For a reconciliation of
adjusted gross profit to gross profit, adjusted EPS (diluted) to EPS
(diluted), and adjusted net revenues to net revenues, see the table
entitled "Reconciliation of Reported to Adjusted Results for the
Consolidated Statements of Operations." For a reconciliation of adjusted
operating income to operating income and adjusted operating income
margin to operating income margin, see the tables entitled
"Reconciliation of Reported Operating Income (Loss) to Adjusted
Operating Income" and "Reconciliation of Reported Operating Income
(Loss) to Adjusted Operating Income by Segment." For a reconciliation of
adjusted effective tax rate and adjusted cash tax rate to effective tax
rate, see the table entitled "Reconciliation of Reported (Loss) Income
Before Income Taxes and Effective Tax Rates to Adjusted Income Before
Income Taxes and Effective Tax Rates." For a reconciliation of adjusted
net income and adjusted net income margin to net income (loss), see the
table entitled "Reconciliation of Reported Net (Loss) Income to Adjusted
Net Income."

The Company also presents free cash flow, adjusted earnings before
interest, taxes, depreciation and amortization ("EBITDA") and net debt.
Management believes that these measures are useful for investors because
it provides them with an important perspective on the cash available for
debt repayment and other strategic measures and provides them with the
same measures that management uses as the basis for making resource
allocation decisions. Free cash flow is defined as net cash provided by
operating activities, less capital expenditures, adjusted EBITDA is
defined as adjusted operating income less depreciation and net debt is
defined as total debt less cash and cash equivalents. For a
reconciliation of Free Cash Flow, see the table entitled "Reconciliation
of Net Cash Provided by Operating Activities to Free Cash Flow," for
adjusted EBITDA, see the table entitled "Reconciliation of Adjusted
Operating Income to Adjusted EBITDA" and for net debt, see the table
entitled "Reconciliation of Total Debt to Net Debt."

These non-GAAP measures should not be considered in isolation, or as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP.

To the extent that the Company provides guidance, it does so only on a
non-GAAP basis and does not provide reconciliations of such
forward-looking non-GAAP measures to GAAP due to the inherent difficulty
in forecasting and quantifying certain amounts that are necessary for
such reconciliation, including adjustments that could be made for
restructuring, integration and acquisition-related expenses,
amortization expenses, adjustments to inventory, and other charges
reflected in our reconciliation of historic numbers, the amount of
which, based on historical experience, could be significant.

- Tables Follow -

 

COTY INC.
SUPPLEMENTAL SCHEDULES INCUDING NON-GAAP
FINANCIAL MEASURES

 

COTY INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

       
Year Ended June 30, Quarter Ended June 30,
(in millions, except per share data) 2018     2017     2016   2018     2017     2016
Net revenues $ 9,398.0 $ 7,650.3 $ 4,349.1 $ 2,299.4 $ 2,241.3 $ 1,075.6
Cost of sales 3,608.4   3,028.5   1,746.0     896.7     875.3     465.6  
as % of Net revenues 38.4 % 39.6 % 40.1 % 39.0 % 39.1 % 43.3 %
Gross profit 5,789.6 4,621.8 2,603.1 1,402.7 1,366.0 610.0
Gross margin 61.6 % 60.4 % 59.9 % 61.0 % 60.9 % 56.7 %
 
Selling, general and administrative expenses 5,009.6 4,060.0 2,027.8 1,245.6 1,315.4 533.9
as % of Net revenues 53.3 % 53.1 % 46.6 % 54.2 % 58.7 % 49.6 %
Amortization expense 352.8 275.1 79.5 92.2 56.1 20.5
Restructuring costs 173.2 372.2 86.9 97.6 193.2 7.6
Acquisition-related costs 64.2 355.4 174.0 0.5 80.3 75.7
Asset impairment charges 5.5
Loss (gain) on sale of asset 28.6   (3.1 ) (24.8 )   28.6         (24.8 )
Operating income (loss) 161.2 (437.8 ) 254.2 (61.8 ) (279.0 ) (2.9 )
as % of Net revenues 1.7 % (5.7 %) 5.8 % (2.7 %) (12.4 %) (0.3 %)
Interest expense, net 265.0 218.6 81.9 65.7 59.5 26.2
Loss on early extinguishment of debt 10.7 3.1 10.7
Other expense, net 38.0   1.6   30.4     27.9     1.4      
(Loss) income before income taxes (152.5 ) (658.0 ) 138.8 (166.1 ) (339.9 ) (29.1 )
as % of Net revenues (1.6 %) (8.6 %) 3.2 % (7.2 %) (15.2 %) (2.7 %)
Provision (benefit) for income taxes (24.7 ) (259.5 ) (40.4 )   4.1     (38.9 )   2.1  
Net (loss) income (127.8 ) (398.5 ) 179.2 (170.2 ) (301.0 ) (31.2 )
as % of Net revenues (1.4 %) (5.2 %) 4.1 % (7.4 %) (13.4 %) (2.9 %)
Net income (loss) attributable to noncontrolling interests 2.0 15.4 7.6 5.0 1.2 (4.5 )
Net income attributable to redeemable noncontrolling interests 39.0   8.3   14.7     6.1     2.6     4.3  
Net (loss) income attributable to Coty Inc. $ (168.8 ) $ (422.2 ) $ 156.9     $ (181.3 )   $ (304.8 )   $ (31.0 )
as % of Net revenues (1.8 %) (5.5 %) 3.6 % (7.9 %) (13.6 %) (2.9 %)
Net (loss) income attributable to Coty Inc. per common share:
Basic $ (0.23 ) $ (0.66 ) $ 0.45 $ (0.24 ) $ (0.41 ) $ (0.09 )
Diluted $ (0.23 ) $ (0.66 ) $ 0.44 $ (0.24 ) $ (0.41 ) $ (0.09 )
Weighted-average common shares outstanding:
Basic 749.7 642.8 345.5 750.6 747.7 338.8
Diluted 749.7 642.8 354.2 750.6 747.7 338.8
 

RECONCILIATION OF REPORTED TO ADJUSTED RESULTS FOR THE CONSOLIDATED
STATEMENTS OF OPERATIONS

These supplemental schedules provide adjusted Non-GAAP financial
information and a quantitative reconciliation of the difference between
the Non-GAAP financial measure and the financial measure calculated and
reported in accordance with GAAP.

    Year Ended June 30, 2018
(in millions) Reported
(GAAP)
    Adjustments(a)    

Adjusted
(Non-GAAP)

   

Foreign Currency
Translation

   

Adjusted Results at
Constant Currency

Net revenues $ 9,398.0 $ $ 9,398.0 $ (311.1 ) $ 9,086.9
Gross profit 5,789.6 62.8 5,852.4 (199.1 ) 5,653.3
Gross margin 61.6 % 62.3 % 62.2 %
Operating income 161.2 838.6 999.8 (11.7 ) 988.1
as % of Net revenues 1.7 % 10.6 % 10.9 %
Net (loss) income attributable to Coty Inc. $ (168.8 ) $ 685.1 $ 516.3
as % of Net revenues (1.8 %) 5.5 %
 
EPS (diluted) $ (0.23 ) $ 0.69
             
Year Ended June 30, 2017
(in millions) Reported
(GAAP)
Adjustments(a) Adjusted
(Non-GAAP)
Net revenues $ 7,650.3 $ $ 7,650.3
Gross profit 4,621.8 151.9 4,773.7
Gross margin 60.4 % 62.4 %
Operating (loss) income (437.8 ) 1,210.6 772.8
as % of Net revenues (5.7 %) 10.1 %
Net (loss) income attributable to Coty Inc. $ (422.2 ) $ 830.7 $ 408.5
as % of Net revenues (5.5 %) 5.3 %
 
EPS (diluted) $ (0.66 ) $ 0.63
(a) See "Reconciliation of Reported Operating (Loss)
Income to Adjusted Operated Income" and "Reconciliation of Reported
Net (Loss) Income to Adjusted Net Income" for a detailed description
of adjusted items.
 
    Three Months Ended June 30, 2018
(in millions) Reported
(GAAP)
    Adjustments(a)     Adjusted
(Non-GAAP)
    Foreign Currency
Translation
   

Adjusted Results at
Constant Currency

Net revenues $ 2,299.4 $ $ 2,299.4 $ (44.2 ) $ 2,255.2
Gross profit 1,402.7 19.5 1,422.2 (32.6 ) 1,389.6
Gross margin 61.0 % 61.9 % 61.6 %
Operating (loss) income (61.8 ) 291.2 229.4 2.0 231.4
as % of Net revenues (2.7 %) 10.0 % 10.3 %
Net (loss) income attributable to Coty Inc. $ (181.3 ) $ 287.9 $ 106.6
as % of Net revenues (7.9 %) 4.6 %
 
EPS (diluted) $ (0.24 ) $ 0.14
 
Three Months Ended June 30, 2017
(in millions) Reported
(GAAP)
    Adjustments(a)     Adjusted
(Non-GAAP)
Net revenues $ 2,241.3 $ $ 2,241.3
Gross profit 1,366.0 25.0 1,391.0
Gross margin 60.9 % 62.1 %
Operating (loss) income (279.0 ) 369.1 90.1
as % of Net revenues (12.4 %) 4.0 %
Net (loss) income attributable to Coty Inc. $ (304.8 ) $ 301.4 $ (3.4 )
as % of Net revenues (13.6 %) (0.2 %)
 
EPS (diluted) $ (0.41 ) $
(a) See "Reconciliation of Reported Operating (Loss)
Income to Adjusted Operated Income" and "Reconciliation of Reported
Net (Loss) Income to Adjusted Net Income" for a detailed description
of adjusted items.
 

RECONCILIATION OF REPORTED OPERATING (LOSS) INCOME TO ADJUSTED
OPERATING INCOME

    Three Months Ended June 30,     Year Ended June 30,
(in millions) 2018     2017     Change 2018     2017     Change
Reported Operating (Loss) Income $ (61.8 ) $ (279.0 ) 78 % $ 161.2 $ (437.8 ) >100%
% of Net revenues (2.7 %) (12.4 %) 1.7 % (5.7 %)
Costs related to acquisition activities (a) 6.5 99.2 (93 %) 76.1 494.9 (85 %)
Amortization expense (b) 92.2 56.1 64 % 352.8 275.1 28 %
Restructuring and other business realignment costs (c) 163.9 212.2 (23 %) 381.1 426.2 (11 %)
Pension settlement (d) 1.6 (100 %) 17.5 (100 %)
Loss (gain) on sale of asset (e) 28.6     >100% 28.6   (3.1 ) >100%
Total adjustments to Reported Operating (Loss) Income 291.2   369.1   (21 %) 838.6   1,210.6   (31 %)
Adjusted Operating Income $ 229.4   $ 90.1   >100% $ 999.8   $ 772.8   29 %
% of Net revenues 10.0 % 4.0 % 10.6 % 10.1 %
 

(a)

 

In the three months ended June 30, 2018, we incurred $6.5 of costs
related to acquisition activities. We recognized
acquisition-related costs of $0.5 in the Consolidated Statements
of Operations, primarily in connection with current year
acquisitions. These costs may include finder's fees, legal,
accounting, valuation, and other professional or consulting fees,
and other internal costs which may include compensation related
expenses for dedicated internal resources. We also incurred $6.0
in costs of sales primarily reflecting the destruction of excess
acquired inventory in connection with the acquisition of the
Burberry Beauty Business, in the Consolidated Statements of
Operations. In the three months ended June 30, 2017, we incurred
$99.2 of costs related to acquisition activities. We recognized
acquisition-related costs of $80.3 in the Consolidated Statements
of Operations, primarily in connection with the acquisition of the
P&G Beauty Business, ghd and Younique. These costs may include
finder's fees, legal, accounting, valuation, and other
professional or consulting fees, and other internal costs which
may include compensation related expenses for dedicated internal
resources. We also incurred $18.6 in costs of sales primarily
reflecting revaluation of acquired inventory in connection with
the acquisition of ghd, Younique and the P&G Beauty Business in
the Consolidated Statements of Operations.

 

In fiscal 2018, we incurred $76.1 of costs related to acquisition
activities. We recognized Acquisition-related costs of $64.2,
primarily in connection with the acquisitions of the P&G Beauty
Business, the Burberry Beauty Business, ghd and Younique. These
costs may include finder's fees, legal, accounting, valuation, and
other professional or consulting fees, and other internal costs
which may include compensation related expenses for dedicated
internal resources.We also incurred $7.1 of cost related to acquired
inventory step-up amortization in connection with the acquisitions
of Younique and the Burberry Beauty Business, as well as $4.8 in
excess inventory-related costs associated with the Burberry Beauty
Business acquisition, included in Cost of sales in the Consolidated
Statements of Operations. In fiscal 2017, we incurred $494.9 of
costs related to acquisition activities. We recognized
Acquisition-related costs of $355.4, primarily in connection with
the acquisition of the P&G Beauty Business, ghd and Younique,
included in the Consolidated Statements of Operations. These may
include finder's fees, legal, accounting, valuation, and other
professional or consulting fees, and other internal costs which may
include compensation related expenses for dedicated internal
resources. We also incurred $48.8, $44.4, and $40.8 in costs of
sales primarily reflecting revaluation of acquired inventory in
connection with the acquisitions of the P&G Beauty Business, ghd,
and Younique, respectively in the Consolidated Statements of
Operations.
 

(b)

In the three months ended June 30, 2018, amortization expense
increased to $92.2 from $56.1 in the three months ended June 30,
2017, primarily as a result of acquisitions. In the three months
ended June 30, 2018, amortization expense of $30.6, $40.1 and
$21.5 was reported in the Luxury, Consumer Beauty and Professional
Beauty segments, respectively. In the three months ended, June 30,
2017, amortization expense of $53.8, $(15.9), and $18.2 was
reported in the Luxury, Consumer Beauty, and Professional Beauty
segments, respectively.

 
In fiscal 2018, amortization expense increased to $352.8 from $275.1
in fiscal 2017 primarily as a result of acquisitions. In fiscal
2018, amortization expense of $145.1, $132.2, and $75.5 were
reported in the Luxury, Consumer Beauty, and Professional Beauty
segments, respectively. In fiscal 2017, amortization expense of
$124.4, $94.9, and $55.8 were reported in the Luxury, Consumer
Beauty, and Professional Beauty segments, respectively.
 

(c)

In the three months ended June 30, 2018, we incurred restructuring
and other business structure realignment costs of $163.9. We
incurred restructuring costs of $97.6 primarily related to
integrating and optimizing the combined company following the
acquisition of the P&G Beauty Business (the "Global Integration
Activities") and the new cost restructuring program ("2018
Restructuring Actions"), included in the Consolidated Statements
of Operations. We incurred business structure realignment costs of
$66.3 primarily related to our Global Integration Activities,
organizational redesign and certain other programs. Of this
amount, $52.4 is included in selling, general and administrative
expenses and $13.9 is included in cost of sales. In the three
months ended June 30, 2017, we incurred restructuring and other
business structure realignment costs of $212.2. We incurred
restructuring costs of $193.2 primarily related to Global
Integration Activities, included in the Consolidated Statements of
Operations. We incurred business structure realignment costs of
$19.0 primarily related to our Global Integration Activities,
organizational redesign and certain other programs. Of this
amount, $13.9 is included in selling, general and administrative
expenses and $5.1 is included in cost of sales.

 
In fiscal 2018, we incurred restructuring and other business
structure realignment costs of $381.1. We incurred restructuring
costs of $173.2 primarily related to the Global Integration
Activities and 2018 Restructuring Actions, included in the
Consolidated Statements of Operations. We incurred business
structure realignment costs of $207.9 primarily related to our
Global Integration Activities. Of this amount $156.8 is included in
selling, general and administrative expenses, $51.1 is included in
cost of sales. In fiscal 2017, we incurred restructuring and other
business structure realignment costs of $426.2. We incurred
restructuring costs of $372.2 primarily related to the Global
Integration Activities, included in the Consolidated Statements of
Operations. We incurred business structure realignment costs of
$54.0 primarily related to our Global Integration Activities,
organizational redesign and certain other programs. Of this amount
$37.4 is included in selling, general and administrative expenses,
$16.6 is included in cost of sales.
 

(d)

In fiscal 2017, we incurred a charge of $17.5, primarily in
connection with the settlement of obligations related to the U.S.
Del Laboratories, Inc. pension plan. The settlement of the plan
was effectuated through lump sum payments to eligible participants
during the three months ended September 30, 2016, in addition to,
the 15 purchase of annuity contracts from a third-party insurance
provider, effectively transferring the U.S. Del Laboratories, Inc.
pension plan obligation to the insurance provider, during the
three months ended December 31, 2016. The settlement charge is as
a result of accelerating the recognition of losses previously
deferred in other comprehensive income (loss).

 

(e)

In fiscal 2018, we sold certain assets relating to two of our
fragrance brands and recorded a loss of $28.6 which has been
reflected in Loss (Gain) on sale of assets in the Consolidated
Statements of Operations. In fiscal 2017, we sold certain assets
relating to the J.Lo brand and recorded a gain of $3.1 which has
been reflected in Gain on sale of assets in the Consolidated
Statements of Operations.

RECONCILIATION OF REPORTED (LOSS) INCOME BEFORE INCOME TAXES AND
EFFECTIVE TAX RATES TO ADJUSTED INCOME BEFORE INCOME TAXES AND ADJUSTED
EFFECTIVE TAX RATES

    Three Months Ended June 30, 2018     Three Months Ended June 30, 2017
(in millions)

(Loss)
income
before
income
taxes

   

Provision
for
income
taxes

   

Effective
tax rate

(Loss)
income
before
income
taxes

   

(Benefit)
provision
for taxes

   

Effective
tax rate

Reported loss before income taxes $ (166.1 ) $ 4.1   (2.5 )% $ (339.9 ) $ (38.9 )   11.4 %
Adjustments to Reported Operating (Loss) (a)(b) 291.2 23.9 369.1 42.0
Other adjustments (b) (c) 33.4   10.4         (0.2 )    
Adjusted income before income taxes $ 158.5   $ 38.4     24.2 % $ 29.2   $ 2.9     9.9 %
(a)   See a description on adjustments under "Reconciliation of Reported
Operating (Loss) Income to Adjusted Operating Income".
(b) The tax effects of each of the items included in adjusted income are
calculated in a manner that results in a corresponding income tax
expense/provision for adjusted income. In preparing the calculation,
each adjustment to reported income is first analyzed to determine if
the adjustment has an income tax consequence. The provision for
taxes is then calculated based on the jurisdiction in which the
adjusted items are incurred, multiplied by the respective statutory
rates and offset by the increase or reversal of any valuation
allowances commensurate with the non–GAAP measure of profitability.
(c) See "Reconciliation of Reported Net (Loss) Income to Adjusted Net
Income."

The adjusted effective tax rate was 24.2% for the three months ended
June 30, 2018 compared to 9.9% for the three months ended June 30, 2017.
The differences were primarily due to the increased accrual of uncertain
tax position reserves during the current year.

    Year Ended June 30, 2018     Year Ended June 30, 2017
(in millions)

(Loss)/
income
before
income
taxes

   

(Benefit)
provision
for
income
taxes

   

Effective
tax rate

(Loss)/
income
before
income
taxes

   

(Benefit)
provision
for
income
taxes

   

Effective
tax rate

Reported (loss) income before income taxes $ (152.5 ) $ (24.7 )   16.2 % $ (658.0 ) $ (259.5 )   39.4 %
Adjustments to reported operating income (loss) (a) (b) 838.6 152.5 1210.6 355.0
Other adjustments (b) (c) 33.4   10.4       1.4 0.4    
Adjusted income before income taxes $ 719.5   $ 138.2     19.2 % $ 554.0   $ 95.9     17.3 %
(a)   See a description on adjustments under "Reconciliation of Reported
Operating (Loss) Income to Adjusted Operating Income".
 
(b) The tax effects of each of the items included in adjusted income are
calculated in a manner that results in a corresponding income tax
expense/provision for adjusted income. In preparing the calculation,
each adjustment to reported income is first analyzed to determine if
the adjustment has an income tax consequence. The provision for
taxes is then calculated based on the jurisdiction in which the
adjusted items are incurred, multiplied by the respective statutory
rates and offset by the increase or reversal of any valuation
allowances commensurate with the non-GAAP measure of profitability.
 
(c) See "Reconciliation of Reported Net (Loss) Income to Adjusted Net
Income."

The adjusted effective tax rate was 19.2% compared to 17.3% in the
prior-year period. The differences were primarily due to the release of
a valuation allowance in the US in the prior period as a result of the
P&G Beauty Business acquisition.

RECONCILIATION OF REPORTED NET (LOSS) INCOME TO ADJUSTED NET INCOME

    Three Months Ended June 30,     Year Ended June 30,
(in millions) 2018     2017     Change 2018     2017     Change
Reported Net (Loss) Income Attributable to Coty Inc. $ (181.3 ) $ (304.8 ) 41 % $ (168.8 ) $ (422.2 ) 60 %
% of Net revenues (7.9 %) (13.6 %) (1.8 %) (5.5 %)
Adjustments to Reported Operating (Loss) Income (a) 291.2 369.1 (21 %) 838.6 1,210.6 (31 %)
Adjustments to other expense (b) 24.1 >100% 24.1 >100%
Loss on early extinguishment of debt (c) 10.7 >100% 10.7 >100%
Adjustments to interest (income) expense (d) (1.4 ) <(100)% (1.4 ) 1.4 <(100%)
Adjustments to noncontrolling interest expense (e) (2.4 ) (25.9 ) 91 % (24.0 ) (25.9 ) (100 %)

Change in tax provision due to adjustments to Reported Net
Income
(Loss) Attributable to Coty Inc.

(34.3 ) (41.8 ) 18 % (162.9 ) (355.4 ) >100%
Adjusted Net Income Attributable to Coty Inc. $ 106.6   $ (3.4 ) >100% $ 516.3   $ 408.5   26 %
% of Net revenues 4.6 % (0.2 %) 5.5 % 5.3 %
 
Per Share Data
Adjusted weighted-average common shares
Basic 750.6 747.7 749.7 642.8
Diluted 753.1 747.7 753.1 647.8
Adjusted Net Income Attributable to Coty Inc. per Common Share
Basic $ 0.14 $ $ 0.69 $ 0.64
Diluted $ 0.14 $ $ 0.69 $ 0.63
(a)   See a description of adjustments under "Reconciliation of Reported
Operating (Loss) Income to Adjusted Operating Income".
 
(b) In fiscal 2018, we incurred $24.1 in third-party debt issuance costs
incurred in connection with the refinancing of the Coty Credit
Agreement and Galleria Credit Agreement.
 
(c) In fiscal 2018, the amount represents the write-off of debt discount
and deferred financing costs in connection with the refinancing of
the Coty Credit Agreement and Galleria Credit Agreement, included in
Loss on early extinguishment of debt in the Consolidated Statements
of Operations.
 
(d) The amount in fiscal 2018 primarily represents one-time gains of
$1.4 on short-term forward contracts to exchange Euros for U.S.
dollars to repay U.S. Dollar debt balances outstanding under the
Coty Credit Agreement and Galleria Credit Agreement, in connection
with the refinancing of those respective agreements in April 2018,
included in Interest expense, net in the Consolidated Statements of
Operations. The amount in fiscal 2017 represents a net loss of $1.4
incurred in connection with the acquisition of the Hypermarcas
Brands and subsequent intercompany loans, included in Interest
expense, net in the Consolidated Statements of Operations.
 
(e) The amounts represent the after-tax impact of the non-GAAP
adjustments included in Net income attributable to noncontrolling
interest based on the relevant noncontrolling interest percentage in
the Consolidated Statements of Operations.

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE
CASH FLOW

   
Year Ended June 30,
(in millions) 2018     2017     2016
Net cash provided by operating activities $ 413.7 $ 757.5 $ 501.4
Capital expenditures (446.4 ) (432.3 ) (150.1 )
Free cash flow $ (32.7 ) $ 325.2   $ 351.3  
 

RECONCILIATION OF TOTAL DEBT TO NET DEBT

    Year Ended June 30,
(in millions) 2018
Total debt $ 7,623.2
Cash   331.6
Net debt $ 7,291.6
 

RECONCILIATION OF ADJUSTED OPERATING INCOME TO ADJUSTED EBITDA

    Year Ended June 30,
(in millions) 2018
Adjusted operating income(a) $ 999.8
Depreciation 384.2
Adjusted EBITDA (b) $ 1,384.0
a   Refer to Reconciliation of Reported Operating Income (loss) to
Adjusted Operating Income
 
b Defined as Adjusted operating income less Depreciation

NET DEBT/ADJUSTED EBITDA

  Year Ended June 30,
  2018
Net Debt/Adjusted EBITDA 5.27

NET REVENUES AND ADJUSTED OPERATING INCOME BY SEGMENT

    Three Months Ended June 30,
Net Revenues     Change    

Reported Operating
Income (Loss)

   

Adjusted Operating
Income (Loss)

(in millions) 2018     2017

Reported
Basis

   

Constant
Currency

  2018     Change   2018     Change
Luxury $ 742.4 $ 648.0 15 % 11 % $ 47.5 >100%   $ 78.1   >100%
Consumer Beauty 1,064.4 1,126.0 (5 %) (6 %) 53.5 (34 )% 93.6 44 %
Professional 492.6 467.3 5 % 2 % 36.2 >100% 57.7 >100%
Corporate     N/A N/A (199.0 ) 36 %   N/A
Total $ 2,299.4   $ 2,241.3   3 % 1 % $ (61.8 ) 78 % $ 229.4   >100%
    Year Ended June 30,
Net Revenues     Change    

Reported Operating
Income (Loss)

 

Adjusted Operating
Income (Loss)

(in millions) 2018     2017

Reported
Basis

   

Combined
Company
Year-Over-
Year

   

Combined
Company
Reported At
Constant
Currency

2018     Change   2018     Change
Luxury $ 3,210.5 $ 2,566.6 25 % 13 % 9 % $ 248.7   57 % $ 393.8 39 %
Consumer Beauty 4,268.1 3,688.2 16 % 4 % 1 % 278.9 7 % 411.1 16 %
Professional 1,919.4 1,395.5 38 % 12 % 8 % 119.4 52 % 194.9 45 %
Corporate     N/A N/A N/A (485.8 ) 48 %   N/A
Total $ 9,398.0   $ 7,650.3   23 % 8 % 5 % $ 161.2     >100%   $ 999.8   29 %
 

NET REVENUES BY GEOGRAPHIC REGION

    Three Months Ended June 30,
Net Revenues     Change
(in millions) 2018     2017

Reported
Basis

   

Combined
Company
Organic (LFL)

North America $ 760.8 $ 779.5 (2 %) (3 %)
Europe 959.1 896.3 7 % 0 %
ALMEA 579.5   565.5   2 % 5 %
Total $ 2,299.4   $ 2,241.3   3 % 0 %
 
    Year Ended June 30,
Net Revenues     Change
(in millions) 2018     2017

Reported
Basis

   

Combined
Company
Year-Over-
Year

   

Combined
Company
Organic
(LFL)

North America $ 2,966.0 $ 2,506.9 18 % 4 % (4 %)
Europe 4,201.6 3,325.7 26 % 11 % (1 %)
ALMEA 2,230.4   1,817.7   23 % 10 % 8 %
Total $ 9,398.0   $ 7,650.3   23 % 8 % 0 %
 

RECONCILIATION OF REPORTED OPERATING INCOME TO ADJUSTED OPERATING
INCOME BY SEGMENT

    Three Months Ended June 30, 2018
(in millions) Reported
(GAAP)
    Adjustments (a)    

Adjusted
(Non-GAAP)

   

Foreign
Currency
Translation

   

Adjusted
Results at
Constant
Currency

OPERATING INCOME (LOSS)  
Luxury $ 47.5 $ (30.6 ) $ 78.1 $ 0.3 $ 78.4
Consumer Beauty 53.5 (40.1 ) 93.6 2.7 96.3
Professional 36.2 (21.5 ) 57.7 (1.1 ) 56.6
Corporate (199.0 ) (199.0 )        
Total $ (61.8 ) $ (291.2 ) $ 229.4   $ 1.9     $ 231.3  
 
OPERATING MARGIN
Luxury 6.4 % 10.5 % 10.9 %
Consumer Beauty 5.0 % 8.8 % 9.1 %
Professional 7.3 % 11.7 % 11.9 %
Corporate N/A N/A N/A
Total (2.7 %) 10.0 % 10.3 %
 
 
Three Months Ended June 30, 2017
(in millions) Reported
(GAAP)
Adjustments (a) Adjusted
(Non-GAAP)
OPERATING INCOME (LOSS)
Luxury $ (43.8 ) $ (53.8 ) $ 10.0
Consumer Beauty 80.9 16.0 64.9
Professional (3.1 ) (18.3 ) 15.2
Corporate (313.0 ) (313.0 )  
Total $ (279.0 ) $ (369.1 ) $ 90.1  
 
OPERATING MARGIN
Luxury (6.8 %) 1.5 %
Consumer Beauty 7.2 % 5.8 %
Professional (0.7 %) 3.3 %
Corporate N/A N/A
Total (12.4 %) 4.0 %
(a)   See "Reconciliation of Reported Operating Income to Adjusted
Operated (Loss) Income" for a detailed description of adjusted items.
 
    Year Ended June 30, 2018
(in millions) Reported
(GAAP)
    Adjustments (a)     Adjusted
(Non-GAAP)
   

Foreign
Currency
Translation

   

Adjusted
Results at
Constant
Currency

OPERATING INCOME (LOSS)
Luxury $ 248.7 $ (145.1 ) $ 393.8 $ (1.4 ) $ 392.4
Consumer Beauty 278.9 (132.2 ) 411.1 (5.1 ) 406.0
Professional 119.4 (75.5 ) 194.9 (5.2 ) 189.7
Corporate (485.8 ) (485.8 )      
Total $ 161.2   $ (838.6 ) $ 999.8   $ (11.7 ) $ 988.1  
 
OPERATING MARGIN
Luxury 7.7 % 12.3 % 12.7 %
Consumer Beauty 6.5 % 9.6 % 9.8 %
Professional 6.2 % 10.2 % 10.3 %
Corporate N/A N/A N/A
Total 1.7 % 10.6 % 10.9 %
 
 
Year Ended June 30, 2017
(in millions) Reported
(GAAP)
Adjustments (a) Adjusted
(Non-GAAP)
OPERATING INCOME (LOSS)
Luxury $ 158.0 $ (125.0 ) $ 283.0
Consumer Beauty 261.2 (94.5 ) 355.7
Professional 78.5 (55.6 ) 134.1
Corporate (935.5 ) (935.5 )  
Total $ (437.8 ) $ (1,210.6 ) $ 772.8  
 
OPERATING MARGIN
Luxury 6.2 % 11.0 %
Consumer Beauty 7.1 % 9.6 %
Professional 5.6 % 9.6 %
Corporate N/A N/A
Total (5.7 %) 10.1 %
(a)   See "Reconciliation of Reported Operating Income (Loss) to Adjusted
Operating Income" for a detailed description of adjusted items
 

.

RECONCILIATION OF REPORTED NET REVENUES INCOME TO LIKE-FOR-LIKE NET
REVENUES

      Three Months Ended June 30, 2018 vs. Three Months Ended June 30,
2017 Net Revenue Change
            of which
Net Revenues Change YoY Reported Basis     Constant Currency    

Impact from
Acquisitions 1

    Organic (LFL)
Luxury 15% 11% 6%     5%
Consumer Beauty (5)% (6)% (3)% (3)%
Professional Beauty 5%     2%     —%     2%
Total Company 3%     1%     1%     —%
¹ Acquisitions reflect the net revenue contribution from the
acquisition of Burberry net of the decreased net revenues from the
termination of Guess and the divestitures of Playboy and Cerruti in
the fourth quarter of fiscal 2018 and the divestiture of J.Lo in the
third quarter of 2017, in each case for the periods of
non-comparability.
 
    Year Ended June 30, 2018 vs. Year Ended June 30, 2017 Net Revenue
Change
              of which
Net Revenues Change YoY

Reported Basis vs
Legacy Coty

   

Combined
Company
Reported 1

   

Combined
Company
Reported at
Constant Currency

   

Impact from
Acquisitions 2

   

Combined
Company Organic
(LFL)

Luxury 25% 13% 9% 3%     6%
Consumer Beauty 16% 4% 1% 5% (4)%
Professional Beauty 38%     12%     8%     6%     2%
Total Company 23%     8%     5%     5%     —%

1 Combined Company reflects combined Legacy-Coty and
P&G Beauty Business net revenues in the current and prior-year
period, as if the acquisition of the P&G Beauty Business was
completed on July 1, 2016.

2 Acquisitions reflect the net revenue contribution in
the current period from the acquisition Burberry, seven months of
the Younique acquisition and five months of the ghd acquisition
net of the decreased net revenues from the termination of Guess
and the divestitures of Playboy and Cerruti in the fourth quarter
of fiscal 2018 and the divestiture of J.Lo in the third quarter of
2017, in each case for the periods of non-comparability.

   

COTY INC. & SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 
June 30,
(in millions) 2018     2017
ASSETS
Current assets:
Cash and cash equivalents $ 331.6 $ 535.4
Restricted cash 30.6 35.3
Trade receivables—less allowances of $81.8 and $58.5, respectively 1,536.0 1,470.3
Inventories 1,148.9 1,052.6
Prepaid expenses and other current assets 603.9   487.9  
Total current assets 3,651.0 3,581.5
Property and equipment, net 1,680.8 1,632.1
Goodwill 8,607.1 8,555.5
Other intangible assets, net 8,284.4 8,425.2
Deferred income taxes 107.4 72.6
Other noncurrent assets 299.5   281.3  
TOTAL ASSETS $ 22,630.2   $ 22,548.2  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 1,928.6 $ 1,732.1
Accrued expenses and other current liabilities 1,844.4 1,796.4
Short-term debt and current portion of long-term debt 218.9 209.1
Income and other taxes payable 52.1   66.0  
Total current liabilities 4,044.0 3,803.6
Long-term debt, net 7,305.4 6,928.3
Pension and other post-employment benefits 533.3 549.2
Deferred income taxes 842.5 924.9
Other noncurrent liabilities 388.5   473.4  
Total liabilities 13,113.7   12,679.4  
COMMITMENTS AND CONTINGENCIES
REDEEMABLE NONCONTROLLING INTERESTS 661.3   551.1  
EQUITY:
Preferred Stock
Class A Common Stock 8.1 8.1
Additional paid-in capital 10,750.8 11,203.2
Accumulated deficit (626.2 ) (459.2 )
Accumulated other comprehensive income 158.8 4.4
Treasury stock (1,441.8 ) (1,441.8 )
Total Coty Inc. stockholders' equity 8,849.7 9,314.7
Noncontrolling interests 5.5   3.0  
Total equity 8,855.2   9,317.7  
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY $ 22,630.2   $ 22,548.2  
 
   

COTY INC. & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
Year Ended
June 30,
2018     2017     2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (127.8 ) $ (398.5 ) $ 179.2
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 737.0 555.1 232.0
Asset impairment charges 5.5
Deferred income taxes (101.7 ) (390.0 ) (139.2 )
Provision for bad debts 24.0 23.4 21.9
Provision for pension and other post-employment benefits 32.4 53.6 9.2
Share-based compensation 30.6 24.6 22.2
Loss (gain) on sale of assets 28.6 (3.1 ) (24.8 )
Loss on early extinguishment of debt 10.7 3.1
Other (1.3 ) 25.9 12.8
Change in operating assets and liabilities, net of effects from
purchase of acquired companies:
Trade receivables (79.6 ) (279.8 ) (44.5 )
Inventories (60.0 ) 162.3 27.2
Prepaid expenses and other current assets (107.6 ) (105.7 ) 6.7
Accounts payable 159.5 540.9 148.2
Accrued expenses and other current liabilities (22.5 ) 479.2 23.3
Income and other taxes payable (83.2 ) 85.0 15.7
Other noncurrent assets (17.9 ) 23.4 9.0
Other noncurrent liabilities (7.5 ) (38.8 ) (6.1 )
Net cash provided by operating activities 413.7   757.5   501.4  
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (446.4 ) (432.3 ) (150.1 )
Payments for business combinations, net of cash acquired (278.0 ) (742.6 ) (908.7 )
Proceeds from sale of assets 36.8 11.3 29.2
Payments related to loss on foreign currency contracts     (29.6 )
Net cash used in investing activities (687.6 ) (1,163.6 ) (1,059.2 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt, original maturity more than three
months
9.5 19.1
Repayments of short-term debt, original maturity more than three
months
(10.2 ) (28.3 )
Net proceeds from (repayments of) short-term debt, original maturity
less than three months
21.0 (49.2 ) 25.4
Proceeds from revolving loan facilities 3,185.5 2,244.4 1,940.0
Repayments of revolving loan facilities (3,643.2 ) (2,074.4 ) (1,430.0 )
Proceeds from term loans and other long term debt 7,467.2 1,075.0 3,506.2
Repayments of term loans and other long term debt (6,492.6 ) (136.1 ) (2,499.4 )
Dividend payment (375.8 ) (372.6 ) (89.0 )
Net proceeds from issuance of Class A Common Stock and Series A
Preferred Stock and related tax benefits
22.6 22.8 44.7
Payments for purchases of Class A Common Stock held as Treasury Stock (36.3 ) (794.9 )
Net proceeds (payments) for foreign currency contracts 12.4 (1.2 ) (9.7 )
Distributions to mandatorily redeemable financial interests,
redeemable noncontrolling interests and noncontrolling interests
(66.4 ) (42.3 ) (33.2 )
Purchase of additional mandatorily redeemable noncontrolling
interests, redeemable noncontrolling interests and noncontrolling
interests
(9.8 ) (0.7 )
Payment of debt issuance costs (55.1 ) (24.4 ) (57.6 )
All other (6.3 )    
Net cash provided by financing activities 69.3   595.2   592.6  
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED
CASH
(3.9 ) 9.2   (3.7 )
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED
CASH
(208.5 ) 198.3 31.1
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 570.7   372.4   341.3  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period 362.2   570.7   372.4  
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the year for interest 242.8 190.2 90.3
Cash paid during the year for income taxes, net of refunds received 124.6 90.1 118.1
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING
ACTIVITIES:
Accrued capital expenditure additions 158.8 106.7 78.0
Non-cash stock issued for business combination 9,628.6
Non-cash debt assumed for business combination 1,943.0
Non-cash capital contribution associated with special share purchase
transaction
13.8
Non-cash acquisition of additional redeemable noncontrolling
interests
415.9 10.1
Non-cash reclassification from noncontrolling interest to
mandatorily redeemable financial interest
49.9
Non-cash contingent consideration for business combination 8.3
 

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