COTY (Common Stock) Price: $26.89 0.57 -2.08%
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|Coty Inc. Reports Third Quarter Fiscal 2014 Results|
Third Quarter Fiscal 2014 Summary
First Nine Months Fiscal 2014 Summary
Commenting on the Company's performance, Michele Scannavini, CEO of
Basis of Presentation and Exceptional Items
The term "like-for-like" describes the performance of the business on a comparable basis, excluding material acquisitions, all divestitures, discontinued operations and foreign currency exchange translations to the extent applicable. "Like-for-like" does not exclude net revenues from joint venture consolidations and conversion from third-party to direct distribution. The term "adjusted" excludes the impact of non-recurring items, private company share-based compensation expense, impairment charges and restructuring costs to the extent applicable. Refer to "Non-GAAP Financial Measures" for a definition of free cash flow.
Net revenues are reported by segment and geographic region and are discussed below on a like-for-like basis. Operating income is reported by segment. All changes in margin percentage are described in basis points rounded to the nearest tenth of a percent.
Net revenues and adjusted operating income are presented on an actual and a constant currency basis. Operating income, net income and earnings per diluted share (EPS (diluted)) are presented on a reported (GAAP) basis and an adjusted (non-GAAP) basis. Selling, general and administrative expense (SG&A), effective tax rate, cash tax rate, gross margin and operating income margin are presented on an adjusted (non-GAAP) basis. Net revenues on a constant currency basis and like-for-like, adjusted operating income on a constant currency basis, adjusted operating income, adjusted operating income margin, adjusted effective tax rate, adjusted cash tax rate, adjusted net income, adjusted gross margin, adjusted EPS (diluted), adjusted SG&A and free cash flow are non-GAAP financial measures. A reconciliation between GAAP and non-GAAP results can be found in the tables and footnotes at the end of this release.
Third Quarter Fiscal 2014 Summary Operating Review
Net revenues of
Adjusted gross margin decreased to 61.6% compared to 61.7% in the prior-year period. This marginal decline primarily reflected the negative impact of higher customer discounts and allowances and the negative impact from foreign currency exchange transactions, almost fully compensated by continuous supply chain savings.
Adjusted SG&A expense as a percentage of net revenues increased to 51.4% from 49.0% in the prior-year period. This reflected higher advertising and consumer promotion spending in support of the brands, increased variable compensation expense, and accelerated investments to build capabilities in emerging markets, partially offset by discretionary cost reductions in the developed markets.
Operating income decreased to an operating loss of
Adjusted operating income decreased 22% to
Adjusted effective tax rate was (40.9%) compared to 6.9% in the prior-year period. The tax benefit in the quarter was a recognition of certain tax benefits upon settlement of certain foreign audits totaling
Net income decreased to a net income loss of
Adjusted net income increased to
Third Quarter Fiscal 2014 Business Review by Segment
Skin & Body Care
Third Quarter Fiscal 2014 Business Review by Geographic Region
Outlook for Fiscal 2014 Fourth Quarter and Fiscal 2015
While market conditions remain challenging, particularly in the mass channel in
Other noteworthy Company developments:
For additional information about
Forward Looking Statements
Certain statements in this release are forward-looking statements. These forward-looking statements reflect the Company's current views with respect to, among other things, its future operations and financial performance; new brand and business partnerships; expected growth; its ability to support its planned business operation on a near- and long-term basis and its outlook for fiscal 2014's fourth quarter and fiscal 2015. These forward-looking statements are generally identified by words or phrases, such as "anticipate", "estimate", "plan", "project", "expect", "believe", "intend", "foresee", "forecast", "will", "may", "should," "outlook," "continue," "target," "aim" and similar words or phrases. Reported results should not be considered an indication of future performance, and actual results may differ materially from the results predicted due to risks and uncertainties including:
More information about potential risks and uncertainties that could affect the Company's business and financial results is included under "Risk Factors" and "Management Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended
The Company assumes no responsibility to update forward-looking statements made herein or otherwise.
For more information:
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 and adjusted operating income.
The Company presents growth on a like-for-like basis. The Company believes that like-for-like growth better enables management and investors to analyze and compare our organic growth from period to period. In the periods described in this release, like-for-like growth excludes the impact of foreign currency exchange translations, the divestiture of one of our licenses and the expiration of a certain North American service agreement that was not renewed and does not exclude revenues from the acquisition of a third-party distributor. For reconciliation of our net revenues like-for-like growth, see the table entitled "Reconciliation of Reported Net revenues to Like-For-Like Net Revenues." For a reconciliation of our like-for-like growth by segment and geographic region, see the tables entitled "Net Revenues and Adjusted Operating Income by Segment" and "Net Revenues by Geographic Regions."
The Company presents SG&A, operating income, operating income margin, gross margin, effective tax rate, cash tax rate, net income 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 the underlying business results from period to period. In calculating adjusted SG&A expense, operating income, operating income margin, gross margin, effective tax rate, cash tax rate, net income and EPS (diluted), the Company excludes the impact of nonrecurring items, private company share-based compensation expense, impairment charges and restructuring costs, to the extent applicable. 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 SG&A expense to SG&A expense, adjusted gross margin to gross margin and adjusted EPS (diluted) to EPS (diluted), see the table entitled "Reconciliation of Reported to Adjusted Results for the Consolidated Statements of Operation." For a reconciliation of adjusted operating income to operating income and adjusted operating income margin to operating income margin, see the table entitled "Reconciliation of Reported Operating Income to Adjusted Operating Income." For a reconciliation of adjusted effective tax rate and adjusted cash tax rate to effective tax rate, see the table entitled "Reconciliation of Reported Income Before Income Taxes and Effective Tax Rates to Adjusted Income Before Income Taxes, Effective Taxes and Cash Tax Rate." For a reconciliation of adjusted net income to net income, see the table entitled "Reconciliation of Reported Net Income to Adjusted Net Income."
The Company also presents free cash flow. Free cash flow is defined as net cash provided by operating activities, less capital expenditures and the contingent purchase price consideration payments of up to
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.
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