Second Quarter Results Show Improved Sequential Trends in Revenues
and Profit
NEW YORK--(BUSINESS WIRE)--Feb. 8, 2019--
Coty Inc. (NYSE:COTY) today announced financial results for the second
quarter of fiscal year 2019, ended December 31, 2018.
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Results at a glance
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Three Months Ended December 31, 2018
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Six Months Ended December 31, 2018
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Change YoY
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Change YoY
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(in millions, except per share data)
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Reported Basis
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Organic (LFL)
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Reported Basis
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Organic (LFL)
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Net revenues
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$
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2,511.2
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(4.8
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%)
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0.7%
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$
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4,542.5
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(6.8
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%)
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(3.2%)
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Operating (loss) income - reported
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(804.6
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NM
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(825.3
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NM
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Operating income - adjusted*
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322.3
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(7
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%)
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463.1
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(15
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%)
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Net (loss) income - reported
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(960.6
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NM
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(972.7
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NM
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Net income - adjusted*
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181.9
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(23
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%)
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262.4
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(16
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%)
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EPS (diluted) - reported
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$
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(1.28
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NM
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$
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(1.30
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NM
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EPS (diluted) - adjusted*
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$
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0.24
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(25
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%)
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$
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0.35
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(17
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%)
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* These measures, as well as “free cash flow,” “adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA)” and “net debt,”
are Non-GAAP Financial Measures. Refer to “Non-GAAP Financial Measures”
for discussion of these measures. Net Income represents Net Income
Attributable to Coty Inc. Reconciliations from reported to adjusted
results can be found at the end of this release.
Overview
Revenues:
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2Q19 reported net revenues of $2,511.2 million decreased 4.8%, with a
like-for-like (LFL) revenue growth of 0.7%. The strong sequential
improvement in both the reported and LFL performance reflected the
combination of several temporary factors, including: (i) Burberry
entering the LFL revenue base and facing a depressed prior year
comparable, (ii) the positive impact from changes in revenue
recognition policy, (iii) the shift of Luxury shipments from 1Q19 into
2Q19 as a result of the U.S. Hurricane Florence, and (iv) some
moderation in the supply chain-related headwinds discussed in 1Q19.
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We estimate these factors cumulatively benefited our LFL revenue
growth rate by approximately 2%, implying a moderate underlying 2Q19
LFL decline. This performance reflects strong LFL growth in Luxury,
underlying growth in Professional Beauty, and a high single digit
decline in Consumer Beauty.
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Year-to-date reported net revenues of $4,542.5 million decreased by
6.8%, with a LFL revenue decline of 3.2%. We estimate that the
underlying LFL net revenue trend was a decline of approximately 2% in
1H19, excluding the temporary factors above.
Gross Margin:
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2Q19 reported gross margin of 61.9% increased by 80 bps from the
prior-year period, while the adjusted gross margin of 62.1% increased
by 50 bps, primarily driven by the divisional revenue mix shift toward
Luxury and Professional Beauty, improvement in the Professional Beauty
gross margin due to product mix, and the margin benefit from favorable
FX.
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Year-to-date reported gross margin of 61.1% was flat with the
prior-year, while the adjusted gross margin of 61.3% decreased by 20
bps, fueled by the gross margin contraction in 1Q19 connected to
supply chain disruptions.
Operating Income:
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2Q19 reported operating loss of $804.6 million compared to 2Q18
reported operating income of $175.2 million, reflecting a $965.1
million non-cash impairment charge primarily connected to the Consumer
Beauty division and select brand trademarks.
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2Q19 adjusted operating income of $322.3 million declined by 7% from
the prior year with an adjusted operating margin of 12.8%. The
year-over-year decline in adjusted operating income reflected the
contraction in net revenues, A&CP increasing as a percentage of net
revenues during the quarter, and foreign exchange headwinds of
approximately 4%. This was partially offset by strong fixed cost
reduction.
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2Q19 adjusted operating income was also impacted by the temporary
factors cited above, including: (i) the supply chain headwinds; (ii)
the timing of Luxury shipments; (iii) revenue recognition; and (iv)
the net impact of M&A, as the incremental Burberry contribution was
partially offset by the lost profit from the FY18 brand
rationalization program. The cumulative negative impact from these
factors in 2Q19 was approximately $2M, which implies a high single
digit decline in underlying adjusted operating income in the quarter.
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Year-to-date reported operating loss of $825.3 million compared to
reported operating income of $204.7 million in the prior year.
Year-to-date adjusted operating income of $463.1 million declined by
15% from the prior year with a margin of 10.2%.
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In 1H19, we estimate that adjusted operating income was adversely
impacted by temporary factors of approximately $48 million, including
over $90 million from the supply chain disruptions. Excluding these
temporary impacts, the 1H19 underlying adjusted operating income would
have declined approximately 6% year over year, with an operating
margin of approximately 11%.
Net Income:
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2Q19 reported net loss of $960.6 million compared to reported net
income of $109.2 million in the prior-year, while the adjusted net
income of $181.9 million declined 23%, driven by the lower adjusted
operating income and the $41.8 million positive foreign tax settlement
in the prior year period.
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Year-to-date reported net loss of $972.7 million compared to reported
net income of $89.5 million in the prior-year, while the adjusted net
income of $262.4 million decreased 16%.
Earnings Per Share (EPS):
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2Q19 reported earnings per share of $(1.28) declined from $0.15 in the
prior-year, and the adjusted EPS of $0.24 declined from $0.32 in the
prior year. The year-over-year decline in reported EPS reflects the
significant $965.1 million impairment charge discussed above, while
the decline in the adjusted EPS is driven by the aforementioned tax
benefit in 2Q18 which contributed $0.05 to EPS.
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Year-to-date reported earnings per share of $(1.30) declined from
$0.12 in the prior-year, and the adjusted EPS of $0.35 declined from
$0.42 in the prior year.
Operating Cash Flow & Net Debt:
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In 2Q19, net cash provided by operating activities was $319.6 million,
broadly in-line with 2Q18, as we drove strong conversion of operating
income into operating cash flow, supported by working capital
improvement. First half operating cash flow totaled $237.7 million,
down $70.1 million from the same period of the prior year.
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Our 2Q19 free cash flow of $193.9 million was largely in-line with
2Q18 and reflected the strong operating cash flow result, and a
moderate year-over-year decline in capex. First half free cash flow of
$(21.6) million decreased from $75.6 million in the prior year, driven
by weakness in 1Q19.
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Net debt of $7,488.5 million on December 31, 2018 decreased by $172.8
million from the balance of $7,661.3 million on September 30, 2018
driven by positive free cash flow and a benefit from foreign exchange.
This resulted in a last twelve months Net debt to adjusted EBITDA
ratio of 5.8x, consistent with the reported ratio on September 30,
2018.
Management Comments
Commenting on the financial results, Pierre Laubies, Coty CEO said:
"Since I joined the company a few months ago, I have been thoroughly
evaluating each part of our business, working to assess what has and has
not worked, and where the opportunities lie. Within Coty, there are
clear opportunities to improve how we run our company in order to
enhance the quality of our business model, thereby giving us the time
that we need to address our more strategic issues. I must stress that
while we are confident that we can return Coty to a path of sustainable
growth, we are also realistic that it will take time to achieve this
outcome. Our Luxury and Professional Beauty divisions are growing
reasonably well, but they cannot compensate completely for the difficult
trajectory of our Consumer Beauty division. In Consumer Beauty, we need
to earn our right to grow.
From a financial standpoint, gross margin improvement will become our
key area of focus. Gross margin is the lifeblood of the business and we
recognize that we must close the gap we have here versus our beauty
peers. That means managing revenue and costs, improving product mix and
range, simplifying our portfolio and formulations, and systemically
deploying lean-inspired methodologies in our manufacturing and logistics
operations. While we will deploy these principles whenever possible in
the remainder of FY19, our immediate objective is to finalize a
Strategic Plan, which will define our agenda for the medium term. I look
forward to sharing more details on this plan in the coming months.
I have a great deal of confidence that the management team we have put
into place is the right one to develop this plan, and that together with
the broader Coty organization, we will be able to meet the objectives of
driving gross margin improvement and sustained topline growth."
Outlook
As we focus on building a healthier business model, we anticipate a
profit trend recovery in the second half of FY19. We expect that FY19
constant currency adjusted operating income will be moderately below
FY18. We continue to expect positive free cash flow for FY19.
Second Quarter Fiscal 2019 Business Review by
Segment
Luxury
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Three Months Ended December 31, 2018
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Six Months Ended December 31, 2018
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Actual
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Reported Basis YoY
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LFL
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Actual
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Reported Basis YoY
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LFL
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Net Revenues
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1,017.5
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7.0%
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10.8%
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$1,810.4
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5.5%
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5.0%
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Reported
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Adjusted
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Reported
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Adjusted
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Operating Income
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113.6
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176.9
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162.3
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278.5
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Operating Margin
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11.2%
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17.4%
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9.0%
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15.4%
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In 2Q19, reported Luxury net revenues of $1,017.5 million increased by
7.0% versus the prior year. On a LFL basis, Luxury net revenues
increased by 10.8%, primarily driven by the addition of Burberry to the
LFL base and solid growth of the core portfolio, despite ongoing impact
from the supply chain disruption. We estimate that the Luxury division
delivered mid single digit growth in 2Q19 and 1H19 after adjusting for
the supply chain disruptions and excluding the impact of Burberry.
2Q19 sell-out was strong across our top brands with particularly good
performances by Gucci, Marc Jacobs and Burberry. Net revenue growth was
driven by Calvin Klein, Gucci, Marc Jacobs and Chloe. Tiffany's sell-out
performance remained strong during the holiday period, despite lapping
the brand's launch in the prior year. Hugo Boss revenues in 2Q19
declined as the brand was impacted by the supply chain disruptions.
The Luxury division delivered reported operating income of $113.6
million, an increase of 33% vs. the prior-year period. 2Q19 adjusted
operating income was $176.9 million, reflecting very strong 41% growth
from the prior year, driven by the reported net revenue growth and solid
fixed cost reductions. The adjusted operating margin was 17.4%, an
increase of over 400 bps versus 2Q18.
Consumer Beauty
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Three Months Ended December 31, 2018
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Six Months Ended December 31, 2018
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Actual
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Reported Basis YoY
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LFL
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Actual
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Reported Basis YoY
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LFL
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Net Revenues
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967.8
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(15.0%)
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(7.3)%
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1,796.6
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(17.7%)
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(10.6)%
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Reported
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Adjusted
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Reported
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Adjusted
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Operating (Loss) Income
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(906.9)
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54.1
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(925.5)
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68.9
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Operating Margin
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(93.7)%
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5.6%
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(51.5)%
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3.8%
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2Q19 Consumer Beauty net revenues of $967.8 million declined 15.0% on a
reported basis and declined 7.3% LFL. We estimate that the net impact of
the supply chain disruptions was offset by the positive impact in 2Q19
from a required revenue recognition policy change, implying a high
single digit underlying LFL decline in both 2Q19 and 1H19. This
performance was broadly in-line with sell-out trends, as our brands were
pressured by continued weakness in the mass beauty market, particularly
in the U.S. and Europe, although we saw some moderation in the pace of
our market share losses. The Consumer Beauty division continues to be
affected by the indirect impacts of the supply chain disruptions,
including customer penalties and increased promotions, which reduced net
revenues.
By category, net revenue in color cosmetics declined mid single digits
and retail hair declined high single digits. While CoverGirl and Clairol
net revenues benefited from a favorable comparable due to the inventory
depletion in the prior year ahead of the 3Q18 brand relaunches,
sell-through continued to decline high single digits in 2Q19. Our U.S.
brands experienced moderating market share losses in traditional
retailers, share gains on Amazon, and improving innovation performance.
Sally Hansen reported strong growth in the quarter, supported by
innovation. The Wella Retail brand continued to gain share with strength
in styling in developed markets and hair color in emerging markets. In
Brazil, our local brands continue to drive strong revenue growth and
market share gains.
During 2Q19, Younique revenues and profit remained pressured due to a
decline in product sales and presenter sponsorship as we continue to
refine our product offerings and compensation plan structure to drive
improvements in presenter sales activity, recruitment and retention. Our
loyalty and subscription programs gained traction in the quarter,
driving growth in customer revenues, although weakness in active
presenters more than offset this growth. In 3Q19, Younique launched a
customizable skincare line, YOU·OLOGY.
Reported operating loss in 2Q19 of $906.9 million compared to reported
operating income of $99.3 million in the prior year period, reflecting
non-cash impairment charges of $832.5 million to the Consumer Beauty
goodwill and $97.8 million to the trademarks of CoverGirl, Clairol, and
two small regional brands. The Consumer Beauty division has experienced
increased competitive and market pressure throughout the first half of
fiscal 2019, which has resulted in lower than expected revenues and
earnings. Additionally, the discount rate used in the impairment review
associated with the division has also increased in the quarter. Based on
these adverse factors, management determined that there were indications
that the goodwill of the division as well as certain trademark
intangible assets may be impaired and accordingly interim intangible
asset and goodwill impairment tests were performed as of December 31,
2018.
The 2Q19 adjusted operating income of $54.1 million declined from $131.9
million in the prior year period, resulting in an adjusted operating
margin of 5.6%. Despite reductions in fixed costs, the adjusted
operating margin was pressured by net revenue contraction and gross
margin pressure linked to the supply chain disruptions.
Professional Beauty
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Three Months Ended December 31, 2018
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Six Months Ended December 31, 2018
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Actual
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Reported Basis YoY
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LFL
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Actual
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Reported Basis YoY
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LFL
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Net Revenues
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525.9
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(4.0%)
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(0.8%)
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935.5
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(4.4%)
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(1.6)%
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Reported
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Adjusted
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Reported
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Adjusted
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Operating Income
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73.8
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91.1
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78.8
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114.9
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Operating Margin
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14.0%
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17.3%
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8.4%
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12.3%
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Professional Beauty 2Q19 net revenues of $525.9 million declined by
4.0%, with LFL down 0.8%. The Professional Beauty division continued to
be impacted by the supply chain disruptions in its North America
warehouse, with OPI being disproportionately affected. Adjusting for
these supply chain disruptions, which impacted revenues by over 2%, we
estimate that the division had low single digit underlying net revenue
growth, with ghd delivering solid growth on the back of strong
innovation. We continue to see no underlying change to the strong
customer demand for our brands in North America or to the overall health
of our salon professional business.
Professional Beauty reported operating income of $73.8 million was flat
to the prior year period, while adjusted operating income grew 1% to
$91.1 million. The Professional Beauty division adjusted operating
margin of 17.3% grew 80 bps, despite the supply chain impacts, driven by
strong gross margin performance and good fixed cost reduction.
Second Quarter Fiscal 2019 Business Review by
Geographic Region
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Three Months Ended December 31,
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Net Revenues
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Change
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(in millions)
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2018
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2017
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Reported Basis
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Organic (LFL)
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North America
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$
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742.2
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$
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741.8
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—
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%
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2
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%
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Europe
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1,201.6
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1,297.6
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(7
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%)
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(1
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%)
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ALMEA
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567.4
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598.2
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(5
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%)
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4
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%
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Total
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$
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2,511.2
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$
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2,637.6
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(5
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%)
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1
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%
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North America
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North America net revenues of $742.2 million, or approximately 29% of
total net revenues, was flat as reported and increased 2% on an
adjusted basis reflecting strong growth in Luxury partially offset by
lower revenues in Professional Beauty, as a result of the supply chain
disruptions, coupled with continued pressure in Consumer Beauty. In
the United States, incremental revenues from Burberry and continued
innovation from Gucci, together with higher year-over-year revenues
from CoverGirl, were offset by lower net revenues from Younique within
the United States due to a decline in product sales and presenter
sponsorship as we continue to refine our product offerings
and compensation plan structure to drive improvements in
presenter sales activity, recruitment and retention.
Europe
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Europe net revenues of $1,201.6 million, or approximately 48% of total
net revenues, declined 7% on a reported basis and declined 1% on a LFL
basis driven by weakness in Consumer Beauty as a result of performance
challenges and supply chain disruptions, largely offset by growth in
Luxury. On a brand level, declines in Bourjois and Rimmel in the U.K.
and Eastern Europe were compounded by declines in mass fragrances in
Western Europe and were offset by strong performances by Burberry and
Calvin Klein across the region.
ALMEA
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ALMEA net revenues of $567.4 million, or approximately 23% of total
net revenues, showed solid growth despite impact from the supply chain
disruptions. Revenues decreased 5% as reported, but grew 4% LFL fueled
by strong growth in Luxury and Professional Beauty. From a brand
perspective, Wella Professional revenues were higher in Brazil and the
rest of Latin America, while in Consumer Beauty Max Factor declined in
China and the Middle East and Wella Retail was lower in Latin America.
Cash Flows
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In 2Q19, net cash provided by operating activities was $319.6 million,
broadly in-line with 2Q18, as we drove strong conversion of operating
income into operating cash flow, supported by working capital
improvement. The impact of integration and restructuring cash costs
was approximately $81 million in 2Q19. The year-to-date operating cash
flow totaled $237.7 million, down $70.1 million from the prior year.
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Our 2Q19 free cash flow of $193.9 million was largely in-line with
2Q18 and reflected the strong operating cash flow result, and a
moderate year-over-year decline in capex. The first half free cash
flow of $(21.6) million decreased from $75.6 million in the prior
year, driven by weakness in 1Q19.
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In 2Q19, we distributed $94.6 million in quarterly dividends.
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Cash and cash equivalents of $417.5 million decreased modestly from
$423.3 million on September 30, 2018. Total debt of $7,906.0 million
decreased by $178.6 million from September 30, 2018, with net debt of
$7,488.5 million down $172.8 million from the balance of $7,661.3
million on September 30, 2018. This net debt decrease reflects
positive free cash flow and a benefit from foreign exchange, as well
as the payment of $94.6 million of dividends.
Other Company Developments
Other company developments include:
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On November 11, 2018, Pierre Laubies was appointed as Coty CEO and
Peter Harf assumed the position of Chairman of the Coty Board of
Directors.
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On January 11, 2019, Coty announced a series of executive leadership
changes to support its ongoing transformation and future growth.
Pierre-André Terisse was appointed Chief Financial Officer and a
member of the Executive Committee, effective February 1, 2019. Pierre
Laubies assumed leadership for the formulation and implementation of
the strategic vision for the Consumer Beauty division, supported by
Gianni Pieraccioni who joined Coty as Chief Operating Officer,
Consumer Beauty, and as a member of the Executive Committee, effective
January 14, 2019. Luc Volatier was appointed Chief Global Supply
Officer and a member of the Executive Committee, effective January 14,
2019.
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On January 14, 2019, Coty announced that Bart Becht resigned from
Coty's Board of Directors and Anna-Lena Kamenetzky joined the Board of
Directors.
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On February 8, 2019, Coty announced a dividend of $0.125 per share
payable on March 15, 2019 to holders of record on February 28, 2019.
This dividend will be considered a return of capital.
Conference Call
Coty Inc. will host a conference call at 8:00 a.m. (ET) today,
February 8, 2019 to discuss its results. The dial-in number for the call
is (866) 834-4311 in the U.S. or (720) 405-2213 internationally
(conference passcode number: 1354018). The live audio webcast and
presentation slides will be available at http://investors.coty.com.
The conference call will be available for replay.
About Coty Inc.
Coty is one of the world’s largest beauty companies with over $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, Bourjois and
Rimmel; Luxury, which is focused on prestige fragrances and skincare
with brands such as Calvin Klein, 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
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 Earnings Release are “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect our current
views with respect to, among other things, the Company’s targets and
outlook for future reporting periods (including the extent and timing of
revenue and profit trends and the Consumer Beauty division’s
stabilization), future profit trends and return to profitable growth,
future gross margins, its future operations and strategy (including
brand relaunches and performance in emerging markets and channels),
synergies, savings, performance, cost, timing and integration relating
to our recent acquisitions (including The Procter & Gamble Company’s
beauty business (the “P&G Beauty Business”)), ongoing and future cost
efficiency and restructuring initiatives and programs (including timing
and impact), finalization of a strategic plan, FY19 adjusted operating
income, positive free cash flow and liquidity, future effective tax
rates, timing and size of cash outflows and debt deleveraging, and
impact and timing of supply chain disruptions and resolution thereof.
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”, “temporary”, “target”, “aim”,
“potential” and similar words or phrases. These statements are based on
certain assumptions and estimates that we consider reasonable, but are
subject to a number of risks and uncertainties, many of which are beyond
our 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:
-
the Company’s ability to achieve its global business strategies
(including any changes to its strategy or operations as a result of
its strategic review of the business), compete effectively in the
beauty industry and achieve the benefits contemplated by its strategic
initiatives within the expected time frame or at all;
-
the Company’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 relaunched or
rebranded products, execution of new launches, and the anticipated
costs and discounting associated with such relaunches and rebrands,
and consumer receptiveness to its marketing and consumer engagement
activities (including digital marketing and media);
-
use of estimates and assumptions in preparing the Company’s financial
statements, including with regard to revenue recognition, stock
compensation expense, income taxes, the assessment of goodwill and
other intangible and long-lived assets for impairments, the market
value of inventory, pension expense and the fair value of acquired
assets and liabilities associated with acquisitions;
-
the impact of any future impairments;
-
managerial, integration, operational, regulatory, legal and financial
risks, including diversion of management attention to and management
of, cash flows, expenses and costs associated with multiple ongoing
and future strategic initiatives, internal reorganizations;
-
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
(including through the Company's cash efficiency initiatives) and
realize other potential efficiencies and benefits (including through
the Company's restructuring initiatives) at the levels and at the
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), distribution and shelf-space resets or
reductions, compression of go-to-market cycles, changes in product and
marketing requirements by retailers, reductions in retailer inventory
levels and order lead-times or changes in purchasing patterns, and
other changes in the retail, e-commerce and wholesale environment in
which the Company does business and sells its products and the
Company's ability to respond to such changes;
-
the Company and its business partners' and licensors' abilities to
obtain, maintain and protect the intellectual property used in its and
their respective businesses, protect its and their respective
reputations (including those of its and their executives or
influencers), public goodwill, and defend claims by third parties for
infringement of intellectual property rights;
-
any change to the Company'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;
-
the Company’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 local and international
regulations;
-
the Company's dependence on certain licenses (especially in its Luxury
division) and the Company's ability to renew expiring licenses on
favorable terms or at all;
-
the Company's dependence on entities performing outsourced functions,
including outsourcing of distribution functions, third-party
manufacturers, logistics and supply chain suppliers, and other
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
regulatory or policy changes, and/or the enforcement thereof that
affect our business, financial performance, operations or products,
including the impact of Brexit, the current U.S. administration, the
results of elections in European countries and in Brazil, changes in
the U.S. tax code and recent changes and future changes in tariffs,
retaliatory or trade protection measures, trade policies and other
international trade regulations in the U.S. and in other regions where
the Company operates including the European Union and China;
-
currency exchange rate volatility and currency devaluation;
-
the number, type, outcomes (by judgment, order or settlement) and
costs of any current or future legal, compliance, tax, regulatory or
administrative proceedings, investigations and/or litigation;
-
the Company’s ability to manage seasonal factors and other variability
and to anticipate future business trends and needs;
-
disruptions in operations and sales, including due to disruptions in
supply chain, logistics, restructurings and other business alignment
activities, manufacturing or information technology systems, labor
disputes, extreme weather and natural disasters, and the impact of
such disruptions on the Company's ability to generate profits,
stabilize or grow revenues or cash flows, comply with its contractual
obligations and accurately forecast demand and supply needs and/or
future results;
-
restrictions imposed on the Company through its license agreements,
credit facilities and senior unsecured bonds or other material
contracts, its ability to generate cash flow to repay, refinance or
recapitalize debt and otherwise comply with its debt instruments, and
changes in the manner in which the Company finances its debt and
future capital needs;
-
increasing dependency on information technology and the Company’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 the Company's digital
transformation initiatives, and the cost of compliance or the
Company's 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 and the
impact of the recent senior management transitions;
-
the distribution and sale by third parties of counterfeit and/or gray
market versions of the Company’s products; and
-
other factors described elsewhere in this document and from time to
time in documents that the Company file 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
the Company’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 the Company’s Annual
Report on Form 10-K for the fiscal year ended June 30, 2018 and other
periodic reports the Company 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 the Company does not undertake
any obligation, other than as may be required by applicable 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, 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) basis. The
Company believes that organic (LFL) better enables management and
investors to analyze and compare the Company's net revenues performance
from period to period. For the period 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. For a
reconciliation of organic (LFL) period-over-period, see the table
entitled “Reconciliation of Reported Net Revenues to Like-For-Like Net
Revenues”.
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.
-
Asset impairment charges: We have excluded the impact of asset
impairments as such non-cash amounts are inconsistent in amount and
frequency and are significantly impacted by the timing and/or size of
acquisitions. Our management believes that the adjustment of these
items supplement the GAAP information with a measure that can be used
to assess the sustainability of our 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 estimated supply chain impact to adjusted operating income only
includes the direct impact on net revenues and the associated impact on
cost of sales, while the Company assumed no impact from any other
operating expenses.
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, Effective Tax Rates and Cash 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 Income to Adjusted Net Income.”
The Company also presents free cash flow, adjusted 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.
|
COTY INC.
|
SUPPLEMENTAL SCHEDULES INCLUDING NON-GAAP FINANCIAL MEASURES
|
|
COTY INC. & SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
(in millions, except per share data)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net revenues
|
|
$
|
2,511.2
|
|
|
$
|
2,637.6
|
|
|
$
|
4,542.5
|
|
|
$
|
4,875.9
|
|
Cost of sales
|
|
956.7
|
|
|
1,024.9
|
|
|
1,765.8
|
|
|
1,899.1
|
|
as % of Net revenues
|
|
38.1
|
%
|
|
38.9
|
%
|
|
38.9
|
%
|
|
38.9
|
%
|
Gross profit
|
|
1,554.5
|
|
|
1,612.7
|
|
|
2,776.7
|
|
|
2,976.8
|
|
Gross margin
|
|
61.9
|
%
|
|
61.1
|
%
|
|
61.1
|
%
|
|
61.1
|
%
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
1,284.0
|
|
|
1,319.2
|
|
|
2,406.3
|
|
|
2,510.3
|
|
as % of Net revenues
|
|
51.1
|
%
|
|
50.0
|
%
|
|
53.0
|
%
|
|
51.5
|
%
|
Amortization expense
|
|
88.5
|
|
|
89.6
|
|
|
181.0
|
|
|
167.8
|
|
Restructuring costs
|
|
21.5
|
|
|
21.7
|
|
|
37.0
|
|
|
32.9
|
|
Acquisition-related costs
|
|
—
|
|
|
7.0
|
|
|
—
|
|
|
61.1
|
|
Asset impairment charges
|
|
965.1
|
|
|
—
|
|
|
977.7
|
|
|
—
|
|
Operating (loss) income
|
|
(804.6
|
)
|
|
175.2
|
|
|
(825.3
|
)
|
|
204.7
|
|
as % of Net revenues
|
|
(32.0
|
%)
|
|
6.6
|
%
|
|
(18.2
|
%)
|
|
4.2
|
%
|
Interest expense, net
|
|
68.3
|
|
|
60.3
|
|
|
132.4
|
|
|
126.7
|
|
Other expense, net
|
|
4.8
|
|
|
4.2
|
|
|
7.5
|
|
|
8.7
|
|
(Loss) income before income taxes
|
|
(877.7
|
)
|
|
110.7
|
|
|
(965.2
|
)
|
|
69.3
|
|
as % of Net revenues
|
|
(35.0
|
%)
|
|
4.2
|
%
|
|
(21.2
|
%)
|
|
1.4
|
%
|
Provision (benefit) for income taxes
|
|
78.3
|
|
|
(7.9
|
)
|
|
0.9
|
|
|
(33.2
|
)
|
Net (loss) income
|
|
(956.0
|
)
|
|
118.6
|
|
|
(966.1
|
)
|
|
102.5
|
|
as % of Net revenues
|
|
(38.1
|
%)
|
|
4.5
|
%
|
|
(21.3
|
%)
|
|
2.1
|
%
|
Net income (loss) attributable to noncontrolling interests
|
|
0.6
|
|
|
(1.9
|
)
|
|
1.8
|
|
|
(4.1
|
)
|
Net income attributable to redeemable noncontrolling interests
|
|
4.0
|
|
|
11.3
|
|
|
4.8
|
|
|
17.1
|
|
Net (loss) income attributable to Coty Inc.
|
|
$
|
(960.6
|
)
|
|
$
|
109.2
|
|
|
$
|
(972.7
|
)
|
|
$
|
89.5
|
|
as % of Net revenues
|
|
(38.3
|
%)
|
|
4.1
|
%
|
|
(21.4
|
%)
|
|
1.8
|
%
|
Net (loss) income attributable to Coty Inc. per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.28
|
)
|
|
$
|
0.15
|
|
|
$
|
(1.30
|
)
|
|
$
|
0.12
|
|
Diluted
|
|
$
|
(1.28
|
)
|
|
$
|
0.15
|
|
|
$
|
(1.30
|
)
|
|
$
|
0.12
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
751.1
|
|
|
749.6
|
|
|
751.0
|
|
|
749.1
|
|
Diluted
|
|
751.1
|
|
|
752.7
|
|
|
751.0
|
|
|
752.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COTY INC.
SUPPLEMENTAL SCHEDULES INCLUDING NON-GAAP FINANCIAL MEASURES
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.
|
|
|
|
|
Three Months Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Reported (GAAP)
|
|
Adjustments(a)
|
|
Adjusted (Non-GAAP)
|
|
Foreign Currency Translation
|
|
Adjusted Results at Constant Currency
|
Net revenues
|
|
$
|
2,511.2
|
|
|
|
|
$
|
2,511.2
|
|
|
$
|
83.7
|
|
|
$
|
2,594.9
|
|
Gross profit
|
|
1,554.5
|
|
|
4.6
|
|
|
1,559.1
|
|
|
45.5
|
|
|
1,604.6
|
|
Gross margin
|
|
61.9
|
%
|
|
|
|
62.1
|
%
|
|
|
|
61.8
|
%
|
Operating (loss) income
|
|
(804.6
|
)
|
|
1,126.9
|
|
|
322.3
|
|
|
12.3
|
|
|
334.6
|
|
as % of Net revenues
|
|
(32.0
|
%)
|
|
|
|
12.8
|
%
|
|
|
|
12.9
|
%
|
Net (loss) income attributable to Coty Inc.
|
|
$
|
(960.6
|
)
|
|
$
|
1,142.5
|
|
|
$
|
181.9
|
|
|
|
|
|
as % of Net revenues
|
|
(38.3
|
%)
|
|
|
|
7.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS (diluted)
|
|
$
|
(1.28
|
)
|
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Reported (GAAP)
|
|
Adjustments(a)
|
|
Adjusted (Non-GAAP)
|
|
|
|
|
Net revenues
|
|
$
|
2,637.6
|
|
|
|
|
$
|
2,637.6
|
|
|
|
|
|
Gross profit
|
|
1,612.7
|
|
|
11.3
|
|
|
1,624.0
|
|
|
|
|
|
Gross margin
|
|
61.1
|
%
|
|
|
|
61.6
|
%
|
|
|
|
|
Operating income
|
|
175.2
|
|
|
173.1
|
|
|
348.3
|
|
|
|
|
|
as % of Net revenues
|
|
6.6
|
%
|
|
|
|
13.2
|
%
|
|
|
|
|
Net income attributable to Coty Inc.
|
|
$
|
109.2
|
|
|
$
|
128.0
|
|
|
$
|
237.2
|
|
|
|
|
|
as % of Net revenues
|
|
4.1
|
%
|
|
|
|
9.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS (diluted)
|
|
$
|
0.15
|
|
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See “Reconciliation of Reported Operating Income to
Adjusted Operated Income” and “Reconciliation of Reported Net Income
to Adjusted Net Income” for a detailed description of adjusted items.
|
|
|
|
|
|
|
Six Months Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Reported (GAAP)
|
|
Adjustments(a)
|
|
Adjusted (Non-GAAP)
|
|
Foreign Currency Translation
|
|
Adjusted Results at Constant Currency
|
Net revenues
|
|
$
|
4,542.5
|
|
|
$
|
—
|
|
|
$
|
4,542.5
|
|
|
$
|
140.9
|
|
|
$
|
4,683.4
|
|
Gross profit
|
|
2,776.7
|
|
|
9.8
|
|
|
2,786.5
|
|
|
74.1
|
|
|
2,860.6
|
|
Gross margin
|
|
61.1
|
%
|
|
|
|
61.3
|
%
|
|
|
|
61.1
|
%
|
Operating (loss) income
|
|
(825.3
|
)
|
|
1,288.4
|
|
|
463.1
|
|
|
19.7
|
|
|
482.8
|
|
as % of Net revenues
|
|
(18.2
|
%)
|
|
|
|
10.2
|
%
|
|
|
|
10.3
|
%
|
Net (loss) income attributable to Coty Inc.
|
|
$
|
(972.7
|
)
|
|
$
|
1,235.1
|
|
|
$
|
262.4
|
|
|
|
|
|
as % of Net revenues
|
|
(21.4
|
%)
|
|
|
|
5.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS (diluted)
|
|
$
|
(1.30
|
)
|
|
|
|
$
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Reported (GAAP)
|
|
Adjustments(a)
|
|
Adjusted (Non-GAAP)
|
|
|
|
|
Net revenues
|
|
$
|
4,875.9
|
|
|
|
|
$
|
4,875.9
|
|
|
|
|
|
Gross profit
|
|
2,976.8
|
|
|
25.3
|
|
|
3,002.1
|
|
|
|
|
|
Gross margin
|
|
61.1
|
%
|
|
|
|
61.6
|
%
|
|
|
|
|
Operating income
|
|
204.7
|
|
|
339.5
|
|
|
544.2
|
|
|
|
|
|
as % of Net revenues
|
|
4.2
|
%
|
|
|
|
11.2
|
%
|
|
|
|
|
Net income attributable to Coty Inc.
|
|
$
|
89.5
|
|
|
$
|
224.0
|
|
|
$
|
313.5
|
|
|
|
|
|
as % of Net revenues
|
|
1.8
|
%
|
|
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS (diluted)
|
|
$
|
0.12
|
|
|
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See “Reconciliation of Reported Operating Income to
Adjusted Operated Income” and “Reconciliation of Reported Net 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 December 31,
|
|
Six Months Ended December 31,
|
(in millions)
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Reported Operating (Loss) Income
|
|
(804.6
|
)
|
|
175.2
|
|
|
NM
|
|
(825.3
|
)
|
|
204.7
|
|
|
NM
|
% of Net revenues
|
|
(32.0
|
%)
|
|
6.6
|
%
|
|
|
|
(18.2
|
%)
|
|
4.2
|
%
|
|
|
Asset impairment charges (a)
|
|
965.1
|
|
|
—
|
|
|
N/A
|
|
977.7
|
|
|
—
|
|
|
N/A
|
Amortization expense (b)
|
|
88.5
|
|
|
89.6
|
|
|
(1
|
%)
|
|
181.0
|
|
|
167.8
|
|
|
8
|
%
|
Restructuring and other business realignment costs (c)
|
|
73.3
|
|
|
75.6
|
|
|
(3
|
%)
|
|
129.7
|
|
|
106.2
|
|
|
22
|
%
|
Costs related to acquisition activities (d)
|
|
—
|
|
|
7.9
|
|
|
(100
|
%)
|
|
—
|
|
|
65.5
|
|
|
(100
|
%)
|
Total adjustments to Reported Operating Income
|
|
1,126.9
|
|
|
173.1
|
|
|
>100%
|
|
1,288.4
|
|
|
339.5
|
|
|
>100%
|
Adjusted Operating Income
|
|
322.3
|
|
|
348.3
|
|
|
(7
|
%)
|
|
463.1
|
|
|
544.2
|
|
|
(15
|
%)
|
% of Net revenues
|
|
12.8
|
%
|
|
13.2
|
%
|
|
|
|
10.2
|
%
|
|
11.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
In the three months ended December 31, 2018 we incurred $965.1 of
asset impairment charges primarily due to $832.5 related to
goodwill, $90.8 related to indefinite-lived other intangible assets
(mainly related to the CoverGirl and Clairol trademarks) and $7.0
related to finite-lived other intangible assets. Additionally, the
Company identified indicators of impairment related to the
philosophy trademark that is part of the Luxury reporting unit and
recorded an asset impairment charge of $22.8. The Company also fully
impaired a Corporate equity security investment and recorded an
asset impairment charge of $12.0.
|
|
|
|
In three months ended December 31, 2017, we did not incur asset
impairment charges.
|
|
|
|
In the six months ended December 31, 2018 , we incurred $977.7 of
asset impairment charges primarily due to $832.5 related to
goodwill, $90.8 related to indefinite-lived other intangible assets
(mainly related to the CoverGirl and Clairol trademarks) and $7.0
related to finite-lived other intangible assets. Additionally, the
Company identified indicators of impairment related to the
philosophy trademark that is part of the Luxury reporting unit and
recorded an asset impairment charge of $22.8 and a $12.6 charge in
the first quarter due to an acquired trademark associated with a
terminated pre-existing license as a result of the acquisition. The
Company also fully impaired a Corporate equity security investment
and recorded an asset impairment charge of $12.0.
|
|
|
|
In six months ended December 31, 2017, we did not incur asset
impairment charges.
|
|
(b)
|
|
In the three months ended December 31, 2018, amortization expense
decreased to $88.5 from $89.6 in the three months ended December 31,
2017. In the three months ended December 31, 2018, amortization
expense of $40.5, $30.7, and $17.3 was reported in the Luxury,
Consumer Beauty and Professional Beauty segments, respectively. In
the three months ended December 31, 2017, amortization expense of
$40.3, $32.6, and $16.7 was reported in the Luxury, Consumer Beauty
and Professional Beauty segments, respectively.
|
|
|
|
In the six months ended December 31, 2018, amortization expense
increased to $181.0 from $167.8 in the six months ended December 31,
2017. In the three months ended December 31, 2018, amortization
expense of $80.8, $64.1, and $36.1 was reported in the Luxury,
Consumer Beauty and Professional Beauty segments, respectively. In
the six months ended December 31, 2017, amortization expense of
$73.5, $59.0, and $35.3 was reported in the Luxury, Consumer Beauty
and Professional Beauty segments, respectively.
|
|
(c)
|
|
In the three months ended December 31, 2018, we incurred
restructuring and other business structure realignment costs of
$73.3. We incurred Restructuring costs of $21.5 primarily related to
Global Integration Activities and 2018 Restructuring Actions,
included in the Condensed Consolidated Statements of Operations. We
incurred business structure realignment costs of $51.8 primarily
related to our Global Integration Activities and certain other
programs. This amount primarily includes $47.2 in Selling, general
and administrative expense and $4.6 in Cost of sales. In the three
months ended December 31, 2017, we incurred restructuring and other
business structure realignment costs of $75.6. We incurred
Restructuring costs of $21.7 primarily related to Global Integration
Activities, included in the Condensed Consolidated Statements of
Operations. We incurred business structure realignment costs of
$53.9 primarily related to our Global Integration Activities. This
amount primarily includes $43.7 in Selling, general and
administrative expense and $10.2 in Cost of sales.
|
|
|
|
In the six months ended December 31, 2018, we incurred restructuring
and other business structure realignment costs of $129.7. We
incurred Restructuring costs of $37.0 primarily related to Global
Integration Activities and 2018 Restructuring Actions, included in
the Condensed Consolidated Statements of Operations. We incurred
business structure realignment costs of $92.7 primarily related to
our Global Integration Activities and certain other programs. This
amount primarily includes $82.9 in Selling, general and
administrative expense and $9.8 in Cost of sales. In the six months
ended December 31, 2017, we incurred restructuring and other
business structure realignment costs of $106.2. We incurred
Restructuring costs of $32.9 primarily related to Global Integration
Activities, included in the Condensed Consolidated Statements of
Operations. We incurred business structure realignment costs of
$73.3 primarily related to our Global Integration Activities. This
amount primarily includes $52.6 in Selling, general and
administrative expense and $20.7 in Cost of sales.
|
|
(d)
|
|
In the three months ended December 31, 2018, we did not incur costs
related to acquisition activities. In the three months ended
December 31, 2017, we incurred $7.9 of costs related to acquisition
activities. We recognized Acquisition-related costs of $7.0,
included in the Condensed Consolidated Statements of Operations.
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 approximately $0.9 in Costs of
sales primarily reflecting revaluation of acquired inventory in
connection with the acquisition of the Burberry Beauty Business in
the Condensed Consolidated Statements of Operations.
|
|
|
|
In the six months ended December 31, 2018, we did not incur costs
related to acquisition activities. In the six months ended December
31, 2017, we incurred $65.5 of costs related to acquisition
activities. We recognized Acquisition-related costs of $61.1,
included in the Condensed Consolidated Statements of Operations.
These costs were primarily incurred in connection with the
acquisition of P&G Beauty Business. These costs include amounts paid
for external consulting fees and internal costs for converting the
data received from P&G during the transition period to satisfy the
Company’s internal and external financial reporting, regulatory and
other requirements, as well as legal, accounting, and valuation
services, and fees paid directly to P&G. We also incurred $3.5 and
$0.9 in Costs of sales primarily reflecting revaluation of acquired
inventory in connection with the acquisitions of Younique and the
Burberry Beauty Business, respectively in the Condensed Consolidated
Statements of Operations.
|
|
|
|
RECONCILIATION OF REPORTED (LOSS) INCOME BEFORE INCOME TAXES AND
EFFECTIVE TAX RATES TO ADJUSTED INCOME BEFORE INCOME TAXES, EFFECTIVE
TAX RATES AND CASH TAX RATES
|
|
Three Months Ended December 31, 2018
|
|
Three Months Ended December 31, 2017
|
(in millions)
|
|
(Loss) Income Before Income Taxes
|
|
Provision for Taxes
|
|
Effective Tax Rate
|
|
Income Before Income Taxes
|
|
(Benefit) Provision for Taxes
|
|
Effective Tax Rate
|
Reported (Loss) Income Before Taxes
|
|
$
|
(877.7
|
)
|
|
$
|
78.3
|
|
|
(8.9)%
|
|
$
|
110.7
|
|
|
$
|
(7.9
|
)
|
|
(7.1)%
|
Adjustments to Reported Operating Income (a) (b)
|
|
1,126.9
|
|
|
(19.2
|
)
|
|
|
|
173.1
|
|
|
37.2
|
|
|
|
Adjusted Income Before Taxes
|
|
$
|
249.2
|
|
|
$
|
59.1
|
|
|
23.7%
|
|
$
|
283.8
|
|
|
$
|
29.3
|
|
|
10.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
See a description of adjustments under “Reconciliation of Reported
Operating 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 benefit/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
benefit/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.
|
|
|
|
The adjusted effective tax rate was 23.7% for the three months ended
December 31, 2018 compared to 10.3% for the three months ended December
31, 2017. The differences were primarily due to the resolution of a
foreign uncertain tax position of approximately $43.0 in the prior
period.
|
|
Six Months Ended December 31, 2018
|
|
Six Months Ended December 31, 2017
|
(in millions)
|
|
(Loss) Before Income Taxes
|
|
Provision for Income Taxes
|
|
Effective Tax Rate
|
|
Income Before Income Taxes
|
|
(Benefit) Provision for Income Taxes
|
|
Effective Tax Rate
|
Reported (Loss) Income Before Taxes
|
|
$
|
(965.2
|
)
|
|
$
|
0.9
|
|
|
(0.1)%
|
|
$
|
69.3
|
|
|
$
|
(33.2
|
)
|
|
(47.9)%
|
Adjustments to Reported Operating Income (a) (b)
|
|
1,288.4
|
|
|
45.9
|
|
|
|
|
339.5
|
|
|
96.8
|
|
|
|
Adjusted Income Before Taxes
|
|
$
|
323.2
|
|
|
$
|
46.8
|
|
|
14.5%
|
|
$
|
408.8
|
|
|
$
|
63.6
|
|
|
15.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
See a description of adjustments under “Reconciliation of Reported
Operating 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.
|
|
|
|
The adjusted effective tax rate was 14.5% for the six months ended
December 31, 2018 compared to 15.6% for the six months ended December
31, 2017. The differences were primarily due to the resolution of
foreign uncertain tax positions.
RECONCILIATION OF REPORTED NET (LOSS) INCOME TO ADJUSTED NET INCOME
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
(in millions)
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Reported Net (Loss) Income Attributable to Coty Inc.
|
|
$
|
(960.6
|
)
|
|
$
|
109.2
|
|
|
NM
|
|
$
|
(972.7
|
)
|
|
$
|
89.5
|
|
|
NM
|
% of Net revenues
|
|
(38.3
|
%)
|
|
4.1
|
%
|
|
|
|
(21.4
|
%)
|
|
1.8
|
%
|
|
|
Adjustments to Reported Operating Income (a)
|
|
1,126.9
|
|
|
173.1
|
|
|
>100%
|
|
1,288.4
|
|
|
339.5
|
|
|
>100%
|
Adjustments to noncontrolling interests (b)
|
|
(3.6
|
)
|
|
(7.9
|
)
|
|
54
|
%
|
|
(7.4
|
)
|
|
(18.7
|
)
|
|
60
|
%
|
Change in tax provision due to adjustments to Reported Net Income
Attributable to Coty Inc.
|
|
19.2
|
|
|
(37.2
|
)
|
|
>100%
|
|
(45.9
|
)
|
|
(96.8
|
)
|
|
53
|
%
|
Adjusted Net Income Attributable to Coty Inc.
|
|
$
|
181.9
|
|
|
$
|
237.2
|
|
|
(23
|
%)
|
|
$
|
262.4
|
|
|
$
|
313.5
|
|
|
(16
|
%)
|
% of Net revenues
|
|
7.2
|
%
|
|
9.0
|
%
|
|
|
|
5.8
|
%
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted-average common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
751.1
|
|
|
749.6
|
|
|
|
|
751.0
|
|
|
749.1
|
|
|
|
Diluted
|
|
752.5
|
|
|
752.7
|
|
|
|
|
752.6
|
|
|
752.5
|
|
|
|
Adjusted Net Income Attributable to Coty Inc. per Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.24
|
|
|
$
|
0.32
|
|
|
|
|
$
|
0.35
|
|
|
$
|
0.42
|
|
|
|
Diluted
|
|
$
|
0.24
|
|
|
$
|
0.32
|
|
|
|
|
$
|
0.35
|
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
See a description of adjustments under “Reconciliation of Reported
Operating Income to Adjusted Operating Income”.
|
|
(b)
|
|
The amounts represent the impact of non-GAAP adjustments to Net
income attributable to noncontrolling interest related to the
Company’s majority-owned consolidated subsidiaries. The amounts are
based on the relevant noncontrolling interest’s percentage ownership
in the related subsidiary, for which the non-GAAP adjustments were
made.
|
|
|
|
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE
CASH FLOW
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
(in millions)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net cash provided by operating activities
|
|
$
|
319.6
|
|
|
$
|
316.7
|
|
|
$
|
237.7
|
|
|
$
|
307.8
|
|
Capital expenditures
|
|
(125.7
|
)
|
|
(120.8
|
)
|
|
(259.3
|
)
|
|
(232.2
|
)
|
Free cash flow
|
|
$
|
193.9
|
|
|
$
|
195.9
|
|
|
$
|
(21.6
|
)
|
|
$
|
75.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF TOTAL DEBT TO NET DEBT
(in millions)
|
|
December 31, 2018
|
Total debt
|
|
$
|
7,906.0
|
Cash
|
|
417.5
|
Net debt
|
|
$
|
7,488.5
|
|
|
|
|
RECONCILIATION OF ADJUSTED OPERATING INCOME TO ADJUSTED EBITDA
(in millions)
|
|
Twelve Months Ended December 31, 2018
|
Adjusted operating income(a)
|
|
$
|
919.5
|
|
Depreciation (b)
|
|
377.4
|
|
Pension Adjustment (c)
|
|
(0.8
|
)
|
Adjusted EBITDA
|
|
1,296.9
|
|
|
|
|
|
a
|
|
Adjusted operating income for the twelve months ended December 31,
2018 represents the summation of the adjusted operating income for
each of the three months ended March 31, 2018, June 30, 2018,
September 30, 2018 and December 31, 2018. For a reconciliation of
adjusted operating income to operating income for each of those
periods, see the tables entitled “Reconciliation of Reported
Operating Income to Adjusted Operating Income” and "Reconciliation
of Reported Operating Income to Adjusted Operating Income by
Segment" for each of those periods.
|
|
|
|
b
|
|
The deprecation adjustment for the twelve months ended December 31,
2018 represents the summation of depreciation expense for each of
the three months ended March 31, 2018, June 30, 2018, September 30,
2018 and December 31, 2018 as adjusted by $4.0, $3.4, $1.8 and $1.6,
respectively, for accelerated depreciation.
|
|
|
|
c
|
|
The pension expense adjustment for the twelve months ended December
31, 2018 represents the summation of the non-service cost components
of net periodic pension cost for each of the three months ended
December 31, 2017, March 31, 2018, June 30, 2018, September 30, 2018
and December 31, 2018.
|
|
|
|
NET DEBT/ADJUSTED EBITDA
|
|
Twelve Months Ended December 31,
|
Net Debt
|
|
7,488.5
|
EBITDA
|
|
1,296.9
|
Net Debt/Adjusted EBITDA
|
|
5.77
|
|
|
|
NET REVENUES AND ADJUSTED OPERATING INCOME BY SEGMENT
|
|
Three Months Ended December 31,
|
|
|
Net Revenues
|
|
Change
|
|
Reported Operating Income (Loss)
|
|
Adjusted Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2018
|
|
2017
|
|
Reported Basis
|
|
Constant Currency
|
|
2018
|
|
Change
|
|
2018
|
|
Change
|
Luxury
|
|
$
|
1,017.5
|
|
|
$
|
951.2
|
|
|
7
|
%
|
|
10
|
%
|
|
$
|
113.6
|
|
|
33
|
%
|
|
$
|
176.9
|
|
|
41
|
%
|
Consumer Beauty
|
|
967.8
|
|
|
1,138.6
|
|
|
(15
|
%)
|
|
(11
|
%)
|
|
(906.9
|
)
|
|
NM
|
|
54.1
|
|
|
(59
|
%)
|
Professional
|
|
525.9
|
|
|
547.8
|
|
|
(4
|
%)
|
|
(1
|
%)
|
|
73.8
|
|
|
0
|
%
|
|
91.1
|
|
|
1
|
%
|
Corporate
|
|
—
|
|
|
—
|
|
|
N/A
|
|
—
|
%
|
|
(85.1
|
)
|
|
(3
|
%)
|
|
0.2
|
|
|
(75
|
%)
|
Total
|
|
$
|
2,511.2
|
|
|
$
|
2,637.6
|
|
|
(5
|
%)
|
|
(2
|
%)
|
|
$
|
(804.6
|
)
|
|
NM
|
|
$
|
322.3
|
|
|
(7
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended December 31,
|
|
|
Net Revenues
|
|
Change
|
|
Reported Operating Income
|
|
Adjusted Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2018
|
|
2017
|
|
Reported Basis
|
|
Constant Currency
|
|
2018
|
|
Change
|
|
2018
|
|
Change
|
Luxury
|
|
$
|
1,810.4
|
|
|
$
|
1,715.6
|
|
|
6
|
%
|
|
8
|
%
|
|
$
|
162.3
|
|
|
14
|
%
|
|
$
|
278.5
|
|
|
29
|
%
|
Consumer Beauty
|
|
1,796.6
|
|
|
2,182.0
|
|
|
(18
|
%)
|
|
(14
|
%)
|
|
(925.5
|
)
|
|
NM
|
|
68.9
|
|
|
(69
|
%)
|
Professional
|
|
935.5
|
|
|
978.3
|
|
|
(4
|
%)
|
|
(2
|
%)
|
|
78.8
|
|
|
10
|
%
|
|
114.9
|
|
|
7
|
%
|
Corporate
|
|
—
|
|
|
—
|
|
|
N/A
|
|
—
|
%
|
|
(140.9
|
)
|
|
17
|
%
|
|
0.8
|
|
|
(50
|
%)
|
Total
|
|
$
|
4,542.5
|
|
|
$
|
4,875.9
|
|
|
(7
|
%)
|
|
(4
|
%)
|
|
$
|
(825.3
|
)
|
|
NM
|
|
$
|
463.1
|
|
|
(15
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET REVENUES BY GEOGRAPHIC REGION
|
|
|
|
|
Three Months Ended December 31,
|
|
|
Net Revenues
|
|
Change
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2018
|
|
2017
|
|
Reported Basis
|
|
Constant Currency
|
North America
|
|
$
|
742.2
|
|
|
$
|
741.8
|
|
|
0%
|
|
0%
|
Europe
|
|
1,201.6
|
|
|
1,297.6
|
|
|
(7%)
|
|
(4%)
|
ALMEA
|
|
567.4
|
|
|
598.2
|
|
|
(5%)
|
|
2%
|
Total
|
|
$
|
2,511.2
|
|
|
$
|
2,637.6
|
|
|
(5%)
|
|
(2%)
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended December 31,
|
|
|
Net Revenues
|
|
Change
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2018
|
|
2017
|
|
Reported Basis
|
|
Constant Currency
|
North America
|
|
$
|
1,387.1
|
|
|
$
|
1,494.3
|
|
|
(7%)
|
|
(7%)
|
Europe
|
|
2,073.8
|
|
|
2,264.1
|
|
|
(8%)
|
|
(6%)
|
ALMEA
|
|
1,081.6
|
|
|
1,117.5
|
|
|
(3%)
|
|
4%
|
Total
|
|
$
|
4,542.5
|
|
|
$
|
4,875.9
|
|
|
(7%)
|
|
(4%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF REPORTED OPERATING (LOSS) INCOME OPERATING INCOME
BY SEGMENT
|
|
Three Months Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Reported (GAAP)
|
|
Adjustments (a)
|
|
Adjusted (Non-GAAP)
|
|
Foreign Currency Translation
|
|
Adjusted Results at Constant Currency
|
OPERATING INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
Luxury
|
|
$
|
113.6
|
|
|
$
|
(63.3
|
)
|
|
$
|
176.9
|
|
|
$
|
4.6
|
|
|
$
|
181.5
|
|
Consumer Beauty
|
|
(906.9
|
)
|
|
(961.0
|
)
|
|
54.1
|
|
|
4.0
|
|
|
58.1
|
|
Professional Beauty
|
|
73.8
|
|
|
(17.3
|
)
|
|
91.1
|
|
|
3.7
|
|
|
94.8
|
|
Corporate
|
|
(85.1
|
)
|
|
(85.3
|
)
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
Total
|
|
$
|
(804.6
|
)
|
|
$
|
(1,126.9
|
)
|
|
$
|
322.3
|
|
|
$
|
12.3
|
|
|
$
|
334.6
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING MARGIN
|
|
|
|
|
|
|
|
|
|
|
Luxury
|
|
11.2
|
%
|
|
|
|
17.4
|
%
|
|
|
|
17.4
|
%
|
Consumer Beauty
|
|
(93.7
|
%)
|
|
|
|
5.6
|
%
|
|
|
|
5.8
|
%
|
Professional Beauty
|
|
14.0
|
%
|
|
|
|
17.3
|
%
|
|
|
|
17.4
|
%
|
Corporate
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
Total
|
|
(32.0
|
%)
|
|
|
|
12.8
|
%
|
|
|
|
12.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2017
|
|
|
|
|
(in millions)
|
|
Reported (GAAP)
|
|
Adjustments (a)
|
|
Adjusted (Non-GAAP)
|
|
|
|
|
OPERATING INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
Luxury
|
|
$
|
85.1
|
|
|
$
|
(40.3
|
)
|
|
$
|
125.4
|
|
|
|
|
|
Consumer Beauty
|
|
99.3
|
|
|
(32.6
|
)
|
|
131.9
|
|
|
|
|
|
Professional Beauty
|
|
73.5
|
|
|
(16.7
|
)
|
|
90.2
|
|
|
|
|
|
Corporate
|
|
(82.7
|
)
|
|
(83.5
|
)
|
|
0.8
|
|
|
|
|
|
Total
|
|
$
|
175.2
|
|
|
$
|
(173.1
|
)
|
|
$
|
348.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING MARGIN
|
|
|
|
|
|
|
|
|
|
|
Luxury
|
|
8.9
|
%
|
|
|
|
13.2
|
%
|
|
|
|
|
Consumer Beauty
|
|
8.7
|
%
|
|
|
|
11.6
|
%
|
|
|
|
|
Professional Beauty
|
|
13.4
|
%
|
|
|
|
16.5
|
%
|
|
|
|
|
Corporate
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
Total
|
|
6.6
|
%
|
|
|
|
13.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
See “Reconciliation of Reported Operating Income to Adjusted
Operated Income” for a detailed description of adjusted items.
|
|
|
|
|
|
|
|
|
Six Months Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Reported (GAAP)
|
|
Adjustments (a)
|
|
Adjusted (Non-GAAP)
|
|
Foreign Currency Translation
|
|
Adjusted Results at Constant Currency
|
OPERATING INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
Luxury
|
|
$
|
162.3
|
|
|
$
|
(116.2
|
)
|
|
$
|
278.5
|
|
|
$
|
8.0
|
|
|
$
|
286.5
|
|
Consumer Beauty
|
|
(925.5
|
)
|
|
(994.4
|
)
|
|
68.9
|
|
|
6.4
|
|
|
75.3
|
|
Professional Beauty
|
|
78.8
|
|
|
(36.1
|
)
|
|
114.9
|
|
|
5.3
|
|
|
120.2
|
|
Corporate
|
|
(140.9
|
)
|
|
(141.7
|
)
|
|
0.8
|
|
|
—
|
|
|
0.8
|
|
Total
|
|
$
|
(825.3
|
)
|
|
$
|
(1,288.4
|
)
|
|
$
|
463.1
|
|
|
$
|
19.7
|
|
|
$
|
482.8
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING MARGIN
|
|
|
|
|
|
|
|
|
|
|
Luxury
|
|
9.0
|
%
|
|
|
|
15.4
|
%
|
|
|
|
15.5
|
%
|
Consumer Beauty
|
|
(51.5
|
%)
|
|
|
|
3.8
|
%
|
|
|
|
4.0
|
%
|
Professional Beauty
|
|
8.4
|
%
|
|
|
|
12.3
|
%
|
|
|
|
12.5
|
%
|
Corporate
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
Total
|
|
(18.2
|
%)
|
|
|
|
10.2
|
%
|
|
|
|
10.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended December 31, 2017
|
|
|
|
|
(in millions)
|
|
Reported (GAAP)
|
|
Adjustments (a)
|
|
Adjusted (Non-GAAP)
|
|
|
|
|
OPERATING INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
Luxury
|
|
$
|
141.8
|
|
|
$
|
(73.5
|
)
|
|
$
|
215.3
|
|
|
|
|
|
Consumer Beauty
|
|
161.2
|
|
|
(59.0
|
)
|
|
220.2
|
|
|
|
|
|
Professional Beauty
|
|
71.8
|
|
|
(35.3
|
)
|
|
107.1
|
|
|
|
|
|
Corporate
|
|
(170.1
|
)
|
|
(171.7
|
)
|
|
1.6
|
|
|
|
|
|
Total
|
|
$
|
204.7
|
|
|
$
|
(339.5
|
)
|
|
$
|
544.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING MARGIN
|
|
|
|
|
|
|
|
|
|
|
Luxury
|
|
8.3
|
%
|
|
|
|
12.5
|
%
|
|
|
|
|
Consumer Beauty
|
|
7.4
|
%
|
|
|
|
10.1
|
%
|
|
|
|
|
Professional Beauty
|
|
7.3
|
%
|
|
|
|
10.9
|
%
|
|
|
|
|
Corporate
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
Total
|
|
4.2
|
%
|
|
|
|
11.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF REPORTED NET REVENUES TO LIKE-FOR-LIKE NET REVENUES
|
|
|
|
|
Three Months Ended December 31, 2018 vs. Three Months Ended
December 31, 2017 Net Revenue Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues Change YoY
|
|
Reported Basis
|
|
Constant Currency
|
|
Impact from Divestitures1
|
|
Organic (LFL)
|
Luxury
|
|
7%
|
|
10%
|
|
(1)%
|
|
11%
|
Consumer Beauty
|
|
(15)%
|
|
(11)%
|
|
(4)%
|
|
(7)%
|
Professional Beauty
|
|
(4)%
|
|
(1)%
|
|
—%
|
|
(1%)
|
Total Company
|
|
(5)%
|
|
(2)%
|
|
(3)%
|
|
1%
|
1
|
|
Divestitures reflect the net revenue reduction from the termination
of Guess and the divestitures of the license of Playboy and the
license of Cerruti in the three months ended December 31, 2017.
|
|
|
|
|
|
Six Months Ended December 31, 2018 vs. Six Months Ended
December 31, 2017 Net Revenue Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenues Change YoY
|
|
Reported
|
|
Constant Currency
|
|
Impact from the Acquisition and Divestitures 1
|
|
Organic (LFL)
|
Luxury
|
|
6%
|
|
8%
|
|
3%
|
|
5%
|
Consumer Beauty
|
|
(18)%
|
|
(14)%
|
|
(4)%
|
|
(10)%
|
Professional Beauty
|
|
(4%)
|
|
(2)%
|
|
—%
|
|
(2%)
|
Total Company
|
|
(7)%
|
|
(4)%
|
|
(1)%
|
|
(3)%
|
|
|
|
|
|
|
|
|
|
1
|
|
Acquisitions reflect the net revenue contribution from the
acquisition of Burberry in the three months ended September 30, 2018
and the net revenue reduction from the termination of Guess and the
divestitures of the license of Playboy and the license of Cerruti in
the six months ended December 31, 2017.
|
|
|
|
|
COTY INC. & SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
|
(in millions)
|
|
December 31, 2018
|
|
June 30, 2018
|
ASSETS
|
|
|
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
417.5
|
|
|
$
|
331.6
|
|
Restricted cash
|
|
27.5
|
|
|
30.6
|
|
Trade receivables—less allowances of $72.8 and $81.8, respectively
|
|
1,542.7
|
|
|
1,536.0
|
|
Inventories
|
|
1,164.6
|
|
|
1,148.9
|
|
Prepaid expenses and other current assets
|
|
562.1
|
|
|
603.9
|
|
Total current assets
|
|
3,714.4
|
|
|
3,651.0
|
|
Property and equipment, net
|
|
1,625.7
|
|
|
1,680.8
|
|
Goodwill
|
|
7,665.0
|
|
|
8,607.1
|
|
Other intangible assets, net
|
|
7,929.4
|
|
|
8,284.4
|
|
Deferred income taxes
|
|
182.7
|
|
|
107.4
|
|
Other noncurrent assets
|
|
153.5
|
|
|
299.5
|
|
TOTAL ASSETS
|
|
$
|
21,270.7
|
|
|
$
|
22,630.2
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
1,818.9
|
|
|
$
|
1,928.6
|
|
Accrued expenses and other current liabilities
|
|
1,738.8
|
|
|
1,844.4
|
|
Short-term debt and current portion of long-term debt
|
|
255.7
|
|
|
218.9
|
|
Income and other taxes payable
|
|
51.6
|
|
|
52.1
|
|
Total current liabilities
|
|
3,865.0
|
|
|
4,044.0
|
|
Long-term debt, net
|
|
7,560.9
|
|
|
7,305.4
|
|
Pension and other post-employment benefits
|
|
519.6
|
|
|
533.3
|
|
Deferred income taxes
|
|
840.6
|
|
|
842.5
|
|
Other noncurrent liabilities
|
|
385.7
|
|
|
388.5
|
|
Total liabilities
|
|
13,171.8
|
|
|
13,113.7
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
REDEEMABLE NONCONTROLLING INTERESTS
|
|
487.6
|
|
|
661.3
|
|
EQUITY:
|
|
|
|
|
Preferred Stock
|
|
—
|
|
|
—
|
|
Common Stock
|
|
8.1
|
|
|
8.1
|
|
Additional paid-in capital
|
|
10,734.9
|
|
|
10,750.8
|
|
Accumulated deficit
|
|
(1,729.7
|
)
|
|
(626.2
|
)
|
Accumulated other comprehensive income
|
|
33.6
|
|
|
158.8
|
|
Treasury stock
|
|
(1,441.8
|
)
|
|
(1,441.8
|
)
|
Total Coty Inc. stockholders’ equity
|
|
7,605.1
|
|
|
8,849.7
|
|
Noncontrolling interests
|
|
6.2
|
|
|
5.5
|
|
Total equity
|
|
7,611.3
|
|
|
8,855.2
|
|
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
|
|
$
|
21,270.7
|
|
|
$
|
22,630.2
|
|
|
|
|
|
|
|
|
|
|
|
COTY INC. & SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
|
|
Six Months Ended December 31,
|
(in millions)
|
|
2018
|
|
2017
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net (loss) income
|
|
$
|
(966.1
|
)
|
|
$
|
102.5
|
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
|
|
|
|
|
Depreciation and amortization
|
|
367.7
|
|
|
350.5
|
|
Deferred income taxes
|
|
(55.9
|
)
|
|
(75.1
|
)
|
Provision for bad debts
|
|
9.4
|
|
|
9.0
|
|
Provision for pension and other post-employment benefits
|
|
18.2
|
|
|
22.2
|
|
Share-based compensation
|
|
8.2
|
|
|
16.2
|
|
Asset impairment charges
|
|
977.7
|
|
|
—
|
|
Non-cash restructuring charges
|
|
23.8
|
|
|
0.2
|
|
Other
|
|
26.4
|
|
|
(5.3
|
)
|
Change in operating assets and liabilities, net of effects from
purchase of acquired companies:
|
|
|
|
|
Trade receivables
|
|
(45.5
|
)
|
|
(246.6
|
)
|
Inventories
|
|
(35.2
|
)
|
|
(22.2
|
)
|
Prepaid expenses and other current assets
|
|
19.7
|
|
|
(47.6
|
)
|
Accounts payable
|
|
(28.6
|
)
|
|
18.7
|
|
Accrued expenses and other current liabilities
|
|
(87.4
|
)
|
|
185.6
|
|
Income and other taxes payable
|
|
12.8
|
|
|
19.5
|
|
Other noncurrent assets
|
|
24.7
|
|
|
(14.9
|
)
|
Other noncurrent liabilities
|
|
(32.2
|
)
|
|
(4.9
|
)
|
Net cash provided by operating activities
|
|
237.7
|
|
|
307.8
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Capital expenditures
|
|
(259.3
|
)
|
|
(232.2
|
)
|
Payment for business combinations and asset acquisitions, net of
cash acquired
|
|
(40.8
|
)
|
|
(264.6
|
)
|
Proceeds from sale of asset
|
|
—
|
|
|
2.8
|
|
Net cash used in investing activities
|
|
(300.1
|
)
|
|
(494.0
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Net proceeds from short-term debt, original maturity less than three
months
|
|
39.7
|
|
|
71.5
|
|
Proceeds from revolving loan facilities
|
|
1,076.6
|
|
|
1,437.0
|
|
Repayments of revolving loan facilities
|
|
(644.8
|
)
|
|
(1,166.4
|
)
|
Repayments of term loans and other long-term debt
|
|
(95.6
|
)
|
|
(95.5
|
)
|
Dividend payment
|
|
(188.4
|
)
|
|
(188.1
|
)
|
Net proceeds from issuance of Class A Common Stock and Series A
Preferred Stock
|
|
0.9
|
|
|
13.7
|
|
Net proceeds from foreign currency contracts
|
|
2.4
|
|
|
8.2
|
|
Distributions to noncontrolling interests, redeemable noncontrolling
interests and mandatorily redeemable financial instruments
|
|
(22.9
|
)
|
|
(40.0
|
)
|
Payment of debt issuance costs
|
|
(10.7
|
)
|
|
(4.0
|
)
|
Other
|
|
(3.5
|
)
|
|
(3.2
|
)
|
Net cash provided by financing activities
|
|
153.7
|
|
|
33.2
|
|
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED
CASH
|
|
(8.5
|
)
|
|
8.0
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED
CASH
|
|
82.8
|
|
|
(145.0
|
)
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period
|
|
362.2
|
|
|
570.7
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period
|
|
$
|
445.0
|
|
|
$
|
425.7
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
|
|
|
|
|
Cash paid during the period for interest
|
|
$
|
140.7
|
|
|
$
|
129.4
|
|
Cash received during the period for settlement of interest rate swaps
|
|
43.2
|
|
|
—
|
|
Cash paid during the period for income taxes, net of refunds received
|
|
57.6
|
|
|
57.5
|
|
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING
ACTIVITIES:
|
|
|
|
|
Accrued capital expenditure additions
|
|
$
|
83.3
|
|
|
$
|
72.6
|
|
Non-cash contingent consideration for business combination
|
|
—
|
|
|
5.0
|
|
|
|
|
|
|
|
|

View source version on businesswire.com: https://www.businesswire.com/news/home/20190208005083/en/
Source: Coty Inc.
Investor Relations
Christina
Frank, +1 212 389-6802
christina_frank@cotyinc.com
Olga Levinzon, +1 212 389-7733
olga_levinzon@cotyinc.com
Media Relations
Jennifer
Friedman, +1 917 754-8399
jennifer_friedman@cotyinc.com