UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDEDMARCH 31,SEPTEMBER 30, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                    TO          
COMMISSION FILE NUMBER001-35964

COTY INC.
(Exact name of registrant as specified in its charter)
Delaware13-3823358
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
350 Fifth Avenue,
 New York,NY10118
(Address of principal executive offices)(Zip Code)
(212) 389-7300
Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes ý      No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes ý      No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer   ☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes ☐     No ý
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.01 par valueCOTYNew York Stock Exchange
At May 3,November 1, 2021, 766,107,084818,476,414 shares of the registrant’s Class A Common Stock, $0.01 par value, were outstanding.



COTY INC.
INDEX TO FORM 10-Q
Page
1
1
2
3
4
86
108
4035
6652
6652
6753
6753
6853
6954
7055


Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
 Three Months Ended
March 31,		Nine Months Ended
March 31,
 2021202020212020
Net revenues$1,027.8 $1,062.5 $3,567.5 $4,157.4 
Cost of sales391.7 460.8 1,440.6 1,655.0 
Gross profit636.1 601.7 2,126.9 2,502.4 
Selling, general and administrative expenses545.6 757.9 1,770.5 2,481.0 
Amortization expense62.2 61.6 189.4 170.7 
Restructuring costs0 (8.0)89.7 125.5 
Acquisition and divestiture-related costs29.7 49.3 127.7 85.3 
Asset impairment charges0 40.4 0 40.4 
Gain on divestitures and sale of brand assets0 0 0 (84.5)
Operating (loss)(1.4)(299.5)(50.4)(316.0)
Interest expense, net50.3 63.8 171.6 185.3 
Other (income) expense, net(62.5)0.3 (50.7)4.0 
Income (loss) from continuing operations before income taxes10.8 (363.6)(171.3)(505.3)
Benefit for income taxes on continuing operations(19.2)(59.8)(304.9)(117.0)
Net income (loss) from continuing operations30.0 (303.8)133.6 (388.3)
Net (loss) income from discontinued operations(17.3)39.4 (148.2)163.8 
Net income (loss)12.7 (264.4)(14.6)(224.5)
Net (loss) income attributable to noncontrolling interests(9.4)6.2 (11.5)9.5 
Net income attributable to redeemable noncontrolling interests6.5 1.0 12.2 6.4 
Net income (loss) attributable to Coty Inc.$15.6 $(271.6)$(15.3)$(240.4)
Amounts attributable to Coty Inc.
Net income (loss) from continuing operations32.9 (311.0)132.9 (404.2)
Convertible Series B Preferred Stock dividends(34.1)0 (78.1)0 
Net (loss) income from continuing operations attributable to common stockholders(1.2)(311.0)54.8 (404.2)
Net (loss) income from discontinued operations(17.3)39.4 (148.2)163.8 
Net loss attributable to common stockholders$(18.5)$(271.6)$(93.4)$(240.4)
Earnings (loss) per common share:  
Earnings (loss) from continuing operations per common share - basic$0 $(0.41)$0.07 $(0.53)
Earnings (loss) from continuing operations per common share - diluted0 (0.41)0.07 (0.53)
(Loss) earnings from discontinued operations - basic(0.02)0.05 (0.19)0.21 
(Loss) earnings from discontinued operations - diluted(0.02)0.05 (0.19)0.21 
Loss per common share - basic(0.02)(0.36)(0.12)(0.32)
Loss per common share - diluted(0.02)(0.36)(0.12)(0.32)
Weighted-average common shares outstanding:    
Basic765.4 760.8 764.6 757.7 
Diluted765.4 760.8 932.1 757.7 
 Three Months Ended
September 30,
 20212020
Net revenues$1,371.7 $1,124.1 
Cost of sales504.8 464.9 
Gross profit866.9 659.2 
Selling, general and administrative expenses776.3 583.4 
Amortization expense57.0 65.4 
Restructuring costs12.4 30.1 
Acquisition- and divestiture-related costs4.0 46.3 
Operating income (loss)17.2 (66.0)
Interest expense, net59.8 62.1 
Other income, net(386.1)(5.8)
Income (loss) from continuing operations before income taxes343.5 (122.3)
Provision (benefit) for income taxes on continuing operations114.6 (244.9)
Net income from continuing operations228.9 122.6 
Net income from discontinued operations— 104.7 
Net income228.9 227.3 
Net (loss) income attributable to noncontrolling interests(0.5)0.4 
Net income attributable to redeemable noncontrolling interests3.4 5.5 
Net income attributable to Coty Inc.$226.0 $221.4 
Amounts attributable to Coty Inc.
Net income from continuing operations226.0 116.7 
Convertible Series B Preferred Stock dividends(123.0)(20.8)
Net income from continuing operations attributable to common stockholders103.0 95.9 
Net income from discontinued operations— 104.7 
Net income attributable to common stockholders$103.0 $200.6 
Earnings per common share:
Earnings from continuing operations per common share - basic$0.13 $0.13 
Earnings from continuing operations per common share - diluted0.13 0.13 
Earnings from discontinued operations - basic— 0.13 
Earnings from discontinued operations - diluted— 0.11 
Earnings per common share - basic0.13 0.26 
Earnings per common share - diluted0.13 0.24 
Weighted-average common shares outstanding:  
Basic777.6 763.9 
Diluted787.7 916.7 

See notes to Condensed Consolidated Financial Statements.
1
Table of Contents
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)
Three Months Ended
March 31,		Nine Months Ended
March 31,
 2021202020212020
Net income (loss)$12.7 $(264.4)$(14.6)$(224.5)
Other comprehensive income (loss):    
Foreign currency translation adjustment(107.1)(364.6)22.0 (385.2)
Net unrealized derivative gain (loss) on cash flow hedges, net of taxes of $(2.4) and $11.0, and $(7.2) and $9.4 during the three and nine months ended, respectively7.8 (35.0)23.2 (29.9)
Pension and other post-employment benefits adjustment, net of tax of $0.2 and $0.0, and $4.5 and $0.0 during the three and nine months ended, respectively(0.4)(1.5)(15.1)(4.6)
Total other comprehensive (loss) income, net of tax(99.7)(401.1)30.1 (419.7)
Comprehensive (loss) income(87.0)(665.5)15.5 (644.2)
Comprehensive income attributable to noncontrolling interests:    
Net (loss) income(9.4)6.2 (11.5)9.5 
Foreign currency translation adjustment(0.2)(0.1)(0.1)0 
Total comprehensive (loss) income attributable to noncontrolling interests(9.6)6.1 (11.6)9.5 
Comprehensive income attributable to redeemable noncontrolling interests:
Net income6.5 1.0 12.2 6.4 
Comprehensive (loss) income attributable to Coty Inc.$(83.9)$(672.6)$14.9 $(660.1)
Three Months Ended
September 30,
 20212020
Net income$228.9 $227.3 
Other comprehensive income (loss):  
Foreign currency translation adjustment(143.1)(10.5)
Net unrealized derivative gain (loss) on cash flow hedges, net of taxes of $(1.6) and $(1.9) during the three months ended, respectively4.4 5.7 
Pension and other post-employment benefits adjustment, net of tax of $0.0 and $0.0 during the three months ended, respectively0.5 (1.2)
Total other comprehensive loss, net of tax(138.2)(6.0)
Comprehensive income90.7 221.3 
Comprehensive income attributable to noncontrolling interests:  
Net (loss) income(0.5)0.4 
Foreign currency translation adjustment(0.2)(0.1)
Total comprehensive (loss) income attributable to noncontrolling interests(0.7)0.3 
Comprehensive income attributable to redeemable noncontrolling interests:
Net income3.4 5.5 
Comprehensive income attributable to Coty Inc.$88.0 $215.5 

See notes to Condensed Consolidated Financial Statements.
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Table of Contents
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
 March 31,
2021		June 30,
2020
ASSETS  
Current assets:  
Cash and cash equivalents$315.3 $308.3 
Restricted cash42.7 43.7 
Trade receivables—less allowances of $51.2 and $57.3, respectively398.1 440.1 
Inventories604.7 678.2 
Prepaid expenses and other current assets457.4 411.6 
Current assets held for sale0 4,613.1 
Total current assets1,818.2 6,495.0 
Property and equipment, net942.6 1,081.6 
Goodwill4,026.6 3,973.9 
Other intangible assets, net4,474.9 4,372.1 
Equity investments1,266.8 0 
Operating lease right-of-use assets331.4 371.4 
Deferred income taxes702.2 362.4 
Other noncurrent assets59.6 72.4 
TOTAL ASSETS$13,622.3 $16,728.8 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY  
Current liabilities:
Accounts payable$1,051.8 $1,190.3 
Accrued expenses and other current liabilities1,174.7 1,111.6 
Short-term debt and current portion of long-term debt193.7 188.3 
Current operating lease liabilities79.3 105.0 
Income and other taxes payable66.4 33.8 
Current liabilities held for sale0 956.7 
Total current liabilities2,565.9 3,585.7 
Long-term debt, net5,182.4 7,892.1 
Long-term operating lease liabilities280.4 317.4 
Pension and other post-employment benefits393.8 400.3 
Deferred income taxes534.1 175.1 
Other noncurrent liabilities371.5 334.5 
Total liabilities9,328.1 12,705.1 
COMMITMENTS AND CONTINGENCIES (See Note 20)00
CONVERTIBLE SERIES B PREFERRED STOCK, $0.01 par value; 1.0 shares authorized; 1.0 and 0.8 issued and 1.0 and 0.8 and outstanding, respectively, at March 31, 2021 and June 30, 2020
1,036.3 715.8 
REDEEMABLE NONCONTROLLING INTERESTS87.4 79.1 
EQUITY:  
Preferred Stock, $0.01 par value; 20.0 shares authorized, 1.5 issued and outstanding at March 31, 2021 and June 30, 2020
0 0 
Class A Common Stock, $0.01 par value; 1,250.0 shares authorized, 832.3 and 830.6 issued and 766.1 and 765.1 outstanding, respectively, at March 31, 2021 and June 30, 20208.3 8.3 
Additional paid-in capital10,395.8 10,447.4 
Accumulated deficit(5,569.6)(5,548.6)
Accumulated other comprehensive income(426.0)(456.2)
Treasury stock—at cost, shares: 66.2 at March 31, 2021 and 65.5 at June 30, 2020
(1,446.3)(1,446.3)
Total Coty Inc. stockholders’ equity2,962.2 3,004.6 
Noncontrolling interests208.3 224.2 
Total equity3,170.5 3,228.8 
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY$13,622.3 $16,728.8 
 September 30,
2021		June 30,
2021
ASSETS  
Current assets:  
Cash and cash equivalents$376.9 $253.5 
Restricted cash45.5 56.9 
Trade receivables—less allowances of $52.6 and $47.7, respectively517.8 348.0 
Inventories660.7 650.8 
Prepaid expenses and other current assets459.3 473.9 
Total current assets2,060.2 1,783.1 
Property and equipment, net847.1 918.1 
Goodwill4,037.4 4,118.1 
Other intangible assets, net4,336.0 4,463.0 
Equity investments1,665.6 1,276.2 
Operating lease right-of-use assets302.6 318.5 
Deferred income taxes738.8 758.5 
Other noncurrent assets50.7 55.9 
TOTAL ASSETS$14,038.4 $13,691.4 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY  
Current liabilities:
Accounts payable$1,232.5 $1,166.1 
Accrued expenses and other current liabilities1,298.4 1,096.0 
Mandatorily redeemable Convertible Series B Preferred Stock394.2 — 
Short-term debt and current portion of long-term debt24.0 24.2 
Current operating lease liabilities69.0 75.7 
Income and other taxes payable53.7 53.4 
Total current liabilities3,071.8 2,415.4 
Long-term debt, net5,250.0 5,401.0 
Long-term operating lease liabilities257.8 269.3 
Pension and other post-employment benefits410.8 420.6 
Deferred income taxes768.4 674.9 
Other noncurrent liabilities298.3 327.6 
Total liabilities10,057.1 9,508.8 
COMMITMENTS AND CONTINGENCIES (See Note 19)00
CONVERTIBLE SERIES B PREFERRED STOCK, $0.01 par value; 1.0 shares authorized; 0.7 and 1.0 issued and 0.7 and 1.0 and outstanding, respectively, at September 30, 2021 and June 30, 2021
453.7 1,036.3 
REDEEMABLE NONCONTROLLING INTERESTS83.4 84.1 
EQUITY:  
Preferred Stock, $0.01 par value; 20.0 shares authorized, 1.5 issued and outstanding at September 30, 2021 and June 30, 2021
— — 
Class A Common Stock, $0.01 par value; 1,250.0 shares authorized, 883.3 and 832.3 issued and 817.0 and 766.0 outstanding, respectively, at September 30, 2021 and June 30, 20218.8 8.3 
Additional paid-in capital10,670.4 10,376.2 
Accumulated deficit(5,529.6)(5,755.6)
Accumulated other comprehensive income(459.9)(321.9)
Treasury stock—at cost, shares: 66.3 at September 30, 2021 and at June 30, 2021
(1,446.3)(1,446.3)
Total Coty Inc. stockholders’ equity3,243.4 2,860.7 
Noncontrolling interests200.8 201.5 
Total equity3,444.2 3,062.2 
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY$14,038.4 $13,691.4 
See notes to Condensed Consolidated Financial Statements.
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Table of Contents
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three and Nine Months Ended March 31,September 30, 2021
(In millions, except per share data)
(Unaudited)
 Preferred Stock
Class A
Common Stock
Additional
Paid-in Capital
(Accumulated Deficit)Accumulated Other Comprehensive (Loss) IncomeTreasury Stock
Total Coty Inc.
Stockholders’ Equity
Noncontrolling InterestsTotal Equity
Redeemable
Noncontrolling Interests
Convertible Series B Preferred Stock
 SharesAmountSharesAmountSharesAmount
BALANCE—July 1, 20211.5 $— 832.3 $8.3 $10,376.2 $(5,755.6)$(321.9)66.3 $(1,446.3)$2,860.7 $201.5 $3,062.2 $84.1 $1,036.3 
Exercise of employee stock options and restricted stock units51.0 — — — — 
Shares withheld for employee taxes(4.2)(4.2)(4.2)
Share-based compensation expense107.8 107.8 107.8 
Equity Investment contribution for share-based compensation1.6 1.6 1.6 
Changes in dividends accrued0.5 0.5 0.5 
Conversion of Convertible Series B Preferred Stock0.5 307.4 307.9 307.9 (307.9)
Reclassification to Mandatorily redeemable Convertible Series B Preferred Stock— — — (394.2)
Dividends Accrued - Convertible Series B Preferred Stock(22.7)(22.7)(22.7)22.7 
Deemed Dividends - Conversion of Convertible Series B Preferred Stock(6.7)(6.7)(6.7)6.7 
Deemed Dividends - Exchange Agreement(93.6)(93.6)(93.6)93.6 
Dividends Paid - Convertible Series B Preferred Stock— — (3.5)
Net income (loss)226.0 226.0 (0.5)225.5 3.4 
Other comprehensive loss(138.0)(138.0)(0.2)(138.2)
Adjustment of redeemable noncontrolling interests to redemption value4.1 4.1 4.1 (4.1)
BALANCE—September 30, 20211.5 $— 883.3 $8.8 $10,670.4 $(5,529.6)$(459.9)66.3 $(1,446.3)$3,243.4 $200.8 $3,444.2 $83.4 $453.7 
 Preferred StockClass A
Common Stock		Additional
Paid-in Capital		(Accumulated Deficit)Accumulated Other Comprehensive (Loss) IncomeTreasury StockTotal Coty Inc.
Stockholders’ Equity		Noncontrolling InterestsTotal EquityRedeemable
Noncontrolling Interests		Convertible Series B Preferred Stock
 SharesAmountSharesAmountSharesAmount
BALANCE as previously reported—July 1, 20201.5 $— 830.6 $8.3 $10,447.4 $(5,548.6)$(456.2)65.5 $(1,446.3)$3,004.6 $224.2 $3,228.8 $79.1 $715.8 
Adjustment due to the adoption of ASU No. 2016-13(5.7)(5.7)(5.7)
BALANCE as adjusted—July 1, 20201.5 $— 830.6 $8.3 $10,447.4 $(5,554.3)$(456.2)65.5 $(1,446.3)$2,998.9 $224.2 $3,223.1 $79.1 $715.8 
Issuance of Preferred Stock— — 242.4 
Exercise of employee stock options and restricted stock units0.6 — — — 
Shares withheld for employee taxes(1.0)(1.0)(1.0)
Share-based compensation expense6.2 6.2 6.2 
Changes in dividends accrued— 0.8 0.8 0.8 
Dividends accrued- Convertible Series B Preferred Stock(20.8)(20.8)(20.8)20.8 
Net income221.4 221.4 0.4 221.8 5.5 
Other comprehensive loss(5.9)(5.9)(0.1)(6.0)
Distribution to noncontrolling interests, net— — — 
Adjustment of redeemable noncontrolling interests to redemption value1.5 1.5 1.5 (1.5)
BALANCE—September 30, 20201.5 $— 831.2 $8.3 $10,434.1 $(5,332.9)$(462.1)65.5 $(1,446.3)$3,201.1 $224.5 $3,425.6 $83.1 $979.0 
Exercise of employee stock options and restricted stock units0.4 — — — 
Shares withheld for employee taxes(0.9)(0.9)(0.9)
Share-based compensation expense14.4 14.4 14.4 
Changes in dividends accrued0.4 0.4 0.4 
Dividends accrued- Convertible Series B Preferred Stock(23.2)(23.2)(23.2)23.2
Net income (loss)(252.3)(252.3)(2.5)(254.8)0.3 
Other comprehensive loss135.6 135.6 0.2 135.8 
Distribution to noncontrolling interests, net— (4.3)(4.3)(2.1)
Adjustment of redeemable noncontrolling interests to redemption value1.8 1.8 1.8 (1.8)
Equity Investment contribution for share-based compensation0.5 0.5 0.5 
BALANCE—December 31, 20201.5 $— 831.6 $8.3 $10,427.1 $(5,585.2)$(326.5)65.5 $(1,446.3)$3,077.4 $217.9 $3,295.3 $79.5 $1,002.2 
Cancellation of Restricted Stock— 0.7 — — — 
Exercise of employee stock options and restricted stock units0.7 — — — 
Shares withheld for employee taxes(2.3)(2.3)(2.3)
Share-based compensation expense6.0 6.0 6.0 

See notes to Condensed Consolidated Financial Statements.
4
Table of Contents
Changes in dividends accrued0.5 0.5 0.5 
Dividends accrued- Convertible Series B Preferred Stock(23.6)(23.6)(23.6)23.6 
Deemed Dividends- Convertible Series B Preferred Stock(10.5)(10.5)(10.5)10.5 
Net income (loss)15.6 15.6 (9.4)6.2 6.5 
Other comprehensive loss(99.5)(99.5)(0.2)(99.7)
Adjustment of redeemable noncontrolling interests to redemption value(1.4)(1.4)(1.4)1.4 
BALANCE—March 31, 20211.5 $— 832.3 $8.3 $10,395.8 $(5,569.6)$(426.0)66.2 $(1,446.3)$2,962.2 $208.3 $3,170.5 $87.4 $1,036.3 
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended September 30, 2020
(In millions, except per share data)
(Unaudited)
 Preferred StockClass A
Common Stock		Additional
Paid-in Capital		(Accumulated Deficit)Accumulated Other Comprehensive (Loss) IncomeTreasury StockTotal Coty Inc.
Stockholders’ Equity		Noncontrolling InterestsTotal EquityRedeemable
Noncontrolling Interests		Convertible Series B Preferred Stock
 SharesAmountSharesAmountSharesAmount
BALANCE as previously reported—July 1, 20201.5 $— 830.6 $8.3 $10,447.4 $(5,548.6)$(456.2)65.5 $(1,446.3)$3,004.6 $224.2 $3,228.8 $79.1 $715.8 
Adjustment due to the adoption of ASU No. 2016-13(5.7)(5.7)(5.7)
BALANCE as adjusted—July 1, 20201.5 $— 830.6 $8.3 $10,447.4 $(5,554.3)$(456.2)65.5 $(1,446.3)$2,998.9 $224.2 $3,223.1 $79.1 $715.8 
Issuance of Preferred Stock— — 242.4 
Exercise of employee stock options and restricted stock units0.6 — — — 
Shares withheld for employee taxes(1.0)(1.0)(1.0)
Share-based compensation expense6.2 6.2 6.2 
Changes in dividends accrued— 0.8 0.8 0.8 
Dividends accrued- Convertible Series B Preferred Stock(20.8)(20.8)(20.8)20.8 
Net income221.4 221.4 0.4 221.8 5.5 
Other comprehensive loss(5.9)(5.9)(0.1)(6.0)
Distribution to noncontrolling interests, net— — — 
Adjustment of redeemable noncontrolling interests to redemption value1.5 1.5 1.5 (1.5)
BALANCE—September 30, 20201.5 $— 831.2 $8.3 $10,434.1 $(5,332.9)$(462.1)65.5 $(1,446.3)$3,201.1 $224.5 $3,425.6 $83.1 $979.0 

See notes to Condensed Consolidated Financial Statements.
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Table of Contents
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three and Nine Months Ended March 31, 2020CASH FLOWS
(In millions, except per share data)millions)
(Unaudited)
 Preferred Stock
Class A
Common Stock
Additional
Paid-in Capital
(Accumulated Deficit)Accumulated Other Comprehensive (Loss) IncomeTreasury Stock
Total Coty Inc.
Stockholders’ Equity
Noncontrolling InterestsTotal Equity
Redeemable
Noncontrolling Interests
Convertible Series B Preferred Stock
 SharesAmountSharesAmountSharesAmount
BALANCE as previously reported—July 1, 20199.4 $0.1 819.2 $8.1 $10,620.5 $(4,541.2)$(58.8)65.0 $(1,441.8)$4,586.9 $6.5 $4,593.4 $451.8 $— 
Adjustment due to the adoption of ASU No. 2016-16(0.7)(0.7)(0.7)
BALANCE as adjusted—July 1, 20199.4 $0.1 819.2 $8.1 $10,620.5 $(4,541.9)$(58.8)65.0 $(1,441.8)$4,586.2 $6.5 $4,592.7 $451.8 $— 
Purchase of Class A Common Stock0.5 (4.5)(4.5)(4.5)
Exercise of employee stock options and restricted stock units0.1 — 0.6 0.6 0.6 
Share-based compensation expense6.2 6.2 6.2 
Dividends declared - Cash and Other ($0.125 per common share)(63.5)(63.5)(63.5)
Dividends declared - Stock ($0.125 per common share)(30.9)(30.9)(30.9)
Dividends settled in Shares of Class A Common Stock3.2 30.9 30.9 30.9 
Net income52.3 52.3 2.8 55.1 1.2 
Other comprehensive loss(124.6)(124.6)(124.6)
Distribution to noncontrolling interests, net— — (1.9)
Adjustments related to the sale of business6.2 6.2 6.2 (360.4)
Adjustment of redeemable noncontrolling interests to redemption value(3.9)(3.9)(3.9)3.9 
BALANCE—September 30, 20199.4 0.1 822.5 8.1 10,566.1 (4,489.6)(183.4)65.5 (1,446.3)4,455.0 9.3 4,464.3 94.6 — 
Exercise of employee stock options and restricted stock units1.1 1.5 1.5 1.5 
Shares withheld for employee taxes(3.5)(3.5)(3.5)
Share-based compensation expense10.3 10.3 10.3 
Dividends declared - Cash and Other(66.1)(66.1)(66.1)
Dividends ($0.125 per common share)(29.3)(29.3)(29.3)
Dividends settled in Shares of Class A Common Stock2.40.229.329.5 29.5 
Net (loss) income(21.1)(21.1)0.5 (20.6)4.2 
Other comprehensive income105.9 105.9 0.1 106.0 
Distribution to noncontrolling interests, net— — (10.7)
Adjustment of redeemable noncontrolling interests to redemption value(10.5)(10.5)(10.5)10.5 
BALANCE—December 31, 20199.4 $0.1 826.0 $8.3 $10,497.8 $(4,510.7)$(77.5)65.5 $(1,446.3)$4,471.7 $9.9 $4,481.6 $98.6 $— 
Cancellation of Preferred Stock(7.9)(0.1)(0.6)(0.7)(0.7)
Exercise of employee stock options and restricted stock units0.2 — 0.6 0.6 0.6 
Shares withheld for employee taxes(0.3)(0.3)(0.3)
Share-based compensation expense3.5 3.5 3.5 
Three Months Ended
September 30,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income$228.9 $227.3 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization137.8 146.2 
Non-cash lease expense18.2 18.0 
Deferred income taxes89.9 (216.0)
Provision (releases) for bad debts1.9 (3.4)
Provision for pension and other post-employment benefits4.1 2.1 
Share-based compensation108.2 7.0 
Unrealized gains from equity investments, net(389.4)— 
Foreign exchange effects(3.9)16.9 
Other10.5 9.7 
Change in operating assets and liabilities  
Trade receivables(183.5)(149.7)
Inventories(24.4)(15.5)
Prepaid expenses and other current assets(2.6)9.2 
Accounts payable82.9 (103.9)
Accrued expenses and other current liabilities231.0 152.6 
Operating lease liabilities(20.4)(34.9)
Income and other taxes payable16.1 (3.4)
Other noncurrent assets3.3 9.7 
Other noncurrent liabilities(22.9)(29.3)
Net cash provided by operating activities285.7 42.6 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Capital expenditures(45.0)(70.9)
Proceeds from sale of business, net of cash disposed— 27.0 
Termination of currency swaps designated as net investment hedges— (37.6)
Net cash used in investing activities(45.0)(81.5)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Net proceeds from short-term debt, original maturity less than three months— 1.6 
Proceeds from revolving loan facilities285.3 637.4 
Repayments of revolving loan facilities(365.5)(554.2)
Repayments of term loans and other long-term debt(6.0)(48.3)
Dividend payment on Class A Common Stock(0.8)(0.8)
Dividend payment on Convertible Series B Preferred Stock(3.5)— 
Proceeds from issuance of Convertible Series B Preferred Stock— 227.2 
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Dividends declared - Cash and Other(66.9)(66.9)(66.9)
Dividends ($0.125 per common share)(28.7)(28.7)(28.7)
Dividends settled in Shares of Class A Common Stock2.428.7 28.7 28.7 
Net (loss) income(271.6)(271.6)6.2 (265.4)1.0 
Other comprehensive income(401.0)(401.0)(0.1)(401.1)
Distribution to noncontrolling interests, net— — — (4.0)
Noncontrolling interest due to transaction— — 212.9 212.9 — 
Adjustment of redeemable noncontrolling interests to redemption value(3.1)(3.1)(3.1)3.1 
BALANCE—March 31, 20201.5 $0 828.6 $8.3 $10,431.0 $(4,782.3)$(478.5)65.5 $(1,446.3)$3,732.2 $228.9 $3,961.1 $98.7 $— 

Net (payments of) proceeds from foreign currency contracts(11.0)3.3 
Purchase of remaining mandatorily redeemable noncontrolling interest(7.1)— 
Distributions to noncontrolling interests, redeemable noncontrolling interests and mandatorily redeemable financial instruments— (0.5)
Payment of financing fees(10.4)— 
All other(3.7)(1.5)
Net cash (used in) provided by financing activities(122.7)264.2 
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH(6.0)(2.0)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH112.0 223.3 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period310.4 352.0 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period$422.4 $575.3 
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:  
Cash paid during the period for interest$20.9 $44.3 
Net cash payments (refunds) for income taxes13.1 (16.1)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:  
Accrued capital expenditure additions$53.1 $46.0 
Non-cash Series B Preferred Stock dividends and deemed dividends (See Note 15)119.5 20.8 
See notes to Condensed Consolidated Financial Statements.
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COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine Months Ended
March 31,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net loss$(14.6)$(224.5)
Adjustments to reconcile net loss to net cash provided by operating activities:  
Depreciation and amortization436.1 547.7 
Non-cash lease expense61.6 81.5 
Deferred income taxes(238.8)(150.7)
Provision for bad debts(9.6)28.2 
Provision for pension and other post-employment benefits8.3 26.4 
Share-based compensation28.9 18.1 
Gain on divestitures and sale of brand assets0 (84.5)
Asset impairment charges0 40.4 
Loss on sale of business in discontinued operations246.6 0 
Unrealized (gains) and losses from equity investments, net(60.9)0 
Foreign exchange effects26.8 33.8 
Other44.7 38.0 
Change in operating assets and liabilities, net of effects from purchase of acquired companies and sale of business:  
Trade receivables(57.3)206.0 
Inventories114.2 97.2 
Prepaid expenses and other current assets(133.0)(8.4)
Accounts payable(137.8)(246.0)
Accrued expenses and other current liabilities64.8 (31.7)
Operating lease liabilities(104.4)(80.9)
Income and other taxes payable(44.4)(25.8)
Other noncurrent assets30.5 (30.8)
Other noncurrent liabilities24.7 (29.5)
Net cash provided by operating activities286.4 204.5 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Capital expenditures(143.7)(206.4)
Proceeds from sale of long term assets4.3 0.2 
Proceeds from sale of business, net of cash disposed27.0 25.6 
Proceeds from sale of discontinued business, net of cash disposed2,374.1 0 
Payment for business combinations and asset acquisitions, net of cash acquired0 (592.2)
Return of capital from equity investments448.0 0 
Payment for equity investment and related asset acquisition(200.0)0 
Termination of currency swaps designated as net investment hedges(37.6)0 
Net cash provided by (used in) investing activities2,472.1 (772.8)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Net proceeds from (repayments of) short-term debt, original maturity less than three months0.5 (4.0)
Proceeds from revolving loan facilities2,147.9 4,543.9 
Repayments of revolving loan facilities(2,963.7)(2,589.0)
Repayments of term loans and other long-term debt(2,162.0)(139.4)
Dividend payment(1.5)(196.9)
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Net proceeds from issuance of Class A Common Stock0 2.7 
Payments for purchases of Class A Common Stock held as Treasury Stock0 (4.5)
Proceeds from issuance of Convertible Series B Preferred Stock227.2 0 
Net proceeds from (payments of) foreign currency contracts20.3 (9.4)
Purchase of remaining mandatorily redeemable noncontrolling interest0 (45.0)
Distributions to noncontrolling interests, redeemable noncontrolling interests and mandatorily redeemable financial instruments(6.3)(24.5)
All other(4.8)(4.1)
Net cash (used in) provided by financing activities(2,742.4)1,529.8 
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH(10.1)(30.3)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH6.0 931.2 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period352.0 380.4 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period$358.0 $1,311.6 
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:  
Cash paid during the period for interest$164.0 $188.8 
Net cash (refunds)/payments for income taxes(5.5)125.5 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:  
Accrued capital expenditure additions$44.5 $82.1 
Non-cash Common Stock dividend0 88.9 
Non-cash Preferred Stock dividend78.1 0 
See notes to Condensed Consolidated Financial Statements.
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COTY INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in millions, except per share data)
(Unaudited)

1. DESCRIPTION OF BUSINESS
Coty Inc. and its subsidiaries (collectively, the “Company” or “Coty”) manufacture, market, sell and distribute branded beauty products, including fragrances, color cosmetics and skin & body related products throughout the world. Coty is a global beauty company with a rich entrepreneurial history and an iconic portfolio of brands.
The Company operates on a fiscal year basis with a year-end of June 30. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year. For example, references to “fiscal 2021”2022” refer to the fiscal year ending June 30, 2021.2022. When used in this Quarterly Report on Form 10-Q, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation.
The Company’s sales generally increase during the second fiscal quarter as a result of increased demand associated with the winter holiday season. Financial performance, working capital requirements, sales, cash flows and borrowings generally experience variability during the three to six months preceding the holiday season. Product innovations, new product launches and the size and timing of orders from the Company’s customers may also result in variability.
On November 30, 2020, the Company completed the previously announced strategic transaction with Rainbow UK Bidco Limited (“KKR Bidco”) (an affiliate of funds and/or separately managed accounts (“KKR Funds”) advised and/or managed by KolbergKohlberg Kravis Roberts & Co. L.P. and its affiliates (“KKR”)), for the sale of a majority stake in Coty’s Professional and Retail Hair business,businesses, including the Wella, Clairol, OPI and ghd brands, (together, the “Wella Business”). As a result, Coty ownsowned a 40% stake in Rainbow JVCO LTD and subsidiaries (together, "Wella"). as of September 30, 2021. See Note 5—Business Combinations, Asset Acquisitions8—Equity Investments for additional information.
As previously disclosed, the Company's chief operating decision maker ("CODM") has been in the process of finalizing her organization structure and Divestitureshow she will assess performance, and the Company has concurrently evaluated the potential impact to its segment reporting. Based on this evaluation, the Company has determined that it is appropriate to realign its reportable segments to a principally product category-based structure, comprised of a Prestige business segment and a Consumer Beauty business segment. See Note 4—Segment Reporting for information on the strategic transaction.Company's segments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited interim Condensed Consolidated Financial Statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and include the Company’s consolidated domestic and international subsidiaries. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements and accompanying footnotes should be read in conjunction with the Company’s Consolidated Financial Statements as of and for the year ended June 30, 2020.2021. In the opinion of management, all adjustments, of a normal recurring nature, considered necessary for a fair presentation have been included in the Condensed Consolidated Financial Statements. The results of operations for the three and nine months ended March 31,September 30, 2021 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending June 30, 2021.2022. All dollar amounts (other than per share amounts) in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.
Restricted Cash
Restricted cash represents funds that are not readily available for general purpose cash needs due to contractual limitations. Restricted cash is classified as a current or long-term asset based on the timing and nature of when or how the cash is expected to be used or when the restrictions are expected to lapse. As of March 31,September 30, 2021 and June 30, 2020,2021, the Company had restricted cash of $42.7$45.5 and $43.7,$56.9, respectively, included in Restricted cash in the Condensed Consolidated Balance Sheets. The Restricted cash balance as of March 31,September 30, 2021 primarily provides collateral for certain bank guarantees on rent, customs and duty accounts and also consists of collections on factored receivables that remain unremitted to the factor as of March 31,September 30, 2021. Restricted cash is included as a component of Cash, cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows.
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Equity Investments
The Company elected the fair value option to account for its investment in the Wella Business to align with the Company’s strategy for this investment. The fair value is updated on a quarterly basis. The investments areinvestment is classified within Level 3 in the fair value hierarchy because the Company estimates the fair value of the investmentsinvestment using eithera combination of the income approach, the market approach and/or income approach.and private transactions, when applicable. Changes in the fair value of equity investmentsinvestment under the fair value option are recorded in Other (income) expense,income, net within the Condensed Consolidated Statements of Operations (see Note 9—8—Equity Investments).
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Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, the net realizable value of inventory, the fair value of acquired assets and liabilities associated with acquisitions, the fair value of equity investments, the assessment of goodwill, other intangible assets and long-lived assets for impairment and income taxes. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the Condensed Consolidated Financial Statements in future periods.
Tax Information
The effective income tax rate for the three months ended March 31,September 30, 2021 and 2020 was (177.8)%33.4% and 16.4%200.2%, respectively and 178.0% and 23.2% for the nine months ended March 31, 2021 and 2020, respectively. The positive effective tax rates for the three and nine months ended March 31, 2020 and nine months ended March 31, 2021 result from reporting losses before income taxes and a benefit for income taxes. The negative effective tax rate for the three months ended March 31,September 30, 2021 results from reporting income before taxes and a provision for income taxes. The positive effective tax rate for the three months ended September 30, 2020 results from reporting losses before income taxes and a benefit for income taxes. The change in the effective tax rate for the three months ended March 31,September 30, 2021, as compared with the three months ended March 31,September 30, 2020, is primarily due to the resolutionlimitation on the deductibility of foreign uncertain tax positions of $22.0executive stock compensation in the current period. Theperiod as well as a benefit related to a change in the effective tax rate for the nine months ended March 31, 2021, as compared with the nine months ended March 31, 2020, is primarily due to a preliminary benefitCompany's main principal location of $220.5 recorded in the first quarter of fiscal 2021 and the U.S. GAAP treatment of the Younique disposition in the prior period. The benefit recorded in the first quarter of fiscal 2021 isprior period was the result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the relocation of the Company's main principal location from Geneva to Amsterdam. This amount will be finalized when negotiations with the tax authorities are completed.
The effective income tax rates vary from the U.S. federal statutory rate of 21% due to the effect of (i) jurisdictions with different statutory rates, (ii) adjustments to the Company’s unrealized tax benefits (“UTBs”) and accrued interest, (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes.
As of March 31,September 30, 2021 and June 30, 2020,2021, the gross amount of UTBs was $280.6$278.5 and $277.9,$279.9, respectively. As of March 31,September 30, 2021, the total amount of UTBs that, if recognized, would impact the effective income tax rate is $155.6.$158.2. As of March 31,September 30, 2021 and June 30, 2020,2021, the liability associated with UTBs, including accrued interest and penalties, was $175.2$180.6 and $170.7,$181.2, respectively, which was recorded in Income and other taxes payable and Other noncurrent liabilities in the Condensed Consolidated Balance Sheets. The total interest and penalties recorded in the Condensed Consolidated Statements of Operations related to UTBs was $(1.4)$0.7 and $1.2$1.3 for the three months ended March 31, 2021 and 2020, respectively and $0.3 and $1.3 for the nine months ended March 31,September 30, 2021 and 2020, respectively. The total gross accrued interest and penalties recorded in the Condensed Consolidated Balance Sheets as of March 31,September 30, 2021 and June 30, 20202021 was $19.6$22.4 and $19.3,$21.7, respectively. On the basis of the information available as of March 31,September 30, 2021, it is reasonably possible that a decrease of up to $22.0$20.0 in UTBs may occur within twelve months as a result of projected resolutions of global tax examinations and a potential lapse of the applicable statutes of limitations.
Recently Adopted Accounting Pronouncements
In June 2016,January 2020, the FASB issued ASU No. 2016-132020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and ASU 2018-19, Financial Instruments-Credit LossesJoint Ventures (Topic 326): Measurement of Credit Losses on Financial Instruments323), and Derivatives and Hedging (Topic 815), which requires that a financial asset (or a group of financial assets) measured at an amortized cost basis be presented atclarifies certain interactions between the net amount expected to be collected. This approach to estimating credit losses applies to most financial assets measured at amortized costaccounting for equity securities, equity method investments, and certain other instruments, including but not limited to, trade and other receivables.derivative instruments. The Company adopted this guidance in the first quarter of fiscal 2021 and the cumulative effect adjustment from adoption was immaterial to the Company's Condensed Consolidated Financial Statements. On initial recognition, the Company recorded an after-tax cumulative effect decrease to retained earnings of $5.7 ($6.6 pre-tax) as of the beginning of fiscal 2021.
On July 1, 2020, the Company adopted Accounting Standards Update No. 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820), which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements.2022. The adoption of this new standard had no impact on the Company's Condensed Consolidated Financial Statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes.
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ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2019-12 effective July 1, 2020, on a prospective basis. The adoption of ASU 2019-12 did not have a material impact on the Company's Condensed Consolidated Financial Statements.financial position and its results of operations.
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Recently Issued Accounting Pronouncements
In January 2021,March 2020, the FASB issued ASU No. 2021-01,2020-04, Reference Rate Reform (Topic 848): ScopeFacilitation of the Effects of Reference Rate Reform on Financial Reporting, which simplifies the accounting for contract modifications made to replace LIBOR or other reference rates that are expected to be discontinued due to reference rate reform.. The new guidance under ASU No. 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to these contract modificationscontracts, hedging relationships and other transactions affected by reference rate reform if certain criterioncriteria are met. The amendment is availableamendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be adopteddiscontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is in the process of assessing the impact, if any, that ASU No. 2020-04 is expected to have on the Company’s financial position, its results of operations and related disclosures.
In August 2020, the FASB issued ASU No. 2020-06, Debt- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40), which removes certain separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. The Company is evaluating the impact of applying this guidance will have on the Company’s financial position, its existing derivative contracts, leasesresults of operations and other arrangements, as well as when to adopt this guidance.related disclosures.
3. DISCONTINUED OPERATIONS
As described in Note 1—Description of Business, on November 30,On June 1, 2020, the Company completed theCompany entered into a definitive agreement with KKR Bidco, regarding a strategic transaction for the sale of the Wella Business, valuing the business at $4,300.0 on a majority stake incash- and debt-free basis. The transaction was completed on November 30, 2020 and Coty retained ownership of 40% of the Wella Business.
In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of the Wella Business are presented as discontinued operations forin the prior period leading up to and including the date of the sale, and, as such, have been excluded from both continuing operations and segment results for all periods presented. Additionally, the Wella Business assets and liabilities included in the sale are presented as assets and liabilities held for sale in the Condensed Consolidated Balance Sheets for the comparative period provided. The Wella Business was comprised of the Professional Beauty reportable segment and the Retail Hair business, which was included in the Americas, EMEA and Asia Pacific reportable segments.businesses.
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The following table has selected financial information included in Net (loss) income from discontinued operations for the Wella Business.
Three Months Ended March 31,Nine Months Ended March 31,
2021 (b)
2020
2021 (b)
2020
Net revenues$0 $465.5 $986.3 $1,658.4 
Cost of sales0 156.3 322.5 559.8 
Gross profit0 309.2 663.8 1,098.6 
Selling, general and administrative expenses0 241.2 443.7 793.3 
Amortization expense0 26.0 0 78.0 
Restructuring costs0 1.3 (0.7)8.7 
Operating income0 40.7 220.8 218.6 
Interest expense, net (a)
0 9.821.3 36.8
Loss on sale of business (c)
27.5 0 246.6 0 
Other expense (income), net0 0.2 (1.0)0 
(Loss) income from discontinued operations before income taxes(27.5)30.7 (46.1)181.8 
(Benefit) provision for income taxes on discontinued operations(10.2)(8.7)102.1 18.0 
Net (loss) income from discontinued operations$(17.3)$39.4 $(148.2)$163.8 

Three Months Ended September 30, 2020
Net revenues$566.4 
Cost of sales181.0 
Gross profit385.4 
Selling, general and administrative expenses240.0 
Operating income145.4 
Interest expense, net (a)
11.8
Other expense (income), net0.1 
(Loss) income from discontinued operations before income taxes133.5 
(Benefit) provision for income taxes on discontinued operations28.8 
Net income from discontinued operations$104.7 
(a)Interest expense was allocated to the discontinued operations due to a requirement in the 2018 Coty Credit Agreement, as amended (defined in Note 12—11—Debt), that cash generated from the divestituresale of any businesses through March 31, 2021 will bethe Wella Business is utilized to reduce ourthe Company’s debt within the twelve months following the sale completion date, other than a maximum of $500.0 that is reservedwill be used for reinvestment in the business.Company's business, pursuant to the 2018 Coty Credit Agreement, as amended. See Note 11—Debt for more information.
(b)As the sale of the Wella Business occurred on November 30, 2020, discontinued operations activity, other than the Loss on sale of business, comprises zero and five months for the three and nine months ended March 31, 2021 respectively.
(c)The Loss on sale of business for the three months ended March 31, 2021 reflects certain purchase price working capital adjustments.
The following is selected financial information included in cash flows from discontinued operations for the Wella Business held for sale:
Nine Months Ended
March 31,
2021 (a)
2020
NON-CASH OPERATING ITEMS
Depreciation and amortization$0 $108.3 
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures$8.7 $19.0 

(a) As the sale of the Wella Business occurred on November 30, 2020, discontinued operations activity comprises five months for the nine month period ended March 31, 2021.
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The major components of assets and liabilities of the Wella Business held for sale are provided below.
JuneThree Months Ended September 30,
2020
(a)NON-CASH OPERATING ITEMS
ASSETSDepreciation and amortization$— 
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures$4.7 
Trade receivables$168.0 
Inventories269.2 
Prepaid expenses and other current assets134.9 
Property and equipment, net241.3 
Goodwill874.8 
Other intangible assets, net2,770.4 
Operating lease right-of-use assets73.4 
Deferred income taxes25.5 
Other noncurrent assets55.6 
TOTAL ASSETS HELD FOR SALE$4,613.1 
LIABILITIES
Accounts payable$128.3 
Accrued expenses and other current liabilities236.4 
Current operating lease liabilities17.2 
Income and other taxes payable15.8 
Long-term operating lease liabilities65.9 
Noncurrent deferred tax liabilities324.8 
Pension and other post-employment benefits140.8 
Other noncurrent liabilities27.5 
TOTAL LIABILITIES HELD FOR SALE$956.7 

(a) The sale of Wella closed on November 30, 2020. For the period ended on June 30, 2020, all assets and liabilities held for sale are reported as current assets and liabilities held for sale on the Consolidated Balance Sheets.
The loss on sale of the Wella Business included in Net (loss) income from discontinued operations in the Condensed Consolidated Statements of Operations was $246.6 for the nine months ended March 31, 2021. Initial cash proceeds received by the Company for the sale of its 60% stake in Wella were $2,451.7 and the Company retained an equity interest of 40%. The loss on sale reflects the net assets sold, taxes and other costs to sell the Wella Business.
4. SEGMENT REPORTING
Operating and reportable segments (referred to as “segments”) reflect the way the Company is managed and for which separate financial information is available and evaluated regularly by the Company’s chief operating decision maker (“CODM”)CODM in deciding how to allocate resources and assess performance. The Company has designated its Chief Executive Officer as the CODM.
DueAs previously disclosed, the CODM has been in the process of finalizing her organization structure and how she will assess performance, and the Company has concurrently evaluated the potential impact to discontinued operations presentation,its segment reporting. Based on this evaluation, the Company’s 3 remainingCompany has determined that it is appropriate to realign its reportable segments to a principally product category-based structure, comprised of a Prestige business segment and a Consumer Beauty business segment beginning in the first quarter of fiscal 2022. The Company has recast its results for fiscal 2021 to reflect the changes in its continuing operations are: Americas, EMEA, and Asia Pacific, excluding the discontinued retail hair operations in each segment. Americas, EMEA, and Asia Pacific include the businesses focused on prestige fragrances, prestige skin care, prestige cosmetics, mass color cosmetics, mass fragrance, mass skin care and body care, and are supported by central marketing teams.segments.
Certain income and shared costs and the results of corporate initiatives are managed by Corporate. Corporate primarily includes stock compensation expense, restructuring and realignment costs, costs related to acquisition and divestiture activities, and impairments of long lived assets, goodwill and intangibles that are not attributable to ongoing operating activities of the segments. The results of Younique, LLC ("Younique") are included in "Other." See Note 5—Business Combinations, Asset Acquisitions and Divestitures for information on Younique and the divestiture, which was completed on September 16, 2019. Corporate costs are not used by the CODM to measure the underlying performance of the segments.
With the exception of goodwill, the Company does not identify or monitor assets by segment. The Company does not present assets by reportable segment since various assets are shared between reportable segments. The allocation of goodwill by segment is presented in Note 10—9—Goodwill and Other Intangible Assets, net.
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Three Months Ended
March 31,		Nine Months Ended
March 31,
SEGMENT DATA2021202020212020
Net revenues:
Americas$409.6 $435.9 $1,419.7 $1,506.2 
EMEA473.0 512.9 1,712.3 2,097.6 
Asia Pacific145.2 113.7 435.5 498.1 
Other0 0 0 55.5 
Total$1,027.8 $1,062.5 $3,567.5 $4,157.4 
Operating income (loss):
Americas2.3 (40.3)55.3 (36.3)
EMEA28.7 (57.5)129.7 69.6 
Asia Pacific1.9 (31.4)(10.9)(17.3)
Other0 0 0 (10.9)
Corporate(34.3)(170.3)(224.5)(321.1)
Total$(1.4)$(299.5)$(50.4)$(316.0)
Reconciliation:
Operating (loss)(1.4)(299.5)(50.4)(316.0)
Interest expense, net50.3 63.8 171.6 185.3 
Other (income) expense, net(62.5)0.3 (50.7)4.0 
Income (loss) from continuing operations before income taxes$10.8 $(363.6)$(171.3)$(505.3)
Three Months Ended
September 30,
SEGMENT DATA20212020
Net revenues:
Prestige$870.7 $644.4 
Consumer Beauty501.0 479.7 
Total$1,371.7 $1,124.1 
Operating income (loss):
Prestige132.1 34.0 
Consumer Beauty11.4 (13.7)
Corporate(126.3)(86.3)
Total$17.2 $(66.0)
Reconciliation:
Operating income (loss)17.2 (66.0)
Interest expense, net59.8 62.1 
Other income, net(386.1)(5.8)
Income (loss) from continuing operations before income taxes$343.5 $(122.3)
Presented below are the percentage of revenues associated with the Company’s product categories:
Three Months Ended
March 31,		Nine Months Ended
March 31,
PRODUCT CATEGORY2021202020212020
Fragrance56.2 %50.7 %59.1 %58.0 %
Color Cosmetics31.2 36.4 27.9 29.6 
Body Care & Other12.6 12.9 13.0 12.4 
Total Coty Inc.100.0 %100.0 %100.0 %100.0 %

Three Months Ended
September 30,
PRODUCT CATEGORY20212020
Fragrance59.7 %56.0 %
Color Cosmetics28.4 30.1 
Body Care & Other11.9 13.9 
Total100.0 %100.0 %
5. BUSINESS COMBINATIONS, ASSET ACQUISITIONS AND DIVESTITURES
Business Combinations and Asset Acquisitions
KKW Beauty Business Transaction
On January 4, 2021, the Company completed its purchase of 20% of the outstanding equity of KKW Holdings, LLC (“KKW Holdings”), pursuant to a Purchase Agreement entered into between the Company, KKW Holdings and other parties listed as signatories (the “KKW Purchase Agreement”). On the same date, as contemplated by the KKW Purchase Agreement, the Company entered into a collaboration agreement, pursuant to which, in exchange for a marketing fee and a license fee, it received the right and license to manufacture, advertise, promote, distribute and sell certain Kim Kardashian West products outside of the existing KKW Holdings scope of fragrances and cosmetics, and use certain intellectual property owned by or licensed to KKW Holdings in connection with the development, manufacture, labelling, packaging, advertising, display, distribution and sale of such products (the “KKW Collaboration Agreement”). Under the KKW Collaboration Agreement, products will be sold by the Company’s consolidated subsidiaries. Therefore, the related revenues generated and expenses incurred by such subsidiaries will be reported in the Company’s Condensed Consolidated Statements of Operations.
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The KKW Purchase Agreement also gives the Company an option to acquire, and the sellers the option to compel the Company to acquire, an additional 31% of the outstanding equity of KKW (the “KKW Call Option” and “KKW Put Option”, respectively). The seller’s ability to exercise the KKW Put Option is contingent upon the achievement of certain contractually defined targets. The KKW Call Option and KKW Put Option expire on the seventh anniversary of the KKW Collaboration Agreement. Future exercise of the KKW Call Option or KKW Put Option has been deemed by the Company to be remote. However, if exercise were to occur such exercise may result in a material cash outflow for the Company.
The purchase consideration paid for the equity interest, the KKW Call Option and rights under the KKW Collaboration Agreement was $200.0 and was allocated as follows using a relative fair value approach at the acquisition date:
Estimated fair valueEstimated useful life (in years)
KKW Collaboration Agreement$180.6 20
20% equity interest in KKW Holdings19.4 
Total purchase consideration$200.0 

The initial fair value of the KKW Collaboration Agreement and the Company’s 20% equity investment were estimated using an income approach. The Company accounts for its 20% investment in the equity of KKW Holdings under the equity method. The initial fair value of the KKW Collaboration Agreement is recognized within Other intangible assets, net and the Company’s equity investment in KKW Holdings is recognized within Equity investments, each within the Condensed Consolidated Balance Sheets. The fair value of the KKW Call Option was deemed to be de minimis.
King Kylie Transaction
On November 18, 2019, the Company entered into a purchase agreement (the “Purchase Agreement”) with King Kylie, LLC ("King Kylie"), a Delaware limited liability company, and the other parties listed as signatories to the Purchase Agreement (the “Seller Group Parties”), to build and further expand King Kylie’s brands globally. Pursuant to the Purchase Agreement, on January 6, 2020, the Company acquired 51% of the equity interests in King Kylie from the applicable Seller Group Parties for a base purchase price of $600.0 in cash. In addition, as contemplated by the Purchase Agreement, the Company entered into a Collaboration Agreement, pursuant to which, in exchange for a marketing fee and a license fee, it received the right and license to manufacture, advertise, promote, distribute and sell certain products of King Kylie and use certain intellectual property owned by or licensed to King Kylie in connection with the development, manufacture, labelling, packaging, advertising, display, distribution and sale of such products.
The Company has finalized the valuation of assets acquired and liabilities assumed for the King Kylie transaction.
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The following table summarizes the estimated allocation of the purchase price to the net assets as of the January 6, 2020 acquisition date:
Estimated fair value (a)
Measurement
period
adjustments (b)
Estimated fair
value as
adjusted		Estimated useful life (in years)
Cash and cash equivalents$7.8 $0 $7.8 
Receivables1.0 0 1.0 
Inventories2.5 0 2.5 
Property, plant and equipment3.6 0 3.6 
Collaboration agreement369.0 0 369.0 20
License agreement280.0 0 280.0 20
Customer relationships27.0 0 27.0 1.5
Goodwill128.6 0 128.6 Indefinite
Net other liabilities(6.6)0 (6.6)
Total value$812.9 $0 $812.9 
Noncontrolling interest212.9 212.9
Total purchase price$600.0 $600.0 

(a) As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
(b) The Company recorded no measurement period adjustments in fiscal 2021, other than allocating the goodwill as noted below.
Goodwill is not expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating King Kylie’s products into the Company’s existing manufacturing and sales channels. Goodwill of $66.6, $35.9 and $26.1 is allocated to the Americas, EMEA, and Asia Pacific segments, respectively. The allocation of goodwill to segments was based on the relative fair values of expected future cash flows.
The fair value of the noncontrolling interest was estimated using the income approach applied to the projected cash flows of King Kylie. As King Kylie is a private company, the fair value measurement was based on significant inputs that are not observable in the market and thus, represent a Level 3 measurement.
Business Divestitures
Wella Business
On November 30, 2020, the Company completed the strategic transaction with KKR for the sale of a majority stake in the Wella Business (see Note 3—Discontinued Operations). Following the sale, Coty deconsolidated the Wella Business as KKR owns approximately 60% of the separately managed business, and the Company owns the remaining 40%. Initial cash proceeds received for the sale of the 60% stake in Wella were $2,451.7 (less cash disposed of $65.5, resulted in net cash proceeds of $2,386.2).
Coty utilized $2,015.5 of the net proceeds to pay down its Term Loans A and B on a pro rata basis and reserved $500.0 for reinvestment in the Company's business (see Note 12—Debt).
During the three months ended March 31, 2021, the Company recorded purchase price and working capital adjustments resulting in an incremental loss on sale related to the Wella Business of $27.5. Of the purchase price adjustments reflected during the three months ended March 31, 2021, $12.1 was settled in cash during the period.
Additionally, as contemplated in the Sale and Purchase Agreement (as amended) relating to the sale of the Wella Business (the “Wella SPA”), the purchase consideration is subject to further adjustments for other working capital and contractually specified items.
As a result of the sale of the majority interest in Wella, the Company determined that it no longer had a controlling interest in the Wella Business. The Company, therefore, deconsolidated its ownership of the Wella assets and liabilities and no longer reported the assets and liabilities of Wella in its Condensed Consolidated Balance Sheet as of March 31, 2021. The operations of Wella were consolidated in the results of the Company through the date of sale. The Company accounted for its 40% stake in the Wella Business under the fair value option (see Note 9—Equity Investments).
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Younique
On August 27, 2019, the Company entered into a contribution and redemption agreement to transfer all of its membership interest in Foundation, which held the net assets of Younique, to an existing noncontrolling interest holder. On September 16, 2019 (the “Closing Date”), the Company completed the sale of all of its membership interest in Foundation. Consideration received at the Closing Date consisted of $50.0 cash and a secured promissory note with a face value of $27.9, which has been paid. The initial estimate of the pre-tax gain of $84.5 was included in Gain on divestitures and sale of brand assets in the Condensed Consolidated Statements of Operations for the nine months ended March 31, 2020. During the fiscal year June 30, 2020, the Company recorded a final pre-tax gain of $111.5 resulting from the sale. The final pre-tax gain is included in (Gain) loss on divestitures and sale of brand assets in the Consolidated Statements of Operations for the fiscal year ended June 30, 2020.
Younique’s operations are included within Other and its results of operations through the Closing Date are included in the Condensed Consolidated Statements of Operations for the nine months ended March 31, 2020.
6. ACQUISITION AND DIVESTITURE-RELATED COSTS
Acquisition-related costs, which are expensed as incurred, represent non-restructuring costs directly related to acquiring and integrating an entity, for both completed and contemplated acquisitions and can include finder’s fees, legal, accounting, valuation, other professional or consulting fees, and other internal costs which can include compensation related expenses for dedicated internal resources. The Company recognized no acquisition-related costs of $3.3 and $13.2 for the three months ended March 31,September 30, 2021 and 2020, respectively and $2.8 and $17.3 for the nine months ended March 31, 2021 and 2020, respectively.2020.
Divestiture-related costs, which are expensed as incurred, represent non-restructuring costs directly related to divesting and selling an entity, for both completed and contemplated divestitures. These costs can include legal, accounting, information technology, other professional or consulting fees and other internal costs. Internal costs can include compensation related expenses for dedicated internal resources. Additionally, for divestitures, the Company includes write-offs of assets that are no longer recoverable and contract related costs due to the divestiture. The Company recognized divestiture-related costs of $26.4$4.0 and $36.1$46.3 for the three months ended March 31, 2021 and 2020, respectively and $124.9 and $68.0 for the nine months ended March 31,September 30, 2021 and 2020, respectively. Divestiture-related costs incurred during the three and nine months ended March 31,September 30, 2021 and 2020 were primarily related to the strategic transaction with KKR for the sale of a majority stake in the Wella Business. See Note 5—Business Combinations, Asset Acquisitions and Divestitures for information on the strategic transaction.
These costs have been recorded in Acquisition and divestiture-related costs in the Condensed Consolidated Statements of Operations.
7.6. RESTRUCTURING COSTS
Restructuring costs for the three and nine months ended March 31,September 30, 2021 and 2020 are presented below:
Three Months Ended
March 31,		Nine Months Ended
March 31,
2021202020212020
Transformation Plan$4.7 $3.5 $98.4 $142.9 
Other Restructuring(4.7)(11.5)(8.7)(17.4)
Total$0 $(8.0)$89.7 $125.5 
Three Months Ended
September 30,
20212020
Transformation Plan$12.4 $31.2 
Other Restructuring— (1.1)
Total$12.4 $30.1 
Transformation Plan
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In connection with the four-year plan announced on July 1, 2019 to drive substantial improvement and optimization in the Company's businesses (the “Turnaround Plan”), the Company has and expects to continue to incur restructuring and related costs. On May 11, 2020, the Company announced an expansion of the Turnaround Plan to further reduce fixed costs, (the “Transformation Plan”). Of the expected costs, the Company has incurred cumulative restructuring charges of $255.0$242.2 related to approved initiatives through March 31,September 30, 2021, which have been recorded in Corporate.
Over the next threetwo fiscal years, the Company expects to incur approximately $80.0$65.0 of additional restructuring charges pertaining to the approved actions, primarily related to employee termination benefits, contract terminations and other exit-related costs.
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The following table presents aggregate restructuring charges for the program:
Severance and Employee BenefitsFixed Asset Write-offsOther Exit CostsTotal
Fiscal 2020$151.2 $(1.1)$6.5 $156.6 
Fiscal 202173.4 (0.5)0.3 73.2 
Fiscal 202212.4 — — 12.4 
Cumulative through September 30, 2021$237.0 $(1.6)$6.8 $242.2 
Severance and Employee BenefitsFixed Asset Write-offsOther Exit CostsTotal
Fiscal 2020$151.2 $(1.1)$6.5 $156.6 
Fiscal 202198.4 (0.4)0.4 98.4 
Cumulative through March 31, 2021$249.6 $(1.5)$6.9 $255.0 
The related liability balance and activity of restructuring costs for the Transformation Plan restructuring costs are presented below:
Severance and Employee BenefitsFixed Asset Write-offsOther Exit CostsTotal
Balance—July 1, 2020$131.9 $0 $0.7 $132.6 
Restructuring charges118.7 (0.4)0.4 118.7 
Payments(62.6)0 (0.2)(62.8)
Changes in estimates(20.3)0 0 (20.3)
Non-cash utilization0 0.4 0 0.4 
Adjustment for sale of the Wella Business(0.6)0 0 (0.6)
Effect of exchange rates5.3 0 0 5.3 
Balance—March 31, 2021$172.4 $0 $0.9 $173.3 
Severance and Employee BenefitsFixed Asset Write-offsOther Exit CostsTotal
Balance—July 1, 2021$122.5 $— $0.3 $122.8 
Restructuring charges14.9 — — 14.9 
Payments(11.7)— (0.3)(12.0)
Changes in estimates(2.5)— — (2.5)
Non-cash utilization— — — — 
Effect of exchange rates(2.2)— 0.1 (2.1)
Balance—September 30, 2021$121.0 $— $0.1 $121.1 
The Company currently estimates that the total remaining accrual of $173.3$121.1 will result in cash expenditures of approximately $34.5, $119.6$68.5, $52.0 and $19.2$0.6 in fiscal 2021, 2022, 2023 and thereafter, respectively.
Other Restructuring
The Company executed a number7. INVENTORIES
Inventories as of other legacy restructuring activities in prior years, which are substantially completed. The Company recognized (income) expenses, net, of $(4.7) and $(11.5) during the three months ended March 31, 2021 and 2020, respectively and $(8.7) and $(17.4) for the nine months ended March 31, 2021 and 2020, respectively. The related liability balances were $0.7 and $14.5 at March 31,September 30, 2021 and June 30, 2020, respectively. The Company currently estimates that the total remaining accrual of $0.7 will result in cash expenditures of $0.7 during the fourth quarter of fiscal 2021.
8. INVENTORIES
Inventories as of March 31, 2021 and June 30, 2020 are presented below:
March 31,
2021		June 30,
2020
Raw materials$139.6 $148.6 
Work-in-process4.6 11.1 
Finished goods460.5 518.5 
Total inventories$604.7 $678.2 
September 30,
2021		June 30,
2021
Raw materials$162.1 $159.5 
Work-in-process8.3 12.5 
Finished goods490.3 478.8 
Total inventories$660.7 $650.8 

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9.8. EQUITY INVESTMENTS
The Company's equity investments, classified as Equity investments on ourthe Condensed Consolidated Balance Sheets as of March 31, 2021 are represented by the following:
(in millions)March 31,
2021
Equity method investments:
KKW Holdings (a)
$16.8 
Equity investments at fair value:
Wella Business (b)
1,250.0 
Total equity investments$1,266.8 

September 30,
2021		June 30,
2021
Equity method investments:
KKW Holdings (a)
$15.6 $16.2 
Equity investments at fair value:
Wella (b)
1,650.0 1,260.0 
Total equity investments$1,665.6 $1,276.2 
(a)On January 4, 2021, the Company completed its purchase of 20% of the outstanding equity of KKW Holdings. (See Note 5—Business Combinations, Asset Acquisitions and Divestitures).

The Company accounts for this minority investment under the equity method, given it has the ability to exercise significant influence over, but not control, the investee. The carrying value of the Company’s investment includes basis differences allocated to amortizable intangible assets.

During the three months ended March 31,September 30, 2021 and 2020, the Company recognized $2.6($0.6) and nil, respectively, representing its share of the investee’s net loss in Other (income) expense,income, net within the Condensed Consolidated Statements of Operations.

(b)On November 30, 2020, the Company completed the previously announced strategic transaction with KKR for the sale of a majority stake in Coty’s Wella Business. As part of the transaction, Coty received initial cash proceeds of $2,451.7, and retained a 40% stake in Wella. The Company initially computed the fair value of its retained noncontrolling interest investment based on the fair value of the Wella Business exchanged with KKR. This resulted in an initial fair value of $1,634.5 for the retained noncontrolling interest investment in Wella. Immediately after closing, Wella drew down on their third party debt for $1,282.4 and used $448.0 of such funds to make a distribution to the Company, which the Company has accounted for as a return of capital. As of March 31,September 30, 2021 and December 31, 2020,June 30, 2021, the fair value of the Company's investment in Wella was estimated to be $1,250.0$1,650.0 and $1,186.5,$1,260.0, respectively.
On October 20, 2021, the Company completed the sale of a 9.4% stake in Wella to an affiliate of KKR, KKR Rainbow Aggregator L.P. ("KKR Aggregator”) in exchange for the redemption of approximately half of KKR Aggregator's remaining Series B Convertible Preferred Stock shares in Coty and a portion of unpaid dividends, reducing the Company's total shareholding in Wella to approximately 30.6%. On November 6, 2021, Coty entered into a definitive agreement to sell an additional approximate 4.7% stake in Wella to KKR Aggregator in exchange for the redemption of approximately 56% of KKR Aggregator 's remaining convertible preferred shares in Coty, reducing the Company’s total shareholding in Wella to 25.9%. The transaction is expected close on November 30, 2021. Refer to Note 15—Equity and Convertible Preferred Stock.
The following table presents summarized financial information of the Company’s equity method investees for the periodsperiod ending March 31, 2021, based on unaudited information provided to us by the investees.September 30, 2021. Amounts presented represent combined totals at the investee level and not the Company’s proportionate share:

(in thousands)Three Months Ended
March 31, 2021		Nine Months Ended
March 31, 2021
Summarized Statements of Operations information:
Net revenues$528.5 $743.7 
Gross profit361.4 508.4 
Operating loss(56.6)(61.7)
Loss before income taxes(89.2)(102.7)
Net loss(78.8)(91.5)

Three Months Ended
September 30,
2021
Summarized Statements of Operations information:
Net revenues$619.2 
Gross profit429.7 
Operating income25.6 
Income before income taxes7.5 
Net income5.5 
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The following table summarizes movements in equity investments with fair value option that are classified within Level 3 for the period ended March 31,September 30, 2021. There were no internal movements to or from Level 3 from Level 1 or Level 2 for the period ended March 31,September 30, 2021.
Equity investments at fair value:
Balance as of June 30, 20202021$0 
Initial investment1,186.51,260.0 
Total gains/(losses) included in earnings - unrealized63.5390.0 
Balance as of March 31,September 30, 2021$1,250.01,650.0 

Level 3 significant unobservable inputs sensitivity
The following table summarizes the significant unobservable inputs used in Level 3 valuation of ourthe Company's investments carried at fair value as of March 31,September 30, 2021. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.
Fair valueValuation TechniqueUnobservable inputRange
Equity investments at fair value$1,250.01,650.0 Discounted cash flowsDiscount rate
11.25%11.00% (a)
Growth rate
1.5% - 8.6%4.2% (a)
Market multipleRevenue multiple
1.8x – 2.0x (b)
EBITDA multiple
12.0x11.5x – 15.0x17.5x (b)

(a)The primary unobservable inputs used in the fair value measurement of ourthe Company's equity investments with fair value option, when using a discounted cash flow method, are the discount rate and revenue growth rate. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. The Company estimates the discount rate based on the investees' projected cost of equity and debt. The revenue growth rate is forecasted for future years by the investee based on their best estimates. Significant increases (decreases) in the revenue growth rate in isolation would result in a significantly higher (lower) fair value measurement.
(b)The primary unobservable inputs used in the fair value measurement of ourthe Company's equity investments with fair value option, when using a market multiple method, are the revenue multiple and EBITDA multiple. Significant increases (decreases) in the revenue multiple or EBITDA multiple in isolation would result in a significantly higher (lower) fair value measurement. The market multiples are derived from a group of guideline public companies.


The Exchange Agreement, as discussed in Note 15—Equity and Convertible Preferred Stock, was also included and weighted for the valuation purposes. Going forward, the weighting of the valuation approaches could have a significant impact on the valuation of the investment.
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10.9. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
Goodwill as of March 31,September 30, 2021 and June 30, 20202021 is presented below:
PrestigeConsumer BeautyTotal
Gross balance at June 30, 2021$6,384.0 $1,774.2 $8,158.2 
Accumulated impairments(3,110.3)(929.8)(4,040.1)
Net balance at June 30, 2021$3,273.7 $844.4 $4,118.1 
Changes during the period ended September 30, 2021
Foreign currency translation(63.9)(16.8)(80.7)
Gross balance at September 30, 2021$6,320.1 $1,757.4 $8,077.5 
Accumulated impairments(3,110.3)(929.8)(4,040.1)
Net balance at September 30, 2021$3,209.8 $827.6 $4,037.4 
AmericasEMEAAPACTotal
Gross balance at June 30, 2020$3,112.2 $3,638.9 $1,262.9 $8,014.0 
Accumulated impairments(1,768.7)(1,857.3)(414.1)(4,040.1)
Net balance at June 30, 2020$1,343.5 $1,781.6 $848.8 $3,973.9 
Changes during the period ended March 31, 2021
Measurement period adjustments (a)
(62.0)35.9 26.1 0 
Foreign currency translation13.3 25.6 13.8 52.7 
Gross balance at March 31, 2021$3,063.5 $3,700.4 $1,302.8 $8,066.7 
Accumulated impairments(1,768.7)(1,857.3)(414.1)(4,040.1)
Net balance at March 31, 2021$1,294.8 $1,843.1 $888.7 $4,026.6 

(a) Includes measurement period adjustmentsAs described in connection withNote 4—Segment Reporting, the King Kylie acquisition (ReferCompany changed its segments during the quarter ended September 30, 2021. As a result, the Company allocated goodwill to Note 5—Business Combinations, Asset Acquisitionsthe new segments using a relative fair value approach. In addition, the Company completed an assessment of any potential goodwill impairment for all reporting units immediately prior to the reallocation and Divestitures).determined that no impairment existed.
Other Intangible Assets, net
Other intangible assets, net as of March 31,September 30, 2021 and June 30, 20202021 are presented below:
March 31,
2021		June 30,
2020
Indefinite-lived other intangible assets$1,011.7 $995.5 
Finite-lived other intangible assets, net3,463.2 3,376.6 
Total Other intangible assets, net$4,474.9 $4,372.1 
September 30,
2021		June 30,
2021
Indefinite-lived other intangible assets$1,008.1 $1,018.7 
Finite-lived other intangible assets, net3,327.9 3,444.3 
Total Other intangible assets, net$4,336.0 $4,463.0 

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The changes in the carrying amount of indefinite-lived other intangible assets are presented below:
TrademarksTotal
Gross balance at June 30, 2020$1,909.0 $1,909.0 
Accumulated impairments(913.5)(913.5)
Net balance at June 30, 2020$995.5 $995.5 
Changes during the period ended March 31, 2021
Foreign currency translation16.2 16.2 
Gross balance at March 31, 2021$1,925.2 $1,925.2 
Accumulated impairments(913.5)(913.5)
Net balance at March 31, 2021$1,011.7 $1,011.7 
TrademarksTotal
Gross balance at June 30, 2021$1,932.2 $1,932.2 
Accumulated impairments(913.5)(913.5)
Net balance at June 30, 2021$1,018.7 $1,018.7 
Changes during the period ended September 30, 2021
Foreign currency translation(10.6)(10.6)
Gross balance at September 30, 2021$1,921.6 $1,921.6 
Accumulated impairments(913.5)(913.5)
Net balance at September 30, 2021$1,008.1 $1,008.1 

Intangible assets subject to amortization are presented below:
CostAccumulated AmortizationAccumulated ImpairmentNet
June 30, 2021
License agreements and collaboration agreements$4,192.9 $(1,229.1)$(19.6)$2,944.2 
Customer relationships803.1 (486.3)(5.5)311.3 
Trademarks330.2 (168.7)(0.5)161.0 
Product formulations and technology90.2 (62.4)— 27.8 
Total$5,416.4 $(1,946.5)$(25.6)$3,444.3 
September 30, 2021
License agreements and collaboration agreements$4,124.3 $(1,251.1)$(19.6)$2,853.6 
Customer relationships765.7 (467.6)(5.5)292.6 
Trademarks327.9 (171.2)(0.5)156.2 
Product formulations and technology88.2 (62.7)— 25.5 
Total$5,306.1 $(1,952.6)$(25.6)$3,327.9 
Amortization expense was $57.0 and $65.4 for the three months ended September 30, 2021 and 2020, respectively.
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Intangible assets subject to amortization are presented below:
CostAccumulated AmortizationAccumulated ImpairmentNet
June 30, 2020
License agreements and collaboration agreements(a)
$3,861.2 $(1,021.1)$(19.6)$2,820.5 
Customer relationships(a)
786.1 (427.3)(5.5)353.3 
Trademarks325.7 (154.0)(0.5)171.2 
Product formulations and technology86.2 (54.6)0 31.6 
Total$5,059.2 $(1,657.0)$(25.6)$3,376.6 
March 31, 2021
License agreements and collaboration agreements(b)
$4,147.5 $(1,173.4)$(19.6)$2,954.5 
Customer relationships793.2 (471.2)(5.5)316.5 
Trademarks330.1 (166.2)(0.5)163.4 
Product formulations and technology87.9 (59.1)0 28.8 
Total$5,358.7 $(1,869.9)$(25.6)$3,463.2 


(a)Includes License and collaboration agreements and Customer relationships of $649.0 and $27.0, respectively resulting from the King Kylie acquisition on January 6, 2020 (Refer to Note 5—Business Combinations, Asset Acquisitions and Divestitures).
(b)Includes the KKW Collaboration Agreement of $180.6 resulting from the KKW Holdings transaction on January 4, 2021 (Refer to Note 5—Business Combinations, Asset Acquisitions and Divestitures).

Amortization expense was $62.2 and $61.6 for the three months ended March 31, 2021 and 2020, respectively, and $189.4 and $170.7 for the nine months ended March 31, 2021 and 2020, respectively.
11.10. LEASES
The Company leases office facilities under non-cancelable operating leases with terms generally ranging between 10 and 25 years. The Company utilizes these leased office facilities for use by its employees in countries in which the Company conducts its business. Leases are negotiated with third parties and, in some instances contain renewal, expansion and termination options. The Company also subleases certain office facilities to third parties when the Company no longer intends to utilize the space. None of the Company’s leases restricts the payment of dividends or the incurrence of debt or additional lease obligations, or contain significant purchase options.
The following chart provides additional information about the Company’s operating leases forleases:
Three Months Ended
September 30,
Lease Cost:20212020
Operating lease cost$20.9 $19.2 
Short-term lease cost0.3 0.2 
Variable lease cost8.9 13.9 
Sublease income(5.3)(1.5)
Net lease cost$24.8 $31.8 
Other information:
Operating cash outflows from operating leases$(22.5)$(31.4)
Right-of-use assets obtained in exchange for lease obligations$8.4 $8.0 
Weighted-average remaining lease term - real estate6.4 years6.8 years
Weighted-average discount rate - real estate leases3.53 %3.20 %
During the three and nine months ended March 31, 2021:September 30, 2021 and 2020, the Company recorded asset impairment charges of $1.0 and $0.0, respectively. The impairment charges are recorded in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and primarily relate to sublease arrangements.
Three Months Ended
March 31,		Nine Months Ended
March 31,
Lease Cost:2021202020212020
Operating lease cost$21.4 $20.7 $60.4 $72.5 
Short-term lease cost0.1 0.5 0.5 1.8 
Variable lease cost8.3 13.0 38.6 33.3 
Sublease income(5.6)(2.1)(10.1)(6.7)
Net lease cost$24.2 $32.1 $89.4 $100.9 
Other information:
Operating cash outflows from operating leases$(29.2)$(25.4)$(109.1)$(76.8)
Right-of-use assets obtained in exchange for lease obligations$16.6 $9.0 $27.4 $6.7 
Weighted-average remaining lease term - real estate6.57.4
Weighted-average discount rate - real estate leases3.55 %3.12 %
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Future minimum lease payments for the Company’s operating leases as of March 31, 2021 are as follows:
Fiscal Year Ending June 30,
2021, remaining$25.7 
202283.9 
202366.8 
202453.4 
202541.6 
Thereafter135.4 
Total future lease payments406.8 
Less: imputed interest(47.1)
Total present value of lease liabilities359.7 
Current operating lease liabilities79.3 
Long-term operating lease liabilities280.4 
Total operating lease liabilities$359.7 

Fiscal Year Ending June 30,
2022, remaining$62.1 
202367.9 
202454.9 
202543.4 
202636.1 
Thereafter104.9 
Total future lease payments369.3 
Less: imputed interest(42.5)
Total present value of lease liabilities326.8 
Current operating lease liabilities69.0 
Long-term operating lease liabilities257.8 
Total operating lease liabilities$326.8 
Table excludes obligations for leases with original terms of twelve months or less which have not been recognized as ROU assets or liabilities in the Condensed Consolidated Balance Sheets.
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11. DEBT
The Company’s debt balances consisted of the following as of March 31,September 30, 2021 and June 30, 2020,2021, respectively:
March 31,
2021		June 30,
2020
Short-term debt$0.5 $0 
2018 Coty Credit Agreement
2018 Coty Revolving Credit Facility due April 2023678.2 1,438.8 
2018 Coty Term A Facility due April 20231,799.1 2,959.0 
2018 Coty Term B Facility due April 20251,457.5 2,308.5 
Senior Unsecured Notes
2026 Dollar Notes due April 2026550.0 550.0 
2023 Euro Notes due April 2023643.7 618.3 
2026 Euro Notes due April 2026292.6 281.1 
Other long-term debt and capital lease obligations0.3 0.6 
Total debt5,421.9 8,156.3 
Less: Short-term debt and current portion of long-term debt(193.7)(188.3)
Total Long-term debt5,228.2 7,968.0 
Less: Unamortized debt issuance costs(41.0)(66.9)
Less: Discount on Long-term debt(4.8)(9.0)
Total Long-term debt, net$5,182.4 $7,892.1 

September 30,
2021		June 30,
2021
Short-term debt$— $— 
Senior Secured Notes
2026 Dollar Senior Secured Notes due April 2026900.0 900.0 
2026 Euro Senior Secured Notes due April 2026812.2 833.3 
2018 Coty Credit Agreement
2018 Coty Revolving Credit Facility due April 2023590.0 670.0 
2021 Coty Revolving Credit Facility due April 2025— — 
2018 Coty Term A Facility due April 2023111.1 114.0 
2018 Coty Term B Facility due April 20251,440.3 1,461.7 
Senior Unsecured Notes
2026 Dollar Notes due April 2026550.0 550.0 
2023 Euro Notes due April 2023638.2 654.7 
2026 Euro Notes due April 2026290.1 297.6 
Other long-term debt and capital lease obligations0.1 0.2 
Total debt5,332.0 5,481.5 
Less: Short-term debt and current portion of long-term debt(24.0)(24.2)
Total Long-term debt5,308.0 5,457.3 
Less: Unamortized financing fees(46.9)(51.7)
Less: Discount on long-term debt(11.1)(4.6)
Total Long-term debt, net$5,250.0 $5,401.0 
Short-Term Debt
The Company maintains short-term lines of credit and other short-term debt with financial institutions around the world. As of March 31,September 30, 2021, total short-term debt increased to $0.5remained constant at $0.0 from $0.0 as of June 30, 2020.2021. In addition, the Company had undrawn letters of credit of $15.0$14.3 and $6.0,$15.0, and bank guarantees of $25.8$21.6 and $45.7$31.2 as of March 31,September 30, 2021 and June 30, 2020,2021, respectively.
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Long-Term Debt
Recent Developments
On September 30, 2021, the Company entered into an amendment to permanently reduce the existing 2018 Coty Revolving Credit Facility by $700.0 and add a new class of incremental revolving facilities in an aggregate principal amount of $700.0 that matures on April 5, 2018,2025 (the "2021 Coty Revolving Credit Facility"). In connection with the 2021 Coty Revolving Credit Facility, the Company capitalized $7.0 of original issue debt discounts and $0.1 of deferred financing fees, and wrote off $0.6 of unamortized deferred financing fees, which were recorded in Other income, net in the Condensed Consolidated Statement of Operations.
Offering of Senior Secured Notes
On June 16, 2021, the Company issued an aggregate principal amount of €700.0 million of 3.875% senior unsecuredsecured notes due 2026 (the “2026 Euro Senior Secured Notes”) in a private offering and entered into a new credit agreement (the “2018offering. Coty Credit Agreement”). The netreceived gross proceeds of €700.0 million in connection with the offering of the notes, together with borrowings under the 2018 Coty Credit Agreement, were used to repay in full and refinance the indebtedness outstanding under the Company’s previously existing long-term debt agreements and to pay accrued interest, related premiums, fees and expenses in connection therewith.
Offering of2026 Euro Senior Unsecured NotesSecured Notes.
On April 5, 201821, 2021, the Company issued at par, $550.0an aggregate principal amount of 6.50%$900.0 of 5.00% senior unsecuredsecured notes due 2026 (the “2026 Dollar Notes”), €550.0 million of 4.00% senior unsecured notes due 2023 (the “2023 Euro Notes”) and €250.0 million of 4.75% senior unsecured notes due 2026 (the “2026 EuroSenior Secured Notes” and, together with the 20232026 Euro Senior Secured Notes, the “Euro Notes,” and“Senior Secured Notes”). Coty received gross proceeds of $900.0 in connection with the Euro Notes together withoffering of the 2026 Dollar Senior Secured Notes.
Coty used the gross proceeds of the offerings of the Senior Secured Notes to repay a portion of the “Senior Unsecured Notes”) in a private offering.term loans outstanding under the existing credit facilities and to pay related fees and expenses thereto.
The Senior UnsecuredSecured Notes are senior unsecured debtsecured obligations of Coty and are guaranteed on a senior secured basis by each of Coty’s wholly-owned domestic subsidiaries that guarantees Coty’s obligations under its existing senior secured credit facilities and are secured by first priority liens on the Companysame collateral that secures Coty’s obligations under its existing senior secured
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credit facilities, as described below. The Senior Secured Notes and will be pari passuthe guarantees are equal in right of payment with all of Coty’s and the Company’sguarantors’ respective existing and future senior indebtedness (including the 2018 Coty Credit Facilities described below). The Senior Unsecured Notes are guaranteed, jointly and severally, on a senior basis by the Guarantors (as later defined under “2018 Coty Credit Agreement”). The Senior Unsecured Notes are senior unsecured obligations of the Company and are effectively junior topari passu with all of Coty’s and the guarantors’ respective existing and future indebtedness that is secured indebtedness ofby a first priority lien on the Companycollateral, including the existing senior secured credit facilities, to the extent of the value of such collateral.
Optional Redemption
Applicable Premium
The indentures governing the collateral securingSenior Secured Notes specify the Applicable Premium (as defined in the respective indentures) to be paid upon early redemption of some or all of the 2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes.
The Applicable Premium related to the 2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes on any redemption date and as calculated by the Company is the greater of:
(1)1.0% of the then outstanding principal amount of the respective 2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes; and
(2)the excess, if any, of (a) the present value at such secured indebtedness. The related guarantees are senior unsecured obligationsredemption date of each Guarantor and are effectively junior to all existing and future secured indebtedness(i) the redemption price of such Guarantor to the extent of the value of the collateral securing such indebtedness.
The2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes will mature on April 15, 2026. Thethat would apply if such 2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes will bear interest at a rate of 6.50% per annum. Interest on the 2026 Dollar Notes is payable semi-annually in arrears on April 15 and October 15 of each year.
The 2023 Euro Notes will maturewere redeemed on April 15, 2023 and(such redemption price is expressed as a percentage of the principal amount being set forth in the table appearing in the Redemption Pricing section below), plus (ii) all remaining scheduled payments of interest due on the 2026 Euro Senior Secured Notes will mature onor 2026 Dollar Senior Secured Notes to and including April 15, 2026. The2023 (excluding accrued but unpaid interest, if any, to, but excluding, the redemption date), with respect to each of subclause (i) and (ii), computed using a discount rate equal to the Treasury Rate in the case of the 2026 Dollar Senior Secured Notes or Bund Rate in the case of the 2026 Euro Senior Secured Notes (both Treasury Rate and Bund Rate as defined in the respective indentures) as of such redemption date plus 50 basis points; over (b) the principal amount of the respective 2026 Dollar Notes, 2023 Euro Notes will bear interest at a rateor 2026 Euro Notes.
Redemption Pricing
At any time and from time to time prior to April 15, 2023, the Company may redeem some or all of 4.00% per annum, and the 2026 Dollar Senior Secured Notes and 2026 Euro Senior Secured Notes will bear interest at a rate of 4.75% per annum. Interest on the Euro Notes is payable semi-annually in arrears on April 15 and October 15 of each year.
Upon the occurrence of certain change of control triggering events with respectredemption prices equal to a series of Senior Unsecured Notes, the Company will be required to offer to repurchase all or part100% of the Senior Unsecured Notes of such series at 101% of theirrespective principal amount,amounts being redeemed plus the Applicable Premium, plus accrued and unpaid interest, if any, to, but excluding, the purchase date applicable to such Senior Unsecured Notes.redemption dates.
The Senior Unsecured Notes contain customary covenants that place restrictions in certain circumstancesAt any time on among other things, incurrence of liens, entry into sale or leaseback transactions, sales of allafter April 15, 2023, the Company may redeem some or substantially all of the Company’s assets2026 Dollar Senior Secured Notes and certain merger or consolidation transactions. The2026 Euro Senior UnsecuredSecured Notes also provide for customary eventsat the redemption prices (expressed in percentage of default.principal amount) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates, if redeemed during the twelve-month period beginning on April 15 of each of the years indicated below:
Price
Year2026 Dollar Senior Secured Notes2026 Euro Senior Secured Notes
2023102.5000%101.9380%
2024101.2500%100.9690%
2025 and thereafter100.0000%100.0000%
2018 Coty Credit Agreement
On April 5, 2018, the Company entered into the 2018a new credit agreement (the "2018 Coty Credit Agreement,Agreement"), which amended and restated the prior Coty Credit Agreement.credit agreement. The 2018 Coty Credit Agreement provides for (a) the incurrence by the Company of (1) a senior secured term A facility in an aggregate principal amount of (i) $1,000.0 denominated in U.S. dollars and (ii) €2,035.0 million denominated in euros (the “2018 Coty Term A Facility”) and (2) a senior secured term B facility in an aggregate principal amount of (i) $1,400.0 denominated in U.S. dollars and (ii) €850.0 million denominated in euros (the “2018 Coty Term B Facility”) and (b) the incurrence by the Company and Coty B.V., a Dutch subsidiary of the Company (the “Dutch Borrower” and, together with the Company, the “Borrowers”), of a senior secured revolving facility in an aggregate principal amount of $3,250.0 denominated in U.S. dollars, specified alternative currencies or other currencies freely convertible into U.S. dollars and readily available in the London interbank market (the “2018 Coty Revolving Credit Facility”) (the 2018 Coty Term A Facility, together with the 2018 Coty Term B Facility and the 2018 Coty Revolving Credit Facility, the “2018 Coty Credit Facilities”). Initial borrowings under the 2018 Coty Term Loan B Facility were issued at a 0.250% discount.
The 2018 Coty Credit Agreement provides that with respect to the 2018 Coty Revolving Credit Facility, up to $150.0 is available for letters of credit and up to $150.0 is available for swing line loans. The 2018 Coty Credit Agreement also permits,
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subject to certain terms and conditions, the incurrence of incremental facilities thereunder in an aggregate amount of (i) $1,700.0 plus (ii) an unlimited amount if the First Lien Net Leverage Ratio (as defined in the 2018 Coty Credit Agreement), at the time of incurrence of such incremental facilities and after giving effect thereto on a pro forma basis, is less than or equal to 3.00 to 1.00.
The obligations of the Company under the 2018 Coty Credit Agreement are guaranteed by the material wholly-owned subsidiaries of the Company organized in the U.S., subject to certain exceptions (the “Guarantors”) and the obligations of the Company and the Guarantors under the 2018 Coty Credit Agreement are secured by a perfected first priority lien (subject to permitted liens) on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. The Dutch
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Borrower does not guarantee the obligations of the Company under the 2018 Coty Credit Agreement or grant any liens on its assets to secure any obligations under the 2018 Coty Credit Agreement.
On June 27, 2019, the Company entered into an amendment (“2019 Amendment”) to the 2018 Coty Credit Agreement. The 2019 Amendment modified the 2018 Coty Credit Agreement by amending the financial covenants to (i) delay until March 31, 2022 the total net leverage ratio step down from 5.25 to 5.0 (as further described in the Covenants section below), (ii) extend the applicable window for certain cost savings add-backs in the calculation of Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) for purpose of determining the total net leverage ratio, and (iii) amend the determination of the exchange rate to be used for purposes of calculating “Total Indebtedness” (as defined in the 2018 Coty Credit Agreement) for purposes of the total net leverage ratio, and decreasing the total commitments under the revolving credit facility by $500.0 to $2,750.0.
On April 29, 2020, the Company amended its existing credit agreement. The amendment (i) provided a net debt to EBITDA financial covenant "holiday" through March 31, 2021; (ii) established a minimum liquidity covenant through March 31, 2021 of $350.0, which increased to $500.0 for the prepayment event noted below; and (iii) effectively placed certain limitations on the ability to make certain investments and restricted payments (including limiting ourthe Company's ability to pay dividends in cash through March 31, 2021) and on incurring additional secured indebtedness. The amendment did not modify the applicable funding costs during the period through March 31, 2021. As of April 1, 2021, the covenant "holiday" and related limitations and restrictions expired.
On November 30, 2020, the Company completed the strategic transaction with KKR for the sale of a majority stake in the Wella Business. As part of the transaction, Coty received initial cash proceeds of $2,451.7 for the sale of its 60% stake in Wella and its pro rata share of Wella's return of capital distribution of $448.0, and retained a 40% stake in Wella (see Note 5—Business Combinations, Asset Acquisitions and Divestitures).Wella. In accordance with the 2018 Coty Credit Agreement, as amended, the Company utilized $2,015.5 of the net proceeds to pay down its 2018 Coty Term Loans A and B Facilities on a pro rata basis and reserved a maximum of $500.0 for reinvestment in the business, as defined in the 2018 Coty Credit Agreement, as amended, ("the Reinvestment Balance"). If the Reinvestment Balance is not reinvested within twelve months, the Company is required to use the remainder to pay down its 2018 Coty Term Loans A and B Facilities on a pro rata basis.basis by December 2021. As a result of the prepayments, the outstanding balances of 2018 Coty Term Loans A and B Facilities were reduced by $1,135.7 and $879.8, respectively, and the Company wrote off $10.7 of unamortized deferred financing fees and $3.1 of unamortized original issue debt discounts. The write-offs of the unamortized deferred financing fees and unamortized original issue debt discounts are included in Other (income) expense, net in the Condensed Consolidated Statements of Operations.respectively. Additionally, in accordance with the 2018 Coty Credit Agreement, as amended, as a result of thethese prepayments, the minimum liquidity covenant increased from $350.0 to $500.0.
See above for the third amendment to the 2018 Coty Credit Agreement entered into on September 30, 2021.
Offering of Senior Unsecured Notes
On April 5, 2018 the Company issued, at par, $550.0 of 6.50% senior unsecured notes due 2026 (the “2026 Dollar Notes”), €550.0 million of 4.00% senior unsecured notes due 2023 (the “2023 Euro Notes”) and €250.0 million of 4.75% senior unsecured notes due 2026 (the “2026 Euro Notes” and, together with the 2023 Euro Notes, the “Euro Notes,” and the Euro Notes together with the 2026 Dollar Notes, the “Senior Unsecured Notes”) in a private offering.
The Senior Unsecured Notes are senior unsecured debt obligations of the Company and will be pari passu in right of payment with all of the Company’s existing and future senior indebtedness (including the 2018 Coty Credit Facilities described below). The Senior Unsecured Notes are guaranteed, jointly and severally, on a senior basis by the Guarantors. The Senior Unsecured Notes are senior unsecured obligations of the Company and are effectively junior to all existing and future secured indebtedness of the Company to the extent of the value of the collateral securing such secured indebtedness. The related guarantees are senior unsecured obligations of each Guarantor and are effectively junior to all existing and future secured indebtedness of such Guarantor to the extent of the value of the collateral securing such indebtedness.
The 2026 Dollar Notes will mature on April 15, 2026. The 2026 Dollar Notes will bear interest at a rate of 6.50% per annum. Interest on the 2026 Dollar Notes is payable semi-annually in arrears on April 15 and October 15 of each year.
The 2023 Euro Notes will mature on April 15, 2023 and the 2026 Euro Notes will mature on April 15, 2026. The 2023 Euro Notes will bear interest at a rate of 4.00% per annum, and the 2026 Euro Notes will bear interest at a rate of 4.75% per annum. Interest on the Euro Notes is payable semi-annually in arrears on April 15 and October 15 of each year.
Upon the occurrence of certain change of control triggering events with respect to a series of Senior Unsecured Notes, the Company will be required to offer to repurchase all or part of the Senior Unsecured Notes of such series at 101% of their
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principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date applicable to such Senior Unsecured Notes.
The Senior Unsecured Notes contain customary covenants that place restrictions in certain circumstances on, among other things, incurrence of liens, entry into sale or leaseback transactions, sales of all or substantially all of the Company’s assets and certain merger or consolidation transactions. The Senior Unsecured Notes also provide for customary events of default.
Scheduled Amortization
The Company makes quarterly payments of 1.25% and 0.25%, of the initial aggregate principal amounts of the 2018 Coty Term A Facility and the 2018 Coty Term B Facility, respectively. The remaining balance of the initial aggregate principal amounts of the 2018 Coty Term A Facility and the 2018 Coty Term B Facility will be payable on the maturity date for each facility, respectively.
Interest
The 2018 Coty Credit Agreement facilities will bear interest at rates equal to, at the Company’s option, either:
•(1)LIBOR of the applicable qualified currency, of which the Company can elect the applicable one, two, three, six or twelve month rate, plus the applicable margin; or
•(2)Alternate base rate (“ABR”) plus the applicable margin.
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In the case of the 2018 Coty Revolving Credit Facility and the 2018 Coty Term A Facility, the applicable margin means the lesser of a percentage per annum to be determined in accordance with the leverage-based pricing grid and the debt rating-based grid below:
Pricing TierTotal Net Leverage Ratio:LIBOR plus:Alternative Base Rate Margin:
1.0Greater than or equal to 4.75:12.000%1.000%
2.0Less than 4.75:1 but greater than or equal to 4.00:11.750%0.750%
3.0Less than 4.00:1 but greater than or equal to 2.75:11.500%0.500%
4.0Less than 2.75:1 but greater than or equal to 2.00:11.250%0.250%
5.0Less than 2.00:1 but greater than or equal to 1.50:11.125%0.125%
6.0Less than 1.50:11.000%0%

Pricing TierTotal Net Leverage Ratio:LIBOR plus:Alternative Base Rate Margin:
1.0Greater than or equal to 4.75:12.000%1.000%
2.0Less than 4.75:1 but greater than or equal to 4.00:11.750%0.750%
3.0Less than 4.00:1 but greater than or equal to 2.75:11.500%0.500%
4.0Less than 2.75:1 but greater than or equal to 2.00:11.250%0.250%
5.0Less than 2.00:1 but greater than or equal to 1.50:11.125%0.125%
6.0Less than 1.50:11.000%—%
Pricing TierDebt Ratings S&P/Moody’s:LIBOR plus:Alternative Base Rate Margin:
5.0Less than BB+/Ba12.000%1.000%
4.0BB+/Ba11.750%0.750%
3.0BBB-/Baa31.500%0.500%
2.0BBB/Baa21.250%0.250%
1.0BBB+/Baa1 or higher1.125%0.125%
In the case of the U.S. dollar portion of the 2018 Coty Term B Facility, the applicable margin means 2.25% per annum, in the case of LIBOR loans, and 1.25% per annum, in the case of ABR loans. In the case of the Euro portion of the 2018 Coty Term B Facility, the applicable margin means 2.50% per annum, in the case of EURIBOR loans. In no event will LIBOR be deemed to be less than 0.00% per annum.
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Fair Value of Debt
March 31, 2021June 30, 2020
Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
2018 Coty Credit Agreement$3,934.8 $3,810.5 $6,706.3 $5,962.3 
Senior Unsecured Notes1,486.3 1,466.6 1,449.4 1,270.3 
September 30, 2021June 30, 2021
Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Senior Secured Notes$1,712.2 $1,755.9 $1,733.3 $1,749.1 
2018 Coty Credit Agreement2,141.4 2,094.0 2,245.7 2,188.5 
Senior Unsecured Notes1,478.3 1,502.3 1,502.3 1,500.5 
The Company uses the market approach to value the 2018 Coty Credit Agreement and the Senior Unsecured Notes.its debt instruments. The Company obtains fair values from independent pricing services to determine the fair value of these debt instruments. Based on the assumptions used to value these liabilities at fair value, these debt instruments are categorized a Level 2 in the fair value hierarchy.
Debt Maturities Schedule
Aggregate maturities of the Company’s long-term debt, including the current portion of long-term debt and excluding capital lease obligations as of March 31,September 30, 2021, are presented below:
Fiscal Year Ending June 30,
2021, remaining$48.3 
2022193.0 
20232,933.6 
202423.9 
20251,379.7 
Thereafter842.6 
Total$5,421.1 
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Fiscal Year Ending June 30,
2022, remaining$17.9 
20231,363.1 
202423.9 
20251,374.7 
20262,552.3 
Thereafter— 
Total$5,331.9 
Covenants
The 2018 Coty Credit Agreement contains affirmative and negative covenants. The negative covenants include, among other things, limitations on debt, liens, dispositions, investments, fundamental changes, restricted payments and affiliate transactions. With certain exceptions as described below, the 2018 Coty Credit Agreement, as amended, includes a financial covenant that requires us to maintain a Total Net Leverage Ratio (as defined below), equal to or less than the ratios shown below for each respective test period.
Quarterly Test Period Ending
Total Net Leverage Ratio (as amended April 29, 2020) (a)
March 31, 2021
N/A (not tested)(b)
JuneSeptember 30, 2021 through December 31, 20215.25 to 1.00
March 31, 20225.00 to 1.00
June 30, 20224.75 to 1.00
September 30, 20224.50 to 1.00
December 31, 20224.25 to 1.00
March 31, 2023 through June 30, 20234.00 to 1.00

(a) Total Net Leverage Ratio means, as of any date of determination, the ratio of: (a) (i) Total Indebtedness minus (ii) unrestricted and Cash Equivalents of the Parent Borrower and its Restricted Subsidiaries as determined in accordance with GAAP to (b) Adjusted EBITDA for the most recently ended Test Period (each of the defined terms, including Adjusted EBITDA, used within the definition of Total Net Leverage Ratio have the meanings ascribed to them within the 2018 Coty Credit Agreement, as amended). Adjusted EBITDA, as defined in the 2018 Coty Credit Agreement, as amended, includes certain add backs related to cost savings, unusual events such as COVID-19, operating expense reductions and future unrealized synergies subject to certain limits and conditions as specified in the 2018 Coty Credit Agreement, as amended.
(b) The 2018 Coty Credit Agreement, as amended, establishes a quarterly minimum liquidity covenant for this period of $500.0. As of March 31, 2021, the immediate liquidity was $2,376.8.
In the 4 fiscal quarters following the closing of any Material Acquisition (as defined in the 2018 Coty Credit Agreement, as amended), including the fiscal quarter in which such Material Acquisition occurs, the maximum Total Net Leverage Ratio shall be the lesser of (i) 5.95 to 1.00 and (ii) 1.00 higher than the otherwise applicable maximum Total Net Leverage Ratio for such quarter (as set forth in the table above). Immediately after any such 4 fiscal quarter period, there shall be at least 2 consecutive fiscal quarters during which ourthe Company's Total Net Leverage Ratio is no greater than the maximum Total Net Leverage Ratio that would otherwise have been required in the absence of such Material Acquisition, regardless of whether any additional Material Acquisitions are consummated during such period.
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As of March 31,September 30, 2021, the Company was in compliance with all covenants contained within the 2018 Coty Credit Agreement, as amended.
13.12. INTEREST EXPENSE, NET
Interest expense, net for the three and nine months ended March 31,September 30, 2021 and 2020, respectively, is presented below:
Three Months Ended
March 31,		Nine Months Ended
March 31,
2021202020212020
Interest expense$51.7 $58.7 $171.3 $173.5 
Foreign exchange (gains) losses, net of derivative contracts(0.6)6.2 3.1 14.8 
Interest income(0.8)(1.1)(2.8)(3.0)
Total interest expense, net$50.3 $63.8 $171.6 $185.3 
Three Months Ended
September 30,
20212020
Interest expense$62.8 $59.0 
Foreign exchange (gains) losses, net of derivative contracts(2.3)4.4 
Interest income(0.7)(1.3)
Total interest expense, net$59.8 $62.1 

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14.13. EMPLOYEE BENEFIT PLANS
As part of the Transformation Plan, the Company concluded that restructuring actions resulted in a significant reduction of future services of active employees in certain of ourthe Company's non-U.S. pension plans. As a result, the Company recognized curtailment gains of $8.0$0.0 and $0.0$5.3 for the ninethree months ended March 31,September 30, 2021 and 2020, respectively. The impact of the curtailment activity on the current and prior comparative periods is included in Other (income) expense,income, net in the Condensed Consolidated Statements of Operations.
The components of net periodic benefit cost for pension plans and other post-employment benefit plans recognized in the Condensed Consolidated Statements of Operations are presented below:
Three Months Ended March 31,
Pension Plans
Other Post-
Employment Benefits
U.S.InternationalTotal
20212020202120202021202020212020
Service cost$0 $0 $2.6 $8.4 $0.3 $0.4 $2.9 $8.8 
Interest cost0.1 0.2 1.7 2.3 0.3 0.5 2.1 3.0 
Expected return on plan assets0 0 (1.1)(2.2)0 0 (1.1)(2.2)
Amortization of prior service credit0 0 0 (0.2)(0.9)(1.5)(0.9)(1.7)
Amortization of net loss0.4 0.2 (0.1)0 0 0 0.3 0.2 
Curtailment gain recognized0 0 (2.7)0 0 0 (2.7)0 
Net periodic benefit cost (credit)$0.5 $0.4 $0.4 $8.3 $(0.3)$(0.6)$0.6 $8.1 

Nine Months Ended March 31,Three Months Ended September 30,
Pension Plans
Other Post-
Employment Benefits
Pension Plans
Other Post-
Employment Benefits
U.S.InternationalTotalU.S.InternationalTotal
2021202020212020202120202021202020212020202120202021202020212020
Service costService cost$0 $0 $14.5 $27.1 $0.9 $1.3 $15.4 $28.4 Service cost$— $— $2.4 $6.7 $0.2 $0.3 $2.6 $7.0 
Interest costInterest cost0.3 0.6 6.4 6.9 0.9 1.5 7.6 9.0 Interest cost0.1 0.1 1.6 2.5 0.3 0.3 2.0 2.9 
Expected return on plan assetsExpected return on plan assets0 0 (4.8)(6.4)0 0 (4.8)(6.4)Expected return on plan assets— — (1.1)(1.9)— — (1.1)(1.9)
Amortization of prior service creditAmortization of prior service credit0 0 (0.2)(0.6)(2.6)(4.6)(2.8)(5.2)Amortization of prior service credit— — — (0.1)(0.1)(0.9)(0.1)(1.0)
Amortization of net lossAmortization of net loss1.1 0.6 (0.2)0 0 0 0.9 0.6 Amortization of net loss0.1 0.4 (0.1)— — — — 0.4 
Settlement loss recognizedSettlement loss recognized— — 0.7 — — — 0.7 — 
Curtailment gain recognizedCurtailment gain recognized0 0 (8.0)0 0 0 (8.0)0 Curtailment gain recognized— — — (5.3)— — — (5.3)
Net periodic benefit cost (credit)Net periodic benefit cost (credit)$1.4 $1.2 $7.7 $27.0 $(0.8)$(1.8)$8.3 $26.4 Net periodic benefit cost (credit)$0.2 $0.5 $3.5 $1.9 $0.4 $(0.3)$4.1 $2.1 
Net periodic benefit costs include amounts related to discontinued operations of $0.0 and $3.6$3.7 for the three months ended March 31, 2021 and 2020, respectively, and $6.2 and $10.8 for the nine months ended March 31, 2021 and 2020, respectively.September 30, 2020.
15.14. DERIVATIVE INSTRUMENTS
Foreign Exchange Risk Management
The Company is exposed to foreign currency exchange fluctuations through its global operations. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in foreign exchange rates by creating offsetting positions through the use of derivative instruments and also by designating foreign currency denominated borrowings and cross-currency swaps as hedges of net investments in foreign subsidiaries. The Company expects that through hedging, any gain or loss on the derivative instruments would generally offset the expected increase or decrease in the value of the underlying forecasted transactions.
The Company is exposed to foreign currency exchange rate fluctuations in the normal course of business, including through exposure to inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the transaction currency. To manage this exposure, beginning in June 2021, the Company entered into non-deliverable forward foreign-exchange contracts (the “NDF contracts”) that are intended to offset changes in cash flow attributable to currency exchange movements. The NDF contracts have been designated as foreign exchange cash flow hedges.
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The Company entered into these contracts with counterparties that are banks or other financial institutions, and the Company considers the risk of non-performance by such counterparties not to be material.
The Company also continued to use certain derivatives as economic hedges of foreign currency exposure on firm commitments, which do not qualify for hedge accounting. Although these derivatives were not designated for hedge accounting, the overall objective of mitigating foreign currency exposure is the same for all derivative instruments. The Company does not enter into derivative financial instruments for trading or speculative purposes, nor is the Company a party to leveraged derivatives. For derivatives not designated as hedging instruments, changes in fair value are recorded in the line item in the Condensed Consolidated Statements of Operations to which the derivative relates.
In September 2020, the Company terminated its existing net investment cross currency swap derivatives with notional amount of $550.0 in exchange for cash payment of $37.6. The related loss from this termination is included in accumulated other comprehensive income (loss) (“AOCI/(L)”) until the sale or substantial liquidation of the underlying net investments.
On December 1, 2020, as part of the divestiture,Beginning in July 2021, the Company entered into a novation agreement with Wella to assign all existing foreign exchange forward contracts and related obligations originally executed byto naturally hedge up to 80% of the Company in connection withCompany's euro denominated external debt as part of management's strategy to minimize the Wella Business.
In December 2020, the Company applied $2,015.5 in proceeds from the Wella transaction to pay down existing U.S. dollar and foreignimpact of currency denominatedmovements on those debt obligations.instruments. The notional amount of those contracts was €1,600.0 million as of September 30, 2021. As a result, foreign currency denominated borrowings designated as net investment hedges decreased from nominal exposures of €3,591.0 million at June 30, 2020 to €2,804.8€1,809.5 million as of December 31, 2020.June 30, 2021 to €207.1 million as of September 30, 2021.
Interest Rate Risk Management
The Company is exposed to interest rate fluctuations related to its variable rate debt instruments. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in the variable interest rates by entering into offsetting positions through the use of derivative instruments, such as interest rate swap contracts. The interest rate swap contracts result in recognizing a fixed interest rate for the portion of the Company’s variable rate debt that was hedged. This will reduce the negative and positive impactsimpact of changesincreases in the variable rates over the term of the contracts. Hedge effectiveness of interest rate swap contracts is based on a long-haul hypothetical derivative methodology and includes all changes in value.
During September 2019, the Company entered into incremental interest rate swap contracts in the notional amount of $1,000.0, which extended the maturity of the interest rate swap portfolio from 2021 through 2023. These interest rate swaps are designated and qualify as cash flow hedges.
In December 2020, the Company terminated certain existing interest rate swaps with notional amount of $600.0 in exchange for cash payment of $4.0. The related loss from this termination is included in Interest expense, net in the Condensed Consolidated Statements of Operations. As of March 31,September 30, 2021 and June 30, 2020,2021, the Company had interest rate swap contracts designated as effective hedges in the notional amount of $2,000.0$1,000.0 and $3,000.0,$1,900.0, respectively.
Derivative and non-derivative financial instruments which are designated as hedging instruments:
The accumulated (loss)/gain on foreign currency borrowings classified as net investment hedges in the foreign currency translation adjustment component of AOCI/(L) was $70.8$22.1 and $261.9$5.4 as of March 31,September 30, 2021 and June 30, 2020,2021, respectively.
The accumulated loss on derivative instruments classified as net investment hedges in the foreign currency translation adjustment component of AOCI/(L) was $(37.6) and $(12.5) as of March 31,September 30, 2021 and June 30, 2020, respectively.2021.
The amount of gains and losses recognized in Other comprehensive income (loss) (“OCI”) in the Condensed Consolidated Balance Sheets related to the Company’s derivative and non-derivative financial instruments which are designated as hedging instruments is presented below:
Gain (Loss) Recognized in OCIThree Months Ended
March 31,		Nine Months Ended
March 31,
2021202020212020
Foreign exchange forward contracts$0 $1.5 $(0.4)$0.9 
Interest rate swap contracts3.9 (27.9)4.3 (24.3)
Cross-currency swap contracts0 14.9 (25.1)(3.8)
Net investment hedge156.4 67.5 (191.1)125.5 
Gain (Loss) Recognized in OCIThree Months Ended
September 30,
20212020
Foreign exchange forward contracts$1.7 $(1.2)
Interest rate swap contracts(0.6)0.2 
Cross-currency swap contracts— (25.1)
Net investment hedges16.7 (173.1)
The accumulated loss on derivative instruments classified as cash flow hedges in AOCI/(L), net of tax, was $(19.8)$(11.1) and $(43.0)$(15.5) as of March 31,September 30, 2021 and June 30, 2020,2021, respectively. The estimated net loss related to these effective hedges that is expected to be reclassified from AOCI/(L) into earnings, net of tax, within the next twelve months is $(10.8)$(7.6). As of September 30, 2021, all of the Company's remaining foreign currency forward contracts designated as hedges were highly effective.
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The amount of gains and losses reclassified from AOCI/(L) to the Condensed Consolidated Statements of Operations related to the Company’s derivative financial instruments which are designated as hedging instruments is presented below:
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Location and Amount of Gain (Loss) Recognized in Income on Cash Flow Hedging RelationshipsLocation and Amount of Gain (Loss) Recognized in Income on Cash Flow Hedging RelationshipsThree Months Ended March 31,Nine Months Ended March 31,Location and Amount of Gain (Loss) Recognized in Income on Cash Flow Hedging RelationshipsThree Months Ended September 30,
202120202021202020212020
Net revenuesInterest expense, netNet revenuesInterest expense, netNet revenuesInterest expense, netNet revenuesInterest expense, netNet revenuesInterest expense, netNet revenuesInterest expense, net
Foreign exchange forward contracts:Foreign exchange forward contracts:Foreign exchange forward contracts:
Amount of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) reclassified from AOCI into income$0 $0 $0 $0 $1.0 $0 $0 $0 Amount of gain (loss) reclassified from AOCI into income$0.1 $— $1.0 $— 
Interest rate swap contracts:Interest rate swap contracts:Interest rate swap contracts:
Amount of gain (loss) reclassified from AOCI into incomeAmount of gain (loss) reclassified from AOCI into income0 (6.3)0 (2.8)0 (27.6)0 (3.1)Amount of gain (loss) reclassified from AOCI into income— (5.0)— (9.8)
Derivatives not designated as hedging:
The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments is presented below:
Condensed Consolidated Statements of Operations
Classification of Gain (Loss) Recognized in Operations		Three Months Ended
March 31,		Nine Months Ended
March 31,
2021202020212020
Foreign exchange contractsSelling, general and administrative expenses$0 $(1.1)$0.1 $(1.6)
Foreign exchange contractsInterest expense, net7.5 (14.5)23.7 (3.2)
Foreign exchange contractsOther expense, net(0.1)1.0 (0.5)0.7 
Condensed Consolidated Statements of Operations
Classification of Gain (Loss) Recognized in Operations		Three Months Ended
September 30,
20212020
Foreign exchange contractsSelling, general and administrative expenses$— $0.1 
Foreign exchange contractsInterest expense, net7.3 5.3 
Foreign exchange contractsOther expense, net(0.2)(0.3)

16.15. EQUITY AND CONVERTIBLE PREFERRED STOCK
Common Stock
As of March 31,September 30, 2021, the Company’s common stock consisted of Class A Common Stock with a par value of $0.01 per share. The holders of Class A Common Stock are entitled to 1 vote per share. As of March 31,September 30, 2021, total authorized shares of Class A Common Stock wStocask was 1,250.0 million and total outstanding shares of Class A Common Stock was 766.1817.0 million.
As of March 31,September 30, 2021, the Company’s largest stockholder was Cottage Holdco B.V., which owned approximately 61%57% of Coty’s outstanding Class A Common Stock. Cottage Holdco B.V., a wholly-owned subsidiary of JAB Cosmetics B.V. (“JABC”), is indirectly controlled by Lucresca SE, Agnaten SE and JAB Holdings B.V. (“JAB”). During the three and nine months ended March 31,September 30, 2021, JABC did not acquire any shares of Class A Common Stock.
Series A and A-1 Preferred Stock
As of March 31,September 30, 2021, total authorized shares of preferred stock are 20.0 million. There are 2 classes of Preferred Stock, Series A Preferred Stock and Series A-1 Preferred Stock, both with a par value of $0.01 per share.
As of March 31,September 30, 2021, there were 1.5 million shares of Series A and 0no shares of Series A-1 Preferred Stock authorized, issued and outstanding. Series A Preferred Stock and Series A-1 Preferred Stock are not entitled to receive any dividends and have 0no voting rights except as required by law.
As of March 31,September 30, 2021, the Company has $0.9$1.2 Series A Preferred Stock classified as a liability recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheet.
Convertible Series B Preferred Stock
On May 11, 2020, the Company entered into an Investment Agreement with KKR Aggregator, (the “Investor”), relating to the issuance and sale by the Company to the InvestorKKR Aggregator of up to 1,000,000 shares of the Company’s new Convertible Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), for an aggregate purchase price of up to $1,000.0, or $1,000 per share (the “Issuance”). The Issuance was proposed to be issued in two tranches: (i) an initial issuance of 750,000 shares of Series B Preferred Stock (the “Initial Issuance”) and (ii) a subsequent issuance of 250,000 shares of Series B Preferred Stock (the “Second Issuance”), which was subject to the execution and delivery of a definitive purchase agreement between the Company and the InvestorKKR Aggregator or certain of its affiliates in respect of the Wella Business.
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On May 26, 2020 (the “Closing Date”), the Company and the InvestorKKR Aggregator completed the issuance and sale of 750,000 shares of the Company’s Series B Preferred Stock for an aggregate purchase price of $750.0. On July 31, 2020, the Company completed the previously announced issuance and sale of 250,000 shares of the Company’s Series B Preferred Stock to the InvestorKKR Aggregator for an aggregate purchase price of $250.0.
On November 16, 2020, KKR Aggregator and affiliated investment funds agreed to sell 146,057 shares of Series B Preferred Stock, to HFS Holdings S.à r.l, that is beneficially owned by Peter Harf, a director of the Company. The transaction, which was subject to customary closing conditions, closed on August 27, 2021.
On September 10, 2021, KKR Aggregator converted 285,576 shares of Series B Preferred Stock, and $26.4 of unpaid dividends into 50,000,088 shares of Class A common stock. Immediately after the conversion, KKR Aggregator completed the public secondary offering of 50,000,088 shares of Class A common stock. The Company did not receive any proceeds from the sale of the shares of Class A Common Stock by KKR Aggregator. As a result of the conversion, the Company measured the accrued dividends at fair value, which resulted in an increase of $6.7. Such adjustment is considered a deemed dividend for purposes of calculating basic and diluted EPS.
On September 30, 2021, the Company entered into a definitive agreement to sell a 9.4% stake in Wella to KKR Aggregator in exchange for the redemption of 290,465 shares of Series B Preferred Stock, and $22.5 of unpaid dividends (the "Exchange Agreement"). The transaction was completed on October 20, 2021. As a result of the Exchange Agreement, the Series B Preferred Stock, net of issuance costs, and related accrued dividends were reclassified from temporary equity to liability as Mandatorily redeemable Convertible Series B Preferred Stock, as of September 30, 2021. Upon reclassification, the Company measured the Series B Preferred Stock and accrued dividends at fair value, which resulted in an increase of $93.6. Such adjustment is considered a deemed dividend for purposes of calculating basic and diluted EPS. A key input in determining the fair value of the liability is based on the Company's share price as of September 30, 2021. As this liability is not actively traded, it is classified as Level 2 fair value measurements. See Note 8—Equity Investments for additional information.
On November 6, 2021, Coty entered into a definitive agreement to sell an additional approximate 4.7% stake in Wella to KKR Aggregator in exchange for the redemption of 154,683 shares of Series B Preferred Stock. The transaction is expected close on November 30, 2021. See Note 8—Equity Investments for additional information.
Cumulative preferred dividends accrue daily on the Series B Preferred Stock at a rate of 9.0% per year. On September 30, 2021, the Board of Directors declared a dividend on the Series B Preferred Stock of $22.7, of which $3.5 was paid. The Series B Preferred Stock had balancesaccrued unpaid dividends of $84.6$66.8 and $6.5$74.1 as of March 31,September 30, 2021 and June 30, 2020,2021, respectively. There were 0
In October 2021, the Company paid the remaining accrued unpaid dividends paid in relation toon the Series B Preferred Stock, in the nine months ended March 31, 2021.totaling $44.3.
Treasury Stock
Share Repurchase Program
Since February 2014, the Board has authorized the Company to repurchase its Class A Common Stock under approved repurchase programs. On February 3, 2016, the Board authorized the Company to repurchase up to $500.0 of its Class A Common Stock (the “Incremental Repurchase Program”). Repurchases may be made from time to time at the Company’s discretion, based on ongoing assessments of the capital needs of the business, the market price of its Class A Common Stock, and general market conditions. For the three and nine months ended March 31,September 30, 2021, the Company did 0tnot repurchase any shares of its Class A Common Stock. As of March 31,September 30, 2021, the Company had authority for $396.8 remaining under the Incremental Repurchase Program.
Other Repurchases
There were 0no other stock repurchases during the three and nine months ended March 31, 2021. The Company repurchased 0.5 million shares of its Class A Common Stock for $4.5 during the three months ended September 30, 2019 in connection with the exit of an executive in September 2019.2021 and 2020.
DividendsDividends
On April 29, 2020, the Board of Directors suspended the payment of dividends.
During fiscal 2020, prior to the Board’s decision to suspend the payment of dividends, the Company maintained a Stock Dividend Reinvestment Program and had registered a total of 19.3 million shares of Class A Common Stock for purchase under the program. All holders of records of Class A Common Stock had the opportunity to participate in the program; if a holder elected to participate in the program fifty percent (50%) of their cash dividends were reinvested in additional shares of Class A Common Stock.
The change in dividends accrued recorded to additional paid-in capital (“APIC”) in the Condensed Consolidated Balance Sheet as of March 31,September 30, 2021 was $1.7,$0.5, which represent dividends no longer expected to vest as a result of forfeitures of
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outstanding RSUs.restricted stock units (“RSUs”). In addition to the activity noted above, the Company made a payment of $1.5$0.8 for the previously accrued dividends on RSUs that vested during the ninethree months ended March 31,September 30, 2021. Thus, total dividends settled in cash during the nine months ended March 31, 2021 were $1.5.
Total accrued dividends on unvested RSUs and phantom units of $1.7$1.6 and $1.8$1.1 are included in Accrued expenses and other current liabilities and Other noncurrent liabilities, respectively, in the Condensed Consolidated Balance Sheet as of March 31,September 30, 2021.
Accumulated Other Comprehensive Income (Loss)
Foreign Currency Translation Adjustments
(Loss) gain on Cash Flow HedgesGain (loss) on Net Investment HedgeOther Foreign Currency Translation Adjustments
Pension and Other Post-Employment Benefit Plans (a)
Total
Balance—July 1, 2020$(43.0)$261.9 $(683.8)$8.7 $(456.2)
Other comprehensive income (loss) before reclassifications2.8 (228.7)250.8 0 24.9 
Net amounts reclassified from AOCI/(L)20.4 0 0 (15.1)5.3 
Net current-period other comprehensive income (loss)23.2 (228.7)250.8 (15.1)30.2 
Balance—March 31, 2021$(19.8)$33.2 $(433.0)$(6.4)$(426.0)

Foreign Currency Translation Adjustments
(Loss) gain on Cash Flow Hedges(Loss) gain on Net Investment HedgeOther Foreign Currency Translation Adjustments
Pension and Other Post-Employment Benefit Plans (a)
Total
Balance—July 1, 2021$(15.5)$(32.2)$(259.3)$(14.9)$(321.9)
Other comprehensive income (loss) before reclassifications0.6 16.7 (159.6)— (142.3)
Net amounts reclassified from AOCI/(L)3.8 — — 0.5 4.3 
Net current-period other comprehensive income (loss)4.4 16.7 (159.6)0.5 (138.0)
Balance—September 30, 2021$(11.1)$(15.5)$(418.9)$(14.4)$(459.9)
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(a) For the ninethree months ended March 31,September 30, 2021, net amounts reclassified from AOCI/(L) related to pensions and other post-employment benefit plans included amortization of prior service credits and actuarial loss of $15.1,$0.5, net of tax of $4.5.nil.
Foreign Currency Translation Adjustments
Loss on Cash Flow HedgesGain on Net Investment HedgeOther Foreign Currency Translation AdjustmentsPension and Other Post-Employment Benefit PlansTotal
Balance—July 1, 2019$(13.3)$214.8 $(257.4)$(2.9)$(58.8)
Other comprehensive (loss) income before reclassifications(31.4)121.7 (506.9)0 (416.6)
Net amounts reclassified from AOCI/(L)1.5 0 0 (4.6)(3.1)
Net current-period other comprehensive (loss) income(29.9)121.7 (506.9)(4.6)(419.7)
Balance—March 31, 2020$(43.2)$336.5 $(764.3)$(7.5)$(478.5)
Foreign Currency Translation Adjustments
Loss on Cash Flow HedgesGain (loss) on Net Investment HedgeOther Foreign Currency Translation AdjustmentsPension and Other Post-Employment Benefit PlansTotal
Balance—July 1, 2020$(43.0)$261.9 $(683.8)$8.7 $(456.2)
Other comprehensive (loss) income before reclassifications(1.0)(210.7)200.3 — (11.4)
Net amounts reclassified from AOCI/(L)6.7 — — (1.2)5.5 
Net current-period other comprehensive income (loss)5.7 (210.7)200.3 (1.2)(5.9)
Balance—September 30, 2020$(37.3)$51.2 $(483.5)$7.5 $(462.1)

17.
16. SHARE-BASED COMPENSATION PLANS
Share-based compensation expense is recognized on a straight-line basis over the requisite service period. Total share-based compensation is shown in the table below:
Three Months Ended
March 31,		Nine Months Ended
March 31,
2021202020212020
Equity plan expense (a)
$6.0 $1.6 $24.6 $14.6 
Equity plan modified and cash settled0 19.0 0.9 19.0 
Liability plan (income) expense0.7 (1.9)1.4 (1.9)
Fringe expense0 0.1 0.4 1.1 
Total share-based compensation expense$6.7 $18.8 $27.3 $32.8 

Three Months Ended
September 30,
20212020
Equity plan expense (a)
$107.8 $4.9 
Equity plan modified and cash settled— 0.9 
Liability plan (income) expense0.4 (0.1)
Fringe expense0.1 — 
Total share-based compensation expense$108.3 $5.7 
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(a) Equity plan shared-based compensation expense of $6.0$107.8 and $3.5, and $26.6 and $20.0$6.2 were recorded to additional paid in capital and presented in the Condensed Consolidated Statements of Equity for the three and nine months ended March 31,September 30, 2021 and 2020, respectively. Of the $6.0 and $3.5$6.2 for the three months ended March 31, 2021 andSeptember 30, 2020, respectively, $0.0 and $1.9, respectively, were reclassified to discontinued operations. Of the $26.6 and $20.0 for the nine months ended March 31, 2021 and 2020, respectively, $2.0 and $5.4, respectively, were$1.3 was reclassified to discontinued operations.
The share-based compensation expense for the three and nine months ended March 31,September 30, 2021 and 2020, respectively, of $6.7$108.3 and $27.3, respectively,$5.7, includes $6.7$108.3 and $30.4$6.4 of expense offset by $0.0nil and $3.1$(0.7) of income respectively, primarily due to significant executive forfeitures of share-based compensation instruments. The share-based compensation expense for the three and nine months ended March 31, 2020 of $18.8 and $32.8, respectively, includes $21.9 and $38.4 expense offset by $3.1 and $5.6 income, respectively, primarily due to significant executive forfeitures of share-based compensation instruments.
As of March 31,September 30, 2021, the total unrecognized share-based compensation expense related to stock options, Series A Preferred Stock, restricted stock, and restricted stock units and other share awards is $11.0,$4.9, $0.0, $2.4$1.8 and $55.3,$210.8, respectively. The unrecognized share-based compensation expense related to stock options, Series A Preferred stock, restricted stock, and restricted stock units and other share awards is expected to be recognized over a weighted-average period of 2.77,2.30, 0.00, 2.181.68 and 2.561.95 years, respectively.
Restricted ShareStock Units and Other Share Awards
The Company granted 0 shares and 8.7 millionno shares of RSUs and other share awards during the three and nine months ended March 31, 2021, respectively.September 30, 2021. The Company recognized share-based compensation expense of $4.5$106.9 and $2.9$5.3 for the three months ended March 31, 2021 and 2020, respectively and $21.6 and $13.3 for the nine months ended March 31,September 30, 2021 and 2020, respectively.
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TableThe Company’s CEO, Sue Nabi, was granted a one-time sign-on award of Contentsrestricted stock units (the “Award”) on June 30, 2021. The Award will vest and settle in 10,000,000 shares of the Company’s Class A Common Stock, par value $0.01 per share, on each of August 31, 2021, August 31, 2022 and August 31, 2023, subject to her continued employment through each such date. The Company will recognize approximately $273.2 of share-based compensation expense, on a straight-line basis over the vesting period, based on the fair value on the grant date. The amount of compensation cost recognized at each vesting date must at least equal the portion of the award legally vested. As such, $168.3, $89.9 and $15.0 will be recognized in the fiscal years ending 2022, 2023 and 2024, respectively.
In connection with this Award, Cottage Holdco B.V., the Company’s largest stockholder and a wholly-owned subsidiary of JAB Holding Company S.à r.l., has agreed, pursuant to an equity transfer agreement, to transfer to Ms. Nabi (either directly or through contributing to the Company) 10,000,000 shares of Common Stock no later than sixty days following the first vesting date. If, however, Ms. Nabi is terminated without cause or due to death or disability on or following the first vesting date but prior to the second vesting date, the Company has agreed to issue to Cottage Holdco B.V. the number of shares of Common Stock determined on pro-rata basis in accordance with the equity transfer agreement. In the event Ms. Nabi remains employed through the third vesting date, Cottage Holdco B.V. has agreed to transfer an additional 5,000,000 shares of Common Stock to Ms. Nabi. On October 29, 2021, Cottage Holdco B.V. completed the transfer of 10,000,000 shares of Common Stock to Ms. Nabi.
The Company recognized share-based compensation expense of $100.8 and nil for Ms. Nabi's award for the three months ended September 30, 2021 and 2020, respectively.
Restricted Stock
The Company granted 0no shares of restricted stock and other share awards during the three and nine months ended March 31,September 30, 2021. The Company recognized share-based compensation expense of $0.2 and $0.0$(0.1) for the three months ended March 31, 2021 and 2020, respectively and $0.7 and $0.0 for the nine months ended March 31,September 30, 2021 and 2020, respectively.
Series A Preferred Stock and Series A-1 Preferred Stock
The Company granted 0no shares of Series A Preferred Stock and 0no shares of Series A-1 Preferred Stock during the three and nine months ended March 31,September 30, 2021. The Company recognized share-based compensation expense (income) of $0.4 and $15.4$(0.1) for the three months ended March 31, 2021 and 2020, respectively and $0.8 and $16.4 for the nine months ended March 31,September 30, 2021 and 2020, respectively.
Non-Qualified Stock Options
The Company granted 0no non-qualified stock options during the three and nine months ended March 31,September 30, 2021. The Company recognized share-based compensation expense of $1.6$0.8 and $0.5$0.6 for the three months ended March 31, 2021 and 2020, respectively and $4.2 and $3.1 for the nine months ended March 31,September 30, 2021 and 2020, respectively.
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18.17. NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC. PER COMMON SHARE
Reconciliation between the numerators and denominators of the basic and diluted income per share (“EPS”) computations is presented below:
Three Months Ended
March 31,		Nine Months Ended
March 31,
2021202020212020
(in millions, except per share data)
Amounts attributable to Coty Inc.:
Net income (loss) from continuing operations$32.9 $(311.0)$132.9 $(404.2)
Convertible Series B Preferred Stock dividends(34.1)0 (78.1)0 
Net (loss) income from continuing operations attributable to common stockholders(1.2)(311.0)54.8 (404.2)
Net (loss) income from discontinued operations, net of tax(17.3)39.4 (148.2)163.8 
Net loss attributable to common stockholders$(18.5)$(271.6)$(93.4)$(240.4)
Weighted-average common shares outstanding:
Weighted-average common shares outstanding—Basic765.4 760.8 764.6 757.7 
Effect of dilutive stock options and Series A/A-1 Preferred Stock(a)
0 0 0 0 
Effect of restricted stock and RSUs(b)
0 0 5.4 0 
Effect of Convertible Series B Preferred Stock0 0 162.1 0 
Weighted-average common shares outstanding—Diluted765.4 760.8 932.1 757.7 
Earnings (loss) per common share:
Earnings (loss) from continuing operations per common share - basic$0 $(0.41)$0.07 $(0.53)
Earnings (loss) from continuing operations per common share - diluted0 (0.41)0.07 (0.53)
(Loss) earnings from discontinued operations - basic(0.02)0.05 (0.19)0.21 
(Loss) earnings from discontinued operations - diluted(0.02)0.05 (0.19)0.21 
Loss per common share - basic(0.02)(0.36)(0.12)(0.32)
Loss per common share - diluted(0.02)(0.36)(0.12)(0.32)

Three Months Ended
September 30,
20212020
Amounts attributable to Coty Inc.:
Net income from continuing operations$226.0 $116.7 
Convertible Series B Preferred Stock dividends(123.0)(20.8)
Net income from continuing operations attributable to common stockholders103.0 95.9 
Net income from discontinued operations, net of tax— 104.7 
Net income attributable to common stockholders$103.0 $200.6 
Weighted-average common shares outstanding:
Weighted-average common shares outstanding—Basic777.6 763.9 
Effect of dilutive stock options and Series A/A-1 Preferred Stock(a)
— — 
Effect of restricted stock and RSUs(b)
10.1 1.4 
Effect of Convertible Series B Preferred Stock(c)
— 151.4 
Weighted-average common shares outstanding—Diluted787.7 916.7 
Earnings per common share:
Earnings from continuing operations per common share - basic$0.13 $0.13 
Earnings from continuing operations per common share - diluted(d)
0.13 0.13 
Earnings from discontinued operations - basic— 0.13 
Earnings from discontinued operations - diluted— 0.11 
Earnings per common share - basic0.13 0.26 
Earnings per common share - diluted(d)
0.13 0.24 
(a) For the nine months ended March 31, 2021, outstanding stock options and Series A/A-1 Preferred Stock with purchase or conversion rights to purchase 15.4 million shares of Common Stock, respectively, were excluded from the computation of diluted EPS as their inclusion would be anti-dilutive. For the three months ended March 31,September 30, 2021 and three and nine months ended March 31, 2020, outstanding stock options and Series A/A-1 Preferred Stock with purchase or conversion rights to purchase 11.4 and 16.8 million shares of Common Stock, respectively, were anti-dilutive and excluded infrom the computation of diluted loss per share due to the net loss incurred during the period.EPS.
(b) For the ninethree months ended March 31,September 30, 2021 and 2020 , there were 6.25.0 and 10.9 million anti-dilutive RSUs, respectively, excluded from the computation of diluted EPS.
(c) For the three months ended September 30, 2021, there were 163.1 million dilutive shares of Convertible Series B Preferred Stock excluded from the computation of diluted EPS as their inclusion would be anti-dilutive. For
(d) Diluted EPS is adjusted by the effect of dilutive securities, including awards under the Company's equity compensation plans and the convertible Series B Preferred Stock. When calculating any potential dilutive effect of stock options, Series A Preferred Stock, restricted stock and RSUs, the Company uses the treasury method and the if-converted method for the Convertible Series B Preferred Stock.The treasury method typically does not adjust the net income attributable to Coty Inc., while the if-converted method requires an adjustment to reverse the impact of the preferred stock dividends of $123.0 and $20.8 for the three months ended March 31,September 30, 2021 and three and nine months ended March 31, 2020, RSUs were excluded in the computation of diluted loss per share duerespectively, on net income applicable to the net loss incurredcommon stockholders during the period.
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19.18. MANDATORILY REDEEMABLE FINANCIAL INTERESTS AND REDEEMABLE NONCONTROLLING INTERESTS
Mandatorily Redeemable Financial Interest
Convertible Series B Preferred Stock
As a result of the Exchange Agreement, discussed in Note 15—Equity and Convertible Preferred Stock, Series B Preferred Stock and related accrued dividends were reclassified from temporary equity to liability as Mandatorily redeemable Convertible Series B Preferred Stock, as of September 30, 2021.
United Arab Emirates subsidiary
TheIn July 2021, the Company is required underpurchased the shareholders agreement (the "U.A.E. Shareholders Agreement) to purchase all of the shares held by theremaining 25% noncontrolling interest holder equal to 25% of the outstanding shares of a certain subsidiary in the United Arab Emirates atfrom the noncontrolling interest holder for $7.1, pursuant to the related U.A.E. Shareholders Agreement. The termination of the agreementwas effective on December 31, 2020 which is currently pending final settlement and transition. The Company has determined such sharesimmediately prior to bethe cash payment, the noncontrolling interest balance was recorded as a mandatorily redeemable financial interest that is recorded as ainstrument liability. The liability is calculated based upon a pre-determined formula in accordance with the related U.A.E. Shareholders Agreement and is expected to be paid by the first quarter of the fiscal year 2022. As of March 31, 2021 and June 30, 2020, the liability amounted to $7.1 and $8.8, respectively.
Redeemable Noncontrolling Interests
Subsidiary in the Middle East
As of March 31,September 30, 2021, the noncontrolling interest holder in the Company’s subsidiary in the Middle East had a 25% ownership share. The Company adjusts the RNCIredeemable noncontrolling interests (“RNCI”) to redemption value at the end of each reporting period with changes recognized as adjustments to APIC. The Company recognized $87.4$83.4 and $79.1$84.1 as the RNCI balances as of March 31,September 30, 2021 and June 30, 2020,2021, respectively.
20.19. COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is involved, from time to time, in various litigation, administrative and other legal proceedings, including regulatory actions, incidental or related to its business, including consumer class or collective actions, personal injury (including asbestos claims related claims)to the Company’s talc-based cosmetic products), intellectual property, competition, compliance and advertising claims litigation and disputes, among others (collectively, “Legal Proceedings”). While the Company cannot predict any final outcomes relating thereto, management believes that the outcome of current Legal Proceedings will not have a material effect upon its business, prospects, financial condition, results of operations, cash flows or the trading price of the Company’s securities. However, management’s assessment of the Company’s current Legal Proceedings is ongoing, and could change in light of the discovery of additional facts with respect to Legal Proceedings not presently known to the Company, further legal analysis, or determinations by judges, arbitrators, juries or other finders of fact or deciders of law which are not in accord with management’s evaluation of the probable liability or outcome of such Legal Proceedings. From time to time, the Company is in discussions with regulators, including discussions initiated by the Company, about actual or potential violations of law in order to remediate or mitigate associated legal or compliance risks and liabilities or penalties. As the outcomes of such proceedings are unpredictable, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, prospects, financial condition, results of operations, cash flows or the trading price of its securities.
Certain Litigation. A consolidated purported stockholder class action and derivative complaint concerning the tender offer by Cottage Holdco B.V. (the “Cottage Tender Offer”) and the Schedule 14D-9 is pending against certain current and former directors of the Company, JAB Holding Company S.à.r.l. r.l., JAB Holdings B.V., JAB Cosmetics B.V., and Cottage Holdco B.V. in the Court of Chancery of the State of Delaware. The Company was named as a nominal defendant. The case, which was filed on May 6, 2019, was captioned Massachusetts Laborers’ Pension Fund v. Harf et al., Case No. 2019-0336-AGB. On June 14, 2019, plaintiffs in the consolidated action filed a Verified Amended Class Action and Derivative Complaint (“Amended Complaint”). After defendants responded to the Amended Complaint, on October 21, 2019, plaintiffs filed a Verified Second Amended Class Action and Derivative Complaint (the “Second Amended Complaint”), alleging that the directors and JAB Holding Company S.à.r.l. r.l., JAB Holdings B.V., JAB Cosmetics B.V., and Cottage Holdco B.V. breached their fiduciary duties to the Company’s stockholders and breached the Stockholders Agreement. The Second Amended Complaint seeks, among other things, monetary relief. On November 21, 2019, the defendants moved to dismiss certain claims asserted in the Second Amended Complaint, and certain of the director defendants also answered the complaint. On May 7, 2020, plaintiffs stipulated to the dismissal without prejudice of JAB Holding Company S.à.r.l. r.l. from the action. On August 17, 2020, the court denied the remaining motions to dismiss. The case is currently at the discovery stage.stage with a trial date scheduled for November 2022.
A purported stockholder class action complaint, alleging violations of the U.S. securities laws in connection with the P&G beauty brands acquisition is pending against the Company as well as certain current and former officers of the Company in the U.S. District Court for the Southern District of New York. The case, which was filed on September 4, 2020, is captioned
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Crystal Garrett-Evans v. Coty Inc. et al., Case No. 1:20-cv-07277.20-cv-07277 (the “Evans Action”). On November 23, 2020, the court appointed the individual Susan Nock as lead plaintiff and the Rosen Firm as lead counsel. PlaintiffThe plaintiff filed an amended complaint on January 22, 2021. The
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Amended Complaint asserts claims under the federal securities laws and seeks, among other things, monetary relief. On March 8, 2021, the Company filed a motion to dismiss the amended compliant, which is currently pending beforecomplaint, and on August 4, 2021 the court.court dismissed the amended complaint, holding that it failed to set forth a valid claim. There has been no appeal of the dismissal and the Evans Action has been concluded.
A second purported stockholder class action and derivative complaint, alleging violations of the U.S. securities laws in connection with the P&G beauty brands acquisition and the Kylie Brands transaction as well as claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets by certain current and former officers and directors of the Company, is pending in the U.S. District Court for the Southern District of New York. The case, which was filed on November 17, 2020, is captioned Chris Lewis v. Becht et al., Case No. 1:20-cv-09685.20-cv-09685 (the “Lewis Action”). The Company was named as a nominal defendant. The plaintiff seeks, among other things, injunctive and/or monetary relief. This case remains at an early stage.
A complaint alleging various claims including breach of contract and violationsaction was voluntarily stayed during the pendency of the California Trade Secrets Act is pending againstmotion to dismiss the Company and King Kylie LLC (“King Kylie”)Evans Action. Following the dismissal of the Evans Action, counsel for the plaintiff in the Superior CourtLewis Action agreed to dismiss the case and the court has approved the dismissal of the Stateaction as of California, County of Los Angeles. The case, which was filed on June 30, 2020, is captioned Seed Beauty, LLC et al., v. Coty Inc., et al., Case No. 20VECV00721 (the “Seed Action”). The plaintiffs, Seed Beauty, LLC and BETA Beauty, LLC (collectively, “Seed”) sought a temporary restraining order to enjoin the Company and King Kylie from discussing or using certain alleged Seed trade secrets. The court denied this request. Discovery is underway with respect to Seed’s anticipated motion for a preliminary injunction. Defendants have moved to compel the action to arbitration, and those motions are pending.
In addition, following the announcement of the potential deal between the Company and KKW Beauty, LLC (“KKW”), Seed commenced a lawsuit against KKW in the Superior Court of the State of California, County of Los Angeles. The case, which was filed June 19, 2020, is captioned Seed Beauty, LLC et al., v. KKW Beauty, LLC, Case No. 20VECV00684, and is before the same court as the Seed Action. Seed secured a temporary restraining order prohibiting KKW from sharing with the Company certain alleged Seed trade secrets related to the business relationship between Seed and KKW, as contained in certain documents filed in the action under seal. The Company is not a party to this action but the temporary restraining order imposed on KKW has been extended to the Company. Discovery is underway with respect to Seed’s anticipated motion for preliminary injunction. KKW has moved to compel the action to arbitration, and that motion is pending.October 2021.
At this time, the Company cannot reasonably estimate a range of loss, if any, not covered by available insurance, that may result given the current status of these lawsuits.
Brazilian Tax Assessments
In connection with aThe Company’s Brazilian subsidiaries receive tax assessments from local, state and federal tax audit of one of the Company’s subsidiariesauthorities in Brazil the Company was notified offrom time to time. Current open tax assessments issued in March of 2018. The assessments relate to local sales tax credits, which the Treasury Office of the State of Goiás considers as improperly registered for 2016-2017 tax periods. These tax assessments, including estimated interest and penalties, through March 31, 2021 amount to a total of R$386.4 million (approximately $66.9 as of March 31, 2021). Additionally,September 30, 2021 are:
Assessment receivedType of assessmentType of TaxTax period impacted
Estimated amount, including interest and penalties as of
September 30, 2021
Mar-18State sales tax credits, which the Treasury Office of the State of Goiás considers as improperly registeredICMS2016-2017
R$1.0 million (approximately $0.2) (a)
Aug-20ICMS2017-2019R$671.2 million (approximately $123.9)
Oct-20Federal excise taxes, which the Treasury Office of the Brazil’s Internal Revenue Service considers as improperly calculatedIPI2016-2017R$344.4 million (approximately $63.6)
Nov-20State sales taxes, which the Treasury Office of the State of Minas Gerais considers as improperly calculatedICMS2016-2019R$188.1 million (approximately $34.7)
Jun-21State sales tax, which the Treasury Office of the State of Goiás considers as improperly calculatedICMS2016-2020R$76.0 million (approximately $14.0)
(a) During the first quarter of fiscal 2022, assessments amounting in R$360.7 million (approximately $66.6) were dismissed by the Goiás State Treasury's Attorney Office in favor of the Company.
All cases are currently in the Company received tax assessments related to tax years 2017-2019 during August 2020. These additional tax assessments, including estimated interest and penalties, through March 31, 2021 amount to a total R$713.9 million (approximately $123.6 as of March 31, 2021).administrative process. The Company is seeking a favorable administrative decisiondecisions on the tax enforcement actions filed by the Treasury Office of the State of Goiás.tax authorities for these assessments. The Company believes it has meritorious defenses and it has not recognized a loss for these assessments as the Company does not believe a loss is probable. Due to the fiscal environment in Brazil, the possibility of further tax assessments related to the same or similar matters cannot be ruled out.
20. RELATED PARTY TRANSACTIONS
Equity Transfer Agreement
In connection with a federal tax audit of one of the Company’s subsidiaries in Brazil, the Company was notified of tax assessments issued in October of 2020. The assessments relate to federal excise taxes, which the Treasury Office of the Brazil’s Internal Revenue Service considers as improperly calculated for the period from February 2016 to December 2017. These tax assessments, including estimated interest and penalties, through March 31, 2021 amount to a total of R$339.1 million (approximately $58.7 as of March 31, 2021). The Company is seeking a favorable administrative decision on the tax enforcement actions filed by the Treasury Office of the Brazil’s Internal Revenue Service. The Company believes it has meritorious defenses and it has not recognized a loss for these assessments as the Company does not believe a loss is probable.
In connection with a local tax audit of one of the Company’s subsidiaries in Brazil, the Company was notified of tax assessments issued in November of 2020. The assessments relate to taxes related to interstate transfers, which the Treasury Office of the State of Minas Gerais considers as improperly calculated for 2016-2019 tax periods. These tax assessments, including estimated interest and penalties, through March 31, 2021 amount to a total of R$185.4 million (approximately $32.1 as of March 31, 2021). The Company is seeking a favorable administrative decision on the tax enforcement actions filed by the Treasury Office of the Brazil’s Internal Revenue Service. The Company believes it has meritorious defenses and it has not recognized a loss for these assessments as the Company does not believe a loss is probable.
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21. RELATED PARTY TRANSACTIONS
Contribution Agreement
In July 2020, in connection with a one-time sign-on award of restricted stock units expected to beAward granted to the Chief Executive Officer (“CEO”) in the fourth quarter of fiscalCompany’s CEO on June 30, 2021, Cottage Holdco B.V., has agreed to transfer to the CEOher (either directly or through contributing to the Company) one-half of the total number of shares of Common Stock owed to the CEOher if and when the awardAward vests. See Note 16—Share-Based Compensation Plans for more information on the Award.
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Relationship with KKR
As noted in Note 16—15—Equity and Convertible Preferred Stock, in fiscal 2020 KKR Aggregator purchased Series B Preferred Stock. This preferred stock conveys to KKR Aggregator the right to designate two directors to the Company’s Board of Directors and voting rights on an as-converted basis. Assuming full conversion of the preferred stock (and accrued dividends through March 31, 2021) and no other changes to the Company’s capitalization, KKR Aggregator would be the second largest shareholder, with a 22.5% stake. On November 16, 2020, KKR Aggregator and affiliated investment funds agreed to sell 146,057 shares of Series B Preferred Stock to HFS Holdings S.à r.l, a private limited liability company incorporated under the laws of Luxembourg that is beneficially owned by Peter Harf, a director of the Company. The transaction, which is subject to customary closing conditions, is expected to close on August 27, 2021.
In June of 2020, KKR Bidco and Coty entered into a separate definitive agreement regarding a strategic transaction (“Wella Transaction”) for the sale of the Company’s Professional and Retail Hair business, which was completed on November 30, 2020. As of September 30, 2021 KKR ownsowned 60% of this separately managed entity and Coty ownsowned the remaining 40%. Refer to Note 15—Equity and Convertible Preferred Stock for the definitive agreement entered into with KKR that closed on October 20, 2021.
On September 10, 2021, KKR Aggregator converted a portion of its Series B Preferred Stock into Class A common stock of the Company and completed a secondary public offering of the converted shares of Class A common stock. Refer to Note 15—Equity and Convertible Preferred Stock.
Assuming full conversion of its remaining preferred stock (and accrued dividends through September 30, 2021) and no other changes to the Company’s capitalization, KKR Aggregator would be the second largest shareholder, with a 10.9% stake as of September 30, 2021.
On October 20, 2021, the Company completed the sale of a 9.4% stake in the Wella Business to KKR Aggregator in exchange for the Series B Preferred Stock Redemption, reducing the Company's total shareholding in the Wella Business to approximately 30.6% as of October 20, 2021. Additionally, on November 6, 2021, Coty entered into a definitive agreement to sell an additional approximate 4.7% stake in Wella to KKR Aggregator in exchange for the redemption of approximately 56% of KKR Aggregator 's remaining convertible preferred shares in Coty, reducing the Company’s total shareholding in Wella to 25.9%. The transaction is expected close on November 30, 2021. Refer to Note 15—Equity and Convertible Preferred Stock.
During fiscal 2021, fees of $7.6 were incurred with KKR in connection with the second closing of the Series B Preferred Stock; these fees reduced the carrying value of the stock.
The Company also entered into agreements with KKR for potential consulting and advisory services. NaNNo fees were incurred under such agreements in fiscal 2022 or 2021.
From time to time, certain funds held by KKR may hold the Company’s Notes.Senior Secured and Unsecured Notes (as defined in Note 11—Debt). These funds may receive principal and interest payments on the same terms as other investors in the Company’s Senior Secured and Unsecured Notes.
Wella
As of September 30, 2021, Coty ownsowned 40% of the Wella Business as an equity investment and performs certain services to Wella. Refer to Note 8— Equity Investments.
In connection with the sale of the Wella Business, the Company and Wella entered into a Transitional Services Agreement (“TSA”). Subject to the terms of this TSA, the Company will perform services for Wella in exchange for related service fees. Such services include billing and collecting from Wella customers, certain logistics and warehouse services, as well as other administrative and systems support. The various TSA services will be provided for a period of up to eighteen months and can be extended for another three month period. The Company and Wella may mutually agree to end certain TSA services before the contractual end date and may ramp down or phase out certain TSA services in the months leading up to the contractual end date. The Company and Wella have also entered into other manufacturing and distribution arrangements to facilitate the Wella Business transition in the U.S. and Brazil. TSA fees and other fees earned since the divestiture were $40.0$33.2 and $1.0,$1.5, respectively, for the three months ended March 31, 2021 and $54.7 and $1.6, respectively, for the four months ended March 31,September 30, 2021. The TSA fees are principally invoiced on a cost plus basis. The TSA fees and other fees were included in Selling, general and administrative expenses and Cost of sales, respectively, in the Company's Condensed Consolidated Statement of Operations. As of March 31,September 30, 2021, accounts receivable from and accounts payable to Wella of $111.8$160.7 and $49.2,$46.2, respectively, were included in Prepaid expenses and other current assets and Accrued expenses and other current liabilities, respectively, in the Company's Condensed Consolidated Balance Sheets. Additionally,
In accordance with the Company has accrued $29.8 within Other noncurrent liabilitiesseparation agreement with Wella, Coty shall retain and be solely responsible for any amounts payable to former Coty employees transferred to Wella (“Wella employees”), who participated in the Coty Long-Term Incentive Plan. The Wella employees will continue to participate and vest on the current terms for the remaining vesting period after the separation. As such, Coty will continue to recognize the share-based compensation expense for Wella employees until the existing equity awards reach their vesting date. For the three months ended September 30, 2021, Coty recorded $1.6 of share-based compensation expense related to certain indemnities to Wella for uncertain tax positions associated with tax filings made prior toemployees, which was presented as part of Other income, net in the saleCondensed Consolidated Statements of the Wella Business.Operations.
The Company has certain sublease arrangements with Wella after the sale. For the three and four months ended March 31,September 30, 2021, the Company reported sublease income of $4.1 and $5.5, respectively,$2.4 from Wella.
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22. SUBSEQUENT EVENTS
Offering of Senior Secured Notes
On April 21, 2021, the Company issued an aggregate principal amount of $900.0 of 5.00% senior secured notes due 2026 (the “2026 Senior Secured Notes”). Coty received gross proceeds of $900.0 in connection with the offering of the 2026 Senior Secured Notes. Coty used the net proceeds of the offering of the 2026 Senior Secured Notes to repay a portion of the term loans outstanding under the existing credit facilities and to pay related premiums, fees and expenses thereto.
The 2026 Senior Secured Notes are senior secured obligations of Coty and are guaranteed on a senior secured basis by each of Coty’s wholly-owned domestic subsidiaries that guarantees Coty’s obligations under its existing senior secured credit facilities and are secured by first priority liens on the same collateral that secures Coty’s obligations under its existing senior
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secured credit facilities. For information21. SUBSEQUENT EVENTS
KKR Definitive Agreement
On October 20, 2021, the Company completed the sale of 9.4% stake in the Wella Business to KKR in exchange for the redemption of approximately half of KKR's remaining Series B Convertible Preferred Stock shares in Coty and a portion of unpaid dividends, reducing the Company's total shareholding in the Wella Business to approximately 30.6%. Additionally, on Coty's existing senior secured credit facilities, seeNovember 6, 2021, Coty entered into a definitive agreement to sell an additional approximate 4.7% stake in Wella to KKR Aggregator in exchange for the redemption of approximately 56% of KKR Aggregator 's remaining convertible preferred shares in Coty, reducing the Company’s total shareholding in Wella to 25.9%. The transaction is expected close on November 30, 2021. Refer to Note 12—Debt. The 2026 Senior Secured Notes15—Equity and the guarantees are equal in right of payment with all of Coty’s and the guarantors’ respective existing and future senior indebtedness and are pari passu with all of Coty’s and the guarantors’ respective existing and future indebtedness that is secured by a first priority lien on the collateral, including the existing senior secured credit facilities, to the extent of the value of such collateral.Convertible Preferred Stock.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the financial condition and results of operations of Coty Inc. and its consolidated subsidiaries, should be read in conjunction with the information contained in the Condensed Consolidated Financial Statements and related notes included elsewhere in this document, and in our other public filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the fiscal year ended June 30, 20202021 (“Fiscal 20202021 Form 10-K”). When used in this discussion, the terms “Coty,” the “Company,” “we,” “our,” or “us” mean, unless the context otherwise indicates, Coty Inc. and its majority and wholly-owned subsidiaries. Also, when used in this Quarterly Report on Form 10-Q, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation. The following report includes certain non-GAAP financial measures. See “Overview—Non-GAAP Financial Measures” for a discussion of non-GAAP financial measures and how they are calculated.
All dollar amounts in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.
More information about potential risks and uncertainties that could affect our 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 this Quarterly Report on Form 10-Q and other periodic reports we have filed and may file with the SEC from time to time.
Forward-looking Statements
Certain statements in this Form 10-Q 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 impact of COVID-19 and potential recovery scenarios, strategic planning, targets, segment reporting and outlook for future reporting periods (including the extent and timing of revenue, expense and profit trends and changes in operating cash flows and cash flows from operating activities and investing activities), the impact of the sale of a majority stake in Coty’s Professional and Retail Hair business, including the Wella, TransactionClairol, OPI and ghd brands, (together, the “Wella Business”) and the related transition services (the “TSA”), the Company’s future operations and strategy (including the expected implementation and related impact of its strategic priorities), ongoing and future cost efficiency, optimization and restructuring initiatives and programs, strategic transactions (including their expected timing and impact), the Company’s capital allocation strategy and payment of dividends (including suspension of dividend payments and the duration thereof and any plans to resume cash dividends)dividends on common stock or to continue to pay dividends in cash on preferred stock), investments, licenses and portfolioportfolio changes, product launches, relaunches or rebranding (including the expected timing or impact thereof), synergies, savings, performance, cost, timing and integration of acquisitions, including the Kingstrategic partnerships with Kylie TransactionJenner and the KKW Transaction,Kim Kardashian West, future cash flows, liquidity and borrowing capacity (including any refinancing activities), timing and size of cash outflows and debt deleveragingthe availability of local government funding or reimbursement programs in connection with COVID-19 (including expected timing and amounts), the timing and extent of any future impairments, and synergies, savings, impact, cost, timing and implementation of the Company’s Transformation Plan (as defined below), including operational and organizational structure changes, operational execution and simplification initiatives, fixed cost reductions, supply chain changes, e-commerce and digital initiatives, the expected impact of global supply chain challenges or inflationary pressures, and the priorities of senior management. 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”, “goal” 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 risks and uncertainties relating to:
•the impact of COVID-19 (or future similar events), including demand for the Company’s products, illness, quarantines, government actions, facility closures, store closures or other restrictions in connection with the COVID-19 pandemic, and the extent and duration thereof, the availability and widespread distribution of a safe and effective vaccine, related impact on our ability to meet customer needs and on the ability of third parties on which we rely, including our suppliers, customers, contract manufacturers, distributors, contractors, commercial banks, joint-venture partners, to meet their obligations to us, in particular collections from customers, the extent that government funding and reimbursement programs in connection with COVID-19 are available to us, and the ability to successfully implement measures to respond to such impacts;
•our ability to successfully implement our multi-year Transformation Plan, including our management realignment, reporting structure changes, operational and organizational changes, and the initiatives to further reduce our cost base, and to develop and achieve our global business strategies (including mix management, select price increases, more disciplined promotions, and foregoing low value sales), compete effectively in the beauty industry and achieve the benefits contemplated by our strategic initiatives (including revenue growth, cost control, gross margin growth and debt deleveraging) and successfully implement our strategic priorities (including innovation performance in prestigePrestige and mass channels, strengthening our positions in core markets, accelerating our digital and e-commerce capabilities,
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building on our skincare portfolio, and expanding our presence in China) in each case within the expected time frame or at all;
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•our ability to anticipate, gauge and respond to market trends and consumer preferences, which may change rapidly, and the market acceptance of new products, including new products related to Kylie Jenner’s or Kim Kardashian West’s existing beauty businesses, any relaunched or rebranded products and the anticipated costs and discounting associated with such relaunches and rebrands, and consumer receptiveness to our current and future marketing philosophy and consumer engagement activities (including digital marketing and media);
•use of estimates and assumptions in preparing our financial statements, including with regard to revenue recognition, income taxes (including the expected timing and amount of the release of any tax valuation allowance), the assessment of goodwill, other intangible and long-lived assets for impairments, the market value of inventory, the fair value of the equity investment, and the fair value of acquired assets and liabilities associated with acquisitions;
•the impact of any future impairments;
•managerial, transformational, operational, regulatory, legal and financial risks, including diversion of management attention to and management of cash flows, expenses and costs associated with the Company'sCompany’s response to COVID-19, the Transformation Plan, the TSA, the integration of the King strategic partnerships with Kylie TransactionJenner and the KKW Transaction,Kim Kardashian, and future strategic initiatives, and, in particular, our ability to manage and execute many initiatives simultaneously including any resulting complexity, employee attrition or diversion of resources;
•the timing, costs and impacts of divestitures and the amount and use of proceeds from any such transactions;
•future divestitures and the impact thereof on, and future acquisitions, new licenses and joint ventures and the integration thereof with, our business, operations, systems, financial data and culture and the ability to realize synergies, manage supply chain challenges and avoid future supply chain and other business disruptions, reduce costs (including through our cash efficiency initiatives), avoid liabilities and realize potential efficiencies and benefits (including through our 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 prestigePrestige 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, impact from COVID-19 on retail revenues, and other changes in the retail, e-commerce and wholesale environment in which we do business and sell our products and our ability to respond to such changes (including our ability to expand our digital, direct-to-consumer and e-commerce capabilities within contemplated timeframes or at all);
•our and our joint ventures’, business partners’ and licensors’ abilities to obtain, maintain and protect the intellectual property used in our and their respective businesses, protect our and their respective reputations (including those of our and their executives or influencers) and public goodwill, and defend claims by third parties for infringement of intellectual property rights;
•any change to our capital allocation and/or cash management priorities, including any change in our dividend policy or, if our Board declares dividends on common stock, our stock dividend reinvestment program (the “Stock Dividend Reinvestment Program”);
•any unanticipated problems, liabilities or integration or other challenges associated with a past or future acquired business, joint ventures or strategic partnerships 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, and specifically in connection with the strategic partnerships with Kylie Jenner and Kim Kardashian, risks related to the entry into a new distribution channel, the potential for channel conflict, risks of retaining customers and key employees, difficulties of integration (or the risks associated with limiting integration), risks related to regulation of multi-level marketing business models, ability to protect trademarks and brand names, litigation or investigations by governmental authorities, and changes in law, regulations and policies that affect KKW Holdings, LLC’s (“KKW Holdings”) business or products, including risk that direct selling laws and regulations may be modified, interpreted or enforced in a manner that results in a negative impact to KKW Holdings’ business model, revenue, sales force or business;
•our international operations and joint ventures, including enforceability and effectiveness of our 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;
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•our dependence on certain licenses (especially in the fragrance category) and our ability to renew expiring licenses on favorable terms or at all;
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•our dependence on entities performing outsourced functions, including outsourcing of distribution functions, and third-party manufacturers, logistics and supply chain suppliers, and other suppliers, including third-party software providers, web-hosting and e-commerce providers;
•administrative, product development and other difficulties in meeting the expected timing of market expansions, product launches and re-launches and marketing efforts, including in connection with new products related to Kylie Jenner’s or Kim Kardashian West’s existing beauty businesses;
•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 (and related business or market disruption), the current U.S. administration and recent election, 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., the European Union and Asia and in other regions where we operate;
•currency exchange rate volatility and currency devaluation;devaluation and/or inflation;
•the number, type, outcomes (by judgment, order or settlement) and costs of current or future legal, compliance, tax, regulatory or administrative proceedings, investigations and/or litigation, including litigation relating to the tender offer by Cottage Holdco B.V. (the “Cottage Tender Offer”), product liability cases (including asbestos)asbestos and talc-related litigation for which indemnities and/or insurance may not be available), distributor or licensor litigation, and litigation or investigations relating to the strategic partnerships with Kylie Jenner and Kim Kardashian West;
•our ability to manage seasonal factors and other variability and to anticipate future business trends and needs;
•disruptions in operations, sales and in other areas, including due to disruptions in our supply chain, restructurings and other business alignment activities, the Wella Transaction and related carve-out and transition activities, manufacturing or information technology systems, labor disputes, extreme weather and natural disasters, impact from COVID-19 or similar global public health events, impact of global supply chain challenges, and the impact of such disruptions on our ability to generate profits, stabilize or grow revenues or cash flows, comply with our contractual obligations and accurately forecast demand and supply needs and/or future results;
•restrictions imposed on us through our license agreements, credit facilities and senior unsecured bonds or other material contracts, our ability to generate cash flow to repay, refinance or recapitalize debt and otherwise comply with our debt instruments, and changes in the manner in which we finance our debt and future capital needs;
•increasing dependency on information technology, including as a result of remote working in response to COVID-19, and our ability to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, including ransomware attacks, costs and timing of implementation and effectiveness of any upgrades or other changes to information technology systems, and the cost of compliance or our failure to comply with any privacy or data security laws (including the European Union General Data Protection Regulation (the “GDPR”), the California Consumer Privacy Act and the Brazil General Data Protection Law) or to protect against theft of customer, employee and corporate sensitive information;
•our ability to attract and retain key personnel and the impact of senior management transitions and organizational structure changes;
•the distribution and sale by third parties of counterfeit and/or gray market versions of our products;
•the impact of our Transformation Plan as well as the Wella Transaction on our relationships with key customers and suppliers and certain material contracts;
•our relationship with Cottage Holdco B.V., as our majority stockholder, and its affiliates, and any related conflicts of interest or litigation;
•our relationship with KKR, whose affiliates KKR Rainbow Aggregator L.P. (“KKR Aggregator”) and KKR Bidco are respectively a significant stockholder in Coty and an investor in the Wella Business, and any related conflicts of interest or litigation;
•future sales of a significant number of shares by our majority stockholder or the perception that such sales could occur; and
•other factors described elsewhere in this document and in documents that we file with the Securities and Exchange Commission (the “SEC”)SEC from time to time.
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All forward-looking statements made in this document are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this document, and we do not undertake any obligation, other than as may be
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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.
Industry, Ranking and Market Data
Unless otherwise indicated, information contained in this Quarterly Report on Form 10-Q concerning our industry and the markets in which we operate, including our general expectations about our industry, market position, market opportunity and market sizes, is based on data from various sources including internal data and estimates as well as third-party sources widely available to the public, such as independent industry publications, government publications, reports by market research firms or other published independent sources and on our assumptions based on that data and other similar sources. We did not fund and are not otherwise affiliated with the third-party sources that we cite. Industry publications and other published sources generally state that the information contained therein has been obtained from third-party sources believed to be reliable. Internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which we operate and management’s understanding of industry conditions, and such information has not been verified by any independent sources. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we generally believe the market, industry and other information included in this Quarterly Report on Form 10-Q to be the most recently available and to be reliable, such information is inherently imprecise and we have not independently verified any third-party information or verified that more recent information is not available.
Our fiscal year ends on June 30. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year. For example, references to “fiscal 2021”2022” refer to the fiscal year ending June 30, 2021.2022. Any reference to a year not preceded by “fiscal” refers to a calendar year.
OVERVIEW
We are one of the world’s largest beauty companies, with an iconic portfolio of brands across fragrance, color cosmetics, and skin and body care. Through targeted strategic transactions, we have strengthened and diversified our presence across the countries, categories and channels in which we compete, building a strong beauty platform. The King Kylie and recently completed Kim Kardashian West transactions complement our existing portfolio as personality-led DTCDirect-to-Consumer (“DTC”) business models with strong social media engines. As we transform the Company, we continue to make progress on our strategic priorities, including stabilization of consumer beauty make-upstabilizing our Consumer Beauty brands and mass fragrances through leading innovation and improved execution, accelerating our prestigePrestige fragrance business and ongoing expansion into prestigePrestige cosmetics, building a comprehensive skincare portfolio leveraging existing brands, enhancement ofenhancing our e-commerce and Direct-to-Consumer (DTC)DTC capabilities, expanding our presence in China through prestigePrestige products and select consumer beautyConsumer Beauty brands, and establishing Coty as an industry leader in sustainability.

The divestiture of the Younique business in September 2019 and the completion of the strategic Wella Transaction are reflectionsis a reflection of our intent to focus on our core go-to-market competencies and to simultaneously deleverage our balance sheet. By retainingOur recent issuances of the senior secured notes further demonstrate our commitment to improve the maturity profile of our debt. In addition, we note the completion on October 20, 2021 of the sale of a 40% interest9.4% stake in the Wella Business followingto KKR Aggregator in exchange for the closingredemption of Series B Preferred Stock. Additionally, on November 6, 2021, Coty entered into a definitive agreement to sell an additional approximate 4.7% stake in Wella to KKR Aggregator in exchange for the redemption of approximately 56% of KKR Aggregator 's remaining convertible preferred shares in Coty, reducing the Company’s total shareholding in Wella Transaction, we are able to benefit from25.9%. The transaction is expected close on November 30, 2021. These transactions reflected significant appreciation in Wella’s value, illustrating the potential upside of the stand-alone business in the longer term, through a potential divestiture at a later stage.term.

COVID-19 Impacts Update

The COVID-19 pandemic has had material effects on all our product categories across all segments and geographies. The continuingmost markets have recently shown encouraging signs of emergence from the pandemic; however, sporadic containment measures and travel restrictions adopted worldwidecontinue to addressimpact volume trends in certain markets. However, the pandemicrecent loosening of social distancing protocols and the gradual removal or reduction of travel restrictions in certain key markets have contributed to a significant decline in volume trends, albeitincreased demand and sales growth, with some emerging evidence of recovery in the AmericasPrestige segment and Asia during fiscal 2021 year to date, most notably in the prestige fragrance categories. In particular, demand for color cosmetics products and products sold in the travel retail channel continuesin particular experiencing positive volume trends over the comparative period. We also continue to be more significantly impacted by temporary closuresexperience growth in e-commerce. Our Consumer Beauty segment has also shown moderate signs of non-essential businessesrecovery. However, many of our Consumer Beauty product categories continue to experience negative effects on sales volume due to changes in consumer behavior as a result of the pandemic and continued social distancing measures although this is being partially offset by growth in beauty product sales online. Many of our mass products are offered in other channels, such as drug and grocery stores, that continue to operate as essential businesses. However, social distancing measures continue to negatively affect sales volumes for these product categories as well.certain regions.

As previously reported, we have implemented several key measures in response to the COVID-19 pandemic which continue to be in place. We have also amplified our Transformation Plan, discussed below, to address the potentially longer-lasting impacts of the COVID-19, the lockdownintermittent lockdowns and a possible recessioneconomic uncertainty resulting from COVID-19 that continue in many markets.
We anticipate continued negative pressure on salesthe recovery to be non-linear until COVID-19 containment measures are discontinued across all regions and normal consumer traffic resumes on a consistent basis. We currently expect that any easing of containment
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measures and recovery of the impacted sectors of the economy will be gradual and uneven, as regions face
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resurgence of COVID-19 and related uncertainties, and the availability and widespread distribution of a safe and effective vaccine varies across regions. As a result, we anticipate that consumer spending habits and consumer confidence will continue to shift, causing future sales and volume trends to be non-linear. Further, risks of inflationary trends in certain markets and global supply chain challenges may negatively affect our sales and operating performance. Currently, we are mitigating these risks through effective financial management and measures such as the use of alternative methods of transportation; however, such measures may not fully offset the impact to our operating performance. After the resumption of more typical business conditions, the economics of developing, producing, launching, supporting and discontinuing products will continue to impact the timing of our sales and operating performance each period. In addition, as product life cycles shorten, results are driven primarily by successfully developing, introducing and marketing new, innovative products.

Transformation Plan Update

As previously reported, we are implementing a comprehensive transformation agenda (the “Transformation Plan”), which aims to stabilize and accelerate revenue growth, improve our profitability through gross margin growth and cost control, optimize our operating model for speed and agility, accelerate e-commerce and digital growth, and deleverage our balance sheet. This Transformation Plan is designed to adjust our cost base to allow us to exit the post-COVID recovery phase as a financially and operationally stronger, more nimble company, which is well positioned to capture growth opportunities. We expect to incur cash costs consistent with the previously announced estimate. We are continually reviewing ways to accelerate and amplify the transformation of the Company, including through the implementation of additional initiatives in connection with our Transformation Plan. As a result, we are on track to exit fiscal 2021 with a higher level of cost savings than initially anticipated. These organizational, business and structural changes are still being operationalized, which introduces additional risk and complexity as we roll out several initiatives simultaneously, including the ongoing obligations under the TSA.

Other Matters

As previously disclosed, in Coty’s public filings, Sue Nabi, the Company’s CEO, will receive, upon approval by the Company’s board of directors, a one-time sign-on award of restricted stock units (the “Award”), which will vest and settle in 10,000,000 shares of the Company’s Class A Common Stock, par value $0.01 per share, on each of August 31, 2021, August 31, 2022 and August 31, 2023, subject to her continued employment through each such date. The Company expects to issue the restricted stock unitsour CODM has been in the fourth quarterprocess of fiscal 2021. The Company will recognize share-based compensation expense based on the closing stock price on the date the grant is approved by the board of directors, which would be $300.3 using the closing stock price for the Class A Common Stock on April 30, 2021 of $10.01 per share. This expense would be amortized over the underlying vesting period. In connection with this Award, Cottage Holdco B.V., the Company’s largest stockholder and a wholly-owned subsidiary of JAB Holding Company S.a r.l., has agreed to transfer to Ms. Nabi (either directly or through contributing to the Company) one-half of the total number of shares of Common Stock owed to Ms. Nabi if and when the Award vests.
As our CEO finalizesfinalizing her organization structure and how she will assess performance, and we arehave concurrently evaluatingevaluated the potential impact to our segment reporting. We expectBased on this processevaluation, we have determined that it is appropriate to culminaterealign our reportable segments to a principally product category-based structure, comprised of a Prestige business segment and a Consumer Beauty business segment beginning in the fourthfirst quarter of fiscal 2021.2022.

Non-GAAP Financial Measures

To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures for continuing operations and Coty Inc. including Adjusted operating income (loss), Adjusted EBITDA, Adjusted net income (loss), and Adjusted net income (loss) attributable to Coty Inc. to common stockholders (collectively, the “Adjusted Performance Measures”). The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in tables below. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Three and Nine months ended March 31, 2021 As Compared to Three and Nine Months Ended March 31, 2020.” These non-GAAP financial measures should not be considered in isolation from, or as a substitute for or superior to, financial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies, including companies in the beauty industry, may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
Despite the limitations of these non-GAAP financial measures, our management uses the Adjusted Performance Measures as key metrics in the evaluation of our performance and annual budgets and to benchmark performance of our business against our competitors. The following are examples of how these Adjusted Performance Measures are utilized by our management:
•strategic plans and annual budgets are prepared using the Adjusted Performance Measures;
•senior management receives a monthly analysis comparing budget to actual operating results that is prepared using the Adjusted Performance Measures; and
•senior management’s annual compensation is calculated, in part, by using some of the Adjusted Performance Measures.
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In addition, our financial covenant compliance calculations under our debt agreements are substantially derived from these Adjusted Performance Measures.
Our management believes that Adjusted Performance Measures are useful to investors in their assessment of our operating performance and the valuation of the Company. In addition, these non-GAAP financial measures address questions we routinely receive from analysts and investors and, in order to ensure that all investors have access to the same data, our management has determined that it is appropriate to make this data available to all investors. The Adjusted Performance Measures exclude the impact of certain items (as further described below) and provide supplemental information regarding our operating performance. By disclosing these non-GAAP financial measures, our management intends to provide investors with a
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supplemental comparison of our operating results and trends for the periods presented. Our management believes these measures are also useful to investors as such measures allow investors to evaluate our performance using the same metrics that our management uses to evaluate past performance and prospects for future performance. We provide disclosure of the effects of these non-GAAP financial measures by presenting the corresponding measure prepared in conformity with GAAP in our financial statements, and by providing a reconciliation to the corresponding GAAP measure so that investors may understand the adjustments made in arriving at the non-GAAP financial measures and use the information to perform their own analyses.
Adjusted operating incomeincome/Adjusted EBITDA from continuing operations excludes restructuring costs and business structure realignment programs, amortization, acquisition- and divestiture-related costs and acquisition accounting impacts, stock-based compensation, and asset impairment charges and other adjustments as described below. For adjusted EBITDA, in addition to the preceding, we exclude adjusted depreciation as defined below. We do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance. They are primarily incurred to realign our operating structure and integrate new acquisitions, and excludeimplement divestitures of components of our business, and fluctuate based on specific facts and circumstances. Additionally, Adjusted net income attributable to Coty Inc. and Adjusted net income attributable to Coty Inc. per common share are adjusted for certain interest and other (income) expense items and preferred stock deemed dividends, as described below, and the related tax effects of each of the items used to derive Adjusted net income as such charges are not used by our management in assessing our operating performance period-to-period.
Adjusted Performance Measures reflect adjustments based on the following items:
•Costs related to acquisition and divestiture activities: We have excluded acquisition- and divestiture-related costs and the 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. Additionally, for divestitures, we exclude write-offs of assets that are no longer recoverable and contract related costs due to the divestiture. The nature and amount of such costs vary significantly based on the size and timing of the acquisitions and divestitures, and the maturities of the businesses being acquired or divested. Also, the size, complexity and/or volume of past transactions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of any future acquisitions or divestitures.
•Restructuring and other business realignment costs: We have excluded 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 referenced expenses from our non-GAAP financial measures, our management is able to further evaluate our ability to utilize existing assets and estimate their long-term value. Furthermore, 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.
•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: We have excluded 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. 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. Although we exclude amortization of intangible assets from our non-GAAP expenses, our 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.
•Loss/(Gain) on divestitures and sale of brand assets:divestitures: We have excluded the impact of Loss/(gain) on divestitures and sale of brand assets as such amounts are inconsistent in amount and frequency and are significantly impacted by the size of divestitures. 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.
•Stock-based compensation: Although stock-based compensation is a key incentive offered to our employees, we have excluded the effect of these expenses from the calculation of adjusted operating income and adjusted EBITDA. This is due to their primarily non-cash nature; in addition, the amount and timing of these expenses may be highly variable and unpredictable, which may negatively affect comparability between periods.
•Depreciation and Adjusted depreciation: Our adjusted operating income excludes the impact of accelerated depreciation for certain restructuring projects that affect the expected useful lives of Property, Plant and Equipment, as
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•Interest (income) expense: Wesuch charges vary significantly based on the size and timing of the programs. Further, we have excluded foreign currency impacts associatedadjusted depreciation, which represents depreciation expense net of accelerated depreciation charges, from our adjusted EBITDA. Our management believes that the adjustment of these items supplement the GAAP information with acquisition-related and debt financing-related forward contracts, as well as debt financing transaction costs asa measure that can be used to assess the nature and amountsustainability of such charges are not consistent and are significantly impacted by the timing and size of such transactions.our operating performance.
•Other (income) expense: We have excluded the impact of costs incurred for legal and advisory services rendered in connection with the tender offer that was in fiscal 2019 initiated by certain of our shareholders. Additionally, we have excluded the write-off of deferred financing fees and discounts that resulted from the pay down of our term debt from the proceeds of the Wella sale, due to the requirements of the 2018 Coty Credit Agreement, as amended. Our management believes these costs do not reflect our underlying ongoing business, and the adjustment of such costs helps investors and others compare and analyze performance from period to period. We have also excluded the impact of pension curtailment (gains) and losses and pension settlements as such events are triggered by our restructuring and other business realignment activities and the amount of such charges vary significantly based on the size and timing of the programs. Further, we have excluded the change in fair value of the investment in Wella, as our management believes these unrealized (gains) and losses do not reflect our underlying ongoing business, and the adjustment of such impact helps investors and others compare and analyze performance from period to period.
•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 is based on the tax rates related to the jurisdiction in which the adjusted items are received or incurred. Additionally, adjustments are made for the tax impact of any intra-entity transfer of assets and liabilities.
•Deemed Preferred Stock Dividends: We have excluded preferred stock deemed dividends related to the Exchange Agreement from our calculation of adjusted net income attributable to Coty Inc. These deemed dividends are nonmonetary in nature and do not reflect our underlying ongoing business. Management believes that this adjustment helps investors and others compare and analyze our performance from period to period.
While acquiring brands and licenses comprises a part of our overall growth strategy, along with targeting organic growth opportunities, we have excluded acquisition-related costs and acquisition accounting impacts in connection with business combinations because these costs are unique to each transaction and the amount and frequency are not consistent and are significantly impacted by the timing and size of our acquisitions. Our management assesses the success of an acquisition as a component of performance using a variety of indicators depending on the size and nature of the acquisition, including:
•the scale of the combined company by evaluating consolidated and segment financial metrics;
•the expansion of product offerings by evaluating segment, brand, and geographic performance and the respective strength of the brands;
•the evaluation of share expansion in categories and geographies;
•the earnings per share accretion and substantial incremental free cash flow generation providing financial flexibility for us; and
•the comparison of actual and projected results, including achievement of projected synergies, post integration; provided that timing for any such comparison will depend on the size and complexity of the acquisition.
Constant Currency
We operate on a global basis, with the majority of our net revenues generated outside of the U.S. Accordingly, fluctuations in foreign currency exchange rates can affect our results of operations. Therefore, to supplement financial results presented in accordance with GAAP, certain financial information is presented in “constant currency”, excluding the impact of foreign currency exchange translations to provide a framework for assessing how our underlying businesses performed excluding the impact of foreign currency exchange translations. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate 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 prior year 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 we present may not be comparable to similarly titled measures reported by other companies.
Basis of Presentation of Acquisitions, Divestitures and Terminations
During the period when we complete an acquisition, divestiture or early license termination, the financial results of the current year period are not comparable to the financial results presented in the prior year period. When explaining such changes from period to period and to maintain a consistent basis between periods, we exclude the financial contribution of: (i) the
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acquired brands or businesses in the current year period until we have twelve months of comparable financial results and (ii) the
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divested brands or businesses or early terminated brands, to maintain comparable financial results with the current fiscal year period. Acquisitions,There are no acquisitions, divestitures andor early license terminations in the comparable periods that would impact the comparability of financial results between periods presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations are shownOperations.
As the sale of the Wella Business was completed on November 30, 2020, no net revenues, operating expenses, or net income from discontinued operations were recorded in the table below.three months ended September 30, 2021. Financial results for the Wella Business for fiscal year 2021 are presented as discontinued operations.
Unless otherwise noted, the following section pertains to the results of continuing operations.
Period of acquisition, divestiture, or terminationAcquisition, divestiture, or terminationImpact on basis of presentation
First quarter fiscal 2020
Divestiture: Younique - the divestiture of the interest in Foundation, which holds the net assets for Younique
First quarter fiscal year 2020 net revenue excluded.
Third quarter fiscal 2020
Acquisition: King Kylie Transaction - the acquisition of 51% interest in King Kylie LLC
First and second quarter fiscal year 2021 net revenue excluded.
When used herein, the term “Acquisitions” and “Divestitures” or "Acquisition" and “Divestiture”, as applicable, refer to the net revenues of the related acquisitions or divestitures and early license terminations shown above, during the period that is not comparable as a result of such acquisitions or divestitures and early license terminations.
Financial results for the Wella Business for fiscal years 2021 and 2020 are presented as discontinued operations.
Unless otherwise noted, the following section pertains to the results of continuing operations.
THREE MONTHS ENDED MARCH 31,SEPTEMBER 30, 2021 AS COMPARED TO THREE MONTHS ENDED MARCH 31,SEPTEMBER 30, 2020
NET REVENUES
In the three months ended March 31,September 30, 2021, net revenues decreased 3%increased 22%, or $34.7,$247.6, to $1,027.8$1,371.7 from $1,062.5$1,124.1 in the three months ended March 31,September 30, 2020, reflecting a decreasean increase in unit volume of 12%2%, partially offset by a positive price and mix impact of 7%19%, and a positive foreign currency exchange translation impact of 2%1%. The overall decreaseincrease in net revenues primarily reflects the impactreopening of the ongoing COVID-19 pandemic, most notably in the EMEA region. The pandemic continued to have a considerable impact on mass color cosmetics,stores across regions and increased leisure travel due mainly to category decline related to COVID-19 protocols such as mask-wearing, remote working arrangements, and social distancing which contributed to reduced demand for several product categories, particularly lip and face products.
The reopeningCOVID restrictions. A number of retail malls across regions, with the exception of Europe which continued to experience rolling lockdowns, coupled with continued e-commerce growth, contributed to overall improvements in net revenues as compared to the prior quarter of fiscal 2021, with the most notable improvementscountries in the Asia Pacific region continued to experience rolling lockdowns; however, in China these lockdowns were generally of a shorter duration and confined to certain localities. The market reopening had a favorable impact on both the Prestige and Consumer Beauty segments, with the highest impact on the Prestige segment. The Prestige segment also benefited from various strong and successful launches such as Gucci Flora, Burberry Hero, CK Defy, Tiffany Rose Gold, and the prestige productsrelaunch of Kylie cosmetics. In addition, the growth of e-commerce and continued expansion in the U.S. market. Travel retail channels remained challenged, especially inand China contributed to the EMEA and Americas regions, due to travel restrictions and significantly decreased leisure travel, which had a negative impact on prestige product revenues.net revenue increase.
Net Revenues by Segment
Three Months Ended
March 31,
(in millions)20212020Change %
NET REVENUES
Americas$409.6 $435.9 (6)%
EMEA473.0 512.9 (8)%
Asia Pacific145.2 113.7 28 %
Total$1,027.8 $1,062.5 (3)%
Three Months Ended
September 30,
(in millions)20212020Change %
NET REVENUES
Prestige$870.7 $644.4 35 %
Consumer Beauty501.0 479.7 4 %
Total$1,371.7 $1,124.1 22 %

AmericasPrestige
In the three months ended March 31,September 30, 2021, net revenues from the Americas region decreased 6%Prestige segment increased 35%, or $26.3$226.3 to $409.6$870.7 compared to $435.9$644.4 in the three months ended March 31,September 30, 2020, reflecting a decreasean increase in unit volume of 7% and28%, a negativepositive foreign currency exchange translation impact of 3%1%, offset byand a positive price and mix impact of 4%6%. This decrease is primarily due to Kylie make-up production transitioning from the previous supplier. The region also experienced lowerincrease in net revenues due to negative brand and category trends for mass color cosmetics, particularly affecting lip and face products related to the COVID-19 pandemic, primarily impacting Covergirl and Rimmel. In addition, rolling travel restrictions due to COVID-19 have significantly affected prestige products in our travel retail channels across the region.reflects:
These decreases in net revenue were partially offset by the following:
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(i)an increase in net revenues from the recenttravel retail business as many localities, particularly in North America, Europe, and China, have reduced travel restrictions and reopened for leisure travel as they emerge from the COVID-19 pandemic;
(ii)an increase in net revenues from the new launches of Gucci Flora, Burberry Hero, CK Defy, Tiffany Rose Gold, and the global relaunch of Kylie cosmetics, as well as the continued success of Marc Jacobs Perfect, and new campaigns behind Marc Jacobs Daisy andGucci Guilty;
(ii), and incremental net revenues due to positive share and category trends for prestige fragrance, particularly in the U.S.Gucci Makeup;
(iii)an increase in net revenues relateddue to growth of e-commerce primarilyacross the regions, distribution expansion in China, and additional shelf space in the United States, Brazil, and Canada;U.S. retail stores; and
(iv)an increase in net revenues in the Russian market due to the resolution of a dispute with a primary distributor, which negatively impacted net revenues in the prior year.
These increases in net revenue were partially offset by:
(i)lower net revenues due to strategic initiatives to reduce sales through lower priced channels; and
(ii)lower net revenues related to Calvin KleinKylie skin products due to lower salesless innovation in prior year as a resultthe current fiscal year.
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EMEAConsumer Beauty
In the three months ended March 31,September 30, 2021, net revenues from the EMEA region decreased 8%Consumer Beauty segment increased 4%, or $39.9,$21.3, to $473.0$501.0 from $512.9$479.7 in the three months ended March 31,September 30, 2020, reflecting a decrease in unit volume of 22%, a positive price and mix impact of 9%3%, and a positive foreign currency exchange translation impact of 5%. The decrease in net revenues primarily reflects lower net revenues due to the COVID-19 pandemic, impacting all product categories across the region. Reduced customer traffic due to continued lockdowns contributed significantly to the overall decrease in the region, with color cosmetics and mass categories experiencing proportionately greater declines than prestige products. Negative category and share trends in color cosmetics, particularly in lip and face categories, adversely impacted net revenues with somewhat greater resilience being shown in products related to lifestyle scenting, nails, and eye categories. Travel retail channels also continue to be significantly impacted as COVID-19 outbreaks continued restrictions in airports and other travel hubs.
These decreases were partially offset by net revenue increases across EMEA resulting from the continued growth of e-commerce sales.
Asia Pacific
In the three months ended March 31, 2021, net revenues from the Asia Pacific region increased 28%, or $31.5, to $145.2 from $113.7 in the three months ended March 31, 2020, reflecting an increase in unit volume of 8%, a positive foreign currency exchange translation impact of 8%, and a positive price and mix impact of 12%1%. The increase in net revenues primarily reflects:
(i)an increase in net revenuerevenues due to continued growthmarket recovery from COVID-19, increasing customer demand and store traffic, which positively impacted all brands within the segment. The highest impacts were seen in CoverGirl and Max Factor. Additionally, new brand positioning and enhanced support for these brands contributed to the net revenue increase. The sales volume increase as a result of e-commerce across the region, including the opening of the Gucci Beauty flagship store on Tmall, and new store expansionsCOVID-19 recovery was partially offset by a decrease in China;sales volume in Brazil, due to a recent price increase resulting in lower orders;
(ii)an increase in net revenue acrossrevenues from adidas due to a strategic focus to expand the region resulting from the continued success of Gucci Face Foundation, Gucci Bloom, and Marc Jacobs Perfectbrand in the prestige category;China; and
(iii)an incremental increase in net revenue related to travel retail mainly forrevenues from GucciMax Factor brand in China and Korea, specifically dueas a result of additional sell through trend compared to reductionsthe prior comparative period.
These increases in travel restrictions within these countries which are emerging from COVID-19 pandemic.
These increasesnet revenue were partially offset by a decrease for Calvin Klein in Australialower net revenues due to reduction in demand as a result of travel restrictions.strategic initiatives to reduce sales through lower priced channels.
COST OF SALES
In the three months ended March 31,September 30, 2021, cost of sales decreased 15%increased 9%, or $69.1,$39.9, to $391.7$504.8 from $460.8$464.9 in the three months ended March 31,September 30, 2020. Cost of sales as a percentage of net revenues decreased to 38.1%36.8% in the three months ended March 31,September 30, 2021 from 43.4%41.4% in the three months ended March 31,September 30, 2020, resulting in a gross margin increase of approximately 530460 basis points, primarily reflecting:
(i)approximately 260230 basis points primarily related to reductions,positive product and category mix associated with increased contribution from higher margin Prestige products, as a percentagewell as reduced sales of revenues, in promotional allowances and other trade spend items, which are recorded as adjustments to net sales;products through lower priced channels;
(ii)approximately 240120 basis points related to decreased manufacturing overhead costs and variable costs due to increased manufacturing efficiencies and improvements in productivity;
(iii)approximately 100 basis points related to decreased excess and obsolescence expense on inventory due to the high levels of excess and obsolescence expensehigher than normal costs in the prior year as a result of the COVID-19 pandemic, impacting demand;as well as improvements in the current fiscal year in forecasting sales and improved focus on planning for new products; and
(iii)(iv)approximately 7050 basis points related to decreased manufacturing overhead cost due to increased manufacturing efficiencies, improvement in productivity, and absence of underutilized facilities costs due to partial plant shutdown in prior year as a result of COVID-19 pandemic.price increases within our product portfolio.
These increases were partially offset by by:
(i)approximately 40 basis points related to inflation in material costs;
(ii)approximately 20 basis points related to an unfavorable mix of Prestige brands with higher royalty rates associated with prestige brands.rates; and
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approximately 10 basis points related to higher freight expenses due to rising global logistics costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
In the three months ended March 31,September 30, 2021, selling, general and administrative expenses decreased 28%increased 33%, or $212.3,$192.9, to $545.6$776.3 from $757.9$583.4 in the three months ended March 31,September 30, 2020. Selling, general and administrative expenses as a percentage of net revenues decreasedincreased to 53.1%56.6% in the three months ended March 31,September 30, 2021 from 71.3%51.9% in the three months ended March 31,September 30, 2020, or approximately 1,820470 basis points. This decreaseincrease primarily reflects:
(i)790740 basis points in stock-based compensation primarily related to the CEO grant made on June 30, 2021;
(ii)520 basis points due to increase in advertising and consumer promotional costs related to support for certain key brands and product launches; and
(iii)60 basis points related to higher bad debt expense.
These increases were partially offset by the following decreases:
(i)660 basis points in administrative costs primarily due to a decrease in compensation related to a reduction in employee headcount, decreased professional service costs, reductions in non-essential travel and meeting/conference expenses;headcount;
(ii)530 basis points related to lower advertising and consumer promotional costs as a percentage of net revenue as disciplined management of advertising and consumer promotion spending, which was instituted to counter the COVID-19 pandemic, led to savings that outpaced the decline in net revenues;
(iii)320120 basis points related to favorable transactional impactimpacts from our exposure to foreign currency exchange fluctuations;
(iv)110 basis points in stock compensation related to a modification of the former CEO's equity awards;
(v)40 basis points related to lower bad debt expense; and
(vi)(iii)3070 basis points related to lower logistics costs as a percentage of net revenue.
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OPERATING INCOME (LOSS)
In the three months ended March 31,September 30, 2021, operating lossincome was $1.4$17.2 compared to a loss of $299.5$66.0 in the three months ended March 31,September 30, 2020. Operating lossincome as a percentage of net revenues, decreasedincreased to 0.1%1.3% in the three months ended March 31,September 30, 2021 as compared to an operating loss as a percentage of net revenues of 28.2%5.9% in the three months ended March 31,September 30, 2020. The improved operating margin is largely driven by a reduction in fixed costs, higher sales volume within the Prestige segment, lower cost of goods sold and decreased selling and general administrative expenses, asset impairment costs, andas a percentage of net revenues, a decrease in acquisition and divestiture related expenses.expenses, reduced restructuring expense, and lower amortization expense, partially offset by higher stock-based compensation and an increase in advertising and consumer promotional costs.
Operating Income by Segment
Three Months Ended
March 31,
(in millions)20212020Change %
Operating income (loss)
Americas$2.3 $(40.3)>100%
EMEA28.7 (57.5)>100%
Asia Pacific1.9 (31.4)>100%
Corporate(34.3)(170.3)80 %
Total$(1.4)$(299.5)100 %
Three Months Ended
September 30,
(in millions)20212020Change %
Operating income (loss)
Prestige$132.1 $34.0 >100%
Consumer Beauty11.4 (13.7)>100%
Corporate(126.3)(86.3)(46)%
Total$17.2 $(66.0)>100%

AmericasPrestige
In the three months ended March 31,September 30, 2021, operating income for AmericasPrestige was $2.3$132.1 compared to lossincome of $40.3$34.0 in the three months ended March 31,September 30, 2020. Operating margin increased to 0.6%15.2% of net revenues in the three months ended March 31,September 30, 2021 as compared to (9.2)5.3% in the three months ended September 30, 2020, driven by higher sales volume, a reduction in fixed costs, and a decrease in amortization expense, partially offset by an increase in advertising and consumer promotional costs.
Consumer Beauty
In the three months ended September 30, 2021, operating income for Consumer Beauty was $11.4 compared to loss of $13.7 in the three months ended September 30, 2020. Operating margin increased to 2.3% of net revenues in the three months ended September 30, 2021 as compared to (2.9)% in the three months ended March 31,September 30, 2020, driven by a significant decrease in advertising and promotional spend, lower cost of goods sold as a percentage of net revenues and a reduction in fixed costs.
EMEA
In the three months ended March 31, 2021, operating income for EMEA was $28.7 compared to loss of $57.5 in the three months ended March 31, 2020. Operating margin increased to 6.1% of net revenues in the three months ended March 31, 2021 as compared to (11.2)% in the three months ended March 31, 2020, driven by a significant decrease in advertising and promotional spend, lower cost of goods sold as a percentage of net revenues, and a reduction in fixed costs.
Asia Pacific
In the three months ended March 31, 2021, operating income for Asia Pacific was $1.9 compared to loss of $(31.4) in the three months ended March 31, 2020. Operating margin increased to 1.3% of net revenues in the three months ended March 31, 2021 as compared to (27.6)% in the three months ended March 31, 2020, driven largely by increased net revenue,costs, partially offset by an increase in cost of goods sold as a percentage of net revenue.
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advertising and consumer promotional costs.
Corporate
Corporate primarily includes income and expenses not directly relating to our operating activities. These items are included in Corporate since we consider them to be Corporate responsibilities, and these items are not used by our management to measure the underlying performance of the segments.
In the three months ended March 31,September 30, 2021, the operating loss for Corporate was $34.3$126.3 compared to a loss of $170.3$86.3 in the three months ended March 31,September 30, 2020, as described under “Adjusted Operating Income (Loss) for Coty Inc.”Continuing Operations” below. The decreaseincrease in the operating loss for Corporate was primarily driven by a decrease in fixed costs, reductionsan increase in share-based compensation expense, lowerpartially offset by a decrease in acquisition and divestiture related expenses and no asset impairment costs in the current quarter.lower restructuring expense.

Adjusted Operating Income (loss)(Loss) by Segment
We believe that adjusted operating income (loss) by segment further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported operating income (loss) to adjusted operating income is presented below, by segment:
Three Months Ended March 31, 2021
(in millions)Reported
(GAAP)
Adjustments (a)
Adjusted
(Non-GAAP)
Operating income (loss)
Americas$2.3 $26.9 $29.2 
EMEA28.7 29.5 58.2 
Asia Pacific1.9 5.7 7.6 
Corporate(34.3)34.9 0.6 
Total$(1.4)$97.0 $95.6 
Three Months Ended March 31, 2020
(in millions)Reported
(GAAP)		Adjustments (a)Adjusted
(Non-GAAP)
Operating income (loss)
Americas$(40.3)$24.3 $(16.0)
EMEA(57.5)31.2 (26.3)
Asia Pacific(31.4)6.2 (25.2)
Corporate(170.3)169.6 (0.7)
Total$(299.5)$231.3 $(68.2)
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Three Months Ended September 30, 2021
(in millions)Reported
(GAAP)
Adjustments (a)
Adjusted
(Non-GAAP)
Operating income (loss)
Prestige$132.1 $44.9 $177.0 
Consumer Beauty11.4 12.1 23.5 
Corporate(126.3)126.3 — 
Total$17.2 $183.3 $200.5 
Three Months Ended September 30, 2020
(in millions)Reported
(GAAP)
Adjustments (a)
Adjusted
(Non-GAAP)
Operating income (loss)
Prestige$34.0 $51.7 $85.7 
Consumer Beauty(13.7)13.7 — 
Corporate(86.3)86.3 — 
Total$(66.0)$151.7 $85.7 
(a)See a reconciliation of reported operating income to adjusted operating income and a description of the adjustments under “Adjusted Operating Income (Loss) for Coty Inc.”Continuing Operations” below. All adjustments are reflected in Corporate, except for amortization and asset impairment charges on goodwill, regional indefinite-lived intangible assets, and finite-lived intangible assets, which are reflected in the Americas, EMEA, Asia Pacific,Prestige and OtherConsumer Beauty segments.
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Adjusted Operating Income (Loss) and Adjusted EBITDA for Continuing Operations
We believe that adjusted operating income (loss) further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” Reconciliation of reported operating income to adjusted operating income is presented below:
Three Months Ended
March 31,
(in millions)20212020Change %
Reported operating income (loss)$(1.4)$(299.5)100 %
% of net revenues(0.1)%(28.2)%
Amortization expense62.2 61.6 1 %
Acquisition and divestiture-related costs29.7 49.3 (40)%
Restructuring and other business realignment costs5.1 80.0 (94)%
Asset impairment charges— 40.4 (100)%
Total adjustments to reported operating income97.0 231.3 (58)%
Adjusted operating income95.6 (68.2)>100%
% of net revenues9.3 %(6.4)%
Three Months Ended
September 30,
(in millions)20212020Change %
Reported operating income (loss)$17.2 $(66.0)>100%
% of net revenues1.3 %(5.9)%
Amortization expense57.0 65.4 (13)%
Restructuring and other business realignment costs14.1 34.4 (59)%
Stock-based compensation108.2 5.6 >100%
Costs related to acquisition and divestiture activities4.0 46.3 (91)%
Total adjustments to reported operating income183.3 151.7 21 %
Adjusted operating income$200.5 $85.7 >100%
% of net revenues14.6 %7.6 %
Adjusted depreciation78.0 80.9 (4)%
Adjusted EBITDA$278.5 $166.6 67 %
% of net revenues20.3 %14.8 %

In the three months ended March 31,September 30, 2021, adjusted operating income increased $163.8$114.8 to $95.6$200.5 from $(68.2)$85.7 in the three months ended March 31,September 30, 2020. Adjusted operating margin increased to 9.3%14.6% of net revenues in the three months ended March 31,September 30, 2021 from (6.4)%7.6% in the three months ended March 31,September 30, 2020. In the three months ended September 30, 2021, adjusted EBITDA increased $111.9 to $278.5 from $166.6 in the three months ended September 30, 2020. Adjusted EBITDA margin increased to 20.3% of net revenues in the three months ended September 30, 2021 from 14.8% in the three months ended September 30, 2020, primarily driven by a decreasereduction in selling and general administrative expenses,fixed costs and lower cost of goods sold as a percentage of net revenues.revenues, partially offset by an increase in advertising and consumer promotional costs.
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Amortization Expense
In the three months ended March 31,September 30, 2021, amortization expense increaseddecreased to $62.2$57.0 from $61.6$65.4 in the three months ended March 31,September 30, 2020. In the three months ended March 31,September 30, 2021, amortization expense of $26.8, $29.6,$44.9 and $5.8$12.1 was reported in the Americas, EMEA,Prestige and Asia PacificConsumer Beauty segments, respectively. In the three months ended March 31,September 30, 2020, amortization expense of $24.3, $31.1,$51.7 and $6.2$13.7 was reported in the Americas, EMEA,Prestige and Asia PacificConsumer Beauty segments, respectively. The decrease was primarily driven by finite intangible assets that are fully amortized as of fiscal 2021, partially offset by amortization for the KKW acquisition completed in the third quarter of fiscal 2021.
Acquisition and Divestiture Activities
In the three months ended March 31,September 30, 2021 we incurred $29.7$4.0 of costs related to acquisition and divestiture activities. These costs were primarily associated with the Wella Transaction.
In the three months ended March 31,September 30, 2020, we incurred $49.3$46.3 of costs related to acquisition and divestiture activities. These costs were partially driven by consulting and legal feesprimarily associated with the process to explore strategic alternatives, including divestment, for the Professional Beauty business including associated hair brands sold by the Consumer Beauty division, as well as the Company’s Brazilian operations, as well as consulting and legal fees associated with the King Kylie purchase agreement.Wella Transaction.
In all reported periods, all costs related to acquisition and divestiture activities were reported in Corporate.
Restructuring and Other Business Realignment Costs
We continue to analyze our cost structure, including opportunities to simplify and optimize operations. In connection with the four-year Turnaround plan announced on July 1, 2019 to drive substantial improvement and optimization in our business, we have and expect to continue to incur restructuring and other business realignment costs. On May 11, 2020, we announced an expansion of the Turnaround Plan to further reduce fixed costs, the Transformation Plan. We incurred $340.2$381.1 of cash costs life-to-date as of March 31,September 30, 2021, which have been recorded in Corporate.
Prior to July 1, 2019, we incurred restructuring and related costs aimed at integrating and optimizing the combined organization following the acquisition of the P&G Beauty Business, which we refer to as the Global Integration Activities, and reducing fixed costs and enabling further investment in the business, which we refer to as the 2018 Restructuring Actions.
In the three months ended March 31,September 30, 2021, we incurred restructuring and other business structure realignment costs of $5.1,$14.1, as follows:
•We incurred restructuring costs of $0.0$12.4 primarily related to the Transformation Plan, included in the Condensed Consolidated Statements of Operations; and
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•We incurred business structure realignment costs of $5.1 primarily related to the Transformation Plan and certain other programs. This amount includes $2.0 reported in selling, general and administrative expenses, and $3.1 reported in cost of sales in the Condensed Consolidated Statement of Operations.
In the three months ended March 31, 2020, we incurred restructuring and other business structure realignment costs of $80.0 as follows:
•We had a revised estimate resulting in a credit in restructuring costs of $8.0 primarily related to the Turnaround Plan, included in the Condensed Consolidated Statements of Operations; and
•We incurred business structure realignment costs of $88.0$1.7 primarily related to the Turnaround Plan.Transformation Plan and certain other programs. This amount includes $76.8$(1.0) reported in selling, general and administrative expenses, and $11.2$2.7 reported in costCost of sales in the Condensed Consolidated Statement of Operations.
In the three months ended September 30, 2020, we incurred restructuring and other business structure realignment costs of $34.4 as follows:
•We incurred restructuring costs of $30.1 primarily related to the Transformation Plan, included in the Condensed Consolidated Statements of Operations; and
•We incurred business structure realignment costs of $4.3 primarily related to the Transformation Plan and certain other programs. This amount includes $4.3 reported in selling, general and administrative expenses, and nil reported in Cost of sales in the Condensed Consolidated Statement of Operations.
In all reported periods, all restructuring and other business realignment costs were reported in Corporate.
Asset Impairment ChargesStock-Based Compensation
In the three months ended March 31,September 30, 2021, we did not incur any asset impairment charges.stock-based compensation was $108.2 as compared with $5.6 in the three months ended September 30, 2020. The increase in stock-based compensation is primarily related to the CEO grant made on June 30, 2021.
In all reported periods, all costs related to stock-based compensation were reported in Corporate.
Adjusted Depreciation Expense
In the three months ended March 31,September 30, 2021, adjusted depreciation expense of $38.0 and $40.0 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended September 30, 2020, we incurred asset impairment chargesadjusted depreciation expense of $40.4$34.1 and $46.8 was reported in Corporate, relating to indefinite-lived other intangible assets (related to the CoverGirl, Max FactorPrestige and Bourjois trademarks).Consumer Beauty segments, respectively.
INTEREST EXPENSE, NET
In the three months ended March 31,September 30, 2021, net interest expense was $50.3$59.8 as compared with $63.8$62.1 in the three months ended March 31,September 30, 2020. This decrease is primarily due to the paydownlower debt balance, partially offset by a higher average interest rate in the current period.
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OTHER INCOME, NET
In the three months ended March 31,September 30, 2021, other income, net was $62.5$386.1 as compared with an expense of $0.3$5.8 in the three months ended March 31,September 30, 2020. This increase is primarily due to a favorable adjustment of $390.0 related to an unrealized gain in the Wella investment.
INCOME TAXES
The effective income tax rate for the three months ended March 31,September 30, 2021 and 2020 was (177.8)%33.4% and 16.4%200.2%, respectively. The positive effective tax rate for the three months ended September 30, 2021 results from reporting income before taxes and a provision for income taxes. The positive effective tax rate for the three months ended September 30, 2020 results from reporting losses before income taxes and a benefit for income taxes. The change in the effective tax rate for the three months ended March 31,September 30, 2021, as compared towith the three months ended March 31,September 30, 2020, is primarily due to the resolutionlimitation on the deductibility of foreign uncertain tax positions of $22.0executive stock compensation in the current period as well as a benefit related to a change in our main principal location of $220.5 recorded in the prior period.
The effective income tax rates vary from the U.S. federal statutory rate of 21% due to the effect of (i) jurisdictions with different statutory rates, (ii) adjustments to our unrecognized tax benefits and accrued interest, (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes. Our effective tax rate could fluctuate significantly and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates.
Reconciliation of Reported (Loss) Income Before Income Taxes to Adjusted Income Before Income Taxes and Effective Tax Rates:
Three Months Ended
March 31, 2021		Three Months Ended
March 31, 2020
(in millions)(Loss) Income Before Income Taxes(Benefit) Provision for Income TaxesEffective Tax Rate(Loss) Income Before Income TaxesProvision for Income TaxesEffective Tax Rate
Reported (loss) before income taxes$10.8 $(19.2)(177.8)%$(363.6)$(59.8)16.4 %
Adjustments to reported operating income (a) (b)
97.0 41.2 231.3 28.1 
Change in fair value of investment in Wella Business (b) (c)
(63.5)(15.9)— — 
Other adjustments (b) (d)
(2.5)(0.7)— — 
Adjusted income before income taxes$41.8 $5.4 12.9 %$(132.3)$(31.7)24.0 %

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Three Months Ended
September 30, 2021		Three Months Ended
September 30, 2020
(in millions)(Loss) Income Before Income Taxes(Benefit) Provision for Income TaxesEffective Tax Rate(Loss) Income Before Income TaxesProvision for Income TaxesEffective Tax Rate
Reported (loss) before income taxes$343.5 $114.6 33.4 %$(122.3)$(244.9)200.2 %
Adjustments to reported operating income (a)
183.3 151.7 
Change in fair value of investment in Wella Business (c)
(390.0)— 
Other adjustments (d)
0.2 (5.3)
Total Adjustments (b) (e)
(206.5)(74.8)146.4 250.9 
Adjusted income before income taxes$137.0 $39.8 29.1 %$24.1 $6.0 24.9 %
(a)See a description of adjustments under “Adjusted Operating Income (Loss) Income for Continuing Operations.”
(b)The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability.
(c)The amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
(d)ThisFor the three months ended September 30, 2021, this primarily represents adjustments forthe loss from equity investment in KKW. For the three months ended September 30, 2020, this primarily represents the pension curtailment gains.gain.
(e)The total tax impact on adjustments in the prior period includes a $220.5 benefit recorded as the result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the relocation of our main principal location from Geneva to Amsterdam on July 1, 2020.
The adjusted effective tax rate was 12.9%29.1% for the three months ended March 31,September 30, 2021 compared to 24.0%24.9% for the three months ended March 31,September 30, 2020. The differences were primarily due to the resolutionjurisdictional mix of foreign uncertain tax positions having a greater proportional effect in the current period.income.
DISCONTINUED OPERATIONS
As the sale of the Wella Business was completed on November 30, 2020, no net revenues or operating expenses from discontinued operations were recorded in the three months ended March 31, 2021.
A loss on sale of the Wella Business was $27.5 for the three months ended March 31, 2021, which reflects certain purchase price working capital adjustments. As we finalize post-closing adjustments to the purchase consideration for working capital and other contractually specified items over the coming several months, there may be further adjustments to the purchase price and loss on sale. The Company anticipates resolution of any further purchase price adjustments by the end of the first quarter of fiscal 2022.
In connection with the $27.5 of additional loss recorded on the sale of a majority stake in the Wella Business, the Company recorded a tax benefit of approximately $10.2 in the three months ended March 31, 2021.
Net loss was $17.3 in the three months ended March 31, 2021 compared to income of $39.4 in the three months ended March 31, 2020. The decrease was primarily due to loss on sale of the Wella Business, partially offset by tax benefits recognized.
NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC.
Net income attributable to Coty Inc. was $15.6 in the three months ended March 31, 2021 as compared to a loss of $271.6 in the three months ended March 31, 2020. The increase in the income is primarily driven by lower cost of goods sold, decrease selling and general administrative expenses, absence of asset impairment cost, increase in income from equity investments, partially offset by net loss recognized in discontinued operations.
We believe that adjusted net income (loss) attributable to Coty Inc. provides an enhanced understanding of our performance. See “Overview—Non-GAAP Financial Measures.”
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Table of Contents
Three Months Ended
March 31,
(in millions)20212020Change %
Net income from Coty Inc. net of noncontrolling interests$15.6 $(271.6)>100%
Convertible Series B Preferred Stock dividends(34.1)— N/A
Reported net income attributable to Coty Inc.$(18.5)$(271.6)93 %
% of net revenues(1.8)%(17.8)%
Adjustments to reported operating income (a)
97.0 258.9 (63)%
Adjustments to Loss on Sale of Business27.5 — N/A
Change in fair value of investment in Wella Business (d)
(63.5)— N/A
Adjustment to other expense (e)
(2.5)— N/A
Adjustments to noncontrolling interests (b)
(2.9)3.1 N/A
Change in tax provision due to adjustments to reported net income attributable to Coty Inc.(34.8)(52.1)33 %
Adjusted net income attributable to Coty Inc.$2.3 $(61.7)>100%
% of net revenues0.2 %(4.0)% 
Per Share Data
Adjusted weighted-average common shares
Basic765.4 760.8 
Diluted (c)
943.8 760.8 
Adjusted net income attributable to Coty Inc. per common share
Basic$— $(0.08)
Diluted (c)
$— $(0.08)

(a)See a description of adjustments under “Adjusted Operating Income for Coty Inc.”
(b)The amounts represent the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interest based on the relevant noncontrolling interest percentage in the Condensed Consolidated Statements of Operations.
(c)Diluted EPS is adjusted by the effect of dilutive securities, including awards under our equity compensation plans and the convertible Series B Preferred Stock. We use the if-converted method for calculating any potential dilutive effect of the convertible Series B Preferred Stock, which requires an adjustment to reverse the impact of the preferred stock dividends of $34.1 on income applicable to common stockholders during the period.
(d)The amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
(e)This primarily represents adjustment for pension curtailment gains.
NINE MONTHS ENDED MARCH 31, 2021 AS COMPARED TO NINE MONTHS ENDED MARCH 31, 2020
NET REVENUES
In the nine months ended March 31, 2021, net revenues decreased 14%, or $589.9, to $3,567.5 from $4,157.4 in the nine months ended March 31, 2020. Excluding the impact of the Acquisition and the Divestiture, total net revenues decreased 14%, or $584.0, to $3,517.9 in the nine months ended March 31, 2021 from $4,101.9 in the nine months ended March 31, 2020, reflecting a decrease in unit volume of 11%, a negative price and mix impact of 4%, partially offset by a positive foreign currency exchange translation impact of 1%. The overall decrease in net revenues primarily reflects lower net revenues due to the COVID-19 pandemic, impacting all product categories across the Company, with the highest impact on the mass color cosmetics, due mainly to category decline related to COVID-19 protocols such as mask-wearing, remote working arrangements, and social distancing which contributed to reduced demand for several product categories, particularly lip and face products. In addition, prestige products in our travel retail channels remained impacted due to continued restrictions on leisure travel.
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Net Revenues by Segment
Nine Months Ended
March 31,
(in millions)20212020Change %
NET REVENUES
Americas$1,419.7 $1,506.2 (6)%
EMEA1,712.3 2,097.6 (18)%
Asia Pacific435.5 498.1 (13)%
Other— 55.5 (100)%
Total$3,567.5 $4,157.4 (14)%
Americas
In the nine months ended March 31, 2021, net revenues from the Americas region decreased 6%, or $86.5, to $1,419.7 from $1,506.2 in the nine months ended March 31, 2020. Excluding the impact of the Acquisition, net revenues from the Americas segment decreased 9%, or $134.6, to $1,371.6 in the nine months ended March 31, 2021 from $1,506.2 in the nine months ended March 31, 2020, reflecting a decrease in unit volume of 3%, a negative foreign currency exchange translation impact of 4%, and a negative price and mix impact of 2%. The decrease in net revenues primarily reflects:
(i)lower net revenues due to negative brand and category trends for mass color cosmetics mainly lip and face products related to the COVID-19 pandemic, primarily impacting Covergirl and Rimmel in the United States, Canada, and Latin America (excluding Brazil). In addition, rolling travel restrictions related due to COVID-19 have significantly affected prestige products in our travel retail channels across the region;
(ii)lower net revenues attributable to Kylie, primarily due to Kylie make-up production transitioning from the previous supplier; and
(iii)lower net revenues due to overall decreased launch activities, reduced holiday exposure, and promotional activity in the current period compared to prior period.
These decreases in net revenue were partially offset by the following:
(i)an increase in net revenues from the recent launches of Marc Jacobs Perfect, Marc Jacobs Daisy, Gucci Guilty, and Diamond Gel from Risqué;
(ii)an increase in net revenues related to e-commerce, primarily in the United States, Brazil, and Canada;
(iii)an increase in net revenues as a result of increased holiday program for the Philosophy brand; and
(iv)an increase in net revenues from Sally Hansen products, primarily in the United States, which continues to benefit as professional salons operate under restrictions. Sally Hansen continues to see incremental net revenues from the launch of Sally Hansen Good.Kind.Pure and Sally Hansen Miracle Gel in prior periods.
EMEA
In the nine months ended March 31, 2021, net revenues from the EMEA region decreased 18%, or $385.3, to $1,712.3 from $2,097.6 in the nine months ended March 31, 2020, reflecting a decrease in unit volume of 20%, and a negative price and mix impact of 1%, partially offset by a positive foreign currency exchange translation impact of 3%. The decrease in net revenues primarily reflects:
(i)lower net revenues due to the COVID-19 pandemic, impacting all product categories across the region. Reduced customer traffic in retail malls contributed significantly to the overall decrease in the region. Travel retail channels also continue to be significantly impacted as COVID-19 outbreaks continued restrictions in airports and other travel hubs. The pandemic also contributed to lower launch activity in the prestige category compared to the comparative period;
(ii)decreased net revenues related to negative category and share trends in color cosmetics and mass fragrance, with somewhat greater resilience being shown in products related to lifestyle scenting, nails, and eyes categories;
(iii)lower net revenues due to the ongoing challenges with a key customer and distribution channel in Russia, primarily occurring in the first quarter of fiscal 2021; and
(iv)lower net revenues due to strategic focus on reducing value distribution.
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These decreases were partially offset by net revenue increases across EMEA resulting from the continued success of launches in new prestige fragrances, including Marc Jacobs Perfect, Hugo Boss Alive, Boss Bottled, and Gucci Guilty, as well as continued growth of e-commerce sales.
Asia Pacific
In the nine months ended March 31, 2021, net revenues from the Asia Pacific region decreased 13%, or $62.6, to $435.5 from $498.1 in the nine months ended March 31, 2020, reflecting a decrease in unit volume of 20%, partially offset by a positive foreign currency exchange translation impact of 4%, and a positive price and mix impact of 3%. The decrease in net revenues primarily reflects:
(i)lower net revenues due to the COVID-19 pandemic, impacting all product categories across the region, with the highest impact on the prestige category primarily due to an ongoing reduction in traffic in retail malls and travel retail channels. While restrictions in the specific countries within this region trended down starting the second quarter of fiscal 2021, travel retail channels in overall region continue to be significantly impacted due to fluctuating travel limitations and regional lockdown protocols;
(ii)lower net revenues due to a reduction in the reliance on the value distribution channel for prestige brands in order to maintain brand integrity across the Asia Pacific region;
(iii)lower net revenues due to declines in Calvin Klein mainly impacting Australia as a result of decrease in travel; and
(iv)lower net revenues in the mass channel, primarily color cosmetics such as Rimmel related to lower market consumption mainly driven by consumer behavior changes partly attributable to the COVID-19 pandemic, and Max Factor related to distribution interventions and lower market consumption mainly in China.
These decreases in net revenue were partially offset by the following:
(i)an increase in net revenue due to continued growth of e-commerce across the region and new store expansions in China;
(ii)an increase in net revenue across the region resulting from the continued success of Gucci Face Foundation, Gucci Bloom, and Marc Jacobs Perfect in the prestige category; and
(iii)an increase in net revenue related to travel retail in China and Korea specifically due to reductions in travel restrictions within these countries.
Other
Other consists of the net revenues from the Divestiture of Younique.
COST OF SALES
In the nine months ended March 31, 2021, cost of sales decreased 13%, or $214.4, to $1,440.6 from $1,655.0 in the nine months ended March 31, 2020. Cost of sales as a percentage of net revenues increased to 40.4% in the nine months ended March 31, 2021 from 39.8% in the nine months ended March 31, 2020 resulting in a gross margin decrease of approximately 60 basis points primarily reflecting:
(i)approximately 40 basis points related to negative gross margin impacts from changes in product and category mix, across all regions, as these markets experienced a relatively lower contribution of higher margin prestige products due to the pandemic and our Brazil market's proportionate share increased, negatively impacting gross margins due to its lower margin contribution;
(ii)approximately 40 basis points related to negative gross margin impact due to an unfavorable mix of prestige brands with higher minimum royalty rates.
These decreases were partially offset by improvements of approximately 20 basis points in excess and obsolescence expense on inventory due to the high levels of excess and obsolescence expense in the prior year as a result of COVID-19 pandemic impacting demand.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
In the nine months ended March 31, 2021, selling, general and administrative expenses decreased 29%, or $710.5, to $1,770.5 from $2,481.0 in the nine months ended March 31, 2020. Selling, general and administrative expenses as a percentage of net revenues decreased to 49.6% in the nine months ended March 31, 2021 from 59.7% in the nine months ended March 31, 2020, or approximately 1,010 basis points. This decrease was primarily due to:
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(i)630 basis points related to lower advertising and consumer promotional costs as a percentage of net revenue as disciplined management of advertising and consumer promotion spending, which was instituted to counter the COVID-19 pandemic, led to savings that outpaced the decline in net revenues;
(ii)260 basis points related to administrative costs primarily due to the decrease in compensation expense from reduction of employee headcount and bonus, reduction in non-essential travel impacted by COVID-19, and decreased professional tax and audit services costs due to completion of the sale of the Wella Business;
(iii)90 basis points related to lower bad debt expense; and
(iv)40 basis points related to favorable transactional impact from our exposure to foreign currency exchange fluctuations.
OPERATING INCOME (LOSS)
In the nine months ended March 31, 2021, operating loss was $50.4 compared to a loss of $316.0 in the nine months ended March 31, 2020. Operating margin, or operating loss as a percentage of net revenues, decreased to (1.4)% in the nine months ended March 31, 2021 as compared to an operating loss as a percentage of net revenues of (7.6)% in the nine months ended March 31, 2020. The improved operating margin is largely driven by various initiatives to lower cost as part of management's plan to cut down advertising and promotional spend and certain discretionary costs, decrease in asset impairment cost in the prior year, reduction in fixed costs and restructuring expense. These are offset by increase in acquisition and divestiture related expenses, amortization expense, and cost of sales as a percentage of net revenues.
Operating Income (Loss) by Segment
Nine Months Ended
March 31,
(in millions)20212020Change %
Operating income (loss)
Americas$55.3 $(36.3)>100%
EMEA129.7 69.6 86 %
Asia Pacific(10.9)(17.3)37 %
Other— (10.9)100 %
Corporate(224.5)(321.1)30 %
Total$(50.4)$(316.0)84 %

Americas
In the nine months ended March 31, 2021, operating income for Americas was $55.3 compared to loss of $36.3 in the nine months ended March 31, 2020. Operating margin increased to 3.9% of net revenues in the nine months ended March 31, 2021 as compared to (2.4)% in the nine months ended March 31, 2020, driven primarily by a significant decrease in advertising and promotional spend, partially offset by higher cost of goods sold as a percentage of net revenues, and amortization expense.
EMEA
In the nine months ended March 31, 2021, operating income for EMEA was $129.7 compared to income of $69.6 in the nine months ended March 31, 2020. Operating margin increased to 7.6% of net revenues in the nine months ended March 31, 2021 as compared to 3.3% in the nine months ended March 31, 2020, driven by a significant decrease in advertising and promotional spend, lower cost of goods sold as a percentage of net revenues, and reduction in fixed costs.
Asia Pacific
In the nine months ended March 31, 2021, the operating loss for Asia Pacific was $10.9 compared to loss of $17.3 in the nine months ended March 31, 2020. Operating loss improved to (2.5)% of net revenues in the nine months ended March 31, 2021 as compared to (3.5)% in the nine months ended March 31, 2020, primarily driven by decrease in advertising and promotional spend, offset by higher cost of goods sold as a percentage of net revenues.
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Other
Other represents operating income (loss) from the Divestiture of Younique.
Corporate
Corporate primarily includes corporate expenses not directly related to our operating activities. These items are included in Corporate since we consider them to be Corporate responsibilities, and these items are not used by our management to measure the underlying performance of the segments.
In the nine months ended March 31, 2021, the operating loss for Corporate was $224.5 compared to a loss of $321.1 in the nine months ended March 31, 2020, as described under “Adjusted Operating Income for Coty Inc.” below. The decrease to the operating loss for Corporate was primarily driven by a reduction in fixed costs, decrease in restructuring and other business realignment costs, and an asset impairment cost in the prior year. These decreases were partially offset by an increase in acquisition and divestiture related costs. Additionally, the variance was amplified by the gain on divestiture of Younique, which was recognized in the comparative period.
Adjusted Operating Income (Loss) by Segment
We believe that Adjusted Operating income (loss) by segment further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported Operating income (loss) to Adjusted Operating income is presented below, by segment:
Nine Months Ended March 31, 2021
(in millions)Reported
(GAAP)
Adjustments (a)
Adjusted
(Non-GAAP)
Operating income (loss)
Americas55.3 $78.2 $133.5 
EMEA129.7 92.8 222.5 
Asia Pacific(10.9)18.4 7.5 
Corporate(224.5)226.0 1.5 
Total$(50.4)$415.4 $365.0 

Nine Months Ended March 31, 2020
(in millions)Reported
(GAAP)
Adjustments (a)
Adjusted
(Non-GAAP)
Operating (loss) income
Americas(36.3)$49.7 $13.4 
EMEA69.6 94.9 164.5 
Asia Pacific(17.3)18.6 1.3 
Other(10.9)7.3 (3.6)
Corporate(321.1)319.1 (2.0)
Total$(316.0)$489.6 $173.6 

(a)See a reconciliation of reported operating income to adjusted operating income and a description of the adjustments under “Adjusted Operating Income for Coty Inc.” below. All adjustments are reflected in Corporate, except for amortization and asset impairment charges on goodwill, regional indefinite-lived intangible assets, and finite-lived intangible assets, which are reflected in the Americas, EMEA, Asia Pacific, and Other segments.
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Adjusted Operating Income for Continuing Operations
We believe that adjusted operating income further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported operating income (loss) to adjusted operating income is presented below:
Nine Months Ended
March 31,
(in millions)20212020Change %
Reported operating income (loss)(50.4)(316.0)84 %
% of net revenues(1.4)%(7.6)%
Asset impairment charges— 40.4 (100)%
Restructuring and other business realignment costs98.3 277.7 (65)%
Amortization expense189.4 170.7 11 %
Acquisition and divestiture-related costs127.7 85.3 50 %
(Gain)/Loss on sale of business— (84.5)100 %
Total adjustments to reported operating income$415.4 $489.6 (15)%
Adjusted operating income$365.0 $173.6 >100%
% of net revenues10.2 %4.2 % 

Adjusted operating income in the nine months ended March 31, 2021 increased $191.4, to $365.0 from $173.6 in the nine months ended March 31, 2020. Adjusted operating margin increased to 10.2% of net revenues in the nine months ended March 31, 2021 as compared to 4.2% in the nine months ended March 31, 2020, primarily driven by various initiatives to lower cost as part of management's plan to reduce advertising and promotional spend and certain discretionary costs, and a reduction in fixed costs. These are partially offset by increase in cost of sales as a percentage of net revenues.
Asset Impairment Charges
In the nine months ended March 31, 2021, we did not incur any asset impairment charges.
In the nine months ended March 31, 2020, we incurred asset impairment charges of $40.4 in Corporate, relating to indefinite-lived other intangible assets (related to the CoverGirl, Max Factor and Bourjois trademarks).
Amortization Expense
In the nine months ended March 31, 2021, amortization expense increased to $189.4 from $170.7 in the nine months ended March 31, 2020. In the nine months ended March 31, 2021, amortization expense of $78.2, $92.8, $18.4, and $0.0 was reported in the Americas, EMEA, Asia Pacific, and Other segments, respectively. In the nine months ended March 31, 2020, amortization expense of $49.8, $94.8, $18.7, and $7.4 was reported in the Americas, EMEA, Asia Pacific, and Other segments, respectively. The increase was primarily driven by expenses recorded due to the Kylie acquisition.
Restructuring and Other Business Realignment Costs
We continue to analyze our cost structure, including opportunities to simplify and optimize operations. In connection with the four-year Turnaround plan announced on July 1, 2019 to drive substantial improvement and optimization in our business, we have and expect to continue to incur restructuring and other business realignment costs. On May 11, 2020 we announced an expansion of the Turnaround Plan to further reduce fixed costs, the Transformation Plan. We incurred $340.2 of cash costs life-to-date as of March 31, 2021, which have been recorded in Corporate.
Prior to July 1, 2019, we incurred restructuring and related costs aimed at integrating and optimizing the combined organization following the acquisition of the P&G Beauty Business, which we refer to as the Global Integration Activities, and reducing fixed costs and enabling further investment in the business, which we refer to as the 2018 Restructuring Actions.
In the nine months ended March 31, 2021, we incurred restructuring and other business structure realignment costs of $98.3, as follows:
•We incurred restructuring costs of $89.7 primarily related to the Transformation Plan, included in the Condensed Consolidated Statements of Operations.
•We incurred business structure realignment costs of $8.6 primarily related to our Transformation plan and certain other programs. This amount includes $5.5 reported in selling, general and administrative expenses, and $3.1 reported in cost of sales in the Condensed Consolidated Statement of Operations.
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In the nine months ended March 31, 2020, we incurred restructuring and other business structure realignment costs of $277.7 as follows:
•We incurred Restructuring costs of $125.5 primarily related to the Turnaround Plan, included in the Condensed Consolidated Statements of Operations.
•We incurred business structure realignment costs of $152.2 primarily related to our Turnaround plan. This amount includes $141.0 reported in selling, general and administrative expenses, and $11.2 reported in cost of sales in the Condensed Consolidated Statement of Operations.
In all reported periods, all restructuring and other business realignment costs were reported in Corporate.
Acquisition and Divestiture Activities
In the nine months ended March 31, 2021, we incurred $127.7 of costs related to acquisition and divestiture activities. These costs were primarily associated with the Wella Transaction.
In the nine months ended March 31, 2020, we incurred $85.3 of cost relating to consulting and legal fees associated with the process to explore strategic alternatives, as well as consulting and legal fees associated with the King Kylie Transaction.
In all reported periods, all costs related to acquisition and divestiture activities were reported in Corporate.
Gain on divestitures and sale of brand assets
In the nine months ended March 31, 2021, there were no gains on divestitures or sales of brand assets.
In the nine months ended March 31, 2020, we completed the divestiture of Younique resulting in income of $84.5 included in Gain on sale of business in the Condensed Consolidated Statements of Operations.
INTEREST EXPENSE, NET
In the nine months ended March 31, 2021, net interest expense was $171.6 as compared with $185.3 in the nine months ended March 31, 2020. This decrease is primarily due to the pay-down of debt as a result of the completion of Wella business sale on November 30, 2020.
OTHER INCOME, NET
In the nine months ended March 31, 2021, other income, net was $50.7 as compared with an expense of $4.0 in the nine months ended March 31, 2020. This increase is primarily due to a favorable adjustment related to unrealized gain in the Wella investment.
INCOME TAXES
The effective income tax rate for the nine months ended March 31, 2021 and 2020 was 178.0% and 23.2%, respectively. The change in the effective tax rate for the nine months ended March 31, 2020, as compared to the prior period is
primarily due to a preliminary benefit of $220.5 recorded in the first quarter of fiscal 2021 and the U.S. GAAP treatment of the Younique disposition in the prior period. The benefit recorded in the first quarter of fiscal 2021 is the result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the relocation of the Company's main principal location from Geneva to Amsterdam. This amount will be finalized when negotiations with the tax authorities are completed.
The effective income tax rates vary from the U.S. federal statutory rate of 21% due to the effect of: (i) jurisdictions with different statutory rates, (ii) adjustments to our unrecognized tax benefits and accrued interest; (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes. Our effective tax rate could fluctuate significantly and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates.
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Reconciliation of Reported (Loss) Income Before Income Taxes to Adjusted Income Before Income Taxes and Effective Tax Rates:
Nine Months Ended
March 31, 2021		Nine Months Ended
March 31, 2020
(in millions)(Loss) Income Before Income TaxesProvision for Income TaxesEffective Tax Rate(Loss) Income Before Income TaxesProvision
 for Income Taxes		Effective
Tax Rate
Reported (loss) income before income taxes$(171.3)$(304.9)178.0 %$(505.3)$(117.0)23.2 %
Gain on sale of business adjustment (a)(b)
— — (84.5)4.8 
Other adjustments to reported operating income (a)(b)
415.4 122.2 574.1 91.7 
Tax Impact of Principal Move (c)
— 220.5 — — 
Change in fair value of investment in Wella Business(b) (d)
(63.5)$(15.9)
Other adjustments (b)(e)
5.9 1.6 — — 
Adjusted income before income taxes$186.5 $23.5 12.6 %$(15.7)$(20.5)130.6 %
(a)See a description of adjustments under “Adjusted Operating Income for Continuing Operations.”
(b)The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability.
(c)Tax benefit of $220.5M is the result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the relocation of our main principal location from Geneva to Amsterdam. This amount will be finalized when negotiations with the tax authorities are completed.
(d)The amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
(e)This mainly represents write-off of deferred financing fees related to Wella sale and adjustments for pension curtailment gains.
The adjusted effective tax rate was 12.6% for the nine months ended March 31, 2021 compared to 130.6% for the nine months ended March 31, 2020. The differences were primarily due to the resolution of foreign uncertain tax positions having a greater proportional effect in the prior year.
DISCONTINUED OPERATIONS
Due toAs the sale of the Wella Business was completed on November 30, 2020, no net revenues, or operating expenses, or net income from discontinued operations were recorded after November 30, 2020. As such, our results from discontinued operations for the nine months ended March 31, 2021 reflect only five months of operations.
In the nine months ended March 31, 2021, net revenues from discontinued operations decreased by (40.5)% or $(672.1) to $986.3 from $1,658.4. In the current nine months, net revenues from discontinued operations increased by 2.6% or $24.6 to $986.3 from $961.7 in the comparative five month period in the prior year. This increase in net revenues was primarily driven by continued growth of ghd products through the e-commerce channel across all geographical regions, and reorders from the reopening and restocking of professional salons in the U.S. and Brazil, increased sales in Wella and Clairol retail channels driven by an ongoing trend of at-home self-care. That increase was partially offset by additional lockdown and restrictions on salon operations due to social distancing protocols.
Operating income was $220.8 in the nine months ended March 31, 2021 compared to income of $218.6 in the nine months ended March 31, 2020. In the current nine months, operating income from discontinued operations increased to $220.8 from income of $145.8 in the comparative five month period in the prior year. This increase in operating income was primarily due to no amortization and depreciation charges in the current year (due to the accounting treatment of assets held for sale), as well as lower selling, general, and administrative expenses due to reduction in travel expenses, and lower cost of goods sold as a percentage of net revenues in the current year.
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The loss on sale of the Wella Business was $246.6 in the nine months ended March 31, 2021. Factored into the loss on sale are the proceeds received from the sale of our majority interest in Wella, the book value of net assets sold and costs to sell. The book value of net assets sold was impacted by the seasonal effects on certain portions of the Wella Business during the months leading up to the sale, resulting in increases in the net assets sold. Additionally, certain legal and tax structuring matters were finalized in the final month of the closing of the transaction, resulting in a reduction to certain deferred tax assets and liabilities that were transferred at the date of sale and an increase in the tax liabilities retained by us. The loss on sale of the Wella Business also reflects certain purchase price working capital adjustments made during the three months ended March 31,September 30, 2021. As we finalize post-closing adjustments to the purchase consideration for working capital and other contractually specified items over the coming several months, there may be further adjustments to the purchase price and loss on sale. The Company anticipates resolution of any further purchase price adjustments by the end of the first quarter ofin fiscal 2022.
In connection with the sale
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Table of a majority stake in the Wella Business, the Company recorded a tax cost of approximately $45.0 in the nine months ended March 31, 2021. This cost is a combination of cash taxes incurred as well as a deferred tax expense due to the utilization of net operating loss carryforwards, capital loss carryforwards, and foreign tax credits.Contents
Net loss was $148.2 in the nine months ended March 31, 2021 compared to net income of $163.8 in the nine months ended March 31, 2020. In the current nine months, net loss was $148.2 compared to net income of $123.2 in the comparative five month period in the prior year. The decrease was primarily due to the loss on sale of Wella Business of $246.6.
NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC.
Net lossincome attributable to Coty Inc. was $15.3$226.0 in the ninethree months ended March 31,September 30, 2021 as compared to net lossan income of $240.4$221.4 in the ninethree months ended March 31,September 30, 2020. This decrease wasThe increase in the income is primarily driven by lower sellinghigher operating income in the current year, and general administrative expenses, absencea favorable adjustment of asset impairment cost, increase$390.0 related to an unrealized gain in income from equity investments, andthe Wella investment, partially offset by a tax benefit of $220.5 in the first quarter of fiscal 2021 which was the result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the relocation of our main principal location from Geneva to Amsterdam. These decreases were partially offset byAmsterdam, and the loss on sale ofnet income recognized from discontinued operations in the Wella Business of $246.6.prior fiscal year.
We believe that adjusted net income (loss) attributable to Coty Inc. provides an enhanced understanding of our performance. See “Overview—Non-GAAP Financial Measures.”
Nine Months Ended
March 31,
(in millions)20212020Change %
Net income from Coty Inc. net of noncontrolling interests(15.3)(240.4)94 %
Convertible Series B Preferred Stock dividends(78.1)— N/A
Reported net income (loss) attributable to Coty Inc.(93.4)(240.4)61 %
% of net revenues(2.1)%(4.1)%
Adjustments to reported operating income (a)
414.7 577.2 (28)%
Adjustments to Loss on Sale of Business246.6 — N/A
Change in fair value of investment in Wella Business (b) (d)
(63.5)— N/A
Adjustments to other expense(b) (e)
5.9 — N/A
Adjustments to noncontrolling interests (b)
(7.4)0.1 <(100%)
Change in tax provision due to adjustments to reported net income attributable to Coty Inc.(283.2)(142.9)(98)%
Adjusted net income attributable to Coty Inc.219.7 194.0 13 %
% of net revenues4.8 %3.3 % 
Per Share Data
Adjusted weighted-average common shares
Basic764.6 757.7 
Diluted932.1 762.1 
Adjusted net income attributable to Coty Inc. per common share
Basic$0.29 $0.26 
Diluted$0.29 $0.25 

Three Months Ended
September 30,
(in millions)20212020Change %
Net income from Coty Inc. net of noncontrolling interests$226.0 $221.4 2 %
Convertible Series B Preferred Stock dividends (a)
(123.0)(20.8)<(100%)
Reported net income attributable to Coty Inc.$103.0 $200.6 (49)%
% of net revenues7.5 %11.9 %
Adjustments to reported operating income (b)
183.3 153.1 20 %
Change in fair value of investment in Wella Business (c)
(390.0)— N/A
Adjustment to other expense (d)
0.2 (5.3)>100%
Adjustments to noncontrolling interests (e)
(1.8)(1.2)(50)%
Change in tax provision due to adjustments to reported net income attributable to Coty Inc.74.8 (255.9)>100%
Adjustment for deemed Series B Preferred Stock dividends related to the Exchange Agreement (a) (f)
93.6 — N/A
Adjusted net income attributable to Coty Inc.$63.1 $91.3 (31)%
% of net revenues4.6 %5.4 % 
Per Share Data
Adjusted weighted-average common shares
Basic777.6 763.9 
Diluted (a)
787.7 763.9 
Adjusted net income attributable to Coty Inc. per common share
Basic$0.08 $0.12 
Diluted (a)
$0.08 $0.12 
(a)See a description of adjustments under “Adjusted Operating Income for Coty Inc.”
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(b)The amounts represent the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interest based on the relevant noncontrolling interest percentage in the Condensed Consolidated Statements of Operations.
(c)Adjusted Diluted EPS is adjusted by the effect of dilutive securities, including awards under our equity compensation plans and the convertible Series B Preferred Stock. We use the if-converted method for calculating any potential dilutive effect ofFor both periods presented, the convertible Series B Preferred Stock which requires an adjustment to reversewas antidilutive. Accordingly, we excluded the impact ofconvertible Series B Preferred Stock from the preferred stock dividends of $78.1 on income applicable to common stockholders duringdiluted shares and did not adjust the period.earnings for the related dividend.
(d)(b)See a description of adjustments under “Adjusted Operating Income (Loss) for Continuing Operations”
(c)The amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
(d)For the three months ended September 30, 2021, this primarily represents the loss from equity investment in KKW. For the three months ended September 30, 2020, this primarily represents the pension curtailment gain.
(e)The amounts represent the after-tax impact of the non-GAAP adjustments included in Net (loss) income attributable to noncontrolling interests based on the relevant noncontrolling interest percentage in the Condensed Consolidated Statements of Operations.
(f)This mainlyadjustment represents the write-offdeemed dividend from the Exchange Agreement on September 30, 2021. The deemed dividend is the result of deferred financing fees related tocarrying the Wella sale and adjustments for pension curtailment gains.Convertible Series B Preferred Stock at fair value.
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FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our primary sources of funds include cash expected to be generated from operations, borrowings from issuance of debt and committed and uncommitted lines of credit provided by banks and lenders in the U.S. and abroad.
Our cash flows are subject to seasonal variation throughout the year, including demands on cash made during our first fiscal quarter in anticipation of higher global sales during the second fiscal quarter and strong cash generation in the second fiscal quarter as a result of increased demand by retailers associated with the holiday season.
Our principal uses of cash are to fund planned operating expenditures, capital expenditures, business structure realignment expenditures, interest payments, acquisitions, dividends, share repurchases and any principal payments on debt. Working capital movements are influenced by the sourcing of materials related to the production of products. Cash and working capital management initiatives, including the phasing of vendor payments and factoring of trade receivables from time-to-time, may also impact the timing and amount of our operating cash flows.
During fiscal 2021, KKR Aggregator purchased an additional $250.0 of convertible preferred stock. In accordance with the terms of our 2018 Coty Credit Agreement (defined below), we have utilized the cash proceeds from the issuance of convertible preferred shares to KKR Aggregator in part to fund the KKW acquisition.
On November 30, 2020, the Company completed the sale of a majority stake in its Professional and Retail Hair business, including the Wella Clairol, OPI and ghd brands to KKR.
Business. As part of the transaction, Cotywe received cash proceeds of $2,451.7 and retained a 40% stake in the business. Immediately after closing, Wella drew down on their third party debt for $1,282.4 and used $448.0 of such funds to make a distribution toIn accordance with the Company, which the Company has accounted for as a return of capital.2018 Coty Credit Agreement, we utilized $2,015.5 of the net proceeds of the sale of the Wella Business to pay down itsour 2018 Coty Term Loans A and B Facilities on a pro rata basis and reserved a maximum of $500.0 for reinvestment in the business. As a result of business ("the prepayments,Reinvestment Balance"). If the outstanding balances ofReinvestment Balance is not reinvested within twelve months, we are required to use the remainder to pay down our 2018 Coty Term Loans A and B were reducedFacilities on a pro rata basis by $1,135.7December 2021.
On September 10, 2021, KKR converted 285,576 shares of Series B Preferred Stock, and $879.8, respectively.
In connection with$26.4 of unpaid dividends into 50,000,088 shares of Class A common stock. Immediately after the conversion, the Investor completed the public secondary offering of 50,000,088 shares of Class A common stock. We did not receive any proceeds from the sale of the shares of Class A Common Stock by KKR.
On October 20, 2021, the Company completed the sale of a 9.4% stake in the Wella Business the Company and Wella entered into the TSA. Under the terms of the TSA, the Company will perform services for Wellato KKR in exchange for related fees. Such services include billingthe redemption of 290,465 shares of Series B Preferred Stock, and collecting from Wella customers, certain logistics and warehouse services, as well as other administrative and systems support. Due to$22.5 of unpaid dividends, reducing the integrated nature of the historical business and related contractual arrangements, certain receivables from customers and certain payables to vendors have Wella and Coty activity that is intermingled. Additionally, keepingCompany's total shareholding in mind the temporary nature of this arrangement, we have included the related cash flows in our Cash flows from operating activities. See Note 21—Related Party Transactions for more information.
During the six months ended December 31, 2020, the Company had Consolidated net cash provided by operating activities of $472.7. Management estimates the impact of excluding the Wella Business to approximately 30.6%. Additionally, on November 6, 2021, Coty entered into a go forward basis, excluding temporary impactsdefinitive agreement to sell an additional approximate 4.7% stake in Wella to KKR Aggregator in exchange for the redemption of approximately 56% of KKR Aggregator 's remaining convertible preferred shares in Coty, reducing the Company’s total shareholding in Wella to 25.9%. The transaction is expected close on November 30, 2021. Refer to Note 15—Equity and Convertible Preferred Stock.
As of November 5, 2021, the Company has obtained binding commitments from the TSA, would be a reduction of 45% in Consolidated net cash provided by operating activities. The decrease in such cash flows are be expected to be partially offset by cost reductions as we exit our service obligationslenders under the TSA.2018 Coty Credit Agreement, as amended, to replace its two existing classes of revolving commitments, having an aggregate principal amount of $2,750.0, with a single class of revolving commitments, having an aggregate principal amount of $2,000.0. The impact on Cash flows from investing activities would be a roughly 10% decrease inresulting class of revolving commitments will have substantially the outflows for capital expenditures relatedsame terms as the new class of revolving commitments established pursuant to the Wella Business. During2021 Coty Revolving Credit Facility, including a maturity in April 2025. The Company expects the transaction to close in the second quarter of 2021, the Company’s total debt decreased from $8,400.2 to $5,391.7, a decrease of roughly 36%, principally due2022, subject to the Sale of the Wella Business. Accordingly, we note that the estimated decrease in our net consolidated cash flows from the exclusion of the Wella Business, inclusive of the reduction in capital expenditures, is slightly higher than the decrease in our debt service obligation for this period. We do not expect a material adverse impact on our future cash flows from the Sale of the Wella Business.
On April 21, 2021, the Company refinanced $900.0 of its term loan debt that was scheduled to mature in 2023 with new senior secured notes that mature in 2026 (see Note 22—Subsequent Events). This improved the Company’s medium term liquidity.
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Following the Wella divestment, the financial net debt as of March 31, 2021 was $5,106.6. Taking into account Coty’s retained 40% Wella stake (valued at $1,250.0), the Company’s economic net debt will stand at approximately $3,856.6, a substantial reduction that will enhance Coty’s flexibility to invest behind key brands and navigate a dynamic operating environment.refinancing conditions.
Our response to the impact of COVID-19
In response to the ongoing risks presented by the COVID-19 pandemic, we continue to utilize a number of measures to bolster our liquidity position and provide additional financial flexibility. Such measures include actively aligning operating expenses to the current state of the business, including slowing down our productioninitiatives to adjust our inventories,improve cash flow and hiring and travel restrictions, and the reduction ofrestrictions. We have also reduced advertising and consumer promotion costs for sales channels that are closed or heavily impacted by social distancing. We intendthe pandemic. However, as certain markets have reopened, we have increased these expenditures to utilize any tax payment deferrals that apply to us in specific jurisdictions.bolster key brands and product launches. We will continue to actively manage our working capital to support our liquidity needs.
DueDespite encouraging signs of recovery in part to these measures, our current cash position is favorable asthe latter half of March 31,fiscal 2021 we had $2,376.8and continuing into the first quarter of immediate liquidity, which consisted of available cash and cash equivalents and available borrowings under our 2018 Coty Revolving Credit Facility.
Whilefiscal 2022, the impact and duration of COVID-19 on our business is currently uncertain,continues to be uncertain. In addition, risks of inflationary trends in certain markets and global supply chain challenges may negatively affect our sales and operating performance. Currently, we are mitigating these risks through effective financial management and measures such as the use of alternative methods of transportation; however, such measures may not fully offset the impact to our operating performance. However, as a result of the cash on hand our amended debt covenants, and our plans to manage expenses, we believe we have sufficient liquidity and covenant headroom to meet our foreseeable business operating and recurring cash needs (including for debt service and capital expenditures). To address the potentially longer-lasting impacts of COVID-19, we have implemented a plan to reduce our cost base by the end of fiscal 2023.2023, with additional plans for savings in fiscal 2024. This plan includes an adaptation of our supply network, organizational changes, renegotiation of purchasing and licensing agreements, as well as a reduction of certain discretionary expenses.
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Debt
Management is in the process of deleveraging our company and improving the maturity mix of our debt. In the fourth quarter of fiscal 2021, we refinanced $900.0 of our dollar-denominated term loan debt and €700.0 million (approximately $833.3 as of June 30, 2021) of our euro-denominated term loan debt that were scheduled to mature in 2023 with new senior secured notes that mature in 2026. This improved our medium term liquidity. We used the net proceeds of these offerings to repay portions of the term loans outstanding under the existing credit facilities and to pay related premiums, fees and expenses thereto. As noted above, our Convertible Series B Preferred stock was converted and exchanged during the quarter which reduces our future commitment to preferred shareholders improving our ability to reduce our external debt. As we refinance our debt in order to extend maturing obligations, the applicable interest rates have been, and are likely to continue to be, higher than previous applicable interest rates, due in large part to prevailing macroeconomic conditions and our credit ratings at the time. Despite these higher interest rates, we expect that our interest expense will be favorably impacted by lower overall debt balances as we continue to deleverage. See Note 12—11—Debt in the notes to our Condensed Consolidated Financial Statements for additional information on our debt arrangements and prior period credit agreements.
Based on our credit agreement (the “2018 Coty Credit Agreement”), as amended, the calculation of our financial covenant for net debt excludes the impact of operating leases. In order to be consistent with our financial covenant, we will continue to report our economic net debt calculation excluding operating leases. Economic net debt is defined as total debt, less cash and cash equivalents less the value of our 40% stake in the Wella Business.
On April 29, 2020, we amended our existing credit agreement. The amendment (i) provided a Total Net Leverage Ratio financial covenant “holiday” through March 31, 2021; (ii) established a minimum liquidity covenant through March 31, 2021 of $350.0, which increased to $500.0 for the prepayment event noted above; and (iii) effectively placed certain limitations on the ability to make certain investments and restricted payments (including limiting our ability to pay dividends in cash through March 31, 2021) and on incurring additional indebtedness. The amendment did not modify the applicable funding costs during the period through March 31, 2021.
Factoring of Receivables
From time to time, we supplement the timing of our cash flows through the factoring of trade receivables. In this regard, we have entered into factoring arrangements with financial institutions.
The net amount utilized under the factoring facilities was $183.0$175.5 and $123.1$133.6 as of March 31,September 30, 2021 and June 30, 2020,2021, respectively. The aggregate amount of trade receivable invoices factored on a worldwide basis amounted to $574.5$264.2 and $676.6$191.2 during the ninethree months ended March 31,September 30, 2021 and 2020, respectively.
Cash Flows
Nine Months Ended
March 31,
20212020
Condensed Consolidated Statements of Cash Flows Data:
(in millions)
Net cash provided by operating activities$286.4 $204.5 
Net cash provided by (used in) investing activities2,472.1 (772.8)
Net cash (used in) provided by financing activities(2,742.4)1,529.8 
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Three Months Ended
September 30,
20212020
Condensed Consolidated Statements of Cash Flows Data:
(in millions)
Net cash provided by operating activities$285.7 $42.6 
Net cash used in investing activities(45.0)(81.5)
Net cash (used in) provided by financing activities(122.7)264.2 
Net cash provided by operating activities
Net cash provided by operating activities was $286.4$285.7 and $204.5$42.6 for the ninethree months ended March 31,September 30, 2021 and 2020, respectively. The increase in cash flows from operating activities of $81.9$243.1 was driven by improvements in ourhigher cash net income due to management reducing costs to offset the impact of COVID-19 on our business. Additionally, the increaseand positive impacts from changes in net working capital. Cash net income was positively impacted by reductions in costs as a percentage of net revenues, and higher net revenues, primarily in the Prestige segment. Higher inflows from changes in net working capital was mainly driven by increases from Accounts payable and Accrued expenses and other current liabilities, which was partially offset by a net lower cash paid for income taxesinflows from changes in other working capital accounts. Changes in Accounts payable in the prior year were impacted by the timing of payments, which did not occur in the current year as a resultto the same extent. Changes in Accrued expenses and other current liabilities in the first quarter of the positive impact in the current year resulted in higher inflows from an increase in accruals for advertising and consumer promotional costs to support key brands and product launches.
Net cash used in investing activities
Net cash used in investing activities was $(45.0) and $(81.5) for the collectionthree months ended September 30, 2021 and 2020, respectively, a decrease in cash flows used in investing activities of tax overpayments made in the prior$36.5 year and less overallover year. The current year taxes paid. Lower cash paid for interestoutflows were related to capital expenditure spend, which was $25.9 lower during the current year also contributed to higher operating cash inflows which resulted principally from lower interest costs resulting from the pay down of long term debt using the proceeds from the sale of the Wella business. These higher cash inflows were partially offset by higher outflows from changes in working capital during the ninefirst three months of the current fiscal year compared to prior year driven by management's plans to reduce capital expenditures. Furthermore, the negative impacts of COVID-19 and higherprior year cash flows associated with investing activities were negatively impacted by the one-time net outflows for acquisition and divestiture-related costs. Lower sales from COVID-19 were the drivertermination of the higher net outflowscross currency swap associated with trade receivables andnet investment hedges which were only partially offset by inflows from positive impacts included in changes in prepaid expenses and other current assets and accrued expenses and other current liabilitiesthe proceeds associated with lower spending for advertising and consumer promotion, customer sales and marketing, and administrative expenses.
Net cash provided by (used in) investing activities
Net cash provided by (used in) investing activities was $2,472.1 and $(772.8) for the nine months ended March 31, 2021 and 2020, respectively, an increase in cash flows from investing activities of $3,244.9 year over year. Cash flows provided by investing activities was principally from the proceeds received from the sale of the Wella Business that took place on November 30, 2020. As part of the transaction, Coty received initial net cash proceeds of $2,386.2 for the sale of the discontinued operations, net of cash disposed as part of the sale, as well as a return of capital of $448.0 under the equity investment whereby Coty retained a 40% stake in Wella. Prior year investing cash flows also includes the impact of the cash used for the purchase of 51% of the equity interest of King Kylie, LLC for a net cash outflow of $592.2, which did not reoccur in the current year and was only partially offset by $200.0 of cash used for the current quarter purchase of 20% KKW Holdings equity investment and related license agreement. Current year investing cash flows were also positively impacted by lower cash used for capital expenditures of $62.7. The current year investing cash flow increases were also only slightly offset by the cash payment of $37.6 resulting from the first quarter termination of the net investment cross currency swap derivative.business.
Net cash (used in) provided by financing activities
Net cash (used in) provided by financing activities during the ninethree months ended March 31,September 30, 2021 and 2020 was $(2,742.4)$(122.7) and $1,529.8,$264.2, respectively. The increase in cash used in financing activities of $4,272.2 was$386.9 is primarily driven by the prior year impact of $227.2 of cash inflows associated with proceeds from the issuance of additional Convertible Series B Preferred Stock, which did not reoccur in the current year. The increase in cash used in financing activities in the current year was also the result of net cash repayments for debt, primarily associated with the Company's revolving loan facility and the use of more than $2,000.0compared to prepay a portion of the outstanding balances on the Company's Term Loans A and B using the proceeds from the sale of the Wella Business. To partially offset thenet cash outflowsborrowings from debt related activity, the nine months ended March 31, 2021 was impacted by $227.2 in net proceeds from the issuance and sale of additional Convertible Series B Preferred Stock in connection with the equity investment agreement with KKR Aggregator and $195.4 in lower dividend payments due to the suspension of dividend payments that began in the fourth quarterprior year.
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Table of fiscal 2020. Further, the current year experienced a positive impact from the prior year payment of $45.0 to purchase the remaining mandatorily redeemable noncontrolling interest in our Southeastern Asian subsidiary.Contents
Dividends
On April 29, 2020, our Board of Directors suspended the payment of dividends, in keeping with our 2018 Coty Credit Agreement, as amended. As we focus on preserving cash, we expect to suspend the payment of dividends through April 1, 2021 or until such later date that we reach a Net debt to Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) of 4x. Any determination to pay dividends in the future will be at the discretion of our Board of Directors.
Dividends on the Convertible Series B Preferred Stock are payable in cash, or by increasing the amount of accrued dividends with respect to a share ofon Convertible Series B Preferred Stock, or any combination thereof, at the sole discretion of the Company. After the expiration of applicable restrictions under the 2018 Coty Credit Agreement, as amended, we began to pay dividends on the Convertible Series B Preferred Stock in cash for the period ending June 30, 2021, and we expect to continue to pay such dividends in cash on a quarterly basis, subject to the declaration thereof by our Board of Directors. Dividends accrued on the Convertible Series B Preferred Stock before April 1, 2021 have been declared and paid in October 2021. The terms of the Convertible Series B Preferred Stock restrict our ability to declare cash dividends on our common stock until all accrued dividends on the Convertible Series B Preferred Stock have been declared and paid in cash. On September 30, 2021, the Board of Directors declared a dividend on the Series B Preferred Stock of $22.7, of which $3.5 was paid.
For additional information on our dividends, see Note 16—15—Equity and Convertible Preferred Stock in the notes to our Condensed Consolidated Financial Statements.
Treasury Stock - Share Repurchase Program
For information on our Share Repurchase Program, see Note 16—15—Equity and Convertible Preferred Stock in the notes to our Condensed Consolidated Financial Statements.
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Commitments and Contingencies
See Note 19—18—Mandatorily Redeemable Financial Interests and Redeemable Noncontrolling Interests in the notes to our Condensed Consolidated Financial Statements for information on our United Arab Emirates subsidiary and subsidiary in the Middle East.
Legal Contingencies
For information on our litigation matters and Brazilian tax assessments, see Note 20—19—Commitments and Contingencies in the notes to our Condensed Consolidated Financial Statements.
Off-Balance Sheet Arrangements
We had undrawn letters of credit of $15.0$14.3 and $6.0$15.0 and bank guarantees of $25.8$21.6 and $45.7$31.2 as of March 31,September 30, 2021 and June 30, 2020,2021, respectively.
Contractual Obligations
See Note 11—10—Leases and Note 12—11—Debt for updates to our contractual obligations resulting from the Wella Transaction.
Our principal contractual obligations and commitments as of March 31,September 30, 2021 are summarized in Item 7 - “Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Contractual Obligations and Commitments,” of our Fiscal 20202021 Form 10-K, except as noted above. For the ninethree months ended March 31,September 30, 2021, there have been no material changes in our contractual obligations outside the ordinary course of business.
Critical Accounting Policies
We believe that the critical accounting policies listed below involve our more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on our Condensed Consolidated Financial Statements:
•Revenue Recognition;
•Equity Investments;
•Goodwill, Other Intangible Assets and Long-Lived Assets;
•Business Combinations;
•Inventory; and
•Income Taxes.
Below are disclosures regarding our equity investments. As of March 31,September 30, 2021, there have been no other material changes to the items disclosed as critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II—Item 7 of our Fiscal 20202021 Form 10-K.
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Equity Investments
Equity investments for whichThe Company elected the fair value option was elected are carried atto account for its investment in the Wella Business to align with the Company’s strategy for this investment. The fair value is updated on a recurringquarterly basis. Fair valuesThe investments are determinedclassified within Level 3 in the fair value hierarchy because the Company estimates the fair value of the investments using eithera combination of the income approach, the market approach and/or income approach. Fairand private transactions, when applicable. The weighting of the approaches could have a significant impact on the valuation of the investment.
On October 20, 2021 the Company completed the sale of a 9.4% stake in the Wella Business to KKR in exchange for the redemption of $312.9 of the Company's Series B Preferred Stock and accrued dividends. This transaction was also included and weighted for the valuation purposes.
Changes in the fair value of equity investments are classified as Level 3 ofunder the fair value hierarchy.option are recorded in Other income, net within the Condensed Consolidated Statements of Operations (see Note 8—Equity Investments and Note 15—Equity and Convertible Preferred Stock).
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See Note 15—14—Derivative Instruments for updates to our foreign currency risk management and interest rate risk management following the Wella Transaction. There have been no material changes in market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of our Fiscal 20202021 Form 10-K.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
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Our management, with the participation of our Chief Executive Officer (the “CEO”) and our Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of March 31,September 30, 2021. Based on the evaluation of our disclosure controls and procedures as of March 31,September 30, 2021, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) of the Exchange Act during the thirdfirst fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our CEO and CFO, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving our objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Part II. OTHER INFORMATION
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Item 1. Legal Proceedings.
For information on our legal matters, see Note 20—19—Commitments and Contingencies in the notes to our Condensed Consolidated Financial Statements.
Item 1A. Risk Factors.
We have disclosed information about the risk factors that could adversely affect our business in Part I, Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for fiscal 2020 and subsequent Quarterly Reports on Form 10-Q. The information presented below supplements and updates and should be read in conjunction with the risk factors and information disclosed in those periodic reports.
Our operations and sales have been adversely impacted by the COVID-19 pandemic, and we must successfully manage the demand, supply, operational and financial challenges associated with the actual or perceived effects of COVID-19 and the related widespread public health crisis.
The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets and business practices. Our business has been, and may continue to be, negatively impacted by the fear of exposure to or actual effects of the COVID-19 pandemic in countries where we operate or our customers are located, such as reduced travel or recommendations or mandates from governmental authorities to avoid large gatherings or to self-quarantine, as well as temporary closures of our facilities or the facilities of our customers or suppliers. Easing of containment measures and recovery of the impacted sectors of the economy has been, and may continue to be, gradual and uneven, as regions face resurgence of COVID-19 and related uncertainties, and the availability and widespread distribution of a safe and effective vaccine varies across regions. The impacts include, but are not limited to:
•significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things, the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, store closures, or financial hardship, shifts in demand away from one or more of our discretionary or higher priced products to lower priced products, or stockpiling or similar activity, supply chain and shipping constraints, reduced options for marketing and promotion of products or other restrictions in connection with COVID-19; if prolonged, such impacts can further increase the difficulty of operating our business, including accurately planning and forecasting, and may adversely impact our results;
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•the inability to meet our customers’ needs and achieve costs targets due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials or other finished product components, transportation, workforce, or other manufacturing and distribution capability, or the allocation of manufacturing capacity towards medical supplies such as hydro-alcoholic gel (which is used in hand sanitizer);
•failure of third parties on which we rely, including our suppliers, our customers, contract manufacturers, distributors, contractors, commercial banks, joint venture partners and external business partners, to meet their obligations to the Company or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact our operations; or
•significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees’ ability to travel or perform necessary business functions, restrict or prevent consumers from having access to our products, or otherwise prevent our third-party partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale and support of our products, which could adversely impact our results.
These impacts have had and could continue to have a negative effect on our business, financial condition, results of operations and cash flows, as well as the trading price of our securities, and the duration and extent to which our future results of operations and overall financial performance will be impacted remains uncertain. In light of the adverse impact on our near-term revenues, earnings, liquidity and cash flows, we have taken and expect to continue to implement measures to reduce discretionary expenses and manage costs. These measures may not achieve results in accordance with our expectations or on the timelines we anticipate. Despite our efforts to manage and remedy these impacts to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of the COVID-19 pandemic as well as third-party actions taken to contain its spread and mitigate its public health effects.

2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
No shares of our Class A Common Stock were repurchased during the fiscal quarter ended March 31,September 30, 2021.
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Item 6. Exhibits, Financial Statement Schedules.
The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q:
Exhibit NumberDescription
10.1
10.2
10.3
10.4
31.1
31.2
32.1
32.2
101.INSInline XBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Labels Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
†    Exhibit is a management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COTY INC.
Date: May 10,November 8, 2021By:/s/Sue Nabi
Name: Sue Nabi
Title: Chief Executive Officer
(Principal Executive Officer)
/s/Laurent Mercier
Name: Laurent Mercier
Title: Chief Financial Officer
(Principal Financial Officer)

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