Coty Inc. (NYSE: COTY) today announced financial results for the fourth quarter and fiscal year ended June 30, 2019.
Results at a glance |
|
Three Months Ended June 30, 2019 |
|
Year Ended June 30, 2019 |
||||||||||||
|
|
|
|
Change YoY |
|
|
|
Change YoY |
||||||||
(in millions, except per share data) |
|
|
|
Reported
|
|
Organic
|
|
|
|
Reported
|
|
Organic
|
||||
Net revenues |
|
$ |
2,115.4 |
|
|
(8.0%) |
|
(4.1%) |
|
$ |
8,648.5 |
|
|
(8.0%) |
|
(3.5%) |
Operating (loss) - reported |
|
(2,731.7 |
) |
|
NM |
|
|
|
(3,471.5 |
) |
|
NM |
|
|
||
Operating income - adjusted* |
|
257.1 |
|
|
12% |
|
|
|
949.7 |
|
|
(5%) |
|
|
||
Net (loss) - reported |
|
(2,799.4 |
) |
|
NM |
|
|
|
(3,784.2 |
) |
|
NM |
|
|
||
Net income - adjusted* |
|
123.6 |
|
|
16% |
|
|
|
487.6 |
|
|
(6%) |
|
|
||
EPS (diluted) - reported |
|
$ |
(3.72 |
) |
|
NM |
|
|
|
$ |
(5.04 |
) |
|
NM |
|
|
EPS (diluted) - adjusted* |
|
$ |
0.16 |
|
|
14% |
|
|
|
$ |
0.65 |
|
|
(6%) |
|
|
* Please refer to footnote below |
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Highlights
Commenting on the operating results, Pierre Laubies, Coty CEO said:
"2019 is the beginning of a new phase in Coty's journey, but I am pleased to start delivering against the targets we shared with you in February, with FY19 adjusted EPS of $0.65, constant currency adjusted operating income of $992 million, and solid cash flow generation. We are now fully engaged in FY20. Our Turnaround Plan focuses on reshaping and simplifying our beauty business to generate fuel for growth and leverage the potential of our Consumer Beauty brands, while continuing to improve growth and margins in our Luxury and Professional Beauty divisions. Our plan will deliver gradually, but we expect dynamics to start changing as soon as this upcoming year, as reflected in our targets for FY20."
Commenting on the financial results, Pierre-André Terisse, Coty CFO said:
"FY19 has been a key milestone, with solid delivery in H2; a thorough review of our assets, including the adjustment of their value in our financial statements; and the strengthening of our financial position and financial policy. This includes a target leverage at 4x net debt to adjusted EBITDA and the confirmation of our dividend, with the option to receive half of it in shares. We now have a clear business and financial framework for the next four years, targeting in FY23 the gradual return to low single digit sales growth, stronger operating margins at 14-16%, and free cash flow above $1 billion. FY20 will be a first step towards these goals, and building on the delivery of FY19, we are confident in the delivery of our targets for the coming year."
FY20 Outlook
* These measures, as well as “adjusted gross margin”, “adjusted operating income”, “Net Debt / Adjusted EBITDA ratio”, and “free cash flow,” are Non-GAAP Financial Measures. Refer to “Non-GAAP Financial Measures” for discussion of these measures. Reconciliations from reported to adjusted results can be found at the end of this release. “NM” indicates calculation not meaningful.
Financial Results
Revenues:
Gross Margin
Operating Income:
Net Income:
Earnings Per Share (EPS):
Operating Cash Flow
Net Debt:
Fiscal 2019 Divisional Business Review
Luxury Division
|
Three Months Ended June 30, 2019 |
|
Year Ended June 30, 2019 |
|||||
|
Actual |
Reported Basis
|
Organic (LFL) |
|
Actual |
Reported Basis
|
Organic (LFL) |
|
Net Revenues |
$754.7 |
1.7% |
5.8% |
|
$3,294.3 |
2.6% |
4.7% |
|
|
|
|
|
|
|
|
|
|
|
Reported |
Adjusted |
|
|
Reported |
Adjusted |
|
|
Operating Income (Loss) |
$(17.2) |
$106.6 |
|
|
$232.8 |
$511.2 |
|
|
Operating Margin |
(2.3)% |
14.1% |
|
|
7.1% |
15.5% |
|
In FY19, reported Luxury net revenues of $3,294.3 million or 38% of total Coty, increased by 2.6% versus the prior year. On a LFL basis, Luxury net revenues grew by 4.7% in FY19 driven by strength in ALMEA and Europe, and solid performance in Travel Retail despite disproportionate supply chain disruption in this channel in the first half of the year. FY19 marked the second consecutive year of double-digit growth in Luxury's emerging markets, with particular strength in China. By brand, FY19 was fueled by Burberry, Calvin Klein and Gucci, supported by successful launches such as Burberry Her, Gucci Guilty Revolution and Gucci's new Alchemist Garden collection. We also had strong performance in Luxury e-commerce revenues in FY19, with approximately 30% e-commerce net revenue growth, with e-commerce penetration reaching a little over 10%.
In 4Q19, reported Luxury net revenues increased by 1.7% versus the prior year, with very strong LFL growth of 5.8%. ALMEA and Travel Retail were stand-out growth contributors in the quarter, including great performance in China. Growth was led by the Burberry, Gucci, Calvin Klein, Hugo Boss, and Marc Jacobs brands. During the quarter, the performance of Luxury also benefited from the successful May launch of the Gucci lipstick collection, which also represents the initial step in our re-launch of the overall Gucci make-up line.
The Luxury division delivered reported operating income of $232.8 million in FY19, a decrease of 6% versus FY18, while adjusted operating income was $511.2 million, reflecting significant 30% growth from the prior-year. The adjusted operating margin was 15.5%, growing 320 bps versus FY18, driven by fixed cost reductions and lower non-working media. In 4Q19, reported operating loss of $(17.2) million fell from $47.5 million in the prior year period, while adjusted operating income of $106.6 million grew 36% from the prior year period, again supported by net revenue growth and fixed cost management. The adjusted operating margin in 4Q19 was 14.1%, an increase of 360 bps from the prior-year period.
Consumer Beauty
|
Three Months Ended June 30, 2019 |
|
Year Ended June 30, 2019 |
|||||
|
Actual |
Reported Basis
|
Organic (LFL) |
|
Actual |
Reported Basis
|
Organic (LFL) |
|
Net Revenues |
$902.4 |
(15.2%) |
(11.5%) |
|
$3,539.3 |
(17.1%) |
(10.6%) |
|
|
|
|
|
|
|
|
|
|
|
Reported |
Adjusted |
|
|
Reported |
Adjusted |
|
|
Operating Income (Loss) |
$(2,697.3) |
$94.3 |
|
|
$(3,598.7) |
$219.0 |
|
|
Operating Margin |
NM |
10.4% |
|
|
NM |
6.2% |
|
FY19 Consumer Beauty reported net revenues of $3,539.3 million or 41% of total Coty. Revenues declined 17.1% as reported, and decreased 10.6% on a LFL basis. Our sell-out performance remained consistent over the course of the year, declining high single digits, as our brands faced share losses and continued weakness of the mass beauty category in North America and Europe. While our sell-out in North America and Europe declined high single digits, net revenues in these regions - which together accounted for approximately 70% of Consumer Beauty - declined double digits, impacted by elevated promotional activity and trade spending, as well as by the supply chain disruptions at the start of the year. On the other hand, revenues and sell-out in ALMEA grew in the low single digits, supported by consistent strength and share gains in Brazil.
By category in FY19, color cosmetics brands continued to account for close to half of the divisional net revenues and declined in the low teens LFL, reflecting the category pressure in mass cosmetics and market share losses. Retail hair color, which accounted for a mid-teens percentage of net revenues, declined high single digits reflecting stable performance of Wella Retail and declines in Clairol. Body care revenues, accounting for mid-teens percentage of Consumer Beauty, grew moderately fueled by our Brazilian local brands. Mass fragrances accounted for approximately 10% and experienced significant decline. Finally, Younique accounted for approximately 10% of the division, with continuing declines in presenter sponsorships.
In 4Q19, net revenues declined 15.2% as reported and decreased 11.5% LFL, with continuing pressure in Younique. Trends in the core Consumer Beauty categories remained fairly consistent with the prior nine months.
Consumer Beauty's reported operating loss in FY19 of $3,598.7 million compared to reported operating income of $278.9 million in the prior year period, reflecting the division's asset impairment charges of $3.7 billion as well as underlying profit decline. FY19 adjusted operating income declined 47% to $219.0 million. The adjusted operating margin declined by 340 bps to 6.2% due to a reduction in net revenues and gross margin decline, partially offset by lower fixed costs and A&CP management. The 4Q19 reported operating loss totaled $(2,697.3) million as a result of the impairment charge recorded in the quarter, while the adjusted operating income for the quarter of $94.3 million grew 1%.
Professional Beauty
|
Three Months Ended June 30, 2019 |
|
Year Ended June 30, 2019 |
|||||
|
Actual |
Reported Basis
|
Organic (LFL) |
|
Actual |
Reported Basis
|
Organic (LFL) |
|
Net Revenues |
458.3 |
(7.0%) |
(3.1%) |
|
1,814.9 |
(5.4%) |
(1.7%) |
|
|
|
|
|
|
|
|
|
|
|
Reported |
Adjusted |
|
|
Reported |
Adjusted |
|
|
Operating Income |
12.6 |
57.2 |
|
|
122.1 |
219.4 |
|
|
Operating Margin |
2.7% |
12.5% |
|
|
6.7% |
12.1% |
|
Professional Beauty FY19 net revenues of $1,814.9 million or 21% of total Coty, decreased by 5.4% as reported and decreased 1.7% LFL. FY19 was a challenging year for the Professional Beauty division, primarily within the North American region, due to supply chain disruptions coupled with trade inventory reductions at certain key customers. Despite this pressure in North America, the division saw solid growth in ALMEA and very strong growth in ghd globally fueled by new product introductions and improved execution. We also made strong progress in our e-commerce efforts, which reached a low teens percentage of our divisional sales, primarily fueled by our online platforms for Wella and ghd.
4Q19 reported revenues of $458.3 million declined by 7.0% on a reported basis, with a LFL decline of 3.1%, primarily related to weakness in North America stemming from continued de-stocking at key accounts.
Professional Beauty reported operating income was $122.1 million in FY19, a growth of 2% versus the prior year, while adjusted operating income grew 13% to $219.4 million, fueled by gross margin expansion and fixed cost reduction. In 4Q19, reported operating income was $12.6 million compared to $36.2 million in 4Q18, while adjusted operating income was $57.2 million and relatively stable YoY. The Professional Beauty adjusted operating margin of 12.1% grew 190 bps during FY19 driven by higher gross margins and reduced fixed costs.
Fiscal 2019 Business Review by Geographic Region
|
|
Year Ended June 30, |
|||||||||||||
|
|
Net Revenues |
|
Change |
|||||||||||
(in millions) |
|
2019 |
|
2018 |
|
Reported
|
|
Organic
|
|||||||
North America |
|
$ |
2,656.5 |
|
|
$ |
2,966.0 |
|
|
(10.4%) |
|
(10.3%) |
|||
Europe |
|
3,777.8 |
|
|
4,201.6 |
|
|
(10.1%) |
|
(4.5%) |
|||||
ALMEA |
|
2,214.2 |
|
|
2,230.4 |
|
|
(0.7%) |
|
7.0% |
|||||
Total |
|
$ |
8,648.5 |
|
|
$ |
9,398.0 |
|
|
(8.0%) |
|
(3.5%) |
North America
Europe
ALMEA
Cash Flows
Noteworthy Company Developments
Other noteworthy company developments include:
Conference Call
Coty Inc. will host a conference call at 8:00 a.m. (ET) today, August 28, 2019 to discuss its results. The dial-in number for the call is (866) 834-4311 in the U.S. or (720) 405-2213 internationally (conference passcode number: 7047837). The live audio webcast and presentation slides will be available at http://investors.coty.com. The conference call will be available for replay.
About Coty Inc.
Coty is one of the world’s largest beauty companies with an iconic portfolio of brands across fragrance, color cosmetics, hair color and styling, and skin and body care. Coty is the global leader in fragrance, a strong number two in professional hair color & styling, and number three in color cosmetics. Coty’s products are sold in over 150 countries around the world. Coty and its brands are committed to a range of social causes as well as seeking to minimize its impact on the environment. For additional information about Coty Inc., please visit www.coty.com.
Forward Looking Statements
Certain statements in this release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Coty’s current views with respect to, among other things, Coty’s Turnaround Plan, strategic planning, targets, segment reporting and outlook for future reporting periods (including the extent and timing of revenue, expense, profit trends and EPS and changes in operating cash flows and cash flows from operating activities and investing activities), its future operations and strategy, ongoing and future cost efficiency and restructuring initiatives and programs, strategic transactions (including their expected timing and impact), investments, licenses and portfolio changes, synergies, savings, performance, cost, timing and integration of acquisitions, future cash flows, liquidity and borrowing capacity, timing and size of cash outflows and debt deleveraging, impact and timing of supply chain disruptions and the resolution thereof, timing and extent of any future impairments, and synergies, savings, impact, cost, timing and implementation of its Turnaround Plan, including operational and organizational structure changes, operational execution and simplification initiatives, the move of Coty’s headquarters, 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 Coty considers reasonable, but are subject to a number of risks and uncertainties, many of which are beyond Coty’s control, which could cause actual events or results (including our financial condition, results of operations, cash flows and prospects) to differ materially from such statements, including risks and uncertainties relating to:
When used herein, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation. More information about potential risks and uncertainties that could affect Coty’s business and financial results is included under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Coty’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019 and other periodic reports Coty has filed and may file with the SEC from time to time.
All forward-looking statements made in this release are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this release, and Coty does not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.
Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance unless expressed as such and should only be viewed as historical data.
Non-GAAP Financial Measures
The Company operates on a global basis, with the majority of net revenues generated outside of the U.S. Accordingly, fluctuations in foreign currency exchange rates can affect results of operations. Therefore, to supplement financial results presented in accordance with GAAP, certain financial information is presented excluding the impact of foreign currency exchange translations to provide a framework for assessing how the underlying businesses performed excluding the impact of foreign currency exchange translations (“constant currency”). Constant currency information compares results between periods as if exchange rates had remained constant period-over-period, with the current period’s results calculated at the prior-year period’s rates. The Company calculates constant currency information by translating current and prior-period results for entities reporting in currencies other than U.S. dollars into U.S. dollars using constant foreign currency exchange rates. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate. The constant currency information presented may not be comparable to similarly titled measures reported by other companies. The Company discloses the following constant currency financial measures: net revenues, organic like-for-like (LFL) net revenues, adjusted gross profit and adjusted operating income.
The Company presents period-over-period comparisons of net revenues on a constant currency basis, as well as on an organic (LFL) basis. The Company believes that organic (LFL) period-over-period better enables management and investors to analyze and compare the Company's net revenues performance from period to period. For the periods described in this release, the term “like-for-like” describes the Company's core operating performance, excluding the financial impact of (i) acquired brands or businesses in the current year period until we have twelve months of comparable financial results, (ii) divested brands or businesses or early terminated brands in the prior year period to maintain comparable financial results with the current fiscal year period and (iii) foreign currency exchange translations to the extent applicable. For a reconciliation of organic (LFL) period-over-period, see the table entitled “Reconciliation of Reported Net Revenues to Like-For-Like Net Revenues”. For a reconciliation of the Company's organic (LFL) period-over-period by segment and geographic region, see the tables entitled “Net Revenues and Adjusted Operating Income by Segment” and “Net Revenues by Geographic Region."
The Company presents operating income, operating income margin, gross profit, gross margin, effective tax rate, net income, net income margin, net revenues and EPS (diluted) on a non-GAAP basis and specifies that these measures are non-GAAP by using the term “adjusted”. The Company believes these non-GAAP financial measures better enable management and investors to analyze and compare operating performance from period to period. In calculating adjusted operating income, operating income margin, gross profit, gross margin, effective tax rate, net income, net income margin and EPS (diluted), the Company excludes the following items:
The Company has provided a quantitative reconciliation of the difference between the non-GAAP financial measures and the financial measures calculated and reported in accordance with GAAP. For a reconciliation of adjusted gross profit to gross profit, adjusted EPS (diluted) to EPS (diluted), and adjusted net revenues to net revenues, see the table entitled “Reconciliation of Reported to Adjusted Results for the Consolidated Statements of Operations.” For a reconciliation of adjusted operating income to operating income and adjusted operating income margin to operating income margin, see the tables entitled “Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income” and "Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income by Segment." For a reconciliation of adjusted effective tax rate and adjusted cash tax rate to effective tax rate, see the table entitled “Reconciliation of Reported (Loss) Income Before Income Taxes and Effective Tax Rates to Adjusted Income Before Income Taxes and Effective Tax Rates.” For a reconciliation of adjusted net income and adjusted net income margin to net income (loss), see the table entitled “Reconciliation of Reported Net (Loss) Income to Adjusted Net Income.”
The Company also presents free cash flow, adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) and net debt. Management believes that these measures are useful for investors because it provides them with an important perspective on the cash available for debt repayment and other strategic measures and provides them with the same measures that management uses as the basis for making resource allocation decisions. Free cash flow is defined as net cash provided by operating activities, less capital expenditures, adjusted EBITDA is defined as adjusted operating income less depreciation and net debt is defined as total debt less cash and cash equivalents. For a reconciliation of Free Cash Flow, see the table entitled “Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow,” for adjusted EBITDA, see the table entitled “Reconciliation of Adjusted Operating Income to Adjusted EBITDA” and for net debt, see the table entitled “Reconciliation of Total Debt to Net Debt.”
These non-GAAP measures should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
To the extent that the Company provides guidance, it does so only on a non-GAAP basis and does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for restructuring, integration and acquisition-related expenses, amortization expenses, adjustments to inventory, and other charges reflected in its reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.
- Tables Follow -
COTY INC. |
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SUPPLEMENTAL SCHEDULES INCLUDING NON-GAAP FINANCIAL MEASURES |
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COTY INC. & SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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|
|
Year Ended June 30, |
|
Quarter Ended June 30, |
||||||||||||||||||||||||
(in millions, except per share data) |
|
2019 |
|
2018 |
|
2017 |
|
2019 |
|
2018 |
|
2017 |
||||||||||||||||
Net revenues |
|
$ |
8,648.5 |
|
|
$ |
|
9,398.0 |
|
|
$ |
|
7,650.3 |
|
|
$ |
2,115.4 |
|
|
$ |
|
2,299.4 |
|
|
$ |
|
2,241.3 |
|
Cost of sales |
|
|
3,306.5 |
|
|
|
3,607.8 |
|
|
|
3,028.3 |
|
|
|
799.5 |
|
|
|
896.4 |
|
|
|
875.1 |
|
||||
as % of Net revenues |
|
|
38.2 |
% |
|
|
38.4 |
% |
|
|
39.6 |
% |
|
|
37.8 |
% |
|
|
39.0 |
% |
|
|
39.0 |
% |
||||
Gross profit |
|
|
5,342.0 |
|
|
|
5,790.2 |
|
|
|
4,622.0 |
|
|
|
1,315.9 |
|
|
|
1,403.0 |
|
|
|
1,366.2 |
|
||||
Gross margin |
|
|
61.8 |
% |
|
|
61.6 |
% |
|
|
60.4 |
% |
|
|
62.2 |
% |
|
|
61.0 |
% |
|
|
61.0 |
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Selling, general and administrative expenses |
|
|
4,563.9 |
|
|
|
5,018.1 |
|
|
|
4,040.7 |
|
|
|
1,087.1 |
|
|
|
1,256.2 |
|
|
|
1,301.3 |
|
||||
as % of Net revenues |
|
|
52.8 |
% |
|
|
53.4 |
% |
|
|
52.8 |
% |
|
|
51.4 |
% |
|
|
54.6 |
% |
|
|
58.1 |
% |
||||
Amortization expense |
|
|
353.5 |
|
|
|
352.8 |
|
|
|
275.1 |
|
|
|
85.8 |
|
|
|
92.2 |
|
|
|
56.1 |
|
||||
Restructuring costs |
|
|
44.2 |
|
|
|
173.2 |
|
|
|
374.8 |
|
|
|
0.5 |
|
|
|
97.6 |
|
|
|
195.8 |
|
||||
Acquisition-related costs |
|
— |
|
|
|
64.2 |
|
|
|
355.4 |
|
|
— |
|
|
|
0.5 |
|
|
|
80.3 |
|
||||||
Asset impairment charges |
|
|
3,851.9 |
|
|
— |
|
|
— |
|
|
|
2,874.2 |
|
|
— |
|
|
— |
|
||||||||
Loss (gain) on sale of brand assets |
|
— |
|
|
|
28.6 |
|
|
|
(3.1 |
) |
|
— |
|
|
|
28.6 |
|
|
— |
|
|||||||
Operating (loss) income |
|
|
(3,471.5 |
) |
|
|
153.3 |
|
|
|
(420.9 |
) |
|
|
(2,731.7 |
) |
|
|
(72.1 |
) |
|
|
(267.3 |
) |
||||
as % of Net revenues |
|
|
(40.1 |
%) |
|
|
1.6 |
% |
|
|
(5.5 |
%) |
|
|
NM |
|
|
(3.1 |
%) |
|
|
(11.9 |
%) |
|||||
Interest expense, net |
|
|
275.7 |
|
|
|
265.0 |
|
|
|
218.6 |
|
|
|
71.3 |
|
|
|
65.7 |
|
|
|
59.5 |
|
||||
Loss on early extinguishment of debt |
|
— |
|
|
|
10.7 |
|
|
— |
|
|
— |
|
|
|
10.7 |
|
|
— |
|
||||||||
Other expense, net |
|
|
30.9 |
|
|
|
30.1 |
|
|
|
18.5 |
|
|
|
5.9 |
|
|
|
17.6 |
|
|
|
13.1 |
|
||||
Loss before income taxes |
|
|
(3,778.1 |
) |
|
|
(152.5 |
) |
|
|
(658.0 |
) |
|
|
(2,808.9 |
) |
|
|
(166.1 |
) |
|
|
(339.9 |
) |
||||
as % of Net revenues |
|
|
(43.7 |
%) |
|
|
(1.6 |
%) |
|
|
(8.6 |
%) |
|
|
NM |
|
|
(7.2 |
%) |
|
|
(15.2 |
%) |
|||||
(Benefit) provision for income taxes |
|
|
(8.5 |
) |
|
|
(24.7 |
) |
|
|
(259.5 |
) |
|
|
(9.4 |
) |
|
|
4.1 |
|
|
|
(38.9 |
) |
||||
Net loss |
|
|
(3,769.6 |
) |
|
|
(127.8 |
) |
|
|
(398.5 |
) |
|
|
(2,799.5 |
) |
|
|
(170.2 |
) |
|
|
(301.0 |
) |
||||
as % of Net revenues |
|
|
(43.6 |
%) |
|
|
(1.4 |
%) |
|
|
(5.2 |
%) |
|
|
NM |
|
|
(7.4 |
%) |
|
|
(13.4 |
%) |
|||||
Net income attributable to noncontrolling interests |
|
|
2.5 |
|
|
|
2.0 |
|
|
|
15.4 |
|
|
|
(1.6 |
) |
|
|
5.0 |
|
|
|
1.2 |
|
||||
Net income attributable to redeemable noncontrolling interests |
|
|
12.1 |
|
|
|
39.0 |
|
|
|
8.3 |
|
|
|
1.5 |
|
|
|
6.1 |
|
|
|
2.6 |
|
||||
Net loss attributable to Coty Inc. |
|
$ |
(3,784.2 |
) |
|
$ |
|
(168.8 |
) |
|
$ |
|
(422.2 |
) |
|
$ |
(2,799.4 |
) |
|
$ |
|
(181.3 |
) |
|
$ |
|
(304.8 |
) |
as % of Net revenues |
|
|
(43.8 |
%) |
|
|
(1.8 |
%) |
|
|
(5.5 |
%) |
|
|
NM |
|
|
(7.9 |
%) |
|
|
(13.6 |
%) |
|||||
Net loss attributable to Coty Inc. per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Basic |
|
$ |
(5.04 |
) |
|
$ |
|
(0.23 |
) |
|
$ |
|
(0.66 |
) |
|
$ |
(3.72 |
) |
|
$ |
|
(0.24 |
) |
|
$ |
|
(0.41 |
) |
Diluted |
|
$ |
(5.04 |
) |
|
$ |
|
(0.23 |
) |
|
$ |
|
(0.66 |
) |
|
$ |
(3.72 |
) |
|
$ |
|
(0.24 |
) |
|
$ |
|
(0.41 |
) |
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Basic |
|
|
751.2 |
|
|
|
749.7 |
|
|
|
642.8 |
|
|
|
751.6 |
|
|
|
750.6 |
|
|
|
747.7 |
|
||||
Diluted |
|
|
751.2 |
|
|
|
749.7 |
|
|
|
642.8 |
|
|
|
751.6 |
|
|
|
750.6 |
|
|
|
747.7 |
|
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS FOR THE CONSOLIDATED STATEMENTS OF OPERATIONS
These supplemental schedules provide adjusted Non-GAAP financial information and a quantitative reconciliation of the difference between the Non-GAAP financial measure and the financial measure calculated and reported in accordance with GAAP. |
|
|
Year Ended June 30, 2019 |
||||||||||||||||||
(in millions) |
|
Reported
|
|
Adjustments(a) |
|
Adjusted
|
|
Foreign Currency
|
|
Adjusted Results at
|
||||||||||
Net revenues |
|
$ |
8,648.5 |
|
|
$ |
— |
|
|
$ |
8,648.5 |
|
|
$ |
332.8 |
|
|
$ |
8,981.3 |
|
Gross profit |
|
5,342.0 |
|
|
9.4 |
|
|
5,351.4 |
|
|
189.0 |
|
|
5,540.4 |
|
|||||
Gross margin |
|
61.8 |
% |
|
|
|
61.9 |
% |
|
|
|
61.7 |
% |
|||||||
Operating (loss) income |
|
(3,471.5 |
) |
|
4,421.2 |
|
|
949.7 |
|
|
42.6 |
|
|
992.3 |
|
|||||
as % of Net revenues |
|
(40.1 |
%) |
|
|
|
11.0 |
% |
|
|
|
11.0 |
% |
|||||||
Net (loss) income attributable to Coty Inc. |
|
$ |
(3,784.2 |
) |
|
4,271.8 |
|
|
$ |
487.6 |
|
|
|
|
|
|||||
as % of Net revenues |
|
(43.8 |
%) |
|
|
|
5.6 |
% |
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
EPS (diluted) |
|
$ |
(5.04 |
) |
|
|
|
$ |
0.65 |
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Year Ended June 30, 2018 |
|
|
|
|
||||||||||||||
(in millions) |
|
Reported
|
|
Adjustments(a)(b) |
|
Adjusted
|
|
|
|
|
||||||||||
Net revenues |
|
$ |
9,398.0 |
|
|
$ |
— |
|
|
$ |
9,398.0 |
|
|
|
|
|
||||
Gross profit |
|
5,790.2 |
|
|
62.8 |
|
|
5,853.0 |
|
|
|
|
|
|||||||
Gross margin |
|
61.6 |
% |
|
|
|
62.3 |
% |
|
|
|
|
||||||||
Operating income (loss) |
|
153.3 |
|
|
849.0 |
|
|
1,002.3 |
|
|
|
|
|
|||||||
as % of Net revenues |
|
1.6 |
% |
|
|
|
10.7 |
% |
|
|
|
|
||||||||
Net (loss) income attributable to Coty Inc. |
|
$ |
(168.8 |
) |
|
685.1 |
|
|
$ |
516.3 |
|
|
|
|
|
|||||
as % of Net revenues |
|
(1.8 |
%) |
|
|
|
5.5 |
% |
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
EPS (diluted) |
|
$ |
(0.23 |
) |
|
|
|
$ |
0.69 |
|
|
|
|
|
(a) See “Reconciliation of Reported Operating (Loss) Income to Adjusted Operated Income” and “Reconciliation of Reported Net (Loss) Income to Adjusted Net Income” for a detailed description of adjusted items. |
(b) Prior periods have been restated in accordance with the adoption of ASU No. 2017-07 as the curtailment gains and pension settlements are a non-service component of the net periodic benefit cost and have therefore been retrospectively reported outside operating income. See “Reconciliation of Reported Net (Loss) Income to Adjusted Net Income” for the description of transactions that have been retrospectively reported outside operating income. |
|
|
Three Months Ended June 30, 2019 |
||||||||||||||||||
(in millions) |
|
Reported
|
|
Adjustments(a) |
|
Adjusted
|
|
Foreign Currency
|
|
Adjusted Results at
|
||||||||||
Net revenues |
|
$ |
2,115.4 |
|
|
$ |
— |
|
|
$ |
2,115.4 |
|
|
$ |
82.3 |
|
|
$ |
2,197.7 |
|
Gross profit |
|
1,315.9 |
|
|
(2.6 |
) |
|
1,313.3 |
|
|
50.2 |
|
|
1,363.5 |
|
|||||
Gross margin |
|
62.2 |
% |
|
|
|
62.1 |
% |
|
|
|
62.0 |
% |
|||||||
Operating (loss) income |
|
(2,731.7 |
) |
|
2,988.8 |
|
|
257.1 |
|
|
11.4 |
|
|
268.5 |
|
|||||
as % of Net revenues |
|
NM |
|
|
|
12.2 |
% |
|
|
|
12.2 |
% |
||||||||
Net (loss) income attributable to Coty Inc. |
|
$ |
(2,799.4 |
) |
|
2,923.0 |
|
|
$ |
123.6 |
|
|
|
|
|
|||||
as % of Net revenues |
|
NM |
|
|
|
5.8 |
% |
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
EPS (diluted) |
|
$ |
(3.72 |
) |
|
|
|
$ |
0.16 |
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Three Months Ended June 30, 2018 |
|
|
|
|
||||||||||||||
(in millions) |
|
Reported
|
|
Adjustments(a)(b) |
|
Adjusted
|
|
|
|
|
||||||||||
Net revenues |
|
$ |
2,299.4 |
|
|
$ |
— |
|
|
$ |
2,299.4 |
|
|
|
|
|
||||
Gross profit |
|
1,403.0 |
|
|
19.5 |
|
|
1,422.5 |
|
|
|
|
|
|||||||
Gross margin |
|
61.0 |
% |
|
|
|
61.9 |
% |
|
|
|
|
||||||||
Operating (loss) income |
|
(72.1 |
) |
|
301.6 |
|
|
229.5 |
|
|
|
|
|
|||||||
as % of Net revenues |
|
(3.1 |
%) |
|
|
|
10.0 |
% |
|
|
|
|
||||||||
Net (loss) income attributable to Coty Inc. |
|
$ |
(181.3 |
) |
|
287.9 |
|
|
$ |
106.6 |
|
|
|
|
|
|||||
as % of Net revenues |
|
(7.9 |
%) |
|
|
|
4.6 |
% |
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
EPS (diluted) |
|
$ |
(0.24 |
) |
|
|
|
$ |
0.14 |
|
|
|
|
|
(a) See “Reconciliation of Reported Operating (Loss) Income to Adjusted Operated Income” and “Reconciliation of Reported Net (Loss) Income to Adjusted Net Income” for a detailed description of adjusted items. |
(b) Prior periods have been restated in accordance with the adoption of ASU No. 2017-07 as the curtailment gains and pension settlements are a non-service component of the net periodic benefit cost and have therefore been retrospectively reported outside operating income. See “Reconciliation of Reported Net (Loss) Income to Adjusted Net Income” for the description of transactions that have been retrospectively reported outside operating income. |
RECONCILIATION OF REPORTED OPERATING (LOSS) INCOME TO ADJUSTED OPERATING INCOME
|
|
Three Months Ended June 30, |
|
Year Ended June 30, |
|||||||||||||||||||
(in millions) |
|
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
|||||||||||
Reported Operating (Loss) Income |
|
$ |
|
(2,731.7) |
|
$ |
|
(72.1 |
) |
|
NM |
|
$ |
|
(3,471.5 |
) |
|
$ |
|
153.3 |
|
|
NM |
% of Net revenues |
|
|
NM |
|
|
(3.1 |
%) |
|
|
|
|
(40.1 |
%) |
|
|
1.6 |
% |
|
|
||||
Asset impairment charges (a) |
|
|
2,874.2 |
|
— |
|
|
N/A |
|
|
3,851.9 |
|
|
— |
|
|
N/A |
||||||
Amortization expense (b) |
|
|
85.8 |
|
|
92.2 |
|
|
(7%) |
|
|
353.5 |
|
|
|
352.8 |
|
|
—% |
||||
Restructuring and other business realignment costs (c) |
|
|
28.8 |
|
|
174.3 |
|
|
(83%) |
|
|
215.8 |
|
|
|
391.5 |
|
|
(45%) |
||||
Costs related to acquisition activities (d) |
|
— |
|
|
6.5 |
|
|
(100%) |
|
— |
|
|
|
76.1 |
|
|
(100%) |
||||||
Loss (gain) on sale of brand assets (e) |
|
— |
|
|
28.6 |
|
|
(100%) |
|
— |
|
|
|
28.6 |
|
|
(100%) |
||||||
Total adjustments to Reported Operating (Loss) Income |
|
|
2,988.8 |
|
|
301.6 |
|
|
>100% |
|
|
4,421.2 |
|
|
|
849.0 |
|
|
>100% |
||||
Adjusted Operating Income |
|
$ |
|
257.1 |
|
$ |
|
229.5 |
|
|
12% |
|
$ |
|
949.7 |
|
|
$ |
|
1,002.3 |
|
|
(5%) |
% of Net revenues |
|
|
12.2% |
|
|
10.0 |
% |
|
|
|
|
11.0 |
% |
|
|
10.7 |
% |
|
|
Prior periods have been restated in accordance with the adoption of ASU No. 2017-07 as the curtailment gains and pension settlements are a non-service component of the net periodic benefit cost and have therefore been retrospectively reported outside operating income. See “Reconciliation of Reported Net (Loss) Income to Adjusted Net Income” for the description of transactions that have been retrospectively reported outside operating income. |
(a) In the three months ended June 30, 2019,, we incurred asset impairment charges of $2,874.2 primarily due to $2,760.4 related to goodwill and other intangible assets in the Consumer Beauty reporting unit, $86.8 related to the philosophy trademark that is part of the Luxury reporting unit and $27.0 related to the professional product line of the Wella trademark that is part of the Professional Beauty reporting unit. In the three months ended June 30, 2018 we did not incur any asset impairment charges. |
In fiscal 2019, we incurred asset impairment charges of 3,851.9 primarily due to $3,690.7 related to goodwill and other intangible assets in the Consumer Beauty reporting unit, $109.6 related to the philosophy trademark that is part of the Luxury reporting unit, $27.0 related to the professional product line of the Wella trademark that is part of the Professional Beauty reporting unit, $12.6 charge in the Luxury reporting unit during fiscal 2019 related to an acquired trademark associated with a terminated pre-existing license as a result of the acquisition and $12.0 related to a Corporate investment. In fiscal 2018 we did not incur any asset impairment charges. |
(b) In the three months ended June 30, 2019, amortization expense decreased to $85.8 from $92.2 in the three months ended June 30, 2018. In the three months ended June 30, 2019, amortization expense of $36.1, $32.0 and $17.7 was reported in the Luxury, Consumer Beauty and Professional Beauty segments, respectively. In the three months ended, June 30, 2018, amortization expense of $30.6, $40.1, and $21.5 was reported in the Luxury, Consumer Beauty, and Professional Beauty segments, respectively. |
In fiscal 2019, amortization expense increased to $353.5 from $352.8 in fiscal 2018. In fiscal 2019, amortization expense of $155.3, $127.8, and $70.4 were reported in the Luxury, Consumer Beauty, and Professional Beauty segments, respectively. In fiscal 2018, amortization expense of $145.1, $132.2, and $75.5 were reported in the Luxury, Consumer Beauty, and Professional Beauty segments, respectively. |
(c) In the three months ended June 30, 2019, we incurred restructuring and other business structure realignment costs of $28.8. We incurred restructuring costs of $0.5 primarily related to the 2018 Restructuring Actions, included in the Consolidated Statements of Operations. We incurred business structure realignment costs of $28.3 primarily related to Global Integration Activities and our Turnaround Plan. Of this amount, $30.9 is included in selling, general and administrative expenses and $(2.6) is included in cost of sales. In the three months ended June 30, 2018, we incurred restructuring and other business structure realignment costs of $174.3 primarily related to the Global Integration Activities and 2018 Restructuring Actions, included in the Consolidated Statements of Operations. We incurred restructuring costs of $97.6 primarily related to the Global Integration Activities and 2018 Restructuring Actions, included in the Consolidated Statements of Operations. We incurred business structure realignment costs of $76.7 primarily related to our Global Integration Activities. Of this amount, $62.8 is included in selling, general and administrative expenses and $13.9 is included in cost of sales. |
In fiscal 2019, we incurred restructuring and other business structure realignment costs of $215.8. We incurred restructuring costs of $44.2 primarily related to the Global Integration Activities and 2018 Restructuring Actions, included in the Consolidated Statements of Operations. We incurred business structure realignment costs of $171.6 primarily related to our Global Integration Activities and Turnaround Plan. Of this amount $162.2 is included in selling, general and administrative expenses, $9.4 is included in cost of sales. In fiscal 2018, we incurred restructuring and other business structure realignment costs of $391.5. We incurred restructuring costs of $173.2 primarily related to the Global Integration Activities and 2018 Restructuring Actions, included in the Consolidated Statements of Operations. We incurred business structure realignment costs of $218.3 primarily related to our Global Integration Activities. Of this amount $167.2 is included in selling, general and administrative expenses, $51.1 is included in cost of sales. |
(d) In the three months ended June 30, 2019, we did not incur costs related to acquisition activities. In the three months ended June 30, 2018, we incurred $6.5 of costs related to acquisition activities. We recognized acquisition-related costs of $0.5 in the Consolidated Statements of Operations, primarily in connection with current year acquisitions. These costs may include finder’s fees, legal, accounting, valuation, and other professional or consulting fees, and other internal costs which may include compensation related expenses for dedicated internal resources. We also incurred $6.0 in costs of sales primarily reflecting the destruction of excess acquired inventory in connection with the acquisition of the Burberry Beauty Business, in the Consolidated Statements of Operations. |
In fiscal 2019, we did not incur costs related to acquisition activities. In fiscal 2018, we incurred $76.1 of costs related to acquisition activities. We recognized Acquisition-related costs of $64.2, included in the Consolidated Statements of Operations, primarily in connection with the acquisitions of the P&G Beauty Business, the Burberry Beauty Business, ghd and Younique. These costs may include finder’s fees, legal, accounting, valuation, and other professional or consulting fees, and other internal costs which may include compensation related expenses for dedicated internal resources. We also incurred $7.1 of cost related to acquired inventory step-up amortization in connection with the acquisitions of Younique and the Burberry Beauty Business, as well as $4.8 in excess inventory-related costs associated with the Burberry Beauty Business acquisition, included in Cost of sales in the Consolidated Statements of Operations. |
(e)In fiscal 2018, we sold certain assets relating to two of our fragrance brands and recorded a loss of $28.6 which has been reflected in Loss (Gain) on sale of brand assets in the Consolidated Statements of Operations. |
RECONCILIATION OF REPORTED (LOSS) INCOME BEFORE INCOME TAXES AND EFFECTIVE TAX RATES TO ADJUSTED INCOME BEFORE INCOME TAXES AND ADJUSTED EFFECTIVE TAX RATES
|
|
Three Months Ended June 30, 2019 |
|
Three Months Ended June 30, 2018 |
||||||||||||||||
(in millions) |
|
(Loss)
|
|
Provision
|
|
Effective
|
|
(Loss)
|
|
(Benefit)
|
|
Effective
|
||||||||
Reported loss before income taxes |
|
$ |
(2,808.9 |
) |
|
$ |
(9.4 |
) |
|
0.3% |
|
$ |
(166.1 |
) |
|
$ |
4.1 |
|
|
(2.5)% |
Adjustments to Reported Operating (Loss) (a)(b) |
|
2,988.8 |
|
|
58.9 |
|
|
|
|
301.6 |
|
|
27.4 |
|
|
|
||||
Other adjustments (b) (c) |
|
(1.7 |
) |
|
1.5 |
|
|
|
|
23.0 |
|
|
6.9 |
|
|
|
||||
Adjusted income before income taxes |
|
$ |
178.2 |
|
|
$ |
51.0 |
|
|
28.6% |
|
$ |
158.5 |
|
|
$ |
38.4 |
|
|
24.2% |
(a) See a description on adjustments under “Reconciliation of Reported Operating (Loss) Income to Adjusted Operating Income”. |
(b) The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non–GAAP measure of profitability. |
(c) See "Reconciliation of Reported Net (Loss) Income to Adjusted Net Income." |
The adjusted effective tax rate was 28.6% for the three months ended June 30, 2019 compared to 24.2% for the three months ended June 30, 2018. The difference was primarily due to the jurisdictional mix of income. |
|
|
Year Ended June 30, 2019 |
|
Year Ended June 30, 2018 |
||||||||||||||||
(in millions) |
|
(Loss)/
|
|
(Benefit)
|
|
Effective
|
|
(Loss)/
|
|
(Benefit)
|
|
Effective
|
||||||||
Reported (loss) income before income taxes |
|
$ |
(3,778.1 |
) |
|
$ |
(8.5 |
) |
|
0.2% |
|
$ |
(152.5 |
) |
|
$ |
(24.7 |
) |
|
16.2% |
Adjustments to reported operating income (loss) (a) (b) |
|
4,421.2 |
|
|
143.4 |
|
|
|
|
849.0 |
|
156.0 |
|
|
||||||
Other adjustments (b) (c) |
|
11.0 |
|
|
2.3 |
|
|
|
|
23.0 |
|
6.9 |
|
|
||||||
Adjusted income before income taxes |
|
$ |
654.1 |
|
|
$ |
137.2 |
|
|
21.0% |
|
$ |
719.5 |
|
|
$ |
138.2 |
|
|
19.2% |
(a) See a description on adjustments under “Reconciliation of Reported Operating (Loss) Income to Adjusted Operating Income”. |
(b) The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability. |
(c) See "Reconciliation of Reported Net (Loss) Income to Adjusted Net Income." |
The adjusted effective tax rate was 21.0% compared to 19.2% in the prior-year period. The difference was primarily due to the resolution of a foreign uncertain tax position of approximately $43.0 in the prior period. |
RECONCILIATION OF REPORTED NET (LOSS) INCOME TO ADJUSTED NET INCOME
|
|
Three Months Ended June 30, |
|
Year Ended June 30, |
||||||||||||||
(in millions) |
|
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
||||||
Reported Net (Loss) Income Attributable to Coty Inc. |
|
$(2,799.4) |
|
$ |
(181.3 |
) |
|
NM |
|
$(3,784.2) |
|
$ |
(168.8 |
) |
|
NM |
||
% of Net revenues |
|
NM |
|
(7.9 |
%) |
|
|
|
(43.8 |
%) |
|
(1.8 |
%) |
|
|
|||
Adjustments to Reported Operating (Loss) Income (a) |
|
2,988.8 |
|
301.6 |
|
|
>100% |
|
4,421.2 |
|
849.0 |
|
|
>100% |
||||
Adjustments to other (income) expense (b) |
|
(1.7) |
|
13.7 |
|
|
NM |
|
11.0 |
|
|
13.7 |
|
|
(20%) |
|||
Loss on early extinguishment of debt (c) |
|
— |
|
10.7 |
|
|
(100%) |
|
— |
|
|
10.7 |
|
|
(100%) |
|||
Adjustments to interest (income) expense (d) |
|
— |
|
(1.4 |
) |
|
100% |
|
— |
|
|
(1.4 |
) |
|
100% |
|||
Adjustments to noncontrolling interest expense (e) |
|
(3.7) |
|
(2.4 |
) |
|
(54%) |
|
(14.7 |
) |
|
(24.0 |
) |
|
39% |
|||
Change in tax provision due to adjustments to Reported Net Income (Loss) Attributable to Coty Inc. |
|
(60.4) |
|
(34.3 |
) |
|
(76%) |
|
(145.7 |
) |
|
(162.9 |
) |
|
11% |
|||
Adjusted Net Income Attributable to Coty Inc. |
|
$123.6 |
|
$ |
106.6 |
|
|
16% |
|
$ |
487.6 |
|
|
$ |
516.3 |
|
|
(6%) |
% of Net revenues |
|
5.8% |
|
4.6 |
% |
|
|
|
5.6 |
% |
|
5.5 |
% |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Per Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Adjusted weighted-average common shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic |
|
751.6 |
|
750.6 |
|
|
|
|
751.2 |
|
|
749.7 |
|
|
|
|||
Diluted |
|
758.1 |
|
753.1 |
|
|
|
|
754.3 |
|
|
753.1 |
|
|
|
|||
Adjusted Net Income Attributable to Coty Inc. per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic |
|
$0.16 |
|
$ |
0.14 |
|
|
|
|
$ |
0.65 |
|
|
$ |
0.69 |
|
|
|
Diluted |
|
$0.16 |
|
$ |
0.14 |
|
|
|
|
$ |
0.65 |
|
|
$ |
0.69 |
|
|
|
Prior periods have been restated in accordance with the adoption of ASU No. 2017-07. See below for the description of transactions that have been retrospectively reported outside operating income. |
(a) See a description of adjustments under “Reconciliation of Reported Operating (Loss) Income to Adjusted Operating Income”. |
(b) In fiscal 2019 the Company incurred $16.1 of legal and advisory services rendered in connection with the evaluation of the tender offer initiated by certain of our shareholders, which was partially offset by $5.1 of pension curtailment gains as a result of the Global Integration Activities. In the three months ended June 30, 2019, the Company incurred $3.4 of legal and advisory services rendered in connection with the evaluation of the tender offer initiated by certain of our shareholders, which was more than offset by the $5.1 of pension curtailment gains discussed above. In fiscal 2018, we incurred $24.1 in third-party debt issuance costs incurred in connection with the refinancing of the Coty Credit Agreement and Galleria Credit Agreement partially offset by $10.4 of pension curtailment gains as a result of the Global Integration Activities. In accordance with the adoption of ASU No. 2017-07, the curtailment gains and pension settlements are a non-service component of the net periodic benefit cost and have therefore been retrospectively reported outside operating income |
(c) In fiscal 2018, the amount represents the write-off of debt discount and deferred financing costs in connection with the refinancing of the Coty Credit Agreement and Galleria Credit Agreement, included in Loss on early extinguishment of debt in the Consolidated Statements of Operations. |
(d) The amount in fiscal 2018 primarily represents one-time gains of $1.4 on short-term forward contracts to exchange Euros for U.S. dollars to repay U.S. Dollar debt balances outstanding under the Coty Credit Agreement and Galleria Credit Agreement, in connection with the refinancing of those respective agreements in April 2018, included in Interest expense, net in the Consolidated Statements of Operations. |
(e) The amounts represent the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interest based on the relevant noncontrolling interest percentage in the Consolidated Statements of Operations. |
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
|
|
Year Ended June 30, |
|||||||||||
(in millions) |
|
2019 |
|
2018 |
|
2017 |
|||||||
Net cash provided by operating activities |
|
$ |
639.6 |
|
|
$ |
413.7 |
|
|
$ |
757.5 |
|
|
Capital expenditures |
|
(426.6 |
) |
|
(446.4 |
) |
|
(432.3 |
) |
||||
Free cash flow |
|
$ |
213.0 |
|
|
$ |
(32.7 |
) |
|
$ |
325.2 |
|
RECONCILIATION OF TOTAL DEBT TO NET DEBT
|
|
Year Ended June 30, |
|||||
(in millions) |
|
2019 |
|||||
Total debt |
|
$ |
7,745.8 |
|
|||
Cash and cash equivalents |
|
340.4 |
|
||||
Net debt |
|
$ |
7,405.4 |
|
RECONCILIATION OF ADJUSTED OPERATING INCOME TO ADJUSTED EBITDA
|
|
Year Ended June 30, |
|||
(in millions) |
|
2019 |
|||
Adjusted operating income(a) |
|
$ |
949.7 |
|
|
Depreciation(b) |
|
378.9 |
|
||
Pension Adjustment (c) |
|
(0.1 |
) |
||
Adjusted EBITDA |
|
$ |
1,328.5 |
|
a For a reconciliation of adjusted operating income to operating income for the twelve months ended June 30, 2019, see the tables entitled “Reconciliation of Reported Operating Income to Adjusted Operating Income” and "Reconciliation of Reported Operating Income to Adjusted Operating Income by Segment" for the twelve months ended June 30, 2019. |
b The depreciation adjustment for the twelve months ended June 30, 2019 represents depreciation expense for the twelve months ended June 30, 2019 as adjusted by $3.5 for accelerated depreciation. |
c The pension expense adjustment for the twelve months ended June 30, 2019 represents the adjusted non-service cost components of net periodic pension cost for the fiscal year. |
NET DEBT/ADJUSTED EBITDA
|
|
Year Ended June 30, |
||
|
|
2019 |
||
Net Debt/Adjusted EBITDA |
|
5.57 |
|
NET REVENUES AND ADJUSTED OPERATING INCOME BY SEGMENT
|
|
Three Months Ended June 30, |
||||||||||||||||||||
|
|
Net Revenues |
|
Change |
|
Reported Operating
|
|
Adjusted Operating Income
|
||||||||||||||
(in millions) |
|
2019 |
|
2018 |
|
Reported
|
|
Constant
|
|
2019 |
|
Change |
|
2019 |
|
Change |
||||||
Luxury |
|
$ |
754.7 |
|
$ |
742.4 |
|
2% |
|
5% |
|
$ |
(17.2 |
) |
|
NM |
|
$ |
106.6 |
|
|
36% |
Consumer Beauty |
|
902.4 |
|
1,064.4 |
|
(15%) |
|
(12%) |
|
(2,697.3 |
) |
|
NM |
|
94.3 |
|
|
1% |
||||
Professional |
|
458.3 |
|
492.6 |
|
(7%) |
|
(3%) |
|
12.6 |
|
|
(65)% |
|
57.2 |
|
|
(1)% |
||||
Corporate |
|
— |
|
— |
|
N/A |
|
N/A |
|
(29.8 |
) |
|
86% |
|
(1.0 |
) |
|
NM |
||||
Total |
|
$ |
2,115.4 |
|
$ |
2,299.4 |
|
(8%) |
|
(4%) |
|
$ |
(2,731.7 |
) |
|
NM |
|
$ |
257.1 |
|
|
12% |
|
|
Year Ended June 30, |
||||||||||||||||||||
|
|
Net Revenues |
|
Change |
Reported Operating
|
|
Adjusted Operating Income
|
|||||||||||||||
(in millions) |
|
2019 |
|
2018 |
|
Reported
|
|
Constant
|
|
2019 |
|
Change |
|
2019 |
|
Change |
||||||
Luxury |
|
$ |
3,294.3 |
|
$ |
3,210.5 |
|
3% |
|
6% |
|
$ |
232.8 |
|
|
(6)% |
|
$ |
511.2 |
|
|
30% |
Consumer Beauty |
|
3,539.3 |
|
4,268.1 |
|
(17%) |
|
(13%) |
|
(3,598.7 |
) |
|
NM |
|
219.0 |
|
|
(47%) |
||||
Professional |
|
1,814.9 |
|
1,919.4 |
|
(5%) |
|
(2%) |
|
122.1 |
|
|
2% |
|
219.4 |
|
|
13% |
||||
Corporate |
|
— |
|
— |
|
—% |
|
—% |
|
(227.7 |
) |
|
54% |
|
0.1 |
|
|
(96%) |
||||
Total |
|
$ |
8,648.5 |
|
$ |
9,398.0 |
|
(8%) |
|
(4%) |
|
$ |
(3,471.5 |
) |
|
NM |
|
$ |
949.7 |
|
|
(5%) |
NET REVENUES BY GEOGRAPHIC REGION
|
|
Three Months Ended June 30, |
||||||||||||
|
|
Net Revenues |
|
Change |
||||||||||
(in millions) |
|
2019 |
|
2018 |
|
Reported
|
|
Constant
|
||||||
North America |
|
$ |
657.7 |
|
|
$ |
760.8 |
|
|
(14 |
%) |
|
(14 |
%) |
Europe |
|
866.1 |
|
|
959.1 |
|
|
(10 |
%) |
|
(4 |
%) |
||
ALMEA |
|
591.6 |
|
|
579.5 |
|
|
2 |
% |
|
8 |
% |
||
Total |
|
$ |
2,115.4 |
|
|
$ |
2,299.4 |
|
|
(8 |
%) |
|
(4 |
%) |
|
|
|
|
|
|
|
|
|
||||||
|
|
Year Ended June 30, |
||||||||||||
|
|
Net Revenues |
|
Change |
||||||||||
(in millions) |
|
2019 |
|
2018 |
|
Reported
|
|
Constant
|
||||||
North America |
|
$ |
2,656.5 |
|
|
$ |
2,966.0 |
|
|
(10 |
%) |
|
(10 |
%) |
Europe |
|
3,777.8 |
|
|
4,201.6 |
|
|
(10 |
%) |
|
(6 |
%) |
||
ALMEA |
|
2,214.2 |
|
|
2,230.4 |
|
|
(1 |
%) |
|
6 |
% |
||
Total |
|
$ |
8,648.5 |
|
|
$ |
9,398.0 |
|
|
(8 |
%) |
|
(4 |
%) |
RECONCILIATION OF REPORTED OPERATING INCOME TO ADJUSTED OPERATING INCOME BY SEGMENT
|
|
Three Months Ended June 30, 2019 |
|||||||||||||
(in millions) |
|
Reported
|
|
Adjustments (a) |
|
Adjusted
|
|
Foreign
|
|
Adjusted
|
|||||
OPERATING (LOSS) INCOME |
|
|
|
|
|
|
|
|
|
|
|
||||
Luxury |
|
$ |
(17.2) |
|
$ |
(123.8) |
|
$ |
106.6 |
|
$ |
3.5 |
|
$ |
110.1 |
Consumer Beauty |
|
(2,697.3) |
|
(2,791.6) |
|
94.3 |
|
5.5 |
|
99.8 |
|||||
Professional |
|
12.6 |
|
(44.6) |
|
57.2 |
|
2.3 |
|
59.5 |
|||||
Corporate |
|
(29.8) |
|
(28.8) |
|
(1.0) |
|
0.1 |
|
(0.9) |
|||||
Total |
|
$ |
(2,731.7) |
|
$ |
(2,988.8) |
|
$ |
257.1 |
|
$ |
11.4 |
|
$ |
268.5 |
|
|
|
|
|
|
|
|
|
|
|
|||||
OPERATING MARGIN |
|
|
|
|
|
|
|
|
|
|
|||||
Luxury |
|
(2.3%) |
|
|
|
14.1% |
|
|
|
14.1% |
|||||
Consumer Beauty |
|
NM |
|
|
|
10.4% |
|
|
|
10.6% |
|||||
Professional |
|
2.7% |
|
|
|
12.5% |
|
|
|
12.5% |
|||||
Corporate |
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|||||
Total |
|
NM |
|
|
|
12.2% |
|
|
|
12.2% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Three Months Ended June 30, 2018 |
|
|
|
|
|||||||||
(in millions) |
|
Reported
|
|
Adjustments (a) |
|
Adjusted
|
|
|
|
|
|||||
OPERATING (LOSS) INCOME |
|
|
|
|
|
|
|
|
|
|
|||||
Luxury |
|
$ |
47.5 |
|
$ |
(30.6) |
|
$ |
78.1 |
|
|
|
|
||
Consumer Beauty |
|
53.5 |
|
(40.1) |
|
93.6 |
|
|
|
|
|||||
Professional |
|
36.2 |
|
(21.5) |
|
57.7 |
|
|
|
|
|||||
Corporate |
|
(209.3) |
|
(209.4) |
|
0.1 |
|
|
|
|
|||||
Total |
|
$ |
(72.1) |
|
$ |
(301.6) |
|
$ |
229.5 |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|||||
OPERATING MARGIN |
|
|
|
|
|
|
|
|
|
|
|||||
Luxury |
|
6.4% |
|
|
|
10.5% |
|
|
|
|
|||||
Consumer Beauty |
|
5.0% |
|
|
|
8.8% |
|
|
|
|
|||||
Professional |
|
7.3% |
|
|
|
11.7% |
|
|
|
|
|||||
Corporate |
|
N/A |
|
|
|
N/A |
|
|
|
|
|||||
Total |
|
(3.1%) |
|
|
|
10.0% |
|
|
|
|
Prior periods have been restated in accordance with the adoption of ASU No. 2017-07. See “Reconciliation of Reported Net (Loss) Income to Adjusted Net Income” for the description of transactions that have been retrospectively reported outside operating income. |
(a) See “Reconciliation of Reported Operating Income to Adjusted Operated (Loss) Income” for a detailed description of adjusted items. |
|
|
Year Ended June 30, 2019 |
|||||||||||||
(in millions) |
|
Reported
|
|
Adjustments (a) |
|
Adjusted
|
|
Foreign
|
|
Adjusted
|
|||||
OPERATING (LOSS) INCOME |
|
|
|
|
|
|
|
|
|
|
|||||
Luxury |
|
$ |
232.8 |
|
$ |
(278.4) |
|
$ |
511.2 |
|
$ |
15.6 |
|
$ |
526.8 |
Consumer Beauty |
|
(3,598.7) |
|
(3,817.7) |
|
219.0 |
|
16.8 |
|
|
235.8 |
||||
Professional |
|
122.1 |
|
(97.3) |
|
219.4 |
|
9.9 |
|
229.3 |
|||||
Corporate |
|
(227.7) |
|
(227.8) |
|
0.1 |
|
0.3 |
|
0.4 |
|||||
Total |
|
$ |
(3,471.5) |
|
$ |
(4,421.2) |
|
$ |
949.7 |
|
$ |
42.6 |
|
$ |
992.3 |
|
|
|
|
|
|
|
|
|
|
|
|||||
OPERATING MARGIN |
|
|
|
|
|
|
|
|
|
|
|||||
Luxury |
|
7.1% |
|
|
|
15.5% |
|
|
|
15.5% |
|||||
Consumer Beauty |
|
NM |
|
|
|
6.2% |
|
|
|
6.4% |
|||||
Professional |
|
6.7% |
|
|
|
12.1% |
|
|
|
12.2% |
|||||
Corporate |
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|||||
Total |
|
(40.1%) |
|
|
|
11.0% |
|
|
|
11.0% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Year Ended June 30, 2018 |
|
|
|
|
|||||||||
(in millions) |
|
Reported
|
|
Adjustments (a) |
|
Adjusted
|
|
|
|
|
|||||
OPERATING INCOME (LOSS) |
|
|
|
|
|
|
|
|
|
|
|||||
Luxury |
|
$ |
248.7 |
|
$ |
(145.1) |
|
$ |
393.8 |
|
|
|
|
||
Consumer Beauty |
|
278.9 |
|
(132.2) |
|
411.1 |
|
|
|
|
|||||
Professional |
|
119.4 |
|
(75.5) |
|
194.9 |
|
|
|
|
|||||
Corporate |
|
(493.7) |
|
(496.2) |
|
2.5 |
|
|
|
|
|||||
Total |
|
$ |
153.3 |
|
$ |
(849.0) |
|
$ |
1,002.3 |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|||||
OPERATING MARGIN |
|
|
|
|
|
|
|
|
|
|
|||||
Luxury |
|
7.7% |
|
|
|
12.3% |
|
|
|
|
|||||
Consumer Beauty |
|
6.5% |
|
|
|
9.6% |
|
|
|
|
|||||
Professional |
|
6.2% |
|
|
|
10.2% |
|
|
|
|
|||||
Corporate |
|
N/A |
|
|
|
N/A |
|
|
|
|
|||||
Total |
|
1.6% |
|
|
|
10.7% |
|
|
|
|
Prior periods have been restated in accordance with the adoption of ASU No. 2017-07. See “Reconciliation of Reported Net (Loss) Income to Adjusted Net Income” for the description of transactions that have been retrospectively reported outside operating income. |
(a) See “Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income” for a detailed description of adjusted items. |
RECONCILIATION OF REPORTED NET REVENUES INCOME TO LIKE-FOR-LIKE NET REVENUES
|
|
Three Months Ended June 30, 2019 vs. Three Months Ended June 30, 2018 Net Revenue Change |
||||||||||
|
|
|
|
|
|
|
||||||
Net Revenues Change YoY |
|
Reported Basis |
|
Constant Currency |
|
Impact from
|
|
Organic (LFL) |
||||
Luxury |
|
2 |
% |
|
5 |
% |
|
(1 |
)% |
|
6 |
% |
Consumer Beauty |
|
(15 |
)% |
|
(12 |
)% |
|
— |
% |
|
(12 |
)% |
Professional Beauty |
|
(7 |
%) |
|
(3 |
)% |
|
— |
% |
|
(3 |
%) |
Total Company |
|
(8 |
)% |
|
(4 |
)% |
|
— |
% |
|
(4 |
)% |
¹ Divestitures reflect the decreased net revenues from the divestiture of Cerruti in the fourth quarter of fiscal 2018. |
|
|
Year Ended June 30, 2019 vs. Year Ended June 30, 2018 Net Revenue Change |
||||||||||
|
|
|
|
|
|
of which |
||||||
Net Revenues Change YoY |
|
Reported Basis |
|
Constant Currency |
|
Impact from
|
|
Organic (LFL) |
||||
Luxury |
|
3 |
% |
|
6 |
% |
|
1 |
% |
|
5 |
% |
Consumer Beauty |
|
(17 |
)% |
|
(13 |
)% |
|
(2 |
)% |
|
(11 |
)% |
Professional Beauty |
|
(5 |
%) |
|
(2 |
)% |
|
— |
% |
|
(2 |
%) |
Total Company |
|
(8 |
)% |
|
(4 |
)% |
|
— |
% |
|
(4 |
)% |
1 Acquisitions reflect the net revenue contribution in the current period from the acquisition of Burberry net of the decreased net revenues from the termination of Guess and the divestitures of Playboy and Cerruti in fiscal 2018, in each case for the periods of non-comparability. |
COTY INC. & SUBSIDIARIES |
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
|
|
June 30, |
||||||
(in millions) |
|
2019 |
|
2018 |
||||
ASSETS |
|
|
|
|
||||
Current assets: |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
340.4 |
|
|
$ |
331.6 |
|
Restricted cash |
|
40.0 |
|
|
30.6 |
|
||
Trade receivables |
|
1,161.2 |
|
|
1,536.0 |
|
||
Inventories |
|
1,153.3 |
|
|
1,148.9 |
|
||
Prepaid expenses and other current assets |
|
577.8 |
|
|
603.9 |
|
||
Total current assets |
|
3,272.7 |
|
|
3,651.0 |
|
||
Property and equipment, net |
|
1,600.6 |
|
|
1,680.8 |
|
||
Goodwill |
|
5,073.8 |
|
|
8,607.1 |
|
||
Other intangible assets, net |
|
7,422.3 |
|
|
8,284.4 |
|
||
Other noncurrent assets |
|
296.0 |
|
|
406.9 |
|
||
TOTAL ASSETS |
|
$ |
17,665.4 |
|
|
$ |
22,630.2 |
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY |
|
|
|
|
||||
Current liabilities: |
|
|
|
|
||||
Accounts payable |
|
$ |
1,732.7 |
|
|
$ |
1,928.6 |
|
Short-term debt and current portion of long-term debt |
|
193.8 |
|
|
218.9 |
|
||
Other current liabilities |
|
1,550.6 |
|
|
1,896.5 |
|
||
Total current liabilities |
|
3,477.1 |
|
|
4,044.0 |
|
||
Long-term debt, net |
|
7,469.9 |
|
|
7,305.4 |
|
||
Other noncurrent liabilities |
|
1,673.2 |
|
|
1,764.3 |
|
||
Total liabilities |
|
12,620.2 |
|
|
13,113.7 |
|
||
REDEEMABLE NONCONTROLLING INTERESTS |
|
451.8 |
|
|
661.3 |
|
||
Total Coty Inc. stockholders’ equity |
|
4,586.9 |
|
|
8,849.7 |
|
||
Noncontrolling interests |
|
6.5 |
|
|
5.5 |
|
||
Total equity |
|
4,593.4 |
|
|
8,855.2 |
|
||
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY |
|
$ |
17,665.4 |
|
|
$ |
22,630.2 |
|
COTY INC. & SUBSIDIARIES |
||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||||
|
Year Ended
|
|||||||||||
|
2019 |
|
2018 |
|
2017 |
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|||||||
Net loss |
$ |
(3,769.6 |
) |
|
$ |
(127.8 |
) |
|
$ |
(398.5 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|||||||
Depreciation and amortization |
736.0 |
|
|
737.0 |
|
|
555.1 |
|
||||
Deferred income taxes |
(175.7 |
) |
|
(101.7 |
) |
|
(390.0 |
) |
||||
Share-based compensation |
14.8 |
|
|
30.6 |
|
|
24.6 |
|
||||
Other |
3,963.9 |
|
|
94.4 |
|
|
99.8 |
|
||||
Change in operating assets and liabilities, net of effects from purchase of acquired companies: |
|
|
|
|
|
|||||||
Trade receivables |
344.9 |
|
|
(79.6 |
) |
|
(279.8 |
) |
||||
Inventories |
(21.9 |
) |
|
(60.0 |
) |
|
162.3 |
|
||||
Accounts payable |
(127.3 |
) |
|
159.5 |
|
|
540.9 |
|
||||
Other |
(325.5 |
) |
|
(238.7 |
) |
|
443.1 |
|
||||
Net cash provided by operating activities |
639.6 |
|
|
413.7 |
|
|
757.5 |
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|||||||
Capital expenditures |
(426.6 |
) |
|
(446.4 |
) |
|
(432.3 |
) |
||||
Payments for business combinations, net of cash acquired |
(40.8 |
) |
|
(278.0 |
) |
|
(742.6 |
) |
||||
Other investing activities |
13.4 |
|
|
36.8 |
|
|
11.3 |
|
||||
Net cash provided by investing activities |
(454.0 |
) |
|
(687.6 |
) |
|
(1,163.6 |
) |
||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|||||||
Proceeds (repayments) of debt, net |
243.1 |
|
|
537.9 |
|
|
1,059.0 |
|
||||
Dividend payments |
(346.2 |
) |
|
(375.8 |
) |
|
(372.6 |
) |
||||
Other financing activities |
(57.2 |
) |
|
(92.8 |
) |
|
(91.2 |
) |
||||
Net cash provided by financing activities |
(160.3 |
) |
|
69.3 |
|
|
595.2 |
|
||||
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
(7.1 |
) |
|
(3.9 |
) |
|
9.2 |
|
||||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
18.2 |
|
|
(208.5 |
) |
|
198.3 |
|
||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period |
362.2 |
|
|
570.7 |
|
|
372.4 |
|
||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period |
380.4 |
|
|
362.2 |
|
|
570.7 |
|
||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190828005203/en/
Investor Relations
Olga Levinzon, +1 212 389-7733
[email protected]
Media
Lisa Kessler, +1 917 348-3373
[email protected]
Arnaud Leblin, + 33 1 58 71 72 00
[email protected]