What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-08-26 compared with 2020-08-27 · 423 added, 338 removed, 580 unchanged (57% of the section changed)

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All dollar amounts in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.

We are a global beauty company.

We manufacture, market, sell and distribute branded beauty products, including fragrances, color cosmetics, hair care products and skin & body related products throughout the world.

We are 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.

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 recent King Kylie transaction and the pending transaction with Kim Kardashian West complement our existing portfolio.

As we continue to transform our Company, we are focused on the fragrance, color cosmetics and skin care categories, in both our prestige and mass beauty businesses.

The divestiture of the Younique business in September 2019 and the strategic Wella Transaction signed in June, 2020 are reflections of our intent to focus on our core go-to-market competencies and to simultaneously deleverage our balance sheet.

By retaining a 40% interest in the Wella Business following the closing of the Wella Transaction, we are able to benefit from the potential upside of the stand-alone business in the longer term.

Our recently announced management changes, including an increase in diversity at both the Board and senior management levels, demonstrate a commitment to our continued transformation.

We expect that our strategy will continue to develop under the direction of our new management team.

COVID-19 Impacts

The COVID-19 pandemic has had, and is expected to continue to have material effects on all of our product categories across all segments and geographies.

The unprecedented containment measures adopted worldwide to address the pandemic have contributed to a significant decline in volume trends.

In particular, demand for prestige products mainly sold in retail malls, professional salon products, and the travel retail channel have been more significantly impacted by temporary closures of non-essential businesses and social distancing measures.

Many of our mass products are offered in other channels, such as drug and grocery stores, that continue to operate as essential businesses.

However, shelter-in-place orders, reduced store hours, and other social distancing measures have resulted in reduced customer traffic and sales volumes for these product categories as well.

In response to the COVID-19 pandemic, we have implemented several key measures.

To mitigate closures of our existing sales channels, open channels and markets are being prioritized, with the acceleration of several initiatives such as e-commerce.

We have also taken aggressive steps to reduce operating costs to more appropriately align with the current sales volume trends.

Such measures include slowing down our production to adjust our inventories, the recently announced temporary compensation reductions for certain executives and for our non-executive board members, hiring and travel restrictions, temporary furloughs for certain employees, using available local government assistance programs to reduce employee costs, and the reduction of advertising and consumer promotion costs for sales channels that are closed or heavily impacted by social distancing.

We intend to utilize any tax payment deferrals that apply to us in specific jurisdictions.

We will actively manage our working capital to support our liquidity needs.

Additionally, to address the potentially longer-lasting impacts of the COVID-19, the lockdown and a possible recession resulting from COVID-19 in many markets, we will be implementing a plan to reduce our cost base, which does not vary with revenues, by 25%, including an adaptation of our supply network and organization as well as a reduction of certain discretionary expenses.

We anticipate continued negative pressure on sales volume until such containment measures are discontinued and normal consumer traffic resumes.

We currently expect that any easing of containment measures and recovery of the impacted sectors of the economy will be gradual and uneven, as regions face potential resurgence of COVID-19 and related uncertainties.

The King Kylie and Kim Kardashian West transactions complement our existing portfolio as personality-led Direct-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 stabilizing our consumer beauty brands through leading innovation and improved execution, accelerating our prestige fragrance business and ongoing expansion into prestige cosmetics, building a comprehensive skincare portfolio leveraging existing brands, enhancing our e-commerce and DTC capabilities, expanding our presence in China through prestige products and select consumer 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 reflections of our intent to focus on our core go-to-market competencies and to simultaneously deleverage our balance sheet.

By retaining a 40% interest in the Wella Business following the closing of the Wella Transaction, we are able to benefit from the potential upside of the stand-alone business in the longer term, through a potential divestiture at a later stage.

COVID-19 Impacts Update

The COVID-19 pandemic has had material effects on all our product categories across all segments and geographies.

The continuing sporadic containment measures and travel restrictions adopted worldwide to address the pandemic have contributed to a significant decline in volume trends, albeit with some emerging evidence of recovery in the Americas and Asia during fiscal 2021, particularly in the latter quarter of the year, and most notably in the prestige fragrance categories.

Demand for color cosmetics products and products sold in the travel retail channel continues to be impacted by temporary closures of non-essential businesses and social distancing measures, although this is being partially offset by the gradual removal or reduction of travel restrictions in key markets, and growth in beauty product sales online.

Many of our mass products are offered in other channels, such as drug and grocery stores, that continued to operate as essential businesses during the height of the pandemic, the negative effects of which were ameliorated through successful vaccination programs and reopenings in many markets in the latter portion of the fiscal year, particularly the fourth quarter.

However, these 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 in 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 intermittent lockdowns and possible economic uncertainty resulting from COVID-19 in many markets.

We anticipate the 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 measures and recovery of the impacted sectors of the economy will 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.

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.

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In addition, as product life cycles shorten, results are driven primarily by successfully developing, introducing and marketing new, innovative products.

Exclusive of the effects of the COVID-19 pandemic, which became more evident in the fourth quarter, our global share trends in the mass color cosmetics categories in which we compete continue to decline.

However, Sally Hansen continues to experience positive trends due to the ongoing success of the Good.Kind.Pure.

April was the low point for net revenues due to the effects of COVID-19 in Fiscal 2020 and we have seen improvements in May and June as different markets re-open.

Further, we have seen considerable improvements during July and the first three weeks of August, however our revenues continue to be below comparable periods in the prior year.

Operating and Reportable Segments

Due to the change in our reporting structure during the third quarter of this year and the discontinued operations presentation (see Footnote 5—Segment Reporting), our business is organized into three operating segments and reportable

Americas, Europe, Middle East & Africa (“EMEA”), and Asia Pacific, which include the businesses focused on prestige fragrances, prestige skin care, prestige color cosmetics, mass color cosmetics, mass fragrance, mass skin care and body care and are supported by central marketing teams.

Certain shared costs and the results of corporate initiatives are managed outside of our three segments by Corporate.

Transformation Plan

Building on the multi-year Turnaround Plan we launched in July 2019, we are implementing a comprehensive transformation agenda (the “Transformation Plan”), which aims to stabilize and gradually accelerate revenue growth, improve our profitability through gross margin growth and cost control, optimizing our operating model for speed and agility, accelerate e-commerce and digital growth, and deleverage our balance sheet.

In 2020, we made organizational changes to reduce geographic fragmentation and costs.

On May 11, 2020, we commenced the implementation of a 25% reduction of our cost base, which does not vary with revenues, by the end of fiscal 2023, including reprioritizing projects providing larger cost reduction benefits, an adaptation of our supply network and organization as well as a reduction of certain discretionary expenses.

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 T ransformation Plan.

These organizational, business and structural changes are still being operationalized, which introduces additional complexity as we roll out several initiatives simultaneously, such as the separation of the Wella Business and the obligations under the related TSA in connection with the Wella Transaction.

As a result, we have exited fiscal 2021 with a higher level of cost savings than initially anticipated.

We expect to incur additional cash costs of approximately $200.0 in fiscal years 2022 and 2023, which is $100.0 below the aggregate estimates previously announced by the Company.

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, our CODM has been in the process of finalizing her organization structure and how she will assess performance, and we have concurrently evaluated the potential impact to our segment reporting.

Based on this evaluation, we have determined that it is appropriate to realign our reportable segments from the current regional structure to a principally product category-based structure, comprised of a prestige business segment and a consumer beauty business segment.

We are in the process of making corresponding changes, as needed, to our management structure and operating responsibilities as well as to our information systems to enable appropriate internal and external financial reporting reflecting such newly identified segments by the first quarter of fiscal year 2022.

Selected Financial Data

(in millions, except per share data) Year Ended June 30,

2021 2020 (a)

Condensed Consolidated Statements of Operations Data:

Net revenues $ 4,629.9 $ 4,717.8 $ 6,287.9

Gross profit 2,768.2 2,726.6 3,789.4

Restructuring costs 63.6 130.2 34.2

Acquisition- and divestiture-related costs 138.8 157.3 —

Asset impairment charges — 434.0 3,729.0

Operating loss (48.6) (1,236.5) (3,688.4)

Interest expense, net 235.1 242.7 225.2

Loss before income taxes from continuing operations (239.8) (1,467.6) (3,945.4)

Benefit for income taxes (172.0) (377.7) (54.8)

Net loss from continuing operations (67.8) (1,089.9) (3,890.6)

Net (loss) income from discontinued operations (137.3) 87.2 121.0

Net loss (205.1) (1,002.7) (3,769.6)

Net loss attributable to Coty Inc.

for common stockholders $ (201.3) $ (1,006.7) $ (3,784.2)

Amounts attributable to Coty Inc.:

Loss from continuing operations attributable to Coty Inc.

common stockholders $ (166.3) $ (1,100.4) $ (3,905.2)

Net loss attributable to Coty Inc.

common stockholders $ (303.6) $ (1,013.2) $ (3,784.2)

Per Share Data:

Net (loss) income attributable to Coty Inc.

per common share:

Basic loss from continuing operations $ (0.22) $ (1.45) $ (5.20)

Basic loss for Coty Inc.

$ (0.40) $ (1.33) $ (5.04)

Diluted loss from continuing operations $ (0.22) $ (1.45) $ (5.20)

Diluted (loss) earnings from discontinued operations $ (0.18) $ 0.12 $ 0.16

Diluted loss for Coty Inc.

$ (0.40) $ (1.33) $ (5.04)

Weighted-average common shares

Basic 764.8 759.1 751.2

Diluted 764.8 759.1 751.2

Dividends declared per common share $ — $ 0.38 $ 0.50

(in millions) Year Ended June 30,

2021 2020 (a)

Consolidated Statements of Cash Flows Data:

Net cash provided by (used in) operating activities $ 318.7 $ (50.9) $ 639.6

Net cash provided by (used in) investing activities 2,441.9 (833.4) (454.0)

Net cash (used in) provided by financing activities (2,795.1) 877.3 (160.3)

(in millions) As of June 30,

2021 2020 (a)(b)

Consolidated Balance Sheets Data:

Cash and cash equivalents $ 253.5 $ 308.3 $ 340.4

Total assets 13,691.4 16,728.8 17,710.0

Total debt, net of discount 5,476.9 8,147.3 7,735.0

Total Coty Inc.

stockholders’ equity 2,860.7 3,004.6 4,586.9

(a) Included in fiscal 2020 are the financial impacts of the divestiture of Younique LLC on September 16, 2019, and the King Kylie transaction on January 6, 2020.

(b) In fiscal 2020, we adopted ASU 2016-02 , Leases (Topic 842) which requires lease assets and liabilities to be recorded on the balance sheet.

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 net income (loss), and Adjusted net income (loss) attributable to 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”).

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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 income from continuing operations excludes restructuring costs and business structure realignment programs, amortization, acquisition- and divestiture-related costs and acquisition accounting impacts, asset impairment charges and other adjustments as described below.

Adjusted operating income/Adjusted EBITDA from continuing operations excludes restructuring costs and business structure realignment programs, amortization, acquisition- and divestiture-related costs and acquisition accounting impacts, asset impairment charges and other adjustments as described below.

For adjusted EBITDA, in addition to the preceding, we adjust for non-cash stock-based compensation expense and depreciation.

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 exclude divestitures, and fluctuate based on specific facts and circumstances.

They are primarily incurred to realign our operating structure and integrate new acquisitions, and implement divestitures of components of our business, and fluctuate based on specific facts and circumstances.

Additionally, Adjusted net income attributable to Coty Inc.

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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.

• Non-cash stock-based compensation:

Although non-cash stock-based compensation is a key incentive offered to our employees, we have excluded the effect of these expenses from the calculation of adjusted EBITDA.

This is primarily due to their 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:

We have excluded adjusted depreciation from our adjusted operating income and depreciation from our adjusted EBITDA.

We have excluded from depreciation the impact of accelerated depreciation for costs related to certain restructuring projects that impacts the expected useful lives of Property, Plant and Equipment as such charges vary significantly based on the size and timing of the programs.

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.

• Interest (income) expense:

We have excluded foreign currency impacts associated with acquisition-related and debt financing-related forward contracts, as well as debt financing transaction costs as the nature and amount of such charges are not consistent and are significantly impacted by the timing and size of such transactions.

• Other expense (income):

We have excluded the impact of costs incurred for legal and advisory services rendered in connection with the evaluation of the tender offer initiated by certain of our shareholders.

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 excluded debt financing transaction costs, including deferred financing fee write-offs and similar costs, as the nature and amount of such charges are not consistent and are significantly impacted by the timing and size of such transactions.

• 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.

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:

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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.

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.

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Period of acquisition, divestiture, or termination Acquisition, divestiture, or termination Impact on basis of 2021/2020 presentation Impact on basis of 2020/2019 presentation

Second quarter fiscal 2018

Acquisition :

Burberry Beauty Business

n/a First quarter fiscal 2019 financial contribution excluded

Third quarter fiscal 2018

Termination :

n/a First, second and third quarter fiscal 2018 financial contribution excluded

Fourth quarter fiscal 2018

Divestitures of licenses :

Playboy and Cerruti

n/a Fiscal 2018 financial contribution excluded

First quarter fiscal 2020 Divestiture:

Younique - the divestiture of the interest in Foundation, which holds the net assets for Younique

September fiscal year 2020 and September - June fiscal year 2019 financial contribution excluded.

Younique - the divestiture of the interest in Foundation, LLC, which held the net assets for Younique

First quarter fiscal year 2020 net revenue excluded.

September of fiscal year 2020 and September - June of fiscal year 2019 financial contribution excluded.

Closing date of divestiture was September 16, 2019.

This effectively excludes the incremental three months and 14 days of net revenue contribution from Younique in the prior year.

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.

Third and fourth quarter fiscal year 2020 financial contribution excluded.

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In fiscal 2021, net revenues decreased 2%, or $87.9, to $4,629.9 from $4,717.8 in fiscal 2020.

Excluding the impacts of the Acquisition and Divestiture, total net revenues in fiscal 2020 decreased 22%, or $1,339.7, to $4,653.4 from $5,993.1 in fiscal 2019, reflecting a negative foreign currency exchange translation impact of 2%, and a decrease in unit volume of 20%.

Excluding the impacts of the Acquisition and Divestiture, total net revenues in fiscal 2021 decreased 2%, or $82.0, to $4,580.3 from $4,662.3 in fiscal 2020, reflecting a positive foreign currency exchange translation impact of 2%, a negative price and mix impact of 1%, and a decrease in unit volume of 3%.

The decrease in net revenues primarily reflects lower net revenues due to the COVID-19 pandemic, with the highest impact on the mass color cosmetics category, 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 lines, particularly lip and face products.

In addition, prestige products in our travel retail channels remained significantly impacted due to continued restrictions on leisure travel.

The decrease in demand throughout most of fiscal 2021 was partially offset by the re-opening of stores and reduced COVID restrictions in the last fiscal quarter, which mainly increased prestige products, a repositioning and reinvestment in mass beauty brands, and growth of e-commerce and continued expansion in China.

The Company also experienced successful launches of Marc Jacobs Perfect , Gucci Guilty and Gucci Bloom in the 2021 fiscal year.

In fiscal 2020, net revenues decreased 25%, or $1,570.1, to $4,717.8 from $6,287.9 in fiscal 2019.

Excluding the impacts of the Acquisition and Divestitures, total net revenues in fiscal 2020 decreased 22%, or $1,339.7, to $4,653.4 from $5,993.1 in fiscal 2019, reflecting a negative foreign currency exchange translation impact of 2%, and a decrease in unit volume of 20%.

The decrease in net revenues primarily reflects lower sales due to the COVID-19 pandemic, impacting all product categories across the Company, which more than offset the positive trends in the first half of the fiscal year driven by the resolution of the supply chain disruptions, which negatively impacted net revenues in the prior year.

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This brand also experienced a successful launch of the Good.Kind.Pure products in the first half of the 2020 fiscal year.

In fiscal 2019, net revenues decreased 8%, or $553.9, to $6,287.9 from $6,841.8 in fiscal 2018.

Excluding the impacts of the Acquisition and Divestitures, total net revenues in fiscal 2019 decreased 7%, or $461.5, to $6,225.6 from $6,687.1 in fiscal 2018, reflecting a negative foreign currency exchange translation impact of 3%, and a decrease in unit volume of 4%.

The decrease in net revenues primarily reflects:

(i) shelf-space losses primarily impacting CoverGirl and Rimmel which have contributed to the negative share trends in the color cosmetics category;

(ii) performance challenges in our brands across Europe which have contributed to the region’s negative share trends in the color cosmetics category;

(iii) moderate weakness in the mass beauty categories in the United States and Europe;

(iv) the supply chain disruptions, which negatively impacted net revenues primarily in the first half of 2019 and were resolved in the fourt h quarter of fiscal 2019.

These decreases were partially offset by continued success from the prestige product category, mainly from increased sales from Burberry, Calvin Klein and Gucci .

Year Ended June 30, Change %

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Total $ 4,629.9 $ 4,717.8 $ 6,287.9 (2 %) (25 %)

In fiscal 2020, net revenues in the Americas segment decrease d 21%, or $477.9 to $1,771.0 from $2,248.9 in fiscal 2019.

Excluding the impact of the Acquisition, net revenues in the Americas segment decreased 24%, or $529.9, to $1,719.0 in fiscal 2020 from $2,248.9 in fiscal 2019, reflecting a decrease in unit volume of 19%, a negative foreign currency exchange translation impact of 2% and a negative price and mix impact of 3%.

In fiscal 2021, net revenues in the Americas segment increase d 5%, or $95.9 to $1,866.9 from $1,771.0 in fiscal 2020.

Excluding the impact of the Acquisition, net revenues in the Americas segment increased 3%, or $47.8, to $1,818.8 in fiscal 2021 from $1,771.0 in fiscal 2020, reflecting an increase in unit volume of 4%, a positive price and mix impact of 2%, partially offset by a negative foreign currency exchange translation impact of 3%.

The increase in net revenues primarily reflects:

(i) increased net revenues due to the recovery from COVID-19 pandemic, with the highest impact on prestige products due to reopening of retail malls, and increased store traffic in the second half of the fiscal year;

(ii) an increase in net revenues from the recent launches of Marc Jacobs Perfect , Gucci Guilty EDP , Burberry London Dream , and Diamond Gel from Risqué , as well as improved performance in the last fiscal quarter due to new brand positioning and increased support for CoverGirl and continued strength of Marc Jacobs Daisy ;

(iii) an increase in net revenues from Sally Hansen products, primarily in the United States, due to increased demand for at-home manicures and creative Sally Hansen collections.

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;

(iv) an increase in net revenues as a result of growth in e-commerce sales across all brands due to change in consumer shopping preferences, as well as increased holiday program specifically for Philosophy ;

(v) an increase in net revenues in Brazil from Monange due to strategic pricing actions leading to market share gain.

These increases were partially offset by:

(i) lower net revenues due to negative brand and category trends for mass color cosmetics, in particular lip and face products, due to the COVID-19 pandemic, primarily impacting CoverGirl and Rimmel ;

(ii) lower net revenues attributable to Kylie , primarily due to Kylie make-up production transitioning from the previous supplier;

(iii) lower net revenues due to overall decreased launch activities, reduced holiday exposure, and promotional activity in the first nine months of the fiscal year compared to prior period;

(iv) lower net revenues from travel retail as a result of rolling travel restrictions due to COVID-19, which significantly affected prestige products across the region.

In fiscal 2020, net revenues in the Americas segment decreased 21%, or $477.9, to $1,771.0 from $2,248.9 in fiscal 2019.

Excluding the impact of the Acquisition and Divestitures, net revenues in Americas decreased 24% or $529.9, to $1,719.0 in fiscal 2020 from $2,248.9 in fiscal 2019, reflecting a decrease in unit volume of 19%, a negative foreign currency exchange translation impact of 2% and a negative price and mix impact of 3%.

The decrease in net revenues primarily reflects:

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(iv) incremental net revenues from Tiffany & Co due to the launch of Tiffany & Love in the first half.

In fiscal 2019, net revenues in the Americas segment decreased 6%, or $150.4, to $2,248.9 from $2,399.3 in fiscal 2018.

Excluding the impact of the Acquisition and Divestitures, net revenues in Americas decreased 6% or $131.6, to $2,232.0 in fiscal 2019 from $2,363.6 in fiscal 2018, reflecting a negative foreign currency exchange translation impact of 3%, a negative price and mix impact of 2%, and a decrease in unit volume of 1%.

In fiscal 2021, net revenues in the EMEA region decreased 5%, or $124.9, to $2,183.7 from $2,308.6 in fiscal 2020, reflecting a decrease in unit volume of 12%, partially offset by a positive foreign currency exchange translation impact of 5%, and a positive price and mix impact of 2%.

The decrease in net revenues primarily reflects:

(i) shelf-space losses in the United States primarily impacting CoverGirl and Rimmel , which have contributed to the negative share trends in the color cosmetics category;

(ii) reduced net revenues in the United States from the supply chain disruptions primarily in the first half of fiscal 2019;

(iii) lower net revenues from philosophy due to distribution losses at a key U.S.

customer and due to the timing of shipments;

(iv) unfavorable foreign currency exchange translation impacts of certain currencies in Latin America.

(i) lower net revenues due to the COVID-19 pandemic, impacting all product lines across the region in the first nine months of the fiscal year.

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.

This COVID-19 impact has been partially offset in the last fiscal quarter as a result of reopening of stores and reduced COVID restrictions;

(ii) 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;

(iii) lower net revenues due to strategic initiatives to reduce sales through lower priced channels;

(iv) 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 eye categories.

These decreases were partially offset by:

(i) increased net revenues from Burberry in the United States due to the integration and growth of the Burberry Beauty Business;

(ii) higher net revenues from Monange due to category growth and share gains in Brazil.

In fiscal 2020, net revenues in the EMEA segment decreased 21%, or $601.1, to $2,308.6 from $2,909.7 in fiscal 2019, reflecting a decrease in unit volume of 21% and a negative foreign currency exchange translation impact of 2%, partially offset by a positive price and mix impact of 2%.

(i) an incremental increase in net revenues from various brands as a result of reductions in promotional allowances and other trade spend items, as well as less customer returns;

(ii) an increase in net revenues across EMEA resulting from the continued success of launches in prestige fragrances and color cosmetics, including Marc Jacobs Perfect , Hugo Boss Alive , Boss Bottled , Gucci Guilty , as well as continued growth of e-commerce sales for prestige and mass beauty products;

(iii) an increase in net revenues due to shelf space gains from Rimmel in the UK.

In fiscal 2020, net revenues in the EMEA region decreased 21%, or $601.1, to $2,308.6 from $2,909.7 in fiscal 2019, reflecting a decrease in unit volume of 21% and a negative foreign currency exchange translation impact of 2%, partially offset by a positive price and mix impact of 2%.

The decrease in net revenues primarily reflects:

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and Bruno Banani mainly driven by the launch of Bruno Banani Loyal Man in Germany.

In fiscal 2019, net revenues in EMEA decreased 10%, or $341.0, to $2,909.7 from $3,250.7 in fiscal 2018.

Excluding the impact of the Acquisition and Divestitures, net revenues in EMEA decreased 9%, or $275.0, to $2,878.0 in fiscal 2019 from $3,153.0 in fiscal 2018, reflecting a decrease in unit volume of 8% and a negative foreign currency exchange translation impact of 4%, offset by a positive price and mix impact of 3%.

In fiscal 2021, net revenues in the Asia Pacific segment decreased 1%, or $3.4, to $579.3 from $582.7 in fiscal 2020, reflecting a decrease in unit volume of 15%, a positive foreign currency exchange translation impact of 5%, and a positive price and mix impact of 9%.

The decrease in net revenues primarily reflects:

(i) performance challenges in our mass category brands across Europe which have contributed to the region’s negative share trends in the color cosmetics category;

(ii) declines in Rimmel , Bourjois , and Max Factor across the region due to the supply chain disruptions primarily in the first half of fiscal 2019;

(iii) declines in mass fragrances in Western Europe in part due to negative share and category trends in the mass fragrances category.

These declines were partially offset by:

(i) incremental net revenues from Calvin Klein and Burberry across the region;

(ii) increased net revenues in South Africa from brands across the color cosmetics and prestige fragrance categories.

In fiscal 2020, net revenues in the Asia Pacific segment decreased 24%, or $188.4, to $582.7 from $771.1 in fiscal 2019, reflecting a decrease in unit volume of 21%, a negative foreign currency exchange translation impact of 2%, and a negative price and mix impact of 1%.

(i) lower net revenues from travel retail as a result of rolling travel restrictions due to COVID-19, which significantly affected prestige products across the region;

(ii) lower net revenues due to strategic initiatives to reduce sales through lower priced channels for prestige products across the Asia Pacific region;

(iii) 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 as a result of a strategic decision to exit department stores in China;

(iv) lower net revenues due to declines in Calvin Klein, mainly impacting Australia as a result of decrease in travel activity.

These decreases were partially offset by:

(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 , Marc Jacobs Perfect , and Chloé Atelier des Fleurs in the prestige category;

(iii) an increase in net revenue related to travel retail in China and Korea, specifically due to reductions in travel restrictions within these countries.

In fiscal 2020, net revenues in Asia Pacific decreased 24%, or $188.4, to $582.7 from $771.1 in fiscal 2019, reflecting a decrease in unit volume of 21%, a negative foreign currency exchange translation impact of 2%, and a negative price and mix impact of 1%.

The decrease in net revenues primarily reflects:

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and Rimmel mainly driven by increased net revenues in Japan.

In fiscal 2019, net revenues in Asia Pacific increased 2%, or $12.4, to $771.1 from $758.7 in fiscal 2018.

Excluding the impact of the Acquisition and Divestitures, net revenues in Asia Pacific increased 3% or $20.0 to $757.4 in fiscal 2019 from $737.4 in fiscal 2018, reflecting an increase in unit volume of 7%, offset by a decrease in price and mix of 1% and a negative foreign currency exchange translation impact of 3%.

The increase in net revenues primarily reflects increased net revenues in China from Gucci and Burberry , offset by lower net revenues in China from Max Factor due to changes to retailer trade inventory levels.

Other consists of the net revenues from Younique.

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In fiscal 2021, cost of sales decreased 7%, or $129.5, to $1,861.7 from $1,991.2 in fiscal 2020.

Cost of sales as a percentage of net revenues increased to 42.2% in fiscal 2020 from 39.7% in fiscal 2019 resulting in a gross margin percentage decrease of approximately 250 basis points primarily reflecting COVID-19 reduced sales volume impact which negatively impacted the gross margin trends during the pre-COVID-19 period, as follows:

(i) increased excess and obsolescence expense on inventory;

(ii) incremental expense of underutilized facilities costs;

(iii) increased designer license fees due to an unfavorable mix of prestige brands with higher minimum royalty rates.

These negative impacts were partially offset by increased gross margin due to sales price increases in Brazil in the current period, compared to lower base due to negative mix impact associated with lower-margin body care products in the prior period.

Cost of sales as a percentage of net revenues decreased to 40.2% in fiscal 2021 from 42.2% in fiscal 2020 resulting in a gross margin percentage increase of approximately 200 basis points, primarily reflecting:

(i) approximately 100 basis points primarily related to reductions, as a percentage of revenues, in promotional allowances and other trade spend items, as well as customer returns, which are recorded as adjustments to net sales;

(ii) approximately 100 basis points related to decreased excess and obsolescence expense due to the high levels of excess and obsolescence expense in the prior year as a result of COVID-19 pandemic impacting demand, as well as improvements in the current fiscal year in forecasting sales and related inventory levels;

(iii) approximately 40 basis points related to decreased manufacturing overhead cost due to increased manufacturing efficiencies.

These positive impacts were partially offset by:

(i) approximately 20 basis points related to negative gross margin impacts from changes in product and category mix, primarily due to increased contribution of relatively lower margin body care products, and an increase in the proportionate share of our Brazil market, which has a lower margin contribution;

(ii) approximately 20 basis points related to negative gross margin impact due to an unfavorable mix of prestige brands with higher minimum royalty rates.

In fisca l 2020, cost of sales decreased 20%, or $507.3, to $1,991.2 from $2,498.5 in fiscal 2019.

Cost of sales as a percentage of net revenues remained constant at 39.7% in fiscal 2019 and in fiscal 2018, primarily reflecting:

(i) a favorable mix impact associated with the increased proportion of net revenue contribution from higher-margin prestige products in the current period as compared to the prior period;

(ii) lower costs from distributor terminations and accelerated depreciation of buildings and equipment associated with plant closures related to the global integration activities in the prior period;

(iii) decreased excess and obsolescence expense on inventory in the Corporate segment for artwork transition activities on acquired inventory in connection with the acquisition of the P&G Beauty Business.

These improvements were mostly offset by:

(i) increased designer license fees due to an unfavorable mix of prestige brands with higher loyalty rates;

(ii) increased excess and obsolescence expense on mass category product inventory;

(iii) increased freight expenses, primarily reflecting higher import duties and freight rates in the Asia Pacific segment;

(iv) the negative mix impact within the mass product category associated with a higher proportionate net revenue contribution from lower-margin body care products, which has its primary commercial market located in Brazil.

Cost of sales as a percentage of net revenues increased to 42.2% in fiscal 2020 from 39.7% in fiscal 2019 resulting in a gross margin percentage decrease of approximately 250.0 basis points primarily reflecting COVID-19 reduced sales volume impact which negatively impacted the gross margin trends during the pre-COVID-19 period, as follows:

(i) Approximately 110 basis points related to increased excess and obsolescence expense on inventory;

(ii) Approximately 60 basis points related to incremental expense of underutilized facilities costs;

(iii) Approximately 50 basis points related to increased designer license fees due to an unfavorable mix of prestige brands with higher minimum royalty rates.

These negative impacts were partially offset by approximately 20 basis points of increased gross margin due to sales price increases in Brazil in the current period, compared to lower base due to negative mix impact associated with lower-margin body care products in the prior period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In fiscal 2021, selling, general and administrative expenses decreased 24%, or $756.8, to $2,363.2 from $3,120.0 in fiscal 2020.

Selling, general and administrative expenses as a percentage of net revenues decreased to 51.0% in fiscal 2021 from 66.1% in fiscal 2020, or approximately 1,510 basis points.

This decrease was primarily due to:

(i) 690 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 fees due to completion of the sale of the Wella Business;

(ii) 620 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, including lower working media spending of 240 basis points instituted to counter the COVID-19 pandemic, led to savings that outpaced the decline in net revenues;

(iii) 110 basis points related to lower bad debt expense;

(iv) 40 basis points related to savings in logistics costs due to cost reductions from packaging and storage fees;

(v) 30 basis points in stock compensation related to a modification of the former CEO's equity awards.

This expense will be impacted in future periods by the CEO grant made on June 30, 2021, with the highest impact coming in fiscal year 2022.

See Note 24—Share-Based Compensation Plans in the notes to our Consolidated Financial Statements for additional information.

In fiscal 2020, selling, general and administrative expenses decreased 10%, or $347.9, to $3,120.0 from $3,467.9 in fiscal 2019.

These amounts include the impact of a higher base of overhead costs in continuing operations following the decision to divest the Wella Business.

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(v) 40 basis points related to savings in logistics costs from the COVID-19 pandemic out-paced by the decline in net revenues.

In fiscal 2019, selling, general and administrative expenses decreased 9%, or $339.2, to $3,467.9 from $3,807.1 in fiscal 2018.

Selling, general and administrative expenses as a percentage of net revenues decreased to 55.2% in fiscal 2019 from 55.6% in fiscal 2018, or approximately 40 basis points.

This decrease was primarily reflecting:

(i) 140 basis points related to lower advertising and consumer promotion costs due to a rationalization of non-strategic spending in non-working media and other consumer promotion activities across all segments, and a decrease in media spending in the mass product category;

(ii) 30 basis points related to lower share-based compensation expense due to significant executive forfeitures of share-based compensation instruments, and positive transactional impact from our exposure to foreign currency exchange fluctuations.

These decreases were partially offset by:

(i) 60 basis points related to higher administrative costs due to our integration activities, as well as the decline in net revenues in the mass product category, which outpaced the overall decline in administrative costs from compensation expense savings as a result of restructuring actions and certain other programs;

(ii) 70 basis points related to higher distribution and warehousing expenses due to a strategic shift in certain markets to distribute through subsidiaries as opposed to third-party distributors;

and other expenses.

OPERATING (LOSS) INCOME FROM CONTINUING OPERATIONS

In fiscal 2021, operating loss from continuing operations was $48.6 compared to a loss of $1,236.5 in fiscal 2020.

Operating margin increased to (26.2)% in fiscal 2020 as compared to (58.7)% in fiscal 2019.

The operating margin improvements are largely driven by lower asset impairment charges in the current year compared with the prior year, partially offset by reduced net revenue base in the current year due to the impact from the COVID-19 pandemic, causing increased cost of goods sold and selling and general administrative expenses as a percentage of net revenues, and higher restructuring expense and acquisition and divestiture related costs in the current year.

Operating loss as a percentage of net revenues, improved to (1.0)% in fiscal 2021 as compared to (26.2)% in fiscal 2020.

The improved operating margin is primarily driven by various initiatives to lower costs, including management's plan to reduce certain discretionary and fixed costs, a temporary reduction in advertising and promotional spend, and lower cost of goods sold as a percentage of net revenues.

Further, there were no asset impairment charges in fiscal 2021.

These improvements are partially offset by an increase in amortization expense.

In fiscal 2020, operating loss from continuing operations was $1,236.5 compared to a loss of $3,688.4 in fiscal 2019.

Operating margin, or operating loss as a percentage of net revenues, decreased to (58.7)% of net revenues in fiscal 2019 as compared to an operating margin of (2.3)% in fiscal 2018.

The operating margin decreases were largely driven by the asset impairment charges in fiscal 2019.

Operating loss as a percentage of net revenues, improved to (26.2)% in fiscal 2020 as compared to (58.7)% in fiscal 2019.

The operating margin improvements are largely driven by lower asset impairment charges in fiscal 2020 compared with fiscal 2019, partially offset by reduced net revenue base in the current year due to the impact from the COVID-19 pandemic, causing increased cost of goods sold and selling and general administrative expenses as a percentage of net revenues, and higher restructuring expense and acquisition and divestiture related costs in the current year.

Operating (Loss) Income by Segment

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(in millions) 2021 2020 2019 2021/2020 2020/2019

OPERATING (LOSS) INCOME FROM CONTINUING OPERATIONS

Operating income (loss) from continuing operations

Americas $ 36.5 $ (164.8) $ (1,474.5) >100% 89 %

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Total $ (48.6) $ (1,236.5) $ (3,688.4) 96 % 66 %

In fiscal 2021, operating income for Americas was $36.5 compared to a loss of $164.8 in fiscal 2020.

Operating margin improved to 2.0% of net revenues in fiscal 2021 as compared to (9.3)% in fiscal 2020, primarily reflecting a significant decrease in advertising and promotional spend and reduction in fixed costs, partially offset by higher cost of goods sold as a percentage of net revenues and amortization expense.

In fiscal 2020, operating loss for Americas was $164.8 compared to a loss of $1,474.5 in fiscal 2019.

Operating margin increased to (9.3)% of net revenues in fiscal 2020 as compared to (65.6)% in fiscal 2019, primarily reflecting higher asset impairment charges in the prior year , partially offset by reduced net revenue base due to the impact from the COVID-19 pandemic, higher cost of goods sold and selling, general, and administrative expense as a percentage of net revenues, and current year asset impairment charges.

In fiscal 2019, operating loss for Americas was $1,474.5 compared to an income of $45.6 in fiscal 2018.

Operating margin decreased to (65.6)% of net revenues in fiscal 2019 as compared to 1.9% in fiscal 2018, primarily driven by the asset impairment charges in fiscal 2019.

Operating margin improved to (9.3)% of net revenues in fiscal 2020 as compared to (65.6)% in fiscal 2019, primarily reflecting higher asset impairment charges in the prior year , partially offset by reduced net revenue base due to the impact from the COVID-19 pandemic, higher cost of goods sold and selling, general, and administrative expense as a percentage of net revenues, and current year asset impairment charges.

In fiscal 2021, operating income for EMEA was $129.8 compared to a loss of $248.4 in fiscal 2020.

Operating margin improved to 5.9% of net revenues in fiscal 2021 as compared to (10.8)% in fiscal 2020, primarily reflecting a significant decrease in advertising and promotional spend, decrease in asset impairment cost, lower cost of goods sold as a percentage of net revenues, and reduction in fixed costs.

In fiscal 2020, operating loss for EMEA was $248.4 compared to a loss of $1,344.1 in fiscal 2019.

Operating margin increased to (10.8)% of net revenues in fiscal 2020 as compared to (46.2)% in fiscal 2019, primarily reflecting higher asset impairment charges in the prior year, partially offset by reduced net revenue base due to the impact from the COVID-19 pandemic, higher cost of goods sold and selling, general, and administrative expense as a percentage of net revenues, and current year asset impairment charges.

In fiscal 2019, operating loss for EMEA was $1,344.1 compared to an income of $131.4 in fiscal 2018.

Operating margin decreased to (46.2)% of net revenues in fiscal 2019 as compared to 4.0% in fiscal 2018, primarily driven by the asset impairment charges in fiscal 2019.

Operating margin improved to (10.8)% of net revenues in fiscal 2020 as compared to (46.2)% in fiscal 2019, primarily reflecting higher asset impairment charges in the prior year, partially offset by reduced net revenue base due to the impact from the COVID-19 pandemic, higher cost of goods sold and selling, general, and administrative expense as a percentage of net revenues, and current year asset impairment charges.

In fiscal 2021, operating loss for Asia Pacific was $13.2 compared to a loss of $74.0 in fiscal 2020.

Operating margin increased to (12.7)% of net revenues in fiscal 2020 as compared to (32.8)% in fiscal 2019, primarily reflecting higher asset impairment charges in the prior year, partially offset by reduced net revenues due to the impact from the COVID-19 pandemic, and higher cost of goods sold and selling, general and administrative expenses as a percentage of net revenues.

In fiscal 2019, operating loss for Asia Pacific was $253.1 compared to an income of $52.7 in fiscal 2018.

Operating margin decreased to (32.8)% of net revenues in fiscal 2019 as compared to 6.9% in fiscal 2018, primarily driven by the asset impairment charges in fiscal 2019.

Operating margin improved to (2.3)% of net revenues in fiscal 2021 as compared to (12.7)% in fiscal 2020, primarily reflecting decrease in advertising and promotional spend, and lower fixed costs as a percentage of net revenues.

In fiscal 2020, operating loss for Asia Pacific was $74.0 compared to a loss of $253.1 in fiscal 2019.

Operating margin improved to (12.7)% of net revenues in fiscal 2020 as compared to (32.8)% in fiscal 2019, primarily reflecting higher asset impairment charges in the prior year, partially offset by reduced net revenues due to the impact from the COVID-19 pandemic, and higher cost of goods sold and selling, general and administrative expenses as a percentage of net revenues.

Other represents operating (loss) income from Younique.

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Operating loss for Corporate was $201.7, $738.4 and $598.1 in fiscal 2021, 2020 and 2019, respectively, as described under “Adjusted Operating Income” below.

The operating loss of $201.7 in fiscal 2021 includes acquisition and divestiture related costs, and restructuring and other business realignment costs.

The operating loss of $738.4 in fiscal 2020 includes asset impairment charges, acquisition and divestiture related costs and restructuring and other business realignment costs, partially offset by the gain on sale of business.

The operating loss of $598.1 in fiscal 2019 includes asset impairment charges and restructuring and other business realignment costs.

Continuing Operations by Segment

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(GAAP) Adjustments (a)

Adjusted Operating loss from continuing operations

Adjusted operating income (loss) from continuing operations

Americas $ 36.5 $ (105.0) $ 141.5

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Asia Pacific (13.2) (24.1) 10.9

Other (10.9) (7.4) (3.5)

Corporate (201.7) (206.8) 5.1

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Adjustments (a)

Adjusted Operating income from continuing operations

Adjusted operating loss from continuing operations

Americas $ (164.8) $ (75.3) $ (89.5)

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Adjustments (a)

Adjusted Operating income from continuing operations

Adjusted operating (loss) income from continuing operations

Americas $ (1,474.5) $ (1,633.7) $ 159.2

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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.

Adjusted Operating (Loss) Income from Continuing Operations for Coty Inc.

Adjusted Operating (Loss) Income and Adjusted EBITDA from Continuing Operations for Coty Inc.

Adjusted operating (loss) income from continuing operations provides investors with supplementary information relating to our performance.

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Costs related to acquisition and divestiture activities 138.8 157.3 — (12 %) N/A

Asset impairment charges 434.0 3,729.0 — (88 %) N/A

Loss/(gain) on divestitures and sale of brand assets (111.5) — 28.6 N/A (100 %)

Asset impairment charges — 434.0 3,729.0 (100 %) (88 %)

Loss/(gain) on divestitures — (111.5) — 100 % N/A

Total adjustments to reported operating loss 458.0 1,074.8 4,179.2 (57 %) (74) %

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% of Net revenues 8.8 % (3.4 %) 7.8 %

Non-cash stock-based compensation 25.2 2.0 12.5 >100% (84 %)

Adjusted depreciation 325.8 334.3 333.6 (3 %) — %

Adjusted EBITDA $ 760.4 $ 174.6 $ 836.9 >100% (79) %

% of Revenues 16.4 % 3.7 % 13.3 %

In fiscal 2021, adjusted operating income was $409.4 compared to a loss of $161.7 in fiscal 2020.

Adjusted operating margin increased to 8.8% of net revenues in fiscal 2021 as compared to (3.4%) in fiscal 2020.

In fiscal 2021, adjusted EBITDA was $760.4 compared to $174.6 in fiscal 2020.

Adjusted EBITDA margin increased to 16.4% of net revenues in 2021 as compared to 3.7% in fiscal 2020, primarily driven by various initiatives to lower costs, including a temporary reduction in advertising and promotional spend, management's plan to reduce certain discretionary and fixed costs, and lower cost of goods sold as a percentage of net revenues.

In fiscal 2020, adjusted operating loss was $161.7 compared to an income of $490.8 in fiscal 2019.

These amounts include the impact of a higher base of overhead costs in continuing operations following the decision to divest the Wella Business.

Adjusted operating margin decreased to (3.4%) of net revenues in fiscal 2020 as compared to 7.8% in fiscal 2019, primarily driven by reduced net revenues due to the COVID-19 pandemic, higher selling, general and administrative costs as a percentage of net revenues and higher cost of goods sold as a percentage of net revenues.

In fiscal 2019, adjusted operating income was $490.8 from $544.5 in fiscal 2018.

Adjusted operating margin decreased to 7.8% of net revenues in fiscal 2019 as compared to 8.0% in fiscal 2018, primarily driven by higher selling, general and administrative costs as a percentage of net revenues, partially offset by cost of goods sold as a percentage of net revenues.

Adjusted operating margin decreased to (3.4%) of net revenues in fiscal 2020 as compared to 7.8% in fiscal 2019.

In fiscal 2020, adjusted EBITDA was $174.6 compared to $836.9 in fiscal 2019.

Adjusted EBITDA margin decreased to 3.7% of net revenues in 2020 as compared to 13.3% in fiscal 2019, primarily driven by reduced net revenues due to the COVID-19 pandemic, higher selling, general and administrative costs as a percentage of net revenues and higher cost of goods sold as a percentage of net revenues.

Amortization Expense

In fiscal 2020, amortization expense decreased to $233.1 from $246.7 in fiscal 2019.

In fiscal 2021, amortization expense increased to $251.2 from $233.1 in fiscal 2020.

In fiscal 2021, amortization expense of $105.0, $122.1, $24.1, and $0.0 was reported in the Americas, EMEA, Asia Pacific, and Other segments, respectively.

In fiscal 2020, amortization expense of $75.3, $125.4, $25.0, and $7.4 was reported in the Americas, EMEA, Asia Pacific, and Other segments, respectively.

In fiscal 2019, amortization expense increased to $246.7 from $244.3 in fiscal 2018 .

The increase was primarily driven by finite lived intangibles recorded for the Kylie acquisition in the third quarter of fiscal 2020.

In fiscal 2020, amortization expense decreased to $233.1 from $246.7 in fiscal 2019.

In fiscal 2019, amortization expense of $53.9, $133.3, $24.6, and $34.9 was reported in the Americas, EMEA, Asia Pacific, and Other segments, respectively.

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On May 11, 2020 we announced an expansion of the Turnaround Plan to further reduce fixed costs, the Transformation Plan.

During fiscal 2020, we paid cash of approximately $210.7 in connection with the execution of the Transformation Plan and our previously announced programs.

We incurred $366.4 of cash costs life-to-date as of June 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 fiscal 2020, we incurred restructuring and other business realignment costs of $361.9, as follows:

In fiscal 2021, we incurred restructuring and other business structure realignment costs of $68.0, as follows:

• We incurred restructuring costs of $63.6, primarily related to the Transformation Plan, included in the Consolidated Statements of Operations;

• We incurred business structure realignment costs of $4.4 primarily related to our Transformation Plan and certain other programs.

This amount includes $217.2 reported in selling, general and administrative expenses, primarily

related to severance, consulting costs and accelerated depreciation costs;

This amount includes $(3.9) reported in selling, general and administrative expenses, which is a result of changes in estimate, and $8.3 reported in cost of sales due to an increase in accelerated depreciation as part of Transformation Plan, in the Consolidated Statement of Operations.

In fiscal 2020, we incurred restructuring and other business structure realignment costs of $361.9, as follows:

• We incurred restructuring costs of $130.2 primarily related to the Transformation Plan, included in the Consolidated Statements of Operations;

• We incurred business structure realignment costs of $231.7 primarily related to our Transformation Plan and certain other programs.

This amount includes $217.2 reported in selling, general and administrative expenses, primarily related to severance, consulting costs and accelerated depreciation costs;

and $14.5 reported in cost of sales in the Consolidated Statement of Operations.

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Of this amount $159.9 is included in selling, general and administrative expenses and $9.4 is included in cost of sales, primarily due to costs incurred for the realignment of the business due to the P&G Beauty Business.

In fiscal 2018, we incurred restructuring and other business structure realignment costs of $351.0, as follows:

• We incurred Restructuring costs of $134.9 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 $216.1 primarily related to our Global Integration Activities and certain other programs.

Of this amount $165.6 is included in selling, general and administrative expenses and $50.5 is included in cost of sales.

In all reported periods, all restructuring and other business realignment costs were reported in Corporate.

Acquisition- and divestiture-related costs

In fiscal 2020,we incurred $157.3 of acquisition- and divestiture-related costs, of which $19.7 were consulting and legal costs associated with the King Kylie Transaction and the pending transaction with Kim Kardashian West, and $137.6 associated with the Wella Transaction and other contract termination costs.

In fiscal 2021,we incurred $138.8 of acquisition- and divestiture-related costs, of which $135.8 were associated with the Wella Transaction, and $3.0 were consulting and legal costs associated with the Kim Kardashian West Transaction.

In fiscal 2020, we incurred $157.3 of acquisition- and divestiture-related costs, of which $137.6 were associated with the Wella Transaction and other contract termination costs, and $19.7 were consulting and legal costs associated with the King Kylie Transaction and the then pending transaction with Kim Kardashian West.

In fiscal 2019, there were no acquisition or divestiture-related charges incurred.

In fiscal 2018, we incurred $64.2 of costs primarily related to the acquisition of the P&G Beauty Business, the Burberry Beauty Business, and Younique.

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 & obsolescence expense on inventory associated with the Burberry Beauty Business acquisition, included in Cost of sales in the Consolidated Statements of Operations.

In all reported periods, all acquisition- and divestiture-related costs were reported in Corporate, except where otherwise noted.

Asset Impairment Charges

In fiscal 2021, we did not incur any asset impairment charges.

In fiscal 2020, we incurred $434.0 of asset impairment charges primarily due to $329.0 related to indefinite-lived other intangible assets and $105.0 related to goodwill, all reported in Corporate.

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and $12.0 related to a Corporate investment recorded during fiscal 2019.

In fiscal 2018, we did not incur any asset impairment charges.

For further detail as to the factors resulting in the asset impairment charges please see Note 12 —Goodwill and Other Intangible Assets, net to the Consolidated Financial Statements.

Loss (Gain) on divestitures and sale of brand assets

In fiscal 2020, we completed the divestiture of Younique resulting in income of $111.5 included in Gain on divestitures and sale of brand assets in the Consolidated Statements of Operations.

In fiscal 2019, we did not incur a loss (gain) on divestitures and sale of brand assets.

In fiscal 2018, we sold certain assets relating to our Playboy and Cerruti fragrance brands and recorded a loss of $28.6.

Loss (Gain) on divestitures

In fiscal 2021, we did not incur a loss (gain) on divestitures.

In fiscal 2020, we completed the divestiture of Younique resulting in income of $111.5 included in Gain on divestitures in the Consolidated Statements of Operations.

In fiscal 2019, we did not incur a loss (gain) on divestitures.

Non-cash stock-based compensation

In fiscal 2021, non-cash stock-based compensation of $10.2, $11.9 and $3.1 was reported in the Americas, EMEA and Asia Pacific segments, respectively.

In fiscal 2020, non-cash stock-based compensation of $0.8, $1.0 and $0.2 was reported in the Americas, EMEA and Asia Pacific segments, respectively.

In fiscal 2019, non-cash stock-based compensation of $4.5, $5.8, $1.5 and $0.7 was reported in the Americas, EMEA, Asia Pacific and Other segments, respectively.

Adjusted depreciation expense

In fiscal 2021, adjusted depreciation expense of $147.3, $134.0 and $44.5 was reported in the Americas, EMEA and Asia Pacific segments, respectively.

In fiscal 2020, adjusted depreciation expense of $145.5, $142.0, $42.5 and $4.3 was reported in the Americas, EMEA, Asia Pacific and Other segments, respectively.

In fiscal 2019, adjusted depreciation expense of $135.2, $139.5, $38.8 and $20.1 was reported in the Americas, EMEA, Asia Pacific and Other segments, respectively.

INTEREST EXPENSE, NET

Net interest expense was $235.1, $242.7, and $225.2 in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.

In fiscal year 2020, the net interest expense was higher due to foreign exchange losses, net of derivative contracts, as compared to gains in fiscal 2019, and lower interest income on bank balances and short-term investments, offset by lower current year interest expense on average debt balances due to lower interest rates.

In fiscal 2019, the increased net interest expense was primarily as a result of higher average debt balances.

LOSS ON EARLY EXTINGUISHMENT OF DEBT

We did not incur any losses related to the early extinguishment of debt in fiscal 2020 and in fiscal 2019.

In fiscal 2018, we incurred $10.7 in losses related to the write-off of debt discount and deferred financing costs in connection with the refinancing of our credit agreement entered into on October 27, 2017 (the “Coty Credit Agreement”) and the debt facilities available under the Galleria Credit Agreement (the “Galleria Credit Agreement”).

In fiscal year 2021, the decrease is primarily due to the paydown of debt as a result of the completion of Wella Business sale on November 30, 2020.

In fiscal 2020, the net interest expense was higher due to foreign exchange losses, net of derivative contracts, as compared to gains in fiscal 2019, and lower interest income on bank balances and short-term investments, offset by lower interest expense on average debt balances due to lower interest rates.

OTHER EXPENSE (INCOME), NET

In fiscal 2021, we incurred $43.9 of net other income, primarily related to a favorable adjustment for the unrealized gain in the Wella investment of $73.5, partially offset by write-off of deferred financing costs and debt discounts of $24.2 as a result of prepayments of the 2018 Coty Term A and B Facilities.

In fiscal 2020, we incurred $11.6 of net other income, primarily related to pension curtailment gains as a result of the Transformation Plan, which significantly reduced the expected years of future service for employees participating in our non-U.S.

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pension plans.

In fiscal 2018, we incurred $27.7 of net other expense, primarily related to third-party debt issuance costs incurred in connection with the refinancing of the Coty Credit Agreement and Galleria Credit Agreement, and costs related to the change in the MRFI balance primarily associated with a certain Southeast Asian subsidiary, partially offset by curtailment gain triggered by an amendment to a non-U.S.

postretirement healthcare plan during fiscal 2018, which significantly reduced the expected years of future service for employees participating in the plan.

The following table presents our (benefit) provision for income taxes, and effective tax rates for the periods presented:

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Effective income tax rate 71.7 % 25.7 % 1.4 %

The effective income tax rate for fiscal 2020 was 25.7% as compared with 1.4% in fiscal 2019 and 8.2% in fiscal 2018.

The positive effective income tax rate in fiscal 2021 is primarily due to a preliminary benefit of $234.4 recorded as a result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the Company’s relocation of the main principal location from Geneva to Amsterdam.

The overall value of the assets and liabilities transferred was negotiated with both the Swiss and Dutch Tax Authorities and per terms of the agreements, will be reevaluated after three years.

The Company also recorded an expense of $130.0 related to an internal restructuring following the Wella divestiture, primarily intended to create a more efficient structure to hold its remaining 40% equity investment in Wella.

The positive effective income tax rate in fiscal 2020 results from reporting losses before taxes and a benefit for income taxes.

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The positive effective income tax rate in fiscal 2019 includes the impact of the goodwill impairment that is not tax-deductible.

The positive effective income tax rate in fiscal 2018 includes an expense of $123.0 as a result of the Tax Act.

This expense is due to the one-time deemed repatriation tax offset by a tax benefit on the revaluation of the Company’s deferred taxes.

The effective rates vary from the blended rate of approximately 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.

The effective 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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— — (111.5) 110.5 — —

Other adjustments (b) (c)

Post Divestiture Restructuring (c)

— (130.0) — — — —

Tax impact from intra-entity transfer of assets (d)

— 234.4 — — — —

Change in fair value of investment in Wella Business (b) (d)

(73.5) (11.2) — — — —

Other adjustments (b) (f)

7.2 2.0 (16.3) (3.1) 11.0 2.3

Adjusted (loss) income before income taxes $ 151.9 $ 32.5 21.4 % $ (409.1) $ (60.0) 14.7 % $ 244.8 $ 71.3 29.1 %

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In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence.

The benefit/provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability.

The 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 expense relates to an internal restructuring following the Wella divestiture, primarily intended to create a more efficient structure to hold its remaining 40% equity investment in Wella.

(d) Tax benefit of $234.4 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.

The overall value of the assets and liabilities transferred was negotiated with both the Swiss and Dutch Tax Authorities and per terms of the agreements, will be reevaluated after three years.

(e) The amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.

(f) See “Reconciliation of Reported Net (Loss) Income Attributable to Coty Inc.

to Adjusted Net (Loss) Income Attributable to Coty Inc.”

The adjusted effective tax rate was 21.4% compared to 14.7% in the prior-year period.

The differences were primarily due to additional foreign uncertain tax positions recorded in the prior period.

The differences were primarily due to the relocation of our main principal from Geneva to Amsterdam.

Cash paid during the years ended June 30, 2021, 2020 and 2019, for income taxes of $15.9, $123.2 and $110.3 represents 10.5%, (30.1)% and 45.1% of Adjusted (loss) income before income taxes for the fiscal year ended, respectively.

NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COTY INC.

In fiscal 2020, net loss from continuing operations attributable to Coty Inc.

NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC.

In fiscal 2021, net loss attributable to Coty Inc.

was $201.3 compared to a loss of $1,006.7 in fiscal 2020.

This net loss decrease primarily reflects a lower operating loss in the current year compared to the operating loss in the prior year.

In fiscal 2019, net loss from continuing operations attributable to Coty Inc.

In fiscal 2020, net loss attributable to Coty Inc.

was $1,006.7 compared to a loss of $3,784.2 in fiscal 2019.

The net loss increase primarily reflects a higher operating loss in fiscal 2019 compared to the operating loss in fiscal 2018.

ADJUSTED NET LOSS ATTRIBUTABLE FROM CONTINUING OPERATIONS TO COTY INC.

We believe that adjusted net (loss) income from continuing operations attributable to Coty Inc.

The net loss decrease primarily reflects a lower operating loss in fiscal 2020 compared to the operating loss in fiscal 2019.

ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC.

We believe that adjusted net income (loss) attributable to Coty Inc.

provides an enhanced understanding of our performance.

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(in millions) 2021 2020 2019 2021/2020 2020/2019

Reported net loss from continuing operations attributable to Coty Inc.

to common stockholders $ (1,100.4) $ (3,905.2) $ (403.3) 72 % <(100%)

% of Net revenues (23.3 %) (62.1 %) (5.9 %)

Adjustments to reported operating income (a)

Net income from Coty Inc.

net of noncontrolling interests $ (201.3) $ (1,006.7) $ (3,784.2) 80 % 73 %

Convertible Series B Preferred Stock dividends (a)

(102.3) (6.5) — <(100%) N/A

Reported net income (loss) attributable to Coty Inc.

(303.6) (1,013.2) (3,784.2) 70 % 73 %

Adjustments to other expense (income) (b)

Adjustments to reported operating income (b)

457.4 1,179.7 4,421.2 (61 %) (73 %)

Loss on early extinguishment of debt (c)

— — 10.7 N/A (100 %)

Adjustments to interest (income) expense (d)

— — (1.4) N/A 100 %

Adjustments to Loss on Sale of Business 246.4 — — N/A N/A

Change in fair value of investment in

Wella Business (c)

(73.5) — — N/A N/A

Adjustments to other expense (income) (d)

7.2 (16.3) 11.0 >100% <(100%)

Adjustments to noncontrolling interest (e)

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(170.0) (338.3) (145.7) 50 % <(100%)

Adjusted net (loss) income from continuing operations attributable to Coty Inc.

to common stockholders $ (364.2) $ 144.2 $ 241.7 <(100%) (40 %)

% of Net revenues (7.7 %) 2.3 % 3.5 %

Adjusted net (loss) income attributable to Coty Inc.

$ 152.6 $ (192.7) $ 487.6 >100% <(100%)

Per Share Data

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Basic 764.8 759.1 751.2

Diluted 759.1 754.3 753.1

Adjusted net income from continuing operations attributable to Coty Inc.

Adjusted net income attributable to Coty Inc.

per common share

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Diluted $ 0.20 $ (0.25) $ 0.65

(a) See a description of adjustments under “Adjusted Operating (Loss) Income for Coty Inc.”

(b) In fiscal 2020, the Company had gains of $14.6 primarily related to pension curtailment gains as a result of the Transformation plan, which significantly reduced the expected years of future service for employees participating in our non-U.S.

(a) 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, including deemed dividends, of $102.3 and $6.5 in fiscal 2021 and 2020, respectively, on income applicable to common stockholders.

(b) See a description of adjustments under “Adjusted Operating (Loss) Income for Coty Inc.”

(c) In fiscal 2021, the amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.

(d) In fiscal 2021, the Company incurred losses of $13.8 due to the write-off of deferred financing fees related to the Wella sale, primarily offset by pension curtailment gains of $6.9 as a result of the Transformation Plan, which significantly reduced the expected years of future service for employees participating in our non-U.S.

pension plans.

In fiscal 2020, the Company had gains of $16.3 primarily related to pension curtailment gains as a result of the Transformation Plan, which significantly reduced the expected years of future service for employees participating in our non-U.S.

pension plans.

In fiscal 2019, the Company incurred legal and advisory services of $16.1 rendered in connection with the evaluation of the tender offer initiated by certain of our shareholders, partially offset by pension curtailment gains of $5.1 as a result of the Global Integration Activities, which significantly reduced the expected years of future service for employees participating in our non-U.S.

pension plans.

In fiscal 2018, we incurred losses of $24.1 related to the expensing of third-party debt issuance costs incurred in connection with the refinancing of the Coty Credit Agreement and Galleria Credit Agreement, partially offset by pension curtailment gains of $10.4 triggered by an amendment to a non-U.S.

postretirement healthcare plan during fiscal 2018, which significantly reduced the expected years of future service for employees participating in the plan.

(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 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 (loss) income attributable to noncontrolling interest based on the relevant noncontrolling interest percentage in the Consolidated Statements of Operations.

(f) As of June 30 2021, 171.1 million shares of outstanding stock options and Series A/A-1 Preferred Stock with purchase or conversion rights to purchase shares of Common Stock, RSUs and Convertible Series B Preferred Stock were excluded in the computation of adjusted weighted-average diluted shares because their effect would be anti-dilutive.

DISCONTINUED OPERATIONS

Due to the sale of the Wella Business on November 30, 2020, no net revenues or operating expenses from discontinued operations were recorded after November 30, 2020.

As such, our results from discontinued operations for the fiscal year ended June 30, 2021 reflect only five months of operations.

In fiscal 2021, net revenues from discontinued operations decreased 51.2%, to $986.3 from $2,020.1 in fiscal 2020.

The decrease in net revenues primarily reflects lower sales due to the COVID-19 pandemic, relatively mitigated by the online sales of ghd products and Clairol in the retail hair category.

Operating income was $218.2 in fiscal 2020 compared to $216.9 in fiscal 2019, due primarily to the asset impairment charges in the prior year and the lower cost of goods sold as a percentage of net

revenues in the current year, offset by the higher selling, general and administrative expenses as a percentage of net revenues in the current year, mainly driven by the lower net revenue base due to the COVID-19 pandemic.

In fiscal 2021, 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.

The increase in net revenues in the comparative five month period 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 fiscal 2021 compared to $218.2 in fiscal 2020.

In fiscal 2021, operating income from discontinued operations increased to $220.8 from income of $145.8 in the comparative five month period in the prior year.

The 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.

The loss on sale of the Wella Business was $246.4 in fiscal 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 fiscal 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 in fiscal 2022.

In connection with the sale of a majority stake in the Wella Business, the Company recorded a tax cost of approximately $34.3 in fiscal 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.

Net loss was $137.3 in fiscal 2021 compared to net income of $87.2 in fiscal 2020.

In fiscal 2021, net loss was $137.3 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 $246.4.

In fiscal 2020, net revenues from discontinued operations decreased 14.4%, to $2,020.1 from $2,360.6 in fiscal 2019.

The decrease in net revenues primarily reflects lower sales due to lower shipments to optimize retailer trade inventory levels for certain U.S.

customers, impact of the supply chain disruptions, shelf space loss for Clairol , and negative impact of foreign currency exchange translation, partially offset by the success of ghd product launches, and favorable price and mix impact from Wella Professional .

Operating income was $216.9 in fiscal 2019 compared to $308.6 in fiscal 2018, due primarily to the asset impairment charges in fiscal 2019, offset by lower selling, general and administrative expenses as a percentage of net revenues and lower cost of goods sold as a percentage of net revenues.

The decrease in net revenues primarily reflects lower sales due to the COVID-19 pandemic, relatively mitigated by the online sales of ghd products and Clairol in the retail hair category.

Operating income was $218.2 in fiscal 2020 compared to $216.9 in fiscal 2019, due primarily to the asset impairment charges in the prior year and the lower cost of goods sold as a percentage of net revenues in the current year, offset by the higher selling, general and administrative expenses as a percentage of net revenues in the current year, mainly driven by the lower net revenue base due to the COVID-19 pandemic.

Quarterly Results of Operations Data

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The results of historical periods are not necessarily indicative of the results of operations for any future period.

The quarterly financial information has been recast to reflect the presentation of discontinued operations as of June 30, 2020.

Fiscal 2021 (a)

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Net (loss) income from discontinued operations 10.9 (17.3) (235.6) 104.7 (76.6) 39.4 84.9 39.5

Net income (loss) attributable to noncontrolling interests (4.6) (9.4) (2.5) 0.4 (4.8) 6.2 0.5 2.8

Net income attributable to redeemable noncontrolling interests 0.1 6.5 0.2 5.5 (7.1) 1.0 4.2 1.2

Net (loss) income attributable to Coty Inc.

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common stockholders:

Convertible Series B Preferred Stock dividends (24.2) (34.1) (23.1) (20.8) (6.5) — — —

Net (loss) income from continuing operations attributable to common stockholders (221.1) (1.2) (39.8) 95.9 (696.2) (311.0) (106.0) 12.8

3 unchanged sentences

Basic 765.4 765.4 764.6 763.9 763.3 760.8 758.1 754.2

Diluted 763.3 760.8 758.1 758.9 751.6 751.4 751.1 750.8

765.4 765.4 764.6 916.7 763.3 760.8 758.1 758.9

Dividends declared per common share $ — $ — $ — $ — $ — $ 0.125 $ 0.125 $ 0.125

8 unchanged sentences

Additionally, beginning in the third quarter of 2020, the financial results include the effect of the King Kylie Transaction.

(b) The outstanding stock options and Series A/A-1 Preferred Stock with purchase or conversion rights to purchase shares of Common Stock, RSUs and Convertible Series B Preferred Stock were excluded in the computation of diluted shares when their effect would be antidilutive.

FINANCIAL CONDITION

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As of June 30, 2021, we had cash and cash equivalents of $253.5 compared with $308.3 at June 30, 2020.

Our cash and cash equivalents balances decreased by $32.1 during fiscal 2020 primarily as a result of cash used from operations, expenditures for acquisitions, and dividend payments to shareholders, partially offset by net borrowings from long-term debt and proceeds from the issuance of convertible preferred stock.

Our cash and cash equivalents balances decreased by $54.8 during fiscal 2021 primarily as a result of cash used from operations, expenditures for acquisitions, and dividend payments to preferred shareholders, partially offset by proceeds from dispositions and proceeds from the issuance of convertible preferred stock.

During fiscal 2021, we decreased our cash held outside of the U.S.

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, interest payments, acquisitions, dividends, share repurchases and any principal payments on debt.

The working capital movements are based on the sourcing of materials related to the production of products within each of our segments.

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.

The working capital movements are based on 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.

We have utilized the cash proceeds from the issuance of convertible preferred shares to KKR Aggregator in order to pay down our revolving credit facility.

As specified in our Credit Agreement, cash generated from the divestiture of any businesses during the next year will be utilized to reduce our outstanding debt, other than a maximum of $500.0 th at will be used to fund operations.

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.

As part of the transaction, we 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 to the Company, which the Company has accounted for as a return of capital.

We utilized $2,015.5 of the net proceeds to pay down our 2018 Coty Term A and B Facilities on a pro rata basis and reserved $500.0 for reinvestment in the business.

In connection with the sale of the Wella Business, the Company and Wella entered into the TSA.

Under the terms of the TSA, the Company will perform services for Wella in exchange for related fees.

Such services include billing and collecting from Wella customers, certain logistics and warehouse services, as well as other administrative and systems support.

Due to 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, keeping in mind the temporary nature of this arrangement, we have included the related cash flows in our Cash flows from operating activities.

See Note 27—Related Party Transactions for more information.

During the six months ended December 30, 2021, the Company had Consolidated net cash provided by operating activities of $472.7.

Management estimates the impact of excluding the Wella Business on a go forward basis, excluding temporary impacts 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 obligations under the TSA.

The impact on Cash flows from investing activities would be a roughly 10% decrease in the outflows for capital expenditures related to the Wella Business.

During 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 due 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.

Our response to the impact of COVID-19

In response to the risks presented by the COVID-19 pandemic, we have been actively implementing 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 production to adjust our inventories, the recently announced temporary compensation reductions for certain executives and for our non-executive board members, hiring and travel restrictions, temporary furloughs for certain employees, using available local government assistance programs to reduce employee costs, and the reduction of advertising and consumer promotion costs for sales channels that are closed or heavily impacted by social distancing.

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, initiatives to improve cash flow, hiring and travel restrictions, and the reduction of advertising and consumer promotion costs for sales channels that are closed or heavily impacted by lockdowns and social distancing.

We intend to utilize any tax payment deferrals that apply to us in specific jurisdictions.

We will actively manage our working capital to support our liquidity needs.

Additionally, on May 26, 2020, KKR Aggregator purchased $750.0 of convertible preferred stock in Coty, which provides us with additional liquidity.

An additional purchase of $250.0 of convertible preferred stock was completed on July 31, 2020.

See additional information in Note 23—Equity and Convertible Preferred Stock and Note 28—Subsequent Events.

Due in part to these measures, our current cash position is favorable;

as of June 30, 2020, we had $1,618.1 of immediate liquidity, which consisted of available cash and cash equivalents and available borrowings under our 2018 Coty Revolving Credit Facility.

While the impact and duration of COVID-19 on our business is currently uncertain, as a result of the cash on hand, our amended debt covenants, our plans to manage expenses and the cash received from KKR Aggregator from the issuance of convertible preferred stock, 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 the COVID-19, the lockdown and a possible recession resulting from COVID-19 in many markets, we will be implementing a plan to reduce our cost base, which does not vary with revenues, by 25%, including an adaptation of our supply network and organization as well as a reduction of certain discretionary expenses.

On April 5, 2018, we completed an offering of three series of U.S.

dollar denominated and euro denominated senior unsecured notes in an aggregate principal amount of $550.0 and €800 million, in a private offering.

On April 5, 2018, we entered into a credit agreement which amended and restated the existing credit agreements.

The credit agreement provides for senior secured credit facilities comprised of (i) a five year revolving credit facility in an aggregate principal amount up to $3,250.0, (ii) a five year term loan A facility consisting of (a) $1,000.0 denominated in U.S.

dollars and (b) €2.035 billion denominated in Euros and (iii) a seven year term loan B facility consisting of (a) $1,400.0 denominated in U.S.

dollars and (b) €850 million denominated in Euros.

Future borrowings under the 2018 Coty Credit Agreement could be used for corporate purposes.

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, and thus, the adoption of the new leasing standard, ASU 2016-02, Leases (Topic 842), (see Note 2—Summary of Significant Accounting Policies), did not impact our financial covenants.

In order to be consistent with our financial covenant, we will continue to report our net debt calculation excluding operating leases.

On June 27, 2019, we entered into an amendment (“2019 Amendment”) to the 2018 Coty Credit Agreement.

We will continue to actively manage our working capital to support our liquidity needs.

Despite encouraging signs of recovery in the latter half of fiscal 2021 and the fourth quarter in particular, the impact and duration of COVID-19 on our business continues to be uncertain.

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, 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.

See Note 15—Debt in the notes to our Consolidated Financial Statements for additional information on our debt arrangements.

In the fourth quarter of fiscal 2021, the 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 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.

On June 27, 2019, we entered into an amendment (“2019 Amendment”) to our existing credit agreement (“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, (ii) extend the applicable window for certain cost savings add-backs in the calculation of 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, we amended our existing credit agreement.

The amendment (i) provides a Total Net Leverage Ratio financial covenant “holiday” through March 31, 2021;

(ii) establishes a minimum liquidity covenant through March 31, 2021 of $350.0;

and (iii) effectively places 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 does not modify the applicable funding costs during the period through March 31, 2021.

See Note 15—Debt in the notes to our Consolidated Financial Statements for additional information on our debt arrangements and prior period credit agreements.

Factoring of Receivables

Receivables Purchase Agreement

On March 19, 2019, we entered into an Uncommitted Receivables Purchase Agreement (the “Receivables Purchase Agreement”) with a financial institution, with an aggregate facility limit of $150.0.

Eligible trade receivables are purchased by the financial institution for cash at net invoice value less a factoring fee.

European Receivables Purchase Agreement

In September,2019, we entered into a factoring agreement with a financial institution, which allows for the transfer of receivables from certain of our European subsidiaries, in exchange for cash (the “European Receivables Purchase Agreement”).

The total outstanding amount permitted among such subsidiaries is €93.0.

Factoring of such receivables under the European Receivables Purchase Agreement is executed on a non-recourse basis.

The net amount utilized under the factoring facilities was $133.6 and $123.1 as of June 30, 2021 and 2020, respectively.

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Business Combinations

During fiscal 2020, we entered into purchase agreement with King Kylie, LLC for a base purchase price of $600.0 in cash.

During fiscal 2021, we completed the acquisition of a 20% ownership interest in the KKW beauty business and the related collaboration agreement.

Total cash paid in the transaction totaled $200.0.

For additional information on our prior period business combinations from fiscal years 2020 and 2019, see Note 4—Business Combinations, Asset Acquisitions and Divestitures in the notes to our Consolidated Financial Statements.

During fiscal 2021, we completed the previously announced strategic transaction with KKR for the sale of a majority stake in Coty’s Wella Business and received cash proceeds of $2,451.7, and retained a 40% stake in Wella.

During fiscal 2020, we divested the Younique business for $50.0 cash and a secured promissory note with a face value of $27.9.

We did not divest of any brands during fiscal 2019.

We did not divest any brands during fiscal 2019.

Year Ended June 30,

2020 2019 2018

Consolidated Statements of Cash Flows Data:

(in millions) 2021 2020 2019

Net cash (used in) provided by operating activities $ (50.9) $ 639.6 $ 413.7

Net cash used in investing activities (833.4) (454.0) (687.6)

Net cash provided by (used in) financing activities 877.3 (160.3) 69.3

Net cash (used in) provided by operating activities

Net cash (used in) provided by operating activities was $(50.9), $639.6 and $413.7 for fiscal 2020, 2019 and 2018, respectively.

Consolidated Statements of Cash Flows Data (a) :

Net cash provided by (used in) operating activities $ 318.7 $ (50.9) $ 639.6

Net cash provided by (used in) investing activities 2,441.9 (833.4) (454.0)

Net cash (used in) provided by financing activities (2,795.1) 877.3 (160.3)

(a) Balances presented herein represent the cash flows of Coty Inc.

Net cash provided by (used in) operating activities

Net cash provided by (used in) operating activities was $318.7, $(50.9) and $639.6 for fiscal 2021, 2020 and 2019, respectively.

The increase in operating activities cash flows of $369.6 from outflows in fiscal 2020 to proceeds in fiscal 2021 is primarily driven by improvements in our net income due to management reducing costs to offset the impact of COVID-19 on our business and better fourth quarter results than in the prior year.

The increase in net cash from a decreased net loss was offset by higher outflows from changes in working capital during the current year driven by the negative impacts of COVID-19 and higher cash outflows for acquisition and divestiture-related costs.

Higher fourth quarter sales in the current year have caused an increase in cash outflows, which was partially offset by current year collection of past due receivables.

These outflows were offset by decreased outflows related to payables due to lower spending for advertising and consumer promotion, customer sales, and administrative expenses in fiscal 2021.

Additionally, there were inflows from changes in tax receivables primarily related to prior year tax overpayments collected in the current year and lower cash paid for interest resulting from lower average debt balances during fiscal 2021.

The decrease in operating activities cash flows of $690.5 from proceeds in fiscal 2019 to outflows in fiscal 2020 is primarily driven by significantly lower cash related operating results of $888.0 resulting from the impact of lower net revenues during the second half of fiscal 2020 due to the COVID-19 pandemic and lower cash flows from changes in other noncurrent assets and liabilities of $31.8.

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Partially offsetting the cash inflows from changes in these working capital accounts, changes in accounts payable contributed to higher outflows of $246.2 mainly attributable to lower overall spending.

The increase in operating cash inflows in fiscal 2019 as compared with fiscal 2018 was $225.9.

This increase is primarily driven by an increase of $286.5 in net income after adjusting for non-cash items only partially offset by increased outflows from net changes in working capital accounts of $60.7.

The increase in net income after adjusting for non-cash items in fiscal 2019, compared to fiscal 2018, as noted above.

Working capital changes included an increase in cash outflows from accounts payable and accrued expenses and other current liabilities of $642.4 which were only partially offset by higher inflows from trade receivables, prepaid expenses and other current assets and inventory of $581.7.

The increase in cash outflows from accounts payable and accrued expenses and other current liabilities were mainly the result of decreases in current restructuring accruals for payments of prior year amounts accrued, combined with decreases in trade spend related payables and accruals due to a smaller revenue base decreasing the level of trade spending.

Changes in trade receivables contributed to $424.5 of the increase in cash inflows during fiscal 2019 compared to fiscal 2018 mainly due to positive results from stronger collection efforts and the implementation of additional factoring facilities.

Net cash used in investing activities

Net cash used in investing activities was $(833.4), $(454.0) and $(687.6) for fiscal 2020, 2019 and 2018, respectively.

Net cash provided by (used in) investing activities

Net cash provided by (used in) investing activities was $2,441.9, $(833.4) and $(454.0) for fiscal 2021, 2020 and 2019, respectively.

The increase in cash flows from investing activities of $3,275.3 in fiscal 2021 as compared with fiscal 2020 was principally driven by 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, and was only partially offset by $200.0 of cash used for the fiscal 2021 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 $93.5.

These current year investing cash flow increases were only slightly offset by the cash payment of $37.6 resulting from the fiscal 2021 termination of the net investment cross currency swap derivative.

The increase in cash used for investing activities of $(379.4) in fiscal 2020 as compared with fiscal 2019 is primarily caused by the payment, net of cash acquired of $592.2 for the purchase of 51% of the equity interest of King Kylie, LLC compared to $40.8 of cash used for the purchase of a trademark in the prior year which did not reoccur in the current year.

The overall increase in cash used in investing activities was partially offset by lower capital expenditures of $159.2 during fiscal 2020 compared to fiscal 2019 and $25.6 of net cash proceeds from the sale of the Younique business during fiscal 2020.

The decrease in cash used for investing activities of $233.6 in fiscal 2019 as compared to fiscal 2018 primarily relates to higher cash outflows of $237.2 from cash paid in prior year for business combinations including the Burberry Beauty Business for $245.1 and other acquisition related activity of $32.4 compared to cash outflows in the current year of $40.8 for the purchase of a trademark.

Net cash provided by (used in) financing activities

Net cash provided by (used in) financing activities was $877.3, $(160.3) and $69.3 for fiscal 2020, 2019 and 2018, respectively.

overall increase in cash used in investing activities was partially offset by lower capital expenditures of $159.2 during fiscal 2020 compared to fiscal 2019 and $25.6 of net cash proceeds from the sale of the Younique business during fiscal 2020.

Net cash (used in) provided by financing activities

Net cash (used in) provided by financing activities was $(2,795.1), $877.3 and $(160.3) for fiscal 2021, 2020 and 2019, respectively.

The decrease in cash inflows of $(3,672.4) in fiscal 2021 as compared to fiscal 2020 was primarily driven by the current year net cash repayments associated with the Company's revolving loan facility compared to net revolver borrowings in the prior year, the use of more than $2,000.0 to prepay a portion of the outstanding balances on the Company's 2018 Coty Term A and B Facilities using the proceeds from the sale of the Wella Business.

Proceeds from the issuance of Senior Secured Notes during the fourth quarter of fiscal 2021 were primarily offset against additional prepayments on the Company's 2018 Coty Term A and B Facilities.

Lower cash inflows from financing activities is also a result of the higher prior year cash proceeds of $724.5 compared to $227.2 in the current year from the issuance and sale of the Company's Convertible Series B Preferred Stock in connection with the Investment Agreement with KKR.

Additionally, dividend payments of $24.2 on the Convertible Series B Preferred Shares also contributed to a decrease in financing cash flows.

These financing related decreases year over year were partially offset by lower dividend payments of $195.4 due to the suspension of common stock dividends payments that began in the fourth quarter 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.

The increase in cash inflows of $1,037.6 in fiscal 2020 as compared to fiscal 2019 was primarily driven by the fiscal 2020 net proceeds of $724.5 from the issuance and sale of the Company's new Convertible Series B Preferred Stock in connection with the Investment Agreement with KKR.

Additionally, the Company had higher net borrowings of $182.7 from its revolving loan facility in fiscal 2020 and a positive impact of $149.3 from lower cash used for dividend payments.

Additionally, the Company had higher net borrowings of $182.7 from its revolving loan facility in fiscal 2020 and a positive impact of $149.3 from lower cash used for common stock dividend payments.

Lower cash payments for dividends was primarily due to the Company's Stock Dividend Reinvestment Program, which became available to stockholders in the fourth quarter of fiscal 2019, and the suspension of dividend payments beginning in the fourth quarter of fiscal 2020.

Partially offsetting the increase in cash from financing activities, the Company paid $45.0 during the first quarter of fiscal 2020 to purchase the remaining mandatorily redeemable noncontrolling interest in the Company's Southeast Asian subsidiary, which did not occur in the prior year.

The decrease in cash inflows of $229.6 in fiscal 2019 as compared to fiscal 2018 was primarily due to lower net borrowings of $294.8.

These decreases were partially offset by cash increases from lower payments for debt issuance costs of $37.7 and lower cash dividend payments of $29.6.

On May 8, 2019, the Board approved a stock dividend reinvestment program giving shareholders the option to receive their full dividend in cash or to receive their dividend in 50% cash / 50% common stock.

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The percentage of our total Common Stock for which the shareholders elected to participate in the Stock Dividend Reinvestment Program for the June 28, 2019, September 30, 2019, December 27, 2019 and March 27, 2020 dividend was 68%, 69%, 65% and 63%, respectively.

On April 29, 2020, our Board of Directors has 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.

On April 29, 2020, our Board of Directors susp ended the payment of dividends, in accordance with our 2018 Coty Credit Agreement, as amended.

As we focus on preserving cash, we have continued to suspend the payment of Common Stock dividends.

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, by increasing the amount of accrued dividends with respect to a share of Convertible Series B Preferred Stock, or any combination thereof, at the sole discretion of the Company.

For additional information on our dividends, see Note 23—Equity and Convertible Preferred Stock in the notes to our Consolidated Financial Statements.

Dividends on the Convertible Series B Preferred Stock are payable in cash, or by increasing the amount of accrued dividends on 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 not been paid in cash and any decision to do so will be at the discretion of our Board.

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.

The Board of Directors declared and paid a dividend on Convertible Series B Preferred Stock, totaling $24.2, for the quarter ended June 30, 2021.

For additional information on our dividends and dividend policy, respectively, see Note 23—Equity and Convertible Preferred Stock in the notes to our Consolidated Financial Statements and Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividend Policy”.

Treasury Stock - Share Repurchase Program

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Contractual Obligations and Commitments

Our principal contractual obligations and commitments, which include those associated with our discontinued operations, are presented below as of June 30, 2020.

Our principal contractual obligations and commitments are presented below as of June 30, 2021.

(in millions) Total Payments Due in Fiscal Thereafter

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See Note 23—Equity and Convertible Preferred Stock in the notes to our Consolidated Financial Statements for further discussion related to the calculation of the Convertible Series B Preferred Stock.

Contingencies

From time to time, our Brazilian subsidiaries receive tax assessments from local, state, and federal tax authorities in Brazil.

See Note 26—Legal and Other Contingencies for more details on these tax assessments.

As of June 30, 2021, we are in the early stages of administrative action and expect the judicial process in Brazil to take a number of years to conclude.

Derivative Financial Instruments and Hedging Activities

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For foreign currency exposures, which primarily relate to receivables, inventory purchases and sales, payables and intercompany loans, derivatives are used to better manage the earnings and cash flow volatility arising from foreign currency exchange rate fluctuations.

In July 2021, the Company entered into foreign exchange forward contracts to hedge up to 80% of our euro denominated external debt as part of management's strategy to minimize the impact of currency movements on those debt instruments.

We recorded foreign currency losses of $7.8, $18.0 and $2.7 in fiscal 2021, 2020 and 2019, respectively, resulting from non-financing foreign currency exchange transactions which are included in their associated expense type and are included in the Consolidated Statements of Operations.

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To date, we do not believe inflation has had a material effect on our business, financial condition or results of operations.

Based on current market conditions, we expect to largely offset the expected inflation in input costs and transportation costs through a combination of gross margin levers and selective price increases.

However, if our costs were to become subject to significant inflationary pressures in the future, we may not be able to fully offset such higher costs through price increases.

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Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.

Our most critical accounting policies relate to revenue recognition, the assessment of goodwill, other intangible and long-lived assets for impairment, business combinations, inventory, and income taxes.

Our most critical accounting policies relate to revenue recognition, the fair value of equity investments, the assessment of goodwill, other intangible and long-lived assets for impairment, business combinations, inventory and income taxes.

Our management has discussed the selection of significant accounting policies and the effect of estimates with the Audit and Finance Committee of our Board of Directors.

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For additional information on our revenue accounting policies, see Note 2—Summary of Significant Accounting Policies.

Returns represent 3%, 2% and 2% of gross revenue after customer discounts and allowances in fiscal 2020, 2019 and 2018, respectively.

Returns represented 2%, 3% and 2% of gross revenue after customer discounts and allowances in fiscal 2021, 2020 and 2019, respectively.

Trade spending activities recorded as a reduction to gross revenue after customer discounts and allowances represent 10%, 11%, and 9% in fiscal 2021, 2020 and 2019, respectively.

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If the historical data we use to calculate these estimates does not approximate future returns, additional allowances may be required.

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 are classified within Level 3 in the fair value hierarchy because the Company estimates the fair value of the investments using a combination of the income and market approaches, when applicable.

Changes in the fair value of equity investments under the fair value option are recorded in Other (income) expense, net within the Consolidated Statements of Operations (see Note 13—Equity Investments).

Some of the inherent estimates and assumptions used in determining fair value of the Wella Business are outside the control of management, including interest rates, cost of capital, tax rates, credit ratings and industry growth.

Given the current COVID-19 global pandemic and the uncertainties regarding the financial potential impact on the Company's business, there can be no assurance that the Company's estimates and assumptions regarding the impact of COVID-19 and the recovery period made for purposes of the equity investment valuation performed during our 2021 fiscal year will prove to be accurate predictions of the future.

While the Company believes it has made reasonable estimates and assumptions to calculate the fair

value of the Wella Business, it is possible changes could occur.

As for the Wella Business, if in future years, the actual results are not consistent with the Company’s estimates and assumptions used to calculate fair value, the Company may be required to recognize additional adjustments.

Goodwill, Other Intangible Assets and Long-Lived Assets

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The assumptions made will impact the outcome and ultimate results of the testing.

We use industry accepted valuation models and set criteria that are reviewed and approved by various levels of management and, in certain instances, we engage independent third-party valuation specialists for advice.

To determine fair value of the reporting unit, we used a combination of the income and market approaches, when applicable.

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Such charge could have a material effect on the Consolidated Statements of Operations and Balance Sheets.

There were no impairments of goodwill at our reporting units or of indefinite-lived other intangible assets in fiscal 2018.

During fiscal 2019, we recorded total goodwill impairments of $3,307.5.

During fiscal 2020, we recorded total goodwill impairments of $105.0, resulting in remaining goodwill balances as of June 30, 2020 of $1,343.5, $1,781.6 and $848.8 in our Americas, EMEA and Asia Pacific reporting units, respectively.

During the third quarter of fiscal 2020, the Company was adversely impacted by the COVID-19 global pandemic.

This drove a decrease in net revenue, impacting all product categories across the Company, due to the closure of retail malls, professional salons, travel retail channels and certain mass channels.

In response to these adverse business indicators and the rapidly declining revenue trends experienced during the third quarter of our 2020 fiscal year, we reduced our near-term revenue projection.

As a result, we determined that our goodwill should be tested for potential impairment.

The fair values of each of the reporting units exceeded the respective carrying values of the reporting units as of March 31, 2020.

Consequently, there were no goodwill impairment charges recorded as a result of the impairment testing performed during the third quarter of our 2020 fiscal year.

Based on the annual impairment test performed at May 1, 2020, we determined that the fair values of each of the reporting units exceeded their respective carrying values at that date by approximately 11.3%, 102.0% and 9.0% relating to the Americas, Asia Pacific and EMEA reporting units, respectively.

Consequently, there were no goodwill impairment charges recorded as a result of the annual impairment test performed on May 1, 2020.

To determine the fair value of the Americas and EMEA reporting units, we have used an average annual revenue growth rate of 2.1% and 2.4% for fiscal 2021 to fiscal 2025, respectively, and a discount rate of 9.75%.

The fair value of the Americas and EMEA reporting units would fall below its carrying value if the assumed average annual growth rate for fiscal 2021 to fiscal 2025 fell 35 basis points, respectively, or the discount rate increased by 85 and 70 basis points, respectively.

On June 1, 2020, the Company entered into a definitive agreement with KKR, regarding a strategic transaction for the sale of the Wella Business.

A goodwill impairment test should be performed immediately before and after a Company reorganizes its reporting structure if the reorganization would affect the composition of one or more of its reporting units.

As a result, we determined that our goodwill should be tested for potential impairment after considering the sale of its Wella Business.

Based on the impairment test performed at June 1, 2020, we determined that the fair values of our Americas and Asia Pacific reporting units exceeded their respective carrying values at that date by approximately 2.4%, and 85.0%, respectively.

To determine the fair value of the Americas reporting unit, we have used an average annual revenue growth rate of 2.2% for fiscal 2021 to fiscal 2025, and a discount rate of 9.75%.

The fair value of the Americas reporting unit would fall below its carrying value if the assumed average annual growth rate for fiscal 2021 to fiscal 2025 fell 10 basis points, or the discount rate increased by 20 basis points.

For our EMEA reporting unit, we determined that the fair value did not exceed the carrying value, and as such we recorded an asset impairment charge of $105.0 relating to goodwill.

The cash flows associated with our EMEA reporting unit were adversely affected by the continuing impacts of the COVID-19 pandemic.

Additionally, we noted the fair value of the EMEA reporting unit was adversely impacted due to a loss of synergies from the sale of the Wella Business.

To determine the fair value of our EMEA reporting unit, we used an average annual revenue growth rate of 2.5% for fiscal 2021 to fiscal 2025 and a discount rate of 9.75%.

As the EMEA reporting unit was impaired, it has a 0% excess and as such, further material negative trends in its actual and expected business performance or an increase in the discount rate may result in further impairments.

If the average annual revenue growth rate for fiscal 2021 to fiscal 2025 declined by 50 basis points it may cause an additional impairment of $485.0.

If the discount rate increased by 50 basis points, it may cause an additional impairment of $234.0.

There were no impairments of goodwill at our reporting units in fiscal 2021.

During fiscal years 2020 and 2019, we recorded total goodwill impairments of $105.0 and $3,037.5, respectively.

Based on the annual impairment tested performed at May 1, 2021, we determined that the fair value of each of the reporting units exceeded their respective carrying values at that date by approximately 54.4%, 120.1% and 60.1% relating to the Americas, Asia Pacific and EMEA reporting units, respectively.

To determine the fair value of our reporting units, we have used annual revenue growth rates ranging from 1.8%-15.4%, 4.3%-25.4% and 1.3%-16.0% for the Americas, Asia Pacific and EMEA reporting units, respectively, and a discount rate of 8.00%.

The revenue growth rates are expected to be higher than historical growth rates for the immediate periods after fiscal year 2021 due to the expected recovery from the COVID-19 global pandemic.

Some of the inherent estimates and assumptions used in determining fair value of the reporting units are outside the control of management, including interest rates, cost of capital, tax rates, credit ratings and industry growth.

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The trademarks’ fair values are based upon the income approach, primarily utilizing the relief from royalty methodology.

This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset.

This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the trademark.

An impairment loss is recognized when the estimated fair value of the intangible asset is less than the carrying value.

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On May 1, 2021, we performed our annual impairment testing of indefinite-lived other intangible assets and determined that no adjustments to carrying values were required.

As a result of the May 1, 2019 annual impairment test, total impairments on indefinite-lived other intangible assets of $389.8 were recorded.

During fiscal 2020, we recorded total impairments on our indefinite-lived other intangible assets of $329.0.

The impairment charges were a result of the following impairment tests:

As noted above, during the third quarter of fiscal 2020, the Company was adversely impacted by the COVID-19 global pandemic.

This drove a decrease in net revenue, impacting all product categories across the Company, due to the closure of retail malls, professional salons, travel retail channels and certain mass channels.

Management concluded that this adverse factor represented an indicator of impairment that warranted an interim impairment test for goodwill and certain other intangible assets.

Accordingly, we re-evaluated future cash flows of intangible assets and the impact of a 25 basis point decrease to the discount rate.

This resulted in asset impairment charges of $40.4 related to indefinite-lived other intangible assets for our CoverGirl ($26.5), Max Factor ($9.2) and Bourjois ($4.7) trademarks.

As part of the May 1, 2020 annual impairment test, the Company considered several factors that developed during the fourth quarter of fiscal 2020 that led to the conclusion that the fair values of certain indefinite-lived other intangible assets were below their carrying amounts.

The continuing impacts of the COVID-19 pandemic was the principle driver of additional impairments.

Additionally, we noted the fair values of the indefinite-lived other intangible assets were adversely impacted by a 165 and 190 basis point increase in the discount rate compared to the May 1, 2019 and March 31, 2020 test, respectively.

This resulted in additional asset impairment charges of $288.6 primarily related to indefinite-lived other intangible assets for our CoverGirl ($147.0), Max Factor ($68.1), Philosophy ($26.6), and Bourjois ($12.8) trademarks.

Based on results of the test, the fair value of the of the CoverGirl trademark fell below its carrying value using projections that assumed an average annual growth rate of 2.0% for fiscal 2021 to fiscal 2025 and a discount rate of 10.4%.

The fair value of the Max Factor trademark fell below its carrying value using projections that assumed an average annual growth rate of 3.0% for fiscal 2021 to fiscal 2025 and a discount rate of 10.4%.

The fair value of the Philosophy trademark fell below its carrying value using projections that assumed an average annual growth rate of 4.5% for fiscal 2021 to fiscal 2025 and a discount rate of 10.4%.

The fair value of the Bourjois trademark fell below its carrying value using projections that assumed an average annual growth rate of (1.5)% for fiscal 2021 to fiscal 2025 and a discount rate of 10.4%.

As the impaired indefinite-lived intangible assets have a 0% excess, further material negative trends in the actual and expected business performance or an increase in the discount rate may result in further impairments.

For instance, with regards to our CoverGirl trademark, our largest impaired indefinite-lived intangible asset, if the average annual revenue growth rate for fiscal 2021 to fiscal 2025 declined by 1% it may cause an additional impairment of $13.1.

If the discount rate increased by 0.5%, it may cause an additional impairment of $16.6.

With regards to our Max Factor trademark, our second largest impaired indefinite-lived intangible asset, if the average annual revenue growth rate for fiscal 2021 to fiscal 2025 declined by 1% it may cause an additional impairment of $6.7.

If the discount rate increased by 0.5%, it may cause an additional impairment of $8.4.

As of May 1, 2020, we determined that the fair value of our Sally Hansen trademark exceeded its carrying value by approximately 0.6% using projections that assumed an average annual revenue growth rate of 0.6% for fiscal 2021 to fiscal 2025 and a discount rate of 10.4%.

The fair value of the Sally Hansen trademark would fall below its carrying value if the average annual revenue growth rate decreased by approximately 20 basis points or the discount rate increased by 10 basis points.

The fair values of the remaining indefinite-lived trademarks exceeded their carrying values by amounts ranging from 56% to more than 100%.

During fiscal years 2020 and 2019, we recorded total impairments on our indefinite-lived other intangible assets of $329.0 and $389.8, respectively.

As of May 1, 2021, we determined that the fair value of our Max Factor trademark exceeded its carrying value by approximately 3.3% using annual revenue growth rates ranging from 1.4%-22.6% and a discount rate of 8.5%.

The revenue growth rates are expected to be higher than historical growth rates for the immediate periods after fiscal year 2021 due to the expected recovery from the COVID-19 global pandemic.

The fair value of the Max Factor trademark would fall below its carrying value if the average annual revenue growth rate decreased by approximately 50 basis points or the discount rate increased by 25 basis points.

The fair values of the remaining indefinite-lived trademarks exceeded their carrying values by amounts ranging from 27% to 82%.

Some of the inherent estimates and assumptions used in determining fair value of the indefinite-lived intangible assets are outside the control of management, including interest rates, cost of capital, tax rates, credit ratings and industry growth.

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The Company may be required to perform additional impairment testing based on changes in the economic environment, disruptions to the Company’s business, significant declines in operating results of the Company’s reporting units and/or tradenames, further sustained deterioration of the Company’s market capitalization, and other factors, which could result in impairment charges in the future.

Although management cannot predict when improvements in macroeconomic conditions will occur, if consumer confidence and consumer spending decline significantly in the future or if commercial and industrial economic activity or the market capitalization deteriorates significantly from current levels, it is reasonably likely the Company will be required to record impairment charges in the future.

Although management cannot predict when improvements in macroeconomic conditions will occur, if consumer

confidence and consumer spending decline significantly in the future or if commercial and industrial economic activity or the market capitalization deteriorates significantly from current levels, it is reasonably likely the Company will be required to record impairment charges in the future.

Long-Lived Assets

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If the projected undiscounted cash flows are less than the carrying value, an impairment would be recorded for the excess of the carrying value over the fair value, which is determined by discounting future cash flows.

During fiscal 2020, 2019 and 2018, we recorded asset impairment charges of $0.0, $27.8 and $15.6, respectively, primarily relating to the planned disposal of certain manufacturing facilities, and the write-off of machinery and equipment in excess of our needs.

These impairment charges are included in Restructuring costs in the Consolidated Statements of Operations.

During fiscal 2020, we recorded asset impairment charges of $16.8 to Property and equipment and $7.8 to Operating lease right-of-use asset, primarily relating to the abandonment of a retail store and software no longer in use.

During fiscal years 2021, 2020 and 2019, we recorded asset impairment charges of $5.2, $16.8 and $27.8, respectively, to Property and equipment and $0.6, $7.8 and $0.0, respectively to Operating lease right-of-use asset, primarily relating to the abandonment of equipment or leases no longer in use.

These impairment charges are primarily recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations.

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• Customer relationships and license agreements - We use an excess earnings method to value customer relationships.

The key assumptions for the model are forecasted net revenue and earnings before interest, taxes, depreciation and

amortization (“EBITDA”), the estimated allocation of earnings between different classes of assets, the attrition rate, the effective tax rate and the discount rate.

The key assumptions for the model are forecasted net revenue and earnings before interest, taxes, depreciation and amortization (“EBITDA”), the estimated allocation of earnings between different classes of assets, the attrition rate, the effective tax rate and the discount rate.

Inventories include items which are considered salable or usable in future periods, and are stated at the lower of cost or net realizable value, with cost being based on standard cost which approximates actual cost on a first-in, first-out basis.

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We do not expect to incur significant withholding or state taxes on future distributions.

To the extent there remains a basis difference between the financial reporting and tax basis of an investment in a foreign subsidiary after the repatriation of the previously taxed income of $4,600.0, the Company is permanently reinvested.

A determination of the unrecognized deferred taxes related to these components is not practicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis