COTY INC. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021. Based on the evaluation of our 60 disclosure controls and procedures as of June 30, 2021, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. We have included our Management Report over Internal Control over Financial Reporting in “Item 15. Exhibits, Financial Statement Schedules” and is incorporated in this Item 9A by reference. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) and 15d-15(f) of the Exchange Act during the fourth fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls Our management, including our CEO and CFO, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving our objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. PART III Item 10. Directors, Executive Officers and Corporate Governance. Directors Information regarding directors is incorporated by reference to the “Directors” and “Corporate Governance” sections of our proxy statement on Schedule 14A for the 2021 Annual Meeting of Stockholders (the “2021 Proxy Statement”). Executive Officers Information regarding executive officers is incorporated by reference to the “Executive Officers” section of our 2021 Proxy Statement. Section 16(a) Beneficial Ownership Reporting Compliance This information is incorporated by reference to the “Section 16(a) Beneficial Ownership Reporting Compliance” section of our 2021 Proxy Statement. Code of Ethics This information is incorporated by reference to the “Corporate Governance Guidelines and Code of Business Conduct” section of our 2021 Proxy Statement. Item 11. Executive Compensation. This information is incorporated by reference to the “Executive Compensation” and “Director Compensation” sections of our 2021 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. This information is incorporated by reference to the “Security Ownership of Certain Beneficial Owners and Management” section of our 2021 Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence. This information is incorporated by reference to the “Certain Relationships and Transactions of Related Persons” and “Corporate Governance” section of our 2021 Proxy Statement. 61 Item 14. Principal Accounting Fees and Services. This information is incorporated by reference to the “Audit Fees and Other Fees” section of our 2021 Proxy Statement. PART IV Item 15. Exhibits, Financial Statement Schedules. List of documents filed as part of this Report: (1) Consolidated Financial Statements and Reports of Independent Registered Public Accounting Firm included herein: See Index on page F-1. (2) Financial Statement Schedule: See S-1. (3) All other schedules are omitted as they are inapplicable or the required information is furnished in the Company’s Consolidated Financial Statements or the Notes thereto. (4) List of Exhibits: Exhibit Number Document 2.1 Transaction Agreement dated as of July 8, 2015 among The Procter & Gamble Company, Coty Inc., Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 2.2 to the Company’s Annual Report on Form 10-K filed on August 17, 2015).* 2.2 Repurchase Letter Agreement dated August 13, 2015 among The Procter & Gamble Company, Coty Inc., Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 2.3 to the Company’s Annual Report on Form 10-K filed on August 17, 2015). 2.3 Letter Agreement, dated February 19, 2016, by and among The Procter & Gamble Company, the registrant, Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 25, 2016). 2.4 Third Amendment to Transaction Agreement, dated May 25, 2016, by and among The Procter & Gamble Company, Coty Inc., Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 27, 2016). 2.5 Fourth Amendment to Transaction Agreement, dated August 25, 2016, by and among The Procter & Gamble Company, Coty Inc., Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 2.5 to Amendment No. 4 to the Company’s Registration Statement on Form S-4, filed on August 25, 2016).* 2.6 Side Letter, dated September 13, 2016, between Coty Inc. and The Procter & Gamble Company (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2016). 2.7 Assignment and Transfer Agreement, dated as of November 2, 2015, by and between JAB Cosmetics B.V. and Coty Inc., including as an exhibit thereto that certain Shares and Trademarks Sale and Purchase Agreement, dated as of November 2, 2015, by and among JAB Cosmetics B.V., Hypermarcas S.A., Cosmed Indústria de Cosméticos e Medicamentos S.A., and as intervening and consenting parties, Novita Distribuição, Armazenamento e Transportes S.A., and Savoy Indústria de Cosméticos S.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 3, 2015). 2.8 Sale and Purchase Agreement, dated as of October 17, 2016, by and among Coty Inc., Gloria Coinvest 1 L.P., Lion Capital Fund III L.P., Lion Capital Fund III SBS L.P., Lion Capital Fund III (USD) L.P., Lion Capital Fund III SBS (USD) L.P., Ghd Nominees Limited (“GHD”), the management sellers named therein, and the other individual sellers named therein (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 17, 2016).* 2.9 Tax Matters Agreement, effective as of October 1, 2016, by and among Coty Inc., The Procter & Gamble Company, Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 3, 2016). 2.10 Purchase Agreement, dated as of November 18, 2019, by and among King Kylie Holdings, LLC, KMJ 2018 Irrevocable Trust, Kylie Jenner Inc., King Kylie, LLC, Coty Inc. and solely for the purpose of Section 6.7 and Section 6.13, KKJ 2018 Irrevocable Trust (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on February 5, 2020). 2.11 Sale and Purchase Agreement, dated June 1, 2020, by and among Coty Inc., Coty International Holding, B.V. and Rainbow UK Bidco Limited (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on June 2, 2020). 62 2.12 Separation Agreement, dated June 1, 2020, by and among Coty Inc., Coty International Holding, B.V., Waves UK Divestco Limited and Rainbow UK Bidco Limited (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 2, 2020). 2.13 Amended and Restated Sale and Purchase Agreement, dated November 11, 2020, by and among Coty Inc., Coty International B.V. and Rainbow UK Bidco Limited (incorporated by reference to Exhibit 2.2 of the Company ’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 12, 2020). 2.14 Amended and Restated Separation Agreement, dated November 11, 2020, by and among Coty Inc., Coty International B.V., Waves UK Divestco Limited and Rainbow UK Bidco Limited(incorporated by reference to Exhibit 2.1 of the C o mpany ’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 12, 2020). 3.1 Amended and Restated Certificate of Incorporation of Coty Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 5 of the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on May 14, 2013) 3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Coty Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 3, 2016). 3.3 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Coty Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 25, 2020). 3.4 Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on April 24, 2013). 4.1 Specimen Class A Common Stock Certificate of the registrant (incorporated by reference to Exhibit 4.1 to Amendment No. 6 to the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on May 28, 2013) 4.2 Certificate of Designations of Preferred Stock, Series A, dated April 17, 2015 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 20, 2015). 4.3 Certificate of Designations of Preferred Stock, Series A-1, dated February 4, 2019 (incorporated by reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q filed on February 8, 2019). 4.4 Certificate of Designations of Preferred Stock, Series B, dated May 26, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 26, 2020). 4.5 Indenture, dated as of April 5, 2018, among Coty Inc., the guarantors named therein, Deutsche Bank Trust Company Americas, as Trustee, Registrar and U.S. Paying Agent with respect to the 2026 Dollar Notes, and Deutsche Bank AG. London Branch, as London Paying Agent with respect to the Euro Notes (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 10, 2018). 4.6 Form of 2026 Dollar notes (included in Exhibit 4. 5 ) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 10, 2018). 4.7 Form of 2023 Euro Notes (included in Exhibit 4. 5 ) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 10, 2018). 4.8 Form of 2036 Euro Notes (included in Exhibit 4. 5 ) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 10, 2018). 4.9 Stockholders Agreement, dated as of March 17, 2019, by and among JAB Holdings, Parent, Offeror and the Company (incorporated by reference to Exhibit (e)(17) to the Company’s Solicitation/Recommendation Statement on Schedule 14D-9/A filed on March 18, 2019). 4.10 Description of Securities. 4.11 Indenture, dated as of April 21, 2021, among Coty Inc., the guarantors named therein, and Deutsche Bank Trust Company Americas, as Trustee and Collateral Agent (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 22, 2021). 4.12 Form of 5.000% Senior Secured Notes due 2026 (included in Exhibit 4.11) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 22, 2021). 4.13 First Lien/First Lien Intercreditor Agreement, dated as of April 21, 2021, among JPMorgan Chase Bank, N.A., as the credit facility agent, Deutsche Bank Trust Company Americas, as the initial other authorized representative, and each additional authorized representative from time to time party thereto, as consented to by Coty Inc. and the other grantors party to the Consent of Grantors attached thereto (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on April 22, 2021). 4.14 Pledge and Security Agreement, dated as of April 21, 2021, by and among Coty Inc., the other grantors from time to time party thereto and Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on April 22, 2021). 63 4.15 Indenture, dated as of June 16, 2021, among Coty Inc., the guarantors named therein, and Deutsche Bank Trust Company Americas, as Trustee and Collateral Agent and Deutsche Bank AG, London Branch as paying agent (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K file on June 16, 2021). 4.16 Form of 3.875% Senior Secured Notes due 2026 (included in Exhibit 4.1 5 ) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K file on June 16, 2021). 4.17 Joinder Agreement No. 1, dated as of June 16, 2021 among and acknowledged by JPMorgan Chase Bank, N.A., as credit facility agent, Deutsche Bank Trust Company Americas as initial other authorized representative, and the Company to the First Lien/First Lien Intercreditor Agreement, dated as of April 21, 2021 among JPMorgan Chase Bank, N.A., as credit facility agent and Deutsche Bank Trust Company Americas as initial other authorized representative (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on June 16, 2021). 4.18 Pledge and Security Agreement, dated as of June 16, 2021, by and among Coty Inc., the other grantors from time to time party thereto and Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 4. 4 to the Company’s Current Report on Form 8-K filed on June 16, 2021). 10.1 Credit Agreement, dated as of October 27, 2015, by and among Coty Inc., the other borrowers party thereto from time to time, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 30, 2015). 10.2 Pledge and Security Agreement, dated as of October 27, 2015, by and among Coty Inc., its subsidiaries signatory thereto and any other subsidiary who may become a party thereto and JPMorgan Chase Bank, N.A, as collateral agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 30, 2015). 10.3 Credit Agreement, dated January 26, 2016, among Galleria Co., as initial borrower, the other borrowers from time to time party thereto, J.P. Morgan Chase Bank, N.A., as administrative agent and collateral agent, and the other agents and lenders party thereto (incorporated by reference to Exhibit 10.4 of Galleria Co.’s Registration Statement on Form S-4 filed on April 22, 2016). 10.4 Guaranty Agreement, dated as of October 27, 2015, by and among Coty Inc., its subsidiaries signatory thereto and any other subsidiary who may become a party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 30, 2015). 10.5 Incremental Assumption Agreement and Amendment No. 1, dated April 8, 2016 to the Credit Agreement, by and among Coty Inc., Coty B.V., certain subsidiaries of Coty Inc. party thereto, the incremental lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 14, 2016). 10.6 Incremental Assumption Agreement and Refinancing Amendment to Credit Agreement, dated as of October 28, 2016, among Coty Inc., Coty B.V., the other loan parties party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 28, 2016). 10.7 Incremental Facility Activation Notice, dated as of October 28, 2016, among Coty Inc., each incremental term A lender and JPMorgan Chase Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 28, 2016). 10.8 Amended and Restated Credit Agreement, dated as of April 5, 2018, by and among Coty Inc., Coty B.V., the other borrowers party thereto from time to time, the lenders and other parties from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 10, 2018). 10.9 Amendment No. 1, dated June 27, 2019, to the Amended and Restated Credit Agreement, dated April 5, 2018, by and among Coty Inc., Coty B.V., the other borrowers party thereto from time to time, the lenders and other parties from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 1, 2019). 10.10 Amendment No. 2, dated April 29, 2020, to the Amended and Restated Credit Agreement, dated April 5, 2018, by and among Coty Inc., Coty B.V., the other borrowers party thereto from time to time, the lenders and other parties from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed on April 30, 2020). 10.11 Amendment No. 3 to Credit Agreement (Incremental Assumption Agreement), dated as of June 4, 2021, by and among Coty Inc., Coty B.V., the other loan parties party thereto, the incremental revolving lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 7, 2021). 10.12 Investment Agreement, dated May 11, 2020, by and between Coty Inc. and KKR Rainbow Aggregator L.P. (incorporated by reference to Exhibit 10.1 to the Company’s 8-K filed on May 12, 2020). 64 10.13 Amendment No. 1 to the Investment Agreement, dated June 1, 2020, by and among Coty Inc. and KKR Rainbow Aggregator L.P.(incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on June 1, 2020). 10.14 Registration Rights Agreement, dated as of May 26, 2020, by and among Coty Inc. and KKR Rainbow Aggregator L.P. (incorporated by reference to Exhibit 10.1 to the Company’s 8-K filed on May 26, 2020). 10.15 Shareholders’ Agreement, dated as of November 30, 2020, by and between Coty Inc., Coty International B.V., Rainbow Capital Group Limited, Rainbow JVCo Limited and Rainbow UK Bidco Limited (incorporated by reference to Exhibit 10.2 to the Company’s 8-K filed on December 1, 2020). 1 0.16 IP Cross-License Agreement, dated as of November 30, 2020, by and between Coty International B.V. and Wella International Operations Switzerland S.á.r.l. (incorporated by reference to Exhibit 10.1 to the Company’s 8-K filed on December 1, 2020). 10.1 6 Employment Agreement, dated January 27, 2020, between Coty Management B.V. and Kristin Blazewicz (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on May 11, 2020).† 10.17 Employment Agreement, dated June 3, 2020, between Coty Management B.V. and Gordon Von Bretten (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K filed on August 27 , 2020).† 10.1 8 Employment Agreement, dated October 31, 2019, between Coty Management B.V. and Richard Jones (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on February 5, 2020).† 10.1 9 Offer Letter, dated as of April 1, 2016, between Ayesha Zafar and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 11, 2016).† 10. 20 Employment Agreement, dated May 7, 2020, between Coty International B.V. and Laurent Mercier (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on February 9, 2021).† 10.2 1 Offer Letter, dated October 21, 2019, between Coty International B.V. and Laurent Mercier (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on February 9, 2021).† 10.2 2 Offer Letter, dated December 5, 2020, Coty International B.V. and Laurent Mercier (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on February 9, 2021).† 10.2 3 Employment Agreement, dated December 21, 2020, between Coty Italia S.r.l. and Anna von Bayern (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021).† 10.2 4 Employment Agreement, dated January 1, 2021, between Coty Italia S.r.l. and Anna von Bayern (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021).† 10.2 5 Employment Agreement, dated October 12, 2016 between HFC Prestige International Operations Switzerland sarl and Anne Jaeckin, and the addendum thereto dated May 18, 2020 (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K filed on August 27 , 2020).† 10.2 6 Employment Agreement, dated October 13, 2020, between Coty Inc. and Sue Nabi (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021).† 10.2 7 Equity Transfer Agreement, dated July 2, 2020, among Cottage Holdco B.V., Coty Inc. and Sue Nabi (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021).† 10.28 Restricted Stock Unit Award between Coty Inc. and Sue Nabi. † 10.2 9 Settlement Agreement, dated December 8, 2020, between Coty Management B.V. and Pierre-Andre Terisse (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on February 9, 2021).† 10. 30 Separation Agreement, dated October 10, 2020 between Coty Inc. and Edgar Huber (incorporated by reference to Exhibit 10. 5 to the Company’s Quarterly Report on Form 10-Q filed on February 9, 2021) .† 10.3 1 Settlement Agreement, dated July 31, 2020, between Coty Management B.V. and Fiona Hughes (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 6, 2020).† 10.3 2 Settlement Agreement, dated September 25, 2020, between Coty Management B.V. and Pascal Baltussen (incorporated by reference to Exhibit 10. 2 to the Company’s Quarterly Report on Form 10-Q filed on November 6, 2020) .† 10.3 3 Form of Indemnification Agreement between the registrant and its directors and officers (incorporated by reference to Exhibit 10.24 to Amendment No. 4 to the Company’s Registration Statement on Form S-1(File No. 333-182420) filed on April 24, 2013). 65 10.3 4 Amended and Restated Annual Performance Plan, as of February 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2017).† 10.3 5 Form of Restricted Stock Unit Award under Coty Inc. 2007 Stock Plan for Directors, as amended on April 8, 2013 (incorporated by reference to Exhibit 10.41 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on April 24, 2013).† 10.3 6 Amended and Restated Coty Inc. Equity and Long-Term Incentive Plan, as amended and restated on November 3 , 20 20 (incorporated by reference to Exhibit 10. 1 to the Company’s Current Report on Form 8 -Q filed on November 6 , 20 2 0 ).† 10.3 7 Restricted Stock Unit Award Terms and Conditions Under Coty Inc. Equity and Long-Term Incentive Plan, as amended and restated on April 8, 2013 (incorporated by reference to Exhibit 10.44 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on April 24, 2013).† 10.3 8 Restricted Stock and Restricted Stock Unit Tandem Award Terms and Conditions under the Coty Inc. Equity and Long-Term Incentive Plan, as amended and restated on April 8, 2013 (incorporated by reference to Exhibit 10.45 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on April 14, 2013).† 10.39 Form of Subscription Agreement for Series A Preferred Stock (incorporated by reference to Exhibit 10.55 to the Company’s Annual Report on Form 10-K filed on August 17, 2015).† 10.40 Amended and Restated Coty Inc. Stock Plan for Directors, as adopted November 3, 2020.† 10. 41 Amended Form of Elite Subscription and Stock Option Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2017).† 10. 42 Form of Phantom Unit Award Terms and Conditions (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 5, 2014).† 10. 43 Terms and Conditions Performance Stock Options under Coty Inc. Equity and Long-Term Incentive Plan, as amended and restated on October 28, 2015 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on February 8, 2018).† 10.4 4 Form of Subscription Agreement for Series A-1 Preferred Stock (incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K filed on August 28, 2019).† 10.4 5 Terms and Conditions of 2019 Incentive Stock Options under Coty Inc. Equity and Long-Term Incentive plan (incorporated by reference to Exhibit 10.46 to the Company’s Annual Report on Form 10-K filed on August 28, 2019).† 10.4 6 Form of Restricted Stock Award Agreement under the Amended and Restated Coty Inc. Equity and Long Term-Incentive Plan (incorporated by reference to Exhibit 10. 5 2 to the Company’s Annual Report on Form 10-K filed on August 27, 2020) † 10.47 Form of Restricted Stock Unit Terms and Conditions, as adopted on December 17, 2020, under the Amended and Restated Coty Inc. Equity and Long-Term Incentive Plan . † 21.1 List of significant subsidiaries. 23.1 Consent of Deloitte & Touche LLP. 24.1 Power of Attorney (included in signature page). 31.1 Certification of Chief Executive Officer, pursuant to Rules 13a-14a and 15d-14(a) 31.2 Certification of Chief Financial Officer, pursuant to Rules 13a-14(d) and 15d-14(d) 32.1 Certification of Chief Executive Officer, pursuant to 18 U.S. C. Section 1350 32.2 Certification of Chief Financial Officer, pursuant to 18 U.S. C. Section 1350 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). * Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementary to the Securities and Exchange Commission a copy of any omitted schedule or similar attachment upon request. † Exhibit is a management contract or compensatory plan or arrangement. 66 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of New York, New York on August 26, 2021. COTY INC. By: /s/ Laurent Mercier Name: Laurent Mercier Title: Chief Financial Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kristin Blazewicz, as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: 67 Signature Title Date /s/Sue Nabi Chief Executive Officer and Director (Principal Executive Officer) August 26, 2021 (Sue Nabi) /s/Laurent Mercier Chief Financial Officer (Principal Financial Officer) August 26, 2021 (Laurent Mercier) /s/Ayesha Zafar Senior Vice President, Group Controller (Principal Accounting Officer) August 26, 2021 (Ayesha Zafar) /s/Maria Asuncion Aramburuzabala Director August 26, 2021 (Maria Asuncion Aramburuzabala) /s/Beatrice Ballini Director August 26, 2021 (Beatrice Ballini) /s/Joachim Creus Director August 26, 2021 (Joachim Creus) /s/Nancy Ford Director August 26, 2021 (Nancy Ford) /s/Olivier Goudet Director August 26, 2021 (Olivier Goudet) /s/Peter Harf Chairman of the Board of Directors August 26, 2021 (Peter Harf) /s/Johannes Huth Vice Chairman of the Board of Directors August 26, 2021 (Johannes Huth) /s/Anna Makanju Director August 26, 2021 (Anna Makanju) /s/Isabelle Parize Director August 26, 2021 (Isabelle Parize) /s/Erhard Schoewel Director August 26, 2021 (Erhard Schoewel) /s/Robert Singer Director August 26, 2021 (Robert Singer) /s/Justine Tan Director August 26, 2021 (Justine Tan) 68 MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Coty’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) of the Securities Exchange Act of 1934) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Coty’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Coty’s management evaluated the effectiveness of internal control over financial reporting as of June 30, 2021 based on the criteria established in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation, management has concluded that Coty maintained effective internal control over financial reporting as of June 30, 2021. The Company's internal control over financial reporting as of June 30, 2021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report which appears herein. /s/Sue Nabi /s/Laurent Mercier Sue Nabi Laurent Mercier Chief Executive Officer Chief Financial Officer August 26, 2021 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Coty Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Coty Inc. and subsidiaries (the “Company”) as of June 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements, and financial statement schedule as of and for the year ended June 30, 2021, of the Company and our report dated August 26, 2021, expressed an unqualified opinion on those financial statements and financial statement schedule. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP New York, New York August 26, 2021 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Coty Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Coty Inc. and subsidiaries (the "Company") as of June 30, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows, for each of the three years in the period ended June 30, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 26, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Goodwill and Other Intangible Assets, net – Max Factor Trademark Valuation – Refer to Notes 2 and 12 to the financial statements Critical Audit Matter Description The Company has trademarks that are indefinite-lived intangible assets. The Company’s evaluation of the trademarks for impairment involves the comparison of the fair value of each trademark to its’ carrying value. Management estimates the fair value of these trademarks annually on its elected assessment date of May 1, or more frequently if certain events occur, based upon the income approach, using the relief from royalty methodology, which is a specific discounted cash flow method. The determination of the fair value requires management to make significant estimates and assumptions related to the trademarks’ estimated cash flows, royalty, and discount rates, especially those related to the Max Factor trademark. Changes in these assumptions could have a significant impact on the fair value of the Max Factor trademark, the amount of any impairment charge, or both. As of June 30, 2021, the carrying value of the indefinite-lived intangible assets was $1,018.7 million, of which $169.7 million related to the Max Factor trademark. The fair value of the Max Factor trademark exceeded its’ carrying value by 3.3%. Given the significant estimates and assumptions made by management to estimate the fair value and the difference between the fair value and carrying value for the Max Factor trademark, performing audit procedures to evaluate the reasonableness of such estimates and assumptions, particularly the estimated cash flows, and the selection of the royalty and discount rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the estimated cash flows, the selection of the royalty and discount rate for the Max Factor trademark included the following, among others: • We tested the effectiveness of controls over indefinite-lived intangible assets, including those over the estimated cash flows for the Max Factor trademark and the selection of the respective royalty and discount rate. • We evaluated management’s ability to accurately forecast by comparing actual results in previous years to management’s historical forecasts and by comparing the May and June 2021 forecasts with actual results for those months. • We evaluated the reasonableness of management’s estimated cash flows for the Max Factor trademark, by comparing management’s forecasts with: ◦ Historical cash flows and trends; ◦ Internal communications to management and the Board of Directors; and ◦ Forecasted information included in Company press releases, as well as analyst and industry reports of the Company and selected companies in its peer group. • We considered the impact of industry and market conditions on management’s forecasts for the Max Factor trademark, including consideration of the effects related to the COVID-19 Pandemic. • We evaluated the impact of changes in management’s forecasts from the May 1, 2021 annual measurement date to June 30, 2021. • With the assistance of our fair value specialists, we evaluated the valuation approach and royalty and discount rate for the Max Factor trademark, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the respective royalty and discount rate selected by management. /s/ Deloitte & Touche LLP New York, New York August 26, 2021 We have served as the Company’s auditor since 1995. COTY INC. & SUBSIDIARIES INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Operations 1 Consolidated Statements of Comprehensive Income (Loss) 2 Consolidated Balance Sheets 3 Consolidated Statements of Equity 6 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 9 Financial Statement Schedule: Schedule II—Valuation and Qualifying Accounts 1 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data ) Year Ended June 30, 2021 2020 2019 Net revenues $ 4,629.9 $ 4,717.8 $ 6,287.9 Cost of sales 1,861.7 1,991.2 2,498.5 Gross profit 2,768.2 2,726.6 3,789.4 Selling, general and administrative expenses 2,363.2 3,120.0 3,467.9 Amortization expense 251.2 233.1 246.7 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 Gain on divestitures — ( 111.5 ) — Operating loss ( 48.6 ) ( 1,236.5 ) ( 3,688.4 ) Interest expense, net 235.1 242.7 225.2 Other (income) expense, net ( 43.9 ) ( 11.6 ) 31.8 Loss from continuing operations before income taxes ( 239.8 ) ( 1,467.6 ) ( 3,945.4 ) Benefit for income taxes on continuing operations ( 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) income attributable to noncontrolling interests ( 16.1 ) 4.7 2.5 Net income (loss) attributable to redeemable noncontrolling interests 12.3 ( 0.7 ) 12.1 Net loss attributable to Coty Inc. $ ( 201.3 ) $ ( 1,006.7 ) $ ( 3,784.2 ) Amounts attributable to Coty Inc. Net loss from continuing operations $ ( 64.0 ) $ ( 1,093.9 ) $ ( 3,905.2 ) Convertible Series B Preferred Stock dividends ( 102.3 ) ( 6.5 ) — Net loss from continuing operations attributable to common stockholders ( 166.3 ) ( 1,100.4 ) ( 3,905.2 ) Net (loss) income from discontinued operations ( 137.3 ) 87.2 121.0 Net loss attributable to common stockholders $ ( 303.6 ) $ ( 1,013.2 ) $ ( 3,784.2 ) (Loss) earnings per common share Loss from continuing operations per common share - basic $ ( 0.22 ) $ ( 1.45 ) $ ( 5.20 ) Loss from continuing operations per common share - diluted $ ( 0.22 ) $ ( 1.45 ) $ ( 5.20 ) (Loss) earnings from discontinued operations - basic $ ( 0.18 ) $ 0.12 $ 0.16 (Loss) earnings from discontinued operations - diluted $ ( 0.18 ) $ 0.12 $ 0.16 Loss per common share - basic $ ( 0.40 ) $ ( 1.33 ) $ ( 5.04 ) Loss per common share - diluted $ ( 0.40 ) $ ( 1.33 ) $ ( 5.04 ) Weighted-average common shares outstanding: Basic 764.8 759.1 751.2 Diluted 764.8 759.1 751.2 See notes to Consolidated Financial Statements. F-1 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In millions) Year Ended June 30, 2021 2020 2019 Net loss $ ( 205.1 ) $ ( 1,002.7 ) $ ( 3,769.6 ) Other comprehensive income (loss): Foreign currency translation adjustment 130.3 ( 379.2 ) ( 113.2 ) Net unrealized derivative gain (loss) on cash flow hedges, net of taxes of $( 8.4 ), $ 9.1 and $ 14.0 , respectively 27.5 ( 29.7 ) ( 45.0 ) Pension and other post-employment benefits, net of tax of $ 9.0 , $( 7.3 ) and $ 17.3 , respectively ( 23.6 ) 11.6 ( 59.3 ) Total other comprehensive income (loss), net of tax 134.2 ( 397.3 ) ( 217.5 ) Comprehensive loss ( 70.9 ) ( 1,400.0 ) ( 3,987.1 ) Comprehensive income attributable to noncontrolling interests: Net (loss) income ( 16.1 ) 4.7 2.5 Foreign currency translation adjustment ( 0.1 ) 0.1 0.1 Total comprehensive (loss) income attributable to noncontrolling interests ( 16.2 ) 4.8 2.6 Comprehensive income attributable to redeemable noncontrolling interests: Net income (loss) 12.3 ( 0.7 ) 12.1 Comprehensive loss attributable to Coty Inc. $ ( 67.0 ) $ ( 1,404.1 ) $ ( 4,001.8 ) See notes to Consolidated Financial Statements. F-2 COTY INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except per share data ) June 30, 2021 June 30, 2020 ASSETS Current assets: Cash and cash equivalents $ 253.5 $ 308.3 Restricted cash 56.9 43.7 Trade receivables— less allowances of $ 47.7 and $ 57.3 , respectively 348.0 440.1 Inventories 650.8 678.2 Prepaid expenses and other current assets 473.9 411.6 Current assets held for sale — 4,613.1 Total current assets 1,783.1 6,495.0 Property and equipment, net 918.1 1,081.6 Goodwill 4,118.1 3,973.9 Other intangible assets, net 4,463.0 4,372.1 Equity investments 1,276.2 — Operating lease right-of-use assets 318.5 371.4 Deferred income taxes 758.5 362.4 Other noncurrent assets 55.9 72.4 TOTAL ASSETS $ 13,691.4 $ 16,728.8 LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,166.1 $ 1,190.3 Accrued expenses and other current liabilities 1,096.0 1,111.6 Short-term debt and current portion of long-term debt 24.2 188.3 Current operating lease liabilities 75.7 105.0 Income and other taxes payable 53.4 33.8 Current liabilities held for sale — 956.7 Total current liabilities 2,415.4 3,585.7 Long-term operating lease liabilities 269.3 317.4 Long-term debt, net 5,401.0 7,892.1 Pension and other post-employment benefits 420.6 400.3 Deferred income taxes 674.9 175.1 Other noncurrent liabilities 327.6 334.5 TOTAL LIABILITIES 9,508.8 12,705.1 COMMITMENTS AND CONTINGENCIES (Note 26) CONVERTIBLE SERIES B PREFERRED STOCK, $ 0.01 par value; 1.0 shares authorized; 1.0 and 0.8 issued and 1.0 and 0.8 outstanding, at June 30, 2021 and 2020, respectively 1,036.3 715.8 REDEEMABLE NONCONTROLLING INTERESTS 84.1 79.1 EQUITY: Preferred stock, $ 0.01 par value; 20.0 shares authorized; 1.5 issued and outstanding, at June 30, 2021 and 2020, respectively — — Class A Common Stock, $ 0.01 par value; 1,250.0 shares authorized, 832.3 and 830.6 issued and 766.0 and 765.1 outstanding at June 30, 2021 and 2020, respectively 8.3 8.3 Additional paid-in capital 10,376.2 10,447.4 Accumulated deficit ( 5,755.6 ) ( 5,548.6 ) Accumulated other comprehensive loss ( 321.9 ) ( 456.2 ) Treasury stock— at cost, shares: 66.3 and 65.5 at June 30, 2021 and 2020, respectively ( 1,446.3 ) ( 1,446.3 ) Total Coty Inc. stockholders’ equity 2,860.7 3,004.6 Noncontrolling interests 201.5 224.2 Total equity 3,062.2 3,228.8 TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY $ 13,691.4 $ 16,728.8 See notes to Consolidated Financial Statements. F-3 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In millions) Preferred Stock Class A Common Stock Additional Paid-in (Accumulated Accumulated Other Comprehensive Treasury Stock Total Coty Inc. Stockholders’ Noncontrolling Total Redeemable Noncontrolling Convertible Series B Shares Amount Shares Amount Capital Deficit) Income (Loss) Shares Amount Equity Interests Equity Interests Preferred Stock BALANCE as previously reported—July 1, 2018 5.0 $ — 815.8 $ 8.1 $ 10,750.8 $ ( 626.2 ) $ 158.8 65.0 $ ( 1,441.8 ) $ 8,849.7 $ 5.5 $ 8,855.2 $ 661.3 $ — Revised Adjustment due to the adoption of ASU No. 2016-16 ( 112.6 ) ( 112.6 ) ( 112.6 ) Adjustment due to the adoption of ASC 606 ( 18.2 ) ( 18.2 ) ( 18.2 ) Balance as adjusted —July 1, 2018 5.0 $ — 815.8 $ 8.1 $ 10,750.8 $ ( 757.0 ) $ 158.8 65.0 $ ( 1,441.8 ) $ 8,718.9 $ 5.5 $ 8,724.4 $ 661.3 $ — Issuance of Preferred Stock 7.9 0.1 0.7 0.8 0.8 Cancellation of Preferred Stock ( 3.5 ) — — — Exercise of employee stock options and restricted stock units 1.0 — 5.2 5.2 5.2 Shares withheld for employee taxes ( 1.4 ) ( 1.4 ) ( 1.4 ) Share-based compensation expense 16.9 16.9 16.9 Dividends declared - Cash and Other ($ 0.500 per Common Share) ( 347.5 ) ( 347.5 ) ( 347.5 ) Dividends settled in Shares of Class A Common Stock 2.4 — 30.6 30.6 30.6 Dividends declared - Stock ($ 0.125 per Common Share) ( 30.6 ) ( 30.6 ) ( 30.6 ) Net income (loss) ( 3,784.2 ) ( 3,784.2 ) 2.5 ( 3,781.7 ) 12.1 Other comprehensive income ( 217.6 ) ( 217.6 ) 0.1 ( 217.5 ) Distribution to noncontrolling interests, net — ( 1.6 ) ( 1.6 ) ( 26.8 ) Additional redeemable noncontrolling interests due to employee grants and other adjustments ( 0.6 ) ( 0.6 ) ( 0.6 ) 1.6 Adjustment of redeemable noncontrolling interests to redemption value 196.4 196.4 196.4 ( 196.4 ) BALANCE—June 30, 2019 9.4 $ 0.1 819.2 $ 8.1 $ 10,620.5 $ ( 4,541.2 ) $ ( 58.8 ) 65.0 $ ( 1,441.8 ) $ 4,586.9 $ 6.5 $ 4,593.4 $ 451.8 $ — See notes to Consolidated Financial Statements. F-4 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In millions) Preferred Stock Class A Common Stock Additional Paid-in (Accumulated Accumulated Other Comprehensive Treasury Stock Total Coty Inc. Stockholders’ Noncontrolling Total Redeemable Noncontrolling Convertible Series B Shares Amount Shares Amount Capital Deficit) Income Shares Amount Equity Interests Equity Interests Preferred Stock BALANCE as previously reported—July 1, 2019 9.4 $ 0.1 819.2 $ 8.1 $ 10,620.5 $ ( 4,541.2 ) $ ( 58.8 ) 65.0 $ ( 1,441.8 ) $ 4,586.9 $ 6.5 $ 4,593.4 $ 451.8 $ — Adjustment due to the adoption of ASC 842 (See Note 2) ( 0.7 ) ( 0.7 ) ( 0.7 ) BALANCE as adjusted—July 1, 2019 9.4 $ 0.1 819.2 $ 8.1 $ 10,620.5 $ ( 4,541.9 ) $ ( 58.8 ) 65.0 $ ( 1,441.8 ) $ 4,586.2 $ 6.5 $ 4,592.7 $ 451.8 $ — Issuance of Preferred Stock — — 709.3 Cancellation of Preferred Stock ( 7.9 ) ( 0.1 ) ( 0.6 ) ( 0.7 ) ( 0.7 ) Purchase of Class A Common Stock 0.5 ( 4.5 ) ( 4.5 ) ( 4.5 ) Issuance of Restricted Stock 2.0 — — — Exercise of employee stock options and restricted stock units 1.4 — 2.7 2.7 2.7 Share-based compensation expense 31.8 31.8 31.8 Dividends declared - Cash and Other ($ 0.375 per common share) ( 196.3 ) ( 196.3 ) ( 196.3 ) Shares withheld for employee taxes ( 5.3 ) ( 5.3 ) ( 5.3 ) Dividends declared - Stock ( 88.9 ) ( 88.9 ) ( 88.9 ) Dividends settled in Shares of Class A Common Stock 8.0 0.2 88.9 89.1 89.1 Dividends accrued - Convertible Series B Preferred Stock ( 6.5 ) ( 6.5 ) ( 6.5 ) 6.5 Net income (loss) ( 1,006.7 ) ( 1,006.7 ) 4.7 ( 1,002.0 ) ( 0.7 ) Other comprehensive loss ( 397.4 ) ( 397.4 ) 0.1 ( 397.3 ) Distribution to noncontrolling interests, net — — ( 16.7 ) Adjustments related to the sale of business 6.2 6.2 6.2 ( 360.4 ) Noncontrolling interest due to transaction (See Note 4) — 212.9 212.9 Adjustment of redeemable noncontrolling interests to redemption value ( 5.1 ) ( 5.1 ) ( 5.1 ) 5.1 BALANCE—June 30, 2020 1.5 $ — 830.6 $ 8.3 $ 10,447.4 $ ( 5,548.6 ) $ ( 456.2 ) 65.5 $ ( 1,446.3 ) $ 3,004.6 $ 224.2 $ 3,228.8 $ 79.1 $ 715.8 See notes to Consolidated Financial Statements. F-5 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In millions) Preferred Stock Class A Common Stock Additional Paid-in (Accumulated Accumulated Other Comprehensive Treasury Stock Total Coty Inc. Stockholders’ Noncontrolling Total Redeemable Noncontrolling Convertible Series B Shares Amount Shares Amount Capital Deficit) (Loss) Income Shares Amount Equity Interests Equity Interests Preferred Stock BALANCE as previously reported—July 1, 2020 1.5 $ — 830.6 $ 8.3 $ 10,447.4 $ ( 5,548.6 ) $ ( 456.2 ) 65.5 $ ( 1,446.3 ) $ 3,004.6 $ 224.2 $ 3,228.8 $ 79.1 $ 715.8 Adjustment due to the adoption of ASU No. 2016-13 ( 5.7 ) ( 5.7 ) ( 5.7 ) BALANCE as adjusted—July 1, 2020 1.5 — 830.6 8.3 $ 10,447.4 $ ( 5,554.3 ) $ ( 456.2 ) 65.5 $ ( 1,446.3 ) $ 2,998.9 $ 224.2 $ 3,223.1 $ 79.1 $ 715.8 Issuance of Preferred Stock — — 242.4 Reacquired Class A Common Stock for employee taxes 0.1 — — — Cancellation of Restricted Stock 0.7 — — Exercise of employee stock options and restricted stock units 1.7 — — — — Share-based compensation expense 27.4 27.4 27.4 Changes in dividends accrued 1.2 1.2 1.2 Shares withheld for employee taxes ( 5.0 ) ( 5.0 ) ( 5.0 ) Deemed Dividends- Convertible Series B Preferred Stock ( 10.5 ) ( 10.5 ) ( 10.5 ) 10.5 Dividends Accrued - Convertible Series B Preferred Stock ( 67.6 ) ( 67.6 ) ( 67.6 ) 67.6 Dividends Paid- Convertible Series B Preferred Stock ( 24.2 ) ( 24.2 ) ( 24.2 ) Net income (loss) ( 201.3 ) ( 201.3 ) ( 16.1 ) ( 217.4 ) 12.3 Other comprehensive loss 134.3 134.3 ( 0.1 ) 134.2 Distribution to noncontrolling interests, net — ( 6.5 ) ( 6.5 ) ( 2.1 ) Adjustment of redeemable noncontrolling interests to redemption value 5.2 5.2 5.2 ( 5.2 ) Equity Investment contribution for share-based compensation 2.3 2.3 2.3 BALANCE—June 30, 2021 1.5 $ — 832.3 $ 8.3 $ 10,376.2 $ ( 5,755.6 ) $ ( 321.9 ) 66.3 $ ( 1,446.3 ) $ 2,860.7 $ 201.5 $ 3,062.2 $ 84.1 $ 1,036.3 See notes to Consolidated Financial Statements. F-6 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Year Ended June 30, 2021 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 205.1 ) $ ( 1,002.7 ) $ ( 3,769.6 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 585.3 716.5 736.0 Non-cash lease expense 81.2 104.5 — Asset impairment charges — 434.0 3,851.9 Deferred income taxes ( 218.1 ) ( 342.7 ) ( 175.7 ) (Release) provision for bad debts ( 13.2 ) 55.4 11.6 Provision for pension and other post-employment benefits 17.8 15.9 29.5 Share-based compensation 29.9 29.8 14.8 Gain on divestiture — ( 111.5 ) — Loss on sale of business in discontinued operations 246.4 — — Loss on impairment of long-lived assets 7.2 24.6 27.8 Unrealized gains from equity investments, net ( 70.3 ) — — Foreign exchange effects 26.7 30.5 ( 4.2 ) Deferred debt issuance cost and debt discount write-off 24.2 — 3.8 Other 38.6 39.6 43.5 Change in operating assets and liabilities, net of effects from purchase of acquired companies: Trade receivables 10.5 424.5 344.9 Inventories 81.2 124.4 ( 21.9 ) Prepaid expenses and other current assets ( 136.5 ) 25.9 11.5 Accounts payable ( 49.7 ) ( 373.5 ) ( 127.3 ) Accrued expenses and other current liabilities ( 45.8 ) ( 36.3 ) ( 378.1 ) Operating lease liabilities ( 125.3 ) ( 106.6 ) — Income and other taxes payable 19.9 ( 46.1 ) 66.4 Other noncurrent assets 40.2 0.8 24.5 Other noncurrent liabilities ( 26.4 ) ( 57.9 ) ( 49.8 ) Net cash provided by (used in) operating activities 318.7 ( 50.9 ) 639.6 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 173.9 ) ( 267.4 ) ( 426.6 ) Payment for business combinations and asset acquisitions, net of cash acquired — ( 592.2 ) ( 40.8 ) Proceeds from sale of business, net of cash disposed 27.0 25.6 — Proceeds from sale of discontinued business, net of cash disposed 2,374.1 — — Return of capital from equity investments 448.0 — — Payment for equity investment and related asset acquisition ( 200.0 ) — — Proceeds from sale of long term assets, including assets under restructuring programs 4.3 0.6 13.4 Termination of currency swaps designated as net investment hedges ( 37.6 ) — — Net cash provided by (used in) investing activities 2,441.9 ( 833.4 ) ( 454.0 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net repayments of short-term debt, original maturity less than three months — ( 4.3 ) ( 21.3 ) Proceeds from revolving loan facilities 2,759.8 4,681.3 2,183.3 Repayments of revolving loan facilities ( 3,593.3 ) ( 4,044.4 ) ( 1,729.1 ) Proceeds from issuance of other long term debt 1,748.8 — — Repayments of term loans and other long term debt ( 3,894.5 ) ( 186.4 ) ( 189.8 ) F-7 Dividend payment on Class A Common Stock ( 1.5 ) ( 196.9 ) ( 346.2 ) Dividend payment on Convertible Series B Preferred Stock ( 24.2 ) — — Net proceeds from issuance of Class A Common Stock and Series A Preferred Stock — 2.7 5.9 Payments for purchases of Class A Common Stock held as Treasury Stock — ( 4.5 ) — Proceeds from issuance of Convertible Series B Preferred Stock 227.2 724.5 — Net proceeds (payments) for foreign currency contracts 18.5 0.2 ( 0.4 ) Distributions to mandatorily redeemable financial interests, redeemable noncontrolling interests and noncontrolling interests ( 8.6 ) ( 24.5 ) ( 38.1 ) Purchase of remaining mandatorily redeemable financial interest — ( 45.0 ) — Payment of debt issuance costs ( 21.9 ) ( 14.2 ) ( 17.4 ) All other ( 5.4 ) ( 11.2 ) ( 7.2 ) Net cash (used in) provided by financing activities ( 2,795.1 ) 877.3 ( 160.3 ) EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 7.1 ) ( 21.4 ) ( 7.1 ) NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 41.6 ) ( 28.4 ) 18.2 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 352.0 380.4 362.2 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period $ 310.4 $ 352.0 $ 380.4 SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash paid during the year for interest $ 230.6 $ 280.6 $ 290.7 Cash received during the period for settlement of interest rate swaps — — 43.2 Cash paid during the year for income taxes, net of refunds received 15.9 123.2 110.3 SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES: Accrued capital expenditure additions $ 69.7 $ 76.7 $ 109.2 Non-cash Common Stock dividend — 88.9 30.6 Non-cash Preferred Stock dividend 78.1 6.5 — Accrued fees related to the issuance of Convertible Series B Preferred Stock — 15.2 — See notes to Consolidated Financial Statements. F-8 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 1. DESCRIPTION OF BUSINESS Coty Inc. and its subsidiaries (collectively, the “Company” or “Coty”) manufacture, market, sell and distribute branded beauty products, including fragrances, color cosmetics and skin & body related products throughout the world. Coty is a global beauty company with a rich entrepreneurial history and an iconic portfolio of brands. The Company operates on a fiscal year basis with a year-end of June 30. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year. For example, references to “fiscal 2021” refer to the fiscal year ended June 30, 2021. When used in this Annual Report on Form 10-K, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation. The Company’s sales generally increase during the second fiscal quarter as a result of increased demand associated with the winter holiday season. Financial performance, working capital requirements, sales, cash flows and borrowings generally experience variability during the three to six months preceding the holiday season. Product innovations, new product launches and the size and timing of orders from the Company’s customers may also result in variability. On November 30, 2020, the Company completed the previously announced strategic transaction with Rainbow UK Bidco Limited (“KKR Bidco”) (an affiliate of funds and/or separately managed accounts (“KKR Funds”) advised and/or managed by Kolberg Kravis Roberts & Co. L.P. and its affiliates (“KKR”)), for the sale of a majority stake in Coty’s Professional and Retail Hair business, including the Wella, Clairol, OPI and ghd brands, (together, the “Wella Business”). As a result Coty owns a 40 % stake in Rainbow JVCO LTD and subsidiaries (together, "Wella"). See Note 4—Business Combinations, Asset Acquisitions and Divestitures for information on the strategic transaction. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying financial statements of the Company are presented on a consolidated basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. The Company also consolidates majority-owned entities in the United States of America, United Arab Emirates, Kingdom of Saudi Arabia, and South Korea where the Company has the ability to exercise controlling influence. Ownership interests of noncontrolling parties are presented as mandatorily redeemable financial interests, noncontrolling interests or redeemable noncontrolling interests, as applicable. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, the net realizable value of inventory, the fair value of acquired assets and liabilities associated with acquisitions, the fair value of equity investments, the assessment of goodwill, other intangible assets and long-lived assets for impairment, and income taxes. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the Consolidated Financial Statements in future periods. Cash Equivalents Cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. F-9 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Restricted Cash Restricted cash represents funds that are not readily available for general purpose cash needs due to contractual limitations. Restricted cash is classified as a current or long-term asset based on the timing and nature of when or how the cash is expected to be used or when the restrictions are expected to lapse. As of June 30, 2021 and 2020, the Company had restricted cash of $ 56.9 and $ 43.7 , respectively, included in Restricted cash in the Consolidated Balance Sheets. The restricted cash balances as of June 30, 2021 and 2020 primarily provide collateral for certain bank guarantees on rent, customs and duty accounts and also consists of collections on factored receivables that remain unremitted to the factor as of June 30, 2021 and 2020. Restricted cash is included as a component of Cash, cash equivalents, and restricted cash in the Consolidated Statement of Cash Flows. Trade Receivables Trade receivables are stated net of the allowance for doubtful accounts and cash discounts, which is based on the evaluation of the accounts receivable aging, specific exposures, and historical trends. The Company reviews its allowances by assessing factors such as an individual trade receivable aging and customers’ liquidity. Trade receivables are written off on a case-by-case basis, net of any amounts that may be collected. Inventories 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. Costs include direct materials, direct labor and overhead (e.g., indirect labor, rent and utilities, depreciation, purchasing, receiving, inspection and quality control) and in-bound freight costs. The Company classifies inventories into various categories based upon their stage in the product life cycle, future marketing sales plans and the disposition process. The Company also records an inventory obsolescence reserve, which represents the excess of the cost of the inventory over its net realizable value, based on various product sales projections. This reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age, historical trends, and requirements to support forecasted sales. In addition, and as necessary, the Company may establish specific reserves for future known or anticipated events. 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). Property and Equipment and Other Long-lived Assets Property and equipment is stated at cost less accumulated depreciation or amortization. The cost of renewals and betterments is capitalized and depreciated. Expenditures for maintenance and repairs are expensed as incurred. Property and equipment that is disposed of through sale, trade-in, donation, or scrapping is written off, and any gain or loss on the transaction, net of costs to dispose, is recorded in Selling, general and administrative expense. Depreciation and amortization are computed principally using the straight-line method over the following estimated useful lives: Description Estimated Useful Lives Buildings 20 - 40 years Marketing furniture and fixtures 3 - 5 years Machinery and equipment 2 - 15 years Computer equipment and software 2 - 5 years Property and equipment under finance leases and leasehold improvements Lesser of lease term or economic life Intangible assets with finite lives are amortized principally using the straight-line method over the following estimated useful lives: Description Estimated Useful Lives License agreements 2 - 34 years Customer relationships 2 - 28 years Trademarks 2 - 30 years Product formulations and technology 2 - 28 years F-10 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Long-lived assets, including tangible and intangible assets with finite lives, are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When such events or changes in circumstances occur, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. If the projected undiscounted cash flows are less than the carrying value, an impairment charge would be recorded for the excess of the carrying value over the fair value. The Company estimates fair value based on the best information available, including discounted cash flows and/or the use of third-party valuations. Goodwill and Other Indefinite-lived Intangible Assets Goodwill is calculated as the excess of the cost of purchased businesses over the fair value of their underlying net assets. Goodwill is allocated and evaluated at the reporting unit level, which are the Company’s operating segments. The Company allocates goodwill to one or more reporting units that are expected to benefit from synergies of the business combination. Goodwill and other intangible assets with indefinite lives are not amortized, but are evaluated for impairment annually as of May 1 or whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When testing goodwill for impairment, the Company has the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as the basis to determine if it is necessary to perform a quantitative goodwill impairment test. In performing its qualitative assessment, the Company considers the extent to which unfavorable events or circumstances identified, such as changes in economic conditions, industry and market conditions or company specific events, could affect the comparison of the reporting unit’s fair value with its carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company is required to perform a quantitative impairment test. Quantitative impairment testing for goodwill is based upon the fair value of a reporting unit as compared to its carrying value. The Company makes certain judgments and assumptions in allocating assets and liabilities to determine carrying values for its reporting units. To determine fair value of the reporting unit, the Company uses a combination of the income and market approaches, when applicable. Under the income approach, fair value is determined using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflects the relative risk of the cash flows. Under the market approach, when applicable, information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units is utilized to create valuation multiples that are applied to the operating performance of the reporting units being tested, to value the reporting unit. The impairment loss recognized would be the difference between a reporting unit’s carrying value and fair value in an amount not to exceed the carrying value of the reporting unit’s goodwill. Indefinite-lived other intangible assets principally consist of trademarks. The fair values of indefinite-lived other intangible assets are estimated and compared to their respective carrying values. The trademarks’ fair values are based upon the income approach, utilizing the relief from royalty or excess earnings 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. An impairment loss is recognized when the estimated fair value of the intangible asset is less than its carrying value. Leases All of the Company’s material leases are operating leases. These are primarily real estate properties, including corporate offices, retail stores and facilities to support the Company's manufacturing, research and development and distribution operations. For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records right-of-use ("ROU") assets and lease obligations for its operating leases, which are initially recognized based on the discounted future lease payments over the term of the lease. Variable lease payments are not included in the measurement of ROU assets and lease liabilities. As the rate implicit in the Company's leases is not easily determinable, the Company’s applicable incremental borrowing rate is used in calculating the present value of the sum of the lease payments. Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company has elected not to recognize ROU asset and lease obligations for its short-term leases, which are defined as leases with an initial term of 12 months or less. ASU 2016-02, Leases (Topic 842) , as amended, was adopted by the Company on July 1, 2019, utilizing a modified retrospective approach. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allows a lessee to carry forward its population of existing leases, the classification of each lease, as well as the treatment of initial direct costs as of the period of adoption. In addition, the Company elected the practical expedient related to lease and non-lease components, as an accounting policy election for all asset classes, which allows a lessee to not separate non-lease from lease components and instead account for consideration paid in a contract as a single lease F-11 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) component. Lastly, the Company did not elect the practical expedient related to hindsight analysis which allows a lessee to use hindsight in determining the lease term and in assessing impairment. Prior to July 1, 2019, leases were accounted for under ASC Topic 840, Leases . Deferred Financing Fees The Company capitalizes costs related to the issuance of debt instruments, as applicable. Such costs are amortized over the contractual term of the related debt instrument in Interest expense, net using the straight-line method, which approximates the effective interest method, in the Consolidated Statements of Operations. Noncontrolling Interests and Redeemable Noncontrolling Interests Interests held by third parties in consolidated majority-owned subsidiaries are presented as noncontrolling interests, which represents the noncontrolling stockholders’ interests in the underlying net assets of the Company’s consolidated majority-owned subsidiaries. Noncontrolling interests that are not redeemable are reported in the equity section of the Consolidated Balance Sheets. Noncontrolling interests, where the Company may be required to repurchase the noncontrolling interest under a put option or other contractual redemption requirement, are reported in the Consolidated Balance Sheets between liabilities and equity, as redeemable noncontrolling interests. The Company adjusts the redeemable noncontrolling interests to the higher of the redemption value or the carrying value (the acquisition date fair value adjusted for the noncontrolling interest’s share of net income (loss) and dividends) on each balance sheet date with changes recognized as an adjustment to retained earnings, or in the absence of retained earnings, as an adjustment to additional paid-in capital. Revenue Recognition Revenue is recognized at a point in time and/or over time when control of the promised goods or services is transferred to the Company’s customers, which usually occurs upon delivery. Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. The Company’s revenue contracts principally represent a performance obligation to sell its beauty products to trade customers and are satisfied when control of promised goods and services is transferred to the customers. Net revenues comprise gross revenues less customer discounts and allowances, actual and expected returns (estimated based on an analysis of historical experience and position in product life cycle) and various trade spending activities. Trade spending activities represent variable consideration promised to the customer and primarily relate to advertising, product promotions and demonstrations, some of which involve cooperative relationships with customers. The costs of trade spend activities are estimated considering all reasonably available information, including contract terms with the customer, the Company’s historical experience and its current expectations of the scope of the activities, and is reflected in the transaction price when sales are recorded. The Company’s payment terms vary by the type and location of its customers and the products offered. The term between invoicing and when payment is due is not significant. The Company’s sales return accrual reflects seasonal fluctuations, including those related to revenues for the holiday season in the first half of the fiscal year. This accrual is a subjective critical estimate that has a direct impact on reported net revenues, and is calculated based on history of actual returns, estimated future returns and information provided by retailers regarding their inventory levels. In addition, as necessary, specific accruals may be established for significant future known or anticipated events. The types of known or anticipated events that the Company has considered, and will continue to consider, include the financial condition of the Company’s customers, store closings by retailers, changes in the retail environment, and the Company’s decision to continue to support new and existing brands. 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 represented 10 %, 11 %, and 9 % in fiscal 2021, 2020 and 2019, respectively. The Company accounts for certain customer store fixtures as other assets. Such fixtures are amortized using the straight-line method over the period of 3 to 5 years as a reduction of revenue. Cost of Sales F-12 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Cost of sales includes all of the costs to manufacture the Company’s products. For products manufactured in the Company’s own facilities, such costs include raw materials and supplies, direct labor and factory overhead. For products manufactured for the Company by third-party contractors, such costs represent the amounts invoiced by the contractors. Cost of sales also includes royalty expense associated with license agreements. Additionally, shipping costs, freight-in and depreciation and amortization expenses related to manufacturing equipment and facilities are included in Cost of sales in the Consolidated Statements of Operations. Selling, General and Administrative Expenses Selling, general and administrative expenses include advertising and promotional costs and research and development costs. Also included in Selling, general and administrative expenses are share-based compensation, certain warehousing fees, manufacturing fixed costs, personnel and related expenses, rent on operating leases, and professional fees. Advertising and promotional costs are expensed as incurred and totaled $ 1,029.4 , $ 1,343.7 and $ 1,595.5 in fiscal 2021, 2020 and 2019, respectively. Included in advertising and promotional costs are $ 130.3 , $ 127.9 , and $ 120.4 of depreciation of marketing furniture and fixtures, such as product displays, in fiscal 2021, 2020 and 2019, respectively. Research and development costs are expensed as incurred and totaled $ 96.5 , $ 93.4 and $ 98.5 in fiscal 2021, 2020 and 2019, respectively. Share-Based Compensation Common Stock Common shares are available to be awarded for the exercise of phantom units, vested stock options, the settlement of restricted stock units (“RSUs”), and the conversion of Series A and Series A-1 Preferred Stock. Share-based compensation expense is measured and fixed at the grant date, based on the estimated fair value of the award and is recognized on a straight-line basis, net of estimated forfeitures, over the employee’s requisite service period. The fair value of stock options is determined using the Black-Scholes valuation model using the assumptions discussed in Note 24—Share-Based Compensation Plans. The fair value of RSUs is determined on the date of grant based on the Company’s stock price. Treasury Stock The Company accounts for treasury stock under the cost method. When shares are reissued or retired from treasury stock they are accounted for at an average price. When treasury stock is re-issued at a price higher than its cost, the difference is recorded as a component of Additional paid-in-capital in the Company’s Consolidated Balance Sheets. When treasury stock is re-issued at a price lower than its cost, the difference is recorded as a reduction of Additional paid-in-capital to the extent that there are treasury stock gains to offset the losses. If there are no treasury stock gains in Additional paid-in-capital, the losses upon re-issuance of treasury stock are recorded as a reduction of Retained earnings in the Company’s Consolidated Balance Sheets. Income Taxes The Company is subject to income taxes in the U.S. and various foreign jurisdictions. The Company accounts for income taxes under the asset and liability method. Therefore, income tax expense is based on reported (Loss) income before income taxes, and deferred income taxes reflect the effect of temporary differences between the carrying amounts of assets and liabilities that are recognized for financial reporting purposes and the carrying amounts that are recognized for income tax purposes. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized based on currently available evidence. The Company considers how to recognize, measure, present and disclose in financial statements uncertain tax positions taken or expected to be taken on a tax return. The Company is subject to tax audits in various jurisdictions. The Company regularly assesses the likely outcomes of such audits in order to determine the appropriateness of liabilities for unrecognized tax benefits (“UTBs”). The Company classifies interest and penalties related to UTBs as a component of the provision for income taxes. For UTBs, the Company first determines whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. As the determination of liabilities related to UTBs and associated interest and penalties requires significant estimates to be made by the Company, there can be no assurance that the Company will accurately predict the outcomes of these audits, and thus the eventual outcomes could have a material impact on the Company’s operating results or financial condition and cash flows. F-13 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) As a result of the 2017 Tax Act changing the U.S. to a modified territorial tax system, the Company no longer asserts that any of its undistributed foreign earnings are permanently reinvested. The Company does 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, the Company is permanently reinvested. A determination of the unrecognized deferred taxes related to these components is not practicable. The Tax Act requires a U.S. shareholder of a foreign corporation to include in income its global intangible low-taxed income (“GILTI”). In general, GILTI is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets. As a result of recently released Financial Accounting Standards Board (“FASB”) guidance, an entity may choose to recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or an entity can elect to treat GILTI as a period cost and include it in the tax expense of the year it is incurred. As such, the Company has elected to treat the tax on GILTI as a tax expense in the year it is incurred rather than recognizing deferred taxes. Restructuring Costs Charges incurred in connection with plans to restructure and integrate acquired businesses or in connection with cost-reduction initiatives that are initiated from time to time are included in Restructuring costs in the Consolidated Statements of Operations if such costs are directly associated with an exit or disposal activity, a reorganization, or with integrating an acquired business. These costs can include employee separations, contract and lease terminations, and other direct exit costs. Employee severance and other termination benefits are primarily determined based on established benefit arrangements, local statutory requirements or historical practices. The Company recognizes these benefits when payment is probable and estimable. Additional elements of severance and termination benefits associated with non-recurring benefits are recognized ratably over each employee’s required future service period. Costs for real estate consolidation are recognized based on the type of cost, and the expected future use of the facility. For locations where the Company does not expect to sub-lease the property, the amortization of any right-of-use asset is accelerated from the decision date to the cease use date. For locations where the Company expects to sub-lease the properties subsequent to its vacating the property, the right-of-use asset is reviewed for potential impairment at the earlier of the cease use date or the date a sub-lease is signed. To determine the amount of impairment, the fair value of the right-of-use asset is determined based on the present value of the estimated net cash flows related to the property. Contractual costs outside of the right-of-use asset are recognized based on the net present value of expected future cash outflows for which the Company will not receive any benefit. Such amounts are reliant on estimates of future sub-lease income to be received and future contractual costs to be incurred. Other business realignment costs represent the incremental cost directly related to the restructuring activities which can include accelerated depreciation, professional or consulting fees and other internal costs including compensation related costs for dedicated internal resources. Other business realignment costs are generally recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations. Charges for accelerated depreciation are recognized on long-lived assets that will be taken out of service before the end of their normal service life, in which case depreciation estimates are revised to reflect the use of the asset over its shortened useful life. All other costs are recognized as incurred. Business Combinations The Company accounts for business combinations using the acquisition method of accounting. The acquisition method of accounting requires that purchase price, including the fair value of contingent consideration, of the acquisition be allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date. The Company remeasures the fair value of contingent consideration at each reporting period using a probability-adjusted discounted cash flow method based on significant inputs not observable in the market and any change in the fair value from either the passage of time or events occurring after the acquisition date, is recorded in earnings. Contingent consideration payments that exceed the acquisition date fair value of the contingent consideration are reflected as an operating activity in the Consolidated Statements of Cash Flows. Payments made for contingent consideration recorded as part of an acquisition’s purchase price are reflected as financing activities in the Company’s Consolidated Statements of Cash Flows, if paid more than three months after the acquisition date. If paid within three months of the acquisition date, these payments are reflected as investing activities in the Company’s Consolidated Statements of Cash Flows. The Company generally uses the following methodologies for valuing the Company’s significant acquired intangibles assets: • Trademarks (indefinite or finite) - The Company uses a relief from royalty method to value trademarks. The key assumptions for the model are forecasted net revenue, the royalty rate, the effective tax rate and the discount rate. F-14 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) • Customer relationships and license agreements - The Company uses an excess earnings method to value customer relationships and license agreements. The key assumptions for the model are forecasted net revenue, 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. Fair Value Measurements The following fair value hierarchy is used in selecting inputs for those assets and liabilities measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The Company evaluates these inputs and recognizes transfers between levels, if any, at the end of each reporting period. The hierarchy consists of three levels: Level 1 - Valuation based on quoted market prices in active markets for identical assets or liabilities; Level 2 - Valuation based on inputs other than Level 1 inputs that are observable for the assets or liabilities either directly or indirectly; Level 3 - Valuation based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and supported by little or no observable market activity. The Company has not elected the fair value measurement option for any financial instruments or other assets not required to be measured at fair value on a recurring basis. Derivative Instruments and Hedging Activities Refer to Note 20—Derivative Instruments for the Company’s policies for Derivative Instruments and Hedging Activities. Foreign Currency Exchange gains or losses incurred on non-financing foreign exchange currency transactions conducted by one of the Company’s operations in a currency other than the operation’s functional currency are reflected in Cost of sales or operating expenses. Net losses of $ 7.8 , $ 18.0 and $ 2.7 in fiscal 2021, 2020 and 2019, respectively resulting from non-financing foreign exchange currency transactions are included in the Consolidated Statements of Operations. Assets and liabilities of foreign operations are translated into U.S. dollars at the rates of exchange in effect at the end of the reporting period. Income and expense items are translated at the average exchange rates prevailing during each reporting period presented. Translation gains or losses are reported as cumulative adjustments in Accumulated other comprehensive income (loss) (“AOCI/(L)”). Net (losses)/gains of $( 6.8 ), $( 14.8 ) and $ 7.6 in fiscal 2021, 2020 and 2019, respectively, resulting from financing foreign exchange currency transactions are included in Interest expense, net in the Consolidated Statements of Operations. Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13 and ASU 2018-19, Financial Instruments-Credit Losses (Topic 326) : M easurement of Credit Losses on Financial Instruments , which requires that a financial asset (or a group of financial assets) measured at an amortized cost basis be presented at the net amount expected to be collected. This approach to estimating credit losses applies to most financial assets measured at amortized cost and certain other instruments, including but not limited to, trade and other receivables. The Company adopted this guidance in the first quarter of fiscal 2021 and the cumulative effect adjustment from adoption was immaterial to the Company's Consolidated Financial Statements. On initial recognition, the Company recorded an after-tax cumulative effect decrease to retained earnings of $ 5.7 ($ 6.6 pre-tax) as of the beginning of fiscal 2021. On July 1, 2020, the Company adopted Accounting Standards Update No. 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) , which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. The adoption of this guidance impacted disclosures only and did not have an impact on the Company‘s financial position or results of operations. On July 1, 2020, the Company adopted Accounting Standards Update No. 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans (Subtopic 715-20) , which improved the effectiveness of disclosure requirements for defined benefit plans. The standard removes, modifies, and clarifies certain disclosure requirements. The adoption of this guidance impacted disclosures only and did not have an impact on the Company‘s financial position or results of operations. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”) as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. F-15 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company adopted ASU 2019-12 effective July 1, 2020, on a prospective basis. The adoption of ASU 2019-12 did not have a material impact on the Company's Consolidated Financial Statements. Recently Issued and Not Yet Adopted Accounting Pronouncements Accounting Standard Update(s) Topic Effective Period Summary 2020-01 Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) Fiscal 2022 The FASB issued authoritative guidance that clarifies certain interactions between the accounting for equity securities, equity method investments, and certain derivative instruments. The Company is evaluating the impact this guidance will have on the Company’s Consolidated Financial Statements and related disclosures. 2020-04, 2021-01 Reference Rate Reform (Topic 848) Fiscal 2022 The FASB issued authoritative guidance that provides temporary optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions to ease the financial reporting burdens related to transitioning from LIBOR and other reference rates expected to be discontinued by reference rate reform to alternative reference rates. The Company is evaluating the impact this guidance will have on the Company’s Consolidated Financial Statements and related disclosures. 2020-06 Debt- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40) Fiscal 2023 The FASB issued authoritative guidance which removes certain separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. The Company is evaluating the impact this guidance will have on the Company’s Consolidated Financial Statements and related disclosures. 3. DISCONTINUED OPERATIONS As described in Note 1—Description of Business, on November 30, 2020, the Company completed the strategic transaction for the sale of a majority stake in the Wella Business. In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of the Wella Business are presented as discontinued operations for the period up to and including the date of the sale, and, as such, have been excluded from both continuing operations and segment results for all periods presented. Additionally, the Wella Business assets and liabilities included in the sale are presented as assets and liabilities held for sale in the Consolidated Balance Sheets for the comparative period provided. The Wella Business was comprised of the Professional Beauty reportable segment and the Retail Hair business, which was included in the Americas, EMEA and Asia Pacific reportable segments. F-16 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The following table has selected financial information included in Net income from discontinued operations for the Wella Business. Year Ended June 30, 2021 (a) 2020 2019 Net revenues $ 986.3 $ 2,020.1 $ 2,360.6 Cost of sales 322.5 689.7 808.0 Gross profit 663.8 1,330.4 1,552.6 Selling, general and administrative expenses 443.7 1,009.2 1,096.0 Amortization expense — 95.5 106.8 Restructuring costs ( 0.7 ) 7.5 10.0 Asset impairment charges — — 122.9 Operating income 220.8 218.2 216.9 Interest expense, net (b) 21.3 49.7 50.6 Loss on sale of business 246.4 — — Other (income) expense, net ( 1.0 ) ( 0.9 ) ( 1.0 ) (Loss) income from discontinued operations before income taxes ( 45.9 ) 169.4 167.3 Income tax on discontinued operations 91.4 82.2 46.3 Net (loss) income from discontinued operations $ ( 137.3 ) $ 87.2 $ 121.0 (a) As the sale of the Wella Business occurred on November 30, 2020, discontinued operations activity, other than the Loss on sale of business, comprises five months for the fiscal year ended 2021. (b) Interest expense was allocated to discontinued operations due to a requirement in the 2018 Coty Credit Agreement, as amended (as defined in the Note 15—Debt) that cash generated from the sale of the Wella Business is utilized to reduce the Company’s debt within the twelve months following the sale completion date, other than a maximum of $ 500.0 that will be used to fund operations. The following is selected financial information included in cash flows from discontinued operations for the Wella Business held for sale: Year Ended June 30, 2021 2020 2019 NON-CASH OPERATING ITEMS Depreciation and amortization $ — $ 131.8 $ 157.5 Goodwill and intangible asset impairment charges — — 123.0 CASH FLOW FROM INVESTING ACTIVITIES Capital Expenditures $ 8.7 $ 24.7 $ 44.1 F-17 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The major components of assets and liabilities of the Wella Business held for sale are provided below. June 30, 2020 (a) ASSETS Trade receivables $ 168.0 Inventories 269.2 Prepaid expenses and other current assets 134.9 Property and equipment, net 241.3 Goodwill 874.8 Other intangible assets, net 2,770.4 Operating lease right of use asset 73.4 Deferred income taxes 25.5 Other noncurrent assets 55.6 TOTAL ASSETS HELD FOR SALE $ 4,613.1 LIABILITIES Accounts payable $ 128.3 Accrued expenses and other current liabilities 236.4 Current operating lease liabilities 17.2 Income and other taxes payable 15.8 Long-term operating lease liabilities 65.9 Noncurrent deferred tax liabilities 324.8 Pension and other post-employment benefits 140.8 Other noncurrent liabilities 27.5 TOTAL LIABILITIES HELD FOR SALE $ 956.7 (a) The sale of Wella closed on November 30, 2020. For the period ended June 30, 2020, all assets and liabilities held for sale are reported as current assets and liabilities held for sale on the Consolidated Balance Sheets. The loss on sale of the Wella Business included in Net (loss) income from discontinued operations in the Consolidated Statements of Operations was $ 246.4 for the year ended June 30, 2021. Initial cash proceeds received by the Company for the sale of its 60 % stake in Wella were $ 2,451.7 and the Company retained an equity interest of 40 %. The loss on sale reflects the net assets sold, taxes and other costs to sell the Wella Business. 4. BUSINESS COMBINATIONS, ASSET ACQUISITIONS AND DIVESTITURES Business Combinations and Asset Acquisitions KKW Beauty Business Transaction On January 4, 2021, the Company completed its purchase of 20 % of the outstanding equity of KKW Holdings, LLC (“KKW Holdings”), pursuant to a purchase agreement entered into between the Company, KKW Holdings and other parties listed as signatories (the “KKW Purchase Agreement”). On the same date, as contemplated by the KKW Purchase Agreement, the Company entered into a collaboration agreement, pursuant to which, in exchange for a marketing fee and a license fee, it received the right and license to manufacture, advertise, promote, distribute and sell certain Kim Kardashian West products outside of the existing KKW Holdings scope of fragrances and cosmetics, and use certain intellectual property owned by or licensed to KKW Holdings in connection with the development, manufacture, labelling, packaging, advertising, display, distribution and sale of such products (the “KKW Collaboration Agreement”). Under the KKW Collaboration Agreement, products will be sold by the Company’s consolidated subsidiaries. Therefore, the related revenues generated and expenses incurred by such subsidiaries will be reported in the Company’s Consolidated Statements of Operations. F-18 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The KKW Purchase Agreement also gives the Company an option to acquire, and the sellers the option to compel the Company to acquire, an additional 31 % of the outstanding equity of KKW (the “KKW Call Option” and “KKW Put Option”, respectively). The seller’s ability to exercise the KKW Put Option is contingent upon the achievement of certain contractually defined targets. The KKW Call Option and KKW Put Option expire on the seventh anniversary of the KKW Collaboration Agreement. Future exercise of the KKW Call Option or KKW Put Option has been deemed by the Company to be remote. However, if exercise were to occur such exercise may result in a material cash outflow for the Company. The purchase consideration paid for the equity interest, the KKW Call Option and rights under the KKW Collaboration Agreement was $ 200.0 and was allocated as follows using a relative fair value approach at the acquisition date: Estimated fair value Estimated useful life (in years) KKW Collaboration Agreement $ 180.6 20 20 % equity interest in KKW Holdings 19.4 Total purchase consideration $ 200.0 The initial fair value of the KKW Collaboration Agreement and the Company’s 20 % equity investment were estimated using an income approach. The Company accounts for its 20 % investment in the equity of KKW Holdings under the equity method. The initial fair value of the KKW Collaboration Agreement is recognized within Other intangible assets, net and the Company’s equity investment in KKW Holdings is recognized within Equity investments, each within the Consolidated Balance Sheets. The fair value of the KKW Call Option was deemed to be de minimis. King Kylie Transaction On November 18, 2019, the Company entered into a purchase agreement (the “Purchase Agreement”) with King Kylie, LLC ("King Kylie"), a Delaware limited liability company, and the other parties listed as signatories to the Purchase Agreement (the “Seller Group Parties”), to build and further expand King Kylie’s brands globally. Pursuant to the Purchase Agreement, on January 6, 2020, the Company acquired 51 % of the equity interests in King Kylie from the applicable Seller Group Parties for a base purchase price of $ 600.0 in cash. In addition, as contemplated by the Purchase Agreement, the Company entered into a Collaboration Agreement, pursuant to which, in exchange for a marketing fee and a license fee, it received the right and license to manufacture, advertise, promote, distribute and sell certain products of King Kylie and use certain intellectual property owned by or licensed to King Kylie in connection with the development, manufacture, labelling, packaging, advertising, display, distribution and sale of such products. The Company has finalized the valuation of assets acquired and liabilities assumed for the King Kylie transaction. F-19 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The following table summarizes the estimated allocation of the purchase price to the net assets as of the January 6, 2020 acquisition date: Estimated fair value (a) Measurement period adjustments (b) Estimated fair value as adjusted Estimated useful life (in years) Cash and cash equivalents $ 7.8 $ — $ 7.8 Receivables 1.0 — 1.0 Inventories 2.5 — 2.5 Property, plant and equipment 3.6 — 3.6 Collaboration agreement 369.0 — 369.0 20 License agreement 280.0 — 280.0 20 Customer relationships 27.0 — 27.0 1.5 Goodwill 128.6 — 128.6 Indefinite Net other liabilities ( 6.6 ) — ( 6.6 ) Total value $ 812.9 $ — $ 812.9 Noncontrolling interest 212.9 212.9 Total purchase price $ 600.0 $ 600.0 (a) As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020. (b) The Company recorded no measurement period adjustments in fiscal 2021, other than allocating the goodwill as noted below. Goodwill is not expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating King Kylie’s products into the Company’s existing manufacturing and sales channels. Goodwill of $ 66.6 , $ 35.9 and $ 26.1 is allocated to the Americas, EMEA, and Asia Pacific segments, respectively. The allocation of goodwill to segments was based on the relative fair values of expected future cash flows. The fair value of the noncontrolling interest was estimated using the income approach applied to the projected cash flows of King Kylie. As King Kylie is a private company, the fair value measurement was based on significant inputs that are not observable in the market and thus, represent a Level 3 measurement. Business Divestitures Wella Business On November 30, 2020, the Company completed the strategic transaction with KKR for the sale of a majority stake in the Wella Business (see Note 3—Discontinued Operations). Following the sale, Coty deconsolidated the Wella Business as KKR owns approximately 60 % of the separately managed business, and the Company owns the remaining 40 %. Initial cash proceeds received for the sale of the 60 % stake in Wella were $ 2,451.7 (less cash disposed of $ 65.5 , resulted in net cash proceeds of $ 2,386.2 ). Coty utilized $ 2,015.5 of the net proceeds to pay down its 2018 Coty Term A and B Facilities (as defined in Note 15—Debt) on a pro rata basis and reserved $ 500.0 for reinvestment in the Company's business (see Note 15—Debt). See Note 3—Discontinued Operations for information on the loss on sale of the Wella Business. Additionally, as contemplated in the Sale and Purchase Agreement (as amended) relating to the sale of the Wella Business (the “Wella SPA”), the purchase consideration is subject to further adjustments for other working capital and contractually specified items. As a result of the sale of the majority interest in Wella, the Company determined that it no longer had a controlling interest in the Wella Business. The Company, therefore, deconsolidated its ownership of the Wella assets and liabilities and no longer reported the assets and liabilities of Wella in its Consolidated Balance Sheet as of December 1, 2020. The operations of Wella were consolidated in the results of the Company through the date of sale. The Company accounted for its 40 % stake in the Wella Business under the fair value option (see Note 13—Equity Investments). F-20 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Younique On August 27, 2019, the Company entered into a contribution and redemption agreement to transfer all of its membership interest in Foundation, LLC (“Foundation”), which held the net assets of Younique, to an existing noncontrolling interest holder. On September 16, 2019, the Company completed the sale of all of its membership interest in Foundation. Total consideration received was $ 77.9 . The final pre-tax gain is included in Gain on divestitures in the Consolidated Statements of Operations for the fiscal year ended June 30, 2020. Younique’s operations are included within Other and its results of operations through the Closing Date are included in the Consolidated Statements of Operations for the fiscal year ended June 30, 2020. 5. SEGMENT REPORTING Operating and reportable segments (referred to as “segments”) reflect the way the Company is managed and for which separate financial information is available and evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company has designated its Chief Executive Officer as the CODM. The Company’s three segments for its continuing operations are: Americas, EMEA, and Asia Pacific. Americas, EMEA, and Asia Pacific include the businesses focused on prestige fragrances, prestige skin care, prestige cosmetics, mass color cosmetics, mass fragrance, mass skin care and body care, and are supported by central marketing teams. As previously disclosed, the Company’s CODM is in the process of finalizing her organization structure and how she will assess performance, and the Company has concurrently evaluated the potential impact to its segment reporting. Based on this evaluation, the Company has determined that it is appropriate to realign its reportable segments from the current regional structure to a principally product category-based structure, comprised of a prestige business segment and a consumer beauty business segment. The Company is in the process of making corresponding changes, as needed, to its management structure and operating responsibilities as well as to its information systems to enable appropriate internal and external financial reporting reflecting such newly identified segments by the first quarter of its fiscal year 2022. Certain income and shared costs and the results of corporate initiatives are managed by Corporate. Corporate primarily includes restructuring and realignment costs, costs related to acquisition and divestiture activities and impairments of long lived assets, goodwill and intangibles that are not attributable to ongoing operating activities of the segments. The results of Younique, LLC ("Younique") are included in "Other." See Note 4—Business Combinations, Asset Acquisitions and Divestitures for information on Younique and the divestiture, which was completed on September 16, 2019. Corporate costs are not used by the CODM to measure the underlying performance of the segments. With the exception of goodwill, the Company does not identify or monitor assets by segment. The Company does not present assets by reportable segment since various assets are shared between reportable segments. The allocation of goodwill by segment is presented in Note 12—Goodwill and Other Intangible Assets, net. F-21 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Year Ended June 30, SEGMENT DATA 2021 2020 2019 Net revenues: Americas $ 1,866.9 $ 1,771.0 $ 2,248.9 EMEA 2,183.7 2,308.6 2,909.7 Asia Pacific 579.3 582.7 771.1 Other — 55.5 358.2 Total $ 4,629.9 $ 4,717.8 $ 6,287.9 Depreciation and amortization: Americas $ 255.7 $ 227.4 $ 188.4 EMEA 259.9 276.0 272.0 Asia Pacific 69.7 69.5 63.3 Other — 11.8 54.8 Total $ 585.3 $ 584.7 $ 578.5 Operating income (loss) from continuing operations Americas $ 36.5 $ ( 164.8 ) $ ( 1,474.5 ) EMEA 129.8 ( 248.4 ) ( 1,344.1 ) Asia Pacific ( 13.2 ) ( 74.0 ) ( 253.1 ) Other — ( 10.9 ) ( 18.6 ) Corporate ( 201.7 ) ( 738.4 ) ( 598.1 ) Total $ ( 48.6 ) $ ( 1,236.5 ) $ ( 3,688.4 ) Reconciliation: Operating loss from continuing operations $ ( 48.6 ) $ ( 1,236.5 ) $ ( 3,688.4 ) Interest expense, net 235.1 242.7 225.2 Other (income) expense, net ( 43.9 ) ( 11.6 ) 31.8 Loss from continuing operations before income taxes $ ( 239.8 ) $ ( 1,467.6 ) $ ( 3,945.4 ) As of June 30, Long-lived assets: 2021 2020 U.S. $ 3,919.0 $ 3,340.5 Netherlands 3,880.8 69.7 Brazil 494.8 494.0 Switzerland 142.3 3,690.9 All other 1,062.3 1,832.5 Total $ 9,499.2 $ 9,427.6 For Net revenues, a major country is defined as a group of subsidiaries in a country with combined revenues greater than 10% of consolidated net revenues or as otherwise deemed significant. The United States is the only country that accounts for more than 10% of total net revenues for fiscal years 2021, 2020 and 2019. The United States had net revenues of $ 1,288.9 , $ 1,159.3 and $ 1,470.5 in fiscal 2021, 2020 and 2019, respectively. No customer or group of affiliated customers accounted for more than 10% of the Company’s Net revenues in fiscal 2021, 2020 and 2019 or are otherwise deemed significant. For Long-lived assets, a major country is defined as a group of subsidiaries within a country with combined long-lived assets greater than 10% of consolidated long-lived assets or as otherwise deemed significant. Long-lived assets include property and equipment, goodwill and other intangible assets. F-22 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Presented below are the net revenues associated with Company’s product categories as a percentage of total net revenues for continuing operations: Year Ended June 30, PRODUCT CATEGORY 2021 2020 2019 Fragrances 57.4 % 55.5 % 54.4 % Color Cosmetics 29.3 % 31.1 % 32.2 % Body Care & Other 13.3 % 13.4 % 13.4 % Total 100.0 % 100.0 % 100.0 % 6. ACQUISITION- AND DIVESTITURE-RELATED COSTS Acquisition-related costs, which are expensed as incurred, represent non-restructuring costs directly related to acquiring and integrating an entity, for both completed and contemplated acquisitions and can include finder’s fees, legal, accounting, valuation, other professional or consulting fees, and other internal costs which can include compensation related expenses for dedicated internal resources. The Company recognized acquisition-related costs of $ 3.0 , $ 19.7 and nil for the fiscal years ended 2021, 2020 and 2019, respectively. Acquisition-related costs incurred during fiscal year 2020 were primarily related to the KKW Beauty Business Transaction and King Kylie Transaction. Divestiture-related costs, which are expensed as incurred, represent non-restructuring costs directly related to divesting and selling an entity, for both completed and contemplated divestitures. These costs can include legal, accounting, information technology, other professional or consulting fees and other internal costs. Internal costs can include compensation related expenses for dedicated internal resources. Additionally, for divestitures, the Company includes write-offs of assets that are no longer recoverable and contract related costs due to the divestiture. The Company recognized divestiture-related costs of $ 135.8 , $ 137.6 and nil for the fiscal 2021, 2020 and 2019, respectively. Divestiture-related costs incurred during the fiscal years 2021 and 2020 were primarily related to the strategic transaction with KKR for the sale of a majority stake in the Wella Business. See Note 4—Business Combinations, Asset Acquisitions and Divestitures for information on the strategic transaction. These costs have been recorded in Acquisition- and divestiture- related costs in the Consolidated Statements of Operations . 7. RESTRUCTURING COSTS Restructuring costs for the fiscal years ended June 30, 2021, 2020 and 2019 are presented below: Year Ended June 30, 2021 2020 2019 Transformation Plan $ 73.2 $ 156.6 $ — Other Restructuring ( 9.6 ) ( 26.4 ) 34.2 Total $ 63.6 $ 130.2 $ 34.2 Transformation Plan In connection with the four-year plan announced on July 1, 2019 to drive substantial improvement in and optimization in the Company's businesses (the “Turnaround Plan”), the Company has and expects to continue to incur restructuring and related costs. On May 11, 2020, the Company announced an expansion of the Turnaround Plan to further reduce fixed costs, (the “Transformation Plan”). Of the expected costs, the Company has incurred cumulative restructuring charges of $ 229.8 related to approved initiatives through June 30, 2021, which have been recorded in Corporate. Over the next two fiscal years, the Company expects to incur approximately $ 80.0 of additional restructuring charges pertaining to the approved actions, primarily related to employee termination benefits, contract terminations and other exit-related costs. The following table presents aggregate restructuring charges for the program: F-23 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Severance and Employee Benefits Fixed Asset Write-offs Other Exit Costs Total Fiscal 2020 $ 151.2 $ ( 1.1 ) $ 6.5 $ 156.6 Fiscal 2021 73.4 ( 0.5 ) 0.3 73.2 Cumulative through June 30, 2021 $ 224.6 $ ( 1.6 ) $ 6.8 $ 229.8 The related liability balance and activity of restructuring costs for the Transformation Plan restructuring costs are presented below: Severance and Employee Benefits Fixed Asset Write-offs Other Exit Costs (a) Total Program Costs Balance—July 1, 2020 $ 131.9 $ — $ 0.7 $ 132.6 Restructuring charges 106.5 ( 0.5 ) 0.4 106.4 Payments ( 88.0 ) — ( 0.8 ) ( 88.8 ) Changes in estimates ( 33.1 ) — ( 0.1 ) ( 33.2 ) Non-cash utilization — 0.5 — 0.5 Adjustment for sale of Wella Business ( 0.6 ) — — ( 0.6 ) Effect of exchange rates 5.8 — 0.1 5.9 Balance—June 30, 2021 $ 122.5 $ — $ 0.3 $ 122.8 The Company currently estimates that the total remaining accrual of $ 122.8 will result in cash expenditures of approximately $ 80.8 , $ 42.0 in fiscal 2022 and thereafter, respectively. Other Restructuring The Company executed a number of other restructuring activities in prior years, which are substantially completed. The Company recognized (income) expenses of $( 9.6 ), $( 26.4 ) and $ 34.2 in fiscal 2021, 2020 and 2019, respectively, which have been recorded in Corporate. The related liability balances were $ 0.0 and $ 14.5 at June 30, 2021 and June 30, 2020, respectively. 8. TRADE RECEIVABLES—FACTORING The Company factors a portion of its trade receivables with unrelated third-party factoring companies on both a recourse and non-recourse basis. The Company maximizes its use of the factoring facility, by factoring additional invoices to replace invoices paid early. The Company accounts for trade receivable transfers under the Receivables Purchase Agreement and European Receivables Purchase Agreement, as defined below, as sales and derecognizes the sold receivables from the Consolidated Balance Sheets. The net amount utilized under the factoring facilities was $ 133.6 and $ 123.1 as of June 30, 2021 and 2020, respectively. The aggregate amount of trade receivable invoices on a worldwide basis amounted to $ 793.8 and $ 839.8 in fiscal 2021 and 2020, respectively. Remaining balances due from factors amounted to $ 6.3 and $ 6.2 as of June 30, 2021 and 2020, respectively, and are included in Trade receivables, net in the Consolidated Balance Sheets. Factoring fees paid under these arrangements were $ 1.2 , $ 1.8 and $ 2.4 in fiscal 2021, 2020 and 2019, respectively, which were recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations. Cash received from the selling of receivables under the Receivables Purchase Agreement are presented as a change in trade receivables within the operating activities section of the Consolidated Statements of Cash Flows. U.S. Receivables Purchase Agreement On March 19, 2019, the Company 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. Pursuant to Receivables Purchase Agreement, the Company acts as collections agent for the financial institution and is responsible for the collection, and remittance to the financial institution, of all customer payments related to trade receivables factored under this arrangement. For certain customer receivables factored, the Company will retain a recourse obligation of up to 10 percent of the respective invoice’s net invoice value, payable to the financial institution if the customer’s payment is not received by the contractual due date. The fair value of sold receivables approximated their book value due to their short-term nature. The Company estimated that the fair value of its servicing responsibilities was not material. F-24 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) European Receivables Purchase Agreement In September 2019, the Company entered into a factoring agreement with a financial institution, which allows for the transfer of receivables from certain of the Company’s European subsidiaries, in exchange for cash (the “European Receivables Purchase Agreement”). The total outstanding amount permitted among such subsidiaries is € 93.0 million. Factoring of such receivables under the European Receivables Purchase Agreement is executed on a non-recourse basis. 9. INVENTORIES Inventories as of June 30, 2021 and 2020 are presented below: June 30, 2021 June 30, 2020 Raw materials $ 159.5 $ 148.6 Work-in-process 12.5 11.1 Finished goods 478.8 518.5 Total inventories $ 650.8 $ 678.2 10. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets as of June 30, 2021 and 2020 are presented below: June 30, 2021 June 30, 2020 Due from related party $ 153.4 $ — Value added tax, sales and other non-income tax assets 84.4 83.1 Expected income tax refunds, credits and prepaid income taxes 79.4 134.4 Prepaid marketing, copyright and agency fees 78.8 91.1 Non-trade receivables 25.3 53.4 Prepaid rent, leases, maintenance and insurance 12.9 15.6 Other 39.7 34.0 Total prepaid expenses and other current assets $ 473.9 $ 411.6 11. PROPERTY AND EQUIPMENT, NET Property and equipment, net as of June 30, 2021 and 2020 are presented below: June 30, 2021 June 30, 2020 Land, buildings and leasehold improvements $ 508.6 $ 475.0 Machinery and equipment 733.1 706.6 Marketing furniture and fixtures 516.7 548.8 Computer equipment and software 780.9 706.3 Construction in progress 63.0 108.6 Property and equipment, gross 2,602.3 2,545.3 Accumulated depreciation and amortization ( 1,684.2 ) ( 1,463.7 ) Property and equipment, net $ 918.1 $ 1,081.6 Depreciation expense of property and equipment totaled $ 334.1 , $ 351.7 and $ 331.8 in fiscal 2021, 2020 and 2019, respectively. Depreciation expense is recorded in Cost of sales and Selling, general and administrative expenses in the Consolidated Statements of Operations. F-25 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) During fiscal 2021, 2020 and 2019 the Company recorded asset impairment charges of $ 5.2 , $ 16.8 and $ 27.8 respectively. The fiscal 2021 and 2020 impairment charges are recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations. The fiscal 2021 impairment charge primarily relates to abandonment of machinery and equipment, while the fiscal 2020 impairment primarily relates to the abandonment of a retail store and software no longer in use. The fiscal 2019 impairment charge is included in Restructuring costs in the Consolidated Statements of Operations and primarily relates to the disposal of certain manufacturing facilities, and the write-off of machinery and equipment in excess of the Company’s needs. 12. GOODWILL AND OTHER INTANGIBLE ASSETS, NET Assessment for Impairments The Company tests goodwill and indefinite-lived other intangible assets for impairment at least annually as of May 1, or more frequently, if certain events or circumstances warrant. During fiscal 2021, there were no impairments of goodwill at the Company’s reporting units and there were no impairments of indefinite-lived other intangible assets. During fiscal years 2020 and 2019, the Company recorded total goodwill impairments of $ 105.0 and $ 3,307.5 , respectively, and total impairments on indefinite-lived other intangible assets of $ 329.0 and $ 389.8 , respectively. Additionally, the Company recorded impairments of $ 19.7 on finite-lived other intangible assets during fiscal 2019 . Goodwill Goodwill as of June 30, 2021, 2020 and 2019 is presented below: Americas EMEA APAC Total Gross balance at June 30, 2019 $ 3,069.4 $ 3,737.9 $ 1,294.6 $ 8,101.9 Accumulated impairments ( 1,768.7 ) ( 1,752.3 ) ( 414.1 ) ( 3,935.1 ) Net balance at June 30, 2019 $ 1,300.7 $ 1,985.6 $ 880.5 $ 4,166.8 Changes during the year ended June 30, 2020 Acquisitions (a) 128.6 — — 128.6 Dispositions ( 10.8 ) ( 10.1 ) ( 2.0 ) ( 22.9 ) Impairment charges (b) — ( 105.0 ) — ( 105.0 ) Foreign currency translation ( 75.0 ) ( 88.9 ) ( 29.7 ) ( 193.6 ) Gross balance at June 30, 2020 $ 3,112.2 $ 3,638.9 $ 1,262.9 $ 8,014.0 Accumulated impairments ( 1,768.7 ) ( 1,857.3 ) ( 414.1 ) ( 4,040.1 ) Net balance at June 30, 2020 $ 1,343.5 $ 1,781.6 $ 848.8 $ 3,973.9 Changes during the year ended June 30, 2021 Measurement period adjustments (c) ( 62.0 ) 35.9 26.1 — Foreign currency translation 46.6 68.2 29.4 144.2 Gross balance at June 30, 2021 $ 3,096.8 $ 3,743.0 $ 1,318.4 $ 8,158.2 Accumulated impairments ( 1,768.7 ) ( 1,857.3 ) ( 414.1 ) ( 4,040.1 ) Net balance at June 30, 2021 $ 1,328.1 $ 1,885.7 $ 904.3 $ 4,118.1 (a) Includes goodwill resulting from the King Kylie Transaction on January 6, 2020 (Refer to Note 4—Business Combinations, Asset Acquisitions and Divestitures). (b) As a result of the June 1, 2020 impairment test, the EMEA reporting unit was impaired due to the COVID-19 pandemic, a loss of synergies from the sale of the Wella Business and an increase in the discount rate. (c) Includes measurement period adjustments in connection with the King Kylie acquisition (Refer to Note 4—Business Combinations, Asset Acquisitions and Divestitures). F-26 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Other Intangible Assets, net Other intangible assets, net as of June 30, 2021 and 2020 are presented below: June 30, 2021 June 30, 2020 Indefinite-lived other intangible assets $ 1,018.7 $ 995.5 Finite-lived other intangible assets, net 3,444.3 3,376.6 Total Other intangible assets, net $ 4,463.0 $ 4,372.1 The changes in the carrying amount of indefinite-lived other intangible assets are presented below: Trademarks Total Gross balance at June 30, 2019 $ 1,914.0 $ 1,914.0 Accumulated impairments ( 584.5 ) ( 584.5 ) Net balance at June 30, 2019 $ 1,329.5 $ 1,329.5 Changes during the year ended June 30, 2020 Impairment charges (a) ( 329.0 ) ( 329.0 ) Foreign currency translation ( 5.0 ) ( 5.0 ) Gross balance at June 30, 2020 $ 1,909.0 $ 1,909.0 Accumulated impairments ( 913.5 ) ( 913.5 ) Net balance at June 30, 2020 $ 995.5 $ 995.5 Changes during the year ended June 30, 2021 Foreign currency translation 23.2 23.2 Gross balance at June 30, 2021 $ 1,932.2 $ 1,932.2 Accumulated impairments $ ( 913.5 ) $ ( 913.5 ) Net balance at June 30, 2021 1,018.7 1,018.7 (a) During fiscal 2020, the Company recognized asset impairment charges of $ 329.0 relating to indefinite-lived other intangible assets, mainly the CoverGirl, Max Factor, Philosophy and Bourjois trademarks. F-27 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Intangible assets subject to amortization are presented below: Cost Accumulated Amortization Accumulated Impairment Net June 30, 2020 License and collaboration agreements (a) $ 3,861.2 $ ( 1,021.1 ) $ ( 19.6 ) $ 2,820.5 Customer relationships (a) 786.1 ( 427.3 ) ( 5.5 ) 353.3 Trademarks 325.7 ( 154.0 ) ( 0.5 ) 171.2 Product formulations and technology 86.2 ( 54.6 ) — 31.6 Total $ 5,059.2 $ ( 1,657.0 ) $ ( 25.6 ) $ 3,376.6 June 30, 2021 License and collaboration agreements (b) $ 4,192.9 $ ( 1,229.1 ) $ ( 19.6 ) $ 2,944.2 Customer relationships 803.1 ( 486.3 ) ( 5.5 ) 311.3 Trademarks 330.2 ( 168.7 ) ( 0.5 ) 161.0 Product formulations and technology 90.2 ( 62.4 ) — 27.8 Total $ 5,416.4 $ ( 1,946.5 ) $ ( 25.6 ) $ 3,444.3 (a) Includes License agreements and Customer relationships of $ 649.0 and $ 27.0 , respectively resulting from the King Kylie acquisition on January 6, 2020 (Refer to Note 4—Business Combinations, Asset Acquisitions and Divestitures). (b) Includes the KKW Collaboration Agreement of $ 180.6 resulting from the KKW Holdings transaction on January 4, 2021 (Refer to Note 4—Business Combinations, Asset Acquisitions and Divestitures). Amortization expense totaled $ 251.2 , $ 233.1 and $ 246.7 for the fiscal years ended June 30, 2021, 2020 and 2019, respectively. Intangible assets subject to amortization are amortized principally using the straight-line method and have the following weighted-average remaining lives: Description License and collaboration agreements 21.8 years Customer relationships 15.9 years Trademarks 16.1 years Product formulations and technology 22.1 years As of June 30, 2021, the remaining weighted-average life of all intangible assets subject to amortization is 21.0 years. The estimated aggregate amortization expense for each of the following fiscal years ending June 30 is presented below: 2022 $ 212.7 2023 205.6 2024 203.7 2025 199.0 2026 167.7 License Agreements The Company records assets for license agreements (“licenses”) acquired in transactions accounted for as business combinations. These licenses provide the Company with the exclusive right to manufacture and market on a worldwide and/or regional basis, certain of the Company’s products which comprise a significant portion of the Company’s revenues. These licenses have initial terms covering various periods. Certain brand licenses provide for automatic extensions ranging from 2 to 10 year terms, at the Company’s discretion. F-28 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 13. EQUITY INVESTMENTS The Company's equity investments, classified as Equity investments on the Consolidated Balance Sheets, as of June 30, 2021 are represented by the following: June 30, 2021 Equity method investments: KKW Holdings (a) $ 16.2 Equity investments at fair value: Wella Business (b) 1,260.0 Total equity investments $ 1,276.2 (a) On January 4, 2021, the Company completed its purchase of 20 % of the outstanding equity of KKW Holdings. (See Note 4—Business Combinations, Asset Acquisitions and Divestitures). The Company accounts for this minority investment under the equity method, given it has the ability to exercise significant influence over, but not control, the investee. The carrying value of the Company’s investment includes basis differences allocated to amortizable intangible assets. During the year ended June 30, 2021, the Company recognized $ 3.2 representing its share of the investee’s net loss and the amortization of basis differences in Other (income) expense, net within the Consolidated Statements of Operations. (b) On November 30, 2020, the Company completed the previously announced strategic transaction with KKR for the sale of a majority stake in Coty’s Wella Business. As part of the transaction, Coty received initial cash proceeds of $ 2,451.7 , and retained a 40 % stake in Wella. The Company initially computed the fair value of its retained noncontrolling interest investment based on the fair value of the Wella Business exchanged with KKR. This resulted in an initial fair value of $ 1,634.5 for the retained noncontrolling interest investment in Wella. Immediately after closing, Wella drew down on their third party debt for $ 1,282.4 and used $ 448.0 of such funds to make a distribution to the Company, which the Company has accounted for as a return of capital. As of June 30, 2021, the fair value of the Company's investment in Wella was estimated to be $ 1,260.0 . The following table presents summarized financial information of the Company’s equity method investees for the year ended June 30, 2021 (for the period of the Company’s investment). Amounts presented represent combined totals at the investee level and not the Company’s proportionate share: Year Ended June 30, 2021 Summarized Statements of Operations information: Net revenues $ 1,317.4 Gross profit 846.3 Operating loss ( 107.3 ) Loss before income taxes ( 157.7 ) Net loss ( 174.3 ) F-29 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) June 30, 2021 Summarized Balance Sheets information: Current assets $ 1,112.5 Noncurrent assets 4,249.4 Total assets 5,361.9 Current liabilities 888.5 Noncurrent liabilities 1,624.5 Total liabilities 2,513.0 As of June 30, 2021, the Wella Business issued 31.8 million shares of common stock and 2,588.0 million shares of redeemable preferred stock, of which Coty holds 40 % of each class of shares. The Wella Business has total equity inclusive of redeemable preferred stock of $ 2,859.1 as of June 30, 2021. The following table summarizes movements in equity investments with fair value option that are classified within Level 3 for the period ended June 30, 2021. There were no internal movements to or from Level 3 from Level 1 or Level 2 for the period ended June 30, 2021. Equity investments at fair value: Balance as of June 30, 2020 $ — Initial investment 1,186.5 Total gains/(losses) included in earnings - unrealized 73.5 Balance as of June 30, 2021 $ 1,260.0 Level 3 significant unobservable inputs sensitivity The following table summarizes the significant unobservable inputs used in Level 3 valuation of the Company’s investments carried at fair value as of June 30, 2021. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments. Fair value Valuation Technique Unobservable input Range Equity investments at fair value $ 1,260.0 Discounted cash flows Discount rate 11.00 % (a) Growth rate 1.5 % - 4.2 % (a) Market multiple Revenue multiple 2.0 x (b) EBITDA multiple 12.5 x – 15.5 x (b) (a) The primary unobservable inputs used in the fair value measurement of the Company’s equity investments with fair value option, when using a discounted cash flow method, are the discount rate and revenue growth rate. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. The Company estimates the discount rate based on the investees' projected cost of equity and debt. The revenue growth rate is forecasted for future years by the investee based on their best estimates. Significant increases (decreases) in the revenue growth rate in isolation would result in a significantly higher (lower) fair value measurement. (b) The primary unobservable inputs used in the fair value measurement of the Company’s equity investments with fair value option, when using a market multiple method, are the revenue multiple and EBITDA multiple. Significant increases (decreases) in the revenue multiple or EBITDA multiple in isolation would result in a significantly higher (lower) fair value measurement. The market multiples are derived from a group of guideline public companies. F-30 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 14. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities as of June 30, 2021 and 2020 consist of the following: June 30, 2021 June 30, 2020 Advertising, marketing and licensing $ 295.7 $ 268.3 Customer returns, discounts, allowances and bonuses 232.3 166.1 Compensation and other compensation related benefits 118.6 183.0 Value added, sales and other non-income taxes 94.0 97.0 Restructuring costs 80.8 120.5 Auditing, consulting, legal and litigation accruals 51.1 61.9 Due to related party 37.9 — Interest 33.5 22.8 Factoring - due to counterparty 25.8 13.2 Unfavorable contract liability 11.5 10.9 Deferred income 10.1 10.0 Interest rate swap liability 9.8 44.6 Mandatorily redeemable financial interest liability (See Note 21) 7.1 1.9 Cross currency swap liability — 12.5 Other 87.8 98.9 Total accrued expenses and other current liabilities $ 1,096.0 $ 1,111.6 15. DEBT June 30, 2021 June 30, 2020 Short-term debt $ — $ — Senior Secured Notes 2026 Dollar Senior Secured Notes due April 2026 900.0 — 2026 Euro Senior Secured Notes due April 2026 833.3 — 2018 Coty Credit Agreement 2018 Coty Revolving Credit Facility due April 2023 670.0 1,438.8 2018 Coty Term A Facility due April 2023 114.0 2,959.0 2018 Coty Term B Facility due April 2025 1,461.7 2,308.5 Senior Unsecured Notes 2026 Dollar Notes due April 2026 550.0 550.0 2023 Euro Notes due April 2023 654.7 618.3 2026 Euro Notes due April 2026 297.6 281.1 Other long-term debt and capital lease obligations 0.2 0.6 Total debt 5,481.5 8,156.3 Less: Short-term debt and current portion of long-term debt ( 24.2 ) ( 188.3 ) Total Long-term debt 5,457.3 7,968.0 Less: Unamortized debt issuance costs ( 51.7 ) ( 66.9 ) Less: Discount on Long-term debt ( 4.6 ) ( 9.0 ) Total Long-term debt, net $ 5,401.0 $ 7,892.1 F-31 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Short-Term Debt The Company maintains short-term lines of credit with financial institutions around the world. Total available lines of credit were $ 88.5 and $ 87.8 , of which nil and nil were outstanding at June 30, 2021 and 2020, respectively. Interest rates on these short-term lines of credit vary depending on market rates for borrowings within the respective geographic locations plus applicable spreads. Interest rates plus applicable spreads on these lines ranged from 0.4 % to 2.2 % and from 0.8 % to 7.3 % as of June 30, 2021 and 2020, respectively. The weighted-average interest rate on short-term debt outstanding was 0.0 % and 0.0 % as of June 30, 2021 and 2020, respectively. In addition, the Company had undrawn letters of credit of $ 15.0 and $ 6.0 and bank guarantees of $ 31.2 and $ 45.7 as of June 30, 2021 and 2020, respectively. Long-Term Debt The Company’s long-term debt facilities consisted of the following as of June 30, 2021 and 2020: Facility Maturity Date Borrowing Capacity (in millions) as of June 30, 2021 Interest Rate Terms Applicable Interest Rate Spread as of June 30, 2021 Debt Discount Repayment Schedule Fiscal 2021 2026 Dollar Senior Secured Notes April 2026 $ 900.0 5.0 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021 5.000 % N/A (b) Payable in full at maturity date 2026 Euro Senior Secured Notes April 2026 € 700.0 3.875 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021 3.875 % N/A (b) Fiscal 2021 and Fiscal 2020 2018 Coty Revolving Credit Facility April 2023 $ 2,750.0 LIBOR (a) plus a margin ranging from 1.00 % to 2.00 % per annum or a base rate plus a margin ranging from 0.00 % to 1.00 % per annum, based on the Company’s total net leverage ratio (c) (d) (e) 1.75 % N/A (b) Payable in full at maturity date 2018 Coty Term A Facility - USD Portion April 2023 $ — (f) 1.75 % N/A (b) Quarterly repayments beginning September 30, 2018 at 1.25 % of original principal amount 2018 Coty Term A Facility - EUR Portion April 2023 € 95.7 (f) 1.75 % N/A (b) 2018 Coty Term B Facility - USD Portion April 2025 $ 849.0 (f) LIBOR (a) plus a margin of 2.25 % per annum or a base rate plus a margin of 1.25 % per annum (d) 2.25 % 0.25 % Quarterly repayments beginning September 30, 2018 at 0.25 % of original principal amount 2018 Coty Term B Facility - EUR Portion April 2025 € 514.8 (f) LIBOR (a) plus a margin of 2.50 % per annum (d) 2.50 % 0.25 % 2026 Dollar Notes April 2026 $ 550.0 6.5 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2018 N/A (b) N/A (b) Payable in full at maturity date 2023 Euro Notes April 2023 € 550.0 4.0 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2018 N/A (b) N/A (b) 2026 Euro Notes April 2026 € 250.0 4.75 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2018 N/A (b) N/A (b) (a) As defined in the Interest section below. (b) N/A - Not Applicable. (c) As defined per the 2018 Coty Credit Agreement, as amended. (d) The selection of the applicable one, two, three, six or twelve month interest rate for the period is at the discretion of the Company. (e) The Company will pay to the Revolving Credit Facility lenders an unused commitment fee calculated at a rate ranging from 0.10 % to 0.35 % per annum, based on the Company’s total net leverage ratio (d) . As of June 30, 2021 and 2020, the applicable rate on the unused commitment fee was 0.30 % and 0.30 %, respectively. F-32 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) (f) As a result of the debt prepayments in fiscal 2021 (as described below), the capacities of the 2018 Coty Term A Facility - USD portion and - EUR portion, and the 2018 Coty Term B Facility - USD portion and - EUR portion permanently decreased from $ 1,000.0 , € 2,035.0 , $ 1,400.0 and € 850.0 , respectively. Offering of Senior Secured Notes On June 16, 2021, the Company issued an aggregate principal amount of € 700.0 million of 3.875 % senior secured notes due 2026 (the “2026 Euro Senior Secured Notes”) in a private offering. Coty received gross proceeds of € 700.0 million in connection with the offering of the 2026 Euro Senior Secured Notes. On April 21, 2021, the Company issued an aggregate principal amount of $ 900.0 of 5.00 % senior secured notes due 2026 (the “2026 Dollar Senior Secured Notes” and, together with the 2026 Euro Senior Secured Notes, the “Senior Secured Notes”). Coty received gross proceeds of $ 900.0 in connection with the offering of the 2026 Dollar Senior Secured Notes. Coty used the gross proceeds of the offerings of the Senior Secured Notes to repay a portion of the term loans outstanding under the existing credit facilities and to pay related fees and expenses thereto. The Senior Secured Notes are senior secured obligations of Coty and are guaranteed on a senior secured basis by each of Coty’s wholly-owned domestic subsidiaries that guarantees Coty’s obligations under its existing senior secured credit facilities and are secured by first priority liens on the same collateral that secures Coty’s obligations under its existing senior secured credit facilities, as described below. The Senior Secured Notes and the guarantees are equal in right of payment with all of Coty’s and the guarantors’ respective existing and future senior indebtedness and are pari passu with all of Coty’s and the guarantors’ respective existing and future indebtedness that is secured by a first priority lien on the collateral, including the existing senior secured credit facilities, to the extent of the value of such collateral. Optional Redemption Applicable Premium The indentures governing the Senior Secured Notes specify the Applicable Premium (as defined in the respective indentures) to be paid upon early redemption of some or all of the 2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes. The Applicable Premium related to the 2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes on any redemption date and as calculated by the Company is the greater of: (1) 1.0 % of the then outstanding principal amount of the respective 2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes; and (2) the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of such 2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes that would apply if such 2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes were redeemed on April 15, 2023 (such redemption price is expressed as a percentage of the principal amount being set forth in the table appearing in the Redemption Pricing section below), plus (ii) all remaining scheduled payments of interest due on the 2026 Euro Senior Secured Notes or 2026 Dollar Senior Secured Notes to and including April 15, 2023 (excluding accrued but unpaid interest, if any, to, but excluding, the redemption date), with respect to each of subclause (i) and (ii), computed using a discount rate equal to the Treasury Rate in the case of the 2026 Dollar Senior Secured Notes or Bund Rate in the case of the 2026 Euro Senior Secured Notes (both Treasury Rate and Bund Rate as defined in the respective indentures) as of such redemption date plus 50 basis points; over (b) the principal amount of the respective 2026 Dollar Notes, 2023 Euro Notes or 2026 Euro Notes. Redemption Pricing At any time and from time to time prior to April 15, 2023, the Company may redeem some or all of the 2026 Dollar Senior Secured Notes and 2026 Euro Senior Secured Notes at redemption prices equal to 100 % of the respective principal amounts being redeemed plus the Applicable Premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates. At any time on or after April 15, 2023, the Company may redeem some or all of the 2026 Dollar Senior Secured Notes and 2026 Euro Senior Secured Notes at the redemption prices (expressed in percentage of principal amount) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates, if redeemed during the twelve-month period beginning on April 15 of each of the years indicated below: F-33 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Price Year 2026 Dollar Senior Secured Notes 2026 Euro Senior Secured Notes 2023 102.5000 % 101.9380 % 2024 101.2500 % 100.9690 % 2025 and thereafter 100.0000 % 100.0000 % 2018 Coty Credit Agreement On April 5, 2018, the Company entered into a new credit agreement (the “2018 Coty Credit Agreement”), which amended and restated the previously existing 2015 Coty Credit Agreement. the incurrence by the Company of (1) a senior secured term A facility in an aggregate principal amount of (i) $ 1,000.0 denominated in U.S. dollars and (ii) € 2,035.0 million denominated in euros (the “2018 Coty Term A Facility”) and (2) a senior secured term B facility in an aggregate principal amount of (i) $ 1,400.0 denominated in U.S. dollars and (ii) € 850.0 million denominated in euros (the “2018 Coty Term B Facility”) and (b) the incurrence by the Company and Coty B.V., a Dutch subsidiary of the Company (the “Dutch Borrower” and, together with the Company, the “Borrowers”), of a senior secured revolving facility in an aggregate principal amount of $ 3,250.0 denominated in U.S. dollars, specified alternative currencies or other currencies freely convertible into U.S. dollars and readily available in the London interbank market (the “2018 Coty Revolving Credit Facility”) (the 2018 Coty Term A Facility, together with the 2018 Coty Term B Facility and the 2018 Coty Revolving Credit Facility, the “2018 Coty Credit Facilities”). Initial borrowings under the 2018 Coty Term B Facility were issued at a 0.250 % discount. The 2018 Coty Credit Agreement provides that with respect to the 2018 Coty Revolving Credit Facility, up to $ 150.0 is available for letters of credit and up to $ 150.0 is available for swing line loans. The 2018 Coty Credit Agreement also permits, subject to certain terms and conditions, the incurrence of incremental facilities thereunder in an aggregate amount of (i) $ 1,700.0 plus (ii) an unlimited amount if the First Lien Net Leverage Ratio (as defined in the 2018 Coty Credit Agreement), at the time of incurrence of such incremental facilities and after giving effect thereto on a pro forma basis, is less than or equal to 3.00 to 1.00. The obligations of the Company under the 2018 Coty Credit Agreement are guaranteed by the material wholly-owned subsidiaries of the Company organized in the U.S., subject to certain exceptions (the “Guarantors”) and the obligations of the Company and the Guarantors under the 2018 Coty Credit Agreement are secured by a perfected first priority lien (subject to permitted liens) on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. The Dutch Borrower does not guarantee the obligations of the Company under the 2018 Coty Credit Agreement or grant any liens on its assets to secure any obligations under the 2018 Coty Credit Agreement. On June 27, 2019, the Company entered into an amendment (“2019 Amendment”) to the 2018 Coty Credit Agreement. The 2019 Amendment modified the 2018 Coty Credit Agreement by amending the financial covenants to (i) delay until March 31, 2022 the total net leverage ratio step down from 5.25 to 5.0 (as further described in the Covenants section below), (ii) extend the applicable window for certain cost savings add-backs in the calculation of Adjusted EBITDA for purpose of determining the total net leverage ratio, and (iii) amend the determination of the exchange rate to be used for purposes of calculating “Total Indebtedness” (as defined in the 2018 Coty Credit Agreement) for purposes of the total net leverage ratio, and decreasing the total commitments under the revolving credit facility by $ 500.0 to $ 2,750.0 . On April 29, 2020, the Company amended its existing credit agreement. The amendment (i) provided a net debt to EBITDA financial covenant "holiday" through March 31, 2021; (ii) established a minimum liquidity covenant through March 31, 2021 of $ 350.0 , which increased to $ 500.0 for the prepayment event noted below; and (iii) effectively placed certain limitations on the ability to make certain investments and restricted payments (including limiting the Company’s ability to pay dividends in cash through March 31, 2021) and on incurring additional secured indebtedness. On November 30, 2020, the Company completed the strategic transaction with KKR for the sale of a majority stake in the Wella Business. As part of the transaction, Coty received initial cash proceeds of $ 2,451.7 for the sale of its 60 % stake in Wella and its pro rata share of Wella's return of capital distribution of $ 448.0 , and retained a 40 % stake in Wella (see Note 4—Business Combinations, Asset Acquisitions and Divestitures). In accordance with the 2018 Coty Credit Agreement, as amended, the Company utilized $ 2,015.5 of the net proceeds to pay down its 2018 Coty Term A and B Facilities on a pro rata basis and reserved $ 500.0 for reinvestment in the business, as defined in the 2018 Coty Credit Agreement, as amended, ("the Reinvestment Balance"). If the Reinvestment Balance is not reinvested within twelve months, the Company is required to use the remainder to pay down its 2018 Coty Term A and B Facilities on a pro rata basis. Additionally, in accordance with the 2018 F-34 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Coty Credit Agreement, as amended, as a result of these prepayments, the minimum liquidity covenant increased from $ 350.0 to $ 500.0 . Offering of Senior Unsecured Notes On April 5, 2018 the Company issued, at par, $ 550.0 of 6.50 % senior unsecured notes due 2026 (the “2026 Dollar Notes”), € 550.0 million of 4.00 % senior unsecured notes due 2023 (the “2023 Euro Notes”) and € 250.0 million of 4.75 % senior unsecured notes due 2026 (the “2026 Euro Notes” and, together with the 2023 Euro Notes, the “Euro Notes,” and the Euro Notes together with the 2026 Dollar Notes, the “Senior Unsecured Notes”) in a private offering. The Senior Unsecured Notes are senior unsecured debt obligations of the Company and will be pari passu in right of payment with all of the Company’s existing and future senior indebtedness (including the 2018 Coty Credit Facilities described below). The Senior Unsecured Notes are guaranteed, jointly and severally, on a senior basis by the Guarantors (as later defined under “ 2018 Coty Credit Agreement ”). The Senior Unsecured Notes are senior unsecured obligations of the Company and are effectively junior to all existing and future secured indebtedness of the Company to the extent of the value of the collateral securing such secured indebtedness. The related guarantees are senior unsecured obligations of each Guarantor and are effectively junior to all existing and future secured indebtedness of such Guarantor to the extent of the value of the collateral securing such indebtedness. The 2026 Dollar Notes will mature on April 15, 2026. The 2026 Dollar Notes will bear interest at a rate of 6.50 % per annum. Interest on the 2026 Dollar Notes is payable semi-annually in arrears on April 15 and October 15 of each year. The 2023 Euro Notes will mature on April 15, 2023 and the 2026 Euro Notes will mature on April 15, 2026. The 2023 Euro Notes will bear interest at a rate of 4.00 % per annum, and the 2026 Euro Notes will bear interest at a rate of 4.75 % per annum. Interest on the Euro Notes is payable semi-annually in arrears on April 15 and October 15 of each year. Upon the occurrence of certain change of control triggering events with respect to a series of Senior Unsecured Notes, the Company will be required to offer to repurchase all or part of the Senior Unsecured Notes of such series at 101 % of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date applicable to such Senior Unsecured Notes. The Senior Unsecured Notes contain customary covenants that place restrictions in certain circumstances on, among other things, incurrence of liens, entry into sale or leaseback transactions, sales of all or substantially all of the Company’s assets and certain merger or consolidation transactions. The Senior Unsecured Notes also provide for customary events of default. Optional Redemption As of June 30, 2021, the Company may at any time redeem some or all of the 2026 Dollar Notes, 2023 Euro Notes and 2026 Euro Notes, respectively, at the redemption prices (expressed in percentage of principal amount) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates, if redeemed during the twelve-month period beginning on April 15 of each of the years indicated below: Price Year 2026 Dollar Notes 2023 Euro Notes 2026 Euro Notes 2021 104.8750 % 101.0000 % 103.5625 % 2022 103.2500 % 100.0000 % 102.3750 % 2023 101.6250 % 100.0000 % 101.1875 % 2024 and thereafter 100.0000 % N/A 100.0000 % F-35 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Deferred Issuance Costs For the fiscal years ended June 30, 2021, 2020 and 2019, the Company capitalized deferred financing fees of $ 25.4 , $ 13.4 , and $ 5.9 , respectively. The Company did no t incur any third-party debt issuance costs during the fiscal year ended June 30, 2021. The Company incurred $ 0.8 and $ 0.8 in third-party debt issuance costs during the fiscal years ended June 30, 2020 and 2019, respectively, which were recorded as Other (income) expense, net in the Consolidated Statement of Operations. Write-offs In fiscal 2021, the Company wrote off $ 21.1 of unamortized deferred financing fees and $ 3.1 of unamortized debt discounts as the prepayments of the 2018 Coty Term A and B Facilities were considered partial extinguishments of debt. There were no write offs in fiscal 2020. In fiscal 2019, the Company wrote off $ 3.8 of unamortized deferred financing fees in connection with the 2019 Amendment. The write-offs of the unamortized deferred financing fees and unamortized debt discounts are included in Other (income) expense, net in the Consolidated Statements of Operations. Interest The 2018 Coty Credit Agreement facilities will bear interest at rates equal to, at the Company’s option, either: • LIBOR of the applicable qualified currency, of which the Company can elect the applicable one, two, three, six or twelve month rate, plus the applicable margin; or • ABR plus the applicable margin. In the case of the 2018 Coty Revolving Credit Facility and the 2018 Coty Term A Facility, the applicable margin means the lesser of a percentage per annum to be determined in accordance with the leverage-based pricing grid and the debt rating-based grid below: Pricing Tier Total Net Leverage Ratio: LIBOR plus: Alternative Base Rate Margin: 1.0 Greater than or equal to 4.75 :1 2.000 % 1.000 % 2.0 Less than 4.75 :1 but greater than or equal to 4.00 :1 1.750 % 0.750 % 3.0 Less than 4.00 :1 but greater than or equal to 2.75 :1 1.500 % 0.500 % 4.0 Less than 2.75 :1 but greater than or equal to 2.00 :1 1.250 % 0.250 % 5.0 Less than 2.00 :1 but greater than or equal to 1.50 :1 1.125 % 0.125 % 6.0 Less than 1.50 :1 1.000 % — % Pricing Tier Debt Ratings S&P/Moody’s: LIBOR plus: Alternative Base Rate Margin: 5.0 Less than BB+/Ba1 2.000 % 1.000 % 4.0 BB+/Ba1 1.750 % 0.750 % 3.0 BBB-/Baa3 1.500 % 0.500 % 2.0 BBB/Baa2 1.250 % 0.250 % 1.0 BBB+/Baa1 or higher 1.125 % 0.125 % In the case of the USD portion of the 2018 Coty Term B Facility, the applicable margin means 2.25 % per annum, in the case of LIBOR loans, and 1.25 % per annum, in the case of ABR loans. In the case of the Euro portion of the 2018 Coty Term B Facility, the applicable margin means 2.50 % per annum, in the case of EURIBOR loans. In no event will LIBOR be deemed to be less than 0.00 % per annum. F-36 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Fair Value of Debt June 30, 2021 June 30, 2020 Carrying Amount Fair Value Carrying Amount Fair Value Senior Secured Notes $ 1,733.3 $ 1,749.1 $ — $ — 2018 Coty Credit Agreement 2,245.7 2,188.5 6,706.3 5,962.3 Senior Unsecured Notes 1,502.3 1,500.5 1,449.4 1,270.3 The Company uses the market approach to value the Senior Secured Notes, the 2018 Coty Credit Agreement and the Senior Unsecured Notes. The Company obtains fair values from independent pricing services to determine the fair value of these debt instruments. Based on the assumptions used to value these liabilities at fair value, these debt instruments are categorized a Level 2 in the fair value hierarchy. Debt Maturities Schedule Aggregate maturities of all long-term debt, including the current portion of long-term debt and excluding capital lease obligations as of June 30, 2021, are presented below: Fiscal Year Ending June 30, 2022 $ 24.1 2023 1,462.8 2024 24.1 2025 1,389.4 2026 2,580.9 Total $ 5,481.3 Covenants The 2018 Coty Credit Agreement contains affirmative and negative covenants. The negative covenants include, among other things, limitations on debt, liens, dispositions, investments, fundamental changes, restricted payments and affiliate transactions. With certain exceptions as described below, the 2018 Coty Credit Agreement, as amended, includes a financial covenant that requires us to maintain a Total Net Leverage Ratio (as defined below), equal to or less than the ratios shown below for each respective test period. Quarterly Test Period Ending Total Net Leverage Ratio (as amended April 29, 2020) (a) June 30, 2021 through December 31, 2021 5.25 to 1.00 March 31, 2022 5.00 to 1.00 June 30, 2022 4.75 to 1.00 September 30, 2022 4.50 to 1.00 December 31, 2022 4.25 to 1.00 March 31, 2023 through June 30, 2023 4.00 to 1.00 (a) Total Net Leverage Ratio means, as of any date of determination, the ratio of: (a) (i) Total Indebtedness minus (ii) unrestricted and Cash Equivalents of the Parent Borrower and its Restricted Subsidiaries as determined in accordance with GAAP to (b) Adjusted EBITDA for the most recently ended Test Period (each of the defined terms, including Adjusted EBITDA, used within the definition of Total Net Leverage Ratio have the meanings ascribed to them within the 2018 Coty Credit Agreement, as amended). Adjusted EBITDA, as defined in the 2018 Coty Credit Agreement, as amended, includes certain add backs related to cost savings, operating expense reductions and future unrealized synergies subject to certain limits and conditions as specified in the 2018 Coty Credit Agreement, as amended. In the four fiscal quarters following the closing of any Material Acquisition (as defined in the 2018 Coty Credit Agreement, as amended), including the fiscal quarter in which such Material Acquisition occurs, the maximum Total Net Leverage Ratio shall be the lesser of (i) 5.95 to 1.00 and (ii) 1.00 higher than the otherwise applicable maximum Total Net Leverage Ratio for such quarter (as set forth in the table above). Immediately after any such four fiscal quarter period, there shall be at least two consecutive fiscal quarters during which the Company’s Total Net Leverage Ratio is no greater than the maximum Total Net F-37 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Leverage Ratio that would otherwise have been required in the absence of such Material Acquisition, regardless of whether any additional Material Acquisitions are consummated during such period. As of June 30, 2021, the Company was in compliance with all covenants contained within the 2018 Coty Credit Agreement, as amended. 16. LEASES The Company leases office facilities under non-cancelable operating leases with terms generally ranging between 10 and 25 years. The Company utilizes these leased office facilities for use by its employees in countries in which the Company conducts its business. Leases are negotiated with third parties and, in some instances contain renewal, expansion and termination options. The Company also subleases certain office facilities to third parties when the Company no longer intends to utilize the space. None of the Company’s leases restricts the payment of dividends or the incurrence of debt or additional lease obligations, or contain significant purchase options. Due to the divestiture of the Wella Business, lease assets, liabilities and expenses specific to this business for the fiscal years ended June 30, 2021 and 2020 are excluded from the subsequent tables. The following table provides additional information about the Company’s operating leases for the fiscal years ended June 30, 2021 and 2020. Lease Cost: Year Ended June 30, 2021 Year Ended June 30, 2020 Operating lease cost $ 87.1 $ 97.0 Short-term lease cost 0.8 2.3 Variable lease cost 49.5 53.4 Sublease income ( 14.9 ) ( 4.8 ) Net lease cost $ 122.5 $ 147.9 Other information: Operating cash outflows from operating leases ( 132.4 ) ( 100.9 ) Right-of-use assets obtained in exchange for lease obligations 27.8 6.3 Weighted-average remaining lease term - real estate 6.4 years 6.9 years Weighted-average discount rate - real estate leases 3.57 % 3.09 % The Company incurred net rent expense of $ 197.7 relating to operating leases under ASC 840 in fiscal year 2019. The Company collected payments from sub-lessors relating to facilities no longer in use by the Company of $ 9.4 for fiscal year 2019. The fiscal year ended 2019 rent expense and sub-lessor payments include amounts related to discontinued operations. During fiscal 2021, 2020 and 2019, the Company recorded asset impairment charges of $ 0.6 , $ 7.8 and $ 0.0 . The fiscal 2020 impairment charges are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations and primarily relate to abandonment of a retail store no longer in use. F-38 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Future minimum lease payments for the Company’s operating leases as of June 30, 2021 are as follows: Fiscal Year Ending June 30, 2022 $ 87.5 2023 68.5 2024 54.4 2025 42.2 2026 34.9 Thereafter 102.5 Total future lease payments 390.0 Less: imputed interest ( 45.0 ) Total present value of lease liabilities $ 345.0 Current operating lease liabilities 75.7 Long-term operating lease liabilities 269.3 Total operating lease liabilities $ 345.0 Table excludes obligations for leases with original terms of twelve months or less which have not been recognized as ROU assets or liabilities in the Consolidated Balance Sheets. 17. INCOME TAXES (Loss) income before income taxes from continuing operations in fiscal 2021, 2020 and 2019 is presented below: Year Ended June 30, 2021 2020 2019 United States $ ( 434.4 ) $ ( 960.3 ) $ ( 2,003.5 ) Foreign 194.6 ( 507.3 ) ( 1,941.9 ) Total $ ( 239.8 ) $ ( 1,467.6 ) $ ( 3,945.4 ) The components of the Company’s total (benefit) provision for income taxes from continuing operations during fiscal 2021, 2020 and 2019 are presented below: Year Ended June 30, 2021 2020 2019 (Benefit) provision for income taxes from continuing operations: Current: Federal $ 3.8 $ — $ 0.8 State and local 14.9 ( 0.3 ) 8.2 Foreign 55.2 90.7 129.4 Total 73.9 90.4 138.4 Deferred: Federal 41.1 ( 286.7 ) ( 116.1 ) State and local 5.4 ( 50.6 ) ( 49.9 ) Foreign ( 292.4 ) ( 130.8 ) ( 27.2 ) Total ( 245.9 ) ( 468.1 ) ( 193.2 ) Benefit for income taxes from continued operations $ ( 172.0 ) $ ( 377.7 ) $ ( 54.8 ) During fiscal 2021, the Company recorded a benefit of $ 234.4 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 F-39 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) $ 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. During fiscal 2020, the Company recorded a benefit of $ 105.7 for the capital loss generated as a result of the disposition of its investment in Younique. During fiscal 2019, the Company recorded goodwill impairment that is not tax-deductible. The reconciliation of the U.S. Federal statutory tax rate to the Company’s effective income tax rate during fiscal 2021, 2020 and 2019 is presented below: Year Ended June 30, 2021 2020 2019 Income (loss) from continuing operations before income taxes $ ( 239.8 ) $ ( 1,467.6 ) $ ( 3,945.4 ) Benefit for income taxes at statutory rate $ ( 50.4 ) $ ( 308.2 ) $ ( 828.5 ) State and local taxes—net of federal benefit 26.3 ( 28.0 ) ( 28.5 ) Foreign tax differentials ( 23.3 ) 7.2 43.0 Change in valuation allowances ( 3.8 ) 7.4 ( 0.8 ) Change in unrecognized tax benefit ( 18.0 ) 21.3 43.3 Permanent differences—net ( 13.1 ) 14.3 5.0 Goodwill impairment — 26.1 675.6 Principal relocation ( 234.4 ) Post-divestiture restructuring 130.0 Gain on sale of business adjustment — ( 132.1 ) — Other 14.7 14.3 36.1 Benefit for income taxes from continuing operations $ ( 172.0 ) $ ( 377.7 ) $ ( 54.8 ) Effective income tax rate 71.7 % 25.7 % 1.4 % Significant components of deferred income tax assets and liabilities as of June 30, 2021 and 2020 are presented below: F-40 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) June 30, 2021 June 30, 2020 Deferred income tax assets: Inventories $ 9.7 $ 14.2 Accruals and allowances 86.4 66.9 Sales returns 16.4 12.9 Share-based compensation 5.8 10.1 Employee benefits 101.6 81.7 Net operating loss carry forwards and tax credits 295.4 446.5 Capital loss carry forwards 1.1 105.7 Interest expense limitation carry forward 15.5 122.1 Lease liability 24.3 22.6 Principal relocation lease liability 487.8 — Property, plant and equipment 7.7 — Other 36.8 54.3 Less: valuation allowances ( 33.4 ) ( 40.0 ) Net deferred income tax assets 1,055.1 897.0 Deferred income tax liabilities: Intangible assets 892.1 635.2 Property, plant and equipment — 6.4 Licensing rights 23.3 20.9 Right of use asset 27.4 32.0 Other 28.7 15.2 Deferred income tax liabilities 971.5 709.7 Net deferred income tax asset $ 83.6 $ 187.3 The expirations of tax loss carry forwards, amounting to $ 1,343.8 as of June 30, 2021, in each of the fiscal years ending June 30, are presented below: Fiscal Year Ending June 30, United States Western Europe Rest of World Total 2022 $ — $ — $ 4.0 $ 4.0 2023 — — 2.1 2.1 2024 — — 5.5 5.5 2025 — 71.9 15.3 87.2 2026 and thereafter — 1,050.4 194.6 1,245.0 Total $ — $ 1,122.3 $ 221.5 $ 1,343.8 The total valuation allowances recorded are $ 33.4 and $ 40.0 as of June 30, 2021 and 2020, respectively. In fiscal 2021, the change in the valuation allowance was due primarily to valuation allowances released as a result of the underlying net operating losses expiring. F-41 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) A reconciliation of the beginning and ending amount of UTBs is presented below: Year Ended June 30, 2021 2020 2019 UTBs—July 1 $ 277.9 $ 263.6 $ 235.7 Additions based on tax positions related to the current year 32.1 15.9 43.9 Additions for tax positions of prior years — 42.9 8.3 Reductions for tax positions of prior years ( 4.5 ) ( 27.6 ) ( 9.6 ) Settlements ( 0.4 ) ( 0.1 ) ( 2.7 ) Lapses in statutes of limitations ( 33.3 ) ( 12.7 ) ( 9.0 ) Foreign currency translation 8.1 ( 4.1 ) ( 3.0 ) UTBs—June 30 $ 279.9 $ 277.9 $ 263.6 As of June 30, 2021, the Company had $ 279.9 of UTBs of which $ 161.7 represents the amount that, if recognized, would impact the effective income tax rate in future periods. As of June 30, 2021 and 2020, the liability associated with UTBs, including accrued interest and penalties, is $ 181.2 and $ 170.7 , respectively, which is recorded in Income and other taxes payable and Other non-current liabilities in the Consolidated Balance Sheets. During fiscal 2021, the Company accrued interest of $ 0.8 , while in fiscal 2020 and 2019 the Company accrued interest of $ 3.2 and $ 4.3 , respectively. During fiscal 2021, the Company released penalties of $ 0.5 , while in fiscal 2020 and 2019 the Company accrued penalties of $ 0.0 and $ 0.0 , respectively. The total gross accrued interest and penalties recorded in the Other noncurrent liabilities in the Consolidated Balance Sheets related to UTBs as of June 30, 2021 and 2020 is $ 21.7 and $ 19.3 , respectively. The Company is present in approximately 50 tax jurisdictions, and at any point in time is subject to several audits at various stages of completion. As a result, the Company evaluates tax positions and establishes liabilities for UTBs that may be challenged by local authorities and may not be fully sustained, despite a belief that the underlying tax positions are fully supportable. UTBs are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closing of statute of limitations. Such adjustments are reflected in the provision for income taxes as appropriate. In fiscal 2021 and 2020, the Company recognized a tax benefit of $ 33.7 and $ 12.8 respectively associated with the settlement of tax audits in multiple jurisdictions and the expiration of foreign and state statutes of limitation. The Company has open tax years ranging from 2009 and forward. On the basis of information available at June 30, 2021, it is reasonably possible that a decrease of up to $ 21.7 in UTBs related to U.S. and foreign exposures may be necessary within the coming year. It is also possible the ongoing audits by tax authorities may result in increases or decreases to the balance of UTBs. Since it is common practice to extend audits beyond the Statute of Limitations, the Company is unable to predict the timing or conclusion of these audits and, accordingly, the Company is unable to estimate the amount of changes to the balance of UTBs that are reasonably possible at this time. However, the Company believes it has adequately provided for its UTBs for all open tax years in each tax jurisdiction. 18. INTEREST EXPENSE, NET Interest expense, net for the years ended June 30, 2021, 2020 and 2019 is presented below: Year Ended June 30, 2021 2020 2019 Interest expense $ 231.8 $ 233.3 $ 252.0 Foreign exchange losses (gain), net of derivative contracts 6.8 14.8 ( 7.6 ) Interest income ( 3.5 ) ( 5.4 ) ( 19.2 ) Total interest expense, net $ 235.1 $ 242.7 $ 225.2 19. EMPLOYEE BENEFIT PLANS Savings and Retirement Plans - The Company’s Savings and Retirement Plans include a U.S. defined contribution plan for employees primarily in the U.S. and international savings plans for employees in certain other countries. In the U.S., hourly F-42 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) and salary based employees are eligible to participate in the plan after 90 days of service and the Company matches 100 % of employee contributions up to 6.0 % of employee compensation. In addition, the Company makes contributions to the plan on behalf of employees determined by their age and compensation. During fiscal 2021, 2020 and 2019, the defined contribution expense for Coty Inc. for the U.S. defined contribution plan was $ 15.8 , $ 20.5 and $ 20.4 , respectively, and the defined contribution expense for the international savings plans was $ 12.0 , $ 14.1 and $ 12.9 , respectively. Defined contribution expense includes amounts related to discontinued operations, which are not material for any period. Pension Plans - The Company sponsors contributory and noncontributory defined benefit pension plans covering certain U.S. and international employees primarily in France, Germany and Switzerland. Participants in the U.S. defined benefit pension plan no longer accrue benefits. The Company measures defined benefit plan assets and obligations as of the date of the Company’s fiscal year-end. The Company’s defined benefit pension plans are funded primarily through contributions from the Company after consideration of recommendations from the pension plans’ independent actuaries and are funded at levels sufficient to comply with local requirements. Settlements and Curtailments for Pension Plans As part of the Turnaround Plan, the Company concluded that restructuring actions resulted in a significant reduction of future services of active employees in certain of the Company’s non-U.S. pension plans. As a result, the Company recognized curtailment gains of $ 6.9 and $ 14.1 during the years ended June 30, 2021 and 2020, respectively. Additionally, the Company recognized a settlement loss of $ 3.8 , of which $ 2.3 was related to restructuring actions during the year ended June 30, 2021. The impact of settlement and curtailment activity on the current and prior comparative periods is included in Other expense, net in the Consolidated Statements of Operations. During fiscal 2019, as part of Global Integration Activities, the Company concluded that restructuring actions resulted in a significant reduction of future services of active employees in certain of the Company’s non-U.S. pension plans. As a result, the Company recognized curtailment gains of $ 5.1 during the year ended June 30, 2019. Plan Amendments for Pension Plans - There were no Plan amendments as of June 30, 2021. Other Post-Employment Benefit Plans (“OPEB”) - The Company provides certain post-employment health and life insurance benefits for certain employees and spouses principally in the U.S. and France if certain age and service requirements are met. Estimated benefits to be paid by the Company are expensed over the service period of each employee based on calculations performed by an independent actuary. In addition, the Company has a supplemental retirement plan and a termination benefit plan for selected salaried employees. Settlements and Curtailments for OPEB Plans As part of the Turnaround Plan, the Company concluded that restructuring actions resulted in a significant reduction of future services of active employees in certain of the Company’s U.S. OPEB Plans. As a result, the Company recognized curtailment gains of $ 0.8 during the year ended June 30, 2020. The impact of settlement and curtailment activity on the current and prior comparative periods is included in Other (income) expense, net in the Consolidated Statements of Operations. F-43 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) All of the disclosures below include amounts related to discontinued operations through November 30, 2020, except when otherwise noted. The aggregate reconciliation of the projected benefit obligations, plan assets, funded status and amounts recognized in the Company’s Consolidated Financial Statements related to the Company’s pension plans and other post-employment benefit plans is presented below: Pension Plans Other Post-Employment Benefits Total U.S. International 2021 2020 2021 2020 2021 2020 2021 2020 Change in benefit obligation Benefit obligation—July 1 $ 18.5 $ 17.7 $ 753.2 $ 790.1 $ 53.7 $ 57.8 $ 825.4 $ 865.6 Service cost — — 18.4 33.1 1.0 1.1 19.4 34.2 Interest cost 0.5 0.6 8.4 9.1 1.3 1.7 10.2 11.4 Plan participants’ contributions — — 4.3 6.1 0.2 0.3 4.5 6.4 Benefits paid ( 0.6 ) ( 1.4 ) ( 16.2 ) ( 16.8 ) ( 2.3 ) ( 2.1 ) ( 19.1 ) ( 20.3 ) New employees transfers in — — 29.7 18.7 — — 29.7 18.7 Premiums paid — — ( 1.3 ) ( 2.3 ) — — ( 1.3 ) ( 2.3 ) Pension curtailment — — ( 6.6 ) ( 11.2 ) — ( 0.8 ) ( 6.6 ) ( 12.0 ) Acquisitions/Divestitures — — ( 303.4 ) — ( 0.6 ) — ( 304.0 ) — Pension settlement — — ( 47.0 ) ( 39.0 ) — — ( 47.0 ) ( 39.0 ) Actuarial loss (gain) 0.5 1.6 35.4 ( 30.6 ) ( 2.8 ) ( 4.2 ) 33.1 ( 33.2 ) Effect of exchange rates — — 41.0 ( 4.0 ) ( 0.3 ) ( 0.1 ) 40.7 ( 4.1 ) Benefit obligation—June 30 $ 18.9 $ 18.5 $ 515.9 $ 753.2 $ 50.2 $ 53.7 $ 585.0 $ 825.4 Change in plan assets Fair value of plan assets—July 1 $ — $ — $ 274.1 $ 268.5 $ 0.5 $ 0.4 $ 274.6 $ 268.9 Actual return on plan assets — — 24.6 3.4 — — 24.6 3.4 Employer contributions 0.6 1.3 25.9 33.2 2.0 1.9 28.5 36.4 Plan participants’ contributions — — 4.3 6.1 0.2 0.3 4.5 6.4 Benefits paid ( 0.6 ) ( 1.3 ) ( 16.2 ) ( 16.5 ) ( 2.3 ) ( 2.1 ) ( 19.1 ) ( 19.9 ) New employees transfers in — — 29.7 18.7 — — 29.7 18.7 Premiums paid — — ( 1.3 ) ( 2.2 ) — — ( 1.3 ) ( 2.2 ) Plan settlements — — ( 46.5 ) ( 39.0 ) — — ( 46.5 ) ( 39.0 ) Acquisitions/Divestitures — — ( 148.6 ) — ( 0.4 ) — ( 149.0 ) — Effect of exchange rates — — 13.1 1.9 — — 13.1 1.9 Fair value of plan assets—June 30 — — 159.1 274.1 — 0.5 159.1 274.6 Reclassification of net obligation to held for sale liabilities — — — 140.8 — — — 140.8 Funded status—June 30 $ ( 18.9 ) $ ( 18.5 ) $ ( 356.8 ) $ ( 338.3 ) $ ( 50.2 ) $ ( 53.2 ) $ ( 425.9 ) $ ( 410.0 ) F-44 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) With respect to the Company’s pension plans and other post-employment benefit plans, amounts recognized in the Company’s Consolidated Balance Sheets as of June 30, 2021 and 2020, are presented below (this table excludes discontinued operations): Pension Plans Other Post-Employment Benefits Total U.S. International 2021 2020 2021 2020 2021 2020 2021 2020 Noncurrent assets $ — $ — $ — $ 1.5 $ — $ — $ — $ 1.5 Current liabilities ( 2.0 ) ( 1.3 ) ( 0.7 ) ( 6.9 ) ( 2.6 ) ( 3.0 ) ( 5.3 ) ( 11.2 ) Noncurrent liabilities ( 16.9 ) ( 17.2 ) ( 356.1 ) ( 332.9 ) ( 47.6 ) ( 50.2 ) ( 420.6 ) ( 400.3 ) Funded status ( 18.9 ) ( 18.5 ) ( 356.8 ) ( 338.3 ) ( 50.2 ) ( 53.2 ) ( 425.9 ) ( 410.0 ) AOC(L)/I 0.3 ( 0.7 ) ( 31.2 ) 1.1 7.7 8.3 ( 23.2 ) 8.7 Net amount recognized $ ( 18.6 ) $ ( 19.2 ) $ ( 388.0 ) $ ( 337.2 ) $ ( 42.5 ) $ ( 44.9 ) $ ( 449.1 ) $ ( 401.3 ) The projected benefit obligation actuarial loss of $ 35.9 is primarily driven by a decrease in discount rates since June 30, 2020. The actuarial loss is the cumulative impact of the decrease in discount rates at (i) the remeasurement as of November 30, 2020 due to the Wella divestiture and (ii) the measurement as of fiscal year ending June 30, 2021. The actuarial loss in the projected benefit obligation was partially offset by the asset gain of $ 18.3 as a result of better than expected asset performance, particularly in Germany. During fiscal 2021 the retiree medical and life insurance plan experienced a gain on the liability of $ 2.8 primarily due to retirees waiving medical coverage this year that had coverage last year, and updated claims, mortality and discount rate assumptions. The gain was slightly offset due to updated medical trend assumptions . The accumulated benefit obligation for the U.S. defined benefit pension plans was $ 18.9 and $ 18.5 as of June 30, 2021 and 2020, respectively. The accumulated benefit obligation for international defined benefit pension plans was $ 498.4 and $ 712.1 as of June 30, 2021 and 2020, respectively. Pension plans with accumulated benefit obligations in excess of plan assets and projected benefit obligations in excess of plan assets are presented below: Pension plans with accumulated benefit obligations in excess of plan assets Pension plans with projected benefit obligations in excess of plan assets U.S. International U.S. International 2021 2020 2021 2020 2021 2020 2021 2020 Projected benefit obligation $ 18.9 $ 18.5 $ 493.4 $ 730.7 $ 18.9 $ 18.5 $ 501.1 $ 739.1 Accumulated benefit obligation 18.9 18.5 479.3 694.9 18.9 18.5 498.4 712.1 Fair value of plan assets — — 138.0 254.4 — — 144.7 261.0 Net Periodic Benefit Cost The components of net periodic benefit cost for pension plans and other post-employment benefit plans recognized in the Consolidated Statements of Operations are presented below: F-45 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Year Ended June 30, Pension Plans Other Post- Employment Benefits U.S. International Total 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 Service cost $ — $ — $ — $ 18.4 $ 33.1 $ 33.3 $ 1.0 $ 1.1 $ 1.2 $ 19.4 $ 34.2 $ 34.5 Interest cost 0.5 0.6 0.7 8.4 9.1 12.8 1.3 1.7 2.1 10.2 11.4 15.6 Expected return on plan assets — — — ( 6.3 ) ( 8.4 ) ( 8.2 ) — — — ( 6.3 ) ( 8.4 ) ( 8.2 ) Amortization of prior service (credit) cost — — — ( 0.3 ) ( 0.8 ) 0.2 ( 3.3 ) ( 5.9 ) ( 5.9 ) ( 3.6 ) ( 6.7 ) ( 5.7 ) Amortization of net (gain) loss 1.5 0.7 ( 0.7 ) ( 0.2 ) ( 0.1 ) 0.3 ( 0.1 ) ( 0.1 ) ( 0.1 ) 1.2 0.5 ( 0.5 ) Settlements (gain) loss recognized — — — 3.8 ( 0.2 ) ( 0.8 ) — — — 3.8 ( 0.2 ) ( 0.8 ) Curtailment (gain) loss recognized — — — ( 6.9 ) ( 14.1 ) ( 5.4 ) — ( 0.8 ) — ( 6.9 ) ( 14.9 ) ( 5.4 ) Net periodic benefit cost $ 2.0 $ 1.3 $ — $ 16.9 $ 18.6 $ 32.2 $ ( 1.1 ) $ ( 4.0 ) $ ( 2.7 ) $ 17.8 $ 15.9 $ 29.5 Net periodic benefit costs include amounts related to discontinued operations of $ 6.2 , $ 14.4 , and $ 12.2 for the years ended June 30, 2021, 2020 and 2019, respectively. Pre-tax amounts recognized in AOC(L)/I, which have not yet been recognized as a component of net periodic benefit cost are presented below: Pension Plans Other Post-Employment Benefits U.S. International Total 2021 2020 2021 2020 2021 2020 2021 2020 Net actuarial (loss) gain $ 0.3 $ ( 0.7 ) $ ( 32.1 ) $ ( 2.8 ) $ 6.9 $ 4.2 $ ( 24.9 ) $ 0.7 Prior service credit (cost) — — 0.9 3.9 0.8 4.1 1.7 8.0 Total recognized in AOC(L)/I $ 0.3 $ ( 0.7 ) $ ( 31.2 ) $ 1.1 $ 7.7 $ 8.3 $ ( 23.2 ) $ 8.7 Changes in plan assets and benefit obligations recognized in OCI/(L) during the fiscal year are presented below: Pension Plans Other Post-Employment Benefits U.S. International Total 2021 2020 2021 2020 2021 2020 2021 2020 Net actuarial (loss) gain $ ( 0.5 ) $ ( 1.6 ) $ ( 17.1 ) $ 25.6 $ 2.8 $ 5.2 $ ( 14.8 ) $ 29.2 Amortization or curtailment recognition of prior service (credit) cost — — ( 0.7 ) ( 3.7 ) ( 3.3 ) ( 6.3 ) ( 4.0 ) ( 10.0 ) Recognized net actuarial (gain) loss 1.5 0.7 3.6 ( 0.6 ) ( 0.1 ) ( 0.6 ) 5.0 ( 0.5 ) Prior service credit (cost) — — — — — — — — Effect of exchange rates — — 0.1 0.2 0.3 — 0.4 0.2 Total recognized in OCI/(L) $ 1.0 $ ( 0.9 ) $ ( 14.1 ) $ 21.5 $ ( 0.3 ) $ ( 1.7 ) $ ( 13.4 ) $ 18.9 Changes in plan assets and benefit obligations recognized in OCI/(L) excludes $( 19.2 ) of discontinued operations for the year ended June 30, 2021. Pension and Other Post-Employment Benefit Assumptions The weighted-average assumptions used to determine the Company’s projected benefit obligation above are presented below: F-46 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Pension Plans Other Post-Employment Benefits U.S. International 2021 2020 2021 2020 2021 2020 Discount rates 2.4 %- 2.6 % 2.5 %- 2.8 % 0.3 %- 1.6 % 0.4 %- 6.7 % 1.5 %- 2.8 % 1.7 %- 2.8 % Future compensation growth rates N/A N/A 1.0 %- 2.5 % 1.0 %- 5.8 % N/A N/A The weighted-average assumptions used to determine the Company’s net periodic benefit cost in fiscal 2021, 2020 and 2019 are presented below: Pension Plans Other Post- Employment Benefits U.S. International 2021 2020 2019 2021 2020 2019 2021 2020 2019 Discount rates 2.5 %- 2.8 % 3.2 %- 3.6 % 4 % 0.4 %- 6.7 % 0.4 %- 8.4 % 0.6 %- 8.0 % 1.7 %- 2.8 % 1.7 %- 3.5 % 2.3 %- 4.2 % Future compensation growth rates N/A N/A N/A 1.5 %- 6.7 % 1.0 %- 5.8 % 1.5 %- 5.7 % N/A N/A N/A Expected long-term rates of return on plan assets N/A N/A N/A 1.0 %- 5.8 % 1.4 %- 8.9 % 2.0 %- 8.4 % N/A N/A N/A The health care cost trend rate assumptions have a significant effect on the amounts reported. Year Ended June 30, 2021 2020 2019 Health care cost trend rate assumed for next year 7.5 %- 7.6 % 6.8 %- 7.6 % 7.1 %- 8.0 % Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 4.5 % 5.0 % 5.0 % Year that the rate reaches the ultimate trend rate 2027 2026 2026 Pension Plan Investment Policy The Company’s investment policies and strategies for plan assets are to achieve the greatest return consistent with the fiduciary character of the plan and to maintain a level of liquidity that is sufficient to meet the need for timely payment of benefits. The goals of the investment managers include minimizing risk and achieving growth in principal value so that the purchasing power of such value is maintained with respect to the rate of inflation. The pension plan’s return on assets is based on management’s expectations of long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this assumption, management considers historical and expected returns for the assets in which the plan is invested, as well as current economic and market conditions. The asset allocation decision includes consideration of future retirements, lump-sum elections, growth in the number of participants, the Company’s contributions and cash flow. These actual characteristics of the plan place certain demands upon the level, risk and required growth of trust assets. Actual asset allocation is regularly reviewed and periodically rebalanced to the strategic allocation when considered appropriate. The target asset allocations for the Company’s pension plans as of June 30, 2021 and 2020, by asset category are presented below: % of Plan Assets at Year Ended Target 2021 2020 Equity securities 40 % 42 % 35 % Fixed income securities 45 % 36 % 38 % Cash and other investments 15 % 22 % 27 % F-47 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Fair Value of Plan Assets The international pension plan assets that the Company measures at fair value on a recurring basis, based on the fair value hierarchy as described in Note 2—Summary of Significant Accounting Policies, as of June 30, 2021 and 2020 are presented below: Level 1 Level 2 Level 3 Total 2021 2020 2021 2020 2021 2020 2021 2020 Equity securities $ 50.7 $ 67.5 $ — $ — $ — $ — $ 50.7 $ 67.5 Fixed income securities: Corporate securities 33.0 58.6 — — — — 33.0 58.6 Other: Cash and cash equivalents 0.2 0.5 — — — 0.2 0.5 Insurance contracts and other — — — — 75.2 148.0 75.2 148.0 Total pension plan assets $ 83.9 $ 126.6 $ — $ — $ 75.2 $ 148.0 $ 159.1 $ 274.6 The following is a description of the valuation methodologies used for plan assets measured at fair value: Equity securities -The fair values reflect the closing price reported on a major market where the individual securities are traded. These investments are classified within Level 1 of the valuation hierarchy. Corporate securities -The fair values are based on a compilation of primarily observable market information or a broker quote in a non-active market. These investments are classified within Level 1 of the valuation hierarchy. Cash and cash equivalents -The carrying amount approximates fair value, primarily because of the short maturity of cash equivalent instruments. These investments are classified within Level 1 of the valuation hierarchy. Insurance contracts and other - Includes contracts issued by insurance companies and other investments that are not publicly traded. These investments are generally classified as Level 3 as there are neither quoted prices nor other observable inputs for pricing. Insurance contracts are valued at cash surrender value, which approximates the contract fair value. Other Level 3 plan assets include real estate and other alternative investment funds requiring inputs that cannot be readily derived from observable market data due to the infrequency with which the underlying assets trade. The Company sponsors a qualified defined benefit pension plan for all eligible Swiss employees. Retirement benefits are provided based on employees’ years of service and earnings, or in accordance with applicable employee regulations. Consistent with typical Swiss practice, the pension plan is funded through a guaranteed insurance contract with an insurance company (“IC”). The IC is responsible for the investment strategy of the insurance premiums that the Company submits and does not hold individual assets per participating employer. Assets are invested in accordance with the IC’s own strategies and risk assessments. Under the terms of the contract, the interest rate as well as the capital value is guaranteed for each participant, with the IC assuming any risk to the value of the underlying assets. The IC is a member of a security fund, whose purpose is to cover any shortfall in the event they are not able to fulfill its contractual agreements. The plan assets of the Swiss plan are included in the Level 3 valuation. The Company also sponsors qualified defined benefit pension plans for certain eligible German employees. The Company’s German pension plans are partially funded with plan assets held in a Contractual Trust Arrangement, under which Company assets have been irrevocably transferred to a registered association for the exclusive purpose of securing and funding pension obligations in Germany. The association invests primarily in publicly tradable equity and fixed income securities, using a funding strategy that is reviewed on a regular basis. Plan assets are also held in the Company’s other non-U.S. defined benefit pension plans. The other non-U.S. defined benefit pension plans provide benefits primarily based on earnings and years of service and are funded in compliance with local laws and practices. The plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and investment return over the long term at an acceptable level of risk. F-48 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The reconciliations of Level 3 plan assets measured at fair value in fiscal 2021 and 2020 are presented below: June 30, 2021 June 30, 2020 Insurance contracts: Fair value—July 1 $ 148.0 $ 143.2 Return on plan assets 3.6 4.3 Purchases, sales and settlements, net ( 82.4 ) ( 2.8 ) Effect of exchange rates 6.0 3.3 Fair value—June 30 $ 75.2 $ 148.0 Contributions The Company plans to contribute approximately $ 2.0 to its remaining U.S. pension plan and expects to contribute approximately $ 17.8 and $ 2.6 to its international pension and other post-employment benefit plans, respectively, during fiscal 2022. Estimated Future Benefit Payments Expected benefit payments, which reflect expected future service, as appropriate, are presented below: Pension Plans Other Post-Employment Benefits Total Fiscal Year Ending June 30, U.S. International 2022 $ 2.0 $ 45.1 $ 2.6 $ 49.7 2023 1.3 19.9 2.7 23.9 2024 1.3 19.4 2.8 23.5 2025 1.2 19.2 3.0 23.4 2026 1.2 20.1 3.0 24.3 2027 - 2030 5.6 105.7 16.0 127.3 20. DERIVATIVE INSTRUMENTS Foreign Exchange Risk Management The Company is exposed to foreign currency exchange fluctuations through its global operations. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in foreign exchange rates by creating offsetting positions through the use of derivative instruments and also by designating foreign currency denominated borrowings and cross-currency swaps as hedges of net investments in foreign subsidiaries. The Company expects that through hedging, any gain or loss on the derivative instruments would generally offset the expected increase or decrease in the value of the underlying forecasted transactions. The Company is exposed to foreign currency exchange rate fluctuations in the normal course of business, including through exposure to inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the transaction currency. To manage this exposure, in June 2021, the Company entered into non-deliverable forward foreign-exchange contracts (the “NDF contracts”) that are intended to offset changes in cash flow attributable to currency exchange movements. The NDF contracts have been designated as foreign exchange cash flow hedges. Hedge effectiveness of the NDF contracts is based on the hypothetical derivative methodology for prospective assessment and on the cumulative dollar offset methodology for retrospective assessment. The Company entered into these contracts with counterparties that are banks or other financial institutions, and the Company considers the risk of non-performance by such counterparties not to be material. The Company also continued to use certain derivatives as economic hedges of foreign currency exposure on firm commitments, which do not qualify for hedge accounting. Although these derivatives were not designated for hedge accounting, the overall objective of mitigating foreign currency exposure is the same for all derivative instruments. The Company does not enter into derivative financial instruments for trading or speculative purposes, nor is the Company a party to leveraged derivatives. For derivatives not designated as hedging instruments, changes in fair value are recorded in the line item in the Consolidated Statements of Operations to which the derivative relates. F-49 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) In September 2020, the Company terminated its existing net investment cross currency swap derivatives with notional amount of $ 550.0 in exchange for cash payment of $ 37.6 . The related loss from this termination is included in AOCI/(L) until the sale or substantial liquidation of the underlying investments. On December 1, 2020, the Company entered into a novation agreement with Wella to assign all then existing foreign exchange forward contracts and related obligation executed by the Company in connection with the Wella Business. In July 2021, the Company entered into foreign exchange forward contracts to hedge up to 80 % of the Company’s euro denominated external debt as part of management’s strategy to minimize the impact of currency movements on those debt instruments. Interest Rate Risk The Company is exposed to interest rate fluctuations related to its variable rate debt instruments. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in the variable interest rates by entering into offsetting positions through the use of derivative instruments, such as interest rate swap contracts. The interest rate swap contracts result in recognizing a fixed interest rate for the portion of the Company’s variable rate debt that was hedged. This will reduce the negative impact of increases in the variable rates over the term of the contracts. Hedge effectiveness of interest rate swap contracts is based on a long-haul hypothetical derivative methodology and includes all changes in value. During September 2019, the Company entered into incremental interest rate swap contracts in the notional amount of $ 1,000.0 , which extended the maturity of the interest rate swap portfolio from 2021 through 2023. These interest rate swaps are designated and qualify as cash flow hedges. In fiscal 2021, the Company terminated certain existing interest rate swaps with notional amount of $ 700.0 in exchange for cash payment of $ 4.9 . The related losses from these terminations is included in Interest expense. As of June 30, 2021 and 2020, the Company had interest rate swap contracts designated as effective hedges in the notional amount of $ 1,900.0 and $ 3,000.0 , respectively. Hedge Accounting Derivative financial instruments are recorded as either assets or liabilities on the Consolidated Balance Sheets and are measured at fair value. For derivatives accounted for as hedging instruments, the Company formally designates and documents, at inception, the financial instrument as a hedge of specific underlying forecasted transactions, the risk management objective and the strategy for undertaking the hedge transaction. In addition, the Company formally assesses both at inception and at least quarterly thereafter, whether the financial instruments used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying exposures. Additionally, all of the master agreements governing the Company’s derivative contracts contain standard provisions that could trigger early termination of the contracts in certain circumstances which would require the Company to discontinue hedge accounting, including if the Company were to merge with another entity and the creditworthiness of the surviving entity were to be “materially weaker” than that of the Company prior to the merger. For derivatives designated as cash flow hedges, changes in the fair value are recorded in AOCI/(L). Gains and losses deferred in AOCI/(L) are then recognized in Net income (loss) in a manner that matches the timing of the actual income or expense related to the hedging instruments with the hedged transaction. The gains and losses related to designated hedging instruments are also recorded in the line item in the Consolidated Statements of Operations to which the derivative relates. Cash flows from derivative instruments designated as cash flow hedges are recorded in the same category as the cash flows from the items being hedged in the Consolidated Statements of Cash Flows. The ineffective portion of foreign exchange forward and interest rate swap contracts are recorded in current-period earnings. For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued and gains and losses accumulated in Other comprehensive income (loss) (“OCI”) are reclassified to earnings when the underlying forecasted transaction occurs. If it is no longer probable that the forecasted transaction will occur, then any gains or losses in AOCI/(L) are reclassified to current-period earnings. For fiscal 2021, all of the Company’s foreign exchange forward and interest rate swap contracts designated as hedges were highly effective. The Company also attempts to minimize credit exposure to counterparties by entering into derivative contracts with counterparties that are major financial institutions and utilizing master netting arrangements. Exposure to credit risk in the event of nonperformance by any of the counterparties with respect to the Company’s foreign exchange forward contracts is limited to the fair value of contracts in net asset positions under master netting arrangements. Exposure to credit risk in the event of nonperformance by any of the counterparties with respect to the Company’s interest rate swap contracts is limited to the fair F-50 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) value of contracts in net asset positions. Accordingly, management of the Company believes risk of material loss under these hedging contracts is remote. Net Investment Hedge Foreign currency gains and losses on borrowings designated as a net investment hedge, except ineffective portions, are reported in the cumulative translation adjustment (“CTA”) component of AOCI/(L), along with the foreign currency translation adjustments on those investments. As a result of the prepayments of the 2018 Coty Term A and B Facilities, as described in Note 15—Debt, foreign currency denominated borrowings designated as net investment hedges decreased from nominal exposures of € 3,591.0 million as of June 30, 2020 to € 1,809.5 million as of June 30, 2021. Net investment hedge effectiveness is assessed based on the change in the spot rate of the foreign currency denominated loans payable. The critical terms (underlying notional and currency) of the loans payable match the portion of the net investments designated as being hedged. The net investment hedges were equal to the designated portions of the international subsidiaries’ investment balances as of June 30, 2021. As such, the net investment hedges were considered to be effective, and, as a result, the changes in the fair value were recorded within CTA on the Company’s Consolidated Balance Sheets. Derivative and non-derivative financial instruments which are designated as hedging instruments: The accumulated gain on foreign currency borrowings classified as net investment hedges in the foreign currency translation adjustment component of AOCI/(L) was $ 5.4 and $ 261.9 as of June 30, 2021 and 2020, respectively. The accumulated loss on derivative instruments classified as net investment hedges in the foreign currency translation adjustment component of AOCI/(L) was $( 37.6 ) and $( 12.5 ) as of June 30, 2021 and 2020, respectively. The amount of gains and losses recognized in OCI in the Consolidated Balance Sheets related to the Company’s derivative and non-derivative financial instruments which are designated as hedging instruments is presented below: Gain (Loss) Recognized in OCI Fiscal Year Ended June 30, 2021 2020 2019 Foreign exchange forward contracts $ ( 0.3 ) $ 1.3 $ 0.9 Interest rate swap contracts 1.0 ( 50.3 ) ( 47.4 ) Cross-currency swap contracts ( 25.1 ) ( 12.5 ) — Net investment hedges ( 256.5 ) 47.1 99.8 The accumulated (loss) gain on derivative instruments classified as cash flow hedges in AOCI/(L), net of tax, was $( 15.5 ) and $( 43.0 ) as of June 30, 2021 and 2020, respectively. The estimated net loss related to these effective hedges that is expected to be reclassified from AOCI/(L) into earnings, net of tax, within the next twelve months is $( 7.3 ). As of June 30, 2021, all of the Company’s remaining foreign currency forward contracts designated as hedges were highly effective. F-51 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The amount of gains and losses reclassified from AOCI/(L) to the Consolidated Statements of Operations related to the Company’s derivative financial instruments which are designated as hedging instruments is presented below: Location and Amount of Gain (Loss) Recognized in Income on Cash Flow Hedging Relationships Fiscal Year Ended June 30, 2021 2020 2019 Net Revenues Interest expense, net Net Revenues Interest expense, net Cost of sales Interest expense, net Foreign exchange forward contracts: Amount of gain (loss) reclassified from AOCI into income $ 1.0 $ — $ 0.6 $ — $ 0.1 $ — Interest rate swap contracts: Amount of gain (loss) reclassified from AOCI into income — ( 36.1 ) — ( 10.8 ) — 12.4 Derivatives not designated as hedging instruments: The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments is presented below: Consolidated Statements of Operations Classification of Gain (Loss) Recognized in Operations Fiscal Year Ended June 30, 2021 2020 2019 Foreign exchange contracts Selling, general and administrative expenses $ 0.1 $ ( 0.8 ) $ — Foreign exchange contracts Interest income (expense), net 26.3 ( 3.1 ) 0.1 Foreign exchange contracts Other income (expense), net ( 0.6 ) 0.4 — 21. MANDATORILY REDEEMABLE FINANCIAL INTEREST United Arab Emirates subsidiary The Company is required under a shareholders agreement to purchase all of the shares held by the noncontrolling interest holder equal to 25 % of the outstanding shares of a certain subsidiary in the United Arab Emirates (the “U.A.E. subsidiary”) at the termination of the agreement on December 31, 2020. The final purchase price of $ 7.1 was paid in July 2021. Prior to the cash purchase of the remaining noncontrolling interest, the noncontrolling interest balance was recorded as a mandatorily redeemable financial instrument (“MRFI”) liability. As of June 30, 2021 and 2020, the liability amounted to $ 7.1 and $ 8.8 , respectively. Southeast Asian subsidiary On May 23, 2017, the Company entered into the Sale of Shares and Termination Deed, as amended (the “Termination Agreement”) to purchase the remaining 49 % noncontrolling interest from the noncontrolling interest holder of a certain Southeast Asian subsidiary for a purchase price of $ 45.0 . In July 2019, the Company purchased the remaining 49 % noncontrolling interest of a certain Southeast Asian subsidiary from the noncontrolling interest holder for $ 45.0 , pursuant to a Sale of Shares and Termination Deed, as amended. The termination was effective on June 30, 2019 and immediately prior to the cash purchase of the remaining noncontrolling interest, the noncontrolling interest balance was recorded as a MRFI liability. 22. REDEEMABLE NONCONTROLLING INTERESTS As of June 30, 2021, the redeemable noncontrolling interests (“RNCI”) consist of interests in a consolidated subsidiary in the Middle East. Younique On September 16, 2019, the Company completed the sale of all of its membership interest in Foundation, which held the net assets of Younique. On the date of this transaction, the Younique membership holders had a 40.7 % membership interest in Foundation. See Note 4—Business Combinations, Asset Acquisitions and Divestitures. As a result of the Company’s sale of its membership interest in Foundation, RNCI of $ 360.4 was derecognized as of the date of sale. F-52 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Subsidiary in the Middle East As of June 30, 2021, the noncontrolling interest holder in the Company’s subsidiary in the Middle East (“Middle East Subsidiary”) had a 25 % ownership share. The Company has the ability to exercise the Call right for the remaining noncontrolling interest of 25 % on December 31, 2028, with such transaction to close on December 31, 2029. In addition to the Call right feature, the noncontrolling interest holder has the right to sell the noncontrolling interest to the Company on December 31, 2028, with such transaction to close on December 31, 2029 (a “Put right”). The amount at which the Put right and Call right can be exercised is based on a formula prescribed by the amended shareholders’ agreement as summarized in the table below, multiplied by the noncontrolling interest holder’s percentage interest in the Middle East Subsidiary. Given the provision of the Put right, the entire noncontrolling interest is redeemable outside of the Company’s control and is recorded in the Consolidated Balance Sheets at the estimated redemption value. The Company adjusts the redeemable noncontrolling interest to the redemption values at the end of each reporting period with changes recognized as adjustments to APIC. The Company recognized $ 84.1 and $ 79.1 as the redeemable noncontrolling interest balances as of June 30, 2021 and 2020, respectively. Middle East Percentage of redeemable noncontrolling interest 25 % Earliest exercise date(s) December 2028 Formula of redemption value (a) 3 -year average of EBIT * 6 (a) EBIT is defined in the amended shareholders’ agreement as the consolidated net earnings before interest and income tax. 23. EQUITY AND CONVERTIBLE PREFERRED STOCK Common Stock As of June 30, 2021, the Company’s Common Stock consisted of Class A Common Stock with a par value of $ 0.01 per share. The holders of Class A Common Stock are entitled to one vote per share. As of June 30, 2021, total authorized shares of Class A Common Stock was 1,250.0 million and total outstanding shares of Class A Common Stock was 766.0 million. In the fiscal years ended June 30, 2021, 2020, and 2019, the Company issued 1.7 , 1.4 , and 1.0 million shares of its Class A Common Stock, respectively, and received $ 0.0 , $ 2.7 , and $ 5.2 , in cash, respectively, in connection with the exercise of employee stock options and settlement of RSUs and special incentive awards. During the fiscal year ended June 30, 2021, the Company reacquired 0.8 million of the 1.4 million shares of Class A Common Stock issued for the restricted stock awards granted during the year ended June 30, 2020. Of the 0.8 million shares of Class A Common Stock reacquired, 0.1 million were withheld for employee taxes due on vested restricted stock awards and 0.7 million were for restricted stock awards forfeited during the year ended, June 30, 2021. During the fiscal years ended June 30, 2021, 2020 and 2019, Cottage Holdco B.V. (“Cottage”), a wholly-owned subsidiary of JAB Cosmetics B.V. (“JABC”), and JABC acquired 0.3 , 10.6 and 10.8 shares, respectively, of Class A Common Stock in the open market. During the year ended June 30, 2020, JABC acquired 3.3 million shares of Class A Common Stock from the Company’s former CEO and elected to receive 7.3 million shares of Class A Common Stock, under the Company’s dividend reinvestment program. The Company did not receive any proceeds from these stock purchases conducted by Cottage or JABC. On April 30, 2019, Cottage completed a tender offer transaction (the “Offer”), acquiring 150.0 million of outstanding Class A shares of the Company at a price of $ 11.65 per share and as a result, became the Company’s majority stockholder. Immediately after completion of this tender offer transaction, Cottage indirectly controlled approximately 60 % of Coty’s Class A shares and the Company became a majority-owned subsidiary of Cottage. Both Cottage and the shares of the Company held by JABC are indirectly controlled by Lucresca SE, Agnaten SE and JAB Holdings B.V. (“JAB”). The Company did not receive any proceeds from these stock purchases conducted by Cottage. Series A and A-1 Preferred Stock The Series A Preferred Stock, with a par value of $ 0.01 , are not entitled to receive any dividends and have no voting rights except as required by law. As of June 30, 2021, total authorized shares of preferred stock are 20.0 million. On January 15, 2019, the Company cancelled 3.0 million shares of its Series A Preferred Stock that were forfeited during the six months ended December 31, 2018, reducing the total authorized number of shares of Series A Preferred Stock from 6.3 million to 3.3 million. F-53 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) On February 4, 2019, the Company authorized, designated and issued 6.9 million shares of Series A-1 Preferred Stock. On June 14, 2019, the Company authorized, designated and issued 1.0 million shares of Series A-1 Preferred Stock, increasing the total authorized number of shares of Series A-1 Preferred Stock from 6.9 million to 7.9 million. On June 18, 2019, the Company cancelled 0.4 million shares of its Series A Preferred Stock that were forfeited during the three months ended March 31, 2019, reducing the total authorized number of shares of Series A Preferred Stock from 3.3 million to 2.9 million. On March 27, 2020, the Company reacquired, retired and cancelled 7.9 million shares of its Series A-1 Preferred Stock, reducing the total authorized number of shares of Series A-1 Preferred Stock from 7.9 million to zero shares. The Series A and Series A-1 Preferred Stock were issued to executive officers and directors under subscription agreements. Generally, the subscription agreements entitle the holder of the vested Series A or Series A-1 Preferred Stock to exchange the Series A or Series A-1 Preferred Stock into either cash or shares of Class A Common Stock, at the election of the Company, at the exchange value. The exchange value is generally equal to the difference between the 10-day trailing average closing price of a share of Class A Common Stock on the date of exchange and a predetermined hurdle price. The Series A Preferred Stock generally vests on the fifth anniversary of issuance, subject to continued employment with the Company and investment by the holder in shares of Class A Common Stock throughout the vesting period. The Series A-1 Preferred Stock generally vests on graded vesting terms where 60 % of the award granted vests after three years , 20 % of the award granted vests after four years and 20 % of the award granted vests after five years , subject to continued employment with the Company and investment by the holder in shares of Class A Common Stock throughout the vesting period. To the extent the Company controls whether such shares will be settled in cash or equity and intends to settle the grant in equity, the grant is treated as an equity grant, otherwise the grant is treated as a liability grant. The following table summarizes the key terms of each outstanding issuance of Series A Preferred Stock: Issuance Date Type Number of Shares Awarded at Grant Date (millions of shares) Number of Shares Outstanding (millions of shares) Hurdle Price per Share February 16, 2017 (a) Series A 0.5 0.3 $ 22.66 March 27, 2017 (a) (b) Series A 1.0 1.0 $ 22.39 November 16, 2017 (a) Series A 1.0 0.2 $ 19.85 (a) If the holder does not exchange the vested Series A Preferred Stock by a specified expiration date, the Company must automatically exchange the Series A Preferred Stock into cash or shares, at election of the Company. (b) This grant was sold to Lambertus J.H. Becht (“Mr. Becht”), the Company’s former Chairman of the Board. Under the terms provided in the subscription agreement, the Series A Preferred Stock immediately vested on the grant date and the holder may exchange the vested shares after the fifth anniversary of the date of issuance. The Company requires shareholder approval in order to settle the exchange in shares of Class A Common Stock. Therefore, the award is classified as a liability as of June 30, 2021. An expense (income) of $ 0.8 , $( 1.9 ) and $( 0.1 ) was recorded during fiscal 2021, 2020 and 2019, respectively, and has been included in Selling, general and administrative expenses on the Consolidated Statements of Operations. As of June 30, 2021, total issued and outstanding shares of Series A and Series A-1 Preferred Stock are 1.5 million and nil , respectively. Of the 1.5 million outstanding shares of Series A Preferred Stock, 1.0 million shares vested on March 27, 2017 and 0.5 million shares were forfeited but remain outstanding pending final settlement. As of June 30, 2021, the Company classified nil Series A and Series A-1 Preferred Stock as equity and $ 0.9 as a liability, inclusive of the related cash bonuses, recorded in Other noncurrent liabilities in the Consolidated Balance Sheet. F-54 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Convertible Series B Preferred Stock On May 11, 2020, the Company entered into an investment agreement (the “Investment Agreement”) with KKR Aggregator (the “Investor”), relating to the issuance and sale by the Company to the Investor of up to 1,000,000 shares of the Company’s new Convertible Series B Preferred Stock, par value $ 0.01 per share (the “Series B Preferred Stock”), for an aggregate purchase price of up to $ 1,000.0 , or $ 1,000 per share (the “Issuance”). The Issuance was proposed to be issued in two tranches: (i) an initial issuance of 750,000 shares of Series B Preferred Stock (the “Initial Issuance”) and (ii) a subsequent issuance of 250,000 shares of Series B Preferred Stock (the “Second Issuance”), which was subject to the execution and delivery of a definitive purchase agreement between the Company and the Investor or certain of its affiliates in respect of the Wella Business. On May 26, 2020 (the “Closing Date”), the Company and the Investor completed the issuance and sale of 750,000 shares of the Company’s Series B Preferred Stock for an aggregate purchase price of $ 750.0 . In connection with the issuance of the Series B Preferred Stock, the Company incurred direct and incremental expenses of $ 40.7 , comprised of transaction fees, and financial advisory and legal expenses, which reduced the carrying value of the Series B Preferred Stock. Cumulative preferred dividends accrue daily on the Series B Preferred Stock at a rate of 9.0 % per year. On July 31, 2020, the Company completed the previously announced issuance and sale of 250,000 shares of the Company’s Series B Preferred Stock to the Investor for an aggregate purchase price of $ 250.0 . On June 3, 2021, the Board of Directors declared and paid a dividend on Series B Preferred Stock, totaling $ 24.2 , for the quarter ended June 30, 2021. The Series B Preferred Stock had accrued unpaid dividends of $ 74.1 and $ 6.5 for the year-ended June 30, 2021 and 2020, respectively. Dividend Rights and Liquidation Preferences. The Series B Preferred Stock rank senior to the Company’s Common Stock with respect to dividend rights and rights on the distribution of assets on any liquidation, dissolution or winding up of the affairs of the Company. The Series B Preferred Stock has a liquidation preference of $ 1,000 per share, representing an aggregate liquidation preference of $ 1,000.0 upon issuance. Holders of the Series B Preferred Stock are entitled to the dividend at the rate of 9 % per annum, accruing daily and payable quarterly in arrears. The dividend rate will increase by a 1 % on the seven-year anniversary of the Closing Date and shall increase by an additional 1 % on each subsequent anniversary up to a total of 12 %. If the Company does not declare and pay a dividend on the Series B Preferred Stock on any dividend payment date, the dividend rate will increase by 1 % per annum until all accrued but unpaid dividends have been paid in full. Dividends will be payable in cash, or by increasing the amount of accrued dividends on Series B Preferred Stock, or any combination thereof, at the sole discretion of the Company. Accrued and unpaid dividends are not payable in shares unless the Series B Preferred Stock is converted to Common Stock. Conversion Features. The Series B Preferred Stock is convertible at the option of the holders at any time into shares of Common Stock at an initial conversion price of $ 6.24 per share of Series B Preferred Stock and an initial conversion rate of 160.2564 shares of Common Stock per share of Series B Preferred Stock. At any time after the third anniversary of the closing date, if the volume weighted average price of the Common Stock exceeds $ 12.48 per share for at least 20 trading dates in any period of 30 consecutive trading days, at the election of the Company, all or any portion of the Series B Preferred Stock will be convertible into the relevant number of shares of Common Stock. As of June 30, 2021, Series B Preferred Stock and Accrued Dividends were convertible into 172,123,533 shares of Common Stock of which no shares have been converted. Redemption Features. At any time following the fifth anniversary of the Closing Date, the Company may redeem some or all of the Series B Preferred Stock for a per share amount in cash equal to (i) the sum of (x) 100 % of the liquidation preference plus (y) all accrued and unpaid dividends, multiplied by (ii) (A) 107 % if the redemption occurs at any time after the fifth anniversary of the Closing Date and prior to the sixth anniversary of the Closing Date, (B) 105 % if the redemption occurs at any time after the sixth anniversary of the Closing Date and prior to the seventh anniversary of the Closing Date, and (C) 100 % if the redemption occurs at any time after the seventh anniversary of the Closing Date. Voting rights. Holders of Series B Preferred Stock are entitled to vote with holders of Common Stock on an as-converted basis, subject to the Ownership Limitation as defined in the Investment Agreement. Holders of the Series B Preferred Stock are entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the Series B Preferred Stock, authorizations or issuances by the Company of securities that are senior to, or equal in priority with, the Series B Preferred Stock, increases or decreases in the number of authorized shares of Series B Preferred Stock, and issuances of shares of the Series B Preferred Stock. Change of Control Put. Upon certain change of control events involving the Company holders of Series B Preferred Stock may, at the holder’s election (i) convert their shares of Series B Preferred Stock into Common Stock at the then-current F-55 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) conversion price or (ii) cause the Company to redeem their shares of Series B Preferred Stock in an amount in cash equal to (x) if the change of control occurs on or before the fifth anniversary of the Closing Date, 110 % of the sum of the liquidation preference thereof plus any accrued and unpaid dividends and (y) if the change of control occurs on or after the fifth anniversary of the Closing Date, 100 % of the Redemption Price, provided that in the case of either clause (i) or (ii) above, if such change of control occurs on or before the fifth anniversary of the Closing Date, the Company will also be required to pay the holders of the Series B Preferred Stock a “make-whole” premium. Participation and Other Pertinent Rights. Pursuant to the Investment Agreement, the Company increased the size of its board of directors (the “Board”) in order to elect two individuals designated by the Investor (the “Designees”) to the Board. Dividends - Common Stock On April 29, 2020, the Board of Directors suspended the payment of dividends on Common Stock. No dividends on Common Stock were declared for the year ended June 30, 2021. During fiscal 2020, prior to the Board’s decision to suspend the payment of dividends, the Company maintained a Stock Dividend Reinvestment Program and had registered a total of 19.3 million shares of Class A Common Stock for purchase under the program. All holders of records of Class A Common Stock had the opportunity to participate in the program; if a holder elected to participate in the program, fifty percent ( 50 %) of their cash dividends were reinvested in additional shares of Class A Common Stock. The following dividends were declared during fiscal years 2020 and 2019: Declaration Date Dividend Type Dividend Per Share Holders of Record Date Dividend Value Dividend Payment Date Dividends Settled in Cash Dividends Settled in Stock (a) Dividends Payable (b) Fiscal 2020 August 28, 2019 Quarterly $ 0.125 September 9, 2019 $ 95.3 September 30, 2019 $ 63.3 $ 30.9 $ 1.1 November 6, 2019 Quarterly 0.125 November 18, 2019 96.1 December 27, 2019 65.5 29.3 1.3 February 5, 2020 Quarterly 0.125 February 18, 2020 96.3 March 27, 2020 66.4 28.7 1.2 Fiscal 2020 $ 0.375 $ 287.7 $ 195.2 $ 88.9 $ 3.6 Fiscal 2019 August 21, 2018 Quarterly $ 0.125 August 31, 2018 $ 94.6 September 14, 2018 $ 93.8 N/A $ 0.8 November 7, 2018 Quarterly 0.125 November 30, 2018 95.1 December 14, 2018 93.9 N/A 1.2 February 8, 2019 Quarterly 0.125 February 28, 2019 95.1 March 15, 2019 93.9 N/A 1.2 May 8. 2019 Quarterly 0.125 June 6, 2019 95.1 June 28, 2019 63.4 30.6 1.1 Fiscal 2019 $ 0.500 $ 379.9 $ 345.0 $ 30.6 $ 4.3 (a) The June 28, 2019, September 30, 2019 , December 27, 2019 and March 27, 2020 stock dividend payments of $ 30.6 , $ 30.9 , $ 29.3 and $ 28.7 resulted in the issuances of 2.4 million, 3.2 million , 2.4 million and 2.4 million shares of Class A Common Stock, respectively. (b) The dividend payable is the value of the remaining dividends payable upon settlement of the RSUs and phantom units outstanding as of the Holders of Record Date. Dividends payable are recorded as Accrued expense and other current liabilities and Other noncurrent liabilities in the Consolidated Balance Sheet. Total dividends in cash and other recorded to additional paid-in capital (“APIC”) in the Consolidated Balance Sheet as of June 30, 2021 was $( 1.2 ) which represents dividends no longer expected to vest as a result of forfeitures of outstanding RSUs. In addition to the activity noted above, the Company made a payment of $ 1.5 for the previously accrued dividends on RSUs that vested during the twelve months ended June 30, 2021. Thus, total dividends settled in cash during the twelve months ended June 30, 2021 was $ 1.5 . F-56 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Total accrued dividends on unvested RSUs and phantom units of $ 2.4 and $ 1.7 , and $ 2.0 and $ 4.7 are included in Accrued expenses and other current liabilities and Other noncurrent liabilities, respectively, in the Consolidated Balance Sheets as of June 30, 2021 and 2020, respectively. Accumulated Other Comprehensive (Loss) Income Foreign Currency Translation Adjustments (Losses) Gains on Cash Flow Hedges (Losses) Gains on Net Investment Hedge Foreign Currency Translation Adjustments Pension and Other Post-Employment Benefit Plans Total Beginning balance at July 1, 2019 $ ( 13.3 ) $ 214.8 $ ( 257.4 ) $ ( 2.9 ) $ ( 58.8 ) Other comprehensive income before reclassifications ( 37.5 ) 47.1 ( 426.4 ) 18.9 ( 397.9 ) Net amounts reclassified from AOCI/(L) (a) 7.8 — — ( 7.3 ) 0.5 Net current-period other comprehensive income ( 29.7 ) 47.1 ( 426.4 ) 11.6 ( 397.4 ) Ending balance at June 30, 2020 $ ( 43.0 ) $ 261.9 $ ( 683.8 ) $ 8.7 $ ( 456.2 ) Other comprehensive income before reclassifications 0.6 ( 294.1 ) 424.5 ( 24.2 ) 106.8 Net amounts reclassified from AOCI/(L) (a) 26.9 — — 0.6 27.5 Net current-period other comprehensive income 27.5 ( 294.1 ) 424.5 ( 23.6 ) 134.3 Ending balance at June 30, 2021 $ ( 15.5 ) $ ( 32.2 ) $ ( 259.3 ) $ ( 14.9 ) $ ( 321.9 ) (a) Amortization of actuarial gains of $ 0.9 and $ 10.5 , net of taxes of $ 0.3 and $ 3.2 , were reclassified out of AOCI/(L) and included in the computation of net period pension costs for the fiscal years ended June 30, 2021 and 2020, respectively (see Note 19—Employee Benefit Plans). Treasury Stock - Share Repurchase Program Since February 2014, the Board has authorized the Company to repurchase its Class A Common Stock under approved repurchase programs. On February 3, 2016, the Board authorized the Company to repurchase up to $ 500.0 of its Class A Common Stock (the “Incremental Repurchase Program”). Such repurchases may be made from time to time at the Company’s discretion, based on ongoing assessments of the capital needs of the business, the market price of its Class A Common Stock, and general market conditions. As of June 30, 2021, the Company has $ 396.8 remaining under the Incremental Repurchase Program. There were no share repurchase activities during the years ended June 30, 2021, 2020 and 2019 under the Incremental Repurchase Program. 24. SHARE-BASED COMPENSATION PLANS The Company has various share-based compensation programs (the “the Compensation Plans”) under which awards, including non-qualified stock options, Series A and Series A-1 Preferred Stock, RSUs, restricted stock and other share-based awards, may be granted or shares of Class A Common Stock may be purchased. As of June 30, 2021, up to 74.6 million shares of the Company's Class A Common Stock were authorized to be granted pursuant to these Plans, of which 43.9 million shares were available. The Company may satisfy the obligation of its stock-based compensation awards with new shares. The Company accounts for its share-based compensation plans for Common Stock as equity plans. The share-based compensation for equity plans is estimated and fixed at the grant date, based on the estimated fair value of the award. Series A Preferred Stock is accounted for partially as equity and partially using liability plan accounting to the extent the award is expected to be settled in cash. Accordingly, share-based compensation expense for the liability plan awards are measured at the end of each reporting period based on the fair value of the award on each reporting date and recognized as an expense to the extent earned. F-57 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Total share-based compensation from continuing operations is shown in the table below: 2021 2020 2019 Equity plan expense (a) $ 25.4 $ 24.8 $ 13.4 Equity plan modified and cash settled 0.9 18.3 — Liability plan (income) expense 1.6 ( 2.0 ) ( 2.1 ) Fringe expense 0.5 1.1 0.4 Total share-based compensation expense $ 28.4 $ 42.2 $ 11.7 (a) Equity plan shared-based compensation expense of $ 27.4 and $ 31.8 was recorded to additional paid in capital and presented in the Consolidated Statement of Equity for the fiscal years ended June 30, 2021 and 2020, respectively. Of the $ 27.4 and $ 31.8 for the fiscal years ended June 30, 2021 and 2020, respectively, $ 2.0 and $ 7.0 was reclassified to discontinued operations. The share-based compensation expense for fiscal 2021, 2020 and 2019 of $ 28.4 , $ 42.2 and $ 11.7 , respectively, includes $ 34.7 , $ 48.9 , and $ 30.0 expense for the respective period offset by $( 6.3 ), $( 6.7 ) and $( 18.3 ) of income for the respective periods primarily due to significant executive forfeitures of share-based compensation instruments. During fiscal 2020, $ 18.3 of share-based compensation expense related to the repurchase of Series A-1 Preferred Stock shares from the Company’s former CEO. As of June 30, 2021, the total unrecognized share-based compensation expense related to unvested stock options, Series A and Series A-1 Preferred Stock, restricted stock, and restricted stock units and other share awards is $ 5.9 , $ 0.0 , $ 2.1 and $ 319.8 , respectively. The unrecognized share-based compensation expense related to unvested stock options, Series A and A-1 Preferred Stock, restricted stock, and restricted stock units and other share awards is expected to be recognized over a weighted-average period of 2.48 , 0.00 , 1.93 and 2.21 years, respectively. Non-Qualified Stock Options During fiscal 2021, 2020 and 2019, the Company granted 0.0 million , 2.2 million and 19.4 million non-qualified stock option awards, respectively. These options are accounted for using equity accounting whereby the share-based compensation expense is estimated and fixed at the grant date based on the estimated value of the options using the Black-Scholes valuation model. During fiscal 2020 and 2019, the share-based compensation expense recognized on non-qualified stock options is based upon the fair value on the grant date estimated using the Black-Scholes valuation model with the following weighted-average assumptions: 2020 2019 Expected life 7.4 years 6.5 years Risk-free interest rate 1.63 % 2.56 % Expected volatility 41.67 % 40.73 % Expected dividend yield 4.10 % 4.64 % Expected life —The expected life represented the period of time (years) that options granted were expected to be outstanding, which the Company calculated using a formula based on the vesting term and the contractual life of the respective option. Risk-free interest rate —The Company based the risk-free interest rate on the implied yield available on a U.S. Treasury note with a term equal to the expected term of the underlying options. Expected volatility —The expected volatility is derived using historical stock price information for the Company’s common stock and that of certain peer group companies, and the volatility implied by the trading of options to purchase the Company’s stock on open-market exchanges. Expected dividend yield —The weighted-average expected dividend yield is based upon the Company’s expectation to pay dividends over the contractual term of the options. F-58 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Non-qualified stock options generally become exercisable five years from the date of the grant or on a graded vesting schedule where 60 % of each award granted vests after three years , 20 % of each award granted vests after four years and 20 % of each award granted vests after five years . All grants expire ten years from the date of the grant. The Company’s outstanding non-qualified stock options as of June 30, 2021 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Term (in years) Outstanding at July 1, 2020 18.0 $ 12.93 Forfeited ( 4.6 ) 12.70 Outstanding at June 30, 2021 13.4 $ 13.00 Vested and expected to vest at June 30, 2021 8.6 $ 13.02 $ — 6.69 Exercisable at June 30, 2021 0.6 $ 10.50 $ — 0.17 Of the 13.4 million stock options outstanding at June 30, 2021, 6.4 million vest on the fifth anniversary of the grant date and 7.0 million vest on the graded vesting schedule. As of June 30, 2021, the grant prices of the outstanding options ranged from $ 8.25 to $ 20.42 , and the grant prices for exercisable options ranged from $ 9.20 to $ 10.50 . A summary of the aggregated weighted-average grant date fair value of stock options granted and total intrinsic value of stock options exercised for fiscal 2020 and 2019 is presented below: 2020 2019 Weighted-average grant date fair value of stock options $ 3.41 $ 2.87 Intrinsic value of options exercised 6.1 11.5 The Company’s non-vested non-qualified stock options as of June 30, 2021 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Grant Date Fair Value Non-vested at July 1, 2020 17.2 $ 3.73 Forfeited ( 4.4 ) 3.63 Non-vested at June 30, 2021 12.8 $ 2.84 The share-based compensation expense recognized on the non-qualified stock options was $ 0.5 , $ 3.6 and $ 4.3 during fiscal 2021, 2020 and 2019, respectively. Executive Ownership Programs The Company encourages executive stock ownership through various programs. These programs govern shares of Class A Common Stock purchased by employees (“Purchased Shares”). Employees purchased 0.1 million, 0.8 million and 1.4 million shares in fiscal 2021, 2020 and 2019, respectively, and received matching non-qualified stock options or RSUs in accordance with the terms of the Compensation Plans under the Omnibus Long-Term Incentive Plan (“Omnibus LTIP”). There was no share-based compensation expense recorded in connection with Purchased Shares for fiscal 2021, 2020 and 2019. Additionally, share-based compensation expense recorded in connection with matching stock awards granted in accordance with the Compensation Plans are noted in their respective section of this footnote. Series A and Series A-1 Preferred Stock In addition to the Executive Ownership Programs discussed above, the Series A Preferred Stock are accounted for partially as equity and partially as a liability as of June 30, 2021, 2020 and 2019 and the Company recognized an (income) expense of $ 0.8 , $ 15.8 and $( 4.4 ) in fiscal 2021, 2020 and 2019, respectively. See Note 23—Equity and Convertible Preferred Stock for additional information. F-59 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) On February 27, 2020, the Company agreed to repurchase 6.9 million shares of Series A-1 Preferred Stock from the former CEO for $ 18.3 , which settled in cash during fiscal 2020. The repurchase was treated as a modification of stock compensation awards’ vesting and settlement terms. The Company recorded an incremental expense of $ 18.3 related to the modification during fiscal 2020. The Company uses the binomial lattice or the Black-Scholes model to value the equity and cash bonus components of the granted Series A/A-1 Preferred Stocks. The fair value of the Company’s outstanding Series A and Series A-1 Preferred Stock were estimated with the following weighted-average assumptions. 2021 2020 2019 Expected life, in years 2.74 years 3.74 years 4.97 years Expected volatility 51.64 % 53.20 % 42.53 % Risk-free rate of return 0.46 % 0.24 % 2.45 % Dividend yield on Class A Common Stock 1.34 % 8.39 % 6.19 % Expected life, in years - The expected life represents the period of time (years) that Series A or Series A-1 Preferred Stock granted are expected to be outstanding, which the Company calculates using a formula based on the vesting term and the contractual life of the respective Series A or Series A-1 Preferred Stock. Expected volatility - The expected volatility is derived using historical stock price information for the Company’s common stock and that of certain peer group companies, and the volatility implied by the trading of options to purchase the Company’s stock on open-market exchanges. Risk-free rate of return - The Company bases the risk-free rate of return on the U.S. Constant Maturity Treasury Rate. Dividend yield on Class A Common Stock - The Company calculated the weighted-average dividend yield on shares using the annualized dividend rate calculated on the per share dividend paid quarterly and the stock price as of the valuation date. Series A and Series A-1 Preferred Shares generally expire seven years from the date of the grant. The Company’s outstanding Series A and Series A-1 Preferred Shares as of June 30, 2021 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Term (in years) Outstanding at July 1, 2020 1.5 $ 22.10 Outstanding at June 30, 2021 1.5 22.10 Vested and expected to vest at June 30, 2021 1.0 $ 22.39 $ — 2.74 The Company’s non-vested shares of Series A and Series A-1 Preferred Stock as of June 30, 2021 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Grant Date Fair Value Non-vested at July 1, 2020 0.5 $ 3.55 Non-vested at June 30, 2021 0.5 $ 3.55 Restricted Share Units On October 1, 2018, the Company’s Board of Directors approved a modification of the vesting schedules for certain RSUs granted during fiscal 2019 and 2020 to improve the Company’s ability to retain the affected employees, from five year cliff vesting to graded vesting where 60 % of each award granted vests after three years , 20 % of each award granted vests after four years and 20 % of each award granted vests after five years . Five hundred sixty employees held outstanding awards subject to the October 1, 2018 modification. During the fiscal year ended June 30, 2019, the incremental stock based compensation expense resulting from the modification was offset by income from actual and expected forfeitures in the modified awards. On October 14, 2020, the Company’s Board of Directors approved a new vesting schedule applicable to RSUs granted during fiscal 2021, to three-year graded vesting where one-third of each award granted vests after the first anniversary of grant, F-60 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) one-third of each award granted vests after the second anniversary of grant and one-third of each awarded granted vests after the third anniversary of grant. During fiscal 2021, 2020 and 2019, 38.1 million, 6.2 million and 6.9 million RSUs were granted under the Omnibus LTIP and 0.3 million, 0.1 million and 0.1 million RSUs were granted under the 2007 Stock Plan for Directors, respectively. The Company’s CEO, Sue Nabi, was granted a one-time sign-on award of restricted stock units (the “Award”) on June 30, 2021. The Award will vest and settle in 10,000,000 shares of the Company’s Class A Common Stock, par value $ 0.01 per share, on each of August 31, 2021, August 31, 2022 and August 31, 2023, subject to her continued employment through each such date. The Company will recognize approximately $ 273.2 of share-based compensation expense, on a straight-line basis over the vesting period, based on the fair value on the grant date. The amount of compensation cost recognized at each vesting date must at least equal the portion of the award legally vested. As such, $ 168.3 , $ 89.9 and $ 15.0 will be recognized in the fiscal years ending 2022, 2023 and 2024, respectively. In connection with this Award, Cottage Holdco B.V., the Company’s largest stockholder and a wholly-owned subsidiary of JAB Holding Company S.à r.l., has agreed, pursuant to an equity transfer agreement, to transfer to Ms. Nabi (either directly or through contributing to the Company) 10,000,000 shares of Common Stock no later than sixty days following the first vesting date. If, however, Ms. Nabi is terminated without cause or due to death or disability on or following the first vesting date but prior to the second vesting date, the Company has agreed to issue to Cottage Holdco B.V. the number of shares of Common Stock determined on pro-rata basis in accordance with the equity transfer agreement. In the event Ms. Nabi remains employed through the third vesting date, Cottage Holdco B.V. has agreed to transfer an additional 5,000,000 shares of Common Stock to Ms. Nabi. The Company’s outstanding RSUs as of June 30, 2021 and activity during the fiscal year then ended are presented below: Shares (in millions) Aggregate Intrinsic Value Weighted Average Remaining Contractual Term Outstanding at July 1, 2020 11.9 Granted 38.4 Settled ( 2.5 ) Cancelled ( 3.6 ) Outstanding at June 30, 2021 44.2 Vested and expected to vest at June 30, 2021 41.8 $ 390.1 2.10 The share-based compensation expense recorded in connection with the RSUs was $ 26.1 , $ 18.2 and $ 11.8 during fiscal 2021, 2020 and 2019, respectively. The Company’s outstanding and non-vested RSUs as of June 30, 2021 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Grant Date Fair Value Outstanding and nonvested at July 1, 2020 11.6 $ 12.48 Granted 38.4 8.08 Vested ( 2.5 ) 13.33 Cancelled ( 3.6 ) 10.92 Outstanding and nonvested at June 30, 2021 43.9 $ 8.78 The total intrinsic value of RSUs vested and settled during fiscal 2021, 2020 and 2019 is $ 32.9 , $ 30.3 and $ 11.1 , respectively. Restricted Stock During fiscal 2021 and 2020, 0.0 million and 2.3 million restricted stock awards were granted under the Omnibus LTIP. F-61 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The Company’s outstanding restricted stock as of June 30, 2021 and activity during the fiscal year then ended are presented below: Shares (in millions) Aggregate Intrinsic Value Weighted Average Remaining Contractual Term Outstanding at July 1, 2020 1.4 Settled ( 0.2 ) Cancelled ( 0.7 ) Outstanding at June 30, 2021 0.5 Vested and expected to vest at June 30, 2021 0.4 $ 1.7 1.41 The share-based compensation expense recorded in connection with the restricted stock was $ 1.0 and $ 4.6 during fiscal 2021 and 2020, respectively. The Company’s outstanding and non-vested restricted stock as of June 30, 2021 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Grant Date Fair Value Outstanding and nonvested at July 1, 2020 1.4 $ 5.08 Vested ( 0.2 ) 1.06 Cancelled ( 0.7 ) 5.08 Outstanding and nonvested at June 30, 2021 0.5 $ 5.08 The total intrinsic value of restricted stock vested and settled during fiscal 2021 and 2020 was $ 1.2 and $ 4.5 , respectively. Phantom Units On July 21, 2015, the Board granted Mr. Becht, the Company’s former Chairman of the Board and interim CEO, an award of 300,000 phantom units, in consideration of Mr. Becht’s increased and continuing responsibilities as interim CEO of the Company. At the time of grant, the phantom units had a value of $ 8.1 based on the closing price of the Company’s Class A Common Stock on July 21, 2015. Each phantom unit has an economic value equivalent to one share of the Company’s Class A Common Stock settleable in cash or shares at the election of Mr. Becht. The award to Mr. Becht was made outside of the Company’s Omnibus LTIP. On July 24, 2015, Mr. Becht elected to receive payment of the phantom units in the form of shares of Class A Common Stock and the phantom units were valued at $ 8.0 . The phantom units vested on the fifth anniversary of the grant date and remain outstanding as of June 30, 2021. The Company recognized $ 8.0 of share-based compensation expense during the fiscal year ended June 30, 2016 as there are no service or performance conditions with respect to the phantom units. 25. NET LOSS ATTRIBUTABLE TO COTY INC. PER COMMON SHARE Net loss attributable to Coty Inc. common stockholders per common share (“basic EPS”) is computed by dividing net loss attributable to Coty Inc. less any dividends on Series B Preferred Stock by the weighted-average number of common shares outstanding during the period. Net loss attributable to Coty Inc. common stockholders per common share assuming dilution (“diluted EPS”) is computed by adjusting the numerator used in basic EPS to add back the dividends applicable to the Series B Preferred Stock and using the basic EPS weighted-average number of common shares and the effect of potentially dilutive securities outstanding during the period as the denominator. Potentially dilutive securities consist of non-qualified stock options, Series A Preferred Stock, RSUs, unvested restricted stock awards and potential shares resulting from the conversion of the Series B Preferred Stock as of June 30, 2021, 2020 and 2019. Net loss attributable to Coty Inc. is adjusted through the application of the two-class method of income per share to reflect a portion of the periodic adjustment of the redemption value in excess of fair value of the redeemable noncontrolling interests. F-62 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) There is no excess of redemption value over fair value of the redeemable noncontrolling interests in fiscal 2021, 2020 and 2019. In addition, there are no participating securities requiring the application of the two-class method of income per share. Reconciliation between the numerators and denominators of the basic and diluted EPS computations is presented below: Year Ended June 30, 2021 2020 2019 Amounts attributable to Coty Inc.: Net loss from continuing operations $ ( 64.0 ) $ ( 1,093.9 ) $ ( 3,905.2 ) Convertible Series B Preferred Stock dividends ( 102.3 ) ( 6.5 ) — Net loss from continuing operations attributable to common stockholders ( 166.3 ) ( 1,100.4 ) ( 3,905.2 ) Net income from discontinued operations, net of tax ( 137.3 ) 87.2 121.0 Net (loss) income attributable to common stockholders $ ( 303.6 ) $ ( 1,013.2 ) $ ( 3,784.2 ) Weighted-average common shares outstanding: Weighted-average common shares outstanding—Basic 764.8 759.1 751.2 Weighted-average common shares and common share equivalents outstanding—Diluted (a) 764.8 759.1 751.2 (Loss) earnings per common share Loss from continuing operations per common share - basic $ ( 0.22 ) $ ( 1.45 ) $ ( 5.20 ) Loss from continuing operations per common share - diluted $ ( 0.22 ) $ ( 1.45 ) $ ( 5.20 ) (Loss) earnings from discontinued operations - basic $ ( 0.18 ) $ 0.12 $ 0.16 (Loss) earnings from discontinued operations - diluted $ ( 0.18 ) $ 0.12 $ 0.16 Loss per common share - basic $ ( 0.40 ) $ ( 1.33 ) $ ( 5.04 ) Loss per common share - diluted $ ( 0.40 ) $ ( 1.33 ) $ ( 5.04 ) (a) As of June 30, 2021, 2020 and 2019, 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 loss per share due to the net loss incurred during the period. 26. LEGAL AND OTHER CONTINGENCIES Legal Matters The Company is involved, from time to time, in various litigation, administrative and other legal proceedings, including regulatory actions, incidental or related to its business, including consumer class or collective actions, personal injury (including asbestos claims related to the Company’s talc-based cosmetic products), intellectual property, competition, compliance and advertising claims litigation and disputes, among others (collectively, “Legal Proceedings”). While the Company cannot predict any final outcomes relating thereto, management believes that the outcome of current Legal Proceedings will not have a material effect upon its business, prospects, financial condition, results of operations, cash flows or the trading price of the Company’s securities. However, management’s assessment of the Company’s current Legal Proceedings is ongoing, and could change in light of the discovery of additional facts with respect to Legal Proceedings not presently known to the Company, further legal analysis, or determinations by judges, arbitrators, juries or other finders of fact or deciders of law which are not in accord with management’s evaluation of the probable liability or outcome of such Legal Proceedings. From time to time, the Company is in discussions with regulators, including discussions initiated by the Company, about actual or potential violations of law in order to remediate or mitigate associated legal or compliance risks and liabilities or penalties. As the outcomes of such proceedings are unpredictable, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, prospects, financial condition, results of operations, cash flows or the trading price of its securities. F-63 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Certain Litigation . A consolidated purported stockholder class action and derivative complaint concerning the tender offer by Cottage Holdco B.V. (the “Cottage Tender Offer”) and the Schedule 14D-9 is pending against certain current and former directors of the Company, JAB Holding Company S.à r.l., JAB Holdings B.V., JAB Cosmetics B.V., and Cottage Holdco B.V. in the Court of Chancery of the State of Delaware. The Company was named as a nominal defendant. The case, which was filed on May 6, 2019, was captioned Massachusetts Laborers’ Pension Fund v. Harf et al., Case No. 2019-0336-AGB. On June 14, 2019, plaintiffs in the consolidated action filed a Verified Amended Class Action and Derivative Complaint (“Amended Complaint”). After defendants responded to the Amended Complaint, on October 21, 2019, plaintiffs filed a Verified Second Amended Class Action and Derivative Complaint (the “Second Amended Complaint”), alleging that the directors and JAB Holding Company S.à r.l., JAB Holdings B.V., JAB Cosmetics B.V., and Cottage Holdco B.V. breached their fiduciary duties to the Company’s stockholders and breached the Stockholders Agreement. The Second Amended Complaint seeks, among other things, monetary relief. On November 21, 2019, the defendants moved to dismiss certain claims asserted in the Second Amended Complaint, and certain of the director defendants also answered the complaint. On May 7, 2020, plaintiffs stipulated to the dismissal without prejudice of JAB Holding Company S.à r.l. from the action. On August 17, 2020, the court denied the remaining motions to dismiss. The case is currently at the discovery stage. A purported stockholder class action complaint, alleging violations of the U.S. securities laws in connection with the P&G beauty brands acquisition is pending against the Company as well as certain current and former officers of the Company in the U.S. District Court for the Southern District of New York. The case, which was filed on September 4, 2020, is captioned Crystal Garrett-Evans v. Coty Inc. et al., Case No. 1:20-cv-07277 (the “Evans Action”). On November 23, 2020, the court appointed the individual Susan Nock as lead plaintiff and the Rosen Firm as lead counsel. Plaintiff filed an amended complaint on January 22, 2021. The Amended Complaint asserts claims under the federal securities laws and seeks, among other things, monetary relief. On March 8, 2021, the Company filed a motion to dismiss the amended complaint, and on August 4, 2021 the court dismissed the amended complaint, holding that it failed to set forth a valid claim. A second purported stockholder class action and derivative complaint, alleging violations of the U.S. securities laws in connection with the P&G beauty brands acquisition and the Kylie Brands transaction as well as claims for breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets by certain current and former officers and directors of the Company, is pending in the U.S. District Court for the Southern District of New York. The case, which was filed on November 17, 2020, is captioned Chris Lewis v. Becht et al., Case No. 1:20-cv-09685. The Company was named as a nominal defendant. The plaintiff seeks, among other things, injunctive and/or monetary relief. This case remains at an early stage. This action was voluntarily stayed during the pendency of the motion to dismiss the Evans Action. At this time, the Company cannot reasonably estimate a range of loss, if any, not covered by available insurance, that may result given the current status of these lawsuits. A complaint alleging various claims including breach of contract and violations of the California Trade Secrets Act was filed against the Company and King Kylie LLC (“King Kylie”) in the Superior Court of the State of California, County of Los Angeles on June 30, 2020. The case is captioned Seed Beauty, LLC et al., v. Coty Inc., et al., Case No. 20VECV00721 (the “Seed Action”). The plaintiffs, Seed Beauty, LLC and BETA Beauty, LLC (collectively, “Seed”) sought a temporary restraining order to enjoin the Company and King Kylie from discussing or using certain alleged Seed trade secrets. The court denied this request. In addition, following the announcement of the potential deal between the Company and KKW Beauty, LLC (“KKW”), Seed commenced a lawsuit against KKW in the Superior Court of the State of California, County of Los Angeles. The case, which was filed June 19, 2020, is captioned Seed Beauty, LLC et al., v. KKW Beauty, LLC, Case No. 20VECV00684, and was before the same court as the Seed Action. Seed secured a temporary restraining order prohibiting KKW from sharing with the Company certain alleged Seed trade secrets related to the business relationship between Seed and KKW, as contained in certain documents filed in the action under seal. The Company was not a party to this action but the temporary restraining order imposed on KKW had been extended to the Company. In April 2021, SEED and King Kylie, KKW and the Company reached an agreement to settle the litigations brought by SEED, which have been formally dismissed. The Company’s portion of the settlement was not material including both its direct allocation as well as the portion attributable to King Kylie and its 20 % KKW stake. A portion of the Company’s direct allocation was covered by indemnifications from the King Kylie and KKW sellers. Brazilian Tax Assessments The Company’s Brazilian subsidiaries receive tax assessments from local, state and federal tax authorities in Brazil from time to time. Current open tax assessments as of June 30, 2021 are: F-64 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Assessment received Type of assessment Type of Tax Tax period impacted Estimated amount, including interest and penalties as of June 30, 2021 Mar-18 State sales tax credits, which the Treasury Office of the State of Goiás considers as improperly registered ICMS 2016-2017 R$ 361.7 million (approximately $ 73.0 ) Aug-20 ICMS 2017-2019 R$ 663.2 million (approximately $ 133.8 ) Oct-20 Federal excise taxes, which the Treasury Office of the Brazil’s Internal Revenue Service considers as improperly calculated IPI 2016-2017 R$ 341.1 million (approximately $ 68.8 ) Nov-20 State sales taxes, which the Treasury Office of the State of Minas Gerais considers as improperly calculated ICMS 2016-2019 R$ 186.4 million (approximately $ 37.6 ) Jun-21 State sales tax, which the Treasury Office of the State of Goiás considers as improperly calculated ICMS 2016-2020 R$ 76.0 million (approximately $ 15.3 ) All cases are currently in the administrative process. The Company is seeking favorable administrative decisions on the tax enforcement actions filed by the tax authorities for these assessments. The Company believes it has meritorious defenses and it has not recognized a loss for these assessments as the Company does not believe a loss is probable. Due to the fiscal environment in Brazil, the possibility of further tax assessments related to the same or similar matters cannot be ruled out. Other Commitments At June 30, 2021, the aggregate future minimum purchase obligations, which include commitments to purchase inventory and other services agreements, were as follows: Fiscal Year Ending June 30, Purchase Obligations 2022 $ 610.7 2023 46.4 2024 28.9 2025 5.3 2026 8.0 Thereafter — Total $ 699.3 27. RELATED PARTY TRANSACTIONS Performance Guarantee In connection with the sales of certain businesses, the Company has assigned its rights and obligations under a real estate lease to JAB Partners LLP. The remaining term of this lease is approximately 10 years. While the Company is no longer the primary obligor under this lease, the lessor has not completely released the Company from its obligation, and holds it secondarily liable in the event that the assignee defaults on the lease. The maximum potential future payments that the Company could be required to make, if the assignee was to default as of June 30, 2021, would be approximately $ 5.7 . The Company has assessed the probability of default by the assignee and has determined it to be remote. Equity Transfer Agreement In connection with the Award granted to the Company’s CEO on June 30, 2021, Cottage Holdco B.V. has agreed to transfer to her (either directly or through contributing to the Company) one-half of the total number of shares of Common Stock owed to her if and when the Award vests. See Note 24—Share-Based Compensation Plans for more information on the Award. Relationship with KKR As noted previously, in fiscal 2020 KKR Aggregator purchased Series B Preferred Stock. This preferred stock conveys to KKR Aggregator the right to designate two directors to the Company’s Board of Directors and voting rights on an as-converted F-65 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) basis. Assuming full conversion of the preferred stock (including any accrued dividends through June 30, 2021) and no other changes to the Company’s capitalization, KKR Aggregator would be the second largest shareholder, with a 18.4 % stake. On November 16, 2020, KKR Aggregator and affiliated investment funds agreed to sell 146,057 shares of Series B Preferred Stock to HFS Holdings S.à r.l, a private limited liability company incorporated under the laws of Luxembourg that is beneficially owned by Peter Harf, a director of the Company. The transaction, which is subject to customary closing conditions, is expected to close on August 27, 2021. In June of 2020, KKR Bidco and Coty entered into a separate definitive agreement regarding a strategic transaction (“Wella Transaction”) for the sale of the Company’s Professional and Retail Hair business, which was completed on November 30, 2020. KKR owns approximately 60 % of this separately managed entity and Coty owns the remaining approximately 40 %. During fiscal 2021 and 2020, fees of $ 7.6 and $ 25.5 , respectively, were incurred with KKR in connection with the initial and second closings of the Series B Preferred Stock; these fees reduced the carrying value of the stock. The Company also entered into agreements with KKR for potential consulting and advisory services. No fees were incurred under such agreements in fiscal 2021 or fiscal 2020. From time to time, certain funds held by KKR may hold the Company’s Senior Secured and Unsecured Notes (as defined in Note 15—Debt). These funds may receive principal and interest payments on the same terms as other investors in the Company’s Senior Secured and Unsecured Notes. Wella Coty owns 40 % of the Wella Business as an equity investment and performs certain services to Wella. In connection with the sale of the Wella Business, the Company and Wella entered into a Transitional Services Agreement (“TSA”). Subject to the terms of this TSA, the Company will perform services for Wella in exchange for related service fees. Such services include billing and collecting from Wella customers, certain logistics and warehouse services, as well as other administrative and systems support. The various services will be provided for a period of up to eighteen months and can be extended for another three month period. TSA fees and other fees earned since the divestiture were $ 86.6 and $ 3.4 , respectively, for the seven months ended June 30, 2021. The TSA fees are principally invoiced on a cost plus basis. The TSA fees and other fees were included in Selling, general and administrative expenses and Cost of sales, respectively, in the Company's Statement of Operations. As of June 30, 2021, accounts receivable from and accounts payable to Wella of $ 153.4 and $ 37.9 , respectively, were included in Prepaid expenses and other current assets and Accrued expenses and other current liabilities, respectively, in the Company's Balance Sheets. In accordance with the separation agreement with Wella, Coty shall retain and be solely responsible for any amounts payable to former Coty employees transferred to Wella (“Wella employee”), who participated in the Coty Long-Term Incentive Plan. The Wella employees will continue to participate and vest on the current terms for the remaining vesting period after the separation. As such, Coty will continue to recognize the share-based compensation expense for Wella employees until the existing equity awards reach their vesting date. For the year ended June 30, 2021, Coty recorded $ 2.3 of share-based compensation expense related to Wella employees, which was presented as part of Other (income) expense, net in the Consolidated Statements of Operations. The Company has certain sublease arrangements with Wella after the sale. For the seven months ended June 30, 2021, the Company reported sublease income of $ 9.1 from Wella. Consulting Services and Other Arrangements The Company had engaged certain affiliates of JAB to provide us with marketing technology services on customary market terms. As of June 30, 2020, these arrangements were no longer in effect. In addition, the Company’s former subsidiary, Beamly, entered into service agreements with affiliates of JAB for the provision of digital media services on customary market terms. Fees under each of these arrangements totaled less than $ 1.0 in fiscal 2020 and 2019, respectively. Beatrice Ballini, a director, serves as a senior member of the Retail Practice and a leader of the Board and CEO Advisory Partners group at Russell Reynolds Associates. From time to time, the Company has engaged Russell Reynolds Associates, a global leadership and search firm, for recruiting assistance. The amounts of such services provided to the Company for fiscal 2021, 2020 and 2019 were $ 2.3 , $ 0.6 and $ 0.1 , respectively. In connection with the appointment of Fiona Hughes as the Company’s former Chief Marketing Officer, Consumer Beauty, the Company agreed in principle to a secondment arrangement with Jacobs Douwe Egberts B.V., an affiliate of JAB, for the reimbursement of certain employment-related expenses through a transition period that ended February 2020. The amount of such reimbursement was approximately $ 0.6 for fiscal 2020. F-66 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 28. SUBSEQUENT EVENTS On August 25, 2021, the Company completed an initial filing with the Brazilian Securities and Exchange Commission, Comissão de Valores Mobiliários, or CVM, in connection with its exploration of a potential public offering of a minority stake in its Brazilian operations. Such a transaction is subject to market and other conditions, including the approval by, and registration of the shares with, the CVM. F-67 COTY INC. & SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years Ended June 30, 2021, 2020, and 2019 ($ in millions, except per share data) Valuation and Qualifying Accounts (a) Description Three Years Ended June 30, Balance at Beginning of Period Balance Change through Acquisition/Divestiture Charged to Costs and Expenses Deductions Balance at End of Period Allowance for doubtful accounts and other customer deductions: 2021 $ 91.1 $ ( 28.4 ) $ 5.7 $ ( 20.7 ) (b)(c) $ 47.7 2020 (a) 48.1 — 55.4 ( 12.4 ) (b)(c) 91.1 2019 (a) 81.8 — 11.6 ( 45.3 ) (b)(c) 48.1 Allowance for customer returns: 2021 $ 67.8 $ — $ 131.3 $ ( 109.2 ) $ 89.9 2020 (a) 56.3 — 160.5 ( 149.0 ) 67.8 2019 (a) 81.1 — 161.2 ( 186.0 ) 56.3 Deferred tax valuation allowances: 2021 $ 54.9 $ ( 14.9 ) $ 1.4 (d) $ ( 8.0 ) $ 33.4 2020 (a) 67.7 — 11.4 (d) ( 24.2 ) 54.9 2019 (a) 104.6 — 4.6 (d) ( 41.5 ) 67.7 (a) Includes amounts from continuing operations and held for sale. (b) Includes reclassification between the allowance for doubtful accounts and gross trade receivables for presentation purposes. (c) Includes amounts written-off, net of recoveries and cash discounts. (d) Includes foreign currency translation adjustments unless otherwise noted. 1