What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-08-25 compared with 2021-08-26 · 429 added, 427 removed, 576 unchanged (60% of the section changed)

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

We are one of the world’s largest beauty companies, with an iconic portfolio of brands across fragrance, color cosmetics, and skin and body care.

Through targeted strategic transactions, we have strengthened and diversified our presence across the countries, categories and channels in which we compete, building a strong beauty platform.

The King Kylie and Kim Kardashian West transactions complement our existing portfolio as personality-led Direct-to-Consumer (“DTC”) business models with strong social media engines.

As we transform the Company, we continue to make progress on our strategic priorities, including stabilizing our consumer beauty brands through leading innovation and improved execution, accelerating our prestige fragrance business and ongoing expansion into prestige cosmetics, building a comprehensive skincare portfolio leveraging existing brands, enhancing our e-commerce and DTC capabilities, expanding our presence in China through prestige products and select consumer beauty brands, and establishing Coty as an industry leader in sustainability.

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

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

We are one of the world’s largest beauty companies with a portfolio of iconic brands across fragrance, color cosmetics, and skin and body care.

We serve consumers around the world, selling prestige and mass market products in approximately 125 countries and territories.

Our brands empower people to express themselves freely, creating their own visions of beauty;

and we are committed to making a positive impact on the planet.

Over the past few years we have been implementing a comprehensive transformation agenda (the “Transformation Plan”), As we execute this multi-year transformation, we have been focusing on our core go-to-market competencies, simplifying our capital structure and deleveraging our balance sheet.

As we transform the Company, we continue to make progress on our strategic priorities, including stabilizing and growing our Consumer Beauty brands through leading innovation and improved execution, accelerating our Prestige fragrance business and ongoing expansion into Prestige cosmetics, building a comprehensive skincare portfolio leveraging existing brands, enhancing our e-commerce and DTC capabilities, expanding our presence in China through Prestige products and select Consumer Beauty brands, and establishing Coty as an industry leader in sustainability.

In fiscal 2022, we completed certain transactions to simplify our capital structure resulting in annual dividend savings.

We also received shareholder distributions from our equity investment in Wella, which we used to repay debt.

We expect that our reported net revenues for fiscal year 2023 will grow in the mid-single digits, excluding the impact of foreign exchange.

We remain attentive to economic and geopolitical conditions that may materially impact our business and the implementation of our strategic priorities.

We continue to explore and implement risk mitigation strategies in the face of these unfolding conditions and remain agile in adapting to changing circumstances.

Such conditions – whether resulting from the Russia-Ukraine War, inflation, the COVID-19 pandemic or any other issues – have or may have global implications which may impact the future performance of our business in unpredictable ways.

In addition, supply chain constraints may impact the availability of raw materials and services (such as transportation) that we need to manufacture and distribute our products which may negatively impact our ability to meet customer demands timely, thereby impacting future profitability.

Russia-Ukraine War

In February of 2022, Russia invaded Ukraine and is still engaged in active armed conflict against the country.

As a result, governments of the United States, the European Union, and other countries have enacted additional sanctions against Russia and Russian interests.

Our operations in Russia, including local Travel Retail, accounted for approximately 3% of consolidated net sales in fiscal 2021.

We do not operate any stores, sales counters, e-commerce sites or industrial activities in Russia.

We do not have any operations in Ukraine.

During April 2022, we announced our Board's decision to wind down the operations of our Russian subsidiary as a result of the war and the related sanctions.

We plan to liquidate our remaining inventory in Russia, in accordance with applicable sanctions, over the next six months as part of the wind down.

During fiscal 2022, we recognized total pre-tax charges of $83.6 associated with our exit of Russia, which primarily relate to the net realizable value of assets associated with the Russian business.

These charges consisted of:

$45.5 in Selling, general and administrative expenses, primarily related to the write-down of working capital, long-term assets, as well as contract termination charges, contingent liabilities and legal costs;

$31.4 in Asset impairment charges related to the impairment of indefinite-lived intangibles;

$6.3 in Restructuring costs related to employee severances;

and $0.4 in Cost of sales related to inventory write-downs.

We incurred $24.1 of income tax charges associated with our decision to exit Russia, in fiscal 2022.

We anticipate incurring up to $10.0 of additional costs through completion of the wind down, and future net cash costs of $40.0 to 45.0 which will be funded by our Russian subsidiary.

Additionally, management anticipates derecognizing the

cumulative translation adjustment balance pertaining to the Russian subsidiary.

The wind down process of the Russian subsidiary is at an early stage and the amount of future costs, including cash costs, will be subject to various factors, such as additional government regulation and the resolution of legal contingencies.

We will continue to monitor events related to the Russia-Ukraine War and any impacts to our global business resulting from increased inflation, supply chain constraints, foreign currency risk and other factors.

However, future impacts to our net sales, earnings and cash flows resulting from negative economic or geopolitical events in neighboring and other territories in which we operate, is currently unknown.

Inflationary trends in most markets and global supply chain challenges may negatively affect our sales and operating performance.

We experienced the impact of greater inflation on material, logistical and other costs during the current fiscal year.

We currently anticipate the impact of inflation in certain markets will be increasing as we move into fiscal 2023.

We will continue to implement mitigation strategies and price increases to offset these trends;

however, such measures may not fully offset the impact to our operating performance.

COVID-19 Impacts Update

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

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

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

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

However, these product categories continue to experience negative effects on sales volume due to changes in consumer behavior as a result of the pandemic, and continued social distancing measures in certain regions.

As previously reported, we have implemented several key measures in response to the COVID-19 pandemic which continue to be in place.

We have also amplified our Transformation Plan, discussed below, to address the potentially longer-lasting impacts of the COVID-19, the intermittent lockdowns and possible economic uncertainty resulting from COVID-19 in many markets.

We anticipate the recovery to be non-linear until COVID-19 containment measures are discontinued across all regions and normal consumer traffic resumes on a consistent basis.

We currently expect that any easing of containment measures and recovery of the impacted sectors of the economy will be gradual and uneven, as regions face resurgence of COVID-19 and related uncertainties, and the availability and widespread distribution of a safe and effective vaccine varies across regions.

As a result, we anticipate that consumer spending habits and consumer confidence will continue to shift, causing future sales and volume trends to be non-linear.

After the resumption of more typical business conditions, the economics of developing, producing, launching, supporting and discontinuing products will continue to impact the timing of our sales and operating performance each period.

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

An increase of COVID-19 related cases in certain parts of China resulted in the re-imposition of widespread lockdowns and restrictions in mid-March 2022.

Although on a full year basis, our operating performance in China showed improvement compared to the prior fiscal year, the impact of these lockdowns did negatively impact our results in the fourth quarter.

We believe that these lockdowns may continue to have a negative impact on our operations in China, due to reduced customer traffic and supply chain constraints.

Future impacts to our sales and operating performance, due to the lockdowns in China or containment measures that may be deployed in other areas or countries are difficult to predict due to the potential high level of uncertainty regarding their nature and duration.

Transformation Plan Update

As previously reported, we are implementing a comprehensive transformation agenda (the “Transformation Plan”), which aims to stabilize and accelerate revenue growth, improve our profitability through gross margin growth and cost control, optimize our operating model for speed and agility, accelerate e-commerce and digital growth, and deleverage our balance sheet.

This Transformation Plan is designed to adjust our cost base to allow us to exit the post-COVID recovery phase as a financially and operationally stronger, more nimble company, which is well positioned to capture growth opportunities.

We are continually reviewing ways to accelerate and amplify the transformation of the Company, including through the implementation of additional initiatives in connection with our Transformation Plan.

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

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

These organizational, business and structural changes are still being operationalized, which introduces additional risk and complexity as we roll out several initiatives simultaneously, including the ongoing obligations under the TSA.

We continue to implement our comprehensive transformation agenda (the “Transformation Plan”), which aims to stabilize and accelerate revenue growth, improve our profitability through gross margin growth and cost control, optimize our operating model for speed and agility, accelerate e-commerce and digital growth, and deleverage our balance sheet.

This plan is anticipated to be completed by the end of fiscal 2023, with additional plans for savings in fiscal 2024.

Other Matters

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

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

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

During the first quarter of fiscal 2022, our CODM finalized the Company's organizational structure and how performance will be assessed, and we realigned our reportable segments to a principally product category-based structure, comprised of a Prestige business segment and a Consumer Beauty business segment beginning in the first quarter of fiscal 2022.

Selected Financial Data

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Asset impairment charges 31.4 — 434.0

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

Operating income (loss) 240.9 (48.6) (1,236.5)

Interest expense, net 224.0 235.1 242.7

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

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

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

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

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

Net loss attributable to Coty Inc.

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

Other Income, net (409.9) (43.9) (11.6)

Income (loss) from continuing operations before income taxes 426.8 (239.8) (1,467.6)

Provision (benefit) for income taxes on continuing operations 164.8 (172.0) (377.7)

Net income (loss) from continuing operations 262.0 (67.8) (1,089.9)

Net income (loss) from discontinued operations 5.7 (137.3) 87.2

Net income (loss) 267.7 (205.1) (1,002.7)

Net income (loss) attributable to Coty Inc.

$ 259.5 $ (201.3) $ (1,006.7)

Amounts attributable to Coty Inc.:

Loss from continuing operations attributable to Coty Inc.

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

Net loss attributable to Coty Inc.

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

Net income (loss) from continuing operations attributable to common stockholders $ 55.5 $ (166.3) $ (1,100.4)

Net income (loss) from continuing operations attributable to common stockholders $ 61.2 $ (303.6) $ (1,013.2)

Per Share Data:

Net (loss) income attributable to Coty Inc.

Net income (loss) attributable to Coty Inc.

per common share:

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

Basic loss for Coty Inc.

Basic income (loss) from continuing operations $ 0.07 $ (0.22) $ (1.45)

Basic income (loss) for Coty Inc.

$ 0.08 $ (0.40) $ (1.33)

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

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

Diluted loss for Coty Inc.

Diluted income (loss) from continuing operations $ 0.07 $ (0.22) $ (1.45)

Diluted income (loss) for Coty Inc.

$ 0.08 $ (0.40) $ (1.33)

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(in millions) As of June 30,

2021 2020 (a)(b)

2022 2021 2020 (a)

Consolidated Balance Sheets Data:

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

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

Non-GAAP Financial Measures

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We provide disclosure of the effects of these non-GAAP financial measures by presenting the corresponding measure prepared in conformity with GAAP in our financial statements, and by providing a reconciliation to the corresponding GAAP measure so that investors may understand the adjustments made in arriving at the non-GAAP financial measures and use the information to perform their own analyses.

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

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

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

For adjusted EBITDA, in addition to the preceding, we exclude adjusted depreciation as defined below.

We do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance.

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and Adjusted net income attributable to Coty Inc.

per common share are adjusted for certain interest and other (income) expense as described below and the related tax effects of each of the items used to derive Adjusted net income as such charges are not used by our management in assessing our operating performance period-to-period.

per common share are adjusted for certain interest and other (income) expense items and preferred stock deemed dividends, as described below, and the related tax effects of each of the items used to derive Adjusted net income as such charges are not used by our management in assessing our operating performance period-to-period.

Adjusted Performance Measures reflect adjustments based on the following items:

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By excluding the referenced expenses from our non-GAAP financial measures, our management is able to further evaluate our ability to utilize existing assets and estimate their long-term value.

Furthermore, our management believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

Furthermore, our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

• Asset impairment charges:

We have excluded the impact of asset impairments as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions.

Our management believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

• Amortization expense:

We have excluded the impact of amortization of finite-lived intangible assets, as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions.

Our management believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

Although we exclude amortization of intangible assets from our non-GAAP expenses, our management believes that it is important for investors to understand that such intangible assets contribute to revenue generation.

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Any future acquisitions may result in the amortization of additional intangible assets.

• Loss/(Gain) on divestitures and sale of brand assets:

We have excluded the impact of Loss/(gain) on divestitures and sale of brand assets as such amounts are inconsistent in amount and frequency and are significantly impacted by the size of divestitures.

Our management believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

• Non-cash stock-based compensation:

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

This is primarily due to their non-cash nature;

• Loss/(Gain) on divestitures, Gain on sale of brand assets and Gains on sale of real estate:

We have excluded the impact of Loss/(gain) on divestitures, Gain on sale of brand assets and Gains on sale of real estate as such amounts are inconsistent in amount and frequency and are significantly impacted by the size of divestitures and sale of real estate.

Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

• Costs related to market exit:

We have excluded the impact of direct incremental costs related to our decision to wind down our business operations in Russia.

We believe that these direct and incremental costs are inconsistent and infrequent in nature.

Consequently, our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

• Stock-based compensation:

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

This is due to their primarily non-cash nature;

in addition, the amount and timing of these expenses may be highly variable and unpredictable, which may negatively affect comparability between periods.

• Depreciation and Adjusted depreciation:

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

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

Our management believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

• Interest (income) expense:

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

Our adjusted operating income excludes the impact of accelerated depreciation for certain restructuring projects that affect the expected useful lives of Property, Plant and Equipment, as such charges vary significantly based on the size and timing of the programs.

Further, we have excluded adjusted depreciation, which represents depreciation expense net of accelerated depreciation charges, from our adjusted EBITDA.

Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

• Other (income) expense:

We have excluded the impact of costs incurred for legal and advisory services rendered in connection with the tender offer that was in fiscal 2019 initiated by certain of our shareholders.

Additionally, we have excluded the write-off of deferred financing fees and discounts that resulted from the pay down of our term debt from the proceeds of the Wella sale, due to the requirements of the 2018 Coty Credit Agreement, as amended.

management believes these costs do not reflect our underlying ongoing business, and the adjustment of such costs helps investors and others compare and analyze performance from period to period.

We have excluded the write-off of deferred financing fees and discounts that resulted from the pay down of our term debt from the proceeds of the Wella sale, due to the requirements of the 2018 Coty Credit Agreement, as amended.

Our management believes these costs do not reflect our underlying ongoing business, and the adjustment of such costs helps investors and others compare and analyze performance from period to period.

We have also excluded the impact of pension curtailment (gains) and losses and pension settlements as such events are triggered by our restructuring and other business realignment activities and the amount of such charges vary significantly based on the size and timing of the programs.

Further, we have excluded the change in fair value of the investment in Wella, as our management believes these unrealized (gains) and losses do not reflect our underlying ongoing business, and the adjustment of such impact helps investors and others compare and analyze performance from period to period.

• Loss on early extinguishment of debt:

We have excluded loss on extinguishment of debt as this represents a non-cash charge, and the amount and frequency of such charges is not consistent and is significantly impacted by the timing and size of debt financing transactions.

We have excluded the gain on the exchange of Series B Preferred Stock.

Such transactions do not reflect our operating results and we have excluded the impact as our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.

• Noncontrolling interest:

This adjustment represents the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interests based on the relevant non-controlling interest percentage.

This adjustment represents the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interests based on the relevant noncontrolling interest percentage.

This adjustment represents the impact of the tax effect of the pretax items excluded from Adjusted net income.

The tax impact of the non-GAAP adjustments is based on the tax rates related to the jurisdiction in which the adjusted items are received or incurred.

The tax impact of the non-GAAP adjustments is based on the tax rates related to the jurisdiction in which the adjusted

items are received or incurred.

Additionally, adjustments are made for the tax impact of any intra-entity transfer of assets and liabilities.

While acquiring brands and licenses comprises a part of our overall growth strategy, along with targeting organic growth opportunities, we have excluded acquisition-related costs and acquisition accounting impacts in connection with business combinations because these costs are unique to each transaction and the amount and frequency are not consistent and are significantly impacted by the timing and size of our acquisitions.

Our management assesses the success of an acquisition as a component of performance using a variety of indicators depending on the size and nature of the acquisition, including:

• the scale of the combined company by evaluating consolidated and segment financial metrics;

• the expansion of product offerings by evaluating segment, brand, and geographic performance and the respective strength of the brands;

• the evaluation of share expansion in categories and geographies;

• the earnings per share accretion and substantial incremental free cash flow generation providing financial flexibility for us;

• the comparison of actual and projected results, including achievement of projected synergies, post integration;

provided that timing for any such comparison will depend on the size and complexity of the acquisition.

Also, in connection with our decision to wind down our operations in Russia, we have adjusted recognized tax charges related to certain direct incremental impacts of our decision.

Constant Currency

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

First quarter fiscal year 2020 net revenue excluded.

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

Closing date of divestiture was September 16, 2019.

n/a First quarter fiscal year 2020 net revenue excluded.

Third quarter fiscal 2020 Acquisition:

King Kylie transaction - the acquisition of 51% interest in King Kylie LLC

First and second quarter fiscal year 2021 net revenue excluded.

Third and fourth quarter fiscal year 2020 financial contribution excluded.

n/a First and second quarter fiscal year 2021 net revenue excluded.

When used herein, the term “Acquisitions” and “Divestitures” refer to the financial contributions of the related acquisitions or divestitures and early license terminations shown above, during the period that is not comparable as a result of such acquisitions or divestitures and early license terminations.

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Unless otherwise noted, the following section pertains to the results of continuing operations.

In fiscal 2022, net revenues increased 15%, or $674.5, to $5,304.4 from $4,629.9 in fiscal 2021, reflecting a positive price and mix impact of 10%, an increase in unit volume of 6%, partially offset by a negative foreign currency exchange translation impact of 1%.

The increase in net revenues primarily reflects the reopening of stores across regions and increased leisure travel due to reduced COVID restrictions.

The reduced travel restrictions have contributed to increased sales through travel retail channels.

A number of countries continued to experience rolling lockdowns;

however, these lockdowns were confined to certain localities.

Increased foot traffic and demand had a favorable impact on both the Prestige and Consumer Beauty segments, with the highest impact on the Prestige segment.

In addition, the Prestige segment benefited from various strong and successful launches such as Gucci Flora, Burberry Hero, Tiffany Rose Gold, Hugo Boss The Scent and the relaunch of Kylie cosmetics .

The Consumer Beauty segment also experienced net revenue increase due to COVID-19 recovery and market share gains as a result of a repositioning and reinvestment in key color cosmetics brands.

Furthermore, the continued growth of e-commerce across the regions and continued market growth in the U.S.

and Europe contributed to the net revenue increase.

China also contributed to net revenue increase despite a downturn in economic conditions due to increased COVID-19 restrictions impacting performance in the second half of the fiscal year.

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

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

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

The decrease in net revenues primarily reflects lower net revenues due to the COVID-19 pandemic, with the highest impact on the mass color cosmetics category, due mainly to category decline related to COVID-19 protocols such as mask-wearing, remote working arrangements, and social distancing which contributed to reduced demand for several product lines, particularly lip and face products.

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

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

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

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

The pandemic had the highest impact on our prestige products, due to the closure of retail malls and travel retail channels, while the impact to the mass category brands sold in drug and grocery stores, although significant due to social distancing directives, was relatively mitigated due to these distribution channels mostly remaining open.

The closure of nail salons had a positive impact on our Sally Hansen brand, mainly in the United States.

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

Year Ended June 30, Change %

(in millions) 2022 2021 2020 2022/2021 2021/2020

Americas $ 1,866.9 $ 1,771.0 $ 2,248.9 5 % (21 %)

EMEA 2,183.7 2,308.6 2,909.7 (5 %) (21 %)

Asia Pacific 579.3 582.7 771.1 (1 %) (24 %)

Other — 55.5 358.2 (100 %) (85 %)

Prestige $ 3,267.9 $ 2,720.8 $ 2,606.6 20 % 4 %

Consumer Beauty 2,036.5 1,909.1 2,111.2 7 % (10 %)

Total $ 5,304.4 $ 4,629.9 $ 4,717.8 15 % (2 %)

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

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

In fiscal 2022, net revenues in the Prestige segment increased 20%, or $547.1 to $3,267.9 from $2,720.8 in fiscal 2021, reflecting an increase in unit volume of 18%, a positive price and mix impact of 4%, partially offset by a negative foreign currency exchange translation impact of 2%.

The increase in net revenues primarily reflects:

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

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

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

Sally Hansen continues to see incremental net revenues from the launch of Sally Hansen Good.Kind.Pure and Sally Hansen Miracle Gel in prior periods;

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

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

(i) an increase in net revenues driven by market growth in the U.S.

and Europe amid a post COVID-19 recovery, as well as from the travel retail business in many localities, particularly in North America, Europe, and China, had reduced travel restrictions and reopened for leisure travel as they emerge from the COVID-19 pandemic;

(ii) an increase in net revenues from the new launches of Gucci Flora, Burberry Hero , Tiffany Rose Gold, CK Defy , Hugo Boss The Scent, and the global relaunch of Kylie cosmetics in the current fiscal year, as well as the continued success of Gucci Makeup , Gucci Guilty , Burberry Her , Gucci Bloom , Chloe Atelier des Fleurs , and Marc Jacobs Perfect ;

(iii) an increase in net revenues due to positive pricing impact and product mix as a result of global price increases and an overall premiumization strategy focusing on premium plus brands, selling new launches at higher prices, and reducing tail lines resulting in more optimized shelf space utilization;

(iv) an increase in net revenues due to the growth of e-commerce across the regions, distribution expansion in China, and additional shelf space in the U.S.

retail stores.

These increases were partially offset by:

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

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

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

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

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

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

The decrease in net revenues primarily reflects:

(i) lower net revenues due to the COVID-19 pandemic, impacting all product categories across the segment, with the highest impact on prestige products due to the closure of retail malls and travel retail channels.

The impact to the mass category brands sold in drug and grocery stores, although significant due to social distancing directives, was relatively mitigated due to these distribution channels mostly remaining open;

(ii) shelf-space losses in the United States primarily in the first half, impacting CoverGirl, and Rimmel which have contributed to the negative share trends in the mass color cosmetics and prestige skin products;

(iii) negative category trends in the United States for mass color cosmetics and mass fragrances.

These decreases were partially offset by:

(i) positive impact in the first half of fiscal 2020 from the resolution of the supply chain disruptions which negatively impacted net revenues in the prior year;

(ii) significant improvement in e-commerce sales from a modest prior year base, primarily in prestige make-up and mass body care;

(iii) increased net revenues from Sally Hansen due to continued success across its core sub-brands as well as incremental net revenues from the launch of Good.Kind.Pure, enhanced by the closure of nail salons across the region due to the COVID-19 pandemic;

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

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

The decrease in net revenues primarily reflects:

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

Reduced customer traffic in retail malls contributed significantly to the overall decrease in the region.

Travel retail channels also continue to be significantly impacted as COVID-19 outbreaks continued restrictions in airports and other travel hubs.

The pandemic also contributed to lower launch activity in the prestige category compared to the comparative period.

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

(ii) lower net revenues due to the ongoing challenges with a key customer and distribution channel in Russia, primarily occurring in the first quarter of fiscal 2021;

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

(ii) lower net revenues in the last fiscal quarter from China due to increased COVID restrictions limiting travel and consumer spending;

(iii) lower net revenues related to Kylie Skin products due to less innovation in the current fiscal year;

(iv) a decrease in the U.S.

net revenues for improvements in returns trends for philosophy in the prior year.

In fiscal 2021, net revenues in the Prestige segment increased 4%, or $114.2, to $2,720.8 from $2,606.6 in fiscal 2020.

Excluding the impact of the Acquisition, net revenues in the Prestige segment increased 2% or $64.6, to $2,671.2 in fiscal 2021 from $2,606.6 in fiscal 2020, reflecting a positive price and mix impact of 3% and a positive foreign currency exchange translation impact of 3%, partially offset by a decrease in unit volume of 4%.

The increase in net revenues primarily reflects:

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

(ii) an increase in net revenues from the launches of Marc Jacobs Perfect, Gucci Guilty EDP and , Hugo Boss Alive as well as improved performance in the last fiscal quarter due to new brand positioning and continued strength of Marc Jacobs Daisy ;

(iii) an increase in net revenue from continued success of Gucci Make-up and Kylie Skin;

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

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

These increases were partially offset by:

(i) lower net revenues due to the COVID-19 pandemic, primarily during the first nine months of the fiscal year as a result of reduced customer traffic in retail malls, reduced travel due to continued restrictions in airports and other travel hubs which impacted travel retail channels, and lower launch activity compared to the comparative period;

(ii) lower net revenues due to declines in Calvin Klein, Lacoste, Tiffany & Co .

and Davidoff mainly as a result of a decrease travel activity;

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

(iv) decreased net revenues related to negative category and share trends in color cosmetics and mass fragrance, with somewhat greater resilience being shown in products related to lifestyle scenting, nails, and eye categories.

These decreases were partially offset by:

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

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

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

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

The decrease in net revenues primarily reflects:

These decreases more than offset the increased net revenues from prestige products in the first half of the fiscal year.

(ii) negative share trends in Europe for mass color cosmetics, partially due to a strategic decision to withdraw Bourjois in the UK.

These decreases were partially offset by:

(i) increased net revenues in the first half of fiscal 2020 due to the resolution of the supply chain disruptions which negatively impacted net revenues in the prior year;

(ii) significant improvement in e-commerce sales from a modest prior year base;

(iii) positive impact in the first three quarters of the fiscal year from:

Burberry due to continued success from the launch of Burberry Her in the prior year;

Lacoste in Russia due to the launch of Lacoste Timeless ;

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

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

The decrease in net revenues primarily reflects:

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

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

(iii) lower net revenues in the mass channel, primarily color cosmetics such as Rimmel related to lower market consumption mainly driven by consumer behavior changes partly attributable to the COVID-19 pandemic, and Max Factor as a result of a strategic decision to exit department stores in China;

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

These decreases were partially offset by:

(i) an increase in net revenue due to continued growth of e-commerce across the region and new store expansions in China;

(ii) an increase in net revenue across the region resulting from the continued success of Gucci Face Foundation , Gucci Bloom , Marc Jacobs Perfect , and Chloé Atelier des Fleurs in the prestige category;

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

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

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

(v) lower net revenues due to the ongoing challenges with a key customer and distribution channel in Russia, primarily occurring in the first quarter of fiscal 2021.

Consumer Beauty

In fiscal 2022, net revenues in the Consumer Beauty segment increased 7%, or $127.4, to $2,036.5 from $1,909.1 in fiscal 2021, reflecting an increase in unit volume of 5%, and a positive price and mix impact of 3%, partially offset by a negative foreign currency exchange translation impact of 1%.

The increase in net revenues primarily reflects:

(i) an increase in net revenues due to market share gain from certain key color cosmetics brands as a result of new brand positioning and enhanced support for these brands;

(ii) an increase in net revenues due to market recovery from COVID-19 and positive market share uplift in the color cosmetics and fragrance categories, increasing customer demand and store traffic, as well as a healthy growth in e-commerce, which positively impacted brands within the segment;

(iii) an increase in net revenues due to a reduction in sales returns, discounts and allowances, primarily as a result of actions implemented in connection to our Transformation Plan.

These actions involved selectively reducing the level of incentives and price reductions on certain products, limiting the frequency and number of shelf resets in the period, and better focusing on planning for new products.

These increases were partially offset by lower net revenues from Beyoncé and Stetson as a result of license expiration.

Also, the exit from the Russian market negatively impacted brands such as Bourjois , which experienced a decline in net revenue, as well as Max Factor .

In addition, nail category declines had a negative impact on our Sally Hansen brand net revenue in the fourth quarter.

This resulted from the closure of nail salons in the prior year due to COVID restrictions which increased demand for at-home nail care, positively impacting the nail category and the brand’s net revenue in fiscal 2021.

In fiscal 2021, net revenues in the Consumer Beauty segment decreased 10%, or $202.1, to $1,909.1 from $2,111.2 in fiscal 2020.

Excluding the impact of the Divestiture, net revenues in the Consumer Beauty segment decreased 7%, or $146.5, to $1,909.1 from $2,055.6 reflecting a negative price and mix impact of 4%, and a decrease in unit volume of 3%.

The decrease in net revenues primarily reflects:

(i) lower net revenues due to the COVID-19 pandemic, impacting all product categories across the segment, with the highest impact on the prestige category due to the closure of retail malls and travel retail channels.

(ii) lower net revenues due to the Hong Kong protests, impacting mainly the prestige brands;

(iii) declines from strategic initiatives to reduce distribution through lower priced channels in Southeast Asia impacting brands across the prestige and mass fragrance category;

(iv) declines in Max Factor in China in an effort to optimize trade inventory levels.

(i) lower net revenues due to negative brand and category trends for mass color cosmetics, in particular lip and face products, primarily impacting Max Factor, CoverGirl and Rimmel related to lower market consumption mainly driven by consumer behavior changes mainly attributable to the COVID-19 pandemic;

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

(iii) lower net revenue due to a decline in Max Factor as a result of a strategic decision to exit department stores in China;

(iv) lower net revenues due to strategic initiatives to reduce sales through lower priced channels.

These decreases were partially offset by:

(i) increased net revenues from the relaunch of Gucci Make-up in the Asia Pacific travel retail channel in the first half of the fiscal year, despite geopolitical disruptions in Hong Kong;

(ii) positive impact in the first half of the fiscal year from Burberry due to continued success from the launch of Burberry Her in the prior year;

and Rimmel mainly driven by increased net revenues in Japan.

Other consists of the net revenues from Younique.

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

(ii) an increase in net revenues from improved performance in the last fiscal quarter due to new brand positioning and increased support for CoverGirl ;

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

Sally Hansen continued to see incremental net revenues from the launch of Sally Hansen Good.Kind.Pure and Sally Hansen Miracle Gel in prior periods.

COST OF SA LES

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

In fiscal 2022, cost of sales increased 4%, or $73.5, to $1,935.2 from $1,861.7 in fiscal 2021.

Cost of sales as a percentage of net revenues decreased to 36.5% in fiscal 2022 from 40.2% in fiscal 2021 resulting in a gross margin percentage increase of approximately 370 basis points, primarily reflecting:

(i) approximately 130 basis points related to positive product and category mix associated with increased contribution from higher margin Prestige products, reduced sales of products through lower priced channels, as well as price increases within our product portfolio;

(ii) approximately 120 basis points related to favorable manufacturing fixed-cost absorption, a favorable impact on variable costs due to increased manufacturing efficiencies, improvements in productivity, as well as procurement and material cost optimization;

(iii) approximately 60 basis points related to decreased excess and obsolescence expense on inventory due to improvements in the current fiscal year in forecasting sales and better focus on planning for new products, as well as the impact of greater sales volume in the fiscal year;

(iv) approximately 30 basis points primarily related to reductions in Consumer Beauty, as a percentage of revenues, in promotional allowances and other trade spend items, which are recorded as adjustments to net sales;

(v) approximately 20 basis points related to designer license fees due to a favorable impact associated with higher Prestige brand sales in the current year;

(vi) approximately 10 basis points related to freight expense, reflecting both the contribution from our cost savings measures as well as the increased volume of higher priced Prestige products sold.

Included in the above is the negative impact of inflation on material, freight, and energy costs of approximately 120 basis points.

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

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

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

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

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

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

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

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

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

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

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In fiscal 2022, selling, general and administrative expenses increased 22%, or $518.1, to $2,881.3 from $2,363.2 in fiscal 2021.

Selling, general and administrative expenses as a percentage of net revenues increased to 54.3% in fiscal 2022 from 51.0% in fiscal 2021, or approximately 330 basis points.

This increase was primarily due to:

(i) 520 basis points due to increase in advertising and consumer promotional costs related to support for certain key brands and product launches, as well as increased store promotions coinciding with store reopenings as COVID restrictions ease;

(ii) 310 basis points in stock-based compensation primarily related to the CEO grant made on June 30, 2021;

(iii) 90 basis points primarily related to the write-down of working capital, long-term assets, as well as contract termination charges and legal costs, in connection with our decision to exit Russia;

(iv) 30 basis points related to higher bad debt expense.

These increases were partially offset by the following decreases:

(i) 330 basis points in administrative costs primarily due to a decrease in compensation related to a reduction in employee headcount;

(ii) 220 basis points related to gains on sale of real estate;

(iii) 50 basis points related to lower logistics costs as a percentage of net revenue;

(iv) 20 basis points related to sale of rights associated with certain brands distributed by a subsidiary in South Africa.

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

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

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

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

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

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

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

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

Selling, general and administrative expenses as a percentage of net revenues increased to 66.1% in fiscal 2020 from 55.2% in fiscal 2019, or approximately 1,090 basis points.

This increase was primarily due to:

(i) 520 basis points related to higher administrative costs as a percentage of net revenue as the compensation expense savings and from prior restructuring programs were out-paced by the decline in net revenues;

(ii) 310 basis points related to higher advertising and consumer promotion costs as a percentage of net revenues as the savings in non-strategic spending in non-working media and other consumer promotion activities across all segments, and savings in media and promotional trade spending from the COVID-19 pandemic were out-paced by the decline in net revenues;

(iii) 150 basis points related to higher bad debt expense of 70 basis points, with the remainder due to:

loss on disposal of assets and lease terminations;

higher negative transactional impact from our exposure to foreign currency exchange fluctuations;

and other expenses;

(iv) 70 basis points related to higher share-based compensation in the current year, compared to significant executive forfeitures of share-based compensation instruments in the prior year;

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

OPERATING (LOSS) INCOME FROM CONTINUING OPERATIONS

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS

In fiscal 2022, operating income from continuing operations was $240.9 compared to a loss of $48.6 in fiscal 2021.

Operating income as a percentage of net revenues, improved to 4.5% in fiscal 2022 as compared to Operating loss as a percentage of net revenues of (1.0)% in fiscal 2021.

The improved operating margin is largely driven by lower cost of goods sold as a percentage of net revenues, a reduction in fixed costs, decrease in acquisition and divestiture related expenses, gains recognized on sale of real estate, lower amortization expense, decrease in restructuring expense, partially offset by an increase in advertising and consumer promotional costs, higher stock-based compensation and asset impairment charges related to the impairment of indefinite-lived intangibles.

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

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

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

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

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

Operating (Loss) Income by Segment

Operating Income (Loss) by Segment

Year Ended June 30, Change %

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Operating income (loss) from continuing operations

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

EMEA 129.8 (248.4) (1,344.1) >100% 82 %

Asia Pacific (13.2) (74.0) (253.1) 82 % 71 %

Other — (10.9) (18.6) 100 % 41 %

Prestige $ 367.2 $ 158.1 $ (279.2) >100% >100%

Consumer Beauty 9.5 26.9 (531.3) (65 %) >100%

Corporate (135.8) (233.6) (426.0) 42 % 45 %

Total $ 240.9 $ (48.6) $ (1,236.5) >100% 96 %

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

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

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

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

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

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

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

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

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

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

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

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

Other represents operating (loss) income from Younique.

In fiscal 2022, operating income for Prestige was $367.2 compared to income of $158.1 in fiscal 2021.

Operating margin improved to 11.2% of net revenues in fiscal 2022 as compared to 5.8% in fiscal 2021, driven primarily by higher sales volume, lower cost of goods sold as a percentage of net revenues, lower fixed costs as a percentage of net revenues and a decrease in amortization expense, partially offset by an increase in advertising and consumer promotional costs.

In fiscal 2021, operating income for Prestige was $158.1 compared to a loss of $279.2 in fiscal 2020.

Operating margin improved to 5.8% of net revenues in fiscal 2021 as compared to (10.7)% in fiscal 2020, primarily reflecting a significant decrease in advertising and promotional spend, higher asset impairment charges in the prior year, a reduction in fixed costs, lower cost of goods sold as a percentage of net revenues, partially offset by higher amortization expense.

Consumer Beauty

In fiscal 2022, operating income for Consumer Beauty was $9.5 compared to a income of $26.9 in fiscal 2021.

Operating margin worsened to 0.5% of net revenues in fiscal 2022 as compared to 1.4% in fiscal 2021, driven by an increase in advertising and consumer promotional costs and asset impairment charges related to the impairment of indefinite-lived intangibles, partially offset by higher sales volume, a reduction in fixed costs, lower cost of goods sold as a percentage of net revenues, and a decrease in amortization expense.

In fiscal 2021, operating income for Consumer Beauty was $26.9 compared to a loss of $531.3 in fiscal 2020.

Operating margin improved to 1.4% of net revenues in fiscal 2021 as compared to a loss of (25.2)% in fiscal 2020, primarily reflecting higher asset impairment charges in the prior year, a decrease in advertising and consumer promotional costs, a reduction in fixed costs, and lower cost of goods sold.

Corporate primarily includes expenses not directly relating to our operating activities.

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Operating loss for Corporate was $135.8, $233.6 and $426.0 in fiscal 2022, 2021 and 2020, respectively, as described under “Adjusted Operating Income” below.

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

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

The operating loss of $135.8 in fiscal 2022 includes stock-based compensation, costs related to the Russia market exit, restructuring and other business realignment costs, acquisition and divestiture related costs, partially offset by a gains on the sale of real estate.

The operating loss of $233.6 in fiscal 2021 includes acquisition and divestiture related costs, restructuring and other business realignment costs, and stock-based compensation.

The operating loss of $426.0 in fiscal 2020 includes asset impairment charges, restructuring and other business realignment costs, acquisition and divestiture related costs, and stock-based compensation, partially offset by the gain on sale of Younique.

Continuing Operations by Segment

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Adjusted operating income (loss) from continuing operations

Americas $ 36.5 $ (105.0) $ 141.5

EMEA 129.8 (122.1) 251.9

Asia Pacific (13.2) (24.1) 10.9

Prestige $ 367.2 $ (162.9) $ 530.1

Consumer Beauty 9.5 (75.9) 85.4

Corporate (135.8) (135.8) —

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Adjustments (a)

Adjusted operating loss from continuing operations

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

EMEA (248.4) (230.4) (18.0)

Asia Pacific (74.0) (25.0) (49.0)

Other (10.9) (7.4) (3.5)

Adjusted operating income (loss) from continuing operations

Prestige $ 158.1 $ (201.2) $ 359.3

Consumer Beauty 26.9 (50.0) 76.9

Corporate (233.6) (233.6) —

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Adjusted operating (loss) income from continuing operations

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

EMEA (1,344.1) (1,597.4) 253.3

Asia Pacific (253.1) (314.8) 61.7

Other (18.6) (34.8) 16.2

Prestige $ (279.2) $ (293.0) $ 13.8

Consumer Beauty (531.3) (374.1) (157.2)

Corporate (426.0) (426.0) —

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(a) See a reconciliation of reported operating (loss) income to adjusted operating income and a description of the adjustments under “Adjusted Operating (Loss) Income from Continuing Operations for Coty Inc.” below.

All adjustments are reflected in Corporate, except for amortization and asset impairment charges on goodwill, regional indefinite-lived intangible assets, and finite-lived intangible assets, which are reflected in the Americas, EMEA, Asia Pacific, and Other segments.

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

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

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

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

See “Overview—Non-GAAP Financial Measures.” Reconciliation of reported operating loss to adjusted operating (loss) income is presented below:

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(in millions) 2022 2021 2020 2022/2021 2021/2020

Reported operating loss from continuing operations $ (48.6) $ (1,236.5) $ (3,688.4) 96 % 66 %

Reported operating income (loss) from continuing operations $ 240.9 $ (48.6) $ (1,236.5) >100% 96 %

% of Net revenues 4.5 % (1.0 %) (26.2 %)

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Restructuring and other business realignment costs 4.7 67.0 339.1 (93 %) (80 %)

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

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

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

Stock-based compensation 195.5 27.8 41.1 >100% (32 %)

Costs related to acquisition and divestiture activities 14.7 138.8 157.3 (89 %) (12 %)

Asset impairment charges 31.4 — 434.0 N/A (100 %)

Gain on divestitures — — (111.5) N/A 100 %

Costs related to market exit 45.9 — — N/A N/A

Gain on sale of brand assets (9.5) — — N/A N/A

Gains on sale of real estate (115.5) — — N/A N/A

Total adjustments to reported operating loss 374.6 484.8 1,093.1 (23 %) (56) %

Adjusted operating (loss) income from continuing operations $ 409.4 $ (161.7) $ 490.8 >100% <(100%)

Adjusted operating income (loss) from continuing operations $ 615.5 $ 436.2 $ (143.4) 41 % >100%

% of Net revenues 11.6 % 9.4 % (3.0 %)

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

Adjusted depreciation 289.8 325.8 334.2 (11 %) (3) %

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% of Revenues 17.1 % 16.5 % 4.0 % 3.6 % >100%

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

In fiscal 2022, adjusted operating income was $615.5 compared to a income of $436.2 in fiscal 2021.

Adjusted operating margin increased to 11.6% of net revenues in fiscal 2022 as compared to 9.4% in fiscal 2021.

In fiscal 2022, adjusted EBITDA was $905.3 compared to $762.0 in fiscal 2021.

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

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

Adjusted EBITDA margin increased to 17.1% of net revenues in 2022 as compared to 16.5% in fiscal 2021, primarily driven by higher sales volume, lower cost of goods sold as a percentage of net revenues, and a reduction in fixed costs, partially offset by an increase in advertising and consumer promotional costs.

In fiscal 2021, adjusted operating income was $436.2 compared to an loss of $143.4 in fiscal 2020.

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

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

Adjusted operating margin increased to 9.4% of net revenues in fiscal 2021 as compared to (3.0%) in fiscal 2020.

In fiscal 2021, adjusted EBITDA was $762.0 compared to $190.8 in fiscal 2020.

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

Adjusted EBITDA margin increased to 16.5% of net revenues in 2021 as compared to 4.0% in fiscal 2020, primarily driven by various initiatives to lower costs, including a temporary reduction in advertising and promotional spend, management's plan to reduce certain discretionary and fixed costs, and lower cost of goods sold as a percentage of net revenues.

Amortization Expense

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

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

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

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

In fiscal 2022, amortization expense decreased to $207.4 from $251.2 in fiscal 2021.

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

In fiscal 2022, amortization expense of $162.9 and $44.5, was reported in the Prestige and Consumer Beauty respectively.

In fiscal 2021, amortization expense of $201.2, $50.0, was reported in the Prestige and Consumer Beauty segments, respectively.

The decrease was primarily driven by finite intangible assets that are fully amortized as of fiscal 2021.

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

In fiscal 2020, amortization expense of $174.9, $58.2, was reported in the Prestige and Consumer Beauty segments, respectively.

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

Restructuring and Other Business Realignment Costs

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In connection with the four-year Turnaround plan announced on July 1, 2019 to drive substantial improvement and optimization in our business, we have and expect to continue to incur restructuring and other business realignment costs.

Restructuring costs are initially

based on estimates which may differ from actuals due to various factors including more than expected employee attrition and final negotiated severance packages.

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

We incurred $436.7 of cash costs life-to-date as of June 30, 2022, which have been recorded in Corporate.

Prior to July 1, 2019, we incurred restructuring and related costs aimed at integrating and optimizing the combined organization following the acquisition of the P&G Beauty Business, which we refer to as the Global Integration Activities, and reducing fixed costs and enabling further investment in the business, which we refer to as the 2018 Restructuring Actions.

In fiscal 2022, we incurred restructuring and other business structure realignment costs of $4.7, as follows:

• We incurred restructuring costs of $(6.5), related to the Transformation Plan, included in the Consolidated Statements of Operations.

Included within restructuring costs is $6.3 related to employee severances in connection with our exit of Russia;

• We incurred business structure realignment costs of $11.2 primarily related to our Transformation Plan and certain other programs.

This amount includes $(0.4) reported in selling, general and administrative expenses, which is a result of changes in estimate, and $11.6 reported in cost of sales due to an increase in accelerated depreciation as part of Transformation Plan, in the Consolidated Statement of Operations.

In fiscal 2021, we incurred restructuring and other business structure realignment costs of $67.0, as follows:

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

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• We incurred business structure realignment costs of $208.9 primarily related to our Transformation Plan and certain other programs.

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

This amount includes $194.4 reported included in selling, general and administrative expenses, primarily related to severance, consulting costs and accelerated depreciation costs;

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

In fiscal 2019, we incurred restructuring and other business structure realignment costs of 203.5, as follows:

• We incurred restructuring costs of $34.2 primarily related to the Global Integration Activities and 2018 Restructuring Actions, included in the Consolidated Statements of Operations;

• We incurred business structure realignment costs of $169.3 primarily related to our Global Integration Activities and certain other programs.

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

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

Stock-based compensation

In fiscal 2022, stock-based compensation was $195.5 as compared with $27.8 in fiscal 2021.

The increase in stock-based compensation is primarily related to the CEO grant made on June 30, 2021.

In fiscal 2021, stock-based compensation was $27.8 as compared with $41.1 in fiscal 2020.

Greater share-based compensation expense in the prior period is related to the repurchase of Series A-1 Preferred Stock shares from the Company’s former CEO in fiscal 2020.

In all reported periods, all costs related to stock-based compensation were reported in Corporate.

Acquisition- and divestiture-related costs

In fiscal 2022, we incurred $14.7 of acquisition- and divestiture-related costs which were associated with the Wella Transaction.

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

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

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

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

Asset Impairment Charges

In fiscal 2022, we incurred $31.4 of asset impairment charges related to the impairment of indefinite-lived intangibles in connection with our decision to exit Russia, all of which was reported in Consumer Beauty.

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

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

In fiscal 2019, we incurred $3,729.0 of asset impairment charges primarily due to:

$3,307.5 related to goodwill;

$389.8 related to indefinite-lived other intangible assets;

$19.7 on finite-lived other intangible assets;

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

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

Of the total asset impairment charges incurred $315.9 was reported in Consumer Beauty and $118.1 was reported in Prestige.

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

Loss (Gain) on divestitures

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

Gain on divestitures

In fiscal 2022, we did not incur a (gain) loss on divestitures.

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

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

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

Non-cash stock-based compensation

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

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

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

Costs Related to Market Exit

In fiscal 2022, we incurred costs related to our decision to wind down our business operations in Russia which are included in Selling, general and administrative expenses and Cost of sales in the Consolidated Statements of Operations.

In fiscal 2021 and 2020, we did not recognize costs related to a market exit.

Gain on Sale of Brand Assets

In fiscal 2022, we recognized a gain of $9.5 related to sale of brand assets in South Africa, which was reported in Corporate.

In fiscal 2021 and 2020, we did not recognize any gain or loss on the sale of brand assets.

Gains on Sale of Real Estate

In fiscal 2022, we recognized gains of $115.5 related to sale of real estate, which was reported in Corporate.

In fiscal 2021 and 2020, we did not recognize any gain or loss on the sale of real estate.

Adjusted depreciation expense

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

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

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

In fiscal 2022, adjusted depreciation expense of $138.7 and $151.1 was reported in the Prestige and Consumer Beauty segments, respectively.

In fiscal 2021, adjusted depreciation expense of $144.4 and $181.4 was reported in the Prestige and Consumer Beauty segments, respectively.

In fiscal 2020, adjusted depreciation expense of $135.8 and $198.4, was reported in the Prestige and Consumer Beauty segments, respectively.

INTEREST EXPENSE, NET

Net interest expense was $224.0, $235.1, and $242.7 in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

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

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

In fiscal year 2022, the decrease was primarily due to foreign currency exchange gains, offset by the impact of higher interest rates despite lower average debt balances.

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

OTHER EXPENSE (INCOME), NET

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

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

In fiscal 2022, net other income was $409.9 of net other income, primarily related to a favorable adjustment for the unrealized gain in the Wella investment of $403.9.

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

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

pension plans, partially offset by changes in the Mandatorily Redeemable Financial Interest (“MRFI”) and other miscellaneous expense.

In fiscal 2019, we incurred $31.8 of net other expense, primarily related to legal and advisory services rendered in connection with the evaluation of the tender offer initiated by certain of our shareholders, changes in the MRFI balance associated with a certain Southeast Asian subsidiary, partially offset by pension curtailment gains as a result of the Global Integration Activities, which significantly reduced the expected years of future service for employees participating in our non-U.S.

pension plans.

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

2022 2021 2020

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

Provision (benefit) for income taxes $ 164.8 $ (172.0) $ (377.7)

Effective income tax rate 38.6 % 71.7 % 25.7 %

The positive effective income tax rate in fiscal 2022 is primarily due to the limitation on the deductibility of executive stock compensation and tax costs associated with the Russia exit, offset by large fair value gains related to the investment in the Wella business.

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

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

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

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

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.

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

The effective rates vary from the U.S.

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Our effective tax rate could fluctuate significantly and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates.

Reconciliation of Reported (Loss) Income Before Income Taxes to Adjusted (Loss) Income Before Income Taxes and Effective Tax Rates from Continuing Operations:

Reconciliation of Reported Income (Loss) Before Income Taxes to Adjusted Income (Loss) Before Income Taxes and Effective Tax Rates from Continuing Operations:

Year Ended June 30, 2022 Year Ended June 30, 2021 Year Ended June 30, 2020

(in millions) (Loss)/ income before income taxes (Benefit) provision for income taxes Effective tax rate (Loss)/ income before income taxes (Benefit) provision for income taxes Effective tax rate (Loss)/income before income taxes (Benefit)provision for income taxes Effective tax rate

Reported (loss) income before income taxes $ (239.8) $ (172.0) 71.7 % $ (1,467.6) $ (377.7) 25.7 % $ (3,945.4) $ (54.8) 1.4 %

Adjustments to reported operating income (loss) (a) (b)

458.0 109.3 1,186.3 210.3 4,179.2 123.8

Gain on sale of business adjustment (a)(b)

— — (111.5) 110.5 — —

Post Divestiture Restructuring (c)

Reported income (loss) before income taxes $ 426.8 $ 164.8 38.6 % $ (239.8) $ (172.0) 71.7 % $ (1,467.6) $ (377.7) 25.7 %

Adjustments to reported operating income (loss) (a)

374.6 484.8 1,093.1

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

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

(403.9) (73.5) —

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

Other adjustments (f)

(2.4) 7.2 (16.4)

Other adjustments (b) (f)

Total Adjustments (b)(c)(d)

(31.7) $ (55.3) 418.5 204.3 1,076.7 320.9

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

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

Adjusted income (loss) before income taxes $ 395.1 $ 109.5 27.7 % $ 178.7 $ 32.3 18.1 % $ (390.9) $ (56.8) 14.5 %

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

(b) The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax benefit/provision for adjusted income.

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

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

(d) Tax benefit of $234.4 is the result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the relocation of our main principal location from Geneva to Amsterdam.

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

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

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

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

In connection with our decision to wind down our operations in Russia, we recognized tax charges related to certain direct incremental impacts of our decision, which are reflected in this amount, in fiscal 2022.

(c) The total tax impact on adjustments in the current period includes a tax expense of $24.1 recorded as the result of the Company’s exit from Russia.

(d) The total tax impact on adjustments in the prior period includes a $234.4 benefit recorded as the result of the tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the relocation of our main principal location from Geneva to Amsterdam on July 1, 2020.

It also includes a $130.0 tax expense recorded as the result of an internal restructuring following the Wella divestiture, primarily intended to create a more efficient structure to hold its equity investment in Wella.

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

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

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

The adjusted effective tax rate was 27.7% compared to 18.1% in the prior-year period.

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

The differences were primarily due to the resolution of foreign uncertain tax positions having a greater proportional effect in the prior period and a valuation allowance recorded in the current period.

Cash paid during the years ended June 30, 2022, 2021 and 2020, for income taxes of $97.2, $15.9 and $123.2 represents 24.6%, 8.9% and (31.5)% of Adjusted (loss) income before income taxes for the fiscal year ended, respectively.

NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC.

In fiscal 2021, net loss attributable to Coty Inc.

In fiscal 2022, net income attributable to Coty Inc.

was $259.5 compared to a loss of $201.3 in fiscal 2021.

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

The net income increase was primarily driven by higher operating income in the current year, a favorable adjustment of $403.9 related to the realized and unrealized gain in the Wella investment in the current year, and the loss on sale of the Wella Business, which was recorded in the comparative period, partially offset by a provision for income taxes in the current year compared to income tax benefit in the prior year.

In fiscal 2021, net loss attributable to Coty Inc.

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(in millions) 2022 2021 2020 2022/2021 2021/2020

Net income from Coty Inc.

Net income (loss) from Coty Inc.

net of noncontrolling interests $ 259.5 $ (201.3) $ (1,006.7) >100% 80 %

Convertible Series B Preferred Stock dividends (a)

(102.3) (6.5) — <(100%) N/A

(198.3) (102.3) (6.5) (94 %) <(100%)

Reported net income (loss) attributable to Coty Inc.

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374.6 486.3 1,204.9 (23 %) (60 %)

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

Change in fair value of investment in

Wella Business (c)

(73.5) — — N/A N/A

Adjustments to Loss on Sale of Business (6.1) 246.4 — <(100%) N/A

Change in fair value of investment in Wella Business (c)

(403.9) (73.5) — <(100%) N/A

Adjustments to other expense (income) (d)

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Adjustments to noncontrolling interest (e)

(11.3) (4.6) (14.7) <(100%) 69 %

(7.0) (11.3) — 38 % N/A

Change in tax provision due to adjustments to reported net (loss) income attributable to Coty Inc.

55.7 (170.0) (342.5) >100% 50 %

Adjusted net (loss) income attributable to Coty Inc.

Adjustment for deemed Series B Preferred Stock dividends related to the First and Second Exchanges 160.0 — —

Adjusted net income (loss) attributable to Coty Inc.

$ 232.1 $ 181.5 $ (167.2) 28 % >100%

% of Net revenues 4.4 % 3.2 % (2.5 %)

Per Share Data

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Basic $ 0.28 $ 0.24 $ (1.33)

Diluted $ 0.20 $ (0.25) $ 0.65

(a) Diluted EPS is adjusted by the effect of dilutive securities, including awards under our equity compensation plans and the convertible Series B Preferred Stock.

We use the if-converted method for calculating any potential dilutive effect of the convertible Series B Preferred Stock, which requires an adjustment to reverse the impact of the preferred stock dividends, including deemed dividends, of $102.3 and $6.5 in fiscal 2021 and 2020, respectively, on income applicable to common stockholders.

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

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

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

$ 0.28 $ 0.24 $ (1.33)

(a) Diluted EPS is adjusted by the effect of dilutive securities, including awards under the Company's equity compensation plans and the convertible Series B Preferred Stock.

When calculating any potential dilutive effect of stock options, Series A Preferred Stock, restricted stock and RSUs, the Company uses the treasury method and the if-converted method for the Convertible Series B Preferred Stock.

The treasury method typically does not adjust the net income attributable to Coty Inc., while the if-converted method requires an adjustment to reverse the impact of the preferred stock dividends, if dilutive,, on net income applicable to common stockholders during the period.

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

(c) In fiscal 2022 and 2021 , the amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.

(d) In fiscal 2022, the amount includes a net gain on the exchange of Series B Preferred Stock partially offset by the amortization of basis differences in certain equity method investments and pension curtailment losses.

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

pension plans.

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pension plans.

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

pension plans.

(e) The amounts represent the after-tax impact of the non-GAAP adjustments included in Net (loss) income attributable to noncontrolling interest based on the relevant noncontrolling interest percentage in the Consolidated Statements of Operations.

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

(e) The amounts represent the after-tax impact of the non-GAAP adjustments included in Net (loss) income attributable to noncontrolling interests based on the relevant noncontrolling interest percentage in the Consolidated Statements of Operations.

(f) As of June 30, 2022 and 2021, 65.4 and 171.1 million shares, respectively, of outstanding stock options and Series A/A-1 Preferred Stock with purchase or conversion rights to purchase shares of Common Stock, RSUs and Convertible Series B Preferred Stock were excluded in the computation of adjusted weighted-average diluted shares because their effect would be anti-dilutive.

DISCONTINUED OPERATIONS

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

In fiscal 2021, net revenues from discontinued operations increased by 2.6% or $24.6 to $986.3 from $961.7 in the comparative

five month period in the prior year.

In fiscal 2021, net revenues from discontinued operations increased by 2.6% or $24.6 to $986.3 from $961.7 in the comparative five month period in the prior year.

The increase in net revenues in the comparative five month period was primarily driven by continued growth of ghd products through the e-commerce channel across all geographical regions, and reorders from the reopening and restocking of professional salons in the U.S.

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The loss on sale of the Wella Business also reflects certain purchase price working capital adjustments made during fiscal 2021.

As we finalize post-closing adjustments to the purchase consideration for working capital and other contractually specified items over the coming several months, there may be further adjustments to the purchase price and loss on sale.

The Company anticipates resolution of any further purchase price adjustments in fiscal 2022.

In connection with the sale of a majority stake in the Wella Business, the Company recorded a tax cost of approximately $34.3 in fiscal 2021.

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

Fiscal 2021 (a)

Condensed Consolidated Statements of Operations Data:

Three Months Ended Three Months Ended

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(in millions, except per share data) 2022 2022 2021 2021 2021 2021 2020 2020

Condensed Consolidated Statements of Operations Data:

Net revenues $ 1,168.3 $ 1,186.2 $ 1,578.2 $ 1,371.7 $ 1,062.4 $ 1,027.8 $ 1,415.6 $ 1,124.1

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Net (loss) income from discontinued operations 1.2 0.7 3.8 — 10.9 (17.3) (235.6) 104.7

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

Net (loss) income attributable to noncontrolling interests (2.8) (0.9) (0.9) (0.5) (4.6) (9.4) (2.5) 0.4

Net income attributable to redeemable noncontrolling interests 4.4 2.3 3.2 3.4 0.1 6.5 0.2 5.5

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Basic for Continuing Operations $ (0.34) $ 0.06 $ 0.23 $ 0.13 $ (0.29) $ — $ (0.05) $ 0.13

Diluted for Continuing Operations $ (0.29) $ — $ (0.05) $ 0.13 $ (0.91) $ (0.41) $ (0.14) $ 0.02

Basic for Coty Inc $ (0.34) $ 0.06 $ 0.23 $ 0.13 $ (0.27) $ (0.02) $ (0.36) $ 0.26

Diluted for Continuing Operations $ (0.34) $ 0.06 $ 0.23 $ 0.13 $ (0.29) $ — $ (0.05) $ 0.13

Diluted for Coty Inc.

$ (0.34) $ 0.06 $ 0.23 $ 0.13 $ (0.27) $ (0.02) $ (0.36) $ 0.24

(a) Beginning in the second quarter 2020, the financial results exclude the effect of the Younique divestiture.

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

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

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

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

Our primary sources of funds include cash expected to be generated from operations, borrowings from issuance of debt and lines of credit provided by banks and lenders in the U.S.

Our cash flows are subject to seasonal variation throughout the year, including demands on cash made during our first fiscal quarter in anticipation of higher global sales during the second fiscal quarter and strong cash generation in the second fiscal quarter as a result of increased demand by retailers associated with the holiday season.

Our principal uses of cash are to fund planned operating expenditures, capital expenditures, business structure realignment expenditures, interest payments, acquisitions, dividends, share repurchases and any principal payments on debt.

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

Working capital movements are influenced by the sourcing of materials related to the production of products.

Cash and working capital management initiatives, including the phasing of vendor payments and factoring of trade receivables from time-to-time, may also impact the timing and amount of our operating cash flows.

During fiscal 2021, KKR Aggregator purchased an additional $250.0 of convertible preferred stock.

In accordance with the terms of our 2018 Coty Credit Agreement (defined below), we have utilized the cash proceeds from the issuance of convertible preferred shares to KKR Aggregator in part to fund the KKW acquisition.

On November 30, 2020, the Company completed the sale of a majority stake in its Professional and Retail Hair business, including the Wella, Clairol, OPI and ghd brands to KKR.

As part of the transaction, we received cash proceeds of $2,451.7 and retained a 40% stake in the business.

Immediately after closing, Wella drew down on their third party debt for $1,282.4 and used $448.0 of such funds to make a distribution to the Company, which the Company has accounted for as a return of capital.

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

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

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

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

Due to the integrated nature of the historical business and related contractual arrangements, certain receivables from customers and certain payables to vendors have Wella and Coty activity that is intermingled.

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

See Note 27—Related Party Transactions for more information.

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

Management estimates the impact of excluding the Wella Business on a go forward basis, excluding temporary impacts from the TSA, would be a reduction of 45% in Consolidated net cash provided by operating activities.

The decrease in such cash flows are be expected to be partially offset by cost reductions as we exit our service obligations under the TSA.

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

During the second quarter of 2021, the Company’s total debt decreased from $8,400.2 to $5,391.7, a decrease of roughly 36%, principally due to the Sale of the Wella Business.

Accordingly, we note that the estimated decrease in our net consolidated cash flows from the exclusion of the Wella Business, inclusive of the reduction in capital expenditures, is slightly higher than the decrease in our debt service obligation for this period.

We do not expect a material adverse impact on our future cash flows from the Sale of the Wella Business.

Our response to the impact of COVID-19

In response to the ongoing risks presented by the COVID-19 pandemic, we continue to utilize a number of measures to bolster our liquidity position and provide additional financial flexibility.

Such measures include actively aligning operating expenses to the current state of the business, initiatives to improve cash flow, hiring and travel restrictions, and the reduction of advertising and consumer promotion costs for sales channels that are closed or heavily impacted by lockdowns and social distancing.

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

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

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

However, as a result of the cash on hand, our amended debt covenants, and our plans to manage expenses, we believe we have sufficient liquidity and covenant headroom to meet our foreseeable business operating and recurring cash needs (including for debt service and capital expenditures).

To address the potentially longer-lasting impacts of COVID-19, we have implemented a plan to reduce our cost base by the end of fiscal 2023, with additional plans for savings in fiscal 2024.

This plan includes an adaptation of our supply network, organizational changes, renegotiation of purchasing and licensing agreements, as well as a reduction of certain discretionary expenses.

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

In the fourth quarter of fiscal 2021, the we refinanced $900.0 of our dollar-denominated term loan debt and €700.0 million (approximately $833.3 as of June 30, 2021) of our euro-denominated term loan debt that were scheduled to mature in 2023 with new senior secured notes that mature in 2026.

This improved our medium term liquidity.

We used the net proceeds of these offerings to repay portions of the term loans outstanding under the existing credit facilities and to pay related premiums, fees and expenses thereto.

As we refinance our debt in order to extend maturing obligations, the applicable interest rates have been, and are likely to continue to be, higher than previous applicable interest rates, due in large part to prevailing macroeconomic conditions and our credit ratings at the time.

Despite these higher interest rates, we expect that our interest expense will be favorably impacted by lower overall debt balances as we continue to deleverage.

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

The 2019 Amendment modified the 2018 Coty Credit Agreement by amending the financial covenants to (i) delay until March 31, 2022 the total net leverage ratio step down from 5.25 to 5.0, (ii) extend the applicable window for certain cost savings add-backs in the calculation of Adjusted EBITDA for purpose of determining the total net leverage ratio, and (iii) amend the determination of the exchange rate to be used for purposes of calculating “Total Indebtedness” (as defined in the 2018 Coty Credit Agreement) for purposes of the total net leverage ratio, and decreasing the total commitments under the revolving credit facility by $500.0 to $2,750.0.

In fiscal 2022, we simplified our capital structure through a series of transactions with KKR Aggregator, as a result of which KKR Aggregator fully exited its ownership of Coty's shares.

Cumulatively, such transactions resulted in annual dividend savings of approximately $77.0.

Refer to Note 23—Equity and Convertible Preferred Stock.

In addition, during fiscal 2022, we received the planned shareholder distributions of $230.6 from our equity investment in Wella, which we used to repay debt.

We do not expect further distributions from Wella in the short term.

During April 2022, we announced our Board's decision to wind down the operations of our Russian subsidiary as a result of the Russia-Ukraine War and the related sanctions.

We plan to liquidate our remaining inventory in Russia, as allowed by the relevant sanctions, over the next six months as part of the wind down.

During fiscal 2022, we recognized total pre-tax charges of $83.6 associated with our exit of Russia.

These charges are primarily related to the net realizable value of assets associated with the Russian business, including working capital and long-lived assets, as well as contract termination charges, certain contingent liabilities, employee severance charges and other costs to effectuate the wind-down.

We incurred $24.1 of income tax charges associated with our decision to exit Russia, in fiscal 2022.

We anticipate incurring up to $10.0 of additional costs through completion of the wind down, and future net cash costs of $40.0 to 45.0 which will be funded by our Russian subsidiary.

The wind down process of our Russian subsidiary is at an early stage, and the amount of future costs, including cash costs, will be subject to various factors, such as additional government regulation and the resolution of legal contingencies.

During fiscal 2022, we experienced inflationary pressures in most markets resulting in higher commodity and supply chain costs, including material, freight, and energy costs.

We expect that the pressures of cost inflation will persist into fiscal 2023.

Further, inflationary trends in certain markets and global supply chain challenges may negatively affect our future sales and operating performance.

Supply chain constraints may impact the availability of raw materials used to manufacture our products which may negatively impact our ability to meet customer demands, thereby impacting our cash flows and profitability.

We are in the process of deleveraging our company and improving the maturity mix of our debt, including through consideration of refinancing or redemption of a portion of our debt.

In fiscal 2022, we replaced our two existing classes of revolving commitments, having an aggregate principal amount of $2,750.0, with a single class of revolving commitments, having an aggregate principal amount of $2,000.0 due April 2025, and issued $500.0 of senior secured notes due January 2029.

We used the net proceeds of these offerings to repay portions of the term loans outstanding under the existing credit facilities originally due April 2023 and to pay related premiums, fees and expenses thereto.

During fiscal 2022, we fully redeemed our 2023 euro-denominated notes in the amount of €550.0 million (approximately $606.4 at the redemption date), by utilizing cash on hand and drawing down on our revolving credit facility, thereby accelerating our deleveraging trajectory.

Also, during fiscal 2022 we entered into two separate agreements that mature in September and October 2023, which established new U.S.

Dollar-denominated credit facilities in Brazil (the “Brazilian Credit Facilities”) in the amounts of $10.5 and $31.9, respectively.

These activities improved our medium term liquidity.

Our Convertible Series B Preferred stock held by KKR Aggregator was fully converted and exchanged during fiscal 2022, which reduced our future commitment to preferred shareholders and improved our ability to reduce our external debt and simplifying our capital structure.

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

Factoring of Receivables

From time to time, we supplement the timing of our cash flows through the factoring of trade receivables.

In this regard, we have entered into factoring arrangements with financial institutions.

The net amount utilized under the factoring facilities was $179.3 and $133.6 as of June 30, 2022 and 2021, respectively.

The aggregate amount of trade receivable invoices factored on a worldwide basis amounted to $1,041.2 and $793.8 in fiscal 2022 and 2021, 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.

Remaining balances due from factors amounted to $11.2 and $6.3 as of June 30, 2022 and 2021, respectively.

Business Combinations

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

During fiscal 2022, we did not enter into any business combinations or asset acquisitions.

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

Total cash paid in the transaction totaled $200.0.

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

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

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

We did not divest any brands during fiscal 2019.

For additional information on our prior period activity from fiscal year 2021, see Note 4—Business Combinations, Asset Acquisitions and Divestitures in the notes to our Consolidated Financial Statements.

During fiscal 2022, we did not enter into any business dispositions.

During fiscal 2021, we completed the sale of a majority stake in the Wella Business and received cash proceeds of $2,451.7, and retained an initial ownership stake of 40% in Wella.

As of June 30, 2022, we owned a 25.9% stake in the Wella Company.

During the current fiscal year, we entered into an agreement related to post-closing adjustments to the purchase consideration for the Wella Business.

Based on this agreement, a $34.0 advance of future contingent proceeds was paid to us and is subject to claw back if recovery targets related to the Wella Business tax credits are not achieved within four years of the Wella sale.

During the current fiscal year, certain recovery targets were achieved and we recognized a $0.7 gain related to the advance payment.

The remainder of $33.3 is unearned as of the current fiscal year end.

For additional information on our prior period business dispositions from fiscal years 2021 and 2020, see Note 4—Business Combinations, Asset Acquisitions and Divestitures in the notes to our Consolidated Financial Statements.

Year Ended June 30,

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Net cash provided by (used in) operating activities was $726.6, $318.7 and $(50.9) for fiscal 2022, 2021 and 2020, respectively.

The increase in cash provided by operating activities of $407.9 in fiscal 2022 as compared with fiscal 2021 is primarily driven by a year over year increase in cash related net income and overall increase in cash flows from changes in net working capital accounts.

Higher net revenues in both segments, lower costs as percentage of revenues, lower costs for acquisition and divestiture related activities, and lower cash outflows associated with operating leases contributed to the higher year over year cash flows from operating activities which were partially offset by outflows from higher costs during fiscal 2022 for selling, general, and administrative expenses.

Higher cash outflows during fiscal 2022 for net income tax payments is driven by the significant prior year tax overpayment collections and were primarily offset by lower year over year cash outflows for restructuring activity payments and payments for interest costs.

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

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

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

These decreases were only partially offset by positive impacts from the changes in working capital accounts of $229.3 during fiscal 2020 compared to fiscal 2019.

Changes in working capital accounts during fiscal 2020 were positively impacted primarily by inflows from changes in accrued expenses and other current liabilities during the current year compared to outflows in the prior year, resulting from less cash payments for restructuring and business realignment programs in the current year as well as current year increase in restructuring accruals for the Transformation Plan.

Further, changes in inventories contributed to higher cash inflows period over period of $146.3 driven by an overall decrease in production caused by the shutdowns associated with the COVID-19 pandemic, and the reversal of the prior year impact of supply chain disruptions.

Changes in trade receivables also contributed to the year over year increase in cash inflows which is the result of timing of collections and lower net revenues during the second half of fiscal 2020.

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

Net cash provided by (used in) investing activities

Net cash provided by (used in) investing activities was $269.7, $2,441.9 and $(833.4) for fiscal 2022, 2021 and 2020, respectively.

The decrease in cash flows provided by investing activities of $2,172.2 in fiscal 2022 as compared with fiscal 2021 was principally driven by higher cash proceeds associated with the sale of the discontinued Wella Business in the prior year.

Cash proceeds from the sale of the business and related returns on capital associated with Coty’s remaining stake in Wella whereby initial cash proceeds from the sale received were $2,374.1 in fiscal 2021 compared to the $34.0 proceeds from contingent consideration in the current fiscal year.

Returns of capital from equity investments for Coty’s remaining stake in Wella were $448.0 in prior year compared to $230.6 in the current year.

Higher proceeds from the sale of other long lived assets in fiscal 2022 and outflows from the prior year related to the KKW Holdings asset acquisition and 20% equity investment helped to partially offset the year over year decrease in cash from investing activities.

The increase in cash flows from investing activities of $3,275.3 in fiscal 2021 as compared with fiscal 2020 was principally driven by the proceeds received from the sale of the Wella Business that took place on November 30, 2020.

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

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

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

Net cash (used in) provided by financing activities

Net cash (used in) provided by financing activities was $(1,034.0), $(2,795.1) and $877.3 for fiscal 2022, 2021 and 2020, respectively.

The decrease in cash used in financing activities of $1,761.1 in fiscal 2022 as compared to fiscal 2021 was primarily driven by lower net cash outflows for repayments associated with the Company's revolving credit facility and other long term debt outstanding under the Company's Credit Agreement.

The year over year change in the level of debt repayments is primarily attributable to the impact of the use of prior year proceeds from the sale of the Wella discontinued business being used to prepay more than $2,000.0 of the outstanding debt on the Company's term loan facilities.

Net overall cash outflows also occurred in the current year but to a lesser extent and were offset by proceeds from the issuance of the 2029 Senior Secured Notes and the Brazilian Credit Facilities.

Increases in cash outflows for the settlement of realized losses on foreign currency contracts in the current year and the prior year inflows from the issuance of Convertible Series B Preferred Stock only partially offset the impact of the year over year changes in debt activities.

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

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Further, the current year experienced a positive impact from the prior year payment of $45.0 to purchase the remaining mandatorily redeemable noncontrolling interest in our Southeastern Asian subsidiary.

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

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

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

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

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

Shareholders were able to make this election on a quarterly basis, beginning with the dividend declared on May 8, 2019 through the dividend declared on February 5, 2020.

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

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

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

In May 2019, the Board approved a stock dividend reinvestment program giving shareholders the option to receive their full dividend in cash or to receive their dividend in 50% cash / 50% common stock, which was effective for dividends declared through February 5, 2020, which was paid March 27, 2020.

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

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

As we focus on preserving cash, we expect to suspend the payment of dividends until we reach a Net debt to Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) of 2x.

Any determination to pay dividends in the future will be at the discretion of our Board of Directors.

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After the expiration of applicable restrictions under the 2018 Coty Credit Agreement, as amended, we began to pay dividends on the Convertible Series B Preferred Stock in cash for the period ending June 30, 2021, and we expect to continue to pay such dividends in cash on a quarterly basis, subject to the declaration thereof by our Board of Directors.

Dividends accrued on the Convertible Series B Preferred Stock before April 1, 2021 have not been paid in cash and any decision to do so will be at the discretion of our Board.

The terms of the Convertible Series B Preferred Stock restrict our ability to declare cash dividends on our common stock until all accrued dividends on the Convertible Series B Preferred Stock have been declared and paid in cash.

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

During the twelve months ended June 30, 2022, the Board of Directors declared dividends on the Series B Preferred Stock of $35.2 of which $30.7 was paid and $1.2 was converted as part of the November 10, 2021 conversion.

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

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(c) Other contractual obligations primarily represent advertising/marketing, manufacturing, logistics and capital improvements commitments.

Additionally, we have included the mandatorily redeemable financial interest arising out of our subsidiaries as discussed in Note 21 — Mandatorily Redeemable Financial Interest.

Additionally, we have included the mandatorily redeemable financial interest arising out of our subsidiaries as discussed in Note 21 —

Mandatorily Redeemable Financial Interest.

We also maintain several distribution agreements for which early termination could result in potential future cash outflows that have not been reflected above.

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See Note 22—Redeemable Noncontrolling Interests in the notes to our Consolidated Financial Statements for further discussion related to the calculation of the redemption value for each of these noncontrolling interests.

The table excludes also excludes $1,036.3 of preferred stock, which is reflected in Convertible Series B Preferred Stock in the Consolidated Balance Sheet as of June 30, 2021 related to the issuance of 1,000,000 shares of our Convertible Series B Preferred Stock.

The table also excludes $142.4 of preferred stock, which is reflected in Convertible Series B Preferred Stock in the Consolidated Balance Sheet as of June 30, 2022.

Given the provisions of the associated Put rights, Convertible Series B Preferred Stock is redeemable outside of our control upon certain change of control events and is recorded in temporary equity.

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

In relation to the appeal of our Brazilian tax assessments, we have entered into surety bonds of R$135.2 million (approximately $26.1) as of June 30, 2022.

As of June 30, 2022, we are in the early stages of administrative action and expect the judicial process in Brazil to take a number of years to conclude.

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

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

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.

We recorded foreign currency gains (losses) of $3.3, $(7.8) and $(18.0) in fiscal 2022, 2021 and 2020, respectively, resulting from non-financing foreign currency exchange transactions which are included in their associated expense type and are included in the Consolidated Statements of Operations.

Net gains (losses) of $10.0, $(6.8) and $(14.8) in fiscal 2022, 2021 and 2020, respectively, resulting from financing foreign exchange currency transactions are included in Interest expense, net in the Consolidated Statements of Operations.

Exchange gains or losses are also partially offset through the use of qualified derivatives under hedge accounting, for which we record accumulated gains or losses in Accumulated other comprehensive income until the underlying transaction occurs at which time the gain or loss is reclassified into the respective account in the Consolidated Statements of Operations.

We have experienced and will continue to experience fluctuations in our net income as a result of balance sheet transactional exposures.

We use a combination of foreign currency forward contracts and cross currency contracts to offset these exposures.

As of June 30, 2022, in the event of a 10% unfavorable change in the prevailing market rates of hedged foreign currencies versus the U.S.

dollar, the change in fair value of all foreign exchange forward contracts would result in a $(0.8) decrease in the fair value of the forward contracts.

In the view of management, these hypothetical gains resulting from an assumed change in foreign currency exchange rates are not material to our consolidated financial statement position or results of operations.

This gain does not include the impact on our underlying foreign currency exposures.

dollar, the change in fair value of all foreign exchange forward contracts and cross currency contracts would result in a $147.8 decrease in the fair value of these forward contracts, which would be offset by an increase in the underlying foreign currency exposures.

Interest Rate Risk Management

We are exposed to interest rate risk that relates primarily to our indebtedness, which is affected by changes in the general level of the interest rates primarily in the U.S.

We periodically enter into interest rate swap agreements to facilitate our interest rate management activities.

We periodically enter into interest rate swap agreements to facilitate

our interest rate management activities.

We have designated these agreements as cash flow hedges and, accordingly, applied hedge accounting.

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The corresponding gain or loss position of the ineffective hedge recorded to AOCI/(L) will be reclassified to current-period earnings.

If interest rates had been 10% higher/lower and all other variables were held constant, Loss from continuing operations before income taxes in fiscal 2021 would decrease/increase by $19.2.

If interest rates had been 10% higher/lower and all other variables were held constant, Income (loss) from continuing operations before income taxes in fiscal 2022 would decrease/increase by $20.1.

Equity Investment Risk

Our equity investments are investments in equity securities of privately-held companies without readily determinable fair values, including an investment of approximately $830.0 that is valued using the fair value option and approximately $12.6 that is accounted for using the equity method as of June 30, 2022.

These investments are subject to a wide variety of market-related risks that could have a material impact on the carrying value of our holdings.

We continually evaluate our equity investments in privately-held companies.

See Note 13—Equity Investments for additional information.

In addition to the above equity investments, we entered into certain forward repurchase contracts to start hedging for a potential $200.0 share buyback program in 2024.

These forward repurchase contracts are accounted for at fair value, with changes in the fair value recorded in Other income, net within the Consolidated Statements of Operations.

Our primary exposure is the movements of our stock price during the contract period, which may be volatile and is likely to fluctuate due to a number of factors beyond our control.

These factors include actual or anticipated fluctuations in the quarterly and annual results of our company or of other peer companies in the industry, market perceptions concerning the macroeconomic, social or political developments, industry conditions, changes in government regulation and the securities market trends.

We estimate that an immediate, hypothetical 10% decline in our stock price would result in a $19.6 decrease in the fair value of these forward repurchase contracts and reduce our Income (loss) from continuing operations before income taxes.

Any realized gains or losses resulting from such fair value changes would occur if we elect to terminate the forward repurchase contracts prior to or on maturity.

Refer to Note 23—Equity and Convertible Preferred Stock.

Credit Risk Management

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Inflation Risk

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

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

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

We began to experience the impact of increased inflation on our business during the fiscal year.

We believe that inflation may have a more material effect on our business, financial condition or results of operations in fiscal year 2023.

Rising inflation may negatively impact our business by raising cost and reducing profitability.

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

Our inability or failure to do so could harm our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.

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We evaluate our estimates and assumptions on an ongoing basis.

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

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

circumstances.

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

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Equity Investments

The Company elected the fair value option to account for its investment in the Wella Business to align with the Company’s strategy for this investment.

We elected the fair value option to account for its investment in Wella to align with our strategy for this investment.

The fair value is updated on a quarterly basis.

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

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

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

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

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

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

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

The investments are classified within Level 3 in the fair value hierarchy because we estimate the fair value of the investments using a combination of the income approach, the market approach and private transactions, when applicable.

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

On October 20, 2021, we completed the sale of a 9.4% stake in Wella to KKR in exchange for the redemption of 290,465 shares of KKR's Series B Convertible Preferred Stock shares in Coty and a portion of unpaid dividends (the "First Exchange").

On November 30, 2021, we completed the sale of an additional 4.7% stake in Wella to KKR in exchange for the redemption of KKR's remaining convertible preferred shares in Coty (the "Second Exchange").

The First Exchange and Second Exchange were included and weighted for valuation purposes, when appropriate.

In May 2022, the Wella Company divested its Russian operations.

The impact of the divestiture was included for valuation purposes.

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

Further, continued uncertainty exists due to the macroeconomic impacts of inflationary and supply chain pressures and the indirect impact of the Russia Ukraine war.

While we believe we have made reasonable estimates and assumptions to calculate the fair value of the Wella Company, it is possible changes could occur.

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

Goodwill, Other Intangible Assets and Long-Lived Assets

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We test goodwill for impairment at the reporting unit level, which is the same level as our reportable segments.

We identify our reporting units by assessing whether the components of our reporting segments constitute businesses for which discrete financial information is available and management of each reporting unit regularly reviews the operating results of those components.

We identify our reporting units by assessing whether the components of our reporting segments constitute businesses for which

discrete financial information is available and management of each reporting unit regularly reviews the operating results of those components.

When testing goodwill for impairment, we have 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.

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

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

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

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

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

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

There were no impairments of goodwill at our reporting units in fiscal 2022 or fiscal 2021.

During fiscal year 2020 we recorded total goodwill impairment of $105.0.

Based on the annual impairment tested performed at May 1, 2022, we determined that the fair value of each of the reporting units exceeded their respective carrying values at that date by approximately 78.6% and 61.5% relating to the Prestige and Consumer Beauty reporting units, respectively.

To determine the fair value of our reporting units, we have used annual revenue growth rates ranging from 3.0%-12.6% and 2.0%-8.5% for the Prestige and Consumer Beauty reporting units, respectively, and a discount rate of 9.25%.

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

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

Further, continued uncertainty exists due to the macroeconomic impacts of inflationary and supply chain pressures, and the indirect impact of the Russia Ukraine war.

While the Company believes it has made reasonable estimates and assumptions to calculate the fair values of the reporting units, it is possible changes could occur.

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Fair value calculation requires significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair value.

Variations in economic conditions or a change in general consumer demands, operating results estimates or the application of alternative assumptions could produce significantly different results.

Variations in economic conditions or a change in general consumer demand, operating results estimates or the application of alternative assumptions could produce significantly different results.

The carrying value of our indefinite-lived other intangible assets was $936.6 as of June 30, 2022, and is comprised of trademarks for the following brands:

CoverGirl of $327.4, Max Factor of $148.4, Sally Hansen of $157.3, Philosophy of $119.2, Bourjois of $35.3 and other trademarks totaling $149.0.

As a result of the May 1, 2020 annual impairment test, total impairments on indefinite-lived other intangible assets of $329.0 were recorded.

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

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

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

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

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

In the fourth quarter of fiscal 2022, as a result of the May 1, 2022 annual impairment test, the Company recorded asset impairment charges of $21.3 and $10.1 related to the Max Factor and Bourjois trademarks, respectively, that are part of the Consumer Beauty reporting unit.

The principle drivers of the impairments were related to the loss of revenue and impact on profitability as a result of the Company’s decision to exit the Russian market.

Additionally, the current macroeconomic environment resulted in a 150 basis point increase in the discount rate compared to the May 1, 2021 test.

Based on results of the test, the fair value of the Max Factor trademark fell below its carrying value using projections that assumed an annual revenue growth rate ranging from 2.0% to 15.1% and a discount rate of 10.0%.

The fair value of the Bourjois trademark fell below its carrying value using projections that assumed an annual revenue growth rate ranging from 2.0% to 7.4% and a discount rate of 10.0%.

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

For instance, with regards to our Max Factor trademark, our largest impaired indefinite-lived intangible asset, if the annual revenue declined by 5% it may cause an additional impairment of $7.3.

If the discount rate increased by 50 basis points, it may cause an additional impairment of $8.6.

With regards to our Bourjois trademark, our second largest impaired indefinite-lived intangible asset, if the annual revenue declined by 5% it may cause an additional impairment of $1.9.

If the discount rate increased by 50 basis points, it may cause an additional impairment of $2.2.

The fair values of the remaining indefinite-lived trademarks exceeded their carrying values by amounts ranging from 39% to 50%.

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

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

Further, continued uncertainty exists due to the macroeconomic impacts of inflationary and supply chain pressures and the indirect impact of the Russia Ukraine war.

While the Company believes it has made reasonable estimates and assumptions to calculate the fair values of the indefinite-lived intangible assets, it is possible changes could occur.

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

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

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

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

Long-Lived Assets

Long-lived assets, including tangible and intangible assets with finite lives, are amortized over their respective lives to their estimated residual values and are also reviewed for impairment whenever certain triggering events may indicate impairment.

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 would be recorded for the excess of the carrying value over the fair value, which is determined by discounting future cash flows.

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

During fiscal years 2022, 2021 and 2020, we recorded asset impairment charges of $2.4, $5.2 and $16.8, respectively, to Property and equipment, net and $1.0, $0.6 and $7.8, respectively to Operating lease right-of-use assets, primarily relating to the abandonment of equipment or leases no longer in use.

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

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What changed 10-K

Item 7. Management’s Discussion and Analysis