COTY INC. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023. Based on the evaluation of our disclosure controls and procedures as of June 30, 2023, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. We have included our Management Report over Internal Control over Financial Reporting in “Item 15. Exhibits, Financial Statement Schedules” and is incorporated in this Item 9A by reference. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) and 15d-15(f) of the Exchange Act during the fourth fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls Our management, including our CEO and CFO, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving our objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Item 9B. Other Information During the three months ended June 30, 2023, none of the Company’s directors or Section 16 reporting officers adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of the SEC’s Regulation S-K). 60 PART III Item 10. Directors, Executive Officers and Corporate Governance. Directors Information regarding directors is incorporated by reference to the “Directors” and “Corporate Governance” sections of our proxy statement on Schedule 14A for the 2023 Annual Meeting of Stockholders (the “2023 Proxy Statement”). Executive Officers Information regarding executive officers is incorporated by reference to the “Executive Officers” section of our 2023 Proxy Statement. Section 16(a) Beneficial Ownership Reporting Compliance This information is incorporated by reference to the “Section 16(a) Beneficial Ownership Reporting Compliance” section of our 2023 Proxy Statement. Code of Ethics This information is incorporated by reference to the “Corporate Governance Guidelines and Code of Business Conduct” section of our 2023 Proxy Statement. Item 11. Executive Compensation. This information is incorporated by reference to the “Executive Compensation” and “Director Compensation” sections of our 2023 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. This information is incorporated by reference to the “Security Ownership of Certain Beneficial Owners and Management” section of our 2023 Proxy Statement. For equity compensation plan information, see “Equity Compensation Plan Information” in Part II, Item 5 hereof, which is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. This information is incorporated by reference to the “Certain Relationships and Transactions of Related Persons” and “Corporate Governance” section of our 2023 Proxy Statement. Item 14. Principal Accounting Fees and Services. This information is incorporated by reference to the “Audit Fees and Other Fees” section of our 2023 Proxy Statement. PART IV Item 15. Exhibits, Financial Statement Schedules. List of documents filed as part of this Report: (1) Consolidated Financial Statements and Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) included herein: See Index on page F-1. (2) Financial Statement Schedule: See S-1. (3) All other schedules are omitted as they are inapplicable or the required information is furnished in the Company’s Consolidated Financial Statements or the Notes thereto. (4) List of Exhibits: Exhibit Number Document 2.1 Transaction Agreement dated as of July 8, 2015 among The Procter & Gamble Company, Coty Inc., Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 2.2 to the Company’s Annual Report on Form 10-K filed on August 17, 2015).* 61 2.2 Repurchase Letter Agreement dated August 13, 2015 among The Procter & Gamble Company, Coty Inc., Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 2.3 to the Company’s Annual Report on Form 10-K filed on August 17, 2015). 2.3 Letter Agreement, dated February 19, 2016, by and among The Procter & Gamble Company, the registrant, Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 25, 2016). 2.4 Third Amendment to Transaction Agreement, dated May 25, 2016, by and among The Procter & Gamble Company, Coty Inc., Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 27, 2016). 2.5 Fourth Amendment to Transaction Agreement, dated August 25, 2016, by and among The Procter & Gamble Company, Coty Inc., Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 2.5 to Amendment No. 4 to the Company’s Registration Statement on Form S-4, filed on August 25, 2016).* 2.6 Side Letter, dated September 13, 2016, between Coty Inc. and The Procter & Gamble Company (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2016). 2.7 Assignment and Transfer Agreement, dated as of November 2, 2015, by and between JAB Cosmetics B.V. and Coty Inc., including as an exhibit thereto that certain Shares and Trademarks Sale and Purchase Agreement, dated as of November 2, 2015, by and among JAB Cosmetics B.V., Hypermarcas S.A., Cosmed Indústria de Cosméticos e Medicamentos S.A., and as intervening and consenting parties, Novita Distribuição, Armazenamento e Transportes S.A., and Savoy Indústria de Cosméticos S.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 3, 2015). 2.8 Sale and Purchase Agreement, dated as of October 17, 2016, by and among Coty Inc., Gloria Coinvest 1 L.P., Lion Capital Fund III L.P., Lion Capital Fund III SBS L.P., Lion Capital Fund III (USD) L.P., Lion Capital Fund III SBS (USD) L.P., Ghd Nominees Limited (“GHD”), the management sellers named therein, and the other individual sellers named therein (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on October 17, 2016).* 2.9 Tax Matters Agreement, effective as of October 1, 2016, by and among Coty Inc., The Procter & Gamble Company, Galleria Co. and Green Acquisition Sub Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 3, 2016). 2.10 Purchase Agreement, dated as of November 18, 2019, by and among King Kylie Holdings, LLC, KMJ 2018 Irrevocable Trust, Kylie Jenner Inc., King Kylie, LLC, Coty Inc. and solely for the purpose of Section 6.7 and Section 6.13, KKJ 2018 Irrevocable Trust (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on February 5, 2020). 2.11 Sale and Purchase Agreement, dated June 1, 2020, by and among Coty Inc., Coty International Holding, B.V. and Rainbow UK Bidco Limited (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed on June 2, 2020). 2.12 Separation Agreement, dated June 1, 2020, by and among Coty Inc., Coty International Holding, B.V., Waves UK Divestco Limited and Rainbow UK Bidco Limited (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on June 2, 2020). 2.13 Amended and Restated Sale and Purchase Agreement, dated November 11, 2020, by and among Coty Inc., Coty International B.V. and Rainbow UK Bidco Limited (incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 12, 2020). 2.14 Amended and Restated Separation Agreement, dated November 11, 2020, by and among Coty Inc., Coty International B.V., Waves UK Divestco Limited and Rainbow UK Bidco Limited(incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 12, 2020). 3.1 Amended and Restated Certificate of Incorporation of Coty Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 5 of the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on May 14, 2013) 3.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Coty Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 3, 2016). 3.3 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Coty Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 25, 2020). 3.4 Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on April 24, 2013). 62 4.1 Specimen Class A Common Stock Certificate of the registrant (incorporated by reference to Exhibit 4.1 to Amendment No. 6 to the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on May 28, 2013) 4.2 Certificate of Designations of Preferred Stock, Series A, dated April 17, 2015 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 20, 2015). 4.3 Certificate of Designations of Preferred Stock, Series A-1, dated February 4, 2019 (incorporated by reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q filed on February 8, 2019). 4.4 Certificate of Designations of Preferred Stock, Series B, dated May 26, 2020 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 26, 2020). 4.5 Indenture, dated as of April 5, 2018, among Coty Inc., the guarantors named therein, Deutsche Bank Trust Company Americas, as Trustee, Registrar and U.S. Paying Agent with respect to the 2026 Dollar Notes, and Deutsche Bank AG. London Branch, as London Paying Agent with respect to the Euro Notes (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 10, 2018). 4.6 Form of 2026 Dollar Notes (included in Exhibit 4.5) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 10, 2018). 4.7 Form of 2026 Euro Notes (included in Exhibit 4. 5 ) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 10, 2018). 4.8 Amended and Rest ated Stockholders Agreement, dated as of June 16, 2023 , by and among Coty Inc., JAB Holdings B.V. and JAB Beauty B.V. (incorporated by reference to Exhibit 4.1 to the Company’s Current Re p ort on Form 8-K filed on June 16 , 20 23 ). 4.9 Description of Securities. 4.10 Indenture, dated as of April 21, 2021, among Coty Inc., the guarantors named therein, and Deutsche Bank Trust Company Americas, as Trustee and Collateral Agent (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 22, 2021). 4.11 Form of 5.000% Senior Secured Notes due 2026 (included in Exhibit 4.1 0 ) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 22, 2021). 4.12 First Lien/First Lien Intercreditor Agreement, dated as of April 21, 2021, among JPMorgan Chase Bank, N.A., as the credit facility agent, Deutsche Bank Trust Company Americas, as the initial other authorized representative, and each additional authorized representative from time to time party thereto, as consented to by Coty Inc. and the other grantors party to the Consent of Grantors attached thereto (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on April 22, 2021). 4.13 Pledge and Security Agreement, dated as of April 21, 2021, by and among Coty Inc., the other grantors from time to time party thereto and Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on April 22, 2021). 4.14 Indenture, dated as of June 16, 2021, among Coty Inc., the guarantors named therein, and Deutsche Bank Trust Company Americas, as Trustee and Collateral Agent and Deutsche Bank AG, London Branch as paying agent (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K file on June 16, 2021). 4.15 Form of 3.875% Senior Secured Notes due 2026 (included in Exhibit 4.1 4 ) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K file on June 16, 2021). 4.16 Joinder Agreement No. 1, dated as of June 16, 2021 among and acknowledged by JPMorgan Chase Bank, N.A., as credit facility agent, Deutsche Bank Trust Company Americas as initial other authorized representative, and the Company to the First Lien/First Lien Intercreditor Agreement, dated as of April 21, 2021 among JPMorgan Chase Bank, N.A., as credit facility agent and Deutsche Bank Trust Company Americas as initial other authorized representative (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on June 16, 2021). 4.17 Pledge and Security Agreement, dated as of June 16, 2021, by and among Coty Inc., the other grantors from time to time party thereto and Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on June 16, 2021). 4.18 Indenture, dated as of November 30, 2021, among Coty Inc., HFC Prestige Products, Inc., HFC Prestige International U.S. LLC, the guarantors named therein, and Deutsche Bank Trust Company Americas, as Trustee, Paying Agent and Collateral Agent. (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on November 30 , 2021). 4.19 Form of 4.750% Senior Secured Notes due 2029. (included in Exhibit 4.1 8 ) (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on November 30, 2021). 63 4.20 Joinder Agreement No. 2, dated as of November 30, 2021 among JPMorgan Chase Bank, N.A., as credit facility agent, Deutsche Bank Trust Company Americas as initial other authorized representative, and the Company to the First Lien/First Lien Intercreditor Agreement, dated as of April 21, 2021, as modified by the Joinder Agreement No. 1, dated as of June 16, 2021, among JPMorgan Chase Bank, N.A., as credit facility agent, and Deutsche Bank Trust Company Americas, as initial other authorized representative. (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed on November 30, 2021). 4.21 Pledge and Security Agreement, dated as of November 30, 2021, by and among Coty Inc., HFC Prestige Products, Inc., HFC Prestige International U.S. LLC, the other grantors from time to time party thereto and Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed on November 30, 2021). 4.22 Indenture, dated as of July 26, 2023, among Coty Inc., HFC Prestige Products, Inc., HFC Prestige International U.S. LLC, the guarantors named therein, and Deutsche Bank Trust Company Americas, as Trustee, Paying Agent and Collateral Agent (incorporated by reference to Exhibit 4.1 to the Company’ s Current Report on Form 8-K filed on Ju ly 26, 2023 ) . 4.23 Form of 6.625% Senior Secured Notes due 2030 (included in Exhibit 4.22)(incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on July 26, 2023). 4.24 Joinder Agreement No. 3, dated as of July 26, 2023 among JPMorgan Chase Bank, N.A., as credit facility agent, Deutsche Bank Trust Company Americas as initial other authorized representative, and the Company to the First Lien/First Lien Intercreditor Agreement, dated as of April 21, 2021, as modified by the Joinder Agreement No. 1, dated as of June 16, 2021, among JPMorgan Chase Bank, N.A., as credit facility agent, and Deutsche Bank Trust Company Americas, as initial other authorized representative and Joinder Agreement No. 2, dated as of November 30, 2021, among JPMorgan Chase Bank, N.A., as credit facility agent, and Deutsche Bank Trust Company Americas as initial other authorized representative (incorporated by reference to Exhibit 4. 3 to the Company’s Current Report on Form 8-K filed on July 26, 2023). 4.25 Pledge and Security Agreement, dated as of July 26, 2023, by and among Coty Inc., HFC Prestige Products, Inc., HFC Prestige International U.S. LLC, the other grantors from time to time party thereto and Deutsche Bank Trust Company Americas, as collateral agent (incorporated by reference to Exhibit 4. 4 to the Company’s Current Report on Form 8-K filed on July 26, 2023). 10.1 Credit Agreement, dated as of October 27, 2015, by and among Coty Inc., the other borrowers party thereto from time to time, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 30, 2015). 10.2 Pledge and Security Agreement, dated as of October 27, 2015, by and among Coty Inc., its subsidiaries signatory thereto and any other subsidiary who may become a party thereto and JPMorgan Chase Bank, N.A, as collateral agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 30, 2015). 10.3 Credit Agreement, dated January 26, 2016, among Galleria Co., as initial borrower, the other borrowers from time to time party thereto, J.P. Morgan Chase Bank, N.A., as administrative agent and collateral agent, and the other agents and lenders party thereto (incorporated by reference to Exhibit 10.4 of Galleria Co.’s Registration Statement on Form S-4 filed on April 22, 2016). 10.4 Guaranty Agreement, dated as of October 27, 2015, by and among Coty Inc., its subsidiaries signatory thereto and any other subsidiary who may become a party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 30, 2015). 10.5 Incremental Assumption Agreement and Amendment No. 1, dated April 8, 2016 to the Credit Agreement, by and among Coty Inc., Coty B.V., certain subsidiaries of Coty Inc. party thereto, the incremental lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 14, 2016). 10.6 Incremental Assumption Agreement and Refinancing Amendment to Credit Agreement, dated as of October 28, 2016, among Coty Inc., Coty B.V., the other loan parties party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 28, 2016). 10.7 Incremental Facility Activation Notice, dated as of October 28, 2016, among Coty Inc., each incremental term A lender and JPMorgan Chase Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 28, 2016). 64 10.8 Amended and Restated Credit Agreement, dated as of April 5, 2018, by and among Coty Inc., Coty B.V., the other borrowers party thereto from time to time, the lenders and other parties from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 10, 2018). 10.9 Amendment No. 1, dated June 27, 2019, to the Amended and Restated Credit Agreement, dated April 5, 2018, by and among Coty Inc., Coty B.V., the other borrowers party thereto from time to time, the lenders and other parties from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 1, 2019). 10.10 Amendment No. 2, dated April 29, 2020, to the Amended and Restated Credit Agreement, dated April 5, 2018, by and among Coty Inc., Coty B.V., the other borrowers party thereto from time to time, the lenders and other parties from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed on April 30, 2020). 10.11 Amendment No. 3 to Credit Agreement (Incremental Assumption Agreement), dated as of June 4, 2021, by and among Coty Inc., Coty B.V., the other loan parties party thereto, the incremental revolving lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 7, 2021). 10.12 Refinancing Amendment, dated as of November 30, 2021, by and among Coty Inc., Coty B.V., the other loan parties party thereto, the refinancing revolving lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. (incorporated by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed on November 30, 2021) 10.13 Amendment No. 5 to Amended and Restated Credit Agreement, dated March 7, 2023, by and among Coty Inc., Coty B.V., the lenders from time to time party thereto and JPMorgan Chase Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 9, 2023). 10.14 Amendment No. 6 (Refinancing Amendment), dated as of July 11, 2023, by and among Coty Inc., Coty B.V., the other loan parties party thereto, the refinancing revolving lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 4. 1 to the Company's Current Report on Form 8-K filed on July 14 , 202 3 ) 10.15 Shareholders’ Agreement, dated as of November 30, 2020, by and between Coty Inc., Coty International B.V., Rainbow Capital Group Limited, Rainbow JVCo Limited and Rainbow UK Bidco Limited (incorporated by reference to Exhibit 10.2 to the Company’s 8-K filed on December 1, 2020). 10.16 IP Cross-License Agreement, dated as of November 30, 2020, by and between Coty International B.V. and Wella International Operations Switzerland S.á.r.l. (incorporated by reference to Exhibit 10.1 to the Company’s 8-K filed on December 1, 2020). 10.17 Redemption Agreement dated as of September 30, 2021, by and among Coty Inc., KKR Rainbow Aggregator L.P., Rainbow Capital Group Limited and Coty JV Holdings S.a.r.l (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on on Form 8-K filed on October 1, 2021). 10.18 Redemption Agreement dated as of November 6, 2021, by and among Coty Inc., KKR Rainbow Aggregator L.P., Rainbow Capital Group Limited and Coty JV Holdings S.a.r.l (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on on Form 8-K filed on November 8, 2021). 10.19 Employment Agreement, dated January 27, 2020, between Coty Management B.V. and Kristin Blazewicz (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on May 11, 2020).† 10.20 Employment Agreement, dated June 3, 2020, between Coty Management B.V. and Gordon Von Bretten (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed on August 27, 2020).† 10.22 Offer Letter, dated as of April 1, 2016, between Ayesha Zafar and the Company (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 11, 2016).† 10.23 Employment Agreement, dated May 7, 2020, between Coty International B.V. and Laurent Mercier (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on February 9, 2021).† 10.24 Offer Letter, dated October 21, 2019, between Coty International B.V. and Laurent Mercier (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on February 9, 2021).† 65 10.25 Offer Letter, dated December 5, 2020, Coty International B.V. and Laurent Mercier (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on February 9, 2021).† 10.26 Offer Letter dated as of November 26, 2021 between Coty Management B.V. and Laurent Mercier (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on February 8, 2022).† 10.27 Offer Letter dated as of June 14, 2022 between Coty Management B.V. and Laurent Mercier (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K filed on August 25, 2022).† 10.28 Offer Letter dated as of June 8, 2023, between Coty Management B.V. and Laurent Mercier.† 10.29 Employment Agreement, dated December 21, 2020, between Coty Italia S.r.l. and Anna von Bayern (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021).† 10.30 Employment Agreement, dated January 1, 2021, between Coty Italia S.r.l. and Anna von Bayern (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021).† 10.31 Employment Agreement, dated October 13, 2020, between Coty Inc. and Sue Nabi (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021).† 10.33 Equity Transfer Agreement, dated July 2, 2020, among Cottage Holdco B.V., Coty Inc. and Sue Nabi (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021).† 10.34 Restricted Stock Unit Award between Coty Inc. and Sue Nabi. (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K filed on August 26, 2021) † 10.35 Amended Employment Agreement, dated May 4, 2023, between Coty Inc. and Sue Nabi..† 10.36 Form of Performance Restricted Stock Unit Award Terms and C onditions for Sue N abi . † 10.37 Form of Restricted Stock Unit Award Terms and C onditions for Sue Nabi .† 10.38 Form of Indemnification Agreement between the registrant and its directors and officers (incorporated by reference to Exhibit 10.24 to Amendment No. 4 to the Company’s Registration Statement on Form S-1(File No. 333-182420) filed on April 24, 2013). 10.39 Amended and Restated Annual Performance Plan, as of February 1, 2017 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2017).† 10.40 Form of Restricted Stock Unit Award under Coty Inc. 2007 Stock Plan for Directors, as amended on April 8, 2013 (incorporated by reference to Exhibit 10.41 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on April 24, 2013).† 10.41 Amended and Restated Coty Inc. Equity and Long-Term Incentive Plan, as amended and restated on November 3, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-Q filed on November 6, 2020).† 10.42 Restricted Stock Unit Award Terms and Conditions Under Coty Inc. Equity and Long-Term Incentive Plan, as amended and restated on April 8, 2013 (incorporated by reference to Exhibit 10.44 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on April 24, 2013).† 10.43 Restricted Stock and Restricted Stock Unit Tandem Award Terms and Conditions under the Coty Inc. Equity and Long-Term Incentive Plan, as amended and restated on April 8, 2013 (incorporated by reference to Exhibit 10.45 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-182420) filed on April 14, 2013).† 10.44 Form of Subscription Agreement for Series A Preferred Stock (incorporated by reference to Exhibit 10.55 to the Company’s Annual Report on Form 10-K filed on August 17, 2015).† 10.45 Amended and Restated Coty Inc. Stock Plan for Directors, as adopted November 3, 2020. (incorporated by reference to Exhibit 10.40 to the Company’s Annual Report on Form 10-K filed on August 26, 2021) † 10.46 Amended Form of Elite Subscription and Stock Option Agreement (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2017).† 10.47 Form of Phantom Unit Award Terms and Conditions (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 5, 2014).† 66 10.48 Form of Restricted Stock Award Agreement under the Amended and Restated Coty Inc. Equity and Long Term-Incentive Plan (incorporated by reference to Exhibit 10.52 to the Company’s Annual Report on Form 10-K filed on August 27, 2020) † 10.49 Form of Restricted Stock Unit Terms and Conditions, as adopted on December 17, 2020, under the Amended and Restated Coty Inc. Equity and Long-Term Incentive Plan. (incorporated by reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K filed on August 26, 2021) † 21.1 List of significant subsidiaries. 23.1 Consent of Deloitte & Touche LLP. 24.1 Power of Attorney (included in signature page). 31.1 Certification of Chief Executive Officer, pursuant to Rules 13a-14a and 15d-14(a) 31.2 Certification of Chief Financial Officer, pursuant to Rules 13a-14(d) and 15d-14(d) 32.1 Certification of Chief Executive Officer, pursuant to 18 U.S. C. Section 1350 32.2 Certification of Chief Financial Officer, pursuant to 18 U.S. C. Section 1350 101.INS Inline XBRL Instance Document. 101.SCH Inline XBRL Taxonomy Extension Schema Document. 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. 104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). * Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementary to the Securities and Exchange Commission a copy of any omitted schedule or similar attachment upon request. † Exhibit is a management contract or compensatory plan or arrangement. 67 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of New York, New York on August 22, 2023. COTY INC. By: /s/ Laurent Mercier Name: Laurent Mercier Title: Chief Financial Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kristin Blazewicz, as their true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as they might or could do in person, hereby ratifying and confirming that all said attorney-in-fact and agent, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /s/Sue Nabi Chief Executive Officer and Director (Principal Executive Officer) August 22, 2023 (Sue Nabi) /s/Laurent Mercier Chief Financial Officer (Principal Financial Officer) August 22, 2023 (Laurent Mercier) /s/Ayesha Zafar Senior Vice President, Group Controller (Principal Accounting Officer) August 22, 2023 (Ayesha Zafar) /s/Maria Asuncion Aramburuzabala Director August 22, 2023 (Maria Asuncion Aramburuzabala) /s/Beatrice Ballini Director August 22, 2023 (Beatrice Ballini) /s/Joachim Creus Director August 22, 2023 (Joachim Creus) /s/Olivier Goudet Director August 22, 2023 (Olivier Goudet) /s/Peter Harf Chairman of the Board of Directors August 22, 2023 (Peter Harf) /s/Johannes Huth Director August 22, 2023 (Johannes Huth) /s/Anna Makanju Director August 22, 2023 (Anna Makanju) /s/Isabelle Parize Director August 22, 2023 (Isabelle Parize) /s/Lubomira Rochet Director August 22, 2023 (Lubomira Rochet) /s/Robert Singer Director August 22, 2023 (Robert Singer) 68 MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Coty’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) of the Securities Exchange Act of 1934) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Coty’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Coty’s management evaluated the effectiveness of internal control over financial reporting as of June 30, 2023 based on the criteria established in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the evaluation, management has concluded that Coty maintained effective internal control over financial reporting as of June 30, 2023. The Company's internal control over financial reporting as of June 30, 2023 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report which appears herein. /s/Sue Nabi /s/Laurent Mercier Sue Nabi Laurent Mercier Chief Executive Officer Chief Financial Officer August 22, 2023 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Coty Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Coty Inc. and subsidiaries (the “Company”) as of June 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements, and financial statement schedule as of and for the year ended June 30, 2023, of the Company and our report dated August 22, 2023, expressed an unqualified opinion on those financial statements and financial statement schedule. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP New York, New York August 22, 2023 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Coty Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Coty Inc. and subsidiaries (the "Company") as of June 30, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows, for each of the three years in the period ended June 30, 2023, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 22, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Goodwill and Other Intangible Assets, net – Max Factor Trademark Valuation – Refer to Notes 2 and 12 to the financial statements Critical Audit Matter Description The Company has trademarks that are indefinite-lived intangible assets. The Company’s evaluation of the trademarks for impairment involves the comparison of the fair value of each trademark to its’ carrying value. Management estimates the fair value of these trademarks annually on its elected assessment date of May 1, or more frequently if certain events occur, based upon the income approach, using the relief from royalty methodology, which is a specific discounted cash flow method. The determination of the fair value requires management to make significant estimates and assumptions related to the trademarks’ estimated cash flows, royalty, and discount rates, especially those related to the Max Factor trademark. Changes in these assumptions could have a significant impact on the fair value of the Max Factor trademark, the amount of any impairment charge, or both. As of June 30, 2023, the carrying value of the indefinite-lived intangible assets was $950.8 million, of which $148.4 million related to the Max Factor trademark. The fair value of the Max Factor trademark exceeded its’ carrying value by 6.8%. Given the significant estimates and assumptions made by management to estimate the fair value and the difference between the fair value and carrying value for the Max Factor trademark, performing audit procedures to evaluate the reasonableness of such estimates and assumptions, particularly the estimated cash flows, and the selection of the royalty and discount rate, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the estimated cash flows, the selection of the royalty and discount rate for the Max Factor trademark included the following, among others: • We tested the effectiveness of controls over indefinite-lived intangible assets, including those over the estimated cash flows for the Max Factor trademark and the selection of the respective royalty and discount rate. • We evaluated management’s ability to accurately forecast by comparing actual results in previous years to management’s historical forecasts and by comparing the May and June 2023 forecasts with actual results for those months. • We evaluated the reasonableness of management’s estimated cash flows for the Max Factor trademark, by comparing management’s forecasts with: ◦ Historical cash flows and trends; ◦ Internal communications to management and the Board of Directors; and ◦ Forecasted information included in industry reports of the Company and selected companies in its peer group. • We considered the impact of industry and market conditions on management’s forecasts for the Max Factor trademark, including consideration of the effects related to the current macro-economic environment. • We evaluated the impact of changes in management’s forecasts from the May 1, 2023 annual measurement date to June 30, 2023. • With the assistance of our fair value specialists, we evaluated the valuation approach and royalty and discount rate for the Max Factor trademark, including testing the underlying source information and the mathematical accuracy of the calculations, and developing independent estimates and comparing those to the respective royalty and discount rate selected by management. /s/ Deloitte & Touche LLP New York, New York August 22, 2023 We have served as the Company’s auditor since 1995. COTY INC. & SUBSIDIARIES INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Operations F- 1 Consolidated Statements of Comprehensive Income (Loss) F- 2 Consolidated Balance Sheets F- 3 Consolidated Statements of Equity F- 4 Consolidated Statements of Cash Flows F- 7 Notes to Consolidated Financial Statements F- 9 Financial Statement Schedule: Schedule II—Valuation and Qualifying Accounts S- 1 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data ) Year Ended June 30, 2023 2022 2021 Net revenues $ 5,554.1 $ 5,304.4 $ 4,629.9 Cost of sales 2,006.8 1,935.2 1,861.7 Gross profit 3,547.3 3,369.2 2,768.2 Selling, general and administrative expenses 2,818.3 2,881.3 2,363.2 Amortization expense 191.8 207.4 251.2 Restructuring costs ( 6.5 ) ( 6.5 ) 63.6 Acquisition- and divestiture- related costs — 14.7 138.8 Asset impairment charges — 31.4 — Operating income (loss) 543.7 240.9 ( 48.6 ) Interest expense, net 257.9 224.0 235.1 Other income, net ( 419.0 ) ( 409.9 ) ( 43.9 ) Income (loss) from continuing operations before income taxes 704.8 426.8 ( 239.8 ) Provision (benefit) for income taxes on continuing operations 181.6 164.8 ( 172.0 ) Net income (loss) from continuing operations 523.2 262.0 ( 67.8 ) Net income (loss) from discontinued operations — 5.7 ( 137.3 ) Net income (loss) 523.2 267.7 ( 205.1 ) Net loss attributable to noncontrolling interests ( 1.8 ) ( 5.1 ) ( 16.1 ) Net income attributable to redeemable noncontrolling interests 16.8 13.3 12.3 Net income (loss) attributable to Coty Inc. $ 508.2 $ 259.5 $ ( 201.3 ) Amounts attributable to Coty Inc. Net income (loss) from continuing operations $ 508.2 $ 253.8 $ ( 64.0 ) Convertible Series B Preferred Stock dividends ( 13.2 ) ( 198.3 ) ( 102.3 ) Net income (loss) from continuing operations attributable to common stockholders 495.0 55.5 ( 166.3 ) Net income (loss) from discontinued operations, net of tax — 5.7 ( 137.3 ) Net income (loss) from continuing operations attributable to common stockholders $ 495.0 $ 61.2 $ ( 303.6 ) Earnings (losses) per common share Earnings (losses) from continuing operations per common share - basic $ 0.58 $ 0.07 $ ( 0.22 ) Earnings (losses) from continuing operations per common share - diluted $ 0.57 $ 0.07 $ ( 0.22 ) Earnings (losses) from discontinued operations - basic $ 0.00 $ 0.01 $ ( 0.18 ) Earnings (losses) from discontinued operations - diluted $ 0.00 $ 0.01 $ ( 0.18 ) Earnings (losses) per common share - basic $ 0.58 $ 0.08 $ ( 0.40 ) Earnings (losses) per common share - diluted $ 0.57 $ 0.08 $ ( 0.40 ) Weighted-average common shares outstanding: Basic 849.0 820.6 764.8 Diluted 886.5 834.1 764.8 See notes to Consolidated Financial Statements. F-1 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In millions) Year Ended June 30, 2023 2022 2021 Net income (loss) $ 523.2 $ 267.7 $ ( 205.1 ) Other comprehensive income (loss): Foreign currency translation adjustment 49.4 ( 476.1 ) 130.3 Net unrealized derivative (loss) gain on cash flow hedges, net of taxes of $ 1.4 , $( 6.0 ) and $( 8.4 ), respectively ( 3.6 ) 19.8 27.5 Pension and other post-employment benefits, net of taxes of $( 4.9 ), $( 24.7 ) and $ 9.0 , respectively 10.1 59.4 ( 23.6 ) Total other comprehensive income (loss), net of tax 55.9 ( 396.9 ) 134.2 Comprehensive income (loss) 579.1 ( 129.2 ) ( 70.9 ) Comprehensive (loss) attributable to noncontrolling interests: Net loss ( 1.8 ) ( 5.1 ) ( 16.1 ) Foreign currency translation adjustment 0.3 ( 0.5 ) ( 0.1 ) Total comprehensive loss attributable to noncontrolling interests ( 1.5 ) ( 5.6 ) ( 16.2 ) Comprehensive income (loss) attributable to redeemable noncontrolling interests: Net income 16.8 13.3 12.3 Foreign currency translation adjustment 0.1 ( 0.4 ) — Total comprehensive income attributable to redeemable noncontrolling interests 16.9 12.9 12.3 Comprehensive income (loss) attributable to Coty Inc. $ 563.7 $ ( 136.5 ) $ ( 67.0 ) See notes to Consolidated Financial Statements. F-2 COTY INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except per share data ) June 30, 2023 June 30, 2022 ASSETS Current assets: Cash and cash equivalents $ 246.9 $ 233.3 Restricted cash 36.9 30.5 Trade receivables— less allowances of $ 23.2 and $ 53.4 , respectively 360.9 364.6 Inventories 853.4 661.5 Prepaid expenses and other current assets 553.6 392.0 Total current assets 2,051.7 1,681.9 Property and equipment, net 712.9 715.5 Goodwill 3,987.9 3,914.7 Other intangible assets, net 3,798.0 3,902.8 Equity investments 1,068.9 842.6 Operating lease right-of-use assets 286.7 320.9 Deferred income taxes 589.9 651.8 Other noncurrent assets 165.6 85.9 TOTAL ASSETS $ 12,661.6 $ 12,116.1 LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 1,444.7 $ 1,268.3 Accrued expenses and other current liabilities 1,042.0 1,097.1 Short-term debt and current portion of long-term debt 57.9 23.0 Current operating lease liabilities 65.6 67.8 Income and other taxes payable 126.6 109.4 Total current liabilities 2,736.8 2,565.6 Long-term operating lease liabilities 247.5 282.2 Long-term debt, net 4,178.2 4,409.1 Pension and other post-employment benefits 280.7 292.2 Deferred income taxes 659.7 669.0 Other noncurrent liabilities 325.4 340.0 TOTAL LIABILITIES 8,428.3 8,558.1 COMMITMENTS AND CONTINGENCIES (Note 26) CONVERTIBLE SERIES B PREFERRED STOCK, $ 0.01 par value; 1.0 shares authorized; 0.1 and 0.1 issued and 0.1 and 0.1 outstanding, at June 30, 2023 and 2022, respectively 142.4 142.4 REDEEMABLE NONCONTROLLING INTERESTS 93.5 69.8 EQUITY: Preferred stock, $ 0.01 par value; 20.0 shares authorized; 1.0 and 1.5 issued and outstanding, at June 30, 2023 and 2022, respectively — — Class A Common Stock, $ 0.01 par value; 1,250.0 shares authorized, 919.3 and 905.5 issued and 852.8 and 839.2 outstanding at June 30, 2023 and 2022, respectively 9.1 9.0 Additional paid-in capital 10,898.6 10,805.8 Accumulated deficit ( 4,987.9 ) ( 5,496.1 ) Accumulated other comprehensive loss ( 662.4 ) ( 717.9 ) Treasury stock— at cost, shares: 66.5 and 66.3 at June 30, 2023 and 2022, respectively ( 1,446.3 ) ( 1,446.3 ) Total Coty Inc. stockholders’ equity 3,811.1 3,154.5 Noncontrolling interests 186.3 191.3 Total equity 3,997.4 3,345.8 TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY $ 12,661.6 $ 12,116.1 See notes to Consolidated Financial Statements. F-3 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In millions) Preferred Stock Class A Common Stock Additional Paid-in (Accumulated Accumulated Other Comprehensive Treasury Stock Total Coty Inc. Stockholders’ Noncontrolling Total Redeemable Noncontrolling Convertible Series B Shares Amount Shares Amount Capital Deficit) Income (Loss) Shares Amount Equity Interests Equity Interests Preferred Stock BALANCE as previously reported—July 1, 2020 1.5 $ — 830.6 $ 8.3 $ 10,447.4 $ ( 5,548.6 ) $ ( 456.2 ) 65.5 $ ( 1,446.3 ) $ 3,004.6 $ 224.2 $ 3,228.8 $ 79.1 $ 715.8 Adjustment due to the adoption of ASU No. 2016-13 ( 5.7 ) ( 5.7 ) ( 5.7 ) Balance as adjusted —July 1, 2020 1.5 $ — 830.6 $ 8.3 $ 10,447.4 $ ( 5,554.3 ) $ ( 456.2 ) 65.5 $ ( 1,446.3 ) $ 2,998.9 $ 224.2 $ 3,223.1 $ 79.1 $ 715.8 Issuance of Preferred Stock — — 242.4 Reacquired Class A Common Stock for employee taxes 0.1 — — Cancellation of Restricted Stock 0.7 — — — Exercise of employee stock options and restricted stock units 1.7 — — — — Share based compensation expense 27.4 27.4 27.4 Changes in dividends accrued 1.2 1.2 1.2 Shares withheld for employee taxes ( 5.0 ) ( 5.0 ) ( 5.0 ) Deemed Dividends- Convertible Series B Preferred Stock ( 10.5 ) ( 10.5 ) ( 10.5 ) 10.5 Dividends Accrued- Convertible Series B Preferred Stock ( 67.6 ) ( 67.6 ) ( 67.6 ) 67.6 Dividends Paid-Convertible Series B Preferred Stock ( 24.2 ) ( 24.2 ) ( 24.2 ) Net income (loss) ( 201.3 ) ( 201.3 ) ( 16.1 ) ( 217.4 ) 12.3 Other comprehensive income 134.3 134.3 ( 0.1 ) 134.2 Distribution to noncontrolling interests, net — ( 6.5 ) ( 6.5 ) ( 2.1 ) Adjustment of redeemable noncontrolling interests to redemption value 5.2 5.2 5.2 ( 5.2 ) Equity Investment contribution for share-based compensation 2.3 2.3 2.3 BALANCE—June 30, 2021 1.5 $ — 832.3 $ 8.3 $ 10,376.2 $ ( 5,755.6 ) $ ( 321.9 ) 66.3 $ ( 1,446.3 ) $ 2,860.7 $ 201.5 $ 3,062.2 $ 84.1 $ 1,036.3 See notes to Consolidated Financial Statements. F-4 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In millions) Preferred Stock Class A Common Stock Additional Paid-in (Accumulated Accumulated Other Comprehensive Treasury Stock Total Coty Inc. Stockholders’ Noncontrolling Total Redeemable Noncontrolling Convertible Series B Shares Amount Shares Amount Capital Deficit) Income Shares Amount Equity Interests Equity Interests Preferred Stock BALANCE as adjusted—July 1, 2021 1.5 $ — 832.3 $ 8.3 $ 10,376.2 $ ( 5,755.6 ) $ ( 321.9 ) 66.3 $ ( 1,446.3 ) $ 2,860.7 $ 201.5 $ 3,062.2 $ 84.1 $ 1,036.3 Exercise of employee stock options and restricted stock units and issuance of restricted stock 3.3 — — Shares withheld for employee taxes ( 12.7 ) ( 12.7 ) ( 12.7 ) Share-based compensation expense 195.4 195.4 195.4 Equity investment contribution for share-based compensation 0.7 0.7 0.7 Changes in dividends accrued 0.8 0.8 0.8 Conversion of Convertible Series B Preferred Stock 69.9 0.7 428.8 429.5 429.5 ( 429.5 ) Exchange Transaction — ( 606.9 ) Dividends Accrued- Convertible Series B Preferred Stock ( 35.2 ) ( 35.2 ) ( 35.2 ) 35.2 Deemed Dividends and Contributions- Convertible Series B Preferred Stock ( 163.1 ) ( 163.1 ) ( 163.1 ) 163.1 Dividends Paid- Convertible Series B Preferred Stock — — ( 55.8 ) Net income (loss) 259.5 259.5 ( 5.1 ) 254.4 13.3 Other comprehensive loss ( 396.0 ) ( 396.0 ) ( 0.5 ) ( 396.5 ) ( 0.4 ) Distribution to noncontrolling interests, net — ( 4.6 ) ( 4.6 ) ( 12.3 ) Adjustment of redeemable noncontrolling interests to redemption value 14.9 14.9 14.9 ( 14.9 ) BALANCE—June 30, 2022 1.5 $ — 905.5 $ 9.0 $ 10,805.8 $ ( 5,496.1 ) $ ( 717.9 ) 66.3 $ ( 1,446.3 ) $ 3,154.5 $ 191.3 $ 3,345.8 $ 69.8 $ 142.4 See notes to Consolidated Financial Statements. F-5 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (In millions) Preferred Stock Class A Common Stock Additional Paid-in (Accumulated Accumulated Other Comprehensive Treasury Stock Total Coty Inc. Stockholders’ Noncontrolling Total Redeemable Noncontrolling Convertible Series B Shares Amount Shares Amount Capital Deficit) (Loss) Income Shares Amount Equity Interests Equity Interests Preferred Stock BALANCE—July 1, 2022 1.5 — 905.5 9.0 $ 10,805.8 $ ( 5,496.1 ) $ ( 717.9 ) 66.3 $ ( 1,446.3 ) $ 3,154.5 $ 191.3 $ 3,345.8 $ 69.8 $ 142.4 Cancellation of Preferred Stock ( 0.5 ) — — — Reacquired Class A Common Stock for employee taxes 0.2 — — — Exercise of employee stock options and restricted stock units and issuance of restricted stock 13.8 0.1 0.8 0.9 0.9 Shares withheld for employee taxes ( 13.6 ) ( 13.6 ) ( 13.6 ) Share-based compensation expense 134.7 134.7 134.7 Equity investment contribution for share-based compensation 4.6 4.6 4.6 Changes in dividends accrued 0.1 0.1 0.1 Dividends Accrued - Convertible Series B Preferred Stock ( 13.2 ) ( 13.2 ) ( 13.2 ) 13.2 Dividends Paid- Convertible Series B Preferred Stock — — ( 13.2 ) Net income (loss) 508.2 508.2 ( 1.8 ) 506.4 16.8 Other comprehensive loss 55.5 55.5 0.3 55.8 0.1 Distribution to noncontrolling interests, net — ( 3.5 ) ( 3.5 ) ( 13.8 ) Adjustment of redeemable noncontrolling interests to redemption value ( 20.6 ) ( 20.6 ) ( 20.6 ) 20.6 BALANCE—June 30, 2023 1.0 $ — 919.3 $ 9.1 $ 10,898.6 $ ( 4,987.9 ) $ ( 662.4 ) 66.5 $ ( 1,446.3 ) $ 3,811.1 $ 186.3 $ 3,997.4 $ 93.5 $ 142.4 See notes to Consolidated Financial Statements. F-6 COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Year Ended June 30, 2023 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 523.2 $ 267.7 $ ( 205.1 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 426.7 516.4 585.3 Non-cash lease expense 63.6 78.5 81.2 Asset impairment charges — 31.4 — Deferred income taxes 56.3 12.1 ( 218.1 ) (Release) provision for bad debts ( 18.9 ) 20.5 ( 13.2 ) Provision for pension and other post-employment benefits 8.5 12.7 17.8 Share-based compensation 135.9 195.5 29.9 (Gain) loss on sale of business in discontinued operations and other business divestiture — ( 6.1 ) 246.4 (Gains) losses on disposals of long-lived assets and license terminations, net ( 99.7 ) ( 115.8 ) 15.4 Realized and unrealized gains from equity investments, net ( 226.3 ) ( 400.3 ) ( 70.3 ) Foreign exchange effects 29.9 ( 16.8 ) 26.7 Unrealized gains on forward repurchase contracts, net ( 196.9 ) ( 16.1 ) — Other 8.9 21.3 54.6 Change in operating assets and liabilities: Trade receivables 36.8 ( 77.2 ) 10.5 Inventories ( 180.3 ) ( 48.3 ) 81.2 Prepaid expenses and other current assets ( 15.2 ) ( 12.7 ) ( 136.5 ) Accounts payable 138.4 140.5 ( 49.7 ) Accrued expenses and other current liabilities ( 21.9 ) 129.6 ( 45.8 ) Operating lease liabilities ( 61.0 ) ( 70.7 ) ( 125.3 ) Income and other taxes payable 59.9 91.7 19.9 Other noncurrent assets ( 7.5 ) ( 6.7 ) 40.2 Other noncurrent liabilities ( 34.7 ) ( 20.6 ) ( 26.4 ) Net cash provided by operating activities 625.7 726.6 318.7 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 222.8 ) ( 174.1 ) ( 173.9 ) Proceeds from sale of long-lived assets and license termination 104.6 179.2 4.3 Proceeds related to the sale of discontinued business, net of cash acquired and related contingent consideration — 34.0 2,374.1 Return of capital from equity investments — 230.6 448.0 Payments for equity investment and asset acquisition — — ( 200.0 ) Proceeds from sale of business, net of cash disposed — — 27.0 Termination of currency swaps designated as net investment hedges — — ( 37.6 ) Net cash (used in) provided by investing activities ( 118.2 ) 269.7 2,441.9 CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds of short-term debt, original maturity less than three months — 0.6 — Proceeds from revolving loan facilities 1,558.0 943.0 2,759.8 Repayments of revolving loan facilities ( 1,600.1 ) ( 1,338.8 ) ( 3,593.3 ) Proceeds from issuance of other long term debt — 542.4 1,748.8 Repayments of term loans and other long term debt ( 226.1 ) ( 868.3 ) ( 3,894.5 ) Dividend payments on Class A Common Stock and Convertible Series B Preferred Stock ( 13.7 ) ( 57.2 ) ( 25.7 ) Proceeds from issuance of Class A Common Stock and Convertible Series B Preferred Stock 0.9 — 227.2 F-7 Net (payments) proceeds for foreign currency contracts ( 128.1 ) ( 178.5 ) 18.5 Distributions to mandatorily redeemable financial interests, redeemable noncontrolling interests and noncontrolling interests ( 17.3 ) ( 16.9 ) ( 8.6 ) Payments related to forward repurchase contracts ( 26.4 ) — — Purchase of remaining mandatorily redeemable financial interest — ( 7.1 ) — Payment of deferred financing fees — ( 39.6 ) ( 21.9 ) All other ( 16.5 ) ( 13.6 ) ( 5.4 ) Net cash (used in) financing activities ( 469.3 ) ( 1,034.0 ) ( 2,795.1 ) EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 18.2 ) ( 8.9 ) ( 7.1 ) NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 20.0 ( 46.6 ) ( 41.6 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 263.8 310.4 352.0 CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period $ 283.8 $ 263.8 $ 310.4 SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash paid during the year for interest $ 229.1 $ 215.4 $ 230.6 Cash paid during the year for income taxes, net of refunds received 58.6 97.2 15.9 SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES: Accrued capital expenditure additions $ 107.8 $ 100.1 $ 69.7 Redemption of Series B Preferred Stock in exchange for Wella Equity Investment — 603.3 — Conversion of Series B Preferred Stock into Class A Common Stock — 429.5 — Non-cash Series B Preferred Stock dividends and deemed (contributions) dividends — ( 1.1 ) 78.1 See notes to Consolidated Financial Statements. F-8 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 1. DESCRIPTION OF BUSINESS Coty Inc. and its subsidiaries (collectively, the “Company” or “Coty”) manufacture, market, sell and distribute branded beauty products, including fragrances, color cosmetics and skin & body related products throughout the world. Coty is a global beauty company with a rich entrepreneurial history and an iconic portfolio of brands. The Company operates on a fiscal year basis with a year-end of June 30. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year. For example, references to “fiscal 2023” refer to the fiscal year ended June 30, 2023. When used in this Annual Report on Form 10-K, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation. The Company’s sales generally increase during the second fiscal quarter as a result of increased demand associated with the winter holiday season. Financial performance, working capital requirements, sales, cash flows and borrowings generally experience variability during the three to six months preceding the holiday season. Product innovations, new product launches and the size and timing of orders from the Company’s customers may also result in variability. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying financial statements of the Company are presented on a consolidated basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation. The Company also consolidates majority-owned entities in the United States of America, United Arab Emirates, Kingdom of Saudi Arabia, and South Korea where the Company has the ability to exercise control. Ownership interests of noncontrolling parties are presented as noncontrolling interests or redeemable noncontrolling interests, as applicable. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, the net realizable value of inventory, the fair value of equity investments, the assessment of goodwill, other intangible assets and long-lived assets for impairment, and income taxes. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the Consolidated Financial Statements in future periods. Cash Equivalents Cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. Restricted Cash Restricted cash represents funds that are not readily available for general purpose cash needs due to contractual limitations. Restricted cash is classified as a current or long-term asset based on the timing and nature of when or how the cash is expected to be used or when the restrictions are expected to lapse. As of June 30, 2023 and 2022, the Company had restricted cash of $ 36.9 and $ 30.5 , respectively, included in Restricted cash in the Consolidated Balance Sheets. The restricted cash balances as of June 30, 2023 and 2022 primarily provide collateral for certain bank guarantees on rent, customs and duty accounts and also consists of collections on factored receivables that remain unremitted to the factor as of June 30, 2023 and 2022. Restricted cash is included as a component of Cash, cash equivalents, and restricted cash in the Consolidated Statement of Cash Flows. F-9 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Trade Receivables Trade receivables are stated net of the allowance for doubtful accounts and cash discounts, which is based on the evaluation of the accounts receivable aging, specific exposures, and historical trends. We make estimates of expected credit and collectibility trends for the allowance for doubtful accounts based upon our assessment of historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect our ability to collect from customers. Trade receivables are written off on a case-by-case basis, net of any amounts that may be collected. Inventories Inventories include items which are considered salable or usable in future periods, and are stated at the lower of cost or net realizable value, with cost being based on standard cost which approximates actual cost on a first-in, first-out basis. Costs include direct materials, direct labor and overhead (e.g., indirect labor, rent and utilities, depreciation, purchasing, receiving, inspection and quality control) and in-bound freight costs. The Company classifies inventories into various categories based upon their stage in the product life cycle, future marketing sales plans and the disposition process. The Company also records an inventory obsolescence reserve, which represents the excess of the cost of the inventory over its net realizable value, based on various product sales projections. This reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age, historical trends, and requirements to support forecasted sales. In addition, and as necessary, the Company may establish specific reserves for future known or anticipated events. Equity Investments The Company elected the fair value option to account for its investment in Rainbow JVCO LTD and subsidiaries (together, "Wella" or the “Wella Company”) to align with the Company’s strategy for this investment. The fair value is updated on a quarterly basis. The investments are classified within Level 3 in the fair value hierarchy because the Company estimates the fair value of the investments using a combination of the income 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) expense, net within the Consolidated Statements of Operations (see Note 13—Equity Investments). Property and Equipment and Other Long-lived Assets Property and equipment is stated at cost less accumulated depreciation or amortization. The cost of renewals and betterments is capitalized and depreciated. Expenditures for maintenance and repairs are expensed as incurred. Property and equipment that is disposed of through sale, trade-in, donation, or scrapping is written off, and any gain or loss on the transaction, net of costs to dispose, is recorded in Selling, general and administrative expense. Depreciation and amortization are computed principally using the straight-line method over the following estimated useful lives: Description Estimated Useful Lives Buildings 20 - 40 years Marketing furniture and fixtures 3 - 5 years Machinery and equipment 2 - 15 years Computer equipment and software 2 - 5 years Property and equipment under finance leases and leasehold improvements Lesser of lease term or economic life Intangible assets with finite lives are amortized principally using the straight-line method over the following estimated useful lives: Description Estimated Useful Lives License agreements 2 - 34 years Customer relationships 2 - 28 years Trademarks 2 - 30 years Product formulations and technology 2 - 28 years Long-lived assets, including tangible and intangible assets with finite lives, are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When such events or changes in circumstances occur, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value. If the projected undiscounted cash flows are less than the carrying value, an impairment charge would be recorded for the excess of the carrying value over the fair value. The Company estimates fair value based on the best information available, including discounted cash flows and/or the use of third-party valuations. F-10 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Goodwill and Other Indefinite-lived Intangible Assets Goodwill is calculated as the excess of the cost of purchased businesses over the fair value of their underlying net assets. Goodwill is allocated and evaluated at the reporting unit level, which are the Company’s operating segments. The Company allocates goodwill to one or more reporting units that are expected to benefit from synergies of the business combination. Goodwill and other intangible assets with indefinite lives are not amortized, but are evaluated for impairment annually as of May 1 or whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When testing goodwill for impairment, the Company has the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as the basis to determine if it is necessary to perform a quantitative goodwill impairment test. In performing its qualitative assessment, the Company considers the extent to which unfavorable events or circumstances identified, such as changes in economic conditions, industry and market conditions or company specific events, could affect the comparison of the reporting unit’s fair value with its carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company is required to perform a quantitative impairment test. Quantitative impairment testing for goodwill is based upon the fair value of a reporting unit as compared to its carrying value. The Company makes certain judgments and assumptions in allocating assets and liabilities to determine carrying values for its reporting units. To determine fair value of the reporting unit, the Company uses a combination of the income and market approaches, when applicable. Under the income approach, fair value is determined using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflects the relative risk of the cash flows. Under the market approach, when applicable, information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units is utilized to create valuation multiples that are applied to the operating performance of the reporting units being tested, to value the reporting unit. The impairment loss recognized would be the difference between a reporting unit’s carrying value and fair value in an amount not to exceed the carrying value of the reporting unit’s goodwill. Indefinite-lived other intangible assets principally consist of trademarks. The fair values of indefinite-lived other intangible assets are estimated and compared to their respective carrying values. The trademarks’ fair values are based upon the income approach, utilizing the relief from royalty or excess earnings methodology. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. An impairment loss is recognized when the estimated fair value of the intangible asset is less than its carrying value. Leases All of the Company’s material leases are operating leases. These are primarily for real estate properties, including corporate offices, retail stores and facilities to support the Company's manufacturing, research and development and distribution operations. For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records right-of-use ("ROU") assets and lease obligations for its operating leases, which are initially recognized based on the discounted future lease payments over the term of the lease. Variable lease payments are not included in the measurement of ROU assets and lease liabilities. As the rate implicit in the Company's leases is not easily determinable, the Company’s applicable incremental borrowing rate is used in calculating the present value of the sum of the lease payments. Lease term is defined as the non-cancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company has elected not to recognize ROU asset and lease obligations for its short-term leases, which are defined as leases with an initial term of 12 months or less. As an accounting policy election for all asset classes, the Company elected the practical expedient related to lease and non-lease components, which allows a lessee to not separate non-lease from lease components and instead account for consideration paid in a contract as a single lease component. Deferred Financing Fees The Company capitalizes costs related to the issuance of debt instruments, as applicable. Such costs are amortized over the contractual term of the related debt instrument in Interest expense, net using the straight-line method, which approximates the effective interest method, in the Consolidated Statements of Operations. Noncontrolling Interests and Redeemable Noncontrolling Interests Interests held by third parties in consolidated majority-owned subsidiaries are presented as noncontrolling interests, which represents the noncontrolling stockholders’ interests in the underlying net assets of the Company’s consolidated majority- F-11 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) owned subsidiaries. Noncontrolling interests that are not redeemable are reported in the equity section of the Consolidated Balance Sheets. Noncontrolling interests, where the Company may be required to repurchase the noncontrolling interest under a put option or other contractual redemption requirement, are reported in the Consolidated Balance Sheets between liabilities and equity, as redeemable noncontrolling interests. The Company adjusts the redeemable noncontrolling interests to the higher of the redemption value or the carrying value (the acquisition date fair value adjusted for the noncontrolling interest’s share of net income (loss) and dividends) on each balance sheet date with changes recognized as an adjustment to retained earnings, or in the absence of retained earnings, as an adjustment to additional paid-in capital. Revenue Recognition Revenue is recognized at a point in time and/or over time when control of the promised goods or services is transferred to the Company’s customers, which usually occurs upon delivery. Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for transferring those goods or services. At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. The Company’s revenue contracts principally represent a performance obligation to sell its beauty products to trade customers and are satisfied when control of promised goods and services is transferred to the customers. Net revenues comprise gross revenues less customer discounts and allowances, actual and expected returns (estimated based on an analysis of historical experience and position in product life cycle) and various trade spending activities. Trade spending activities represent variable consideration promised to the customer and primarily relate to advertising, product promotions and demonstrations, some of which involve cooperative relationships with customers. The costs of trade spend activities are estimated considering all reasonably available information, including contract terms with the customer, the Company’s historical experience and its current expectations of the scope of the activities, and is reflected in the transaction price when sales are recorded. The Company’s payment terms vary by the type and location of its customers and the products offered. The term between invoicing and when payment is due is not significant. The Company’s sales return accrual reflects seasonal fluctuations, including those related to revenues for the holiday season in the first half of the fiscal year. This accrual is a subjective critical estimate that has a direct impact on reported net revenues, and is calculated based on history of actual returns, estimated future returns and information provided by retailers regarding their inventory levels. In addition, as necessary, specific accruals may be established for significant future known or anticipated events. The types of known or anticipated events that the Company has considered, and will continue to consider, include the financial condition of the Company’s customers, store closings by retailers, changes in the retail environment, and the Company’s decision to continue to support new and existing brands. Returns represented 2 %, 2 % and 2 % of gross revenue after customer discounts and allowances in fiscal 2023, 2022 and 2021, respectively. Trade spending activities recorded as a reduction to gross revenue after customer discounts and allowances represented 10 %, 10 %, and 10 % in fiscal 2023, 2022 and 2021, respectively. The Company accounts for certain customer store fixtures as other assets. Such fixtures are amortized using the straight-line method over the period of 3 to 5 years as a reduction of revenue. Cost of Sales Cost of sales includes all of the costs to manufacture the Company’s products. For products manufactured in the Company’s own facilities, such costs include raw materials and supplies, direct labor and factory overhead. For products manufactured for the Company by third-party contractors, such costs represent the amounts invoiced by the contractors. Cost of sales also includes royalty expense associated with license agreements. Additionally, shipping costs, freight-in and depreciation and amortization expenses related to manufacturing equipment and facilities are included in Cost of sales in the Consolidated Statements of Operations. Selling, General and Administrative Expenses Selling, general and administrative expenses include advertising and promotional costs and research and development costs. Also included in Selling, general and administrative expenses are share-based compensation, certain warehousing fees, manufacturing fixed costs, personnel and related expenses, rent on operating leases, and professional fees. F-12 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Advertising and promotional costs are expensed as incurred and totaled $ 1,479.6 , $ 1,465.1 and $ 1,029.4 in fiscal 2023, 2022 and 2021, respectively. Included in advertising and promotional costs are $ 103.0 , $ 119.4 , and $ 130.3 of depreciation of marketing furniture and fixtures, such as product displays, in fiscal 2023, 2022 and 2021, respectively. Research and development costs are expensed as incurred and totaled $ 105.2 , $ 97.3 and $ 96.5 in fiscal 2023, 2022 and 2021, respectively. Share-Based Compensation Common Stock Common shares are available to be awarded for the exercise of phantom units, vested stock options, the settlement of restricted stock units (“RSUs”) and performance restricted stock units (“PRSUs”), and the conversion of Series A and Series A-1 Preferred Stock. Share-based compensation expense is measured and fixed at the grant date, based on the estimated fair value of the award and is recognized on a straight-line basis, net of estimated forfeitures, over the employee’s requisite service period and, for PRSUs, when it is probable that the performance condition will be achieved. The fair value of stock options is determined using the Black-Scholes valuation model using the assumptions discussed in Note 24—Share-Based Compensation Plans. The fair value of RSUs and PRSUs are determined on the date of grant based on the Company’s stock price. Treasury Stock The Company accounts for treasury stock under the cost method. When shares are reissued or retired from treasury stock they are accounted for at an average price. When treasury stock is re-issued at a price higher than its cost, the difference is recorded as a component of Additional paid-in-capital in the Company’s Consolidated Balance Sheets. When treasury stock is re-issued at a price lower than its cost, the difference is recorded as a reduction of Additional paid-in-capital to the extent that there are treasury stock gains to offset the losses. If there are no treasury stock gains in Additional paid-in-capital, the losses upon re-issuance of treasury stock are recorded as a reduction of Retained earnings in the Company’s Consolidated Balance Sheets. Income Taxes The Company is subject to income taxes in the U.S. and various foreign jurisdictions. The Company accounts for income taxes under the asset and liability method. Therefore, income tax expense is based on reported (Loss) income before income taxes, and deferred income taxes reflect the effect of temporary differences between the carrying amounts of assets and liabilities that are recognized for financial reporting purposes and the carrying amounts that are recognized for income tax purposes. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized based on currently available evidence. The Company considers how to recognize, measure, present and disclose in financial statements uncertain tax positions taken or expected to be taken on a tax return. The Company is subject to tax audits in various jurisdictions. The Company regularly assesses the likely outcomes of such audits in order to determine the appropriateness of liabilities for unrecognized tax benefits (“UTBs”). The Company classifies interest and penalties related to UTBs as a component of the provision for income taxes. For UTBs, the Company first determines whether it is more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more-likely-than-not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. As the determination of liabilities related to UTBs and associated interest and penalties requires significant estimates to be made by the Company, there can be no assurance that the Company will accurately predict the outcomes of these audits, and thus the eventual outcomes could have a material impact on the Company’s operating results or financial condition and cash flows. As a result of the 2017 Tax Act changing the U.S. to a modified territorial tax system, the Company no longer asserts that any of its undistributed foreign earnings are permanently reinvested. The Company does not expect to incur significant withholding or state taxes on future distributions. To the extent there remains a basis difference between the financial reporting and tax basis of an investment in a foreign subsidiary after the repatriation of the previously taxed income, the Company is permanently reinvested. A determination of the unrecognized deferred taxes related to these components is not practicable. The Tax Act requires a U.S. shareholder of a foreign corporation to include in income its global intangible low-taxed income (“GILTI”). In general, GILTI is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets. An entity may choose to recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or an entity can elect to treat GILTI as a period cost and include it in the tax expense of the year it is F-13 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) incurred. As such, the Company has elected to treat the tax on GILTI as a tax expense in the year it is incurred rather than recognizing deferred taxes. Restructuring Costs Charges incurred in connection with plans to restructure and integrate acquired businesses or in connection with cost-reduction initiatives that are initiated from time to time are included in Restructuring costs in the Consolidated Statements of Operations if such costs are directly associated with an exit or disposal activity, a reorganization, or with integrating an acquired business. These costs can include employee separations, contract and lease terminations, and other direct exit costs. Employee severance and other termination benefits are primarily determined based on established benefit arrangements, local statutory requirements or historical practices. The Company recognizes these benefits when payment is probable and estimable. Other business realignment costs represent the incremental cost directly related to the restructuring activities which can include accelerated depreciation, professional or consulting fees and other internal costs including compensation related costs for dedicated internal resources. Other business realignment costs are generally recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations. Fair Value Measurements The following fair value hierarchy is used in selecting inputs for those assets and liabilities measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s assumptions (unobservable inputs). The Company evaluates these inputs and recognizes transfers between levels, if any, at the end of each reporting period. The hierarchy consists of three levels: Level 1 - Valuation based on quoted market prices in active markets for identical assets or liabilities; Level 2 - Valuation based on inputs other than Level 1 inputs that are observable for the assets or liabilities either directly or indirectly; Level 3 - Valuation based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and supported by little or no observable market activity. Apart from Coty’s equity investment in Wella (see Note 13—Equity Investments), the Company has not elected the fair value measurement option for any financial instruments or other assets not required to be measured at fair value on a recurring basis. Derivative Instruments and Hedging Activities All derivatives are recognized as assets or liabilities and measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments designated as cash flow hedges under FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"), the change in fair value of the derivative is initially recorded in Accumulated other comprehensive (loss) income in the Consolidated Balance Sheets and is subsequently recognized in earnings when the hedged exposure impacts earnings. For derivative instruments that are not designated as hedges, gains (losses) from changes in fair values are recognized in Net income (loss). The Company does not enter into derivatives for trading or speculative purposes. Foreign Currency Exchange gains or losses incurred on non-financing foreign exchange currency transactions conducted by one of the Company’s operations in a currency other than the operation’s functional currency are reflected in Cost of sales or operating expenses. Net (losses)/gains of $( 32.3 ), $ 3.3 and $( 7.8 ) in fiscal 2023, 2022 and 2021, respectively resulting from non-financing foreign exchange currency transactions are included in the Consolidated Statements of Operations. Assets and liabilities of foreign operations are translated into U.S. dollars at the rates of exchange in effect at the end of the reporting period. Income and expense items are translated at the average exchange rates prevailing during each reporting period presented. Translation gains or losses are reported as cumulative adjustments in Accumulated other comprehensive income (loss) (“AOCI/(L)”). Net (losses)/gains of $( 12.2 ), $ 10.0 and $( 6.8 ) in fiscal 2023, 2022 and 2021, respectively, resulting from financing foreign exchange currency transactions are included in Interest expense, net in the Consolidated Statements of Operations. Lacoste Fragrances License Termination During fiscal 2023, the Company terminated its licensing arrangement for Lacoste fragrances and received termination payments from the licensor totaling € 87.8 million (approximately $ 93.9 ). The Company is expected to receive an additional payment of € 15.0 million (approximately $ 16.3 ) in fiscal 2024. The Company recognized a net gain within Selling, general and F-14 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) administrative expenses of $ 104.4 reflecting the termination proceeds, net of estimated expenses for contractual termination obligations and non-recoverable assets associated with the license termination. Amounts due to the Company from the licensor are reflected in Prepaid expenses and other current assets as of June 30, 2023. The Company will continue to sell remaining Lacoste fragrances inventory through December of calendar year 2023, as per a contractual inventory sell-off arrangement. Russia Market Exit On April 27, 2022, the Company announced the Board of Directors’ decision to wind down its Russian operations. During fiscal 2022, the Company recognized total pre-tax charges in the Condensed Consolidated Statements of Operations of $ 83.6 associated with its exit of Russia. These charges are primarily related 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. The Company incurred $ 24.1 of income tax charges associated with its decision to exit Russia, in fiscal 2022. Additionally, the Company recognized total pre-tax gains in the Condensed Consolidated Statements of Operations of $ 17.0 in the fiscal year ended June 30, 2023. These amounts are primarily related to a bad debt accrual release due to better than expected collections. The Company recognized $ 0.4 of income tax benefits associated with the decision to exit Russia in the fiscal year ended June 30, 2023. The Company anticipates that it will incur an immaterial amount of additional costs through completion of the wind down. Additionally, management anticipates derecognizing the cumulative translation adjustment balance pertaining to the Russian subsidiary. The Company has substantially completed its commercial activities in Russia. However, the Company anticipates that the process related to the liquidation of the Russian legal entity will take an extended period of time. Recently Adopted Accounting Pronouncements In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments, which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease on the commencement date of the lease if specified criteria are met. The Company adopted this guidance in the first quarter of fiscal year 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. Recently Issued and Not Yet Adopted Accounting Pronouncements Accounting Standard Update(s) Topic Effective Period Summary 2023-01 Leases (Topic 842) - Common Control Arrangements Fiscal 2025 The FASB issued ASU No. 2023-01, Leases (Topic 842) - Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with common control leases. The guidance will be effective for the Company in fiscal 2025 with early adoption permitted. The Company does not expect this ASU will have a material effect on its consolidated financial position, results of operations or cash flows. 3. DISCONTINUED OPERATIONS On June 1, 2020, the Comp any entered into a definitive agreement with Rainbow UK Bidco Limited (“KKR Bidco”), regarding a strategic transaction for the sale of Coty’s Professional and Retail Hair businesses, including the Wella, Clairol, OPI and ghd brands, (together, the “Wella Business”), valuing the business at $ 4,300.0 on a cash- and debt-free basis. The transaction was completed on November 30, 2020 and Coty retained an initial ownership of 40 % of the Wella Company. As of June 30, 2023, the Company owned a 25.9 % stake in the Wella Company. See Note 13—Equity Investments for additional information. In accordance with applicable accounting guidance for the disposal of long-lived assets, the results of the Wella Business are presented as discontinued operations in the prior period leading up to the date of the sale, and, as such, have been excluded F-15 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) from both continuing operations and segment results for all periods presented. The Wella Business was comprised of the Professional Beauty and Retail Hair businesses. The following table has selected financial information included in Net income from discontinued operations for the Wella Business. Year Ended June 30, 2023 2022 (a) 2021 (b) Net revenues $ — $ — $ 986.3 Cost of sales — — 322.5 Gross profit — — 663.8 Selling, general and administrative expenses — — 443.7 Restructuring costs — — ( 0.7 ) Operating income — — 220.8 Interest expense, net — — 21.3 (Gain) loss on sale of business — ( 6.1 ) 246.4 Other (income) expense, net — — ( 1.0 ) Income (loss) from discontinued operations before income taxes — 6.1 ( 45.9 ) Income tax on discontinued operations — 0.4 91.4 Net income (loss) from discontinued operations $ — $ 5.7 $ ( 137.3 ) (a) Net income from discontinued operations for the year ended June 30, 2022 reflect certain working capital adjustments net of the related income tax impact. (b) As the sale of the Wella Business occurred on November 30, 2020, discontinued operations activity, other than the Loss on sale of business, comprises five months for the fiscal year ended 2021. The following is selected financial information included in cash flows from discontinued operations for the Wella Business held for sale: Year Ended June 30, 2023 2022 2021 CASH FLOW FROM INVESTING ACTIVITIES Capital expenditures $ — $ — $ 8.7 The gain/(loss) on sale of the Wella Business included in Net income (loss) from discontinued operations in the Consolidated Statements of Operations was nil, $ 6.1 , and $( 246.4 ) for the years ended June 30, 2023, 2022 and 2021, respectively. Initial cash proceeds received by the Company for the sale of its 60 % stake in the Wella Business were $ 2,451.7 and the Company retained an equity interest of 40 %. The loss on sale reflects the net assets sold, taxes and other costs to sell the Wella Business. On December 22, 2021, the Company entered into an agreement with KKR Bidco related to post-closing adjustments to the purchase consideration for the Wella Business. As part of this agreement, the Company may receive future contingent proceeds, based on the future recovery of certain tax credits of the Wella Business. The Company accounts for the initial measurement of contingent consideration under a loss recovery approach. As of the time the contingent consideration arrangement was entered into, the Company was unable to determine that it was probable that any of the contingent consideration would be earned. Therefore, no contingent consideration gain was initially recognized. Subsequent measurement of the contingent consideration is based on the guidance for gain contingencies and any gain will be recorded at the time the consideration is earned. In fiscal 2022, a $ 34.0 advance of future contingent proceeds was paid to the Company and subject to claw back if recovery targets related to the Wella Business tax credits are not achieved. During fiscal 2023 and 2022, certain recovery targets were achieved and the Company recognized gains of $ 30.8 and $ 0.7 , respectively, reported in Other income, net. The remaining $ 2.5 is unearned and is included in Other noncurrent liabilities in the Consolidated Balance Sheet until the contingency is resolved. F-16 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 4. BUSINESS COMBINATIONS, ASSET ACQUISITIONS AND DIVESTITURES Business Combinations and Asset Acquisitions There were no business combination or asset acquisition transactions during the years ended June 30, 2023 and 2022. KKW Beauty Business Transaction On January 4, 2021, the Company completed its purchase of 20 % of the outstanding equity of KKW Holdings, LLC (“KKW Holdings”), pursuant to a purchase agreement entered into between the Company, KKW Holdings and other parties listed as signatories (the “KKW Purchase Agreement”). On the same date, as contemplated by the KKW Purchase Agreement, the Company entered into a collaboration agreement, pursuant to which, in exchange for a marketing fee and a license fee, it received the right and license to manufacture, advertise, promote, distribute and sell certain Kim Kardashian products outside of the existing KKW Holdings scope of fragrances and cosmetics, and use certain intellectual property owned by or licensed to KKW Holdings in connection with the development, manufacture, labelling, packaging, advertising, display, distribution and sale of such products (the “KKW Collaboration Agreement”). Under the KKW Collaboration Agreement, products will be sold by the Company’s consolidated subsidiaries. Therefore, the related revenues generated and expenses incurred by such subsidiaries will be reported in the Company’s Consolidated Statements of Operations. The KKW Purchase Agreement also gives the Company an option to acquire, and the sellers the option to compel the Company to acquire, an additional 31 % of the outstanding equity of KKW Holdings (the “KKW Call Option” and “KKW Put Option”, respectively). The seller’s ability to exercise the KKW Put Option is contingent upon the achievement of certain contractually defined targets. The KKW Call Option and KKW Put Option expire on the seventh anniversary of the KKW Collaboration Agreement. Future exercise of the KKW Call Option or KKW Put Option has been deemed by the Company to be remote. However, if exercise were to occur such exercise may result in a material cash outflow for the Company. The purchase consideration paid for the equity interest, the KKW Call Option and rights under the KKW Collaboration Agreement was $ 200.0 and was allocated as follows using a relative fair value approach at the acquisition date: Estimated fair value Estimated useful life (in years) KKW Collaboration Agreement $ 180.6 20 20 % equity interest in KKW Holdings 19.4 Total purchase consideration $ 200.0 The initial fair value of the KKW Collaboration Agreement and the Company’s 20 % equity investment were estimated using an income approach. The Company accounts for its 20 % investment in the equity of KKW Holdings under the equity method. The initial fair value of the KKW Collaboration Agreement is recognized within Other intangible assets, net and the Company’s equity investment in KKW Holdings is recognized within Equity investments, each within the Consolidated Balance Sheets. The fair value of the KKW Call Option was deemed to be de minimis. Business Divestitures There were no divestiture transactions during the years ended June 30, 2023 and 2022. Wella Business On November 30, 2020, the Company completed the strategic transaction with Kohlberg Kravis Roberts & Co. L.P. and its affiliates (“KKR”) for the sale of a majority stake in the Wella Business (see Note 3—Discontinued Operations). Following the sale, Coty deconsolidated the Wella Business as KKR owned approximately 60 % of the separately managed business, and the Company owned the remaining 40 %. As of June 30, 2023, the Company owned a 25.9 % stake in the Wella Company. See Note 13—Equity Investments for additional information. Initial cash proceeds received for the sale of the 60 % stake in the Wella Business were $ 2,451.7 (less cash disposed of $ 65.5 , resulted in net cash proceeds of $ 2,386.2 ). Coty utilized $ 2,015.5 of the net proceeds to pay down its 2018 Coty Term A and B Facilities (as defined in Note 15—Debt) on a pro rata basis and reserved $ 500.0 for reinvestment in the Company's business, pursuant to the 2018 Coty Credit Agreement, as amended (as defined in Note 15—Debt). In connection with the November 30, 2021 amendment to the 2018 F-17 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Coty Credit Agreement, the Company received consent from the participating banks to eliminate the requirements to utilize or repay the Reinvestment Balance (as defined in Note 15—Debt). Additionally, as contemplated in the Sale and Purchase Agreement (as amended) relating to the sale of the Wella Business (the “Wella SPA”), the purchase consideration was subject to further adjustments for other working capital and contractually specified items. See Note 3—Discontinued Operations for more information. As a result of the sale of the majority interest in the Wella Business, the Company determined that it no longer had a controlling interest in the Wella Business. The Company, therefore, deconsolidated its ownership of the Wella Business assets and liabilities and no longer reported the assets and liabilities of the Wella Business in its Consolidated Balance Sheet as of December 1, 2020. The operations of the Wella Business were consolidated in the results of the Company through the date of sale. The Company accounted for its stake in Wella under the fair value option (see Note 13—Equity Investments). 5. SEGMENT REPORTING Operating and reportable segments (referred to as “segments”) reflect the way the Company is managed and for which separate financial information is available and evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company has designated its Chief Executive Officer as the CODM. Certain income and shared costs and the results of corporate initiatives are managed by Corporate. Corporate primarily includes stock compensation expense, restructuring and realignment costs, costs related to acquisition and divestiture activities, and impairments of long-lived assets, goodwill and intangibles that are not attributable to ongoing operating activities of the segments. Corporate costs are not used by the CODM to measure the underlying performance of the segments. With the exception of goodwill and acquired intangible assets, the Company does not identify or monitor assets by segment. The Company does not present assets by reportable segment since various assets are shared between reportable segments. The allocation of goodwill by segment is presented in Note 12—Goodwill and Other Intangible Assets, net. Year Ended June 30, SEGMENT DATA 2023 2022 2021 Net revenues: Prestige $ 3,420.5 $ 3,267.9 $ 2,720.8 Consumer Beauty 2,133.6 2,036.5 1,909.1 Total $ 5,554.1 $ 5,304.4 $ 4,629.9 Depreciation and amortization: Prestige $ 262.4 $ 313.4 $ 350.4 Consumer Beauty 164.3 203.0 234.9 Total $ 426.7 $ 516.4 $ 585.3 Operating income (loss) from continuing operations Prestige $ 483.7 $ 367.2 $ 158.1 Consumer Beauty 63.3 9.5 26.9 Corporate ( 3.3 ) ( 135.8 ) ( 233.6 ) Total $ 543.7 $ 240.9 $ ( 48.6 ) Reconciliation: Operating income (loss) from continuing operations $ 543.7 $ 240.9 $ ( 48.6 ) Interest expense, net 257.9 224.0 235.1 Other income, net ( 419.0 ) ( 409.9 ) ( 43.9 ) Income (loss) from continuing operations before income taxes $ 704.8 $ 426.8 $ ( 239.8 ) F-18 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) As of June 30, Long-lived assets: 2023 2022 U.S. $ 3,597.3 $ 3,724.7 Netherlands 3,367.5 3,313.5 Brazil 495.0 467.9 All other 1,039.0 1,026.9 Total $ 8,498.8 $ 8,533.0 For Net revenues, a major country is defined as a group of subsidiaries in a country with combined revenues greater than 10% of consolidated net revenues or as otherwise deemed significant. The United States is the only country that accounts for more than 10% of total net revenues for fiscal years 2023, 2022 and 2021. The United States had net revenues of $ 1,547.7 , $ 1,477.7 and $ 1,288.9 in fiscal 2023, 2022 and 2021, respectively. No customer or group of affiliated customers accounted for more than 10% of the Company’s Net revenues in fiscal 2023, 2022 and 2021 or are otherwise deemed significant. For Long-lived assets, a major country is defined as a group of subsidiaries within a country with combined long-lived assets greater than 10% of consolidated long-lived assets or as otherwise deemed significant. Long-lived assets include property and equipment, goodwill and other intangible assets. Presented below are the net revenues associated with Company’s product categories as a percentage of total net revenues for continuing operations: Year Ended June 30, PRODUCT CATEGORY 2023 2022 2021 Fragrances 59.4 % 58.9 % 57.4 % Color Cosmetics 27.9 % 28.7 % 29.3 % Body Care, Skin & Other 12.7 % 12.4 % 13.3 % Total 100.0 % 100.0 % 100.0 % 6. ACQUISITION- AND DIVESTITURE-RELATED COSTS Acquisition-related costs, which are expensed as incurred, represent non-restructuring costs directly related to acquiring and integrating an entity, for both completed and contemplated acquisitions and can include finder’s fees, legal, accounting, valuation, other professional or consulting fees, and other internal costs which can include compensation related expenses for dedicated internal resources. The Company recognized acquisition-related costs of nil , nil and $ 3.0 for the fiscal years ended 2023, 2022 and 2021, respectively. Divestiture-related costs, which are expensed as incurred, represent non-restructuring costs directly related to divesting and selling an entity, including partial sales, for both completed and contemplated divestitures. These costs can include legal, accounting, information technology, other professional or consulting fees and other internal costs. Internal costs can include compensation related expenses for dedicated internal resources. Additionally, for divestitures, the Company includes write-offs of assets that are no longer recoverable and contract related costs due to the divestiture. The Company recognized divestiture-related costs of nil , $ 14.7 and $ 135.8 for the fiscal 2023, 2022 and 2021, respectively. Divestiture-related costs incurred during the fiscal years 2022 and 2021 were primarily related to the strategic transaction with KKR for the sale of a majority stake in the Wella Business. See Note 4—Business Combinations, Asset Acquisitions and Divestitures for information on the strategic transaction. These costs have been recorded in Acquisition- and divestiture- related costs in the Consolidated Statements of Operations. 7. RESTRUCTURING COSTS Restructuring costs for the fiscal years ended June 30, 2023, 2022 and 2021 are presented below: Year Ended June 30, 2023 2022 2021 Transformation Plan $ ( 6.5 ) $ ( 6.5 ) $ 73.2 Other Restructuring — — ( 9.6 ) Total $ ( 6.5 ) $ ( 6.5 ) $ 63.6 Transformation Plan F-19 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) On July 1, 2019, the Company announced a four-year plan to drive substantial improvement in and optimization in the Company's businesses (the “Turnaround Plan”). This plan was expanded on May 11, 2020 to further reduce fixed costs (the “Transformation Plan”). Of the expected costs, the Company has incurred cumulative restructuring charges of $ 216.8 related to approved initiatives through June 30, 2023, which have been recorded in Corporate. As of June 30, 2023, the Company does not expect to incur any additional restructuring charges pertaining to the Transformation Plan. The following table presents aggregate restructuring charges for the program: Severance and Employee Benefits Fixed Asset Write-offs Other Exit Costs Total Fiscal 2020 $ 151.2 $ ( 1.1 ) $ 6.5 $ 156.6 Fiscal 2021 $ 73.4 $ ( 0.5 ) $ 0.3 $ 73.2 Fiscal 2022 ( 6.2 ) — ( 0.3 ) $ ( 6.5 ) Fiscal 2023 ( 6.5 ) — — ( 6.5 ) Cumulative through June 30, 2023 211.9 ( 1.6 ) 6.5 216.8 The related liability balance and activity of restructuring costs for the Transformation Plan restructuring costs are presented below: Severance and Employee Benefits Total Program Costs Balance—July 1, 2022 $ 55.2 $ 55.2 Restructuring charges 4.6 4.6 Payments ( 37.8 ) ( 37.8 ) Changes in estimates ( 11.1 ) ( 11.1 ) Effect of exchange rates ( 0.9 ) ( 0.9 ) Balance—June 30, 2023 $ 10.0 $ 10.0 The Company currently estimates that the total remaining accrual of $ 10.0 will result in cash expenditures of approximately $ 8.9 and $ 1.1 in fiscal 2024 and thereafter, respectively. Other Restructuring The Company executed a number of other restructuring activities in prior years, which are substantially completed. The Company recognized expenses (income) of $ 0.0 , $ 0.0 , and $( 9.6 ) in fiscal 2023, 2022 and 2021, respectively, which have been recorded in Corporate. The related liability balances were $ 0.0 at both June 30, 2023 and June 30, 2022. 8. TRADE RECEIVABLES—FACTORING The Company factors a portion of its trade receivables with unrelated third-party factoring companies on both a recourse and non-recourse basis. The Company accounts for trade receivable transfers as sales and derecognizes the sold receivables from the Consolidated Balance Sheets. The net amount utilized under factoring facilities was $ 202.9 and $ 179.3 as of June 30, 2023 and 2022, respectively. The aggregate amount of trade receivable invoices on a worldwide basis amounted to $ 1,579.2 and $ 1,041.2 in fiscal 2023 and 2022, respectively. Remaining balances due from factors amounted to $ 14.2 and $ 11.2 as of June 30, 2023 and 2022, respectively, and are included in Trade receivables, net in the Consolidated Balance Sheets. Factoring fees paid under these arrangements were $ 8.5 , $ 3.0 and $ 1.2 in fiscal 2023, 2022 and 2021, respectively, which were recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations. Cash received from the selling of receivables are presented as a change in trade receivables within the operating activities section of the Consolidated Statements of Cash Flows. U.S. Receivables Purchase Agreement On March 19, 2019, the Company entered into an Uncommitted Receivables Purchase Agreement (the “Receivables Purchase Agreement”) with a financial institution, with an aggregate facility limit of $ 150.0 . Eligible trade receivables are purchased by the financial institution for cash at net invoice value less a factoring fee. Pursuant to Receivables Purchase Agreement, the Company acts as collections agent for the financial institution and is responsible for the collection, and F-20 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) remittance to the financial institution, of all customer payments related to trade receivables factored under this arrangement. For certain customer receivables factored, the Company will retain a recourse obligation of up to 10 percent of the respective invoice’s net invoice value, payable to the financial institution if the customer’s payment is not received by the contractual due date. The fair value of sold receivables approximated their book value due to their short-term nature. The Company estimated that the fair value of its servicing responsibilities was not material. European Receivables Purchase Agreement In September 2019, the Company entered into a factoring agreement with a financial institution, which allows for the transfer of receivables from certain of the Company’s European subsidiaries, in exchange for cash (the “European Receivables Purchase Agreement”). The total outstanding amount permitted among such subsidiaries is € 102.6 million. Factoring of such receivables under the European Receivables Purchase Agreement is executed on a non-recourse basis. Other Factoring Agreements In addition to the Company’s main factoring facilities described above, from time to time, certain of the Company’s subsidiaries may enter into local factoring agreements with local financial institutions. Based on the terms of such arrangements entered into during fiscal 2023 and 2022, the Company has derecognized receivables sold pursuant to these arrangements from the Consolidated Balance Sheets. 9. INVENTORIES Inventories as of June 30, 2023 and 2022 are presented below: June 30, 2023 June 30, 2022 Raw materials $ 224.1 $ 171.5 Work-in-process 15.6 13.2 Finished goods 613.7 476.8 Total inventories $ 853.4 $ 661.5 10. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets as of June 30, 2023 and 2022 are presented below: June 30, 2023 June 30, 2022 Due from related party $ 70.6 $ 70.2 Value added tax, sales and other non-income tax assets 60.2 59.4 Expected income tax refunds, credits and prepaid income taxes 102.4 116.3 Prepaid marketing, copyright and agency fees 88.7 66.9 Non-trade receivables 18.4 15.3 Prepaid rent, leases, maintenance and insurance 17.5 10.3 Interest rate swap asset 2.8 7.6 Forward Repurchase Contracts Asset 137.6 — Other 55.4 46.0 Total prepaid expenses and other current assets $ 553.6 $ 392.0 F-21 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 11. PROPERTY AND EQUIPMENT, NET Property and equipment, net as of June 30, 2023 and 2022 are presented below: June 30, 2023 June 30, 2022 Land, buildings and leasehold improvements $ 432.1 $ 424.2 Machinery and equipment 676.4 670.7 Marketing furniture and fixtures 531.8 501.8 Computer equipment and software 751.5 737.9 Construction in progress 81.6 65.2 Property and equipment, gross 2,473.4 2,399.8 Accumulated depreciation and amortization ( 1,760.5 ) ( 1,684.3 ) Property and equipment, net $ 712.9 $ 715.5 Depreciation expense of property and equipment totaled $ 235.0 , $ 309.0 and $ 334.1 in fiscal 2023, 2022 and 2021, respectively. Depreciation expense is recorded in Cost of sales and Selling, general and administrative expenses in the Consolidated Statements of Operations. During fiscal 2023, 2022 and 2021, the Company recorded asset impairment charges of $ 4.3 , $ 2.4 and $ 5.2 respectively, which are included in Selling, general and administrative expenses in the Consolidated Statements of Operations. The fiscal 2023, 2022, and 2021 impairment charges primarily relate to the abandonment of distribution equipment and IT software, the abandonment of computer software, and the abandonment of machinery and equipment, respectively. 12. GOODWILL AND OTHER INTANGIBLE ASSETS, NET Assessment for Impairments The Company tests goodwill and indefinite-lived other intangible assets for impairment at least annually as of May 1, or more frequently, if certain events or circumstances warrant. During fiscal years 2023, 2022 and 2021, the Company recorded no impairments of goodwill at the Company’s reporting units. During fiscal years 2023, 2022 and 2021, the Company recorded total impairments on indefinite-lived other intangible assets of nil , $ 31.4 and nil , respectively. Additionally, the Company recorded no impairments on finite-lived other intangible assets during fiscal years 2023, 2022 or 2021. F-22 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Goodwill Goodwill as of June 30, 2023, 2022 and 2021 is presented below: Prestige Consumer Beauty Total Gross balance at June 30, 2021 $ 6,384.0 $ 1,774.2 $ 8,158.2 Accumulated impairments ( 3,110.3 ) ( 929.8 ) ( 4,040.1 ) Net balance at June 30, 2021 $ 3,273.7 $ 844.4 $ 4,118.1 Changes during the year ended June 30, 2022 Foreign currency translation ( 163.3 ) ( 40.1 ) ( 203.4 ) Gross balance at June 30, 2022 $ 6,220.7 $ 1,734.1 $ 7,954.8 Accumulated impairments ( 3,110.3 ) ( 929.8 ) ( 4,040.1 ) Net balance at June 30, 2022 $ 3,110.4 $ 804.3 $ 3,914.7 Changes during the year ended June 30, 2023 Foreign currency translation 58.5 14.7 73.2 Gross balance at June 30, 2023 $ 6,279.2 $ 1,748.8 $ 8,028.0 Accumulated impairments ( 3,110.3 ) ( 929.8 ) ( 4,040.1 ) Net balance at June 30, 2023 $ 3,168.9 $ 819.0 $ 3,987.9 Other Intangible Assets, net Other intangible assets, net as of June 30, 2023 and 2022 are presented below: June 30, 2023 June 30, 2022 Indefinite-lived other intangible assets $ 950.8 $ 936.6 Finite-lived other intangible assets, net 2,847.2 2,966.2 Total Other intangible assets, net $ 3,798.0 $ 3,902.8 F-23 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The changes in the carrying amount of indefinite-lived other intangible assets are presented below: Trademarks Total Gross balance at June 30, 2021 $ 1,932.2 $ 1,932.2 Accumulated impairments ( 913.5 ) ( 913.5 ) Net balance at June 30, 2021 $ 1,018.7 $ 1,018.7 Changes during the year ended June 30, 2022 Impairment charges (a) ( 31.4 ) ( 31.4 ) Foreign currency translation ( 50.7 ) ( 50.7 ) Gross balance at June 30, 2022 $ 1,881.5 $ 1,881.5 Accumulated impairments ( 944.9 ) ( 944.9 ) Net balance at June 30, 2022 $ 936.6 $ 936.6 Changes during the year ended June 30, 2023 Foreign currency translation 14.2 14.2 Gross balance at June 30, 2023 $ 1,895.7 $ 1,895.7 Accumulated impairments $ ( 944.9 ) $ ( 944.9 ) Net balance at June 30, 2023 950.8 950.8 (a) During fiscal 2022, the Company recognized asset impairment charges of $ 31.4 relating to the Max Factor and Bourjois trademarks. Intangible assets subject to amortization are presented below: Cost Accumulated Amortization Accumulated Impairment Net June 30, 2022 License and collaboration agreements $ 3,861.9 $ ( 1,302.2 ) $ ( 19.6 ) $ 2,540.1 Customer relationships 740.0 ( 473.5 ) ( 5.5 ) 261.0 Trademarks 320.5 ( 177.1 ) ( 0.5 ) 142.9 Product formulations and technology 83.9 ( 61.7 ) — 22.2 Total $ 5,006.3 $ ( 2,014.5 ) $ ( 25.6 ) $ 2,966.2 June 30, 2023 License and collaboration agreements $ 3,756.2 $ ( 1,282.6 ) $ ( 19.6 ) $ 2,454.0 Customer relationships 750.6 ( 505.9 ) ( 5.5 ) 239.2 Trademarks 313.0 ( 180.6 ) ( 0.5 ) 131.9 Product formulations and technology 85.6 ( 63.5 ) — 22.1 Total $ 4,905.4 $ ( 2,032.6 ) $ ( 25.6 ) $ 2,847.2 Amortization expense totaled $ 191.8 , $ 207.4 and $ 251.2 for the fiscal years ended June 30, 2023, 2022 and 2021, respectively. F-24 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Intangible assets subject to amortization are amortized principally using the straight-line method and have the following weighted-average remaining lives: Description License and collaboration agreements 20.2 years Customer relationships 15.4 years Trademarks 14.9 years Product formulations and technology 21.3 years As of June 30, 2023, the remaining weighted-average life of all intangible assets subject to amortization is 19.6 years. The estimated aggregate amortization expense for each of the following fiscal years ending June 30 is presented below: 2024 $ 190.0 2025 185.7 2026 154.8 2027 145.5 2028 142.1 License Agreements The Company records assets for license agreements (“licenses”) acquired in transactions accounted for as business combinations. These licenses provide the Company with the exclusive right to manufacture and market on a worldwide and/or regional basis, certain of the Company’s products which comprise a significant portion of the Company’s revenues. These licenses have initial terms covering various periods. Certain brand licenses provide for automatic extensions ranging from 2 to 10 year terms, at the Company’s discretion. F-25 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 13. EQUITY INVESTMENTS The Company's equity investments, classified as Equity investments on the Consolidated Balance Sheets, as of June 30, 2023 are represented by the following: June 30, 2023 June 30, 2022 Equity method investments: KKW Holdings (a) $ 8.9 $ 12.6 Equity investments at fair value: Wella (b) 1,060.0 830.0 Total equity investments $ 1,068.9 $ 842.6 (a) On January 4, 2021, the Company completed its purchase of 20 % of the outstanding equity of KKW Holdings. (See Note 4—Business Combinations, Asset Acquisitions and Divestitures). During the years ended June 30, 2023 and 2022, the Company recognized $ 3.7 and $ 3.6 , respectively, representing its share of the investee’s net loss and the amortization of basis differences in Other income, net within the Consolidated Statements of Operations. (b) On November 30, 2020, the Company completed the strategic transaction with KKR for the sale of a 60 % stake in Coty’s Wella Business. As of June 30, 2023 and 2022, the Company's stake in the Wella Company was 25.9 %. The following table presents summarized financial information of the Company’s equity method investees for the years ended June 30, 2023 and 2022. Amounts presented represent combined totals at the investee level and not the Company’s proportionate share: Summarized Statements of Operations information: Year Ended June 30, 2023 Year Ended June 30, 2022 Net revenues $ 2,477.7 $ 2,505.1 Gross profit 1,616.2 1,706.5 Operating income (loss) 163.6 91.9 Loss before income taxes ( 33.6 ) ( 137.8 ) Net loss ( 76.2 ) ( 171.7 ) Summarized Balance Sheets information: June 30, 2023 June 30, 2022 Current assets $ 1,093.4 $ 951.4 Noncurrent assets 4,554.5 4,577.5 Total assets 5,647.9 5,528.9 Current liabilities 1,038.9 985.7 Noncurrent liabilities 2,708.5 2,525.6 Total liabilities 3,747.4 3,511.3 F-26 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) As of June 30, 2023, the Wella Company had 30.0 million shares of issued common stock and 1,843.2 million shares of issued redeemable preferred stock, of which Coty held 25.9 % of each class of shares. The Wella Company had total equity inclusive of redeemable preferred stock of $ 1,938.8 as of June 30, 2023. The following table summarizes movements in equity investments with fair value option that are classified within Level 3 for the period ended June 30, 2023. There were no internal movements to or from Level 3 from Level 1 or Level 2 for the period ended June 30, 2023. Equity investments at fair value: Balance as of June 30, 2022 $ 830.0 Total gains/(losses) included in earnings 230.0 Balance as of June 30, 2023 $ 1,060.0 Level 3 significant unobservable inputs sensitivity The following table summarizes the significant unobservable inputs used in Level 3 valuation of the Company’s investments carried at fair value as of June 30, 2023. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments. Fair value Valuation Technique Unobservable input Range Equity investments at fair value $ 1,060.0 Discounted cash flows Discount rate 10.75 % (a) Growth rate 1.8 % - 9.2 % (a) Market multiple Revenue multiple 2.5 x- 3.0 x (b) EBITDA multiple 12.0 x – 15.0 x (b) (a) The primary unobservable inputs used in the fair value measurement of the Company’s equity investments with fair value option, when using a discounted cash flow method, are the discount rate and revenue growth rate. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. The Company estimates the discount rate based on the investees' projected cost of equity and debt. The revenue growth rate is forecasted for future years by the investee based on their best estimates. Significant increases (decreases) in the revenue growth rate in isolation would result in a significantly higher (lower) fair value measurement. (b) The primary unobservable inputs used in the fair value measurement of the Company’s equity investments with fair value option, when using a market multiple method, are the revenue multiple and EBITDA multiple. Significant increases (decreases) in the revenue multiple or EBITDA multiple in isolation would result in a significantly higher (lower) fair value measurement. The market multiples are derived from a group of guideline public companies. F-27 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 14. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities as of June 30, 2023 and 2022 consist of the following: June 30, 2023 June 30, 2022 Advertising, marketing and licensing $ 338.4 $ 314.9 Customer returns, discounts, allowances and bonuses 261.5 254.1 Compensation and other compensation related benefits 171.1 131.7 Value added, sales and other non-income taxes 71.5 83.1 Derivative liability for foreign currency 4.3 62.1 Restructuring costs 8.9 54.1 Interest 47.0 47.8 Auditing, consulting, legal and litigation accruals 25.2 30.8 Deferred income 6.9 21.5 Factoring - due to counterparty 23.0 12.8 Unfavorable contract liability 10.5 10.1 Due to related party 8.3 4.7 Cross currency swap liability 0.5 3.5 Other 64.9 65.9 Total accrued expenses and other current liabilities $ 1,042.0 $ 1,097.1 15. DEBT June 30, 2023 June 30, 2022 Short-term debt $ — $ — Senior Secured Notes 2026 Dollar Senior Secured Notes due April 2026 900.0 900.0 2026 Euro Senior Secured Notes due April 2026 761.0 731.8 2029 Dollar Senior Secured Notes due January 2029 500.00 500.0 2018 Coty Credit Agreement 2021 Coty Revolving Credit Facility due April 2025 228.9 273.6 2018 Coty Term B Facility due April 2025 1,183.7 1,239.2 Senior Unsecured Notes 2026 Dollar Notes due April 2026 473.0 550.0 2026 Euro Notes due April 2026 196.0 261.4 Brazilian Credit Facility 31.9 42.4 Other long-term debt and finance lease obligations 7.1 0.1 Total debt 4,281.6 4,498.5 Less: Short-term debt and current portion of long-term debt ( 57.9 ) ( 23.0 ) Total Long-term debt 4,223.7 4,475.5 Less: Unamortized financing fees ( 29.8 ) ( 41.8 ) Less: Discount on long-term debt ( 15.7 ) ( 24.6 ) Total Long-term debt, net $ 4,178.2 $ 4,409.1 Short-Term Debt The Company maintains short-term lines of credit with financial institutions around the world. Total available lines of credit were $ 49.2 and $ 43.1 , of which nil and nil were outstanding at June 30, 2023 and 2022, respectively. Interest rates on F-28 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) these short-term lines of credit vary depending on market rates for borrowings within the respective geographic locations plus applicable spreads. Interest rates plus applicable spreads on these lines ranged from 4.8 % to 16.4 % and from 1.2 % to 15.9 % as of June 30, 2023 and 2022, respectively. The weighted-average interest rate on short-term debt outstanding was 0.0 % and 0.0 % as of June 30, 2023 and 2022, respectively. In addition, the Company had undrawn letters of credit of $ 7.2 and $ 14.3 and bank guarantees of $ 16.3 and $ 17.2 as of June 30, 2023 and 2022, respectively. Long-Term Debt The Company’s long-term debt facilities consisted of the following as of June 30, 2023 and 2022: Facility Maturity Date Borrowing Capacity (in millions) as of June 30, 2023 Interest Rate Terms Applicable Interest Rate Spread as of June 30, 2023 Debt Discount Repayment Schedule Fiscal 2023 and 2022 2029 Dollar Senior Secured Notes January 2029 $ 500.0 4.75 % per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2022 4.75 % N/A (b) Payable in full at maturity date 2021 Coty Revolving Credit Facility (f) (g) April 2025 $ 2,000.0 SOFR (a) plus a margin ranging from 1.00 % to 2.00 % per annum or a base rate plus a margin ranging from 0.00 % to 1.00 % per annum, based on the Company’s total net leverage ratio (c) (d) (e) 1.75 % N/A (b) Payable in full at maturity date Brazilian Credit Facilities - October 2023 October 2023 $ 31.9 3.48 % per annum, payable quarterly in arrears beginning on July 5, 2022 3.48 % N/A (b) Payable in full at maturity date Brazilian Credit Facilities - September 2023 September 2023 $ — 3.74 % per annum, payable quarterly in arrears beginning on June 30, 2022 3.74 % N/A (b) Repaid in full 2026 Dollar Senior Secured Notes April 2026 $ 900.0 5.0 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021 5.000 % N/A (b) Payable in full at maturity date 2026 Euro Senior Secured Notes April 2026 € 700.0 3.875 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2021 3.875 % N/A (b) 2018 Coty Term B Facility - USD Portion (g) April 2025 $ 715.5 SOFR (a) plus a margin of 2.25 % per annum or a base rate plus a margin of 1.25 % per annum (d) 2.25 % 0.25 % Quarterly repayments beginning September 30, 2018 at 0.25 % of original principal amount 2018 Coty Term B Facility - EUR Portion (g) April 2025 € 430.6 SOFR (a) plus a margin of 2.50 % per annum (d) 2.50 % 0.25 % 2026 Dollar Notes April 2026 $ 473.0 6.5 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2018 N/A (b) N/A (b) Payable in full at maturity date 2026 Euro Notes April 2026 € 180.3 4.75 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2018 N/A (b) N/A (b) (a) As defined in the Interest section below. (b) N/A - Not Applicable. (c) As defined per the 2018 Coty Credit Agreement, as amended. (d) The selection of the applicable one, two, three, six or twelve month interest rate for the period is at the discretion of the Company. (e) The Company will pay to the Revolving Credit Facility lenders an unused commitment fee calculated at a rate ranging from 0.10 % to 0.35 % per annum, based on the Company’s total net leverage ratio (d) . As of June 30, 2023 and 2022, the applicable rate on the unused commitment fee was 0.25 % and 0.25 %, respectively. (f) As a result of the amendments entered into in fiscal 2022, the 2018 Coty Revolving Credit Facility was refinanced and replaced by the 2021 Coty Revolving Credit Facility due April 5, 2025 (as described below). (g) Except as described below in amendments to the 2018 Coty Credit Agreement (as defined below), original terms of the 2018 Coty Credit Agreement apply to these debt facilities. F-29 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Recent Developments Early Paydown of Brazilian Credit Facility On June 23, 2023, a wholly-owned subsidiary of the Company utilized cash on hand to fully paid down one of the existing U.S. Dollar-denominated credit facilities in Brazil in the amount of $ 10.5 . This facility was set to mature in September 2023. Financing Activities The Company completed certain financing activities in the first quarter of fiscal 2024, as discussed in Note 28—Subsequent Events. Senior Secured Notes On November 30, 2021, the Company issued an aggregate principal amount of $ 500.0 of 4.75 % senior secured notes due 2029 ("2029 Dollar Senior Secured Notes"). Coty received gross proceeds of $ 500.0 in connection with the offering of the 2029 Dollar Senior Secured Notes. In accordance with the 2018 Coty Credit Agreement, as amended, a portion of the gross proceeds received were utilized to pay down the remaining outstanding principal balance of the 2018 Coty Revolving Credit Facility of $ 394.0 and the 2018 Coty Term A Facility of € 89.5 million (approximately $ 100.4 ). On June 16, 2021, the Company issued an aggregate principal amount of € 700.0 million of 3.875 % senior secured notes due 2026 (the “2026 Euro Senior Secured Notes”) in a private offering. Coty received gross proceeds of € 700.0 million in connection with the offering of the 2026 Euro Senior Secured Notes. On April 21, 2021, the Company issued an aggregate principal amount of $ 900.0 of 5.00 % senior secured notes due 2026 (the “2026 Dollar Senior Secured Notes” and, together with the 2026 Euro Senior Secured Notes and 2029 Dollar Senior Secured Notes, the “Senior Secured Notes”). Coty received gross proceeds of $ 900.0 in connection with the offering of the 2026 Dollar Senior Secured Notes. Coty used the gross proceeds of the offerings of the Senior Secured Notes to repay a portion of the term loans outstanding under the existing credit facilities and to pay related fees and expenses thereto. The Senior Secured Notes are senior secured obligations of Coty and are guaranteed on a senior secured basis by each of Coty’s wholly-owned domestic subsidiaries that guarantees Coty’s obligations under its existing senior secured credit facilities and are secured by first priority liens on the same collateral that secures Coty’s obligations under its existing senior secured credit facilities, as described below. The Senior Secured Notes and the guarantees are equal in right of payment with all of Coty’s and the guarantors’ respective existing and future senior indebtedness and are pari passu with all of Coty’s and the guarantors’ respective existing and future indebtedness that is secured by a first priority lien on the collateral, including the existing senior secured credit facilities, to the extent of the value of such collateral. Optional Redemption Applicable Premium The indentures governing the Senior Secured Notes specify the Applicable Premium (as defined in the respective indentures) to be paid upon early redemption of some or all of the Senior Secured Notes prior to, and on or after, April 15, 2023 for the 2026 Euro Senior Secured Notes and 2026 Dollar Senior Secured Notes, and January 15, 2025 for the 2029 Dollar Senior Secured Notes (the "Early Redemption Dates"). The Applicable Premium related to the respective Senior Secured Notes on any redemption date and as calculated by the Company is the greater of: (1) 1.0 % of the then outstanding principal amount of the respective Senior Secured Notes; and (2) the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of such respective Senior Secured Notes that would apply if such respective notes were redeemed on the respective Early Redemption Dates, (such redemption price is expressed as a percentage of the principal amount being set forth in the table appearing in the Redemption Pricing section below), plus (ii) all remaining scheduled payments of interest due on the respective Senior Secured Notes to and including the respective Early Redemption Dates, (excluding accrued but unpaid interest, if any, to, but excluding, the redemption date), with respect to each of subclause (i) and (ii), computed using a discount rate equal to the Treasury Rate in the case of the 2026 Dollar Senior Secured Notes and 2029 Dollar Senior Secured Notes, or Bund Rate in the case of the 2026 Euro Senior Secured Notes (both Treasury Rate and Bund Rate as defined in the F-30 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) respective indentures) as of such redemption date plus 50 basis points; over (b) the principal amount of the respective Senior Secured Notes. Redemption Pricing At any time and from time to time prior to the Early Redemption Dates, the Company may redeem some or all of the respective notes at redemption prices equal to 100 % of the respective principal amounts being redeemed plus the Applicable Premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates. At any time on or after the Early Redemption Dates, the Company may redeem some or all of the respective notes at the redemption prices (expressed in percentage of principal amount) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates, if redeemed during the twelve-month period beginning on respective dates of each of the years indicated below: Price For the period beginning 2026 Dollar Senior Secured Notes 2026 Euro Senior Secured Notes 2029 Dollar Senior Secured Notes Year April 15, January 15, 2024 101.250 % 100.969 % N/A 2025 100.000 % 100.000 % 102.375 % 2026 N/A N/A 101.188 % 2027 and thereafter N/A N/A 100.000 % 2018 Coty Credit Agreement On April 5, 2018, the Company entered into an amended and restated credit agreement (the "2018 Coty Credit Agreement"), which, as previously disclosed, was amended in June 2019, September 2021 and November 2021. On March 7, 2023, the Company further amended the 2018 Coty Credit Agreement to effectuate the transition of the underlying variable interest rate from LIBOR to the Secured Overnight Financing Rate ("SOFR"). As amended and restated through March 2023, the 2018 Coty Credit Agreement matures on April 5, 2025 and provides for (a) the incurrence by the Company of (1) a senior secured term A facility in an aggregate principal amount of (i) $ 1,000.0 denominated in U.S. dollars and (ii) € 2,035.0 million denominated in euros (the “2018 Coty Term A Facility”) and (2) a senior secured term B facility in an aggregate principal amount of (i) $ 1,400.0 denominated in U.S. dollars and (ii) € 850.0 million denominated in euros (the “2018 Coty Term B Facility”) and (b) the incurrence by the Company and Coty B.V., a Dutch subsidiary of the Company (the “Dutch Borrower” and, together with the Company, the “Borrowers”), of a senior secured revolving facility in an aggregate principal amount of $ 2,000.0 denominated in U.S. dollars, specified alternative currencies or other currencies freely convertible into U.S. dollars (the “2021 Coty Revolving Credit Facility”) (as amended through March 2023, the 2018 Coty Term A Facility, together with the 2018 Coty Term B Facility and the 2021 Coty Revolving Credit Facility, the “2018 Coty Credit Facilities”). The 2018 Coty Credit Agreement provides that with respect to the 2021 Coty Revolving Credit Facility, up to $ 150.0 is available for letters of credit and up to $ 150.0 is available for swing line loans. The 2018 Coty Credit Agreement also permits, subject to certain terms and conditions, the incurrence of incremental facilities thereunder in an aggregate amount of (i) $ 1,700.0 plus (ii) an unlimited amount if the First Lien Net Leverage Ratio (as defined in the 2018 Coty Credit Agreement), at the time of incurrence of such incremental facilities and after giving effect thereto on a pro forma basis, is less than or equal to 3.00 to 1.00. The obligations of the Company under the 2018 Coty Credit Agreement are guaranteed by the material wholly-owned subsidiaries of the Company organized in the U.S., subject to certain exceptions (the “Guarantors”) and the obligations of the Company and the Guarantors under the 2018 Coty Credit Agreement are secured by a perfected first priority lien (subject to permitted liens) on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. The Dutch Borrower does not guarantee the obligations of the Company under the 2018 Coty Credit Agreement or grant any liens on its assets to secure any obligations under the 2018 Coty Credit Agreement. F-31 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) As previously disclosed, the Company utilized proceeds from certain transactions to pay down portions of the outstanding balances of the 2018 Coty Term A Facility and 2018 Coty Term B Facility in November 2020, October 2021 and January 2022. In December 2022, in connection with the Lacoste license termination, a portion of the termination payment totaling € 52.5 million (approximately $ 55.6 at the time) was advanced to the Company. In accordance with the 2018 Coty Credit Agreement, as amended, the Company utilized a portion of the advance proceeds to pay down € 13.5 million (approximately $ 14.3 ) and $ 21.5 , respectively, of the outstanding balances of the euro and U.S. dollar portions of the 2018 Term B Facility on December 23, 2022. In June 2023, in connection with the Lacoste license termination, a portion of the termination payment totaling € 35.3 (approximately $ 38.3 ) was paid to the Company. In accordance with the 2018 Coty Credit Agreement, as amended, the Company utilized a portion of the proceeds to pay down € 6.6 million (approximately $ 7.2 ) and $ 8.0 , respectively, of the outstanding balances of the euro and U.S. dollar portions of the 2018 Term B Facility on June 30, 2023. No balances remain outstanding under the 2018 Coty Term A Facility. Senior Unsecured Notes On April 5, 2018 the Company issued, at par, $ 550.0 of 6.50 % senior unsecured notes due 2026 (the “2026 Dollar Notes”), € 550.0 million of 4.00 % senior unsecured notes due 2023 (the “2023 Euro Notes”) and € 250.0 million of 4.75 % senior unsecured notes due 2026 (the “2026 Euro Notes” and, together with the 2023 Euro Notes, the “Euro Notes,” and the Euro Notes together with the 2026 Dollar Notes, the “Senior Unsecured Notes”) in a private offering. The Senior Unsecured Notes are senior unsecured debt obligations of the Company and will be pari passu in right of payment with all of the Company’s existing and future senior indebtedness (including the 2018 Coty Credit Facilities). The Senior Unsecured Notes are guaranteed, jointly and severally, on a senior basis by the Guarantors. The Senior Unsecured Notes are senior unsecured obligations of the Company and are effectively junior to all existing and future secured indebtedness of the Company to the extent of the value of the collateral securing such secured indebtedness. The related guarantees are senior unsecured obligations of each Guarantor and are effectively junior to all existing and future secured indebtedness of such Guarantor to the extent of the value of the collateral securing such indebtedness. The 2026 Dollar and Euro Notes will mature on April 15, 2026. The 2026 Dollar Notes will bear interest at a rate of 6.50 % per annum. The 2026 Euro Notes will bear interest at a rate of 4.75 % per annum. Interest on the 2026 Dollar and Euro Notes is payable semi-annually in arrears on April 15 and October 15 of each year. The Company issued a notice of full redemption of the 2023 Euro Notes (as defined below) on February 15, 2022 and redeemed the 2023 Euro Notes on April 15, 2022 in the amount of € 550.0 million (approximately $ 606.4 ). The Company utilized cash on hand of $ 480.7 and drew down $ 125.7 on the 2021 Coty Revolving Credit Facility (as defined below) for the redemption. On December 7, 2022, the Company redeemed $ 77.0 of the 2026 Dollar Notes and € 69.7 million (approximately $ 72.2 ) of the 2026 Euro Notes. Upon the occurrence of certain change of control triggering events with respect to a series of Senior Unsecured Notes, the Company will be required to offer to repurchase all or part of the Senior Unsecured Notes of such series at 101 % of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date applicable to such Senior Unsecured Notes. The Senior Unsecured Notes contain customary covenants that place restrictions in certain circumstances on, among other things, incurrence of liens, entry into sale or leaseback transactions, sales of all or substantially all of the Company’s assets and certain merger or consolidation transactions. The Senior Unsecured Notes also provide for customary events of default. Optional Redemption As of June 30, 2023, the Company may at any time redeem some or all of the 2026 Dollar Notes and 2026 Euro Notes, respectively, at the redemption prices (expressed in percentage of principal amount) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates, if redeemed during the twelve-month period beginning on April 15 of F-32 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) each of the years indicated below: Price Year 2026 Dollar Notes 2026 Euro Notes 2023 101.6250 % 101.1875 % 2024 and thereafter 100.0000 % 100.0000 % Deferred Issuance Costs For the fiscal years ended June 30, 2023, 2022 and 2021, the Company capitalized deferred financing fees of nil , $ 9.2 , and $ 25.4 , respectively. The Company incurred nil , $ 27.0 and nil in third-party debt issuance costs during the fiscal years ended June 30, 2023, 2022 and 2021, respectively, which were recorded as Other income, net in the Consolidated Statement of Operations. Write-offs In fiscal 2023, the Company wrote off unamortized deferred financing fees of $ 0.7 and $ 0.1 of unamortized debt discounts. In fiscal 2022, the Company wrote off $ 4.7 of unamortized deferred financing fees and $ 0.4 of unamortized debt discounts. In fiscal 2021, the Company wrote off $ 21.1 of unamortized deferred financing fees and $ 3.1 of unamortized debt discounts. The write-offs of the unamortized deferred financing fees and unamortized debt discounts are included in Other income, net in the Consolidated Statements of Operations. Interest The 2018 Coty Credit Agreement facilities will bear interest at rates equal to, at the Company’s option, either: • SOFR of the applicable qualified currency, of which the Company can elect the applicable one, two, three, six or twelve month rate, plus the applicable margin; or • Alternate base rate (“ABR”) plus the applicable margin. In the case of the 2021 Coty Revolving Credit Facility, the applicable margin means the lesser of a percentage per annum to be determined in accordance with the leverage-based pricing grid and the debt rating-based grid below: Pricing Tier Total Net Leverage Ratio: SOFR plus: Alternative Base Rate Margin: 1.0 Greater than or equal to 4.75 :1 2.000 % 1.000 % 2.0 Less than 4.75 :1 but greater than or equal to 4.00 :1 1.750 % 0.750 % 3.0 Less than 4.00 :1 but greater than or equal to 2.75 :1 1.500 % 0.500 % 4.0 Less than 2.75 :1 but greater than or equal to 2.00 :1 1.250 % 0.250 % 5.0 Less than 2.00 :1 but greater than or equal to 1.50 :1 1.125 % 0.125 % 6.0 Less than 1.50 :1 1.000 % — % Pricing Tier Debt Ratings S&P/Moody’s: SOFR plus: Alternative Base Rate Margin: 5.0 Less than BB+/Ba1 2.000 % 1.000 % 4.0 BB+/Ba1 1.750 % 0.750 % 3.0 BBB-/Baa3 1.500 % 0.500 % 2.0 BBB/Baa2 1.250 % 0.250 % 1.0 BBB+/Baa1 or higher 1.125 % 0.125 % In the case of the U.S. dollar portion of the 2018 Coty Term B Facility, the applicable margin means 2.25 % per annum, in the case of SOFR loans, and 1.25 % per annum, in the case of ABR loans. In the case of the Euro portion of the 2018 Coty Term B Facility, the applicable margin means 2.50 % per annum, in the case of EURIBOR loans. In no event will SOFR be deemed to be less than 0.00 % per annum. F-33 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Fair Value of Debt June 30, 2023 June 30, 2022 Carrying Amount Fair Value Carrying Amount Fair Value Senior Secured Notes $ 2,161.0 $ 2,066.9 $ 2,131.8 $ 1,914.1 2018 Coty Credit Agreement 1,412.6 1,393.5 1,512.8 1,451.5 Senior Unsecured Notes 669.0 661.5 811.4 733.5 Brazilian Credit Facility 31.9 32.2 42.4 48.2 The Company uses the market approach to value its debt instruments. The Company obtains fair values from independent pricing services or utilizes the USD SOFR curve to determine the fair value of these debt instruments. Based on the assumptions used to value these liabilities at fair value, these debt instruments are categorized as Level 2 in the fair value hierarchy. Debt Maturities Schedule Aggregate maturities of the Company’s long-term debt, including the current portion of long-term debt and excluding capital lease obligations as of June 30, 2023, are presented below: Fiscal Year Ending June 30, 2024 $ 55.1 2025 1,389.3 2026 2,330.1 2027 — 2028 — Thereafter 500.0 Total $ 4,274.5 Covenants The 2018 Coty Credit Agreement contains affirmative and negative covenants. The negative covenants include, among other things, limitations on debt, liens, dispositions, investments, fundamental changes, restricted payments and affiliate transactions. With certain exceptions as described below, the 2018 Coty Credit Agreement, as amended, includes a financial covenant that requires us to maintain a Total Net Leverage Ratio (as defined below), equal to or less than the ratios shown below for each respective test period. Quarterly Test Period Ending Total Net Leverage Ratio (a) June 30, 2023 through April 5, 2025 4.00 to 1.00 (a) Total Net Leverage Ratio means, as of any date of determination, the ratio of: (a) (i) Total Indebtedness minus (ii) unrestricted and Cash Equivalents of the Parent Borrower and its Restricted Subsidiaries as determined in accordance with GAAP to (b) Adjusted EBITDA for the most recently ended Test Period (each of the defined terms, including Adjusted EBITDA, used within the definition of Total Net Leverage Ratio have the meanings ascribed to them within the 2018 Coty Credit Agreement, as amended). Adjusted EBITDA, as defined in the 2018 Coty Credit Agreement, as amended, includes certain add backs related to cost savings, unusual events such as COVID-19, operating expense reductions and future unrealized synergies subject to certain limits and conditions as specified in the 2018 Coty Credit Agreement, as amended. In the four fiscal quarters following the closing of any Material Acquisition (as defined in the 2018 Coty Credit Agreement, as amended), including the fiscal quarter in which such Material Acquisition occurs, the maximum Total Net Leverage Ratio shall be the lesser of (i) 5.95 to 1.00 and (ii) 1.00 higher than the otherwise applicable maximum Total Net Leverage Ratio for such quarter (as set forth in the table above). Immediately after any such four fiscal quarter period, there shall be at least two consecutive fiscal quarters during which the Company’s Total Net Leverage Ratio is no greater than the maximum Total Net Leverage Ratio that would otherwise have been required in the absence of such Material Acquisition, regardless of whether any additional Material Acquisitions are consummated during such period. As of June 30, 2023, the Company was in compliance with all covenants contained within the 2018 Coty Credit Agreement, as amended. F-34 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 16. LEASES The Company leases office facilities under non-cancelable operating leases with terms generally ranging between 5 and 25 years. The Company utilizes these leased office facilities for use by its employees in countries in which the Company conducts its business. Leases are negotiated with third parties and, in some instances contain renewal, expansion and termination options. The Company also subleases certain office facilities to third parties when the Company no longer intends to utilize the space. None of the Company’s leases restricts the payment of dividends or the incurrence of debt or additional lease obligations, or contain significant purchase options. Due to the divestiture of the Wella Business, lease assets, liabilities and expenses specific to this business for the fiscal year ended June 30, 2021 are excluded from the subsequent tables. The following table provides additional information about the Company’s operating leases for the fiscal years ended June 30, 2023, 2022 and 2021. Lease Cost: Year Ended June 30, 2023 Year Ended June 30, 2022 Year Ended June 30, 2021 Operating lease cost $ 76.2 $ 90.4 $ 87.1 Short-term lease cost 0.9 1.2 0.8 Variable lease cost 40.3 39.3 49.5 Sublease income ( 15.8 ) ( 20.0 ) ( 14.9 ) Net lease cost $ 101.6 $ 110.9 $ 122.5 Other information: Operating cash outflows from operating leases ( 73.8 ) ( 83.8 ) $ ( 132.4 ) Right-of-use assets obtained in exchange for lease obligations 25.7 104.9 $ 27.8 Weighted-average remaining lease term - real estate 7.2 years 7.6 years 6.4 years Weighted-average discount rate - real estate leases 4.13 % 3.85 % 3.57 % Future minimum lease payments for the Company’s operating leases as of June 30, 2023 are as follows: Fiscal Year Ending June 30, 2024 $ 78.6 2025 60.0 2026 48.8 2027 41.0 2028 32.7 Thereafter 107.1 Total future lease payments 368.2 Less: imputed interest ( 55.1 ) Total present value of lease liabilities $ 313.1 Current operating lease liabilities 65.6 Long-term operating lease liabilities 247.5 Total operating lease liabilities $ 313.1 Table excludes obligations for leases with original terms of twelve months or less which have not been recognized as ROU assets or liabilities in the Consolidated Balance Sheets. F-35 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 17. INCOME TAXES Income (loss) from continuing operations before income taxes in fiscal 2023, 2022 and 2021 is presented below: Year Ended June 30, 2023 2022 2021 United States $ ( 253.6 ) $ ( 277.5 ) $ ( 434.4 ) Foreign 958.4 704.3 194.6 Total $ 704.8 $ 426.8 $ ( 239.8 ) The components of the Company’s total provision (benefit) for income taxes from continuing operations during fiscal 2023, 2022 and 2021 are presented below: Year Ended June 30, 2023 2022 2021 Provision (benefit) for income taxes on continuing operations: Current: Federal $ 2.6 $ 6.6 $ 3.8 State and local 2.6 ( 6.0 ) 14.9 Foreign 120.1 152.1 55.2 Total 125.3 152.7 73.9 Deferred: Federal ( 61.1 ) ( 2.7 ) 41.1 State and local 1.0 ( 12.8 ) 5.4 Foreign 116.4 27.6 ( 292.4 ) Total 56.3 12.1 ( 245.9 ) Provision (benefit) for income taxes on continuing operations $ 181.6 $ 164.8 $ ( 172.0 ) During fiscal 2023, the Company recorded a provision of $ 181.6 primarily due to the limitation on the deductibility of executive stock compensation, offset by fair value gains related to the investment in the Wella business at a lower rate. During fiscal 2022, the Company recorded a provision of $ 164.8 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 at a lower rate. During fiscal 2021, the Company recorded a benefit of $ 234.4 as a result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the Company’s relocation of the main principal location from Geneva to Amsterdam. The overall value of the assets and liabilities transferred was negotiated with both the Swiss and Dutch tax authorities and per terms of the agreements, will be reevaluated after three years. The Company also recorded an expense of $ 130.0 related to an internal restructuring following the Wella divestiture, primarily intended to create a more efficient structure to hold its equity investment in Wella. F-36 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The reconciliation of the U.S. Federal statutory tax rate to the Company’s effective income tax rate during fiscal 2023, 2022 and 2021 is presented below: Year Ended June 30, 2023 2022 2021 Income (loss) from continuing operations before income taxes $ 704.8 $ 426.8 $ ( 239.8 ) Provision (benefit) for income taxes at statutory rate $ 148.0 $ 89.6 $ ( 50.4 ) State and local taxes—net of federal benefit 2.8 ( 14.9 ) 26.3 Foreign tax differentials ( 10.1 ) ( 16.4 ) ( 23.3 ) Change in valuation allowances 10.2 ( 2.3 ) ( 3.8 ) Change in unrecognized tax benefit 32.5 ( 10.6 ) ( 18.0 ) Permanent differences—net ( 4.9 ) 25.4 ( 13.1 ) Non-deductible executive stock compensation 27.7 37.1 — Currency Loss ( 13.6 ) ( 0.2 ) — Dispositions of business assets — 12.7 — Russia exit ( 7.0 ) 24.1 — Principal relocation — — ( 234.4 ) Post-divestiture restructuring — — 130.0 Other ( 4.0 ) 20.3 14.7 Provision (benefit) for income taxes on continuing operations $ 181.6 $ 164.8 $ ( 172.0 ) Effective income tax rate 25.8 % 38.6 % 71.7 % Significant components of deferred income tax assets and liabilities as of June 30, 2023 and 2022 are presented below: June 30, 2023 June 30, 2022 Deferred income tax assets: Inventories $ 7.5 $ 8.3 Accruals and allowances 54.9 58.6 Sales returns 19.1 17.3 Share-based compensation 4.8 5.1 Employee benefits 55.6 60.3 Net operating loss carry forwards and tax credits 241.4 296.4 Capital loss carry forwards 0.3 1.1 Interest expense limitation carry forward 47.5 28.5 Lease liability 28.6 30.6 Principal relocation lease liability 424.0 434.0 Property, plant and equipment 13.0 — Other 48.4 31.7 Less: valuation allowances ( 60.7 ) ( 41.7 ) Net deferred income tax assets 884.4 930.2 Deferred income tax liabilities: Intangible assets 817.4 811.9 Property, plant and equipment — 9.2 Licensing rights 27.8 25.7 Right of use asset 28.6 31.2 Other 80.5 69.4 Deferred income tax liabilities 954.3 947.4 Net deferred income tax (liability) asset $ ( 69.9 ) $ ( 17.2 ) F-37 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The expirations of tax loss carry forwards, amounting to $ 686.9 as of June 30, 2023, in each of the fiscal years ending June 30, are presented below: Fiscal Year Ending June 30, United States Western Europe Rest of World Total 2024 $ — $ 7.9 $ 0.6 $ 8.5 2025 — 3.1 3.9 7.0 2026 — — 9.5 9.5 2027 — 245.9 27.8 273.7 2028 and thereafter — 115.5 272.7 388.2 Total $ — $ 372.4 $ 314.5 $ 686.9 The total valuation allowances recorded are $ 60.7 and $ 41.7 as of June 30, 2023 and 2022, respectively. In fiscal 2023, the change in the valuation allowance was primarily due to an increase in valuation allowance on certain state and foreign net operating losses. A reconciliation of the beginning and ending amount of UTBs is presented below: Year Ended June 30, 2023 2022 2021 UTBs—July 1 $ 251.6 $ 279.9 $ 277.9 Additions based on tax positions related to the current year 6.7 1.7 32.1 Additions for tax positions of prior years 0.7 20.8 — Reductions for tax positions of prior years ( 1.4 ) ( 29.4 ) ( 4.5 ) Settlements ( 4.6 ) ( 0.2 ) ( 0.4 ) Lapses in statutes of limitations ( 13.8 ) ( 14.1 ) ( 33.3 ) Foreign currency translation ( 3.7 ) ( 7.1 ) 8.1 UTBs—June 30 $ 235.5 $ 251.6 $ 279.9 As of June 30, 2023, the Company had $ 235.5 of UTBs of which $ 184.9 represents the amount that, if recognized, would impact the effective income tax rate in future periods. As of June 30, 2023 and 2022, the liability associated with UTBs, including accrued interest and penalties, is $ 218.6 and $ 191.8 , respectively, which is recorded in Income and other taxes payable and Other non-current liabilities in the Consolidated Balance Sheets. The Company accrued interest of $ 7.8 , $ 4.2 and $ 0.8 , respectively, in fiscal 2023, 2022 and 2021. The Company accrued immaterial penalties in fiscal 2023 and no penalties in fiscal 2022, and released penalties of $ 0.5 in fiscal 2021. The total gross accrued interest and penalties recorded in the Other noncurrent liabilities in the Consolidated Balance Sheets related to UTBs as of June 30, 2023 and 2022 is $ 33.1 and $ 26.4 , respectively. The Company is present in approximately 40 tax jurisdictions, and at any point in time is subject to several audits at various stages of completion. As a result, the Company evaluates tax positions and establishes liabilities for UTBs that may be challenged by local authorities and may not be fully sustained, despite a belief that the underlying tax positions are fully supportable. UTBs are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law, and closing of statute of limitations. Such adjustments are reflected in the provision for income taxes as appropriate. In fiscal 2023 and 2022, the Company recognized a tax benefit of $ 18.4 and $ 14.3 respectively associated with the settlement of tax audits in multiple jurisdictions and the expiration of foreign and state statutes of limitation. The Company has open tax years ranging from 2009 and forward. On the basis of information available at June 30, 2023, it is reasonably possible that a decrease of up to $ 21.5 in UTBs related to U.S. and foreign exposures may be necessary within the coming year. It is also possible the ongoing audits by tax authorities may result in increases or decreases to the balance of UTBs. Since it is common practice to extend audits beyond the Statute of Limitations, the Company is unable to predict the timing or conclusion of these audits and, accordingly, the Company is unable to estimate the amount of changes to the balance of UTBs that are reasonably possible at this time. However, the Company believes it has adequately provided for its UTBs for all open tax years in each tax jurisdiction. F-38 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 18. INTEREST EXPENSE, NET Interest expense, net for the years ended June 30, 2023, 2022 and 2021 is presented below: Year Ended June 30, 2023 2022 2021 Interest expense $ 261.1 $ 241.2 $ 231.8 Foreign exchange losses (gains), net of derivative contracts 12.2 ( 10.0 ) 6.8 Interest income ( 15.4 ) ( 7.2 ) ( 3.5 ) Total interest expense, net $ 257.9 $ 224.0 $ 235.1 19. EMPLOYEE BENEFIT PLANS Savings and Retirement Plans - The Company’s Savings and Retirement Plans include a U.S. defined contribution plan for employees primarily in the U.S. and international savings plans for employees in certain other countries. In the U.S., hourly and salary based employees are eligible to participate in the plan after 90 days of service and the Company matches 100 % of employee contributions up to 6.0 % of employee compensation. In addition, the Company makes contributions to the plan on behalf of employees determined by their age and compensation. During fiscal 2023, 2022 and 2021, the defined contribution expense for Coty Inc. for the U.S. defined contribution plan was $ 13.7 , $ 13.6 and $ 15.8 , respectively, and the defined contribution expense for the international savings plans was $ 9.6 , $ 9.7 and $ 12.0 , respectively. Defined contribution expense includes amounts related to discontinued operations, which are not material for any period. Pension Plans - The Company sponsors contributory and noncontributory defined benefit pension plans covering certain U.S. and international employees primarily in France, Germany and Switzerland. Participants in the U.S. defined benefit pension plan no longer accrue benefits. The Company measures defined benefit plan assets and obligations as of the date of the Company’s fiscal year-end. The Company’s defined benefit pension plans are funded primarily through contributions from the Company after consideration of recommendations from the pension plans’ independent actuaries and are funded at levels sufficient to comply with local requirements. Settlements and Curtailments for Pension Plans As part of the Transformation Plan, the Company concluded that restructuring actions resulted in a significant reduction of future services of active employees in certain of the Company’s non-U.S. pension plans. As a result, the Company recognized curtailment gains of $ 0.7 , $ 1.3 and $ 6.9 during the years ended June 30, 2023, 2022 and 2021, respectively. Additionally, the Company recognized settlement losses of $ 0.2 , $ 1.8 , and $ 3.8 , of which $ 0.0 , $ 1.4 , and $ 2.3 were related to restructuring actions during the years ended June 30 2023, 2022 and 2021, respectively. The impact of settlement and curtailment activity on the current and prior comparative periods is included in Other income, net in the Consolidated Statements of Operations. Plan Amendments for Pension Plans - There were no Plan amendments as of June 30, 2023. Other Post-Employment Benefit Plans (“OPEB”) - The Company provides certain post-employment health and life insurance benefits for certain employees and spouses principally in the U.S. and France if certain age and service requirements are met. Estimated benefits to be paid by the Company are expensed over the service period of each employee based on calculations performed by an independent actuary. In addition, the Company has a supplemental retirement plan and a termination benefit plan for selected salaried employees. All of the disclosures below include amounts related to discontinued operations through November 30, 2020, except when otherwise noted. F-39 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The aggregate reconciliation of the projected benefit obligations, plan assets, funded status and amounts recognized in the Company’s Consolidated Financial Statements related to the Company’s pension plans and other post-employment benefit plans is presented below: Pension Plans Other Post-Employment Benefits Total U.S. International 2023 2022 2023 2022 2023 2022 2023 2022 Change in benefit obligation Benefit obligation—July 1 $ 14.5 $ 18.9 $ 343.7 $ 515.9 $ 38.8 $ 50.2 $ 397.0 $ 585.0 Service cost — — 4.8 9.1 0.6 0.8 5.4 9.9 Interest cost 0.7 0.5 10.9 5.9 1.7 0.8 13.3 7.2 Plan participants’ contributions — — 1.1 1.5 0.2 0.2 1.3 1.7 Benefits paid ( 1.4 ) ( 2.1 ) ( 14.5 ) ( 15.1 ) ( 1.9 ) ( 2.2 ) ( 17.8 ) ( 19.4 ) New employees transfers in — — 1.0 4.2 — — 1.0 4.2 Premiums paid — — ( 0.5 ) ( 0.5 ) — — ( 0.5 ) ( 0.5 ) Pension curtailment — — ( 0.7 ) ( 1.6 ) — — ( 0.7 ) ( 1.6 ) Other (a) — — 16.2 — — — 16.2 — Pension settlement — — ( 4.2 ) ( 39.3 ) — — ( 4.2 ) ( 39.3 ) Actuarial loss (gain) ( 0.8 ) ( 2.8 ) ( 16.6 ) ( 86.8 ) ( 3.3 ) ( 10.9 ) ( 20.7 ) ( 100.5 ) Effect of exchange rates — — 14.4 ( 49.6 ) ( 0.1 ) ( 0.1 ) 14.3 ( 49.7 ) Benefit obligation—June 30 $ 13.0 $ 14.5 $ 355.6 $ 343.7 $ 36.0 $ 38.8 $ 404.6 $ 397.0 Change in plan assets Fair value of plan assets—July 1 $ — $ — $ 101.5 $ 159.1 $ — $ — $ 101.5 $ 159.1 Actual return on plan assets — — 1.5 ( 11.6 ) — — 1.5 ( 11.6 ) Employer contributions 1.4 2.1 13.7 15.7 1.8 2.0 16.9 19.8 Plan participants’ contributions — — 1.1 1.5 0.2 0.2 1.3 1.7 Benefits paid ( 1.4 ) ( 2.1 ) ( 14.5 ) ( 15.1 ) ( 1.9 ) ( 2.2 ) ( 17.8 ) ( 19.4 ) New employees transfers in — — 1.0 4.2 — — 1.0 4.2 Premiums paid — — ( 0.5 ) ( 0.5 ) — — ( 0.5 ) ( 0.5 ) Plan settlements — — ( 4.2 ) ( 39.1 ) — — ( 4.2 ) ( 39.1 ) Other (a) — — 16.2 — — — 16.2 — Effect of exchange rates — — 5.1 ( 12.7 ) — — 5.1 ( 12.7 ) Fair value of plan assets—June 30 — — 120.9 101.5 0.1 — 121.0 101.5 Funded status—June 30 $ ( 13.0 ) $ ( 14.5 ) $ ( 234.7 ) $ ( 242.2 ) $ ( 35.9 ) $ ( 38.8 ) $ ( 283.6 ) $ ( 295.5 ) (a) In connection with the P&G Beauty business acquisition in 2016, the Company assumed certain international pension and OPEB obligations and assets (the “P&G plans”). At that time, the P&G plans had an active legal dispute that has been resolved during fiscal 2023, resulting in $ 16.2 of additional assets being paid to the Coty plans. The projected benefit obligation has also increased $ 16.2 to reflect the liability to distribute these funds to the employees who were originally in the P&G plans. We expect that most of these assets will be paid out in fiscal 2024. F-40 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) With respect to the Company’s pension plans and other post-employment benefit plans, amounts recognized in the Company’s Consolidated Balance Sheets as of June 30, 2023 and 2022, are presented below: Pension Plans Other Post-Employment Benefits Total U.S. International 2023 2022 2023 2022 2023 2022 2023 2022 Noncurrent assets $ — $ — $ 1.4 $ 1.4 $ — $ — $ 1.4 $ 1.4 Current liabilities ( 1.3 ) ( 1.3 ) ( 0.5 ) ( 0.8 ) ( 2.5 ) ( 2.6 ) ( 4.3 ) ( 4.7 ) Noncurrent liabilities ( 11.7 ) ( 13.2 ) ( 235.6 ) ( 242.8 ) ( 33.4 ) ( 36.2 ) ( 280.7 ) ( 292.2 ) Funded status ( 13.0 ) ( 14.5 ) ( 234.7 ) ( 242.2 ) ( 35.9 ) ( 38.8 ) ( 283.6 ) ( 295.5 ) AOC(L)/I 1.4 3.5 56.1 39.8 18.5 17.6 76.0 60.9 Net amount recognized $ ( 11.6 ) $ ( 11.0 ) $ ( 178.6 ) $ ( 202.4 ) $ ( 17.4 ) $ ( 21.2 ) $ ( 207.6 ) $ ( 234.6 ) The projected benefit obligation actuarial gain of $ 17.4 for the fiscal year ended June 30, 2023 was primarily driven by increases in discount rates offset by an increase in inflation since the fiscal year ended June 30, 2022. The actuarial gain in the projected benefit obligation was partially offset by an asset loss of $ 1.9 as a result of worse than expected asset performance. For the fiscal year ended June 30, 2022, the projected benefit obligation actuarial gain of $ 89.6 was primarily driven by a significant increase in discount rates since June 30, 2021. The actuarial gain in the projected benefit obligation was partially offset by the asset loss of $ 16.0 as a result of worse than expected asset performance, particularly in Switzerland and Germany. During fiscal 2023 the retiree medical and life insurance plan experienced a gain on the liability of $ 3.3 primarily driven by the increase in the discount rate. Retirees waiving medical coverage and changes in the pre-65 medical claim costs also contributed to the gain, which was slightly offset by increases in the medical trend assumption. During fiscal 2022 the retiree medical and life insurance plan experienced a gain on the liability of $ 10.9 primarily driven by the increase in the discount rate. Retirees waiving medical coverage, updated medical trend, and a change in the plan participation assumption for active participants to 50% HSA and 50% OAP also contributed to the gain. The gain was slightly offset due to updated claims and mortality assumption changes. The accumulated benefit obligation for the U.S. defined benefit pension plans was $ 13.0 and $ 14.5 as of June 30, 2023 and 2022, respectively. The accumulated benefit obligation for international defined benefit pension plans was $ 346.3 and $ 333.0 as of June 30, 2023 and 2022, respectively. Pension plans with accumulated benefit obligations in excess of plan assets and projected benefit obligations in excess of plan assets are presented below: Pension plans with accumulated benefit obligations in excess of plan assets Pension plans with projected benefit obligations in excess of plan assets U.S. International U.S. International 2023 2022 2023 2022 2023 2022 2023 2022 Projected benefit obligation $ 13.0 $ 14.5 $ 342.0 $ 328.8 $ 13.0 $ 14.5 $ 342.0 $ 328.8 Accumulated benefit obligation 13.0 14.5 333.7 319.0 13.0 14.5 333.7 319.0 Fair value of plan assets — — 106.2 85.3 — — 106.2 85.3 F-41 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Net Periodic Benefit Cost The components of net periodic benefit cost for pension plans and other post-employment benefit plans recognized in the Consolidated Statements of Operations are presented below: Year Ended June 30, Pension Plans Other Post- Employment Benefits U.S. International Total 2023 2022 2021 2023 2022 2021 2023 2022 2021 2023 2022 2021 Service cost $ — $ — $ — $ 4.8 $ 9.1 $ 18.4 $ 0.6 $ 0.8 $ 1.0 $ 5.4 $ 9.9 $ 19.4 Interest cost 0.7 0.5 0.5 10.9 5.9 8.4 1.7 0.8 1.3 13.3 7.2 10.2 Expected return on plan assets — — — ( 3.4 ) ( 4.5 ) ( 6.3 ) — — — ( 3.4 ) ( 4.5 ) ( 6.3 ) Amortization of prior service (credit) cost — — — ( 0.1 ) ( 0.1 ) ( 0.3 ) ( 0.2 ) ( 0.3 ) ( 3.3 ) ( 0.3 ) ( 0.4 ) ( 3.6 ) Amortization of net (gain) loss ( 2.9 ) 0.4 1.5 ( 0.7 ) ( 0.2 ) ( 0.2 ) ( 2.4 ) ( 0.2 ) ( 0.1 ) ( 6.0 ) — 1.2 Settlements (gain) loss recognized — — — 0.2 1.8 3.8 — — — 0.2 1.8 3.8 Curtailment (gain) loss recognized — — — ( 0.7 ) ( 1.3 ) ( 6.9 ) — — — ( 0.7 ) ( 1.3 ) ( 6.9 ) Net periodic benefit cost $ ( 2.2 ) $ 0.9 $ 2.0 $ 11.0 $ 10.7 $ 16.9 $ ( 0.3 ) $ 1.1 $ ( 1.1 ) $ 8.5 $ 12.7 $ 17.8 Net periodic benefit costs include amounts related to discontinued operations of $ 0.0 , $ 0.0 , and $ 6.2 for the years ended June 30, 2023, 2022 and 2021, respectively. Pre-tax amounts recognized in AOC(L)/I, which have not yet been recognized as a component of net periodic benefit cost are presented below: Pension Plans Other Post-Employment Benefits U.S. International Total 2023 2022 2023 2022 2023 2022 2023 2022 Net actuarial (loss) gain $ 1.4 $ 3.5 $ 55.3 $ 39.0 $ 18.2 $ 17.1 $ 74.9 $ 59.6 Prior service credit (cost) — — 0.8 0.8 0.3 0.5 1.1 1.3 Total recognized in AOC(L)/I $ 1.4 $ 3.5 $ 56.1 $ 39.8 $ 18.5 $ 17.6 $ 76.0 $ 60.9 Changes in plan assets and benefit obligations recognized in OCI/(L) during the fiscal year are presented below: Pension Plans Other Post-Employment Benefits U.S. International Total 2023 2022 2023 2022 2023 2022 2023 2022 Net actuarial (loss) gain $ 0.8 $ 2.8 $ 14.7 $ 71.1 $ 3.3 $ 10.9 $ 18.8 $ 84.8 Amortization or curtailment recognition of prior service (credit) cost — — ( 0.1 ) ( 0.1 ) ( 0.2 ) ( 0.3 ) ( 0.3 ) ( 0.4 ) Recognized net actuarial (gain) loss ( 2.9 ) 0.4 ( 0.5 ) 1.7 ( 2.4 ) ( 0.2 ) ( 5.8 ) 1.9 Prior service credit (cost) — — — — — — — — Effect of exchange rates — — 2.1 ( 1.7 ) 0.2 ( 0.5 ) 2.3 ( 2.2 ) Total recognized in OCI/(L) $ ( 2.1 ) $ 3.2 $ 16.2 $ 71.0 $ 0.9 $ 9.9 $ 15.0 $ 84.1 Pension and Other Post-Employment Benefit Assumptions The weighted-average assumptions used to determine the Company’s projected benefit obligation above are presented below: Pension Plans Other Post-Employment Benefits U.S. International 2023 2022 2023 2022 2023 2022 Discount rates 4.9 %- 5.3 % 4.0 %- 4.7 % 2.0 %- 4.2 % 2.3 %- 3.4 % 4.1 %- 5.1 % 2.9 %- 4.7 % Future compensation growth rates N/A N/A 1.3 %- 3.2 % 1.1 %- 3.2 % N/A N/A F-42 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The weighted-average assumptions used to determine the Company’s net periodic benefit cost in fiscal 2023, 2022 and 2021 are presented below: Pension Plans Other Post- Employment Benefits U.S. International 2023 2022 2021 2023 2022 2021 2023 2022 2021 Discount rates 4.0 %- 4.7 % 2.4 %- 2.6 % 2.5 %- 2.8 % 2.3 %- 3.4 % 0.3 %- 1.6 % 0.4 %- 6.7 % 2.9 %- 4.7 % 1.5 %- 2.8 % 1.7 %- 2.8 % Future compensation growth rates N/A N/A N/A 1.1 %- 3.2 % 1.0 %- 2.5 % 1.5 %- 6.7 % N/A N/A N/A Expected long-term rates of return on plan assets N/A N/A N/A 2.7 %- 3.8 % 1.3 %- 3.8 % 1.0 %- 5.8 % N/A N/A N/A The health care cost trend rate assumptions have a significant effect on the amounts reported. Year Ended June 30, 2023 2022 2021 Health care cost trend rate assumed for next year 7.1 % 6.7 % 7.5 %- 7.6 % Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 4.5 % 4.5 % 4.5 % Year that the rate reaches the ultimate trend rate 2030 2029 2027 Pension Plan Investment Policy The Company’s investment policies and strategies for plan assets are to achieve the greatest return consistent with the fiduciary character of the plan and to maintain a level of liquidity that is sufficient to meet the need for timely payment of benefits. The goals of the investment managers include minimizing risk and achieving growth in principal value so that the purchasing power of such value is maintained with respect to the rate of inflation. The pension plan’s return on assets is based on management’s expectations of long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this assumption, management considers historical and expected returns for the assets in which the plan is invested, as well as current economic and market conditions. The asset allocation decision includes consideration of future retirements, lump-sum elections, growth in the number of participants, the Company’s contributions and cash flow. These actual characteristics of the plan place certain demands upon the level, risk and required growth of trust assets. Actual asset allocation is regularly reviewed and periodically rebalanced to the strategic allocation when considered appropriate. The target asset allocations for the Company’s pension plans as of June 30, 2023 and 2022, by asset category are presented below: % of Plan Assets at Year Ended Target 2023 2022 Equity securities 40 % 32 % 38 % Fixed income securities 49 % 37 % 42 % Cash and other investments 11 % 31 % 20 % F-43 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Fair Value of Plan Assets The international pension plan assets that the Company measures at fair value on a recurring basis, based on the fair value hierarchy as described in Note 2—Summary of Significant Accounting Policies, as of June 30, 2023 and 2022 are presented below: Level 1 Level 2 Level 3 Total 2023 2022 2023 2022 2023 2022 2023 2022 Equity securities $ 32.1 $ 32.5 $ — $ — $ — $ — $ 32.1 $ 32.5 Fixed income securities: Corporate securities 37.3 33.8 — — — — 37.3 33.8 Other: Cash and cash equivalents 0.2 1.6 — — — — 0.2 1.6 Insurance contracts and other — — — — 51.4 33.6 51.4 33.6 Total pension plan assets $ 69.6 $ 67.9 $ — $ — $ 51.4 $ 33.6 $ 121.0 $ 101.5 The following is a description of the valuation methodologies used for plan assets measured at fair value: Equity securities -The fair values reflect the closing price reported on a major market where the individual securities are traded. These investments are classified within Level 1 of the valuation hierarchy. Corporate securities -The fair values are based on a compilation of primarily observable market information or a broker quote in a non-active market. These investments are classified within Level 1 of the valuation hierarchy. Cash and cash equivalents -The carrying amount approximates fair value, primarily because of the short maturity of cash equivalent instruments. These investments are classified within Level 1 of the valuation hierarchy. Insurance contracts and other - Includes contracts issued by insurance companies and other investments that are not publicly traded. These investments are generally classified as Level 3 as there are neither quoted prices nor other observable inputs for pricing. Insurance contracts are valued at cash surrender value, which approximates the contract fair value. Other Level 3 plan assets include real estate and other alternative investment funds requiring inputs that cannot be readily derived from observable market data due to the infrequency with which the underlying assets trade. The Company sponsors a qualified defined benefit pension plan for all eligible Swiss employees. Retirement benefits are provided based on employees’ years of service and earnings, or in accordance with applicable employee regulations. Consistent with typical Swiss practice, the pension plan is funded through a guaranteed insurance contract with an insurance company (“IC”). The IC is responsible for the investment strategy of the insurance premiums that the Company submits and does not hold individual assets per participating employer. Assets are invested in accordance with the IC’s own strategies and risk assessments. Under the terms of the contract, the interest rate as well as the capital value is guaranteed for each participant, with the IC assuming any risk to the value of the underlying assets. The IC is a member of a security fund, whose purpose is to cover any shortfall in the event they are not able to fulfill its contractual agreements. The plan assets of the Swiss plan are included in the Level 3 valuation. The Company also sponsors qualified defined benefit pension plans for certain eligible German employees. The Company’s German pension plans are partially funded with plan assets held in a Contractual Trust Arrangement, under which Company assets have been irrevocably transferred to a registered association for the exclusive purpose of securing and funding pension obligations in Germany. The association invests primarily in publicly tradable equity and fixed income securities, using a funding strategy that is reviewed on a regular basis. Plan assets are also held in the Company’s other non-U.S. defined benefit pension plans. The other non-U.S. defined benefit pension plans provide benefits primarily based on earnings and years of service and are funded in compliance with local laws and practices. The plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and investment return over the long term at an acceptable level of risk. F-44 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The reconciliations of Level 3 plan assets measured at fair value in fiscal 2023 and 2022 are presented below: June 30, 2023 June 30, 2022 Insurance contracts: Fair value—July 1 $ 33.6 $ 75.2 Return on plan assets ( 0.3 ) ( 7.5 ) Purchases, sales and settlements, net 15.5 ( 31.6 ) Effect of exchange rates 2.6 ( 2.5 ) Fair value—June 30 $ 51.4 $ 33.6 Contributions The Company plans to contribute approximately $ 1.3 to its remaining U.S. pension plan and expects to contribute approximately $ 16.2 and $ 2.4 to its international pension and other post-employment benefit plans, respectively, during fiscal 2024. Estimated Future Benefit Payments Expected benefit payments, which reflect expected future service, as appropriate, are presented below: Pension Plans Other Post-Employment Benefits Total Fiscal Year Ending June 30, U.S. International 2024 $ 1.3 $ 21.7 $ 2.5 $ 25.5 2025 1.3 18.3 2.7 22.3 2026 1.2 19.0 2.8 23.0 2027 1.2 19.6 2.9 23.7 2028 1.2 19.8 3.0 24.0 2029 - 2032 5.3 106.9 15.6 127.8 20. DERIVATIVE INSTRUMENTS Foreign Exchange Risk The Company is exposed to foreign currency exchange fluctuations through its global operations. The Company reduces its exposure to fluctuations in foreign exchange rates by creating offsetting positions through the use of derivative instruments, including forward foreign exchange contracts and by designating foreign currency denominated borrowings and cross-currency swaps as hedges of net investments in foreign subsidiaries. The Company expects that through hedging, any gain or loss on the derivative instruments would generally offset the expected increase or decrease in the value of the underlying forecasted transactions. In September 2019, the Company entered into cross-currency swap contracts in the notional amount of $ 550.0 and designated these cross-currency swaps as hedges of its net investment in certain foreign subsidiaries. In September 2020, the Company terminated these net investment cross currency swap derivatives in exchange for cash payment of $ 37.6 . The related loss from this termination is included in AOCI/(L) until the sale or substantial liquidation of the underlying investments. As of June 30, 2023 and 2022, the notional amounts of the outstanding forward foreign exchange contracts designated as cash flow hedges were $ 28.0 and $ 30.0 , respectively. The Company also uses certain derivatives not designated as hedging instruments consisting primarily of foreign currency forward contracts and cross currency swaps to hedge intercompany transactions and foreign currency denominated external debt. Although these derivatives were not designated for hedge accounting, the overall objective of mitigating foreign currency exposure is the same for all derivative instruments. For derivatives not designated as hedging instruments, changes in fair value are recorded in the line item in the Consolidated Statements of Operations to which the derivative relates. As of June 30, 2023 and 2022, the notional amounts of these outstanding non-designated foreign currency forward and cross currency forward contracts were $ 1,653.5 and $ 2,403.8 , respectively. F-45 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Interest Rate Risk The Company is exposed to interest rate fluctuations related to its variable rate debt instruments. The Company reduces its exposure to fluctuations in the cash flows associated with changes in the variable interest rates by entering into offsetting positions through the use of derivative instruments, such as interest rate swap contracts. The interest rate swap contracts result in recognizing a fixed interest rate for the portion of the Company’s variable rate debt that was hedged. This will reduce the negative impact of increases in the variable rates over the term of the contracts. Hedge effectiveness of interest rate swap contracts is based on a long-haul hypothetical derivative methodology and includes all changes in value. During September 2019, the Company entered into incremental interest rate swap contracts in the notional amount of $ 1,000.0 , which extended the maturity of the interest rate swap portfolio from 2021 through 2023. In fiscal 2021 and 2022, the Company terminated certain existing interest rate swaps with notional amounts of $ 700.0 and $ 200.0 in exchange for cash payments of $ 4.9 and $ 1.9 , respectively. The related losses from these terminations are included in Interest expense, net, within the Consolidated Statement of Operations. As of June 30, 2023 and 2022, the Company had interest rate swap contracts designated as effective hedges in the notional amounts of $ 200.0 and $ 800.0 , respectively. These interest rate swaps are designated and qualify as cash flow hedges and were highly effective. Net Investment Hedge Foreign currency gains and losses on borrowings designated as a net investment hedge, except ineffective portions, are reported in the cumulative translation adjustment (“CTA”) component of AOCI/(L), along with the foreign currency translation adjustments on those investments. As of June 30, 2023 and 2022, the nominal exposures of foreign currency denominated borrowings designated as net investment hedges were € 701.3 million and € 289.0 million, respectively. The designated hedge amounts were considered highly effective. Forward Repurchase Contracts In June and December 2022, the Company entered into certain forward repurchase contracts to start hedging for two potential $ 200.0 and $ 196.0 share buyback programs, in 2024 and 2025, respectively. These forward repurchase contracts are accounted for at fair value, with changes in the fair value recorded in Net income (loss) in the Consolidated Statements of Operations. Refer to Note 23—Equity and Convertible Preferred Stock. Derivative and non-derivative financial instruments which are designated as hedging instruments: The accumulated (loss) gain on foreign currency borrowings classified as net investment hedges in the foreign currency translation adjustment component of AOCI/(L) was $( 12.2 ) and $ 41.7 as of June 30, 2023 and 2022, respectively. The accumulated loss on cross currency swaps designated as net investment hedges in the foreign currency translation adjustment component of AOCI/(L) was $( 37.6 ) as of June 30, 2023 and 2022. The amount of gains and losses recognized in OCI in the Consolidated Balance Sheets related to the Company’s derivative and non-derivative financial instruments which are designated as hedging instruments is presented below: Gain (Loss) Recognized in OCI Fiscal Year Ended June 30, 2023 2022 2021 Foreign exchange forward contracts $ ( 3.7 ) $ ( 1.0 ) $ ( 0.3 ) Interest rate swap contracts 5.4 13.9 1.0 Cross-currency swap contracts — — ( 25.1 ) Net investment hedges ( 53.9 ) 36.3 ( 256.5 ) The accumulated gain on derivative instruments classified as cash flow hedges in AOCI/(L), net of tax, was $ 0.7 and $ 4.3 as of June 30, 2023 and 2022, respectively. The estimated net gain related to these effective hedges that is expected to be reclassified from AOCI/(L) into earnings, net of tax, within the next twelve months is $ 0.2 . As of June 30, 2023, all of the Company’s remaining foreign currency forward contracts designated as hedges were highly effective. F-46 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The amount of gains and losses reclassified from AOCI/(L) to the Consolidated Statements of Operations related to the Company’s derivative financial instruments which are designated as hedging instruments is presented below: Location and Amount of Gain (Loss) Recognized in Income on Cash Flow Hedging Relationships Fiscal Year Ended June 30, 2023 2022 2021 Net Revenues Cost of sales Interest expense, net Net Revenues Cost of sales Interest expense, net Net Revenues Cost of sales Interest expense, net Foreign exchange forward contracts: Amount of gain reclassified from AOCI into income $ — $ ( 1.6 ) $ — $ — $ 1.7 $ — $ 1.0 $ — $ — Interest rate swap contracts: Amount of loss reclassified from AOCI into income — — 8.3 — — ( 13.0 ) — — ( 36.1 ) Derivatives not designated as hedging instruments: The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments is presented below: Consolidated Statements of Operations Classification of Gain (Loss) Recognized in Operations Fiscal Year Ended June 30, 2023 2022 2021 Foreign exchange contracts Selling, general and administrative expenses $ ( 5.1 ) $ ( 0.1 ) $ 0.1 Foreign exchange contracts Interest income (expense), net ( 69.3 ) 2.7 26.3 Foreign exchange and forward repurchase contracts Other income (expense), net 168.7 18.4 ( 0.6 ) 21. MANDATORILY REDEEMABLE FINANCIAL INTEREST United Arab Emirates subsidiary The Company is required under a shareholders agreement to purchase all of the shares held by the noncontrolling interest holder equal to 25 % of the outstanding shares of a certain subsidiary in the United Arab Emirates (the “U.A.E. subsidiary”) at the termination of the agreement on December 31, 2020. The final purchase price of $ 7.1 was paid in July 2021. 22. REDEEMABLE NONCONTROLLING INTERESTS As of June 30, 2023, the redeemable noncontrolling interests (“RNCI”) consist of interests in a consolidated subsidiary in the Middle East (“Middle East Subsidiary”). The noncontrolling interest holder in the Company’s Middle East Subsidiary had a 25 % ownership share. The Company has the ability to exercise the Call right for the remaining noncontrolling interest of 25 % on December 31, 2028, with such transaction to close on December 31, 2029. In addition to the Call right feature, the noncontrolling interest holder has the right to sell the noncontrolling interest to the Company on December 31, 2028, with such transaction to close on December 31, 2029 (a “Put right”). The amount at which the Put right and Call right can be exercised is based on a formula prescribed by the amended shareholders’ agreement as summarized in the table below, multiplied by the noncontrolling interest holder’s percentage interest in the Middle East Subsidiary. Given the provision of the Put right, the entire noncontrolling interest is redeemable outside of the Company’s control and is recorded in the Consolidated Balance Sheets at the estimated redemption value. The Company adjusts the redeemable noncontrolling interest to the redemption values at the end of each reporting period with changes recognized as adjustments to APIC. The Company recognized $ 93.5 and $ 69.8 F-47 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) as the redeemable noncontrolling interest balances as of June 30, 2023 and 2022, respectively. Middle East Percentage of redeemable noncontrolling interest 25 % Earliest exercise date(s) December 2028 Formula of redemption value (a) 3 -year average of EBIT * 6 (a) EBIT is defined in the amended shareholders’ agreement as the consolidated net earnings before interest and income tax. 23. EQUITY AND CONVERTIBLE PREFERRED STOCK Common Stock As of June 30, 2023, the Company’s Common Stock consisted of Class A Common Stock with a par value of $ 0.01 per share. The holders of Class A Common Stock are entitled to one vote per share. As of June 30, 2023, total authorized shares of Class A Common Stock was 1,250.0 million and total outstanding shares of Class A Common Stock was 852.8 million. In the fiscal years ended June 30, 2023, 2022, and 2021, the Company issued 13.8 , 3.3 , and 1.7 million shares of its Class A Common Stock, respectively, and received $ 0.9 , nil , and nil in cash, in connection with the exercise of employee stock options and settlement of RSUs. During the fiscal year ended June 30, 2022, the Company issued 69.9 million shares of its Class A Common Stock as a result of conversions of Series B Preferred Stock. During the fiscal year ended June 30, 2021, the Company reacquired 0.8 million of the 1.4 million shares of Class A Common Stock issued for the restricted stock awards granted during the year ended June 30, 2020. Of the 0.8 million shares of Class A Common Stock reacquired, 0.1 million were withheld for employee taxes due on vested restricted stock awards and 0.7 million were for restricted stock awards forfeited during the year ended, June 30, 2021. During the fiscal years ended June 30, 2023, 2022 and 2021, JAB Beauty B.V. (formerly known as Cottage Holdco B.V.), a wholly-owned subsidiary of JAB Cosmetics B.V. (“JABC”), and JABC acquired 0.0 , 0.0 and 0.3 million shares, respectively, of Class A Common Stock in the open market. As of June 30, 2023, the Company’s largest stockholder was JAB Beauty B.V., which owned approximately 53 % of Coty’s outstanding Class A Common Stock. JAB Beauty B.V., a wholly-owned subsidiary of JAB Cosmetics B.V. (“JABC”), is indirectly controlled by Lucresca SE, Agnaten SE and JAB Holdings B.V. (“JAB”). The Company’s CEO, Sue Nabi, was granted a one-time sign-on award of restricted stock units (the “Award”) on June 30, 2021. On October 29, 2021, JAB Beauty B.V. completed the transfer of 10.0 million shares of Common Stock to Ms. Nabi in connection with her sign-on award of restricted stock units. See Note 24—Share-Based Compensation Plans for additional information. Series A and A-1 Preferred Stock As of June 30, 2023, total authorized shares of preferred stock are 20.0 million. There are two classes of Preferred Stock, Series A Preferred Stock and Series A-1 Preferred Stock, both with a par value of $ 0.01 per share. As of June 30, 2023, there were 1.0 million shares of Series A and no shares of Series A-1 Preferred Stock authorized, issued and outstanding. Series A Preferred Stock and Series A-1 Preferred Stock are not entitled to receive any dividends and have no voting rights except as required by law. The Series A and Series A-1 Preferred Stock were issued to executive officers and directors under subscription agreements. Generally, the subscription agreements entitle the holder of the vested Series A or Series A-1 Preferred Stock to exchange the Series A or Series A-1 Preferred Stock into either cash or shares of Class A Common Stock, at the election of the Company, at the exchange value. The exchange value is generally equal to the difference between the 10-day trailing average closing price of a share of Class A Common Stock on the date of exchange and a predetermined hurdle price. The Series A Preferred Stock generally vests on the fifth anniversary of issuance, subject to continued employment with the Company and investment by the holder in shares of Class A Common Stock throughout the vesting period. The Series A-1 Preferred Stock generally vests on graded vesting terms where 60 % of the award granted vests after three years , 20 % of the award granted vests after four years and 20 % of the award granted vests after five years , subject to continued employment with the Company and investment by the holder in shares of Class A Common Stock throughout the vesting period. To the extent the Company controls whether such shares will be settled in cash or equity and intends to settle the grant in equity, the grant is treated as an equity grant, otherwise the grant is treated as a liability grant. F-48 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The following table summarizes the key terms of the outstanding issuance of Series A Preferred Stock: Issuance Date Type Number of Shares Awarded at Grant Date (millions of shares) Number of Shares Outstanding (millions of shares) Hurdle Price per Share March 27, 2017 (a) (b) Series A 1.0 1.0 $ 22.39 (a) If the holder does not exchange the vested Series A Preferred Stock by a specified expiration date, the Company must automatically exchange the Series A Preferred Stock into cash or shares, at election of the Company. (b) This grant was sold to Lambertus J.H. Becht (“Mr. Becht”), the Company’s former Chairman of the Board. Under the terms provided in the subscription agreement, the Series A Preferred Stock immediately vested on the grant date and the holder may exchange the vested shares after the fifth anniversary of the date of issuance. The Company requires shareholder approval in order to settle the exchange in shares of Class A Common Stock. Therefore, the award is classified as a liability as of June 30, 2023. An expense (income) of $ 0.2 , $( 0.2 ) and $ 0.8 was recorded during fiscal 2023, 2022 and 2021, respectively, and has been included in Selling, general and administrative expenses on the Consolidated Statements of Operations. As of June 30, 2023, total issued and outstanding shares of Series A Preferred Stock is 1.0 million, which vested on March 27, 2017. As of June 30, 2023, the Company classified $ 0.8 of Series A Preferred Stock as a liability, recorded in Other noncurrent liabilities in the Consolidated Balance Sheet. Convertible Series B Preferred Stock On May 11, 2020, the Company entered into an Investment Agreement with KKR Aggregator, relating to the issuance and sale by the Company to KKR Aggregator of up to 1,000,000 shares of the Company’s new Convertible Series B Preferred Stock, par value $ 0.01 per share (the “Series B Preferred Stock”), for an aggregate purchase price of up to $ 1,000.0 , or $ 1,000 per share (the “Issuance”). The Company completed the issuances and sales of the Series B Preferred Stock on May 26, 2020 and July 31, 2020. On November 16, 2020, KKR Aggregator and affiliated investment funds agreed to sell 146,057 shares of Series B Preferred Stock, to HFS Holdings S.à r.l, that is beneficially owned by Peter Harf, a director of the Company. The transaction closed on August 27, 2021. As a result of various conversions and exchanges of KKR Aggregator's shares of the Series B Preferred Stock, as of December 31, 2021, KKR has fully redeemed/exchanged all of their Series B Preferred Stock. Cumulative preferred dividends accrue daily on the Series B Preferred Stock at a rate of 9.0 % per year. During the twelve months ended June 30, 2023 and 2022, the Board of Directors declared dividends on the Series B Preferred Stock of $ 13.2 and $ 35.2 , paid accrued dividends of $ 13.2 and $ 55.8 and converted/exchanged dividends of $ 0.0 and $ 50.1 , respectively. As of June 30, 2023, 2022 and 2021, the Series B Preferred Stock had outstanding accrued dividends of $ 3.3 , $ 3.3 and $ 74.1 , respectively. Dividend Rights and Liquidation Preferences. The Series B Preferred Stock rank senior to the Company’s Common Stock with respect to dividend rights and rights on the distribution of assets on any liquidation, dissolution or winding up of the affairs of the Company. The Series B Preferred Stock has a liquidation preference of $ 1,000 per share, representing an aggregate liquidation preference of $ 1,000.0 upon issuance. Holders of the Series B Preferred Stock are entitled to the dividend at the rate of 9 % per annum, accruing daily and payable quarterly in arrears. The dividend rate will increase by a 1 % on the seven-year anniversary of the Closing Date and shall increase by an additional 1 % on each subsequent anniversary up to a total of 12 %. If the Company does not declare and pay a dividend on the Series B Preferred Stock on any dividend payment date, the dividend rate will increase by 1 % per annum until all accrued but unpaid dividends have been paid in full. Dividends will be payable in cash, or by increasing the amount of accrued dividends on Series B Preferred Stock, or any combination thereof, at the sole discretion of the Company. Accrued and unpaid dividends are not payable in shares unless the Series B Preferred Stock is converted to Common Stock. Conversion Features. The Series B Preferred Stock is convertible at the option of the holders at any time into shares of Common Stock at an initial conversion price of $ 6.24 per share of Series B Preferred Stock and an initial conversion rate of 160.2564 shares of Common Stock per share of Series B Preferred Stock. At any time after the third anniversary of the closing date, if the volume weighted average price of the Common Stock exceeds $ 12.48 per share for at least 20 trading dates in any period of 30 consecutive trading days, at the election of the Company, all or any portion of the Series B Preferred Stock will be convertible into the relevant number of shares of Common Stock. Redemption Features. At any time following the fifth anniversary of the Closing Date, the Company may redeem some or all of the Series B Preferred Stock for a per share amount in cash equal to (i) the sum of (x) 100 % of the liquidation preference plus (y) all accrued and unpaid dividends, multiplied by (ii) (A) 107 % if the redemption occurs at any time after the fifth F-49 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) anniversary of the Closing Date and prior to the sixth anniversary of the Closing Date, (B) 105 % if the redemption occurs at any time after the sixth anniversary of the Closing Date and prior to the seventh anniversary of the Closing Date, and (C) 100 % if the redemption occurs at any time after the seventh anniversary of the Closing Date. Voting rights. Holders of Series B Preferred Stock are entitled to vote with holders of Common Stock on an as-converted basis, subject to the Ownership Limitation as defined in the Investment Agreement. Holders of the Series B Preferred Stock are entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the Series B Preferred Stock, authorizations or issuances by the Company of securities that are senior to, or equal in priority with, the Series B Preferred Stock, increases or decreases in the number of authorized shares of Series B Preferred Stock, and issuances of shares of the Series B Preferred Stock. Change of Control Put. Upon certain change of control events involving the Company holders of Series B Preferred Stock may, at the holder’s election (i) convert their shares of Series B Preferred Stock into Common Stock at the then-current conversion price or (ii) cause the Company to redeem their shares of Series B Preferred Stock in an amount in cash equal to (x) if the change of control occurs on or before the fifth anniversary of the Closing Date, 110 % of the sum of the liquidation preference thereof plus any accrued and unpaid dividends and (y) if the change of control occurs on or after the fifth anniversary of the Closing Date, 100 % of the Redemption Price, provided that in the case of either clause (i) or (ii) above, if such change of control occurs on or before the fifth anniversary of the Closing Date, the Company will also be required to pay the holders of the Series B Preferred Stock a “make-whole” premium. Participation and Other Pertinent Rights. Following the Second Exchange, KKR no longer holds any preferred stock of the Company and no longer has the right to designate any directors to the Company's Board of Directors. Dividends - Common Stock On April 29, 2020, the Board of Directors suspended the payment of dividends on Common Stock. No dividends on Common Stock were declared for the year ended June 30, 2023. Total dividends in cash and other recorded to additional paid-in capital (“APIC”) in the Consolidated Balance Sheet as of June 30, 2023 and 2022 was $ 0.1 and $ 0.8 , respectively, which represents dividends no longer expected to vest as a result of forfeitures of outstanding RSUs. In addition to the activity noted above, the Company made payments of $ 0.7 , of which $ 0.2 relates to tax, and $ 1.4 , respectively, for the previously accrued dividends on RSUs that vested during the twelve months ended June 30, 2023 and 2022. Total accrued dividends on unvested RSUs and phantom units included in Accrued expenses and other current liabilities are $ 1.0 and $ 1.4 as of June 30, 2023 and 2022, respectively. In addition, accrued dividends of $ 0.1 and $ 0.5 are included in Other noncurrent liabilities as of June 30, 2023 and 2022, respectively. Accumulated Other Comprehensive (Loss) Income Foreign Currency Translation Adjustments (Losses) Gains on Cash Flow Hedges (Losses) Gains on Net Investment Hedge Foreign Currency Translation Adjustments Pension and Other Post-Employment Benefit Plans Total Beginning balance at July 1, 2021 $ ( 15.5 ) $ ( 32.2 ) $ ( 259.3 ) $ ( 14.9 ) $ ( 321.9 ) Other comprehensive income (loss) before reclassifications 11.0 36.3 ( 511.5 ) 58.0 ( 406.2 ) Net amounts reclassified from AOCI/(L) (a) 8.8 — — 1.4 10.2 Net current-period other comprehensive income (loss) 19.8 36.3 ( 511.5 ) 59.4 ( 396.0 ) Ending balance at June 30, 2022 $ 4.3 $ 4.1 $ ( 770.8 ) $ 44.5 $ ( 717.9 ) Other comprehensive income (loss) before reclassifications 1.7 ( 53.9 ) 102.9 14.7 65.4 Net amounts reclassified from AOCI/(L) (a) ( 5.3 ) — — ( 4.6 ) ( 9.9 ) Net current-period other comprehensive income (loss) ( 3.6 ) ( 53.9 ) 102.9 10.1 55.5 Ending balance at June 30, 2023 $ 0.7 $ ( 49.8 ) $ ( 667.9 ) $ 54.6 $ ( 662.4 ) F-50 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) (a) Amortization of actuarial gains of $ 6.1 and $ 1.6 , net of taxes of $ 1.5 and $ 0.2 , were reclassified out of AOCI/(L) and included in the computation of net period pension costs for the fiscal years ended June 30, 2023 and 2022, respectively (see Note 19—Employee Benefit Plans). Treasury Stock - Share Repurchase Program Since February 2014, the Board has authorized the Company to repurchase its Class A Common Stock under approved repurchase programs. On February 3, 2016, the Board authorized the Company to repurchase up to $ 500.0 of its Class A Common Stock (the “Incremental Repurchase Program”). Such repurchases may be made from time to time at the Company’s discretion, based on ongoing assessments of the capital needs of the business, the market price of its Class A Common Stock, and general market conditions. As of June 30, 2023, the Company has $ 396.8 remaining under the Incremental Repurchase Program. There were no share repurchase activities during the years ended June 30, 2023, 2022 and 2021 under the Incremental Repurchase Program. In June and December 2022, the Company entered into forward repurchase contracts (the “Forward” and together the “Forwards”) with three large financial institutions (“Counterparties”) to start hedging for potential $ 200.0 and $ 196.0 share buyback programs in 2024 and 2025, respectively. In connection with the June and December 2022 Forward transactions, the Company incurred certain execution fees of $ 2.0 and $ 2.0 , respectively, which were recognized as a premium to the forward price recorded at inception and amortized ratably over the contract periods. As part of the Forward agreements, the Company will pay interest on the outstanding underlying notional amount of the Forwards held by the Counterparties during the contract periods. The interest rates are variable, based on the United States secured overnight funding rate (“SOFR”) plus a spread. The weighted average interest rate plus applicable spread for the June and December 2022 Forward transactions were 8.2 % and 9.2 %, respectively, as of June 30, 2023. As part of the June 2022 Forward transaction, two of the Counterparties purchased approximately 27.0 million shares of the Company’s Class A Common Stock. In addition, as part of the December 2022 Forward transaction, these two Counterparties purchased approximately 11.0 million shares of the Company’s Class A Common Stock. The June and December 2022 Forward agreements require the Company to: (i) repurchase the shares on or before June 6, 2024 and December 15, 2024, respectively, at a price based on the weighted average of the daily volume weighted average price (“VWAP”) during the initial acquisition period (“Initial Price”); or (ii) at the Company’s option, pay or receive the difference between the Final Price, defined as the weighted average of the daily VWAP during the unwind period as defined in the agreement, and Initial Price of the Forwards. As part of the December 2022 Forward transaction, the remaining Counterparty purchased approximately 11.5 million shares of the Company’s Class A Common Stock. This Forward requires the Company to pay or receive the difference between the Final Price and Initial Price established at inception of the Forward on or before January 15, 2025. In addition, the Forwards include a provision for a potential true-up in cash upon specified changes in the price of the Company’s Class A Common Stock relative to the Initial Price (“Hedge Valuation Adjustment”). Such Hedge Valuation adjustment shall not result in a termination date or any adjustment of the number of Coty’s Class A Common Stock shares purchased by the Counterparties at inception. In the event the Company declares and pays any cash dividends on its Class A Common Stock, the Forward Counterparties will be entitled to such dividend payments and payable at termination of the Forwards. Since the Forwards permit a net cash settlement alternative in addition to the physical settlement, the Company accounted for the Forwards initially and subsequently at their fair value, with changes in the fair value recorded in Other income, net in the Condensed Consolidated Statement of Operations. The fair values of the Company’s Forwards were $ 219.8 and $ 24.5 as of June 30, 2023 and 2022, respectively. The Forwards are valued principally based on the change in the quoted market price of the Company’s common stock price between the inception date and the end of the period. We classify these instruments as Level 2. 24. SHARE-BASED COMPENSATION PLANS The Company has various share-based compensation programs (the “the Compensation Plans”) under which awards, including non-qualified stock options, Series A and Series A-1 Preferred Stock, RSUs, PRSUs, restricted stock and other share-based awards, may be granted or shares of Class A Common Stock may be purchased. As of June 30, 2023, 114.5 million shares of the Company's Class A Common Stock were authorized to be granted pursuant to these Plans. As of June 30, 2023, approximately 46.3 million shares of Class A Common Stock were reserved and available to be granted pursuant to these Plans. The Company may satisfy the obligation of its stock-based compensation awards with new shares. F-51 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The Company accounts for its share-based compensation plans for Common Stock as equity plans. The share-based compensation for equity plans is estimated and fixed at the grant date, based on the estimated fair value of the award. Series A Preferred Stock is accounted for partially as equity and partially using liability plan accounting to the extent the award is expected to be settled in cash. Accordingly, share-based compensation expense for the liability plan awards are measured at the end of each reporting period based on the fair value of the award on each reporting date and recognized as an expense to the extent earned. Total share-based compensation from continuing operations is shown in the table below: 2023 2022 2021 Equity plan expense (a) $ 134.7 $ 195.4 $ 25.4 Equity plan modified and cash settled — — 0.9 Liability plan expense (income) 1.2 0.1 1.6 Fringe expense 1.7 2.3 0.5 Total share-based compensation expense (b) $ 137.6 $ 197.8 $ 28.4 (a) Equity plan shared-based compensation expense of $ 134.7 , $ 195.4 , and $ 27.4 was recorded to additional paid in capital and presented in the Consolidated Statement of Equity for the fiscal years ended June 30, 2023, 2022, and 2021, respectively. Of the $ 134.7 , $ 195.4 , and $ 27.4 for the fiscal years ended June 30, 2023, 2022, and 2021, respectively, $ 0.0 , $ 0.0 , and $ 2.0 was reclassified to discontinued operations. (b) Expenses relating to share-based awards granted to non-Coty employees (Wella) are recorded within other income, net, within the Consolidated Statement of Operations. See Note 27 -Related Party Transactions for additional information. The share-based compensation expense for fiscal 2023, 2022 and 2021 of $ 137.6 , $ 197.8 and $ 28.4 , respectively, includes $ 138.7 , $ 202.0 , and $ 34.7 expense for the respective period offset by $( 1.1 ), $( 4.2 ) and $( 6.3 ) of income for the respective periods primarily due to significant executive forfeitures of share-based compensation instruments. As of June 30, 2023, the total unrecognized share-based compensation expense related to unvested stock options, Series A Preferred Stock, restricted stock, PRSUs, and restricted stock units and other share awards is $ 0.8 , $ 0.0 , $ 3.2 , $ 5.0 and $ 172.9 , respectively. The unrecognized share-based compensation expense related to unvested stock options, Series A Preferred Stock, restricted stock, PRSUs, and restricted stock units and other share awards is expected to be recognized over a weighted-average period of 0.86 , 0.00, 1.95 , 2.31 and 3.74 years, respectively. Non-Qualified Stock Options During fiscal 2023, 2022 and 2021, the Company granted 0.0 million , non-qualified stock option awards. These options are accounted for using equity accounting whereby the share-based compensation expense is estimated and fixed at the grant date based on the estimated value of the options using the Black-Scholes valuation model. Non-qualified stock options generally become exercisable five years from the date of the grant or on a graded vesting schedule where 60 % of each award granted vests after three years , 20 % of each award granted vests after four years and 20 % of each award granted vests after five years . All grants expire ten years from the date of the grant. The Company’s outstanding non-qualified stock options as of June 30, 2023 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Term (in years) Outstanding at July 1, 2022 5.8 $ 12.85 Exercised ( 0.1 ) 11.08 Forfeited ( 0.6 ) 11.42 Outstanding at June 30, 2023 5.1 $ 13.06 Vested and expected to vest at June 30, 2023 4.9 $ 13.13 $ — 5.10 Exercisable at June 30, 2023 4.1 $ 13.48 $ — 4.95 Of the 5.1 million stock options outstanding at June 30, 2023, 2.0 million vest on the fifth anniversary of the grant date and 3.1 million vest on the graded vesting schedule. F-52 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) As of June 30, 2023, the grant prices of the outstanding options ranged from $ 11.08 to $ 18.55 , and the grant prices for exercisable options ranged from $ 11.08 to $ 18.55 . A summary of the aggregated intrinsic value of stock options exercised for fiscal 2023 is presented below: 2023 Intrinsic value of options exercised $ 0.1 The Company’s non-vested non-qualified stock options as of June 30, 2023 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Grant Date Fair Value Non-vested at July 1, 2022 2.3 $ 3.14 Vested ( 0.9 ) 3.70 Forfeited ( 0.4 ) 2.23 Non-vested at June 30, 2023 1.0 $ 3.02 The share-based compensation expense recognized on the non-qualified stock options was $ 1.3 , $( 0.9 ) and $ 0.5 during fiscal 2023, 2022 and 2021, respectively. Executive Ownership Programs The Company encourages executive stock ownership through various programs. These programs govern shares of Class A Common Stock purchased by employees (“Purchased Shares”). Employees purchased 0.0 million , 0.0 million and 0.1 million shares in fiscal 2023, 2022 and 2021, respectively, and received matching non-qualified stock options or RSUs in accordance with the terms of the Compensation Plans under the Omnibus Long-Term Incentive Plan (“Omnibus LTIP”). There was no share-based compensation expense recorded in connection with Purchased Shares for fiscal 2023, 2022 and 2021. Additionally, share-based compensation expense recorded in connection with matching stock awards granted in accordance with the Compensation Plans are noted in their respective section of this footnote. Series A Preferred Stock In addition to the Executive Ownership Programs discussed above, the Series A Preferred Stock are accounted for partially as equity and partially as a liability as of June 30, 2023, 2022 and 2021 and the Company recognized an expense (income) of $ 0.2 , $( 0.2 ) and $ 0.8 in fiscal 2023, 2022 and 2021, respectively. See Note 23—Equity and Convertible Preferred Stock for additional information. The Company uses the binomial lattice or the Black-Scholes model to value the outstanding Series A Preferred Stocks. The fair value of the Company’s outstanding Series A Preferred Stock were estimated with the following assumptions. 2023 2022 2021 Expected life, in years 0.74 years 1.74 years 2.74 years Expected volatility 66.31 % 65.57 % 51.64 % Risk-free rate of return 5.44 % 2.89 % 0.46 % Dividend yield on Class A Common Stock — % 1.56 % 1.34 % Expected life, in years - The expected life represents the period of time (years) that Series A Preferred Stock granted are expected to be outstanding, which the Company calculates using a formula based on the contractual life of the respective Series A Preferred Stock. Expected volatility - The expected volatility is derived using historical stock price information for the Company’s common stock and that of certain peer group companies, and the volatility implied by the trading of options to purchase the Company’s stock on open-market exchanges. Risk-free rate of return - The Company bases the risk-free rate of return on the U.S. Constant Maturity Treasury Rate. Dividend yield on Class A Common Stock - The Company calculated the dividend yield on shares using the expected annualized dividend rate and the stock price as of the valuation date. Series A Preferred Shares generally expire seven years from the date of the grant. F-53 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The Company’s outstanding Series A Preferred Shares as of June 30, 2023 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Exercise Price Aggregate Intrinsic Value Weighted Average Remaining Contractual Term (in years) Outstanding at July 1, 2022 1.5 $ 22.10 Forfeited ( 0.5 ) 21.52 Outstanding at June 30, 2023 1.0 22.39 Vested and expected to vest at June 30, 2023 1.0 $ 22.39 $ — 0.74 Exercisable 1.0 $ 22.39 $ — 0.74 The Company’s non-vested shares of Series A Preferred Stock as of June 30, 2023 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Grant Date Fair Value Non-vested at July 1, 2022 0.2 $ 3.65 Forfeited ( 0.2 ) 3.65 Non-vested at June 30, 2023 — $ — Long-term Equity Program for CEO The Company’s CEO, Sue Nabi, was granted a one-time sign-on award of restricted stock units (the “Award”) on June 30, 2021. The Award will vest and settle in 10,000,000 shares of the Company’s Class A Common Stock, par value $ 0.01 per share, on each of August 31, 2021, August 31, 2022 and August 31, 2023, subject to her continued employment through each such date. The Company will recognize approximately $ 280.2 of share-based compensation expense, on a straight-line basis over the vesting period, based on the fair value on the grant date. The amount of compensation cost recognized at each vesting date must at least equal the portion of the award legally vested. As such, $ 93.4 and $ 170.9 were recognized in fiscal years ended June 30, 2023 and 2022. In addition, $ 15.9 will be recognized in the fiscal year ending 2024. In connection with this Award, on October 29, 2021, JAB Beauty B.V., the Company’s largest stockholder and a wholly-owned subsidiary of JAB Holding Company S.à r.l., completed the transfer of 10,000,000 shares of Common Stock to Ms. Nabi. In the event Ms. Nabi remains employed through the third vesting date, JAB Beauty B.V. has agreed, pursuant to an equity transfer agreement, to transfer (either directly or through contributing to the Company) an additional 5,000,000 shares of Common Stock to Ms. Nabi. On August 31, 2022, the Company issued 10,000,000 shares of Class A Common Stock to Ms. Nabi in connection with the second vesting of the Award. On May 4, 2023 the Company granted Ms. Nabi 10,416,667 RSUs (the “Second Award”), which will vest and settle in shares of the Company’s Class A Common Stock, par value $ 0.01 per share over five years on the following vesting schedule: (i) 15 % on September 1, 2024, (ii) 15 % on September 1, 2025, (iii) 20 % on September 1, 2026, (iv) 20 % on September 1, 2027; and (v) 30 % on September 1, 2028, in each case subject to Ms. Nabi’s continued employment through the applicable vesting date. The Company will recognize approximately $ 109.6 of share-based compensation expense, on a straight-line basis over the vesting period, based on the fair value on the grant date, net of forfeitures. The amount of compensation cost recognized at each vesting date must at least equal the portion of the award legally vested. For the fiscal year ended June 30, 2023, $ 3.2 was recognized. In addition, pursuant to the terms of the amended employment agreement the Company agreed to grant Ms. Nabi an award of 2,083,333 PRSUs which shall fully vest on September 1, 2026, subject to the achievement of three-year performance objectives to be determined by the Board on or around September 2023 and subject to Ms. Nabi’s continued employment. The new arrangement also provides that on or around each September 1 of 2024 through 2027, the Company shall grant Ms. Nabi an additional award of 2,083,333 PRSUs, which shall vest on the third-year anniversary of the respective grant date, subject in each case to the achievement of three-year performance objectives to be determined by the Board. The Company will recognize share-based compensation expense associated with these PRSUs, on a straight-line basis over the vesting period, based on the fair value on the grant date when it is probable that the performance condition will be achieved. F-54 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) In the event that JAB and Ms. Nabi sell shares of Common Stock for cash in a privately negotiated transaction, subject to Board approval, the Company will grant Ms. Nabi new options to acquire shares of Common Stock (the “Reload Options”) in an amount equal to the number of shares sold by Ms. Nabi in such transaction. The Reload Options will have a strike price equal to the greater of the volume weighted average price for shares at the time of the relevant transaction and the fair market value on the date of grant. The potential expense attributed to the reload options will be recognized when the reload options are granted. Restricted Stock Units On October 14, 2020, the Company’s Board of Directors approved a new vesting schedule applicable to RSUs granted during fiscal 2021, to three-year graded vesting where one-third of each award granted vests after the first anniversary of grant, one-third of each award granted vests after the second anniversary of grant and one-third of each awarded granted vests after the third anniversary of grant. On October 14, 2021, the Company’s Board of Directors approved a new vesting schedule applicable to RSUs granted during fiscal 2022, to three-year graded vesting where one-quarter of each award granted vests after the first anniversary of grant, one-quarter of each award granted vests after the second anniversary of grant and one-half of each awarded granted vests after the third anniversary of grant. During fiscal 2023, 2022 and 2021, 17.2 million, 4.6 million and 38.1 million RSUs were granted under the Omnibus LTIP and 0.3 million, 0.3 million and 0.3 million RSUs were granted under the 2007 Stock Plan for Directors, respectively. The Company’s outstanding RSUs as of June 30, 2023 and activity during the fiscal year then ended are presented below: Shares (in millions) Aggregate Intrinsic Value Weighted Average Remaining Contractual Term Outstanding at July 1, 2022 32.4 Granted 17.5 Settled ( 14.9 ) Cancelled ( 1.1 ) Outstanding at June 30, 2023 33.9 Vested and expected to vest at June 30, 2023 31.0 $ 381.0 2.26 The share-based compensation expense recorded in connection with the RSUs was $ 131.9 , $ 197.2 and $ 26.1 during fiscal 2023, 2022 and 2021, respectively. The Company’s outstanding and non-vested RSUs as of June 30, 2023 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Grant Date Fair Value Outstanding and nonvested at July 1, 2022 32.0 $ 8.63 Granted 17.5 9.70 Vested ( 15.0 ) 8.79 Cancelled ( 1.1 ) 8.02 Outstanding and nonvested at June 30, 2023 33.4 $ 9.38 The total intrinsic value of RSUs vested and settled during fiscal 2023, 2022 and 2021 is $ 34.3 , $ 33.5 and $ 32.9 , respectively. Performance Restricted Stock Units During fiscal 2023, 1.2 million PRSUs were granted under the Omnibus LTIP. F-55 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The Company’s outstanding PRSUs as of June 30, 2023 and activity during the fiscal year then ended are presented below: Shares (in millions) Aggregate Intrinsic Value Weighted Average Remaining Contractual Term Outstanding at July 1, 2022 — Granted 1.2 Settled — Outstanding at June 30, 2023 1.2 Vested and expected to vest at June 30, 2023 1.0 12.3 2.31 The share-based compensation expense recorded in connection with the PRSUs was $ 1.5 during fiscal 2023. The Company’s outstanding and non-vested PRSUs as of June 30, 2023 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Grant Date Fair Value Outstanding and nonvested at July 1, 2022 — Granted 1.2 6.62 Vested — Outstanding and nonvested at June 30, 2023 1.2 $ 6.62 The total intrinsic value of PRSUs vested and settled during fiscal 2023 was $ 0.0 . Restricted Stock During fiscal 2023, 2022 and 2021, 0.4 million, 0.3 million and 0.0 million , restricted stock awards were granted under the Omnibus LTIP. The Company’s outstanding restricted stock as of June 30, 2023 and activity during the fiscal year then ended are presented below: Shares (in millions) Aggregate Intrinsic Value Weighted Average Remaining Contractual Term Outstanding at July 1, 2022 0.6 Granted 0.4 Settled ( 0.3 ) Outstanding at June 30, 2023 0.7 Vested and expected to vest at June 30, 2023 0.6 $ 7.8 1.95 F-56 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) The share-based compensation expense recorded in connection with the restricted stock was $ 2.7 , $ 1.8 , $ 1.0 during fiscal 2023, 2022 and 2021, respectively. The Company’s outstanding and non-vested restricted stock as of June 30, 2023 and activity during the fiscal year then ended are presented below: Shares (in millions) Weighted Average Grant Date Fair Value Outstanding and nonvested at July 1, 2022 0.6 $ 6.58 Granted 0.4 6.62 Vested ( 0.3 ) 5.94 Outstanding and nonvested at June 30, 2023 0.7 $ 6.94 The total intrinsic value of restricted stock vested and settled during fiscal 2023 and 2022 was $ 2.6 and $ 1.7 , respectively. Phantom Units On July 21, 2015, the Board granted Mr. Becht, the Company’s former Chairman of the Board and interim CEO, an award of 300,000 phantom units, in consideration of Mr. Becht’s increased and continuing responsibilities as interim CEO of the Company. Each phantom unit has an economic value equivalent to one share of the Company’s Class A Common Stock settleable in cash or shares at the election of Mr. Becht. The award to Mr. Becht was made outside of the Company’s Omnibus LTIP. On July 24, 2015, Mr. Becht elected to receive payment of the phantom units in the form of shares of Class A Common Stock and the phantom units were valued at $ 8.0 . The phantom units vested on the fifth anniversary of the grant date and remain outstanding as of June 30, 2023. 25. NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC. PER COMMON SHARE Net income (loss) attributable to Coty Inc. common stockholders per common share (“basic EPS”) is computed by dividing net income (loss) attributable to Coty Inc. less any dividends on Series B Preferred Stock by the weighted-average number of common shares outstanding during the period. Net income (loss) attributable to Coty Inc. common stockholders per common share assuming dilution (“diluted EPS”) is computed by adjusting the numerator used in basic EPS to add back the dividends applicable to the Series B Preferred Stock, if dilutive, and using the basic EPS weighted-average number of common shares and the effect of potentially dilutive securities outstanding during the period as the denominator. Potentially dilutive securities consist of non-qualified stock options, Series A Preferred Stock, RSUs, unvested restricted stock awards and potential shares resulting from the conversion of the Series B Preferred Stock as of June 30, 2023, 2022 and 2021. Net income (loss) attributable to Coty Inc. is adjusted through the application of the two-class method of income per share to reflect a portion of the periodic adjustment of the redemption value in excess of fair value of the redeemable noncontrolling interests. There is no excess of redemption value over fair value of the redeemable noncontrolling interests in fiscal 2023, 2022 and 2021. In addition, there are no participating securities requiring the application of the two-class method of income per share. F-57 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Reconciliation between the numerators and denominators of the basic and diluted EPS computations is presented below: Year Ended June 30, 2023 2022 2021 Amounts attributable to Coty Inc.: Net income (loss) from continuing operations $ 508.2 $ 253.8 $ ( 64.0 ) Convertible Series B Preferred Stock dividends ( 13.2 ) ( 198.3 ) ( 102.3 ) Net income (loss) from continuing operations attributable to common stockholders 495.0 55.5 ( 166.3 ) Net income (loss) from discontinued operations, net of tax — 5.7 ( 137.3 ) Net income (loss) attributable to common stockholders $ 495.0 $ 61.2 $ ( 303.6 ) Weighted-average common shares outstanding: Weighted-average common shares outstanding—Basic 849.0 820.6 764.8 Effect of dilutive stock options and Series A/A-1 Preferred Stock (a) — — — Effect of restricted stock, PRSUs and RSUs (b) 13.8 13.5 — Effect of Convertible Series B Preferred Stock (c) 23.7 — — Effect of Forward Repurchase Contracts (d) — — — Weighted-average common shares and common share equivalents outstanding—Diluted 886.5 834.1 764.8 Earnings (losses) per common share Earnings (losses) from continuing operations per common share - basic $ 0.58 $ 0.07 $ ( 0.22 ) Earnings (losses) from continuing operations per common share - diluted (e) $ 0.57 $ 0.07 $ ( 0.22 ) Earnings (losses) from discontinued operations - basic $ 0.00 $ 0.01 $ ( 0.18 ) Earnings (losses) from discontinued operations - diluted $ 0.00 $ 0.01 $ ( 0.18 ) Earnings (losses) per common share - basic $ 0.58 $ 0.08 $ ( 0.40 ) Earnings (losses) per common share - diluted (e) $ 0.57 $ 0.08 $ ( 0.40 ) (a) As of June 30, 2023 and 2022, outstanding stock options and Series A Preferred Stock with purchase or conversion rights to purchase 4.8 million and 8.3 million weighted average anti-dilutive shares of Common Stock, respectively, were excluded from the computation of diluted EPS. As of June 30, 2021, outstanding stock options and Series A Preferred Stock with purchase or conversion rights to purchase shares of Common Stock were excluded in the computation of diluted loss per share due to the net loss incurred during the period. (b) As of June 30, 2023 and 2022, there were 3.2 million and 1.6 million weighted average anti-dilutive RSUs, respectively, excluded from the computation of diluted EPS. As of June 30, 2021, RSUs were excluded in the computation of diluted loss per share due to the net loss incurred during the period. (c ) As of June 30, 2022, there were 65.4 million dilutive shares of Convertible Series B Preferred Stock excluded from the computation of diluted EPS as their inclusion would be anti-dilutive. As of June 30 2021, Convertible Series B Preferred Stock shares were excluded from the computation of diluted EPS due to the net loss incurred during the period. (d) For the twelve months ended June 30, 2023, potential shares for the Forward Repurchase Contracts were excluded from the computation of diluted EPS as Coty is in the position to receive shares from the counterparties and as such their inclusion would be anti-dilutive. (e) Diluted EPS is adjusted by the effect of dilutive securities, including awards under the Company's equity compensation plans, the convertible Series B Preferred Stock, and the Forward Repurchase Contracts. When calculating any potential dilutive effect of stock options, Series A Preferred Stock, restricted stock, PRSUs and RSUs, the Company uses the treasury method and the if-converted method for the Convertible Series B Preferred Stock and the Forward Repurchase Contracts. The treasury method typically does not adjust the net income attributable to Coty Inc., while the if-converted method requires an adjustment to reverse the impact of the preferred stock dividends of $ 13.2 , $ 198.3 , and $ 102.3 , respectively, and to reverse the impact of fair market value (gains)/losses for contracts with the option to settle in shares or cash of $( 101.8 ), $ 0 , and $ 0 , respectively, if dilutive, for the twelve months ended June 30, 2023, 2022 and 2021 on net income applicable to common stockholders during the period. F-58 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) 26. LEGAL AND OTHER CONTINGENCIES Legal Matters The Company is involved, from time to time, in various litigation, administrative and other legal proceedings, including regulatory actions, incidental or related to its business, including consumer class or collective actions, personal injury (most involving allegations related to alleged asbestos in the Company’s talc-based cosmetic products), intellectual property, competition, compliance and advertising claims litigation and disputes, among others (collectively, “Legal Proceedings”). While the Company cannot predict any final outcomes relating thereto, management believes that the outcome of current Legal Proceedings will not have a material effect upon its business, prospects, financial condition, results of operations, cash flows or the trading price of the Company’s securities. However, management’s assessment of the Company’s current Legal Proceedings is ongoing, and could change in light of the discovery of additional facts with respect to Legal Proceedings not presently known to the Company, further legal analysis, or determinations by judges, arbitrators, juries or other finders of fact or deciders of law which are not in accord with management’s evaluation of the probable liability or outcome of such Legal Proceedings. From time to time, the Company is in discussions with regulators, including discussions initiated by the Company, about actual or potential violations of law in order to remediate or mitigate associated legal or compliance risks and liabilities or penalties. As the outcomes of such proceedings are unpredictable, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, prospects, financial condition, results of operations, cash flows or the trading price of its securities. Certain Litigation . On June 13, 2023, the Court of Chancery of the State of Delaware approved the settlement of the consolidated purported stockholder class action and derivative complaint concerning the tender offer by Cottage Holdco B.V. (now known as JAB Beauty B.V.) (the “Cottage Tender Offer”) and the Schedule 14D-9 that was filed on May 6, 2019 against certain current and former directors of the Company, JAB Holding Company S.à r.l., JAB Holdings B.V., JAB Cosmetics B.V., and Cottage Holdco B.V. The Company was named as a nominal defendant. The case was captioned Massachusetts Laborers’ Pension Fund v. Harf et al., Case No. 2019-0336-AGB. On June 14, 2019, plaintiffs in the consolidated action filed a Verified Amended Class Action and Derivative Complaint (“Amended Complaint”). After defendants responded to the Amended Complaint, on October 21, 2019, plaintiffs filed a Verified Second Amended Class Action and Derivative Complaint (the “Second Amended Complaint”), alleging that the directors and JAB Holding Company S.à r.l., JAB Holdings B.V., JAB Cosmetics B.V., and Cottage Holdco B.V. breached their fiduciary duties to the Company’s stockholders and breached the Stockholders Agreement. The Second Amended Complaint sought, among other things, monetary relief. On November 21, 2019, the defendants moved to dismiss certain claims asserted in the Second Amended Complaint, and certain of the director defendants also answered the complaint. On May 7, 2020, plaintiffs stipulated to the dismissal without prejudice of JAB Holding Company S.à r.l. from the action. On August 17, 2020, the court denied the remaining motions to dismiss. On March 29, 2023, the parties entered into a Stipulation and Agreement of Compromise and Settlement, the terms of which have been made available as part of the public filing requirements associated with the court-approval process. The settlement was approved by the Court on June 13, 2023 and did not have a material impact on the Company’s financial results. Brazilian Tax Assessments The Company’s Brazilian subsidiaries receive tax assessments from local, state and federal tax authorities in Brazil from time to time. Current open tax assessments as of June 30, 2023 are: F-59 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Assessment received Type of assessment Type of Tax Tax period impacted Estimated amount, including interest and penalties as of June 30, 2023 Mar-18 State sales tax credits, which the Treasury Office of the State of Goiás considers as improperly registered ICMS 2016-2017 R$ 1.1 million (approximately $ 0.2 ) (a) Aug-20 ICMS 2017-2019 R$ 569.3 million (approximately $ 117.2 ) Oct-20 Federal excise taxes, which the Treasury Office of the Brazil’s Internal Revenue Service considers as improperly calculated IPI 2016-2017 R$ 401.9 million (approximately $ 82.8 ) Nov-22 IPI 2018-2019 R$ 537.3 million (approximately $ 110.6 ) Nov-20 State sales taxes, which the Treasury Office of the State of Minas Gerais considers as improperly calculated ICMS 2016-2019 R$ 217.4 million (approximately $ 44.8 ) Jun-21 State sales tax, which the Treasury Office of the State of Goiás considers as improperly calculated ICMS 2016-2020 R$ 63.8 million (approximately $ 13.1 ) (a) During the fourth quarter of fiscal 2023, the ICMS assessment received in March 2018 had an unfavorable decision at administrative instance and the Company decided to pay the $ 0.2 penalty at case closure. The Company does not believe the outcome of this decision will weigh on other pending cases as the case factors for other open ICMS assessments are different. During the third quarter of fiscal 2023, the ICMS assessment received in November 2020 was moved to the judicial process. All other cases are currently in the administrative process. The Company is seeking favorable judicial and administrative decisions on the tax enforcement actions filed by the tax authorities for these assessments. The Company believes it has meritorious defenses and it has not recognized a loss for these assessments as the Company does not believe a loss is probable. Due to the fiscal environment in Brazil, the possibility of further tax assessments related to the same or similar matters cannot be ruled out. Other Commitments At June 30, 2023, the aggregate future minimum purchase obligations, which include commitments to purchase inventory and other services agreements, were as follows: Fiscal Year Ending June 30, Purchase Obligations 2024 $ 869.3 2025 24.5 2026 22.8 2027 9.9 2028 5.1 Thereafter — Total $ 931.6 27. RELATED PARTY TRANSACTIONS Performance Guarantee In connection with the sales of certain businesses, the Company has assigned its rights and obligations under a real estate lease to JAB Partners LLP. The remaining term of this lease is approximately eight years . While the Company is no longer the primary obligor under this lease, the lessor has not completely released the Company from its obligation, and holds it secondarily liable in the event that the assignee defaults on the lease. The maximum potential future payments that the Company could be required to make, if the assignee was to default as of June 30, 2023, would be approximately $ 4.1 . The Company has assessed the probability of default by the assignee and has determined it to be remote. F-60 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) Equity Transfer Agreement In connection with the Award granted to the Company’s CEO on June 30, 2021, JAB Beauty B.V. has agreed to transfer to her (either directly or through contributing to the Company) one-half of the total number of shares of Common Stock owed to her if and when the Award vests. See Note 24—Share-Based Compensation Plans for more information on the Award. Relationship with KKR As noted in Note 23—Equity and Convertible Preferred Stock, in fiscal 2020 KKR Aggregator purchased Series B Preferred Stock. This preferred stock conveyed to KKR Aggregator the right to designate two directors to the Company’s Board of Directors and voting rights on an as-converted basis. On November 16, 2020, KKR Aggregator and affiliated investment funds agreed to sell 146,057 shares of Series B Preferred Stock to HFS Holdings S.à r.l, a private limited liability company incorporated under the laws of Luxembourg that is beneficially owned by Peter Harf, a director of the Company. The transaction, which was subject to customary closing conditions, closed on August 27, 2021. In June of 2020, KKR Bidco and Coty entered into a separate definitive agreement regarding a strategic transaction (“Wella Transaction”) for the sale of the Company’s Professional and Retail Hair business, which was completed on November 30, 2020. Refer to Note 23—Equity and Convertible Preferred Stock for the definitive agreement entered into with KKR that closed on October 20, 2021. On September 10, 2021, KKR Aggregator converted a portion of its Series B Preferred Stock into Class A common stock of the Company and completed a secondary public offering of the converted shares of Class A common stock. Refer to Note 23—Equity and Convertible Preferred Stock. On October 20, 2021, the Company completed the sale of a 9.4 % stake in Wella to KKR Aggregator in the First Exchange. On November 10, 2021, KKR Aggregator converted 123,219 shares of Series B Preferred Stock, and $ 1.2 of unpaid dividends into 19,944,701 shares of Class A common stock. Immediately after the conversion, KKR Aggregator completed a sale of 19,944,701 shares of Class A common stock. On November 30, 2021, Coty completed the sale of an additional 4.7 % stake in Wella to KKR Aggregator in the Second Exchange, reducing the Company’s total shareholding in the Wella Company to 25.9 %. Refer to Note 23—Equity and Convertible Preferred Stock. Following the Second Exchange, KKR no longer holds any preferred stock of the Company and no longer has the right to designate any directors to the Company's Board of Directors. During fiscal 2023, 2022 and 2021, fees of nil , nil and $ 7.6 , respectively, were incurred with KKR in connection with the initial and second closings of the Series B Preferred Stock; these fees reduced the carrying value of the stock. During fiscal 2023 and 2022, the Company recognized gains related to its post-closing contingent consideration agreement for the sale of Wella, of $ 30.8 and $ 0.7 , respectively, reported in Other income, net. The remaining $ 2.5 is unearned and is included in Other noncurrent liabilities until the contingency is resolved. Refer to Note 3—Discontinued Operations. From time to time, certain funds held by KKR may hold the Company’s Senior Secured and Unsecured Notes (as defined in Note 15—Debt). These funds may receive principal and interest payments on the same terms as other investors in the Company’s Senior Secured and Unsecured Notes. Wella As of June 30, 2023, Coty owned 25.9 % of the Wella Company as an equity investment and performs certain services to Wella. Refer to Note 13—Equity Investments and Note 28—Subsequent Events. In connection with the sale of the Wella Business, the Company and Wella entered into a Transitional Services Agreement (“TSA”). Subject to the terms of this TSA, the Company will perform services for Wella in exchange for related service fees. Such services include billing and collecting from Wella customers, certain logistics and warehouse services, as well as other administrative and systems support. The Company and Wella have mutually agreed to end the contracted TSA services on January 31, 2022. The Company and Wella have also entered into other manufacturing and distribution arrangements to facilitate the Wella Business transition in the U.S. and Brazil. TSA fees and other fees earned were $ 3.3 and $ 7.6 , respectively, for the year ended June 30, 2023, $ 87.5 and $ 6.7 , respectively for the year ended June 30, 2022, and $ 86.6 and $ 3.4 , respectively for the seven months ended June 30, 2021. The TSA fees are principally invoiced on a cost plus basis. The TSA fees and other fees were included in Selling, general and administrative expenses and Cost of sales, respectively, in the Company's Statement of Operations. As of June 30, 2023, accounts receivable from and accounts payable to Wella of $ 70.6 and $ 8.3 , respectively, were included in Prepaid expenses and other current assets and Accrued expenses and other current liabilities, respectively, in the Company's Balance Sheets. Additionally, as of June 30, 2023, the Company has accrued $ 33.0 related to long-term payables due to Wella included in Other noncurrent liabilities in the Company's Consolidated Balance Sheet. F-61 COTY INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ($ in millions, except per share data) In accordance with the separation agreement with Wella, Coty shall retain and be solely responsible for any amounts payable to former Coty employees transferred to Wella (“Wella employees”), who participated in the Coty Long-Term Incentive Plan. The Wella employees will continue to participate and vest on the current terms for the remaining vesting period after the separation. As such, Coty will continue to recognize the share-based compensation expense for Wella employees until the existing equity awards reach their vesting date. For the years ended June 30, 2023, 2022, and 2021 Coty recorded $ 4.6 , $ 0.7 , and $ 2.3 of share-based compensation expense related to Wella employees, which was presented as part of Other income, net in the Consolidated Statements of Operations. The Company also entered into an agreement with Wella to provide management, consulting and financial services to Wella and its direct and indirect divisions, subsidiaries, parent entities and controlled affiliates (in assisting it in the management of its business). Fees earned and reflected in Other income, net in fiscal years 2023, 2022 and 2021 were $ 2.7 , nil and nil respectively. As of June 30, 2023, $ 0.8 is due from Wella. The Company has certain sublease arrangements with Wella after the sale. For the years ended June 30, 2023, 2022, and seven months ended 2021, the Company reported sublease income of $ 9.1 , $ 13.3 , and $ 9.1 from Wella. Orveda The disinterested members of the Board reviewed and approved the entry into a license agreement with Orveda, an ultra-premium skincare brand co-founded by Coty’s CEO, Sue Nabi. Ms. Nabi has no continuing formal role at Orveda or economic interest in Orveda as a result of divesting her interests which was settled in cash in December 2021; however her business partner and co-founder, Nicolas Vu, is the sole owner and CEO of Orveda, and Mr. Vu also provides consulting services, related to the skincare category and Orveda positioning, to Coty under the terms of a separate agreement. The initial term of the Orveda license agreement is five years , with two five-year automatic renewals subject to the achievement of certain net revenue milestones. The principal terms of the license agreement are consistent with other Coty prestige licenses and the Board determined that the terms were no more favorable than to an unaffiliated third party. Consulting Services and Other Arrangements Beatrice Ballini, a director, serves as a senior member of the Retail Practice and a leader of the Board and CEO Advisory Partners group at Russell Reynolds Associates. From time to time, the Company has engaged Russell Reynolds Associates, a global leadership and search firm, for recruiting assistance. The amounts of such services provided to the Company for fiscal 2023, 2022 and 2021 were $ 0.9 , $ 0.7 and $ 2.3 , respectively. 28. SUBSEQUENT EVENTS Sale of Partial Wella Stake On July 18, 2023 the Company announced that it had entered into a binding letter of intent to sell a 3.6 % stake in Wella to investment firm IGF Wealth Management for $ 150.0 . The closing of the transaction is subject to, among other things, completion of due diligence and the satisfaction of certain closing conditions, including the approval of the transaction by KKR. If the transaction closes, Coty intends to use the net proceeds to pay down a portion of the outstanding principal balance of its Revolving Credit Facility. Assuming the transaction closes, Coty would retain 22.3 % of the Wella Company. Refinancing Amendment On July 11, 2023, the Company entered into an amendment to the 2018 Coty Credit Agreement that (i) refinanced all of the existing $ 2,000.0 of revolving credit commitments and the outstanding loans made pursuant thereto with two new tranches of senior secured revolving credit commitments, one in an aggregate principal amount of $ 1,670 available in dollars and certain other currencies and the other in an aggregate principal amount of € 300 million available in euros, maturing in in July 2028, (ii) provided for a credit spread adjustment of 0.10 % for all interest periods, with respect to SOFR loans, (iii) added Fitch as a relevant rating agency for purposes of the collateral release provisions and determining applicable interest rates and fees and (iv) provided that certain covenants will cease to apply during a collateral release period. Offering of Senior Secured Notes On July 26, 2023, the Company issued an aggregate principal amount of $ 750.0 of 6.625 % senior secured notes due 2030 (“2030 Dollar Senior Secured Notes”). Coty received net proceeds of $ 740.6 in connection with the offering of the 2030 Dollar Senior Secured Notes. In accordance with the 2018 Coty Credit Agreement, as amended, the net proceeds received were utilized to pay down a portion of the outstanding principal balance of the 2018 Coty Term B Facility. 2018 Term B Facility repayment On August 3, 2023, the Company repaid € 408.0 million of debt outstanding under the 2018 Term B Facility. F-62 COTY INC. & SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Years Ended June 30, 2023, 2022, and 2021 ($ in millions, except per share data) Valuation and Qualifying Accounts (a) Description Three Years Ended June 30, Balance at Beginning of Period Balance Change through Acquisition/Divestiture Charged to Costs and Expenses Deductions Balance at End of Period Allowance for doubtful accounts and other customer deductions: 2023 $ 53.4 $ — $ 4.3 $ ( 34.5 ) (b) $ 23.2 2022 47.7 — 26.2 ( 20.5 ) (b) 53.4 2021 (a) 91.1 ( 28.4 ) 5.7 ( 20.7 ) (b) 47.7 Allowance for customer returns: 2023 $ 95.3 $ — $ 103.0 $ ( 115.5 ) $ 82.8 2022 89.9 — 128.4 ( 123.0 ) 95.3 2021 (a) 67.8 — 131.3 ( 109.2 ) 89.9 Deferred tax valuation allowances: 2023 $ 41.7 $ — $ 21.7 $ ( 2.7 ) $ 60.7 2022 33.4 — 12.5 ( 4.2 ) 41.7 2021 (a) 54.9 ( 14.9 ) 1.4 ( 8.0 ) 33.4 (a) Includes amounts from continuing operations and held for sale. (b) Includes amounts written-off, net of recoveries and cash discounts. S-1