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What changed in COTY INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of COTY INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+450 added−439 removedSource: 10-K (2024-08-20) vs 10-K (2023-08-22)

Top changes in COTY INC.'s 2024 10-K

450 paragraphs added · 439 removed · 314 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeEnvironmental, Social and Governance Coty’s sustainability commitment, Beauty That Lasts, is a multi-pillared strategy which aims to contribute to a more sustainable and inclusive future. With a focus on products, planet and people we see sustainability as the ultimate driver of innovation. 4 We report annually on our progress towards our sustainability targets through a separate sustainability report.
Biggest changeWe recognize the importance of our employees to our business and believe our relationship with our employees is satisfactory. 4 Environmental, Social and Governance Our sustainability framework, Beauty That Lasts, is a multi-pillared strategy which aims to contribute to a more sustainable and inclusive future.
We continue to evaluate and modify our processes and activities to further limit our impact on the environment and to enable the deployment of our climate-related initiatives to meet our proposed targets. 5 The Beauty of Our People We are committed to playing our part in creating a more inclusive business and society.
We continue to evaluate and modify our processes and activities to further limit our impact on the environment and to enable the deployment of our climate-related initiatives to meet our proposed targets. The Beauty of Our People We are committed to playing our part in creating a more inclusive business and society.
We are subject to numerous foreign, federal, provincial, state, municipal and local environmental, health and safety laws and regulations relating to, among other matters, safe working conditions, product stewardship and environmental protection, including those relating to emissions to the air, discharges to land and surface waters, generation, handling, storage, transportation, treatment and disposal of hazardous substances and waste materials, and the registration and evaluation of chemicals.
We are subject to numerous foreign, federal, provincial, state, municipal and local environmental, health and safety laws and regulations relating to, among other matters, safe working conditions, product stewardship, and environmental protection, including those relating to emissions to the air, discharges to land and surface waters, deforestation and land use, generation, handling, storage, transportation, treatment and disposal of hazardous substances and waste materials, and the registration and evaluation of chemicals.
We maintain policies and procedures to monitor and control environmental, health and safety risks, and to monitor compliance with applicable environmental, health and safety requirements.
We maintain policies and procedures to monitor and control environmental, health and safety risks, 6 and to monitor compliance with applicable environmental, health and safety requirements.
Changing circumstances, including evolving expectations for sustainability, or changes in standards and the way progress is measured, may lead to adjustments in, or the discontinuation of, our pursuit of certain goals, commitments, or initiatives (see additional discussion in “Forward-looking Statements— Cautionary Note Regarding Sustainability Information ”).
Changing circumstances, including evolving expectations for sustainability, or changes in standards and the way progress is measured, may lead to adjustments in, or the discontinuation of, our pursuit of certain goals, commitments, or initiatives (see additional discussion in “Forward-looking Statements—Cautionary Note Regarding Sustainability Information”).
Human Capital Workforce . As of June 30, 2023, we had approximately 11,350 full-time employees in over 36 countries. In addition, we typically employ a large number of seasonal contractors during our peak manufacturing and promotional season. Our employees in the U.S. are not covered by collective bargaining agreements.
Human Capital Workforce . As of June 30, 2024, we had approximately 11,791 full-time employees in over 36 countries. In addition, we typically employ a large number of seasonal contractors during our peak manufacturing and promotional season. Our employees in the U.S. are not covered by collective bargaining agreements.
Over the past few years we have been implementing a comprehensive transformation agenda (the “Transformation Plan”), focusing on our core go-to-market competencies, simplifying our capital structure and deleveraging our balance sheet.
Over the past few years we have implemented a comprehensive transformation agenda (the “Transformation Plan”), focusing on our core go-to-market competencies, simplifying our capital structure and deleveraging our balance sheet.
However, the mix of product sales can vary considerably as a result of changes in seasonal and geographic demand for particular types of products, as well as other macroeconomic, operating and logistics-related factors, as evidenced by the impact of the COVID-19 pandemic. 6 Availability of Reports We make available financial information, news releases and other information on our website at www.coty.com.
However, the mix of product sales can vary considerably as a result of changes in seasonal and geographic demand for particular types of products, as well as other macroeconomic, operating and logistics-related factors. Availability of Reports We make available financial information, news releases and other information on our website at www.coty.com.
The Beauty of Our Planet Conserving and protecting the natural environment is a vital part of our responsibility as a business. We are committed to minimizing the environmental impact of our operations and preserving resources for generations to come. During fiscal year 2023, our greenhouse gas emissions targets were approved by the Science Based Target initiative.
The Beauty of Our Planet Conserving and protecting the natural environment is a vital part of our responsibility as a business. We are committed to minimizing the environmental impact of our operations and preserving resources for generations to come. Our short-term greenhouse gas emissions targets are approved by the Science Based Target initiative (“SBTi”).
We continue to explore options to further optimize our supply chain operations. 3 Competition There is significant competition within each market where our products are sold. We compete against manufacturers and marketers of beauty products, salon professional nail products and personal care products.
We continue to explore options to further optimize our supply chain operations, including the implementation of advanced digital solutions to streamline and enhance our supply chain operations. 3 Competition There is significant competition within each market where our products are sold. We compete against manufacturers and marketers of beauty products, salon professional nail products and personal care products.
The content of our sustainability reports and information on our website are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. On March 31, 2022, the SEC issued a proposed rule on climate-related disclosures by U.S. public companies. The proposed rule is not yet final.
The content of our sustainability reports and information on our website are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. On March 6, 2024, the SEC adopted a rule on climate-related disclosures by U.S. public companies.
For segment financial information and information about our long-lived assets, see Note 5— Segment Reporting in the notes to our Consolidated Financial Statements, and for information about recent acquisitions or dispositions, see Note 4—Business Combinations, Asset Acquisitions and Divestitures in the notes to our Consolidated Financial Statements. 1 Brands The following chart reflects our iconic brand portfolio: Consumer Beauty Prestige Adidas Burberry Beckham Calvin Klein Biocolor* Chloe Bozzano* Davidoff Bourjois* Escada* Bruno Banani Gucci CoverGirl* Hugo Boss Jovan* Jil Sander Max Factor* Joop!* Mexx Kylie Jenner Monange* Lancaster* Nautica Marc Jacobs Paixao* Miu Miu Rimmel* Orveda Risque* philosophy* Sally Hansen* SKKN BY KIM Tiffany & Co. * Indicates an owned beauty brand.
For segment financial information and information about our long-lived assets, see Note 4— Segment Reporting in the notes to our Consolidated Financial Statements. 1 Brands The following chart reflects our iconic brand portfolio: Consumer Beauty Prestige Adidas Burberry Beckham Calvin Klein Bozzano* Chloe Bourjois* Davidoff Bruno Banani Escada* CoverGirl* Gucci Jovan* Hugo Boss LeGer by Lena Gercke Infiniment Coty Paris* Max Factor* Jil Sander Mexx Joop!* Monange* Kylie Cosmetics by Kylie Jenner Nautica Lancaster* Paixao* Marc Jacobs Rimmel* Miu Miu Risque* Orveda Sally Hansen* philosophy* Vera Wang SKKN BY KIM Tiffany & Co. * Indicates an owned beauty brand.
Our employees are a key source of competitive advantage and their actions, guided by our Code of Conduct and our global compliance program, Behave Beautifully , are critical to the long-term success of our business. We recognize the importance of our employees to our business and believe our relationship with our employees is satisfactory.
Our employees are a key source of competitive advantage and their actions, guided by our Code of Conduct and our global compliance program, Behave Beautifully , are critical to the long-term success of our business.
We recognize that sustainability efforts require collaboration which goes beyond our own organization. To that end we are members of several industry initiatives, including the Responsible Beauty Initiative and Responsible Mica Initiative, focused on responsible sourcing, and the Sustainable Packaging Initiative for Cosmetics, focused on creating common guidelines and tools for eco-design of packaging.
We recognize that sustainability efforts require collaboration which goes beyond our own organization. To that end we are members of several industry initiatives, including the Responsible Beauty Initiative and Responsible Mica Initiative, focused on responsible sourcing.
However, environmental and social responsibility laws and regulations have tended to become increasingly stringent and, to the extent regulatory changes occur in the future, they could result in, among other things, increased costs and risks of non-compliance for us. For example, certain states in the U.S., such as California, and the U.S.
However, environmental and social responsibility laws and regulations have tended to become increasingly stringent which has increased our compliance costs and, to the extent regulatory changes occur in the future, they could result in, among other things, increased costs and risks of non-compliance for us.
The targets cover our Greenhouse gas emissions for scopes 1 and 2, renewable electricity commitment and our greenhouse gas reduction for scope 3. We continue to focus on the implementation of these targets with the development of operational plans.
The targets cover our greenhouse gas emissions for scopes 1 and 2, renewable electricity commitment and our greenhouse gas reduction for scope 3. In November 2023, we committed to the SBTi to set emissions reduction targets in line with science-based net-zero 1 . We continue to focus on the implementation of these targets with the development of operational plans.
We have dedicated marketing and sales forces in most of our significant markets. These teams leverage local insights to strategically promote our brands and product offerings and tailor our creative marketing to fit local tastes and resonate with consumers most effectively.
These teams leverage local insights to strategically promote our brands and product offerings and tailor our creative marketing to fit local tastes and resonate with consumers most effectively.
We also leverage our relationships with celebrities and on-line influencers to endorse certain of our products. Our marketing efforts benefit from cooperative advertising programs with retailers, often in connection with in-store marketing activities designed to engage consumers so that they try, or purchase, our products, including sampling and “gift-with-purchase” programs designed to stimulate product trials.
Our marketing efforts also benefit from cooperative advertising programs with retailers, often in connection with in-store marketing activities designed to engage consumers so that they try, or purchase, our products, including sampling and “gift-with-purchase” programs designed to stimulate product trials. We have dedicated marketing and sales forces in most of our significant markets.
While certain projects are already in execution phase, other projects are in the early stages as we validate their feasibility and explore new ones to achieve our proposed targets.
We have implemented several measures to reduce water consumption across our plants and distribution centers. While certain projects are already in execution phase, other projects are in the early stages as we validate their feasibility and explore new ones to achieve our proposed targets.
Our mass beauty brands are primarily sold through hypermarkets, supermarkets, drug stores and pharmacies, mid-tier department stores, traditional food and drug retailers, and dedicated e-commerce retailers. The prestige products are primarily sold through prestige retailers, including perfumeries, department stores, e-retailers, direct-to-consumer websites and duty-free shops. We continue to focus on expanding our e-commerce and direct-to-consumer channels.
We have a balanced multi-channel distribution strategy which complements our product categories. Our mass beauty brands are primarily sold through hypermarkets, supermarkets, drug stores and pharmacies, mid-tier department stores, traditional food and drug retailers, and dedicated e-commerce retailers. The prestige products are primarily sold through prestige retailers, including perfumeries, department stores, e-retailers, direct-to-consumer websites and duty-free shops.
As we transform the Company, we continue to make progress on our strategic priorities, including stabilizing and growing our consumer beauty brands through leading innovation and improved execution, accelerating our prestige fragrance brands and ongoing expansion into prestige cosmetics, building a comprehensive skincare portfolio leveraging existing brands, enhancing our e-commerce and direct-to-consumer (“DTC”) capabilities, expanding our presence in China and travel retail through prestige products and select consumer beauty brands, and establishing Coty as an industry leader in sustainability.
Following this transformation, we continue to make progress on our strategic priorities, including stabilizing and growing our consumer beauty brands through leading innovation and improved execution, accelerating our prestige fragrance brands and ongoing expansion into prestige cosmetics, building a comprehensive skincare portfolio over the mid-to-long term leveraging existing brands, enhancing our organizational growth capabilities including digital and research and development, expanding our presence in the travel retail channel, China and other growth markets, and establishing Coty as an industry leader in sustainability.
Congress have proposed legislation relating to chemical disclosure and other requirements related to the content of our products.
In the U.S., certain states, such as California, and the U.S. Congress have proposed legislation relating to chemical disclosure and other requirements related to the content of our products.
We have introduced new ways to customize the consumer experience, including using artificial intelligence-powered tools to provide personalized advice on selecting and using products, and augmented reality tools that invite customers to virtually try products with curated looks, tutorials and product recommendations. In addition, we continuously seek to improve our products through research and development.
We have also focused our efforts on meeting evolving consumer shopping preferences and behaviors, both on-line and in-store. We have introduced new ways to customize the consumer experience, including using artificial intelligence-powered tools to provide personalized advice on selecting and using products, and augmented reality tools that invite customers to virtually try products with curated looks, tutorials and product recommendations.
Certain brand licenses provide for automatic extensions, so long as minimum annual royalty payments are made, while renewal of others is contingent upon attaining specified sales levels or upon agreement of the licensor.
Certain brand licenses provide for automatic extensions, so long as minimum annual royalty payments are made, while renewal of others is contingent upon attaining specified sales levels or upon agreement of the licensor. None of our top seven licenses are up for non-automatic renewal before 2028, with an average remaining duration of 14 years.
We are also part of the EcoBeautyScore Consortium – a breakthrough initiative which aims to develop an industry-wide environmental scoring system for cosmetics products, with the aim of empowering consumers to make sustainable beauty choices. We continue to evaluate and modify our processes and activities to further limit our impact on the environment as we implement our sustainability strategy.
We are also part of the EcoBeautyScore Consortium – a breakthrough initiative which aims to develop an industry-wide environmental scoring system for cosmetics products, with the aim of empowering consumers to make sustainable beauty choices.
We promote our brands through various channels to reach and engage beauty consumers, through traditional media, through in-store displays, on digital and social media, and through collaborations, product placements and events. In addition, we seek editorial coverage for products and brands in both traditional media and digital and social media to drive influencer amplification and to build brand equity.
We promote our brands through various channels to reach and engage beauty consumers to build brand awareness, affinity and loyalty, through traditional media, through in-store displays, on digital and social media, and through collaborations, product placements and events.
Assuming the transaction closes, we would retain 22.3% of the Wella Company. All dollar amounts in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.
All dollar amounts in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.
We review our supplier base periodically with the specific objectives of improving quality, increasing innovation and speed-to-market, ensuring supply sufficiency and reducing costs.
We collaborate with our suppliers to meet our stringent design and creative criteria. We believe that we currently have adequate sources of supply for all our products. We review our supplier base periodically with the specific objectives of improving quality, increasing innovation and speed-to-market, ensuring supply sufficiency and reducing costs.
We also sell our products through third-party distributors. In fiscal 2023, no retailer accounted for more than 10% of our global net revenues; however, certain retailers accounted for more than 10% of net revenues within certain geographic markets and segments. In fiscal 2023, Walmart, our top retailer, accounted for approximately 5% of total Coty Inc. net revenues from continuing operations.
We continue to focus on expanding our e-commerce and direct-to-consumer channels. We also sell our products through third-party distributors. In fiscal 2024, no retailer accounted for more than 10% of our global net revenues; however, certain retailers accounted for more than 10% of net revenues within certain geographic markets and segments.
The principal raw materials used in the manufacture of our products are primarily essential oils, alcohols and specialty chemicals. The essential oils in our fragrance products are generally sourced from fragrance houses. As a result, we realize material cost savings and benefits from the technology, innovation and resources provided by these fragrance houses.
The essential oils in our fragrance products are generally sourced from fragrance houses. As a result, we realize material cost savings and benefits from the technology, innovation and resources provided by these fragrance houses. We purchase the raw materials for all our products from various third parties. We also purchase packaging components that are manufactured to our design specifications.
While we consider our patents and copyrights, and the protection thereof, to be important, no single patent or copyright, or group of related patents or copyrights, is material to the conduct of our business.
While we consider our patents and copyrights, and the protection thereof, to be important, no single patent or copyright, or group of related patents or copyrights, is material to the conduct of our business. Products representing 50% of our fiscal 2024 net revenues are manufactured and marketed under brands owned by us or under licenses which are effectively perpetual.
Our basic and applied research groups, which conduct longer-term and “blue sky” research, seek to develop proprietary new technologies for first-to-market products and for improving existing products. This research and development is done both internally and through affiliations with various universities, technical centers, supply partners, industry associations and technical associations.
In addition, we continuously seek to improve our products through research and development. Our basic and applied research groups, which conduct longer-term and “blue sky” research, seek to develop proprietary new technologies for first-to-market products and for improving existing products.
Products representing 63% of our fiscal 2023 net revenues from continuing operations are manufactured and marketed under exclusive license agreements granted to us for use on a worldwide and/or regional basis. As of June 30, 2023, we maintained 22 brand licenses.
Of the remaining portfolio, 34% of our fiscal 2024 sales are under exclusive license agreements granted to us for use on a worldwide and/or regional basis with a remaining duration spanning from 6 to 30 years. As of June 30, 2024, we maintained 24 brand licenses.
We utilize in-depth brand and market data analytics to develop branding, merchandising and marketing execution strategies to maximize the consumer experience and build a better business.
We utilize in-depth brand and market data analytics to develop branding, merchandising and marketing execution strategies to maximize the consumer experience and build a better business. 2 Distribution Channels and Retail Sales We market, sell and distribute our products in approximately 121 countries and territories, with dedicated local sales forces in most of our significant markets.
A number of our products incorporate patented, patent-pending or proprietary technology. In addition, several of our products and/or packaging for our products are covered by design rights protections. Our principal research and development centers are located in the U.S. and Europe. See “Item 2.
This research and development is done both internally and through affiliations with various universities, technical centers, supply partners, industry associations and technical associations. A number of our products incorporate patented, patent-pending or proprietary technology. In addition, several of our products and/or packaging for our products are covered by design rights protections.
We celebrate diversity in all its forms and continue to work towards building a more inclusive business. We recognize the importance of diversity at a leadership level and throughout our whole organization, including diversity of gender, ethnicity, ability, background, religion, gender identity, and sexual orientation. Our Executive Committee and our Board of Directors are majority female.
We celebrate diversity in all its forms and continue to work towards building a more inclusive business. We recognize the importance of diversity at a leadership level and throughout our whole organization. In fiscal 2024, we made strides in advancing our Diversity, Equity, and Inclusion (DE&I) initiatives.
Since 2020, we have an operational Beauty That Lasts Index in place, which is a qualitative tool for evaluating the social and environmental profile of new product developments. We have ambition to reduce the amount of packaging we use across our portfolio, while sourcing from more sustainable sources.
We are changing the way we design, formulate and manufacture in order to minimize our environmental impact and create innovative products. Since 2020, we have an operational Beauty That Lasts Index in place, which is a qualitative tool for evaluating the sustainability profile of new product developments.
Properties.” We do not perform, nor do we commission any third parties on our behalf to perform, testing of our products or ingredients on animals except where required by law. In the few jurisdictions requiring animal testing, we actively apply for exemptions and work with local authorities and organizations to authorize alternative methods of product testing.
Our principal research and development centers are located in the U.S. and Europe. See “Item 2. Properties.” We do not perform, nor do we commission any third parties on our behalf to perform, testing of our products or ingredients on animals except where required by law.
In addition, approximately 54% of our fiscal 2023 net revenues from continuing operations were attributable to prestige fragrance, of which approximately 88% was from our top seven prestige fragrance brands.
In addition, approximately 56% of our fiscal 2024 net revenues were attributable to prestige fragrance, of which approximately 91% was from our top seven prestige fragrance brands. Approximately 82% of the revenues from our top seven fragrance brands were from licenses with remaining durations spanning from approximately 8 to 21 years, or perpetual.
We are continuously innovating to increase our sales by elevating our digital presence, including e-commerce and digital, social media and influencer marketing designed to build brand equity and consumer engagement. We have also focused our efforts on meeting evolving consumer shopping preferences and behaviors, both on-line and in-store.
Our research and development teams work with our marketing and operations teams to identify recent trends and consumer needs and to bring products quickly to market. We are continuously innovating to increase our sales by elevating our digital presence, including e-commerce and digital, social media and influencer marketing designed to build brand equity and consumer engagement.
We are currently implementing our climate strategy focusing on three focus areas: our product impact, our transportation and the impact of our own operations. In fiscal 2023, we have extended existing efforts made on our supply chain sites (factories and distribution centers) to our R&D centers and Corporate Offices.
We are currently implementing our climate strategy focusing on three focus areas: our product impact, our transportation and the impact of our own operations. In fiscal 2024, we have expanded our solar panel use across four sites and we now have eight carbon neutral sites, labs and offices 2 .
As of October 2022, we were proud to achieve our commitment to pay equity for similar roles and performance, regardless of gender by reducing the gap in every level of our global management categories. To further gender equality within our business, we also launched a gender-neutral Parental Leave Policy.
These initiatives collectively reflect our ongoing commitment to not only embrace diversity but also to actively nurture and develop the potential of every associate within our global community. As of October 2023, we maintained our commitment to pay equity for similar roles and performance, regardless of gender by reducing the gap in every level of our global management categories.
To respond to evolving social and environmental challenges, sustainability is at the heart of our product creation, from design and development through to sourcing of materials. We are changing the way we design, formulate and manufacture in order to minimize our environmental impact and create innovative products.
The Beauty of Our Product Our products have an important role to play in building a sustainable future for the beauty sector. To respond to evolving social and environmental challenges, we are putting sustainability at the heart of our product creation, from design and development through to sourcing of materials. We see sustainability as the ultimate driver of innovation.
Supply Chain During fiscal year 2023, we continued to manufacture and package approximately 79% of our products, primarily in facilities located in the United States, Brazil, China and various countries in Europe. We recognize the importance of our employees at our manufacturing facilities and have in place programs designed to ensure operating safety.
In the few jurisdictions requiring animal testing, we actively apply for exemptions and work with local authorities and organizations to authorize alternative methods of product testing. Supply Chain During fiscal year 2024, we continued to manufacture and package approximately 79% of our products, primarily in facilities located in the United States, Brazil, China and various countries in Europe.
In addition, we implement programs designed to ensure that our manufacturing and distribution facilities comply with applicable environmental rules and regulations, as well as initiatives to support our sustainability goals. To capitalize on innovation and other supply chain benefits, we continue to utilize a network of third-party manufacturers on a global basis who produce approximately 21% of our finished products.
We recognize the importance of our employees at our manufacturing facilities and have in place programs designed to ensure operating safety. In addition, we implement programs designed to ensure that our manufacturing and distribution facilities comply with applicable environmental rules and regulations, as well as initiatives to support our sustainability goals.
In addition, we work to reduce the environmental impact of our product formulas and our new products, for example integrating carbon captured alcohol into our fragrances. In fiscal 2023, we launched Gucci, The Alchemist’s Garden, Where My Heart Beats Eau de Parfum, which was the first globally distributed fragrance manufactured using 100% carbon captured alcohol.
We are implementing screw neck caps for new prestige fragrance bottle designs to further enable refill potential. In addition, we work to reduce the environmental impact of our product formulas and our new products. In fiscal 2024, Infiniment Coty Paris is the first globally distributed full fragrance collection manufactured using 100% carbon-captured ethanol.
Innovation Innovation is a pillar of our business. We innovate through brand-building and new product lines, as well as through new technology. Our research and development teams work with our marketing and operations teams to identify recent trends and consumer needs and to bring products quickly to market.
In fiscal 2024, Walmart, our top retailer, accounted for approximately 5% of total Coty Inc. net revenues. Innovation Innovation is a pillar of our business. We innovate through brand-building and new product lines, as well as through new technology.
Our sustainability reports and other information on our sustainability initiatives and achievements are available on our website.
With a focus on product, planet and people, we aim to contribute towards delivering a more sustainable and inclusive world. We report annually on our progress towards our sustainability targets through a separate sustainability report. Our sustainability reports and other information on our sustainability initiatives and achievements are available on our website.
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In fiscal 2021, we completed the sale of a majority stake in Coty’s Professional and Retail Hair business, including the Wella, Clairol, OPI and ghd brands, (together, the “Wella Business”). As of June 30, 2023, Coty owned a 25.9% stake in Rainbow JVCO LTD and subsidiaries (together, “Wella” or the “Wella Company”).
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In addition, we seek editorial coverage for products and brands in both traditional media and digital and social media to drive influencer amplification and to build brand equity. We are focused on accelerating our digital advocacy strategy to amplify our brand and product innovations, leverage consumer analytics and insights, and improve the return on investment of our marketing activities.
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On July 18, 2023 we announced that we 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.
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We leverage our relationships with celebrities, on-line influencers and brand ambassadors to endorse certain of our products, and we seek to attract and engage existing and new consumers through buzz-worthy activations, unexpected creativity and unique collaborations.
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We continue to concentrate working media resources on select products, channels and markets, which we believe represents a significant opportunity for revenue and gross margin improvement, and to implement a tactical, in-store strategy for the others.
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To capitalize on innovation and other supply chain benefits, we continue to utilize a network of third-party manufacturers on a global basis who produce approximately 21% of our finished products. The principal raw materials used in the manufacture of our products are primarily essential oils, alcohols and specialty chemicals.
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Distribution Channels and Retail Sales 2 We market, sell and distribute our products in approximately 126 countries and territories, with dedicated local sales forces in most of our significant markets. We have a balanced multi-channel distribution strategy which complements our product categories.
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On April 4, 2024, the SEC stayed the rule pending the completion of judicial review of the consolidated Eighth Circuit petitions.
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We purchase the raw materials for all our products from various third parties. We also purchase packaging components that are manufactured to our design specifications. We collaborate with our suppliers to meet our stringent design and creative criteria. We believe that we currently have adequate sources of supply for all our products.
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We are unable to predict if or when the stay will be lifted, and the extent to which the outcome of the petitions may result in changes to the final rules and the timing of the effectiveness of such rules.
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None of our top seven licenses, which account for approximately 88% of our prestige fragrance sales, are up for non-automatic renewal before 2028, with an average remaining duration of 13 years. We are currently in the process of renewing a smaller license which is up for renewal during fiscal 2024.
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We have an ambition to reduce the amount of packaging we use across our portfolio, while sourcing from more sustainable sources. In fiscal 2024, we are continuing to steadily expand refillable formats, including Burberry Goddess , Cosmic Kylie Jenner and Infiniment Coty Paris .
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We are unable to predict if or when the rule will be finalized and the extent to which a final rule will apply or deviate from the proposal. The Beauty of Our Product Our products have an important role to play in building a sustainable future for the beauty sector.
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We are also active members of the Sustainable Packaging Initiative for Cosmetics — SPICE — where we partner with other companies in the cosmetics industry to collectively shape the future of sustainable packaging. We continue to evaluate and modify our processes and activities to further limit our impact on the environment as we implement our sustainability strategy.
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In fiscal 2023, we introduced refillable packaging solutions into our global portfolio, including Chloé Rose Naturelle Intense Eau de Parfum and Adidas Active Skin and Mind range of shower gels which delivered a packaging weight reduction compared to the original baseline body care range.
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Air freight emissions have decreased by more than 50% since 2019 due to the efforts of our transport and supply chain teams to improve planning and educating internal stakeholders about the importance of shifting to less carbon intense modes of transport.
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Accordingly, our offices and R&D centers are developing energy reduction and transition plans. For example, our Paris Headquarter has now transitioned to renewable electricity and we have completed an extensive energy audit in our Amsterdam Headquarter with very positive results.
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In our efforts to reduce our impacts on the environment, none of the waste from our factories and distribution centers 3 was sent to landfi 1 Per SBTi target setting process, targets will be set within 24 months of November 2023. 2 Scope 1 and 2 emissions . 3 The scope for our waste reporting is our factories and distribution centers managed by Coty.
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In our efforts to reduce our impacts on the environment, none of the waste from our factories and distribution centers was sent to landfill, while most was reused, recycled, or composted. We have implemented several measures to reduce water consumption across our plants and distribution centers.
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For our reporting on our emissions, energy usage and water consumption our scope covers our factories and distribution centers managed by Coty and our corporate offices (14 factories and distribution centers, and 40+ offices and R&D centers) and excludes third-party operated factories and distribution centers. 5 ll, while most was reused, recycled, or composted.
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For associates, we rolled out a new training to broaden knowledge of our sustainability framework, Beauty That Lasts. This training introduced the three-pillared framework and included short modules on climate change and DE&I topics such as bias and microaggressions.
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Through the Coty Academy, we enhanced our training programs to include DE&I fundamentals, unconscious bias, and cultural awareness. Additionally, we launched a global toolkit to facilitate Learning Festivals aimed at bolstering interpersonal communication, collaboration, and DE&I skills across our organization. Additionally, we strive for gender balance in leadership. Our Executive Committee and our Board of Directors are majority female.
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In July 2022, we implemented a sustainability objective for all employees eligible to the bonus plans, as part of their annual goals. This applies for employees’ fiscal 2023 bonuses. The accomplishment of these objectives is considered when assessing eligibility for annual bonuses.
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We also strive to reflect the communities we serve through our brands, which champion the diversity of beauty and beauty of diversity. In fiscal 2024, Max Factor UK entered the second year of partnership with UNICEF to support Skills4Girls.
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From November 2022, all employees, regardless of gender, have access to the same number of fully paid weeks of parental leave offered in their local region when starting or extending a family. We also strive to reflect the communities we serve through our brands, which champion the diversity of beauty and beauty of diversity.
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This program is helping give young girls the tools and resources to reach their full potential and become the next generation of successful leaders, entrepreneurs, and change-makers. A notable development this year was the introduction of a pilot program with new performance management philosophy for senior leaders, centered around Co-Creation Principles.
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In fiscal 2023, Sally Hansen & CoverGirl continued their multi-year partnership with LGBTQ advocacy organization GLAAD. Marc Jacobs Fragrance celebrates the third year of its partnerships with US-based NGO The Lesbian, Gay, Bisexual & Transgender Community Center (The Center) and second year with UK-based charity, akt.
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This new approach is pivotal in our efforts to transform our workplace culture into a more inclusive and empowering environment. We have expanded our parental leave policy to offer 14 weeks of fully paid leave to all employees globally, regardless of gender, further reinforcing our commitment to creating supportive and equitable work environments.
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We are committed to creating opportunities for our associates to develop skills, advance their careers and nurture their long-term employability. Our associates undergo an annual performance review process, and work with their manager to build customized development plans. We offer our employees a range of development activities, from learning formally through e-learning courses and trainings, and on the job.
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Our dedication to DE&I has been recognized through various accolades, including one of our UK subsidiaries’ ranking among Stonewall’s Top 100 LGBTQIA+ Employers and our recognition as a leader in LGBTQ+ workplace inclusion in the US Corporate Equality Index.
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Additionally, two of our UK subsidiaries have achieved certification as Disability Confident Committed Employers, underscoring our commitment to accessible and inclusive work settings. We continue to focus on the development of our associates to foster their career growth and long-term employability.
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Our training programs at the Coty Academy are designed to align with business priorities and to enhance essential skills such as personal effectiveness, people management, and leadership. Annual Learning Festivals have been hosted at most of our largest sites and are supported by our Leadership Team. The Learning Festivals feature a strategic and experiential agenda, that have been extremely well-received.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSome of the factors that could materially and adversely affect our business, financial condition, results of operations or prospects include: • The beauty industry is highly competitive, and if we are unable to compete effectively, our business, prospects, financial condition and results of operations could suffer. • Further consolidation in the retail industry and shifting preferences in how and where consumers shop, including to e-commerce, may adversely affect our business, prospects, financial condition and results of operations. • Changes in industry trends and consumer preferences could adversely affect our business, prospects, financial condition and results of operations. • Our success depends, in part, on the quality, efficacy and safety of our products. • Our failure to protect our reputation, or the failure of our brand partners or licensors to protect their reputations, could have a material adverse effect on our brand images. • Our brand licenses may be terminated if specified conditions are not met, and we may not be able to renew expiring licenses on favorable terms or at all. • If we are unable to obtain, maintain and protect our intellectual property rights, in particular trademarks, patents and copyrights, or if our brand partners and licensors are unable to maintain and protect their intellectual property rights that we use in connection with our products, our ability to compete could be negatively impacted. • Our success depends on our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property of third parties. • Our business is subject to seasonal variability. • Our success depends on our ability to achieve our global business strategies. 7 • We have incurred significant costs in connection with the integration of acquisitions and simplifying our business, and expect to incur costs in connection with the implementation of our global business strategies, that could affect our period-to-period operating results. • Our new product introductions may not be as successful as we anticipate, which could have a material adverse effect on our business, prospects, financial condition and results of operations. • We may not be able to identify suitable acquisition targets and our acquisition activities and other strategic transactions may present managerial, integration, operational and financial risks, which may prevent us from realizing the full intended benefit of the acquisitions we undertake. • We face risks associated with our joint ventures and strategic partnership investments. • Our goodwill and other assets have been subject to impairment and may continue to be subject to impairment in the future. • A disruption in operations could adversely affect our business. • We outsource a number of functions to third-party service providers, and any failure to perform or other disruptions or delays at our third-party service providers could adversely impact our business, our results of operations or our financial condition. • We are increasingly dependent on information technology, and if we are unable to protect against service interruptions, corruption of our data and privacy protections, cyber-based attacks or network security breaches, our operations could be disrupted. • Our success depends, in part, on our employees, including our key personnel. • If we underestimate or overestimate demand for our products and do not maintain appropriate inventory levels, our net revenues or working capital could be negatively impacted. • We are subject to risks related to our international operations. • We have taken on significant debt, and the agreements that govern such debt contain various covenants that impose restrictions on us, which may adversely affect our business. • Our ability to service and repay our indebtedness will be dependent on the cash flow generated by our subsidiaries and events beyond our control. • Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase. • We must successfully manage the impact of a general economic downturn, credit constriction, uncertainty in global economic or political conditions or other global events or a sudden disruption in business conditions which may affect consumer spending, global supply chain conditions and inflationary pressures and adversely affect our financial results. • The COVID-19 pandemic has had, and could continue to have, a negative impact on our business, financial condition, results of operations and cash flows. • Price inflation for labor, materials and services, further exacerbated by volatility in energy and commodity markets by the war in Ukraine, could adversely affect our business, results of operations and financial condition. • Volatility in the financial markets could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities. • Fluctuations in currency exchange rates may negatively impact our financial condition and results of operations. • We are subject to legal proceedings and legal compliance risks, including talc-related litigation alleging bodily injury. • Changes in laws, regulations and policies that affect our business or products could adversely affect our business, financial condition, results of operations, cash flows, as well as the trading price of our securities. • Our operations and acquisitions in certain foreign areas expose us to political, regulatory, economic and reputational risks. • Our employees or others may engage in misconduct or other improper activities including noncompliance with regulatory standards and regulatory requirements. • Violations of our prohibition on harassment, sexual or otherwise, could result in liabilities and/or litigation. • If the Distribution (as defined below) or the acquisition of the P&G Beauty Business does not qualify for its intended tax treatment, in certain circumstances we are required to indemnify P&G for resulting tax-related losses under the tax matters agreement entered into in connection with the acquisition of the P&G Beauty Business dated October 1, 2016. • We are subject to risks related to our common stock and our stock repurchase program. 8 • JABC Cosmetics B.V.
Biggest changeSome of the factors that could materially and adversely affect our business, financial condition, results of operations or prospects include: • The beauty industry is highly competitive, and if we are unable to compete effectively, our business, prospects, financial condition and results of operations could suffer. • Further consolidation in the retail industry and shifting preferences in how and where consumers shop, including to e-commerce, may adversely affect our business, prospects, financial condition and results of operations. • Changes in industry trends and consumer preferences could adversely affect our business, prospects, financial condition and results of operations. • Our success depends, in part, on the quality, efficacy and safety of our products. • Our failure to protect our reputation, or the failure of our brand partners or licensors to protect their reputations, could have a material adverse effect on our brand images. • Our brand licenses may be terminated if specified conditions are not met, and we may not be able to renew expiring licenses on favorable terms or at all. • If we are unable to obtain, maintain and protect our intellectual property rights, in particular trademarks, patents and copyrights, or if our brand partners and licensors are unable to maintain and protect their intellectual property rights that we use in connection with our products, our ability to compete could be negatively impacted. • Our success depends on our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property of third parties. • Our business is subject to seasonal variability. • Our success depends on our ability to achieve our global business strategies. • We have incurred significant costs in connection with the integration of acquisitions and simplifying our business, and expect to incur costs in connection with the implementation of our global business strategies, that could affect our period-to-period operating results. • Our new product introductions may not be as successful as we anticipate, which could have a material adverse effect on our business, prospects, financial condition and results of operations. • We may not be able to identify suitable acquisition targets and our acquisition activities and other strategic transactions may present managerial, integration, operational and financial risks, which may prevent us from realizing the full intended benefit of the acquisitions we undertake. • We face risks associated with our joint ventures and strategic partnership investments. • Our goodwill and other assets have been subject to impairment and may continue to be subject to impairment in the future. • A disruption in operations could adversely affect our business. • We outsource a number of functions to third-party service providers, and any failure to perform or other disruptions or delays at our third-party service providers could adversely impact our business, our results of operations or our financial condition. • We are increasingly dependent on information technology, and if we are unable to protect against service interruptions, corruption of our data and privacy protections, cyber-based attacks or network security breaches, our operations could be disrupted. • We must continue to maintain and make requisite or critical upgrades to our information technology systems, and our failure to do so could have a material adverse effect on our business, financial condition and results of operations. • Failure to protect sensitive information of our consumers and information technology systems against security breaches could damage our reputation and substantially harm our business, financial condition and results of operations. • Failure of or disruption to one or more of our information technology platforms could affect our ability to execute our operating strategy. • We use AI in our business, and challenges with properly managing its use could result in harm to our brands, reputation, business or customers. • Our success depends, in part, on our employees, including our key personnel. 8 • If we underestimate or overestimate demand for our products and do not maintain appropriate inventory levels, our net revenues or working capital could be negatively impacted. • We are subject to risks related to our international operations. • Changes in tax laws or regulations, or challenges to our tax positions, could significantly increase our tax liabilities. • We have taken on significant debt, and the agreements that govern such debt contain various covenants that impose restrictions on us, which may adversely affect our business. • Our ability to service and repay our indebtedness will be dependent on the cash flow generated by our subsidiaries and events beyond our control. • Our variable rate indebtedness subjects us to interest rate risk, which could cause certain debt service obligations to increase. • We must successfully manage the impact of a general economic downturn, credit constriction, uncertainty in global economic or political conditions or other global events or a sudden disruption in business conditions which may affect consumer spending, global supply chain conditions and inflationary pressures and adversely affect our financial results. • Price inflation for labor, materials and services, further exacerbated by volatility in energy and commodity markets by geopolitical events, could adversely affect our business, results of operations and financial condition. • Volatility in the financial markets could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities. • Fluctuations in currency exchange rates may negatively impact our financial condition and results of operations. • Public health crises could have a negative impact on our business, financial condition, results of operations and cash flows. • We are subject to legal proceedings and legal compliance risks, including talc-related litigation alleging bodily injury. • Changes in laws, regulations and policies that affect our business or products could adversely affect our business, financial condition, results of operations, cash flows, as well as the trading price of our securities. • Our operations and acquisitions in certain foreign areas expose us to political, regulatory, economic and reputational risks. • Our employees or others may engage in misconduct or other improper activities including noncompliance with regulatory standards and regulatory requirements. • Violations of our prohibition on harassment, sexual or otherwise, could result in liabilities and/or litigation. • If the Distribution (as defined below) or the acquisition of the P&G Beauty Business does not qualify for its intended tax treatment, in certain circumstances we are required to indemnify P&G for resulting tax-related losses under the tax matters agreement entered into in connection with the acquisition of the P&G Beauty Business dated October 1, 2016. • We are subject to risks related to our common stock and our stock repurchase program. • JAB Beauty B.V.
If we do not generate sufficient cash flow to satisfy our covenants and debt service obligations, including payments on our senior secured notes, senior unsecured notes and under the 2018 Coty Credit Agreement, we may have to undertake additional cost reduction measures or alternative financing plans, such as refinancing or restructuring our debt; selling assets; reducing or delaying capital investments; modifying terms of agreements, 20 including timing of payments, with vendors, customers, and other third parties; or seeking to raise additional capital.
If we do not generate sufficient cash flow to satisfy our covenants and debt service obligations, including payments on our senior secured notes, senior unsecured notes and under the 2018 Coty Credit Agreement, we may have to undertake additional cost reduction measures or alternative financing plans, such as refinancing or restructuring our debt; selling assets; reducing or delaying capital investments; modifying terms of agreements, including timing of payments, with vendors, customers, and other third parties; or seeking to raise additional capital.
If our management is not able to effectively manage these initiatives, address fixed and other costs, we incur additional operating expenses or capital expenditures to realize synergies, simplifications and cost savings, or if any significant business activities are interrupted as a result of these initiatives, our business, prospects, financial condition, results of operations, cash 13 flows, as well as the trading price of our securities may be materially adversely affected.
If our management is not able to effectively manage these initiatives, address fixed and other costs, we incur additional operating expenses or capital expenditures to realize synergies, simplifications and cost savings, or if any significant business activities are interrupted as a result of these initiatives, our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities may be materially adversely affected.
We are engaged in efforts to rationalize our wholesale distribution channel and continue efforts to reduce the amount of product diversion to the value and mass channels; however, stopping or significantly reducing such commerce could result in a potential adverse impact to our sales and net revenues, including to those customers who are selling our products to unauthorized retailers, or an increase in returns over historical levels.
We are engaged in efforts to rationalize our wholesale distribution channel and continue efforts to reduce the amount of product diversion to the value and mass channels; however, 12 stopping or significantly reducing such commerce could result in a potential adverse impact to our sales and net revenues, including to those customers who are selling our products to unauthorized retailers, or an increase in returns over historical levels.
We may also be required to pay substantial damages or be subject to a court order prohibiting us and our customers from selling certain products or engaging in certain 12 activities, which could therefore have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows, as well as the trading price of our securities.
We may also be required to pay substantial damages or be subject to a court order prohibiting us and our customers from selling certain products or engaging in certain activities, which could therefore have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows, as well as the trading price of our securities.
The general level of consumer spending is affected by a number of factors, including general economic conditions (including potential recessions in one or more 21 significant economies), inflation, interest rates, government policies that affect consumers (such as those relating to medical insurance or income tax), energy costs and consumer confidence, each of which is beyond our control.
The general level of consumer spending is affected by a number of factors, including general economic conditions (including potential recessions in one or more significant economies), inflation, interest rates, government policies that affect consumers (such as those relating to medical insurance or income tax), energy costs and consumer confidence, each of which is beyond our control.
We are under the jurisdiction of regulators and other governmental authorities which may, in certain circumstances, lead to enforcement actions, changes in business practices, fines and penalties, the assertion of private litigation claims and damages. Some of these actions may also adversely impact our customer relationships, particularly to the extent customers were implicated by such proceedings.
We are under the jurisdiction of regulators and other governmental authorities which may, in certain circumstances, lead to enforcement actions, changes in business practices, fines and penalties, the assertion of private litigation claims and damages. Some of these actions 24 may also adversely impact our customer relationships, particularly to the extent customers were implicated by such proceedings.
These restrictions may limit or prohibit our ability and the ability of our restricted subsidiaries to, among other things: • incur indebtedness or grant liens on our property; • dispose of assets or equity; • make acquisitions or investments; • make dividends, distributions or other restricted payments; • effect affiliate transactions; • enter into sale and leaseback transactions; and • enter into mergers, consolidations or sales of substantially all of our assets and the assets of our subsidiaries.
These restrictions may limit or prohibit our ability and the ability of our restricted subsidiaries to, among other things: • incur indebtedness or grant liens on our property; • dispose of assets or equity; • make acquisitions or investments; • make dividends, distributions or other restricted payments; • effect affiliate transactions; • enter into sale and leaseback transactions; and 21 • enter into mergers, consolidations or sales of substantially all of our assets and the assets of our subsidiaries.
Our operations and acquisitions in certain foreign areas expose us to political, regulatory, economic and reputational risks. We operate on a global basis. Our employees, contractors and agents, business partners, joint ventures and joint venture partners and companies to which we outsource certain of our business operations, may take actions in violation of our compliance policies or applicable law.
Our operations and acquisitions in certain foreign areas expose us to political, regulatory, economic and reputational risks. 25 We operate on a global basis. Our employees, contractors and agents, business partners, joint ventures and joint venture partners and companies to which we outsource certain of our business operations, may take actions in violation of our compliance policies or applicable law.
In addition, we could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in connection with these matters. Additionally, our success is also partially dependent on the reputations of our brand partners, influencers and licensors and the goodwill associated with their intellectual property.
In addition, we could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in connection with these matters. 11 Additionally, our success is also partially dependent on the reputations of our brand partners, influencers and licensors and the goodwill associated with their intellectual property.
In connection with the closing of the acquisition of the P&G Beauty Business on October 1, 2016, we and P&G received written opinions from special tax counsel regarding the intended tax treatment of the merger, and The Procter & Gamble Company (“P&G”) received an additional written opinion from special tax counsel regarding the intended tax treatment of the distribution by P&G of its shares of Galleria Co.
In connection with the closing of the acquisition of the P&G Beauty Business on October 1, 2016, we and P&G received written opinions from special tax counsel regarding the intended tax treatment of the merger, and The Procter & Gamble Company (“P&G”) received an additional written opinion from special tax counsel regarding the intended tax treatment of the 26 distribution by P&G of its shares of Galleria Co.
See “—Fluctuations in currency exchange rates may negatively impact our financial condition and results of operations” and “—We are subject to risks related to our international operations.” We face risks associated with our joint ventures and strategic partnership investments. We are party to several joint ventures and strategic partnership investments in both the U.S. and abroad.
See “—Fluctuations in currency exchange rates may negatively impact our financial condition and results of operations” and “—We are subject to risks related to our international operations.” 15 We face risks associated with our joint ventures and strategic partnership investments. We are party to several joint ventures and strategic partnership investments in both the U.S. and abroad.
In particular, expansion of our direct-to-consumer business presents challenges for logistics and fulfillment as well as additional regulatory compliance. If we are not successful in our efforts to expand distribution channels, including 9 growing our e-commerce activities, we will not be able to compete effectively.
In particular, expansion of our direct-to-consumer business presents challenges for logistics and fulfillment as well as additional regulatory compliance. If we are not successful in our efforts to expand distribution channels, including growing our e-commerce activities, we will not be able to compete effectively.
The loss of, or damage or disruption to, any of our manufacturing facilities or distribution centers could have a material adverse effect on our business, prospects, results of operations, financial condition, results of operations, cash flows, as well as the trading price of our securities. We manufacture and package a majority of our products.
The loss of, or damage or disruption to, any of our manufacturing facilities or distribution centers could 16 have a material adverse effect on our business, prospects, results of operations, financial condition, results of operations, cash flows, as well as the trading price of our securities. We manufacture and package a majority of our products.
These existing laws and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data and other personal information, require us to evaluate our current operations, information technology systems and data handling practices and implement enhancements 17 and adaptations where necessary to comply.
These existing laws and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data and other personal information, require us to evaluate our current operations, information technology systems and data handling practices and implement enhancements and adaptations where necessary to comply.
While we believe that we have valid defenses to these lawsuits, these risks will 23 continue to exist with respect to our business, and additional legal proceedings and other contingencies, the outcome and impact of which (including legal fees) cannot be predicted with certainty, will arise from time to time.
While we believe that we have valid defenses to these lawsuits, these risks will continue to exist with respect to our business, and additional legal proceedings and other contingencies, the outcome and impact of which (including legal fees) cannot be predicted with certainty, will arise from time to time.
(“Galleria”) common stock to P&G shareholders by way of an exchange offer (the “Distribution”). The opinions were based on, among other things, certain assumptions and representations as to factual 25 matters and certain covenants made by us, P&G, Galleria and Green Acquisition Sub Inc.
(“Galleria”) common stock to P&G shareholders by way of an exchange offer (the “Distribution”). The opinions were based on, among other things, certain assumptions and representations as to factual matters and certain covenants made by us, P&G, Galleria and Green Acquisition Sub Inc.
SEC rules implementing these requirements may have the effect of reducing the pool of suppliers who can supply “conflict free” products, and we may not be able to obtain conflict free products or supplies in sufficient quantities for our operations.
SEC rules implementing these requirements may have the effect of reducing the pool of suppliers who may supply “conflict free” products, and we may not be able to obtain conflict free products or supplies in sufficient quantities for our operations.
Further, other companies may attempt to recruit our key personnel and we may attempt to recruit their key personnel, even if bound by non-competes, which could result in diversion of management attention and our resources to litigation related to such recruitment.
Further, other 19 companies may attempt to recruit our key personnel and we may attempt to recruit their key personnel, even if bound by non-competes, which could result in diversion of management attention and our resources to litigation related to such recruitment.
The beauty industry is highly competitive and can change rapidly due to consumer preferences and industry trends, such as the expansion of digital channels, direct-to-consumer channels, new “disruptor” trendy brands and advances in technology such as artificial intelligence.
The beauty industry is highly competitive and can change rapidly due to consumer preferences and industry trends, such as the expansion of digital channels, direct-to-consumer channels, new “disruptor” trendy brands and advances in technology such as artificial intelligence (“AI”).
Impairment may result from various factors, including adverse changes in 15 assumptions used for valuation purposes, such as actual or projected revenue growth rates, profitability or discount rates.
Impairment may result from various factors, including adverse changes in assumptions used for valuation purposes, such as actual or projected revenue growth rates, profitability or discount rates.
In particular, increases in energy costs due to global geopolitical conditions, particularly in Europe, have impacted the cost and availability of raw materials, including glass and glass components and certain resins.
In particular, increases in energy costs due to global geopolitical conditions, particularly in Europe, impacted the cost and availability of raw materials, including glass and glass components and certain resins.
These risks may be exacerbated by the stresses associated with changes in our global business strategy, the implementation of our restructuring activities, any continued changes in our senior management team and other key personnel, and other initiatives. During fiscal 2023, we continued to experience an increasingly competitive labor market, increased employee turnover, and labor shortages in our extended supply chain.
These risks may be exacerbated by the stresses associated with changes in our global business strategy, the implementation of our restructuring activities, any continued changes in our senior management team and other key personnel, and other initiatives. During fiscal 2024, we continued to experience an increasingly competitive labor market, increased employee turnover, and labor shortages in our extended supply chain.
Consequently, any substantial decrease in, or inaccurate forecasting with respect to, net revenues during such periods of high demand including as a result of decreased customer purchases, increased product returns, production or distribution disruptions or other events (many of which are outside of our control), would prevent us from being able to recoup our earlier expenses and could have a material adverse effect on our financial condition, results of operations and cash flows, as well as the trading price of our securities.
Consequently, any substantial decrease in, or inaccurate forecasting with respect to, net revenues during such periods of high demand including as a result of decreased customer purchases or other changes in order patterns, increased product returns, production or distribution disruptions or other events (many of which are outside of our control), would prevent us from being able to recoup our earlier expenses and could have a material adverse effect on our financial condition, results of operations and cash flows, as well as the trading price of our securities.
As a controlled company, we are exempt under the NYSE standards from the obligation to comply with certain NYSE corporate governance requirements, including the requirements: • that a majority of our board of directors consists of independent directors; • that we have a nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and 26 • that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
As a controlled company, we are exempt under the NYSE standards from the obligation to comply with certain NYSE corporate governance requirements, including the requirements: • that a majority of our board of directors consists of independent directors; • that we have a nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and 27 • that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
In addition, we are required to maintain certain financial ratios calculated pursuant to a financial maintenance covenant under the 2018 Coty Credit Agreement on a quarterly basis. For a further description of the 2018 Coty Credit Agreement and the covenants thereunder please refer to Note 15, “Debt” in the notes to our Consolidated Financial Statements.
In addition, we are required to maintain certain financial ratios calculated pursuant to a financial maintenance covenant under the 2018 Coty Credit Agreement on a quarterly basis. For a further description of the 2018 Coty Credit Agreement and the covenants thereunder please refer to Note 14, “Debt” in the notes to our Consolidated Financial Statements.
JABC and its affiliates are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete indirectly with us. JABC or its affiliates may also pursue acquisition opportunities that are complementary to our business, and, as a result, those acquisition opportunities may not be available to us.
JABH and its affiliates are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete indirectly with us. JABH or its affiliates may also pursue acquisition opportunities that are complementary to our business, and, as a result, those acquisition opportunities may not be available to us.
Accordingly, the interests of JABC may not always coincide with our interests or the interests of other stockholders, and JABC may seek to cause us to take courses of action that, in its judgment, could enhance its investment in the Company but which might involve risks to our other stockholders or adversely affect us or our other stockholders.
Accordingly, the interests of JABH may not always coincide with our interests or the interests of other stockholders, and JABH may seek to cause us to take courses of action that, in its judgment, could enhance its investment in the Company but which might involve risks to our other stockholders or adversely affect us or our other stockholders.
The failure to realize benefits, which may be due to our inability to execute plans, delays in the implementation of our global business strategy, global or local economic conditions, competition, changes in the beauty industry and the other risks described herein, could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.
The failure to realize benefits, which may be due to our inability to execute plans, delays in the implementation of our global business strategies, global or local economic conditions, competition, 13 changes in the beauty industry and the other risks described herein, could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.
As a result, JABC has the ability to exercise control over certain decisions requiring stockholder approval, including the election of directors, amendments to our certificate of incorporation and approval of significant corporate transactions, such as a merger or other sale of the Company or our assets.
As a result, JABH has the ability to exercise control over certain decisions requiring stockholder approval, including the election of directors, amendments to our certificate of incorporation and approval of significant corporate transactions, such as a merger or other sale of the Company or our assets.
In addition, this concentration of ownership may have the effect of delaying, preventing or deterring a change in control of us and may negatively affect the market price of our stock. JABC’s interests may be different from or conflict with our interests or the interests of our other stockholders.
In addition, this concentration of ownership may have the effect of delaying, preventing or deterring a change in control of us and may negatively affect the market price of our stock. JABH’s interests may be different from or conflict with our interests or the interests of our other stockholders.
The multi-year implementation of our transformation agenda and our global business strategies has resulted and is expected to continue to result in changes to business priorities and operations, capital allocation priorities, operational and organizational structure, and increased demands on management.
The multi-year implementation of our global business strategies has resulted and is expected to continue to result in changes to business priorities and operations, capital allocation priorities, operational and organizational structure, and increased demands on management.
In addition, several of the members of our Board of Directors are affiliated with JABC. Accordingly, JAB has significant influence over us and our decisions, including the appointment of management and any other action requiring a vote of our Board of Directors.
In addition, several of the members of our Board of Directors are affiliated with JABH. Accordingly, JAB has significant influence over us and our decisions, including the appointment of management and any other action requiring a vote of our Board of Directors.
(“JABC”) and its affiliates, through their ownership of approximately 53% of the outstanding shares of our Class A Common Stock, have the ability to effect and/or significantly influence certain decisions requiring stockholder approval, which may be inconsistent with the interests of our other stockholders. • We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, are entitled to rely on exemptions from certain corporate governance requirements that are designed to provide protection to stockholders of companies that are not “controlled companies”. • The dual-listing of our Class A Common Stock on the NYSE and on Euronext Paris’s Professional Segment may adversely affect the liquidity and value of our Class A Common Stock.
(“JAB”) and its affiliates, through their ownership of approximately 55% of the outstanding shares of our Class A Common Stock, have the ability to effect and/or significantly influence certain decisions requiring stockholder approval, which may be inconsistent with the interests of our other stockholders. • We are a “controlled company” within the meaning of the NYSE rules and, as a result, are entitled to rely on exemptions from certain corporate governance requirements that are designed to provide protection to stockholders of companies that are not “controlled companies”. • The dual-listing of our Class A Common Stock on the New York Stock Exchange (“NYSE”) and on Euronext Paris’s Professional Segment may adversely affect the liquidity and value of our Class A Common Stock.
These forward repurchase transactions expose us to additional risks related to the price of our common stock, including a potential true-up in cash upon specified changes in the price of our common stock. JAB Cosmetics B.V.
These forward repurchase transactions expose us to additional risks related to the price of our common stock, including a potential true-up in cash upon specified changes in the price of our common stock. JAB Beauty B.V.
Non-U.S. operations are subject to many risks and uncertainties, including ongoing instability or changes in a country’s or region’s economic, regulatory or political conditions, including inflation, recession, interest rate fluctuations, sovereign default risk and actual or anticipated military or political conflicts (including any other change resulting from Brexit), labor market disruptions, sanctions, boycotts, new or increased tariffs, quotas, exchange or price controls, trade barriers or other restrictions on foreign businesses, our failure to effectively and timely implement processes and policies across our diverse operations and employee base and difficulties and costs associated with complying with a wide variety of complex and potentially conflicting regulations across multiple jurisdictions.
Non-U.S. operations are subject to many risks and uncertainties, including ongoing instability or changes in a country’s or region’s economic, regulatory or political conditions, including inflation, recession, interest rate fluctuations, sovereign default risk and actual or anticipated military or political conflicts, labor market disruptions, sanctions, boycotts, new or increased tariffs, quotas, exchange or price controls, trade barriers or other restrictions on foreign businesses, our failure to effectively and 20 timely implement processes and policies across our diverse operations and employee base and difficulties and costs associated with complying with a wide variety of complex and potentially conflicting regulations across multiple jurisdictions.
Further consolidation and store closures, or reduction in inventory levels of our products or shelf space devoted to our products, could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.
Further consolidation and store closures, or reduction in inventory levels of our products or shelf space devoted to our products, or the financial distress of a major retailer, could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.
The color cosmetics category has been influenced by entry by new competitors and smaller competitors that are fast to respond to trends and engage with their customers through digital platforms, including using new or advancing technologies such as artificial intelligence and innovative in-store activations.
The color cosmetics category has been influenced by entry by new competitors and smaller competitors that are fast to respond to trends and engage with their customers through digital platforms, including using new or advancing technologies such as AI and innovative in-store activations.
We are also subject to reporting requirements under The Dodd-Frank Wall Street Reform and Consumer Protection Act regarding the use of certain minerals mined from the Democratic Republic of Congo and adjoining countries and procedures pertaining to a manufacturer’s efforts regarding the source of such minerals.
We are also subject to reporting requirements under The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 regarding the use of certain minerals mined from the Democratic Republic of Congo and adjoining countries and procedures pertaining to a manufacturer’s efforts in identifying the source of such minerals.
The above risks have been and may continue to be exacerbated by the impact of inflationary pressures, global supply chain disruptions and the ongoing effects of COVID-19 on our business, and our efforts to manage and remedy these impacts to the Company may not achieve results in accordance with our expectations or on the timelines we anticipate.
The above risks have been and may continue to be exacerbated by the impact of inflationary pressures, global supply chain disruptions on our business, and our efforts to manage and remedy these impacts to the Company may not achieve results in accordance with our expectations or on the timelines we anticipate.
The above risks have been and may continue to be exacerbated by the impact of inflationary pressures and global supply chain disruptions and the ongoing effects of COVID-19 on our business, and our efforts to manage and remedy these impacts to the Company may not achieve results in accordance with our expectations or on the timelines we anticipate.
The above risks have been and may continue to be exacerbated by the impact of inflationary pressures and global supply chain disruptions on our business, and our efforts to manage and remedy these impacts to the Company may not achieve results in accordance with our expectations or on the timelines we anticipate.
The COVID-19 pandemic has had, and could continue to have, a negative impact on our business, financial condition, results of operations and cash flows. The COVID-19 pandemic and the actions taken by governments and third-parties in response have had, and continue to have, evolving and unpredictable impacts on global economies, financial markets and business practices.
Public health crises could have a negative impact on our business, financial condition, results of operations and cash flows. The COVID-19 pandemic and the actions taken by governments and third-parties in response have had, and continue to have, evolving and unpredictable impacts on global economies, financial markets and business practices.
The price of our Class A Common Stock listed on Euronext Paris’s Professional Segment could also be adversely affected by trading in our Class A Common Stock on the NYSE. In addition, currency fluctuations between the Euro and U.S. dollar may have an adverse impact on the value of our Class A Common Stock traded on Euronext Paris’s Professional Segment.
The price of our Class A Common Stock listed on Euronext Paris could also be adversely affected by trading in our Class A Common Stock on the NYSE. In addition, currency fluctuations between the Euro and U.S. dollar may have an adverse impact on the value of our Class A Common Stock traded on Euronext Paris.
The above-referenced factors, as well as new product risks, could have an adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities. These risks have been exacerbated by the impact of general economic conditions such as inflationary pressures and the ongoing effects of COVID-19 on our business.
The above-referenced factors, as well as new product risks, could have an adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities. These risks have been exacerbated by the impact of general economic conditions such as inflationary pressures on our business.
Risks related to our Indebtedness We have taken on significant debt, and the agreements that govern such debt contain various covenants that impose significant operating and financial restrictions on us, which may adversely affect our business. We have a substantial amount of indebtedness.
Risks related to our Indebtedness We have taken on significant debt, and the agreements that govern such debt contain various covenants that impose significant operating and financial restrictions on us, which may adversely affect our business.
In addition, we have entered into forward repurchase transactions to begin hedging for a potential $200 million repurchase under our stock repurchase program currently planned for 2024 and an additional potential $196 million repurchase planned for 2025.
In addition, we have entered into forward repurchase transactions to begin hedging for a potential $196 million repurchase under our stock repurchase program currently planned for 2025 and an additional potential $294 million repurchase planned for 2026.
In addition, the unauthorized disclosure of nonpublic sensitive information could lead to the loss of intellectual property or damage our reputation and brand image or otherwise adversely affect our ability to compete.
In addition, the unauthorized disclosure of nonpublic sensitive information could lead to the loss of trade secrets or damage our reputation and brand image or otherwise adversely affect our ability to compete.
We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, are entitled to rely on exemptions from certain corporate governance requirements that are designed to provide protection to stockholders of companies that are not “controlled companies”.
We are a “controlled company” within the meaning of the NYSE rules and, as a result, are entitled to rely on exemptions from certain corporate governance requirements that are designed to provide protection to stockholders of companies that are not “controlled companies”.
In the past year, inflationary pressures as well as global supply chain disruptions have caused significant volatility in the cost and availability of the raw materials and services (such as transportation) that we need to manufacture and distribute our products.
In fiscal 2023, inflationary pressures as well as global supply chain disruptions caused significant volatility in the cost and availability of the raw materials and services (such as transportation) that we need to manufacture and distribute our products.
Increases in the costs of raw materials or other commodities and transportation services may adversely affect our profit margins if we are unable to pass along any higher costs in the form of price increases or otherwise achieve cost efficiencies in manufacturing and distribution.
Although inflationary pressures have eased, future increases in the costs of raw materials or other commodities and transportation services may adversely affect our profit margins if we are unable to pass along any higher costs in the form of price increases or otherwise achieve cost efficiencies in manufacturing and distribution.
Abrupt political change, terrorist activity, and armed conflict, such as the ongoing war in Ukraine and any escalation or expansion thereof, pose a risk of further general economic disruption in affected regions.
Abrupt political change, terrorist activity, and armed conflict, such as the ongoing war in Ukraine and/or the armed conflict in the Middle East (including the Red Sea conflict) and any escalation or expansion thereof, pose a risk of further general economic disruption in affected regions.
Such attacks have become increasingly difficult to detect, defend against or prevent and may originate from outside parties, hackers, criminal organizations or other threat actors, including nation states. As artificial intelligence (“AI”) capabilities improve and gain widespread use, we may experience cyberattacks created using artificial intelligence, which may be difficult to detect and mitigate against.
Such attacks have become increasingly difficult to detect, defend against or prevent and may originate from outside parties, hackers, criminal organizations or other threat actors, including nation states. As AI capabilities 17 improve and gain widespread use, we may experience cyber attacks created using AI, which may be difficult to detect and mitigate against.
Several governments, including the E.U., have regulations dealing with the collection and use of personal information obtained from their citizens, and regulators globally are also imposing greater monetary fines for privacy violations.
Several governments, including the E.U., the U.K., Brazil, China and several states in the United States, have regulations dealing with the collection and use of personal information obtained from their citizens, and regulators globally are also imposing greater monetary fines for privacy violations.
If we are unable to obtain, maintain and protect our intellectual property rights, in particular trademarks, patents and copyrights, or if our brand partners and licensors are unable to maintain and protect their intellectual property rights that we use in connection with our products, our ability to compete could be negatively impacted. 11 Our intellectual property is a valuable asset of our business.
If we are unable to obtain, maintain and protect our intellectual property rights, in particular trademarks, patents and copyrights, or if our brand partners and licensors are unable to maintain and protect their intellectual property rights that we use in connection with our products, our ability to compete could be negatively impacted.
We are subject to risks related to our international operations. We operate on a global basis, and approximately 69% of our net revenues from continuing operations in fiscal 2023, were generated outside North America. We have employees in more than 36 countries, and we market, sell and distribute our products in over 126 countries and territories.
We are subject to risks related to our international operations. We operate on a global basis, and approximately 71% of our net revenues in fiscal 2024, were generated outside North America. We have employees in more than 36 countries, and we market, sell and distribute our products in over 121 countries and territories.
The war in Ukraine and prolonged geopolitical conflict globally may continue to result in increased price inflation, escalating energy and commodity prices and increasing costs of materials and services (together with shortages or inconsistent availability of materials and services) , which may also have the effect of heightening many of our other risks, such as those relating to cyber security, supply chain disruption, volatility in prices and market conditions, our ability to forecast demand, and our ability to successfully implement our global business strategies, any of which could negatively affect our business, results of operations and financial condition.
The war in Ukraine and/or the armed conflict in the Middle East and prolonged geopolitical conflict globally may continue to result in increased price inflation, escalating energy and commodity prices and increasing costs of materials and services (together with shortages or inconsistent availability of materials and services) , which may also have the effect of heightening many of our other risks, such as those relating to cyber security, supply chain disruption, volatility in prices and market conditions, our ability to forecast demand, and our ability to successfully implement our global business strategies, any of which could negatively affect our business, results of operations and financial condition. 23 Volatility in the financial markets could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.
Consumer spending habits and consumer confidence have shifted and may continue to change in light of re-imposition of containment measures (such as the lockdowns imposed in China), inflationary pressures, as well as changes in work practices and travel trends impacting the demand for our products. Our success depends, in part, on the quality, efficacy and safety of our products.
Consumer spending habits and consumer confidence have shifted and may continue to change in light of inflationary pressures, as well as changes in work practices and travel trends impacting the demand for our products. Our success depends, in part, on the quality, efficacy and safety of our products.
In addition, JABC’s obligations under its credit facility may cause JABC to take actions which may be inconsistent with your interests.
In addition, JABH’s obligations under its credit facility may cause JABH to take actions which may be inconsistent with your interests.
(“JABC”) and its affiliates beneficially own approximately 53% of the fully diluted shares of our Class A Common Stock and, as such, have the ability to effect certain decisions requiring stockholder approval, which may be inconsistent with the interests of our other stockholders.
(“JAB”) and its affiliates beneficially own approximately 55% of the fully diluted shares of our Class A Common Stock and, as such, have the ability to effect certain decisions requiring stockholder approval, which may be inconsistent with the interests of our other stockholders. JAB Holdings B.V.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase. Borrowings under the 2018 Coty Credit Agreement are at variable rates of interest and expose us to interest rate risk.
Our variable rate indebtedness subjects us to interest rate risk, which could cause certain debt service obligations to increase. Borrowings under the 2018 Coty Credit Agreement, as well as certain payments under our forward repurchase contracts, are at variable rates of interest and expose us to interest rate risk.
These cost overruns and delays and distractions as well as our reliance on certain third parties for certain business and financial information could impact our financial statements and could adversely impact our ability to run our business, correctly forecast future performance and make fully informed decisions. Our success depends, in part, on our employees, including our key personnel.
These cost overruns and delays and distractions as well as our reliance on certain third parties for certain business and financial information could impact our financial statements and could adversely impact our ability to run our business, correctly forecast future performance and make fully informed decisions.
If interest rates were to continue to increase, our debt service obligations on the variable rate indebtedness referred to above would increase even if the principal amount borrowed remained the same, and our net income and cash flows will correspondingly decrease.
If interest rates were to continue to increase, our debt service obligations on the variable rate indebtedness referred to above would increase even if the principal amount borrowed remained the same, and our net income and cash flows will correspondingly decrease. We do not maintain interest rate swaps with respect to our variable rate exposures.
We operate in an environment of slow overall growth in the segments and geographies in which we compete with increasing competitive pressure and changing consumer preferences, and global economic activity has been in decline as a result of higher levels of unemployment, unprecedented levels of inflation, recessionary conditions and geopolitical conditions including the war in Ukraine and the ongoing effects of COVID-19.
We operate in an environment of slow overall growth in the segments and geographies in which we compete with increasing competitive pressure and changing consumer preferences, and global economic activity has been in decline as a result of higher levels of unemployment, unprecedented levels of inflation, recessionary conditions and geopolitical conditions including the war in Ukraine and/or the armed conflict in the Middle East (including the Red Sea conflict) .
For so long as JABC and its affiliates own more than 50% of the total voting power of our common shares, we are a “controlled company” within the meaning of the New York Stock Exchange (“NYSE”) corporate governance standards.
For so long as JABH and its affiliates own more than 50% of the total voting power of our common shares, we are a “controlled company” within the meaning of the NYSE corporate governance standards.
Deterioration in global financial markets, including as a result of global and regional economic conditions, COVID-19, the war in Ukraine and related geopolitical conditions, could make future financing difficult or more expensive.
Deterioration in global financial markets, including as a result of global and regional economic conditions, the war in Ukraine and/or the armed conflict in the Middle East (including the Red Sea conflict) and related geopolitical conditions, could make future financing difficult or more expensive.
Risks related to Macroeconomic Conditions and Market Risks We must successfully manage the impact of a general economic downturn, credit constriction, uncertainty in global economic or political conditions or other global events or a sudden disruption in business conditions which may affect consumer spending, global supply chain conditions and inflationary pressures and adversely affect our financial results.
As a result, the amount of interest we may pay on our variable rate indebtedness is difficult to predict. 22 Risks related to Macroeconomic Conditions and Market Risks We must successfully manage the impact of a general economic downturn, credit constriction, uncertainty in global economic or political conditions or other global events or a sudden disruption in business conditions which may affect consumer spending, global supply chain conditions and inflationary pressures and adversely affect our financial results.
For a further discussion of the impact of the wind down, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview —Russia-Ukraine War.” We are subject to the interpretation and enforcement by governmental agencies of other foreign laws, rules, regulations or policies, including any changes thereto, such as restrictions on trade, import and export license requirements, and tariffs and taxes (including assessments and disputes related thereto), which may require us to adjust our operations in certain areas where we do business.
We are subject to the interpretation and enforcement by governmental agencies of other foreign laws, rules, regulations or policies, including any changes thereto, such as restrictions on trade, import and export license requirements, and tariffs and taxes (including assessments and disputes related thereto), which may require us to adjust our operations in certain areas where we do business.
We have made changes and may continue to change our process for the continuous development and evaluation of new product concepts. In addition, each new product launch carries risks. For example, we may incur costs exceeding our expectations, our advertising, promotional and marketing strategies may be less effective than planned or customer purchases may not be as high as anticipated.
In addition, each new product launch carries risks. For example, we may incur costs exceeding our expectations, our advertising, promotional and marketing strategies may be less effective than planned or customer purchases may not be as high as anticipated.
Any of these outcomes could result in a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.
Each of the aforementioned risks could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our securities.
As we consider growth opportunities, we may continue to seek acquisitions that we believe strengthen our competitive position in our key segments and geographies or accelerate our ability to grow into adjacent 14 product categories and channels and emerging markets or which otherwise fit our strategy.
These assets represent a significant portion of our net assets, particularly the P&G Beauty Business. As we consider growth opportunities, we may continue to seek acquisitions that we believe strengthen our competitive position in our key segments and geographies or accelerate our ability to grow into adjacent product categories and channels and emerging markets or which otherwise fit our strategy.
Our business has been, and may continue to be, negatively impacted by the COVID-19 pandemic in such countries.
Our business has been, and may continue to be, negatively impacted by the COVID-19 pandemic in such countries, although the impacts have decreased and have been less significant in fiscal 2024.
Changes in laws, regulations and policies that affect our business or products could adversely affect our business, financial condition, results of operations, cash flows, as well as the trading price of our securities. Our business is subject to numerous laws, regulations and policies.
See Note 24— Legal and Other Contingencies for more information regarding our potential tax obligations in Brazil. Changes in laws, regulations and policies that affect our business or products could adversely affect our business, financial condition, results of operations, cash flows, as well as the trading price of our securities. Our business is subject to numerous laws, regulations and policies.
When used in this discussion, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation and the terms “Coty,” the “Company,” “we,” “our,” or “us” mean, unless the context otherwise indicates, Coty Inc. and its majority and wholly-owned subsidiaries.
When used in this discussion, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation and the terms “Coty,” the “Company,” “we,” “our,” or “us” mean, unless the context otherwise indicates, Coty Inc. and its majority and wholly-owned subsidiaries. 7 Risk Factor Summary We are providing the following summary of the risk factors to enhance the readability and accessibility of our risk factor disclosures.
This product innovation also can place a strain on our employees and our financial resources, including incurring expenses in connection with product innovation and development, marketing and advertising that are not subsequently supported by a sufficient level of sales. Furthermore, we cannot predict how consumers will react to any new products that we launch or to repositioning of our brands.
This product innovation also can place a strain on our employees and our financial resources, including incurring expenses in connection with product innovation and development, marketing and advertising that are not subsequently supported by a sufficient level of sales.
We outsource a number of functions to third-party service providers, and any failure to perform or other disruptions or delays at our third-party service providers could adversely impact our business, our results of operations or our financial condition. 16 We have outsourced and may continue to outsource certain functions, including outsourcing of distribution functions, outsourcing of business processes (including certain financing and accounting functions), and third-party manufacturers, logistics and supply chain suppliers, and other suppliers, including third-party software providers, web-hosting and e-commerce providers, and we are dependent on the entities performing those functions.
We have outsourced and may continue to outsource certain functions, including outsourcing of distribution functions, outsourcing of business processes (including certain financing and accounting functions), and third-party manufacturers, logistics and supply chain suppliers, and other suppliers, including third-party software providers, web-hosting and e-commerce providers, and we are dependent on the entities performing those functions.
We currently engage in a program seeking to improve control over our product demand and inventories. We have identified, and may continue to identify, inventories that are not saleable in the ordinary course, but our existing program or any future inventory management program may not be successful in improving our inventory control.
We have identified, and may continue to identify, inventories that are not saleable in the ordinary course, but our existing program or any future inventory management program may not be successful in improving our inventory control. Our ability to manage our inventory levels to meet demand for our products is important for our business.
The dual-listing of our Class A Common Stock on the NYSE and on Euronext Paris’s Professional Segment may adversely affect the liquidity and value of our Class A Common Stock. We have announced our intention to apply to list our Class A Common Stock on Euronext Paris’s Professional Segment.
The dual-listing of our Class A Common Stock on the NYSE and on Euronext Paris’s Professional Segment may adversely affect the liquidity and value of our Class A Common Stock. Our Class A Common Stock is listed on Euronext Paris’s Professional Segment (“Euronext Paris”).
Our successful product launches may not continue. The amount of positive or negative sales contribution of any of our products may change significantly within a period or from period to period.
Furthermore, we cannot predict how consumers will react to any new products that we launch or to repositioning of our brands. 10 Our successful product launches may not continue. The amount of positive or negative sales contribution of any of our products may change significantly within a period or from period to period.
SOFR is a relatively new reference rate and with a limited history, and changes in SOFR have, on occasion, been more volatile than changes in other benchmark or market rates. As a result, the amount of interest we may pay on our variable rate indebtedness is difficult to predict.
SOFR is a relatively new reference rate and with a limited history, and changes in SOFR have, on occasion, been more volatile than changes in other benchmark or market rates.
While the dual-listing of our Class A Common Stock is intended to promote additional liquidity for investors and provide greater access to our Class A Common Stock among investors in Europe who may be required to invest in Eurozone markets or certain currencies only, we cannot predict the effect of this dual-listing on the value of our Class A Common Stock on the NYSE and Euronext Paris’s Professional Segment.
While the dual-listing of our Class A Common Stock was intended to promote additional liquidity for investors and provide greater access to our Class A Common Stock among investors in Europe who may be required to invest in Eurozone markets or certain currencies only, this dual-listing may dilute the liquidity of these securities in one or both markets and may adversely affect the development of an active trading market for Class A Common Stock on Euronext Paris.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest change(owned) Manufacturing Prestige Senador Canedo, Brazil (owned) Manufacturing Consumer Beauty Wujiang, China (owned) Manufacturing Consumer Beauty Morris Plains, New Jersey, U.S. (leased) R&D All segments 27 Item 3. Legal Proceedings. For information on our legal matters, see Note 26—Legal and Other Contingencies in the notes to our Consolidated Financial Statements. PART II
Biggest change(owned) Manufacturing Prestige Senador Canedo, Brazil (owned) Manufacturing Consumer Beauty Wujiang, China (owned) Manufacturing Consumer Beauty Morris Plains, New Jersey, U.S. (leased) R&D All segments Item 3. Legal Proceedings. For information on our legal matters, see Note 24—Legal and Other Contingencies in the notes to our Consolidated Financial Statements. PART II
We consider our properties to be generally in good condition and believe that our facilities are adequate for our operations and provide sufficient capacity to meet anticipated requirements. The following table sets forth our principal owned and leased corporate, manufacturing and research and development facilities as of June 30, 2023.
We consider our properties to be generally in good condition and believe that our facilities are adequate for our operations and provide sufficient capacity to meet anticipated requirements. The following table sets forth our principal owned and leased corporate, manufacturing and research and development facilities as of June 30, 2024.
(leased) Corporate/Commercial Corporate / Consumer Beauty Paris, France (3 locations) (leased) Corporate/Commercial Corporate / Prestige Singapore, Singapore (leased) Corporate/Commercial Corporate Ashford, England (land leased, building owned) Manufacturing Consumer Beauty Chartres, France (owned) Manufacturing Prestige Granollers, Spain (owned) Manufacturing Prestige Hunt Valley, U.S. (owned) Manufacturing Consumer Beauty Monaco, Monaco (leased) Manufacturing /R&D Prestige Sanford, North Carolina, U.S.
(leased) Corporate/Commercial Corporate / Consumer Beauty Paris, France (2 locations) (leased) Corporate/Commercial Corporate / Prestige Singapore, Singapore (leased) Corporate/Commercial Corporate Ashford, England (land leased, building owned) Manufacturing Consumer Beauty Chartres, France (owned) Manufacturing Prestige Granollers, Spain (owned) Manufacturing Prestige Hunt Valley, U.S. (owned) Manufacturing Consumer Beauty Monaco, Monaco (leased) Manufacturing /R&D Prestige Sanford, North Carolina, U.S.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings 28 Part II: Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 28 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 60
Biggest changeItem 3. Legal Proceedings 29 Part II: Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 29 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(c) On March 27, 2017, the Board approved an award of 1,000,000 shares of Series A Preferred Stock, par value $0.01 per share, to Lambertus J.H.
Biggest changeThe Company has the right to redeem the Series A Preferred Stock (1.0 million shares) at a redemption price of $0.01 per share. The Company plans to redeem these shares of Series A Preferred Stock in accordance with their terms. (c) On December 1, 2014, the Board granted Lambertus J.H. Becht an award of 49,432 phantom units (the “December Grant”).
After the expiration of applicable restrictions under the 2018 Coty Credit Agreement, as amended, we began to pay dividends on the Convertible Series B Preferred Stock in cash for the period ending June 30, 2021, and we expect to continue to pay such dividends in cash on a quarterly basis, subject to the declaration thereof by our Board of Directors.
After the expiration of applicable restrictions under the 2018 Coty Credit Agreement, as amended, we began to pay dividends on the Convertible Series B Preferred Stock in cash for the period ended June 30, 2021, and we expect to continue to pay such dividends in cash on a quarterly basis, subject to the declaration thereof by our Board of Directors.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Liquidity and Capital Resources—Debt” and Note 15—Debt in the notes to our Consolidated Financial Statements. 28 Market Performance Graph Comparison of 5 Year Cumulative Total Return (a) Coty Inc., The S&P 500 Index, and Fiscal 2023 Peer Group (b) (a) Total return assumes reinvestment of dividends at the closing price at the end of each quarter, since June 30, 2018.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition—Liquidity and Capital Resources—Debt” and Note 14—Debt in the notes to our Consolidated Financial Statements. 30 Market Performance Graph Comparison of 5 Year Cumulative Total Return (a) Coty Inc., The S&P 500 Index, and Fiscal 2024 Peer Group (b) (a) Total return assumes reinvestment of dividends at the closing price at the end of each quarter, since June 30, 2019.
Any determination to pay dividends on our common stock in the future will be at the discretion of our Board of Directors and is subject to the restrictions under the terms of the Convertible Series B Preferred Stock described below.
As we focus on preserving cash, we have continued to suspend the payment of Common Stock dividends. Any determination to pay dividends on our common stock in the future will be at the discretion of our Board of Directors and is subject to the restrictions under the terms of the Convertible Series B Preferred Stock described below.
The returns of each company in the Peer Group have been weighted according to their respective stock market capitalization at the beginning of the measurement period for purposes of arriving at a Peer Group average. 29 Equity Compensation Plan Information Plan Category (1) Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (e ) (excluding securities reflected in column (1) ) Equity compensation plans approved by security holders Options (a) 5,084,137 $ 13.06 Restricted Stock Units (a) 33,932,994 N/A Performance Restricted Stock Units (f) 11,640,282 N/A Subtotal 50,657,413 — 35,856,976 Equity compensation plans not approved by security holders Series A Preferred Stock (b)(c) 1,000,000 $ 22.39 Phantom Units (d) 349,432 N/A Subtotal 1,349,432 — — Total 52,006,845 35,507,544 N/A is not applicable (a) For information about Options and Restricted Stock Units, see Note 24 — Share-Based Compensation Plans in the notes to our Consolidated Financial Statements.
The returns of each company in the Peer Group have been weighted according to their respective stock market capitalization at the beginning of the measurement period for purposes of arriving at a Peer Group average. 31 Equity Compensation Plan Information Plan Category (1) Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (d ) (excluding securities reflected in column (1) ) Equity compensation plans approved by security holders Options (a) 3,581,669 $ 13.82 Restricted Stock Units (a) 22,054,245 N/A Performance Restricted Stock Units (e) 13,422,500 N/A Subtotal 39,058,414 — 46,537,839 Equity compensation plans not approved by security holders Series A Preferred Stock (b) 1,000,000 $ 22.39 Phantom Units (c) 349,432 N/A Subtotal 1,349,432 — — Total 40,407,846 46,188,407 N/A is not applicable (a) For information about Options and Restricted Stock Units, see Note 22 — Share-Based Compensation Plans in the notes to our Consolidated Financial Statements.
Becht an award of 49,432 phantom units (the “December Grant”). On July 21, 2015, the Board granted to Mr. Becht an award of 300,000 phantom units (the “July Grant”). Both the December Grant and July Grant to Mr. Becht were outside of the Company’s Equity and Long-Term Incentive Plan.
On July 21, 2015, the Board granted to Mr. Becht an award of 300,000 phantom units (the “July Grant”). Both the December Grant and July Grant to Mr. Becht were outside of the Company’s Equity and Long-Term Incentive Plan. Each phantom unit has an economic value equivalent to one share of the Company’s Class A Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock Our common stock is listed on the New York Stock Exchange under the symbol “COTY.” Stockholders of Record As of June 30, 2023 there were 690 stockholders of record of our Class A Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock 29 Our common stock is listed on the New York Stock Exchange under the symbol “COTY.” It is also listed on the Euronext Paris Professional Segment.
The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Stockholders of Record As of June 30, 2024 there were 588 stockholders of record of our Class A Common Stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Each phantom unit has an economic value equivalent to one share of the Company’s Class A Common Stock. The phantom units vested on the fifth anniversary of the grant date. Mr. Becht elected to receive payment in respect of the December Grant and the July Grant in shares of Class A Common Stock.
The phantom units vested on the fifth anniversary of the grant date. Mr. Becht elected to receive payment in respect of the December Grant and the July Grant in shares of Class A Common Stock. (d) Reflects number of securities remaining available for future issuance under equity compensation plans, excluding share reserves related to terminated equity plans.
Dividend Policy On April 29, 2020, our Board of Directors susp ended the payment of dividends on our common stock, in accordance with our 2018 Coty Credit Agreement, as amended. As we focus on preserving cash, we have continued to suspend the payment of Common Stock dividends.
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividend Policy On April 29, 2020, our Board of Directors susp ended the payment of dividends on our common stock, in accordance with our 2018 Coty Credit Agreement, as amended.
(e) Reflects number of securities remaining available for future issuance under equity compensation plans, excluding share reserves related to terminated equity plans. (f) Performance Restricted Stock Units are subject to the achievement of performance objectives and continued employment through vesting date.
(e) Performance Restricted Stock Units are subject to the achievement of performance objectives and continued employment through vesting date.
The Market Performance Graph above assumes a $100.00 investment on June 30, 2018, in Coty Inc.’s common stock, the S&P 500 Index and the Peer Group. The dollar amounts indicated in the graph above are as of the last trading day in the quarter.
(b) The Peer Group includes L'Oréal S.A., Inc., Estée Lauder Companies, Inc., Beiersdorf AG, Shiseido Company, Limited and Inter Parfums Inc. The Market Performance Graph above assumes a $100.00 investment on June 30, 2019, in Coty Inc.’s common stock, the S&P 500 Index and the Peer Group.
Issuer Purchases of Equity Securities No shares of Class A Common Stock were repurchased during the fiscal years ended June 30, 2023 and 2022. 30
For additional information on our Share Repurchase Program and our forward repurchase contracts, see Note 21—Equity and Convertible Preferred Stock in the notes to our Consolidated Financial Statements. No shares of Class A Common Stock were repurchased during the fiscal year ended June 30, 2023. 32
Removed
(b) The Peer Group includes L'Oréal S.A., Inc., Estée Lauder Companies, Inc., Beiersdorf AG, Shiseido Company, Limited and Inter Parfums Inc. We added Beiersdorf AG to our peer group to replace Revlon, Inc. following its delisting from the New York Stock Exchange.
Added
The dollar amounts indicated in the graph above are as of the last trading day in the quarter.
Removed
(b) Upon vesting of the Series A Preferred Stock, the recipient receives, in cash or shares, at our sole election, the fair market value of our Class A Common Stock on the vest date of the Series A Preferred Stock less the sum of the fair market value of our Class A Common Stock on the original issue date of the Series A Preferred Stock and a hurdle price specified in the recipient’s subscription agreement.
Added
(b) On March 27, 2017 a Series A Preferred Stock subscription agreement was entered into with Lambertus J.H. Becht (“Mr. Becht”), the Company’s former Chairman of the Board.
Removed
As such, the benefit provided under the Series A Preferred Stock will always be based solely on the increase in value of our Class A Common Stock after the date of grant and the Series A Preferred Stock will not have any value to the participant until the value of our Class A Common Stock exceeds the value of such shares on the date of grant plus the specified hurdle.
Added
Under the terms provided in the subscription agreement, the Series A Preferred Stock immediately vested on the grant date and the holder was entitled to exchange the vested shares after the fifth anniversary of the date of issuance. This exchange right expired on March 27, 2024.
Removed
Becht in his capacity as a non-employee director to compensate him for services performed in connection with closing the P&G Beauty Business transaction, aiding with the transition of the new chief executive officer into his role and integrating the P&G Beauty Business. (d) On December 1, 2014, the Board granted Lambertus J.H.
Added
Issuer Purchases of Equity Securities In February 2024, we elected to physically settle one of our forward repurchase contracts, authorized under our repurchase program, for a cash payment of $200.0 in exchange for 27.0 million shares of our Class A Common Stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

152 edited+73 added−87 removed113 unchanged
Biggest changeCondensed Consolidated Statements of Operations Data: Fiscal 2023 Fiscal 2022 Three Months Ended Three Months Ended June 30, March 31, December 31, September 30, June 30, March 31, December 31, September 30, (in millions, except per share data) 2023 2023 2022 2022 2022 2022 2021 2021 Net revenues $ 1,351.6 $ 1,288.9 $ 1,523.6 $ 1,390.0 $ 1,168.3 $ 1,186.2 $ 1,578.2 $ 1,371.7 Gross profit 849.5 810.8 998.3 888.7 722.1 763.1 1,017.1 866.9 Restructuring costs (1.1) (1.3) (2.9) (1.2) (8.0) (6.8) (4.1) 12.4 Acquisition-and divestiture-related costs — — — — 0.5 3.3 6.9 4.0 Asset impairment charges — — — — 31.4 — — — Operating income (loss) 129.0 43.5 199.3 171.9 (77.4) 57.1 244.0 17.2 Interest expense, net 72.2 58.8 61.0 65.9 40.4 62.9 60.9 59.8 Income (Loss) from continuing operations before income taxes 78.8 141.6 280.2 204.2 (280.8) 54.8 309.3 343.5 Provision (benefit) for income taxes 43.3 29.8 38.8 69.7 0.3 0.5 49.4 114.6 Net (loss) income from continuing operations 35.5 111.8 241.4 134.5 (281.1) 54.3 259.9 228.9 Net (loss) income from discontinued operations — — — — 1.2 0.7 3.8 — Net (loss) income attributable to noncontrolling interests (1.4) 1.0 (1.4) — (2.8) (0.9) (0.9) (0.5) Net income attributable to redeemable noncontrolling interests 4.0 2.4 4.5 5.9 4.4 2.3 3.2 3.4 Net (loss) income attributable to Coty Inc. $ 32.9 $ 108.4 $ 238.3 $ 128.6 $ (281.5) $ 53.6 $ 261.4 $ 226.0 Amounts attributable to Coty Inc. common stockholders: Convertible Series B Preferred Stock dividends (3.3) (3.3) (3.3) (3.3) (3.3) (3.3) (68.7) (123.0) Net (loss) income from continuing operations attributable to common stockholders 29.6 105.1 235.0 125.3 (286.0) 49.6 188.9 103.0 Net (loss) income attributable to common stockholders $ 29.6 $ 105.1 $ 235.0 $ 125.3 $ (284.8) $ 50.3 $ 192.7 $ 103.0 Per Share Data: Weighted-average common shares: Basic 852.0 851.6 850.8 842.0 838.4 838.4 829.1 777.6 Diluted (a) 864.7 865.2 886.8 882.2 838.4 852.9 842.7 787.7 Dividends declared per common share $ — $ — $ — $ — $ — $ — $ — $ — Net (loss) income attributable to Coty Inc. per common share: Basic for Continuing Operations $ 0.03 $ 0.12 $ 0.28 $ 0.15 $ (0.34) $ 0.06 $ 0.23 $ 0.13 Basic for Coty Inc $ 0.03 $ 0.12 $ 0.28 $ 0.15 $ (0.34) $ 0.06 $ 0.23 $ 0.13 Diluted for Continuing Operations $ 0.03 $ 0.12 $ 0.27 $ 0.15 $ (0.34) $ 0.06 $ 0.23 $ 0.13 Diluted for Coty Inc. $ 0.03 $ 0.12 $ 0.27 $ 0.15 $ (0.34) $ 0.06 $ 0.23 $ 0.13 (a) The outstanding stock options and Series A/A-1 Preferred Stock with purchase or conversion rights to purchase shares of Common Stock, RSUs and Convertible Series B Preferred Stock were excluded in the computation of diluted shares when their effect would be antidilutive. 49 FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES Overview Our primary sources of funds include cash expected to be generated from operations, borrowings from issuance of debt and lines of credit provided by banks and lenders in the U.S. and abroad.
Biggest changeCondensed Consolidated Statements of Operations Data: Fiscal 2024 Fiscal 2023 Three Months Ended Three Months Ended June 30, March 31, December 31, September 30, June 30, March 31, December 31, September 30, (in millions, except per share data) 2024 2024 2023 2023 2023 2023 2022 2022 Net revenues $ 1,363.4 $ 1,385.6 $ 1,727.6 $ 1,641.4 $ 1,351.6 $ 1,288.9 $ 1,523.6 $ 1,390.0 Gross profit 875.4 897.8 1,124.1 1,041.9 849.5 810.8 998.3 888.7 Restructuring costs 1.7 0.9 5.7 28.4 (1.1) (1.3) (2.9) (1.2) Operating income (loss) 34.7 77.8 236.7 197.5 129.0 43.5 199.3 171.9 Interest expense, net 61.7 60.4 60.1 69.8 72.2 58.8 61.0 65.9 Income (Loss) from continuing operations before income taxes (107.4) 3.4 257.4 51.1 78.8 141.6 280.2 204.2 Provision (benefit) for income taxes (11.8) (5.4) 71.4 40.9 43.3 29.8 38.8 69.7 Net (loss) income from continuing operations (95.6) 8.8 186.0 10.2 35.5 111.8 241.4 134.5 Net (loss) income attributable to noncontrolling interests 1.3 2.4 0.5 1.1 (1.4) 1.0 (1.4) — Net income attributable to redeemable noncontrolling interests — 2.6 4.6 7.5 4.0 2.4 4.5 5.9 Net (loss) income attributable to Coty Inc. $ (96.9) $ 3.8 $ 180.9 $ 1.6 $ 32.9 $ 108.4 $ 238.3 $ 128.6 Amounts attributable to Coty Inc. common stockholders: Convertible Series B Preferred Stock dividends (3.3) (3.3) (3.3) (3.3) (3.3) (3.3) (3.3) (3.3) Net (loss) income from continuing operations attributable to common stockholders (100.2) 0.5 177.6 (1.7) 29.6 105.1 235.0 125.3 Net (loss) income attributable to common stockholders $ (100.2) $ 0.5 $ 177.6 $ (1.7) $ 29.6 $ 105.1 $ 235.0 $ 125.3 Per Share Data: Weighted-average common shares: Basic 867.9 883.1 892.8 854.3 852.0 851.6 850.8 842.0 Diluted (a) 867.9 892.0 922.8 854.3 864.7 865.2 886.8 882.2 Dividends declared per common share $ — $ — $ — $ — $ — $ — $ — $ — Net (loss) income attributable to Coty Inc. per common share: Basic for Coty Inc $ (0.12) $ — $ 0.20 $ — $ 0.03 $ 0.12 $ 0.28 $ 0.15 Diluted for Coty Inc. $ (0.12) $ — $ 0.20 $ — $ 0.03 $ 0.12 $ 0.27 $ 0.15 (a) The outstanding stock options and Series A Preferred Stock with purchase or conversion rights to purchase shares of Common Stock, RSUs and Convertible Series B Preferred Stock were excluded in the computation of diluted shares when their effect would be antidilutive. 52 FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES Overview Our primary sources of funds include cash expected to be generated from operations, borrowings from issuance of debt and lines of credit provided by banks and lenders in the U.S. and abroad.
Consumer Beauty In fiscal 2023, operating income for Consumer Beauty was $63.3 compared to income of $9.5 in fiscal 2022.
In fiscal 2023, operating income for Consumer Beauty was $63.3 compared to income of $9.5 in fiscal 2022.
In fiscal 2023, we incurred a credit in restructuring and other business structure realignment costs of $(6.3), as follows: • We incurred a credit in restructuring costs of $(6.5), related to the Transformation Plan, included in the Consolidated Statements of Operations and • We incurred business structure realignment costs of $0.2 primarily related to our Transformation Plan.
In fiscal 2023, we incurred a credit in restructuring and other business structure realignment costs of $(6.3), as follows: • We incurred a credit in restructuring costs of $(6.5) primarily related to the Transformation Plan, included in the Consolidated Statements of Operations and • We incurred business structure realignment costs of $0.2 primarily related to our Transformation Plan.
ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC. We believe that adjusted net income (loss) attributable to Coty Inc. provides an enhanced understanding of our performance.
We believe that adjusted net income (loss) attributable to Coty Inc. provides an enhanced understanding of our performance.
The decrease in cash used in financing activities of $564.7 in fiscal 2023 as compared to fiscal 2022 was primarily driven mainly by higher cash outflows in the prior year for net paydowns of the Company's revolving credit facility and other long term debt balances as well, as higher payments of deferred financing fees, and higher dividend payments on Series B Preferred Stock.
The decrease in cash used in financing activities of $564.7 in fiscal 2023 as compared to fiscal 2022 was primarily driven by higher cash outflows in the prior year for net paydowns of the Company's revolving credit facility and other long term debt balances as well, as higher payments of deferred financing fees, and higher dividend payments on Series B Preferred Stock.
If the historical data we use to calculate these estimates does not approximate future returns, additional allowances may be required. Equity Investments We elected the fair value option to account for its investment in Wella to align with our strategy for this investment. The fair value is updated on a quarterly basis.
If the historical data we use to calculate these estimates does not approximate future returns, additional allowances may be required. Equity Investments 58 We elected the fair value option to account for its investment in Wella to align with our strategy for this investment. The fair value is updated on a quarterly basis.
As a result of the May 1, 2022 annual impairment test, total impairments on indefinite-lived other intangible assets of $31.4 were recorded. On May 1, 2023, we performed our annual impairment testing of indefinite-lived other intangible assets and determined that no adjustments to carrying values were required.
As a result of the May 1, 2022 annual impairment test, total impairments on indefinite-lived other intangible assets of $31.4 were recorded. On May 1, 2024 and 2023, we performed our annual impairment testing of indefinite-lived other intangible assets and determined that no adjustments to carrying values were required.
Cash and working capital management initiatives, including the phasing of vendor payments and factoring of trade receivables from time-to-time, may also impact the timing and amount of our operating cash flows. We remain focused on deleveraging our balance sheet using cash flows generated from our operations.
Cash and working capital management initiatives, including the phasing of vendor and tax payments and factoring of trade receivables from time-to-time, may also impact the timing and amount of our operating cash flows. We remain focused on deleveraging our balance sheet using cash flows generated from our operations.
The overall increase in net revenues reflects the successful implementation of global price increases across all product categories, our product premiumization strategy, and positive overall market trends. 36 Net revenues also grew across all of our major geographic regions led by growth in the U.S. and Brazil.
The overall increase in net revenues reflects the successful implementation of global price increases across all product categories, our product premiumization strategy, and positive overall market trends. Net revenues also grew across all of our major geographic regions led by growth in the U.S. and Brazil.
Included within the credit in restructuring costs is $(6.3) related to employee severances in connection with our exit of Russia; and • We incurred business structure realignment costs of $11.2 primarily related to our Transformation Plan and certain other programs.
Included within the credit in restructuring costs is $(6.3) related to employee severances in connection with our exit of Russia; and 47 • We incurred business structure realignment costs of $11.2 primarily related to our Transformation Plan and certain other programs.
These factors include actual or anticipated fluctuations in the quarterly and annual results of our Company or of other peer companies in the industry, market perceptions concerning the macroeconomic, social or political developments, industry conditions, changes in government regulation and the securities market trends.
These factors include actual or anticipated fluctuations in the quarterly 57 and annual results of our Company or of other peer companies in the industry, market perceptions concerning the macroeconomic, social or political developments, industry conditions, changes in government regulation and the securities market trends.
When such events or changes in circumstances occur, a recoverability test is performed comparing projected 58 undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value.
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.
This decrease was primarily due to: (i) 130 basis points in stock-based compensation cost primarily related to a reduction in expense recognized in connection with a prior year's grant made to the CEO; (ii) 100 basis points due to a decrease in advertising and consumer promotional costs as a percentage of net revenues primarily related to a reduction of working media in the fiscal period; (iii) 100 basis points due to a decrease in administrative costs as a percentage of net revenues primarily due to lower depreciation expense related to fully depreciated IT equipment and lower consulting fees; (iv) 70 basis points due to a decrease in bad debt expense as a percentage of net revenues; and 39 (v) 40 basis points due to a decrease in logistics costs as a percentage of net revenues.
This decrease was primarily due to: (i) 130 basis points in stock-based compensation cost primarily related to a reduction in expense recognized in connection with a prior year's grant made to the CEO; (ii) 100 basis points due to a decrease in advertising and consumer promotional costs as a percentage of net revenues primarily related to a reduction of working media in the fiscal period; 41 (iii) 100 basis points due to a decrease in administrative costs as a percentage of net revenues primarily due to lower depreciation expense related to fully depreciated IT equipment and lower consulting fees; (iv) 70 basis points due to a decrease in bad debt expense as a percentage of net revenues; and (v) 40 basis points due to a decrease in logistics costs as a percentage of net revenues.
In connection with our decision to wind down our operations in Russia, we recognized tax charges related to certain direct incremental impacts of our decision, which are reflected in this amount, in fiscal 2023 and fiscal 2022.
In connection with our decision to wind down our operations in Russia, we recognized tax charges related to certain direct incremental impacts of our decision, which are reflected in this amount, in fiscal 2024, fiscal 2023 and fiscal 2022.
The investments are classified within Level 3 in the fair value hierarchy because we estimate the fair value of the investments using a combination of the income approach, the market approach and private 56 transactions, when applicable.
The investments are classified within Level 3 in the fair value hierarchy because we estimate the fair value of the investments using a combination of the income approach, the market approach and private transactions, when applicable.
Also, the size, complexity and/or volume of past transactions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of any future acquisitions or divestitures. 34 • Restructuring and other business realignment costs: We have excluded costs associated with restructuring and business structure realignment programs to allow for comparable financial results to historical operations and forward-looking guidance.
Also, the size, complexity and/or volume of past transactions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of any future acquisitions or divestitures. 36 • Restructuring and other business realignment costs: We have excluded costs associated with restructuring and business structure realignment programs to allow for comparable financial results to historical operations and forward-looking guidance.
Any future acquisitions may result in the amortization of additional intangible assets. • Gain on sale and termination of brand assets: We have excluded the impact of gain on sale and termination of brand assets as such amounts are inconsistent in amount and frequency and are significantly impacted by the size of the sale and termination of brand assets. • Costs related to market exit: We have excluded the impact of direct incremental costs related to our decision to wind down our business operations in Russia.
Any future acquisitions may result in the amortization of additional intangible assets. • Gain on sale and termination of brand assets and early license termination: We have excluded the impact of gain on sale and termination of brand assets and early license termination as such amounts are inconsistent in amount and frequency and are significantly impacted by the size of the sale of brand assets and early license termination. • Costs related to market exit: We have excluded the impact of direct incremental costs related to our decision to wind down our business operations in Russia.
Given the provisions of the associated Put and Call rights, RNCI is redeemable outside of our control and is recorded in temporary equity. See Note 22—Redeemable Noncontrolling Interests in the notes to our Consolidated Financial Statements for further discussion related to the calculation of the redemption value of this noncontrolling interest.
Given the provisions of the associated Put and Call rights, RNCI is redeemable outside of our control and is recorded in temporary equity. See Note 20—Redeemable Noncontrolling Interests in the notes to our Consolidated Financial Statements for further discussion related to the calculation of the redemption value of this noncontrolling interest.
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. 59
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. 61
For additional information on our dividends and dividend policy, respectively, see Note 23—Equity and Convertible Preferred Stock in the notes to our Consolidated Financial Statements and Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividend Policy”.
For additional information on our dividends and dividend policy, respectively, see Note 21—Equity and Convertible Preferred Stock in the notes to our Consolidated Financial Statements and Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividend Policy”.
These investments are subject to a wide variety of market-related risks that could have a material impact on the carrying value of our holdings. We continually evaluate our equity investments in privately-held companies. See Note 13—Equity Investments for additional information.
These investments are subject to a wide variety of market-related risks that could have a material impact on the carrying value of our holdings. We continually evaluate our equity investments in privately-held companies. See Note 12—Equity Investments for additional information.
(b) See a description of adjustments under “Adjusted Operating Income (Loss) from Continuing Operations for Coty Inc.” (c) In fiscal 2023, 2022, and 2021, the amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
(b) See a description of adjustments under “Adjusted Operating Income (Loss) from Continuing Operations for Coty Inc.” (c) In fiscal 2024, 2023, and 2022, the amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
Any realized gains or losses resulting from such fair value changes would occur if we elect to terminate the forward repurchase contracts prior to or on maturity. Refer to Note 23—Equity and Convertible Preferred Stock.
Any realized gains or losses resulting from such fair value changes would occur if we elect to terminate the forward repurchase contracts prior to or on maturity. Refer to Note 21—Equity and Convertible Preferred Stock.
We have experienced and will continue to experience fluctuations in our net income as a result of balance sheet transactional exposures. We use a combination of foreign currency forward contracts and cross currency contracts to offset these exposures.
We have experienced and will continue to experience fluctuations in our net income as a result of balance sheet transactional exposures. We use a combination of foreign currency forward contracts and cross currency contracts when necessary to offset these exposures.
Such charge could have a material effect on the Consolidated Statements of Operations and Balance Sheets. There were no impairments of goodwill at our reporting units in fiscal 2023, 2022 or fiscal 2021.
Such charge could have a material effect on the Consolidated Statements of Operations and Balance Sheets. There were no impairments of goodwill at our reporting units in fiscal 2024, 2023 or fiscal 2022.
The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate. The constant currency information we present may not be comparable to similarly titled measures reported by other companies.
The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate, or for the impacts of hyperinflation. The constant currency information we present may not be comparable to similarly titled measures reported by other companies.
The table also excludes $142.4 of preferred stock, which is reflected in Convertible Series B Preferred Stock in the Consolidated Balance Sheet as of June 30, 2023. Given the provisions of the associated Put rights, Convertible Series B Preferred Stock is redeemable outside of our control upon certain change of control events and is recorded in temporary equity.
The table excludes $142.4 of preferred stock, which is reflected in Convertible Series B Preferred Stock in the Consolidated Balance Sheet as of June 30, 2024. Given the provisions of the associated Put rights, Convertible Series B Preferred Stock is redeemable outside of our control upon certain change of control events and is recorded in temporary equity.
A 25 basis-point increase in our variable interest rate debt would have increased our interest costs by $22.0 over the term of our long-term debt. (b) Obligations under license agreements relate to royalty payments and required advertising and promotional spending levels for our products bearing the licensed trademark. Royalty payments are typically made based on contractually defined net sales.
A 25 basis-point increase in our variable interest rate debt would have increased our interest costs by $35.6 over the term of our long-term debt. (b) Obligations under license agreements relate to royalty payments and required advertising and promotional spending levels for our products bearing the licensed trademark. Royalty payments are typically made based on contractually defined net sales.
The tax impact of the non-GAAP adjustments is based on the tax rates related to the jurisdiction in which the adjusted 35 items are received or incurred.
The tax impact of the non-GAAP adjustments is based on the tax rates related to the jurisdiction in which the adjusted 37 items are received or incurred.
We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our most critical accounting policies relate to revenue recognition, the fair value of equity investments, the assessment of goodwill, other intangible and long-lived assets for impairment, inventory and income taxes.
Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our most critical accounting policies relate to revenue recognition, the fair value of equity investments, the assessment of goodwill, other intangible and long-lived assets for impairment, inventory and income taxes.
(d) In fiscal 2023, the amount includes the amortization of basis differences in certain equity method investments and pension curtailment gains. In fiscal 2022, the amount includes a net gain on the exchange of Series B Preferred Stock partially offset by the amortization of basis differences in certain equity method investments and pension curtailment losses.
In fiscal 2022, the amount includes a net gain on the exchange of Series B Preferred Stock partially offset by the amortization of basis differences in certain equity method investments and pension curtailment losses.
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. We classify inventories into various categories based upon their stage in the product life cycle, future marketing sales plans and the disposition process.
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.
During the twelve months ended June 30, 2023, the Board of Directors declared dividends on the Series B Preferred Stock of $13.2 of which $9.9 was paid and $3.3 was paid in July 2023.
During the twelve months ended June 30, 2024, the Board of Directors declared dividends on the Series B Preferred Stock of $13.2, of which $9.9 was paid during fiscal 2024 and $3.3 was paid in July 2024.
Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the fair value of contracts in net asset positions, which totaled $225.5 as of June 30, 2023. Management believes risk of material loss under these hedging contracts is remote.
Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the fair value of contracts in net asset positions, which totaled $1.5 as of June 30, 2024. Management believes risk of material loss under these hedging contracts is remote.
Additionally, adjustments are made for the tax impact of any intra-entity transfer of assets and liabilities. • Deemed Preferred Stock Dividends: We have excluded preferred stock deemed dividends related to the First Exchange and the Second Exchange (as disclosed and defined in Note 13—Equity Investments in our Annual Report on Form 10-K for fiscal 2023) from our calculation of adjusted net income attributable to Coty Inc.
Additionally, adjustments are made for the tax impact of any intra-entity transfer of assets and liabilities. • Deemed Preferred Stock Dividends: We have excluded preferred stock deemed dividends related to the First Exchange and the Second Exchange (as disclosed and defined in Note 27—Related Party Transactions in our Annual Report on Form 10-K for fiscal 2023) from our calculation of adjusted net income attributable to Coty Inc.
Subsequent funding requirements cannot be reasonably estimated as the return on plan assets in future periods, as well as future assumptions are not known. The table above excludes obligations for uncertain tax benefits, including interest and penalties, of $218.6 as of June 30, 2023, as we are unable to predict when, or if, any payments would be made.
Subsequent funding requirements cannot be reasonably estimated as the return on plan assets in future periods, as well as future assumptions are not known. The table above excludes obligations for uncertain tax benefits, including interest and penalties, of $200.2 as of June 30, 2024, as we are unable to predict when, or if, any payments would be made.
We continue to take steps to permanently reduce our debt, in order to reduce interest costs and improve our long term profitability and cash flows. In addition, our 25.9% investment in Wella gives us the opportunity for further permanent debt reductions, when our equity position is divested.
We continue to take steps to permanently reduce our debt, in order to reduce interest costs and improve our long term profitability and cash flows. In addition, our 25.84% investment in Wella gives us the opportunity for further permanent debt reductions, when our equity position is fully or partially divested.
We also record an inventory obsolescence reserve, which represents the excess of the cost of the inventory over its estimated 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.
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 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.
See Note 17—Income Taxes in the notes to our Consolidated Financial Statements for additional information on our uncertain tax benefits. The table excludes $93.5 of RNCI which is reflected in Redeemable noncontrolling interest in the Consolidated Balance Sheet as of June 30, 2023 related to the 25.0% RNCI in our subsidiary in the Middle East (“Middle East Subsidiary”).
See Note 16—Income Taxes in the notes to our Consolidated Financial Statements for additional information on our uncertain tax benefits. The table excludes $93.6 of RNCI which is reflected in Redeemable noncontrolling interest in the Consolidated Balance Sheet as of June 30, 2024 related to the 25.0% RNCI in our subsidiary in the Middle East (“Middle East Subsidiary”).
Changes in the fair value of equity investments under the fair value option are recorded in Other income, net within the Consolidated Statements of Operations (see Note 13—Equity Investments).
Changes in the fair value of equity investments under the fair value option are recorded in Other expense (income), net within the Consolidated Statements of Operations (see Note 12—Equity Investments).
We estimate that an immediate, hypothetical 10% decline in our stock price would result in a $60.9 decrease in the fair value of these forward repurchase contracts and reduce our Income (loss) from continuing operations before income 55 taxes.
We estimate that an immediate, hypothetical 10% decline in our stock price would result in a $47.6 decrease in the fair value of these forward repurchase contracts and reduce our Income (loss) from continuing operations before income taxes.
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 represent 10%, 10%, and 10% in fiscal 2023, 2022 and 2021, respectively.
Returns represented 1%, 2% and 2% of gross revenue after customer discounts and allowances in fiscal 2024, 2023 and 2022, respectively. Trade spending activities recorded as a reduction to gross revenue after customer discounts and allowances represent 9%, 10%, and 10% in fiscal 2024, 2023 and 2022, respectively.
During fiscal years 2023, 2022 and 2021, we recorded asset impairment charges of $4.3, $2.4 and $5.2, respectively, to Property and equipment, net and $1.1, $1.0 and $0.6, respectively to Operating lease right-of-use assets, primarily relating to the abandonment of equipment or leases no longer in use.
During fiscal years 2024, 2023 and 2022, we recorded asset impairment charges of $1.7, $4.3 and $2.4, respectively, to Property and equipment, net and nil, $1.1 and $1.0, respectively to Operating lease right-of-use assets, primarily relating to the abandonment of equipment or leases no longer in use.
The decrease in cash flows from investing activities of $387.9 in fiscal 2023 as compared with fiscal 2022 was mainly attributable to the prior year cash received from return of capital from one of our equity investments which did not reoccur 52 during the year ended June 30, 2023.
The decrease in cash flows provided by investing activities of $387.9 in fiscal 2023 as compared with fiscal 2022 was mainly attributable to the prior year cash received from return of capital from one of our equity investments which did not reoccur during fiscal 2023.
The net amount utilized under the factoring facilities was $202.9 and $179.3 as of June 30, 2023 and 2022, respectively. The aggregate amount of trade receivable invoices factored on a worldwide basis amounted to $1,579.2 and $1,041.2 in fiscal 2023 and 2022, respectively.
The net amount utilized under the factoring facilities was $195.3 and $202.9 as of June 30, 2024 and 2023, respectively. The aggregate amount of trade receivable invoices factored on a worldwide basis amounted to $1,534.3 and $1,579.2 in fiscal 2024 and 2023, respectively.
Treasury Stock - Share Repurchase Program For additional information on our Share Repurchase Program, see Note 23—Equity and Convertible Preferred Stock in the notes to our Consolidated Financial Statements. 53 Contractual Obligations and Commitments Our principal contractual obligations and commitments are presented below as of June 30, 2023.
Treasury Stock - Share Repurchase Program For additional information on our Share Repurchase Program, see Note 21—Equity and Convertible Preferred Stock in the notes to our Consolidated Financial Statements. 55 Contractual Obligations and Commitments Our principal contractual obligations and commitments are presented below as of June 30, 2024.
Excluding net revenue from the second half of the prior period from Russia, net revenues increased 6% or $107.8 to $2,133.6 from $2,025.8, reflecting a positive price and mix impact of 10% partially offset by a negative foreign currency exchange translation impact of 4%.
Excluding net revenue from the second half of the prior period from Russia, net revenues increased 6% or $107.8 to $2,133.6 from $2,025.8, reflecting a positive price and mix impact of 10% (primarily due to the positive pricing impact as a result of global price increases) partially offset by a negative foreign currency exchange translation impact of 4%.
Selling, general and administrative expenses as a percentage of net revenues decreased to 50.7% in fiscal 2023 from 54.3% in fiscal 2022, or approximately 360 basis points.
In fiscal 2023, selling, general and administrative expenses decreased 2%, or $63.0, to $2,818.3 from $2,881.3 in fiscal 2022. Selling, general and administrative expenses as a percentage of net revenues decreased to 50.7% in fiscal 2023 from 54.3% in fiscal 2022, or approximately 360 basis points.
We are exposed to changes in interest rates because of certain variable-rate debt discussed in Note 15—Debt. If interest rates had been 10% higher and all other variables were held constant, Income (loss) from continuing operations before income taxes in fiscal 2023 would decrease by $8.4. As of June 30, 2023, we also had fixed-rate senior notes (the “Notes”) outstanding.
We are exposed to changes in interest rates because of certain variable-rate debt discussed in Note 14—Debt. If interest rates had been 10% higher and all other variables were held constant, Income from continuing operations before income taxes in fiscal 2024 would decrease by $2.3. As of June 30, 2024, we also had fixed-rate senior notes (the “Notes”) outstanding.
As of June 30, 2023, in the event of a 10% unfavorable change in the prevailing market rates of hedged foreign currencies versus the U.S. dollar, the change in fair value of all foreign exchange forward contracts and cross currency contracts would result in a $91.6 decrease in the fair value of these forward contracts, which would be offset by an increase in the underlying foreign currency exposures.
As of June 30, 2024, in the event of a 10% unfavorable change in the prevailing market rates of hedged foreign currencies versus the U.S. dollar, the change in fair value of all foreign exchange forward contracts would result in a $89.5 decrease in the fair value of these forward contracts, which would be offset by an increase in the underlying foreign currency exposures.
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.
Net (losses) gains of $(16.5), $(12.2) and $10.0 in fiscal 2024, 2023 and 2022, respectively, resulting from financing foreign exchange currency transactions are included in Interest expense, net in the Consolidated Statements of Operations.
We account for income taxes under the asset and liability method. Therefore, income tax expense is based on reported income before income taxes, and deferred income taxes reflect the effect of temporary differences between the amounts of assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes.
Therefore, income tax expense is based on reported income before income taxes, and deferred income taxes reflect the effect of temporary differences between the amounts of assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes.
As of May 1, 2023, we determined that the fair value of our Max Factor and Bourjois trademarks exceeded their carrying values by approximately 6.8% and 10.5%, respectively, using annual revenue growth rates ranging from 2.0%-10.5% and 2.0%-8.2%, respectively, and a discount rate of 10.3%.
As of May 1, 2024, we determined that the fair value of our Max Factor and Bourjois trademarks exceeded their carrying values by approximately 4.8% and 5.8%, respectively, using annual revenue growth rates ranging from 2.0%-15.0% and 2.0%-13.5%, respectively, and a discount rate of 10.37%.
The net income increase was primarily driven by higher operating income in the current year, a favorable adjustment of $403.9 related to the realized and unrealized gain in the Wella investment in the current year, and the loss on sale of the Wella Business, which was recorded in the comparative period, partially offset by a provision for income taxes in the current year compared to income tax benefit in the prior year.
The net income increase was primarily driven by higher operating income in the current year, a favorable adjustment of $230.0 related to the realized and unrealized gain in the Wella investment in the current year, and the loss on sale of the Wella Business, which was recorded in the comparative period, partially offset by a provision for income taxes in the current year compared to income tax benefit in the prior year. 50 ADJUSTED NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC.
Cash Flows Year Ended June 30, (in millions) 2023 2022 2021 Consolidated Statements of Cash Flows Data (a) : Net cash provided by operating activities $ 625.7 $ 726.6 $ 318.7 Net cash (used in) provided by investing activities (118.2) 269.7 2,441.9 Net cash (used in) financing activities (469.3) (1,034.0) (2,795.1) (a) Balances presented herein represent the cash flows of Coty Inc.
Cash Flows Year Ended June 30, (in millions) 2024 2023 2022 Consolidated Statements of Cash Flows Data (a) : Net cash provided by operating activities $ 614.6 $ 625.7 $ 726.6 Net cash (used in) provided by investing activities (226.2) (118.2) 269.7 Net cash used in financing activities (336.7) (469.3) (1,034.0) (a) Balances presented herein represent the cash flows of Coty Inc.
Adjusted operating margin increased to 13.3% of net revenues in fiscal 2023 as compared to 11.6% in fiscal 2022. In fiscal 2023, adjusted EBITDA was $972.8 compared to $905.3 in fiscal 2022.
In fiscal 2023, adjusted operating income was $738.8 compared to an income of $615.5 in fiscal 2022. Adjusted operating margin increased to 13.3% of net revenues in fiscal 2023 as compared to 11.6% in fiscal 2022. In fiscal 2023, adjusted EBITDA was $972.8 compared to $905.3 in fiscal 2022.
We recorded foreign currency gains (losses) of $(32.3), $3.3 and $(7.8) in fiscal 2023, 2022 and 2021, respectively, resulting from non-financing foreign currency exchange transactions which are included in their associated expense type and are included in the Consolidated Statements of Operations.
We recorded net foreign currency (losses) gains of $(18.1), $(32.3) and $3.3 in fiscal 2024, 2023 and 2022, respectively, resulting from non-financing foreign currency exchange transactions which are included in their associated expense type and are included in the Consolidated Statements of Operations.
Equity Investment Risk Our equity investments are investments in equity securities of privately-held companies without readily determinable fair values, including an investment of approximately $1,060.0 that is valued using the fair value option and approximately $8.9 that is accounted for using the equity method as of June 30, 2023.
Equity Investment Risk Our equity investments are investments in equity securities of privately-held companies without readily determinable fair values, including an investment of approximately $1,085.0 that is valued using the fair value option and approximately $5.6 that is accounted for using the equity method as of June 30, 2024.
Based on the annual impairment test performed on May 1, 2023, we determined that the fair value of each of the reporting units exceeded their respective carrying values at that date by approximately 132.1% and 71.6% relating to the Prestige and Consumer Beauty reporting units, respectively.
Based on the annual impairment test performed on May 1, 2024, we determined that the fair value of each of the reporting units exceeded their respective carrying values at that date by approximately 143.6% and 69.9% relating to the Prestige and 59 Consumer Beauty reporting units, respectively.
Net cash provided by operating activities Net cash provided by operating activities was $625.7, $726.6 and $318.7 for fiscal 2023, 2022 and 2021, respectively.
Net cash provided by operating activities Net cash provided by operating activities was $614.6, $625.7 and $726.6 for fiscal 2024, 2023 and 2022, respectively.
Period of acquisition, divestiture, termination, or market exit Acquisition, divestiture, termination, or market exit Impact on basis of 2023/2022 presentation Impact on basis of 2022/2021 presentation Third quarter fiscal 2023 Market Exit from Russia Third and fourth quarters fiscal 2022 net revenue excluded. n/a When used herein, the term “Acquisitions,” “Divestitures,” “Terminations,” and “Market Exit,” refer to the financial contributions of the related acquisitions or divestitures, early license terminations, and market exits shown above, during the period that is not comparable as a result of such acquisitions or divestitures, early license terminations, and market exits.
Third quarter fiscal 2024 Termination: Lacoste Third and fourth quarters fiscal 2023 net revenue excluded. n/a When used herein, the term “Acquisitions,” “Divestitures,” “Terminations,” and “Market Exit,” refer to the financial contributions of the related acquisitions or divestitures, early license terminations, and market exits shown above, during the period that is not comparable as a result of such acquisitions or divestitures, early license terminations, and market exits.
Operating loss for Corporate was $3.3, $135.8 and $233.6 in fiscal 2023, 2022 and 2021, respectively, as described under “Adjusted Operating Income” below.
Operating loss for Corporate was $123.3, $3.3 and $135.8 in fiscal 2024, 2023 and 2022, respectively, as described under “Adjusted Operating Income” below.
Interest Rate Risk Management We are exposed to interest rate risk that relates primarily to our indebtedness, which is affected by changes in the general level of the interest rates primarily in the U.S. and Europe. We periodically enter into interest rate swap agreements to facilitate our interest rate management activities.
Interest Rate Risk Management We are exposed to interest rate risk that relates primarily to our indebtedness, which is affected by changes in the general level of the interest rates primarily in the U.S. and Europe.
Net cash (used in) provided by investing activities Net cash (used in) provided by investing activities was $(118.2), $269.7 and $2,441.9 for fiscal 2023, 2022 and 2021, respectively.
Net cash (used in) provided by investing activities Net cash (used in) provided by investing activities was $(226.2), $(118.2) and $269.7 for fiscal 2024, 2023 and 2022, respectively.
The fair value of the Max Factor and Bourjois trademarks would fall below their carrying values if the average annual revenue growth rate decreased by approximately 55 basis points and 80 basis points, respectively, or the discount rate increased by 60 basis points and 90 basis points, respectively.
The fair value of the Max Factor and Bourjois trademarks would fall below their carrying values if the average annual revenue growth rate decreased by approximately 62 and 75 basis points, respectively, or the discount rate increased by 42 basis points and 50 basis points, respectively.
Our ongoing exit from Russia impacted the overall change in our reported net revenues. Considering total fiscal year-to-date net revenues from Russia in both the current and prior year periods, the net negative impact on our fiscal year-to-date reported net revenue was approximately 1% on a consolidated basis, 1% for our Prestige division, and 1% for our Consumer Beauty division.
Considering total fiscal 2023 year-to-date net revenues from Russia in both the current and prior fiscal 2022 period, the net negative impact on our fiscal year-to-date reported net revenue was approximately 1% on a consolidated basis, 1% for our Prestige division, and 1% for our Consumer Beauty division.
Further, we have excluded the change in fair value of the investment in Wella, as our management believes these unrealized (gains) and losses do not reflect our underlying ongoing business, and the adjustment of such impact helps investors and others compare and analyze performance from period to period.
Further, we have excluded the change in fair value of the investment in Wella, as well as expenses related to potential or actual sales transactions reducing equity investments, as our management believes these unrealized (gains) and losses do not reflect our underlying ongoing business, and the adjustment of such impact helps investors and others compare and analyze performance from period to period.
This amount includes $11.6 reported in cost of sales due to an increase in accelerated depreciation as part of Transformation Plan, and a credit of $(0.4) reported in selling, general and administrative expenses in the Consolidated Statement of Operations.
This amount includes $11.6 reported in cost of sales due to an increase in accelerated depreciation as part of Transformation Plan, and a credit of $(0.4) reported included in selling, general and administrative expenses in the Consolidated Statement of Operations. In all reported periods, all restructuring and other business realignment costs were reported in Corporate.
The growth in our Consumer Beauty segment was due to positive performance across the body care, skincare, and color cosmetics categories. Growth in our Prestige segment was primarily due to the positive performance in the prestige fragrance category due to the continued success of fragrance brands such as Burberry, Calvin Klein, Hugo Boss, Gucci, and Marc Jacobs .
Growth in our Prestige segment was primarily due to the positive performance in the prestige fragrance category due to the continued success of fragrance brands such as Burberry, Calvin Klein, Hugo Boss, Gucci, and Marc Jacobs .
Cash paid during the years ended June 30, 2023, 2022 and 2021, for income taxes was $58.6, $97.2 and $15.9, respectively. 46 NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC. In fiscal 2023, net income attributable to Coty Inc. was $508.2 compared to income of $259.5 in fiscal 2022.
Cash paid during the years ended June 30, 2024, 2023 and 2022, for income taxes was $172.6, $58.6 and $97.2, respectively. NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC. In fiscal 2024, net income attributable to Coty Inc. was $89.4 compared to income of $508.2 in fiscal 2023.
Excluding net revenue from the second half of the prior period from Russia, net revenues increased 6% or $276.8 to $5,554.1 from $5,277.3, reflecting a positive price and mix impact of 11% partially offset by a negative foreign currency exchange translation impact of 5%. Net revenues grew across both our segments.
In fiscal 2023, net revenues increased 5%, or $249.7, to $5,554.1 from $5,304.4 in fiscal 2022. Excluding net revenue from the second half of the prior period from Russia, net revenues increased 6% or $276.8 to $5,554.1 from $5,277.3, reflecting a positive price and mix impact of 11% partially offset by a negative foreign currency exchange translation impact of 5%.
Excluding net revenue from the second half of the prior period from Russia, net revenues increased 6% or $169.0 to $3,420.5 from $3,251.5, reflecting a positive price and mix impact of 11% partially offset by a negative foreign currency exchange translation impact of 5%.
Excluding net revenue from the second half of the prior period from Russia, net revenues increased 6% or $169.0 to $3,420.5 from $3,251.5, reflecting a positive price and mix impact of 11% (primarily due to the positive pricing impact as a result of global price increases and in line with overall premiumization strategy) partially offset by a negative foreign currency exchange translation impact of 5%.
We have taken action to reduce variability in our interest payments including paying down variable interest rate debt outstanding under our 2018 Coty Term B Facility, issuing fixed rate bonds (as discussed in the Debt section below), and entering into floating to fixed interest rate swaps.
We have taken action to reduce variability in our interest payments including completely paying down variable interest rate debt outstanding under our 2018 Coty Term B Facility and issuing fixed rate bonds.
Dividends on the Convertible Series B Preferred Stock are payable in cash, or by increasing the amount of accrued dividends on Convertible Series B Preferred Stock, or any combination thereof, at the sole discretion of the Company.
Any determination to pay dividends in the future will be at the discretion of our Board of Directors. Dividends on the Convertible Series B Preferred Stock are payable in cash, or by increasing the amount of accrued dividends on Convertible Series B Preferred Stock, or any combination thereof, at the sole discretion of the Company.
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS In fiscal 2023, operating income from continuing operations was $543.7 compared to a income of $240.9 in fiscal 2022. Operating income as a percentage of net revenues, improved to 9.8% in fiscal 2023 as compared to Operating income as a percentage of net revenues of 4.5% in fiscal 2022.
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS In fiscal 2024, operating income from continuing operations was $546.7 compared to income of $543.7 in fiscal 2023. Operating income as a percentage of net revenues, worsened to 8.9% in fiscal 2024 as compared to Operating income as a percentage of net revenues of 9.8% in fiscal 2023.
Foreign Currency Exchange Risk Management 54 We operate in multiple functional currencies and are exposed to the impact of foreign currency fluctuations. For foreign currency exposures, which primarily relate to receivables, inventory purchases and sales, payables and intercompany loans, derivatives are used to better manage the earnings and cash flow volatility arising from foreign currency exchange rate fluctuations.
For foreign currency exposures, which primarily relate to receivables, inventory purchases and sales, payables and intercompany loans, derivatives are used to better manage the earnings and cash flow volatility arising from foreign currency exchange rate fluctuations.
Additionally, lower cash payments in the current year for the settlement of foreign currency contracts contributed to the overall decrease in use of cash but were partially offset by cash payments related to the Company's forward repurchase contracts.
Additionally, lower cash payments in the current year for the settlement of foreign currency contracts contributed to the overall decrease in use of cash but were partially offset by cash payments related to the Company's forward repurchase contracts. Dividends On April 29, 2020, the Board of Directors suspended the payment of dividends on Common Stock.
Reconciliation of Reported Income (Loss) Before Income Taxes to Adjusted Income (Loss) Before Income Taxes and Effective Tax Rates from Continuing Operations: Year Ended June 30, 2023 Year Ended June 30, 2022 Year Ended June 30, 2021 (in millions) (Loss)/ income before income taxes (Benefit) provision for income taxes Effective tax rate (Loss)/ income before income taxes (Benefit) provision for income taxes Effective tax rate (Loss)/income before income taxes (Benefit)provision for income taxes Effective tax rate Reported income (loss) before income taxes $ 704.8 $ 181.6 25.8 % $ 426.8 $ 164.8 38.6 % $ (239.8) $ (172.0) 71.7 % Adjustments to reported operating income (loss) (a) 195.1 374.6 484.8 Change in fair value of investment in Wella Business (e) (230.0) (403.9) (73.5) Other adjustments (f) 0.2 (2.4) 7.2 Total Adjustments (b)(c)(d) (34.7) $ (4.5) (31.7) (55.3) 418.5 204.3 Adjusted income before income taxes $ 670.1 $ 177.1 26.4 % $ 395.1 $ 109.5 27.7 % $ 178.7 $ 32.3 18.1 % (a) See a description of adjustments under “Adjusted Operating Income (Loss) for Coty Inc.” (b) The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax benefit/provision for adjusted income.
Our effective tax rate could fluctuate significantly and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates. 49 Reconciliation of Reported Income (Loss) Before Income Taxes to Adjusted Income (Loss) Before Income Taxes and Effective Tax Rates from Continuing Operations: Year Ended June 30, 2024 Year Ended June 30, 2023 Year Ended June 30, 2022 (in millions) (Loss)/ income before income taxes (Benefit) provision for income taxes Effective tax rate (Loss)/ income before income taxes (Benefit) provision for income taxes Effective tax rate (Loss)/income before income taxes (Benefit)provision for income taxes Effective tax rate Reported income before income taxes $ 204.5 $ 95.1 46.5 % $ 704.8 $ 181.6 25.8 % $ 426.8 $ 164.8 38.6 % Adjustments to reported operating income (loss) (a) 316.7 195.1 374.6 Change in fair value of investment in Wella Business (d) (25.0) (230.0) (403.9) Other adjustments (e) (2.4) 0.2 (2.4) Total Adjustments (b)(c) 289.3 $ 35.6 (34.7) (4.5) (31.7) (55.3) Adjusted income before income taxes $ 493.8 $ 130.7 26.5 % $ 670.1 $ 177.1 26.4 % $ 395.1 $ 109.5 27.7 % (a) See a description of adjustments under “Adjusted Operating Income (Loss) for Coty Inc.” (b) The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax benefit/provision for adjusted income.
OTHER EXPENSE (INCOME), NET In fiscal 2023, net other income was $419.0, primarily related to a favorable adjustment for the unrealized gain in the Wella investment of $230.0 and unrealized gain on forward repurchase contracts of $196.9.
In fiscal 2023, net other income was $419.0, primarily related to a favorable adjustment for the unrealized gain in the Wella investment of $230.0 and unrealized gain on forward repurchase contracts of $196.9 partially offset by associated fees of $28.2. 48 In fiscal 2022, net other income was $409.9, primarily related to a favorable adjustment for the unrealized gain in the Wella investment of $403.9.
Year Ended June 30, Change % (in millions) 2023 2022 2021 2023/2022 2022/2021 NET REVENUES Prestige $ 3,420.5 $ 3,267.9 $ 2,720.8 5 % 20 % Consumer Beauty 2,133.6 2,036.5 1,909.1 5 % 7 % Total $ 5,554.1 $ 5,304.4 $ 4,629.9 5 % 15 % Prestige In fiscal 2023, net revenues in the Prestige segment increased 5%, or $152.6 to $3,420.5 from $3,267.9 in fiscal 2022.
Year Ended June 30, Change % (in millions) 2024 2023 2022 2024/2023 2023/2022 NET REVENUES Prestige $ 3,857.3 $ 3,420.5 $ 3,267.9 13 % 5 % Consumer Beauty 2,260.7 2,133.6 2,036.5 6 % 5 % Total $ 6,118.0 $ 5,554.1 $ 5,304.4 10 % 5 % Prestige In fiscal 2024, net revenues in the Prestige segment increased 13%, or $436.8 to $3,857.3 from $3,420.5 in fiscal 2023.

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