10q10k10q10k.net

What changed in COTY INC.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of COTY INC.'s 2022 and 2023 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 2023 report.

+394 added−427 removedSource: 10-K (2023-08-22) vs 10-K (2022-08-25)

Top changes in COTY INC.'s 2023 10-K

394 paragraphs added · 427 removed · 299 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

39 edited+15 added−18 removed36 unchanged
Biggest changeWe offer our employees a range of development activities, from learning formally through e-learning courses and trainings, to learning through special projects and assignments and on the job. In fiscal 2022, we have made steady progress on pay equity for similar roles and performance, regardless of gender.
Biggest changeWe 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.
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. 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, 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.
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 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.
Financial performance, working capital requirements, sales, cash flows and borrowings generally experience variability during the three to six months preceding the holiday season. Product innovations, new product launches 6 and the size and timing of orders from the Company’s customers may also result in variability.
Financial performance, working capital requirements, sales, cash flows and borrowings generally experience variability during the three to six months preceding the holiday season. Product innovations, new product launches and the size and timing of orders from the Company’s customers may also result in variability.
We continue to concentrate working media resources on 2 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.
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.
As we transform the Company, we continue to make progress on our strategic priorities, including stabilizing our consumer beauty brands through leading innovation and improved execution, accelerating our prestige fragrance 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 through prestige products and select consumer beauty brands, and establishing Coty as an industry leader in sustainability.
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.
We also joined 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 continue to evaluate and modify our processes and activities to further limit our impact on the environment as we implement our sustainability strategy.
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 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.
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 Bottega Veneta Biocolor* Calvin Klein Bozzano* Cavalli Bourjois* Chloe Bruno Banani Davidoff CoverGirl* Escada* Jovan* Gucci Max Factor* Hugo Boss Mexx Jil Sander Monange* Joop!* Nautica Kylie Jenner Paixao* Lacoste Rimmel* Lancaster* Risque* Marc Jacobs Sally Hansen* Miu Miu 007 James Bond Orveda philosophy* SKKN BY KIM Tiffany & Co. * Indicates an owned beauty brand.
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.
Distribution Channels and Retail Sales We market, sell and distribute our products in approximately 125 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.
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.
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, 2022, Coty owns a 25.9% stake in Rainbow JVCO LTD and subsidiaries (together, “Wella” or the “Wella Company”).
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”).
Supply Chain During fiscal year 2022, we continued to manufacture and package approximately 80% 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.
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.
Products representing 63% of our fiscal 2022 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, 2022, we maintained 23 brand licenses.
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.
We believe that we are currently in material compliance with the terms of our material brand license agreements. Most brand licenses have renewal options for one or more terms, which can range from two to ten years.
We believe that we are currently in material compliance with the terms of our material brand license agreements. Our license agreements have an average duration of over 25 years. Most brand licenses have renewal options for one or more terms, which can range from two to ten years.
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.
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.
In addition, we implement programs designed to ensure that our manufacturing and distribution facilities comply with applicable environmental rules and regulations. 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 20% of our finished products.
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.
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 brand licenses are up for renewal during fiscal 2023.
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.
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.
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.
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, gender identity, and sexual orientation.
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.
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.
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.
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 our packaging consumption with a focus on virgin plastic, glass and carton while sourcing from more sustainable sources.
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 compete against manufacturers and marketers of beauty products, salon professional nail products and personal care products. In addition to the established multinational brands against which we compete, small targeted niche brands continue to enter the beauty market. We also have competition from private label products sold by retailers.
In addition to the established multinational brands against which we compete, small targeted niche brands continue to enter the beauty market. We also have competition from private label products sold by retailers.
In addition, approximately 53% of our fiscal 2022 net revenues from continuing operations were attributable to prestige fragrance, of which approximately 82% was from our top six prestige fragrance brands.
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.
Human Capital Workforce . As of June 30, 2022, we had approximately 11,012 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.
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.
We have experienced disruptions in our supply chain from time to time, including in connection with our past restructuring efforts and, more recently due to global supply disruptions, and we work to anticipate and respond to actual and potential disruptions. 3 Competition There is significant competition within each market where our products are sold.
We have experienced disruptions in our supply chain from time to time, including in connection with our past restructuring efforts and, more recently due to global supply disruptions, and we work to anticipate and respond to actual and potential disruptions.
While certain projects are already in execution phase, other projects are in the early stages as we identify specific courses of action and validate the feasibility of 5 such projects to achieve our proposed targets.
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.
All dollar amounts in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.
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.
To that end we are members of several industry initiatives, including the Responsible Beauty Initiative, focused on sustainable sourcing for the industry, or Sustainable Packaging Initiative for Cosmetics, focused on creating common guidelines and tool for eco-design 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, and the Sustainable Packaging Initiative for Cosmetics, focused on creating common guidelines and tools for eco-design of packaging.
In fiscal 2022, 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 2022, Walmart, our top retailer, accounted for approximately 6% of total Coty Inc. net revenues from continuing operations. Innovation Innovation is a pillar of our business.
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.
The policy, which is complemented by our Code of Conduct, sets out the principles that guide our approach to Health and Safety, as well as outlining responsibilities within the business. Oversight .
Our global Health and Safety Policy governs the management of work-related health and safety risks across all our manufacturing and distribution sites, including corporate offices. The policy, which is complemented by our Code of Conduct, sets out the principles that guide our approach to Health and Safety, as well as outlining responsibilities within the business.
Item 1. Business. Overview Founded in 1904, Coty Inc. is one of the world’s largest beauty companies with an iconic portfolio of brands across fragrance, color cosmetics, and skin and body care. Through targeted strategic transactions, the Company has strengthened and diversified its presence across the countries, categories and channels in which we compete, building a strong beauty platform.
Item 1. Business. Overview Founded in 1904, Coty Inc. is one of the world’s largest beauty companies with an iconic portfolio of brands across fragrance, color cosmetics, and skin and body care.
The Beauty of Our Planet We recognize that 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. In fiscal 2022, we made considerable progress towards our environmental impact goals.
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.
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. We collaborate with our suppliers to meet our stringent design and creative criteria.
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.
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.
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.
We recognize the importance of our employees to our business and believe our relationship with our employees is satisfactory. 4 Environmental, 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.
Environmental, 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.
We have achieved this through optimization, use of renewable electricity, and where necessary, by offsetting any remaining Scope 1 and 2 emissions. 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.
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.
We are refining our controls to address the specific requirements of the proposed rule and reporting requirements. The Beauty of Our Product Our products have an important role to play in building a sustainable future for the beauty sector.
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.
As part of our ongoing transformation, we continue to explore options to further optimize our supply chain operations. 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.
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.
With a focus on products, planet and people we see sustainability as the ultimate driver of innovation. 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.
Our sustainability reports and other information on our sustainability initiatives and achievements are available on our website.
Removed
During the first quarter of fiscal 2022, the CODM finalized the Company's organizational structure and how performance will be assessed, and the Company realigned its reportable segments to a principally product category-based structure, comprised of a Prestige business segment and a Consumer Beauty business segment beginning in the first quarter of fiscal 2022.
Added
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.
Removed
The Company recast its results for fiscal years 2021 and 2020 to reflect the changes in its segments.
Added
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.
Removed
Due to the impact of COVID-19 and as part of our strategic initiatives, we have focused on expanding our e-commerce and direct-to-consumer channels. We also sell our products through third-party distributors.
Added
In light of these challenges, we are continually benchmarking the performance of our supply chain, and we augment our supply base, adjust our distribution networks and manufacturing footprint, enhance our forecasting and planning capabilities and adjust our inventory strategy based upon the changing needs of the business.
Removed
We believe that we currently have adequate sources of supply for all our products.
Added
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.
Removed
None of our top eight licenses is up for renewal before the end of calendar 2026, with the majority running longer than that and providing for renewal without licensor consent.
Added
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.
Removed
W e expect our overall headcount, as well as the use of seasonal contractors, to decrease as we continue our efforts to restructure and rationalize our business in connection with our strategic priorities, including through outsourcing initiatives and strategic transactions. Our employees in the U.S. are not covered by collective bargaining agreements.
Added
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.
Removed
While the proposed rule is not yet final, it is expected to be effective for Coty starting with its fiscal year 2024 annual report based on the effective date as set forth in the proposed rule. Certain audit requirements are expected to phase in during fiscal year 2024.
Added
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.
Removed
In addition, our Green Science program aims to minimize the pressure of our products on natural resources. In fiscal 2022, we began production of our first globally distributed fragrances using carbon-captured ethanol and have plans to integrate this ethanol into our wider fragrance portfolio. We recognized that sustainability efforts require collaboration which goes beyond our own organization.
Added
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.
Removed
All of our factories and distribution centers now use renewable electricity (including through buying of renewable energy certificates), and we have made strong progress on energy reduction. We continue to invest in additional energy optimization methods, including bringing two sites to carbon neutrality for scope 1 and 2 emissions.
Added
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.
Removed
We have implemented several measures to reduce water consumption across our plants and distribution centers. During fiscal year 2021, we conducted a footprint study assessing our impact on Climate, Water and Biodiversity.
Added
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.
Removed
From this work, in fiscal year 2022 we have focused on our impact on climate and have identified key actions to reduce our carbon footprint and develop science-based climate targets for reducing greenhouse gases.
Added
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.
Removed
We have submitted these proposed carbon targets to the Science Based Target initiative (“SBTi”) for validation and plan to communicate our targets by the end of fiscal 2023. Implementation of plans to operationalize our proposed targets are in progress.
Added
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.
Removed
We want to create a culture in which our associates bring their true selves to work, in turn making Coty stronger for it. We are committed to creating opportunities for our associates to develop skills, advance their careers and nurture their long-term employability.
Added
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.
Removed
Our Executive Committee is majority female and our Board of Directors was evenly gender-split during fiscal 2022. For all associates, we have launched a global diversity, equity, and inclusion (DE&I) training curricula and introduced employee resource groups to drive DE&I action by associates to enable employees to raise awareness and educate on DE&I topics they are passionate about.
Added
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.
Removed
We also strive to reflect the communities we serve through our brands, which champion the diversity of beauty and beauty of diversity. Our global compliance program, “Behave Beautifully”, is designed to detect and prevent unlawful behavior and promote a culture of ethical business practice.
Added
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.
Removed
“Behave Beautifully” sets out our standards across a number of areas, including, but not limited to, anti-bribery and corruption, competition law, data privacy, preventing workplace harassment and discrimination. Our global Health and Safety Policy governs the management of work-related health and safety risks across all our manufacturing and distribution sites, including corporate offices.
Removed
The Remuneration and Nomination Committee of our Board of Directors provides oversight on certain human capital matters including diversity and inclusion strategy, executive compensation, retention and succession planning and human resources strategies in connection with talent management.
Removed
In addition, in connection with the Beauty that Lasts program, we established a Global Diversity, Equity and Inclusion project team responsible for developing and implementing a three-year roadmap with both global and local strategic objectives relating to our diversity, equity and inclusion initiatives.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

88 edited+21 added−13 removed241 unchanged
Biggest changeThese impacts include, but are not limited to: • Significant reductions in demand or significant volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, store closures, or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products to lower priced products, or stockpiling or similar activity, supply chain and shipping constraints, reduced options for marketing and promotion of products or other restrictions in connection with outbreaks of contagious diseases; if prolonged, such impacts can further increase the difficulty of operating our business, including accurately planning and forecasting, and may adversely impact our results; • Inability to meet our customers’ needs and achieve costs targets due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials or other finished product components, transportation, workforce, or other manufacturing and distribution capability, or the allocation of manufacturing capacity towards medical supplies such as hydro-alcoholic gel (which is used as hand sanitizer); • Failure of third parties on which we rely, including our suppliers, our customers, contract manufacturers, distributors, contractors, commercial banks, joint venture partners and external business partners, to meet their obligations to us or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact our operations; or • Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including quarantines, governmental or regulatory actions, closures or other restrictions that limit or close our operating and manufacturing facilities, restrict our employees’ ability to travel or perform necessary business functions, restrict or prevent consumers from having access to our products, or otherwise prevent our third-party partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of our products, which could adversely impact our results.
Biggest changeThese impacts include, but are not limited to: • Reductions in demand or volatility in demand for one or more of our products, which, if prolonged, can further increase the difficulty of operating our business, including accurately planning and forecasting, and may adversely impact our results; • Inability to meet our customers’ needs and achieve costs targets due to disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements such as raw materials or other finished product components, transportation, workforce, or other manufacturing and distribution capability; • Failure of third parties on which we rely, including our suppliers, our customers, contract manufacturers, distributors, contractors, commercial banks, joint venture partners and external business partners, to meet their obligations to us or to timely meet those obligations, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties and may adversely impact our operations; or • Significant changes in the political conditions in markets in which we manufacture, sell or distribute our products, including government or third-party actions that limit or close our operating and manufacturing facilities or otherwise prevent consumers from having access to our products, restrict our employees’ ability to travel or perform necessary business functions or otherwise prevent our third-party partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of our products, which could adversely impact our results.
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 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. As a result, the amount of interest we may pay on our variable rate indebtedness is difficult to predict.
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; 26 • 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 • 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 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.
The war in Ukraine and prolonged geopolitical conflict globally may continue to result in increased 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 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 failure of one or more such providers to provide the expected services, provide them on a timely basis or provide them at the prices we expect, the failure of one or more 16 of such providers to meet our performance standards and expectations, including with respect to data security, compliance with data protection and privacy laws, disruptions arising from the transition of functions to an outsourcing provider, or the costs incurred in returning these outsourced functions to being performed under our management and direct control, may have a material adverse effect on our results of operations or financial condition.
The failure of one or more such providers to provide the expected services, provide them on a timely basis or provide them at the prices we expect, the failure of one or more of such providers to meet our performance standards and expectations, including with respect to data security, compliance with data protection and privacy laws, disruptions arising from the transition of functions to an outsourcing provider, or the costs incurred in returning these outsourced functions to being performed under our management and direct control, may have a material adverse effect on our results of operations or financial condition.
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 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.
(the “Hypermarcas Brands”) and our joint venture with Kylie Jenner and our investment in the Kim Kardashian West beauty business, entail certain particular risks, including potential difficulties in geographies and channels in which we lack a significant presence, difficulty in seizing business opportunities compared to local or other global competitors, difficulty in complying with new regulatory frameworks, the acquisition of new or unexpected liabilities, the adverse impact of fluctuating exchange rates and entering lines of business where we have limited or no direct experience.
(the “Hypermarcas Brands”) and our joint venture with Kylie Jenner and our investment in the Kim Kardashian beauty business, entail certain particular risks, including potential difficulties in geographies and channels in which we lack a significant presence, difficulty in seizing business opportunities compared to local or other global competitors, difficulty in complying with new regulatory frameworks, the acquisition of new or unexpected liabilities, the adverse impact of fluctuating exchange rates and entering lines of business where we have limited or no direct experience.
Our reputation could be jeopardized if we fail to maintain high standards for product quality and integrity (including should we be perceived as violating the law) or if we, or the third parties with whom we do business, do not comply with regulations or accepted practices 10 and are subject to a significant product recall, litigation, or allegations of tampering, animal testing, use of certain ingredients (such as certain palm oil) or misconduct by executives, founders or influencers.
Our reputation could be jeopardized if we fail to maintain high standards for product quality and integrity (including should we be perceived as violating the law) or if we, or the third parties with whom we do business, do not comply with regulations or accepted practices and are subject to a significant product recall, litigation, or allegations of tampering, animal testing, use of certain ingredients (such as certain palm oil) or misconduct by executives, founders or influencers.
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.
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.
The presence of counterfeit versions of our products in the market and of prestige products in mass distribution channels could also dilute the value of our brands, force us and our distributors to compete with heavily discounted products, cause us to be in breach of contract (including license agreements), impact our compliance with distribution and competition laws in jurisdictions including the E.U. and China, or otherwise have a negative impact on our reputation and business, prospects, financial condition or results of operations.
The presence of counterfeit versions of our products in the market and of prestige products in mass distribution channels, including grey market products, could also dilute the value of our brands, force us and our distributors to compete with heavily discounted products, cause us to be in breach of contract (including license agreements), impact our compliance with distribution and competition laws in jurisdictions including the E.U. and China, or otherwise have a negative impact on our reputation and business, prospects, financial condition or results of operations.
If we overestimate or underestimate demand for any of our products, we may not maintain appropriate inventory levels, we could have excess inventory that we may need to hold for a long period of time, write down, sell at prices lower than expected or discard, which could negatively impact our reputation, net sales, working capital or cash flows from working capital, or cause us to incur excess and obsolete inventory 18 charges.
If we overestimate or underestimate demand for any of our products, we may not maintain appropriate inventory levels, we could have excess inventory that we may need to hold for a long period of time, write down, sell at prices lower than expected or discard, which could negatively impact our reputation, net sales, working capital or cash flows from working capital, or cause us to incur excess and obsolete inventory charges.
We are also subject to legal proceedings and legal compliance risks in connection with legacy matters involving the P&G Beauty Business, the Burberry fragrance business, Hypermarcas Brands, the Kylie Jenner business and the Kim Kardashian West business that were previously outside our control and that we are now independently addressing, as well as retained liabilities relating to divested businesses, which may result in unanticipated or new liabilities.
We are also subject to legal proceedings and legal compliance risks in connection with legacy matters involving the P&G Beauty Business, the Burberry fragrance business, Hypermarcas Brands, the Kylie Jenner business and the Kim Kardashian business that were previously outside our control and that we are now independently addressing, as well as retained liabilities relating to divested businesses, which may result in unanticipated or new liabilities.
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.
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.
In addition, if we are unable to prevent or detect security breaches, or properly remedy them, we may suffer financial and reputational damage or penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners, customers or suppliers, including personal employee, consumer or presenter information stored in our or third-party 17 systems or as a result of the dissemination of inaccurate information.
In addition, if we are unable to prevent or detect security breaches, or properly remedy them, we may suffer financial and reputational damage or penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners, customers or suppliers, including personal employee, consumer or presenter information stored in our or third-party systems or as a result of the dissemination of inaccurate information.
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.
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.
Our business is subject to seasonal variability. Our sales generally increase during our second fiscal quarter as a result of increased demand by retailers associated with the winter holiday season. Accordingly, our financial performance, sales, working capital requirements, cash flow and 12 borrowings generally experience variability during the three to six months preceding and during the holiday period.
Our business is subject to seasonal variability. Our sales generally increase during our second fiscal quarter as a result of increased demand by retailers associated with the winter holiday season. Accordingly, our financial performance, sales, working capital requirements, cash flow and borrowings generally experience variability during the three to six months preceding and during the holiday period.
Deterioration of social or economic conditions in Europe or elsewhere could reduce sales and could also impair collections on accounts receivable. For example, recent political and economic developments in the U.S., the U.K., Europe, Brazil and China have introduced uncertainty in the regulatory and business environment in which we operate (including potential increases in tariffs).
Deterioration of social or economic conditions in Europe or elsewhere could reduce sales and could also impair collections on accounts receivable. For example, political and economic developments in the U.S., the U.K., Europe, Brazil and China have introduced uncertainty in the regulatory and business environment in which we operate (including potential increases in tariffs).
Although certain of the intellectual property we use is registered in the U.S. and in many of the foreign countries in which we operate, there can be no assurances with respect to the continuation of such intellectual property rights, including our ability to further register, use or defend key current or future 11 trademarks.
Although certain of the intellectual property we use is registered in the U.S. and in many of the foreign countries in which we operate, there can be no assurances with respect to the continuation of such intellectual property rights, including our ability to further register, use or defend key current or future trademarks.
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.
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.
If the testing indicates that an impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or indefinite intangible assets and the fair value of the goodwill or of indefinite-lived intangible assets. 15 We cannot predict the amount and timing of any future impairments, if any.
If the testing indicates that an impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or indefinite intangible assets and the fair value of the goodwill or of indefinite-lived intangible assets. We cannot predict the amount and timing of any future impairments, if any.
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.
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.
We cannot predict 21 whether we would be able to undertake any of these actions to raise funds on a timely basis or on satisfactory terms or at all. The financial difficulties of a customer or retailer could also cause us to curtail or eliminate business with that customer or retailer.
We cannot predict whether we would be able to undertake any of these actions to raise funds on a timely basis or on satisfactory terms or at all. The financial difficulties of a customer or retailer could also cause us to curtail or eliminate business with that customer or retailer.
We may not have adequate or any insurance coverage for some of these legacy matters, including matters assumed in the acquisition of the P&G Beauty Business, the Hypermarcas Brands and the Burberry fragrance business, the joint venture with Kylie Jenner and the strategic partnership with Kim Kardashian West.
We may not have adequate or any insurance coverage for some of these legacy matters, including matters assumed in the acquisition of the P&G Beauty Business, the Hypermarcas Brands and the Burberry fragrance business, the joint venture with Kylie Jenner and the strategic partnership with Kim Kardashian.
In addition, our entry into new categories and geographies has exposed, and may continue to expose, us to new distribution channels or risks about which we have less experience. Any change in our distribution channels, such as direct 9 sales, could also expose us to disputes with distributors.
In addition, our entry into new categories and geographies has exposed, and may continue to expose, us to new distribution channels or risks about which we have less experience. Any change in our distribution channels, such as direct sales, could also expose us to disputes with distributors.
(“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.
(“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.
For example, we completed five significant acquisitions in fiscal 2016 through fiscal 2018 (including the acquisition of the P&G Beauty Business in October 2016). We entered into a joint venture with Kylie Jenner in fiscal 2020 and a strategic partnership with Kim Kardashian West in fiscal 2021.
For example, we completed five significant acquisitions in fiscal 2016 through fiscal 2018 (including the acquisition of the P&G Beauty Business in October 2016). We entered into a joint venture with Kylie Jenner in fiscal 2020 and a strategic partnership with Kim Kardashian in fiscal 2021.
For example, the refinancing of certain 20 portions of our debt in 2021 resulted in higher interest rates applicable to the newly issued senior secured notes, in part due to prevailing macroeconomic conditions and a decline in our credit ratings since our previous refinancing transactions in 2018.
For example, the refinancing of certain portions of our debt in 2021 resulted in higher interest rates applicable to the newly issued senior secured notes, in part due to prevailing macroeconomic conditions and a decline in our credit ratings since our previous refinancing transactions in 2018.
For example, we entered into strategic partnerships with Kylie Jenner and Kim Kardashian West, both digital-native beauty businesses, we are continuing our expansion into prestige cosmetics, and we are building a comprehensive skincare portfolio leveraging existing and new brands.
For example, we entered into strategic partnerships with Kylie Jenner and Kim Kardashian, both digital-native beauty businesses, we are continuing our expansion into prestige cosmetics, and we are building a comprehensive skincare portfolio leveraging existing and new brands.
In addition, certain countries have laws that differ with those 24 in the US, including relating to competition and product distribution, with which US and other personnel may be unfamiliar, thereby increasing the risk of non-compliance.
In addition, certain countries have laws that differ with those in the US, including relating to competition and product distribution, with which US and other personnel may be unfamiliar, thereby increasing the risk of non-compliance.
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.
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.
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 indemnity 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 (the “Tax Matters Agreement”).
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 (the “Tax Matters Agreement”).
In particular, the potential impact of talc-related litigation is highly uncertain, as nationwide trial results in similar cases filed against other manufacturers or retailers of cosmetic talc products have ranged from outright dismissals to very large jury awards of both compensatory and punitive damages.
In particular, the potential impact of talc-related litigation is highly uncertain, as nationwide trial results in similar cases filed against Coty and other manufacturers or retailers of cosmetic talc products have ranged from outright dismissals to very large settlements and jury awards of both compensatory and punitive damages.
The currencies to which we are exposed include the euro, the British pound, the Chinese yuan, the Polish zloty, the Russian ruble, the Brazilian real, the Australian dollar and the Canadian dollar. The exchange rates between these currencies and the U.S. dollar in recent years have fluctuated significantly and may continue to do so in the future.
The currencies to which we are exposed include the euro, the British pound, the Chinese yuan, the Polish zloty, the Brazilian real, the Australian dollar and the Canadian dollar. The exchange rates between these currencies and the U.S. dollar in recent years have fluctuated significantly and may continue to do so in the future.
(“JABC”) and its affiliates beneficially own approximately 54% 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.
(“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.
Risks Related to Ownership of Our Common Stock We are subject to risks related to our common stock, our stock repurchase program and our Stock Dividend Reinvestment Program. Any repurchases pursuant to our stock repurchase program, or a decision to discontinue our stock repurchase program, which may be discontinued at any time, could affect our stock price and increase volatility.
Risks Related to Ownership of Our Common Stock We are subject to risks related to our common stock and our stock repurchase program. Any repurchases pursuant to our stock repurchase program, or a decision to discontinue our stock repurchase program, which may be discontinued at any time, could affect our stock price and increase volatility.
We prohibit harassment or discrimination in the workplace, in sexual or in any other form. This policy applies to all aspects of employment. Notwithstanding our conducting training and taking disciplinary action against alleged violations, we may encounter additional costs from claims made and/or legal proceedings brought against us, and we could suffer reputational harm.
We prohibit harassment or discrimination in the workplace, in sexual or in any other form. This policy applies to all aspects of employment. Notwithstanding our conducting training and taking disciplinary action against alleged violations, we may encounter additional costs from claims made and/or legal proceedings brought against us, and, regardless of the ultimate outcome, we could suffer reputational harm.
In addition, in 2021 we amended our 2018 Credit Agreement to allow us to reference the Secured Overnight Financing Rate (“SOFR”) as the primary benchmark rate for our variable rate indebtedness, in lieu of the London Interbank Offered Rate (“LIBOR”).
In addition, we have amended our 2018 Credit Agreement to allow us to reference the Secured Overnight Financing Rate (“SOFR”) as the primary benchmark rate for our variable rate indebtedness, in lieu of the London Interbank Offered Rate (“LIBOR”).
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.
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.
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 and 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 may also adversely impact our customer relationships, particularly to the extent customers were implicated by such proceedings.
Deterioration in global financial markets, including as a result of 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, COVID-19, the war in Ukraine and related geopolitical conditions, could make future financing difficult or more expensive.
Since our supply chain is complex, we may face operational obstacles and reputational challenges with our customers and stockholders if we are unable to continue to sufficiently verify the origins for the minerals used in our products or if we are subject to additional supply chain diligence and disclosure regulations or other reporting obligations.
Since our supply chain is complex, we may face operational obstacles and reputational challenges with our customers and stockholders if we are unable to continue to sufficiently verify the origins for materials used in our products and packaging or if we are subject to additional supply chain diligence and disclosure regulations or other reporting obligations.
While many of our licenses are long term, licenses relating to certain of our brands are up for renewal in the next few years, including three licenses up for renewal in fiscal 2024. We may not be able to renew expiring licenses on terms that are favorable to us or at all.
While many of our licenses are long term, licenses relating to certain of our brands are up for renewal in the next few years, including one license up for renewal in fiscal 2024. We may not be able to renew expiring licenses on terms that are favorable to us or at all.
In order to protect or enforce our intellectual property and other proprietary rights, we may initiate litigation or other proceedings against third parties, such as infringement suits, opposition proceedings or interference proceedings.
To protect or enforce our intellectual property and other proprietary rights, we may initiate litigation or other proceedings against third parties, such as infringement suits, opposition proceedings or interference proceedings.
In addition, third parties may distribute and sell counterfeit (or grey market) versions of our products, which may be inferior or pose safety risks and could confuse consumers or customers, which could cause them to refrain from purchasing our brands in the future or otherwise damage our reputation.
In addition, third parties may distribute and sell counterfeit or other infringing versions of our products, which may be inferior or pose safety risks and could confuse consumers or customers, which could cause them to refrain from purchasing our brands in the future or otherwise damage our reputation.
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 is in decline as a result of COVID-19, higher levels of unemployment, unprecedented levels of inflation, recessionary conditions and geopolitical conditions including the war in Ukraine.
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.
The above risks have been and may continue to be exacerbated by the impact of COVID-19, inflationary pressures and global supply chain issues, 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 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.
As we continue to restructure our workforce from time to time (including with respect to our global business strategies and other business restructuring initiatives, our efforts to manage the impact of COVID-19, as well as acquisitions and our overall growth strategy) and work with more brand partners and licensors, the risk of potential employment-related claims and disputes will also increase.
As we continue to restructure our workforce from time to time (including with respect to our global business strategies and other business restructuring initiatives, as well as acquisitions and our overall growth strategy) and work with more brand partners and licensors, the risk of potential employment-related claims and disputes will also increase.
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 COVID-19 and general economic conditions.
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.
In recent months, global 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 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.
We generally do not have long-term sales contracts or other sales assurances with our retail customers. Consumer shopping preferences have also shifted, including as a result of COVID-19, and may continue to shift in the future, to distribution channels other than traditional retail in which we have more limited experience, presence and development, such as direct-to-consumer sales and e-commerce.
We generally do not have long-term sales contracts or other sales assurances with our retail customers. Consumer shopping preferences have also shifted, and may continue to shift in the future, to distribution channels other than traditional retail in which we have more limited experience, presence and development, such as direct-to-consumer sales and e-commerce.
Some 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. 7 • 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. • 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. • Our operations and sales have been adversely impacted by the COVID-19 pandemic, and we must successfully manage the demand, supply, operational and financial challenges associated with COVID-19 and related variants, as well as the occurrence of outbreaks of other contagious diseases or similar widespread public health concerns. • 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. • 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. • We are subject to risks related to our common stock, our stock repurchase program and our Stock Dividend Reinvestment Program. 8 • JABC Cosmetics B.V.
Some 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.
Despite our efforts to manage and remedy these impacts to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such disease outbreak, as well as third-party actions taken to contain its spread and mitigate its public health effects.
Despite our ability to manage and remedy these impacts to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such disease outbreak, as well as the actions taken by governments or third-parties to contain its spread and mitigate its public health effects.
We have a substantial amount of indebtedness. We may not be able to refinance our indebtedness in the future (1) on commercially reasonable terms, (2) on terms, including with respect to interest rates, as favorable as our current debt or (3) at all.
We may not be able to refinance our indebtedness in the future (1) on commercially reasonable terms, (2) on terms, including with respect to interest rates, as favorable as our current debt or (3) at all.
We also increasingly depend on our information technology infrastructure for digital marketing activities, e‑commerce and for electronic communications among our locations, personnel, customers and suppliers around the world, including as a result of remote working in response to COVID-19 and flexible working arrangements.
We also increasingly depend on our information technology infrastructure for digital marketing activities, e‑commerce and for electronic communications among our locations, personnel, customers and suppliers around the world, including as a result of remote working in connection with flexible working arrangements.
Legal and Regulatory Risks We are subject to legal proceedings and legal compliance risks. We are subject to a variety of legal proceedings and legal compliance risks in the countries in which we do business, including the matters described under the heading “Legal Proceedings” in Part I, Item 3 of this report.
Legal and Regulatory Risks We are subject to legal proceedings and legal compliance risks, including talc-related litigation alleging bodily injury. We are subject to a variety of legal proceedings and legal compliance risks in the countries in which we do business, including the matters described under the heading “Legal Proceedings” in Part I, Item 3 of this report.
As a result of the completion of the Cottage Tender Offer in May 2019, JABC, through an affiliate, Cottage Holdco B.V., owns approximately 54% of the outstanding shares of our Class A Common Stock.
As a result of the completion of the Cottage Tender Offer in May 2019, JABC, through an affiliate, JAB Beauty B.V., owns approximately 53% of the outstanding shares of our Class A Common Stock.
Our success depends, in part, on the quality, efficacy and safety of our products. Product safety or quality failures, actual or perceived, or allegations of product contamination, even when false or unfounded, or inclusion of regulated ingredients could tarnish the image of our brands and could cause consumers to choose other products.
Product safety or quality failures, actual or perceived, or allegations of product contamination, even when false or unfounded, or inclusion of regulated ingredients could tarnish the image of our brands and could cause consumers to choose other products.
(“JABC”) and its affiliates, through their ownership of approximately 54% 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”.
(“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.
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.
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.
The opinions are not binding on the Internal Revenue Service (“IRS”) or a court, and the IRS or a court may not agree with the opinions. 25 Under the Tax Matters Agreement, in certain circumstances and subject to certain limitations, we are required to indemnify P&G against tax-related losses (e.g., increased taxes, penalties and interest required to be paid by P&G) if the Distribution or the merger fails to qualify for its intended tax treatment, including if the Distribution becomes taxable to P&G as a result of the acquisition of a 50% or greater interest (by vote or value) in us as part of a plan or series of related transactions that included the Distribution or if such failure is attributable to a breach of certain representations and warranties by us or certain actions or omissions by us.
Under the Tax Matters Agreement, in certain circumstances and subject to certain limitations, we are required to indemnify P&G against tax-related losses (e.g., increased taxes, penalties and interest required to be paid by P&G) if the Distribution or the merger fails to qualify for its intended tax treatment, including if the Distribution becomes taxable to P&G as a result of the acquisition of a 50% or greater interest (by vote or value) in us as part of a plan or series of related transactions that included the Distribution or if such failure is attributable to a breach of certain representations and warranties by us or certain actions or omissions by us.
There can be no assurance that we will be able to identify suitable acquisition candidates, be the successful bidder or consummate acquisitions on favorable terms, have the funds to acquire desirable acquisitions or otherwise realize the full intended benefit of such transactions.
There can be no assurance that we will be able to identify suitable acquisition candidates, be the successful bidder or consummate acquisitions on favorable terms, have the funds to acquire desirable acquisitions or otherwise realize the full intended benefit of such transactions. In addition, acquisitions could adversely impact our deleveraging strategy.
These impacts have had and could continue to have a negative effect on our business, financial condition, results of operations and cash flows, as well as the trading price of our securities, and the duration and extent to which our future results of operations and overall financial performance will be impacted remains uncertain.
These impacts have had, and could continue to have, a negative impact on our business, financial condition, results of operations and cash flows, as well as the trading price of our securities, and the duration and extent to which our future results of operations and overall financial performance may be impacted cannot be determined.
We also are involved in numerous lawsuits involving product liability issues, including allegations related to alleged asbestos in our talc-based cosmetic products.
We also are involved in numerous lawsuits involving product liability issues, most involving allegations related to alleged asbestos in our talc-based cosmetic products, allegedly leading to mesothelioma.
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 in March 2022), inflationary pressures, as well as changes in work practices and travel trends impacting the demand for our products.
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.
Furthermore, increased online competition and declining in-store traffic has resulted, and may continue to result, in brick-and-mortar retailers closing physical stores, which could negatively impact our distribution strategies and/or sales if such retailers decide to significantly reduce their inventory levels for our products (as occurred from time to time in connection with COVID-19 as retailers faced store closures or reduced traffic) or to designate more shelf space to our competitors.
Furthermore, increased online competition and declining in-store traffic has resulted, and may continue to result, in brick-and-mortar retailers closing physical stores, which could negatively impact our distribution strategies and/or sales if such retailers decide to significantly reduce their inventory levels for our products or to designate more shelf space to our competitors.
The above risks have been and may continue to be exacerbated by the impact of COVID-19, inflationary pressures and global supply chain disruption, 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. We are subject to risks related to our international operations.
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.
We operate on a global basis, and approximately 69% of our net revenues from continuing operations in fiscal 2022, were generated outside North America. We have employees in more than 36 countries, and we market, sell and distribute our products in over 125 countries and territories.
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.
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 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 artificial intelligence and innovative in-store activations.
In recent months, global inflation and other factors have resulted in an increase in interest rates generally, which has impacted our borrowing costs.
In the past year, inflation and other factors have resulted in an increase in interest rates generally, which has impacted our borrowing costs.
The occurrence of any of these events may 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.
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.
Although we are seeking a favorable administrative decision on the related tax enforcement action, we may not be successful. See Note 26— Legal and Other Contingencies for more information regarding our potential tax obligations in Brazil.
In addition, we are subject to pending tax assessment matters in Brazil relating to local sales tax credits for the 2016-2017 tax periods. Although we are seeking a favorable administrative decision on the related tax enforcement action, we may not be successful. See Note 26— Legal and Other Contingencies for more information regarding our potential tax obligations in Brazil.
In addition, some foreign governments may enact tax laws in response to the Tax Act or other U.S. tax law changes that could result in further changes to global taxation and that could materially adversely affect our financial results, which could have a material adverse effect on our results of operations, financial condition and cash flows, as well as the trading price of our securities. 19 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, some foreign governments may enact tax laws in response to the Tax Act or other U.S. tax law changes that could result in further changes to global taxation and that could materially adversely affect our financial results, which could have a material adverse effect on our results of operations, financial condition and cash flows, as well as the trading price of our securities.
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.
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.
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 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 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.
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.
For example, an increase of COVID-19 related cases in certain parts of China resulted in the re-imposition of widespread lockdowns and restrictions in mid-March 2022, which negatively impacted our results in China in the fourth quarter of fiscal 2022 due to reduced customer traffic and supply chain constraints. 22 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.
For example, an increase of COVID-19 related cases in certain parts of China resulted in the re-imposition of widespread lockdowns and restrictions in mid-March 2022, which negatively impacted our results in China in the fourth quarter of fiscal 2022 due to reduced customer traffic and supply chain constraints.
In addition, acquisitions could adversely impact our deleveraging strategy. 14 The assumptions we use to evaluate acquisition opportunities may prove to be inaccurate, and intended benefits may not be realized.
The assumptions we use to evaluate acquisition opportunities may prove to be inaccurate, and intended benefits may not be realized.
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.
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.
While we believe that we 23 have valid defenses to these risks and have adopted, and/or will adopt, appropriate risk management and compliance programs, such adoptions take time and, given the global nature of our operations and many laws and regulations to which we are subject, these legal and compliance risks will continue to exist with respect to our business, and additional legal proceedings and other contingencies, the outcome and impact of which 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 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.
In addition, the implementation of our global business strategies, any continuing or future restructuring initiatives and the integration of acquisitions may impact our ability to anticipate future business trends and accurately forecast future results. 13 The diversion of resources to the integration of the P&G Beauty Business, together with changes and turnover in our management teams as we reorganized our business, negatively impacted our fiscal 2018 and 2019 results.
The diversion of resources to the integration of the P&G Beauty Business, together with changes and turnover in our management teams as we reorganized our business, negatively impacted our fiscal 2018 and 2019 results. The implementation of our global business strategies could result in similar challenges.

… 42 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed3 unchanged
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 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 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
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, 2022.
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings 27 Part II: Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 59
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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+2 added−2 removed10 unchanged
Biggest changeEquity 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) 5,798,801 $ 12.85 Series A Preferred Stock (b) 495,074 21.52 Restricted Stock Units 32,616,416 N/A Subtotal 38,910,291 — 35,160,379 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 40,259,723 35,160,379 N/A is not applicable (a) For information about options, see Note 24 — Share-Based Compensation Plans in the notes to our Consolidated Financial Statements.
Biggest changeThe 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 Market Performance Graph above assumes a $100.00 investment on June 30, 2017, 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.
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.
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, 2022 there were 736 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 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.
Dividends accrued on the Convertible Series B Preferred Stock before April 1, 2021 have been declared and paid in October 2021. The terms of the Convertible Series B Preferred Stock restrict our ability to declare cash dividends on our common stock until all accrued dividends on the Convertible Series B Preferred Stock have been declared and paid in cash.
The terms of the Convertible Series B Preferred Stock restrict our ability to declare cash dividends on our common stock until all accrued dividends on the Convertible Series B Preferred Stock have been declared and paid in cash.
The 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.
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.
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.
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.
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. 27 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.
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.
Market Performance Graph Comparison of 5 Year Cumulative Total Return (a) Coty Inc., The S&P 500 Index, and Fiscal 2022 Peer Group (b) (a) Total return assumes reinvestment of dividends at the closing price at the end of each quarter, since June 30, 2017. 28 (b) The Peer Group includes L'Oréal S.A., Inc., Estée Lauder Companies, Inc., Revlon, Inc., Shiseido Company, Limited and Inter Parfums Inc.
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.
(e) Reflects number of securities remaining available for future issuance under equity compensation plans, excluding share reserves related to terminated equity plans. Issuer Purchases of Equity Securities No shares of Class A Common Stock were repurchased during the fiscal years ende d June 30, 2022 and 2021. 29
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
Removed
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.
Added
(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.
Removed
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.
Added
(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.

Item 7. Management's Discussion & Analysis

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

160 edited+57 added−95 removed135 unchanged
Biggest changeOther Matters During the first quarter of fiscal 2022, our CODM finalized the Company's organizational structure and how performance will be assessed, and we realigned our reportable segments to a principally product category-based structure, comprised of a Prestige business segment and a Consumer Beauty business segment beginning in the first quarter of fiscal 2022. 31 Selected Financial Data (in millions, except per share data) Year Ended June 30, 2022 2021 2020 (a) Condensed Consolidated Statements of Operations Data: Net revenues $ 5,304.4 $ 4,629.9 $ 4,717.8 Gross profit 3,369.2 2,768.2 2,726.6 Restructuring costs (6.5) 63.6 130.2 Acquisition- and divestiture-related costs 14.7 138.8 157.3 Asset impairment charges 31.4 — 434.0 Operating income (loss) 240.9 (48.6) (1,236.5) Interest expense, net 224.0 235.1 242.7 Other Income, net (409.9) (43.9) (11.6) Income (loss) from continuing operations before income taxes 426.8 (239.8) (1,467.6) Provision (benefit) for income taxes on continuing operations 164.8 (172.0) (377.7) Net income (loss) from continuing operations 262.0 (67.8) (1,089.9) Net income (loss) from discontinued operations 5.7 (137.3) 87.2 Net income (loss) 267.7 (205.1) (1,002.7) Net income (loss) attributable to Coty Inc. $ 259.5 $ (201.3) $ (1,006.7) Amounts attributable to Coty Inc.: Net income (loss) from continuing operations attributable to common stockholders $ 55.5 $ (166.3) $ (1,100.4) Net income (loss) from continuing operations attributable to common stockholders $ 61.2 $ (303.6) $ (1,013.2) Per Share Data: Net income (loss) attributable to Coty Inc. per common share: Basic income (loss) from continuing operations $ 0.07 $ (0.22) $ (1.45) Basic income (loss) for Coty Inc. $ 0.08 $ (0.40) $ (1.33) Diluted income (loss) from continuing operations $ 0.07 $ (0.22) $ (1.45) Diluted income (loss) for Coty Inc. $ 0.08 $ (0.40) $ (1.33) Weighted-average common shares Basic 820.6 764.8 759.1 Diluted 834.1 764.8 759.1 Dividends declared per common share $ — $ — $ 0.38 (in millions) Year Ended June 30, 2022 2021 2020 (a) Consolidated Statements of Cash Flows Data: Net cash provided by (used in) operating activities $ 726.6 $ 318.7 $ (50.9) Net cash provided by (used in) investing activities 269.7 2,441.9 (833.4) Net cash (used in) provided by financing activities (1,034.0) (2,795.1) 877.3 (in millions) As of June 30, 2022 2021 2020 (a) Consolidated Balance Sheets Data: Cash and cash equivalents $ 233.3 $ 253.5 $ 308.3 Total assets 12,116.1 13,691.4 16,728.8 Total debt, net of discount 4,473.9 5,476.9 8,147.3 Total Coty Inc. stockholders’ equity 3,154.5 2,860.7 3,004.6 (a) Included in fiscal 2020 are the financial impacts of the divestiture of Younique LLC on September 16, 2019, and the King Kylie transaction on January 6, 2020. 32 Non-GAAP Financial Measures To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures for continuing operations and Coty Inc. including Adjusted operating income (loss), Adjusted EBITDA, Adjusted net income (loss), and Adjusted net income (loss) attributable to Coty Inc. to common stockholders (collectively, the “Adjusted Performance Measures”).
Biggest changeHowever, we anticipate that the process related to the liquidation of the Russian legal entity will take an extended period of time. 32 Selected Financial Data (in millions, except per share data) Year Ended June 30, 2023 2022 2021 Net revenues $ 5,554.1 $ 5,304.4 $ 4,629.9 Gross profit 3,547.3 3,369.2 2,768.2 Restructuring costs (6.5) (6.5) 63.6 Acquisition- and divestiture-related costs — 14.7 138.8 Asset impairment charges — 31.4 — Operating income (loss) 543.7 240.9 (48.6) Interest expense, net 257.9 224.0 235.1 Other Income, net (419.0) (409.9) (43.9) Income (loss) from continuing operations before income taxes 704.8 426.8 (239.8) Provision (benefit) for income taxes on continuing operations 181.6 164.8 (172.0) Net income (loss) from continuing operations 523.2 262.0 (67.8) Net income (loss) from discontinued operations — 5.7 (137.3) Net income (loss) 523.2 267.7 (205.1) Net income (loss) attributable to Coty Inc. $ 508.2 $ 259.5 $ (201.3) Amounts attributable to Coty Inc.: Net income (loss) from continuing operations attributable to common stockholders $ 495.0 $ 55.5 $ (166.3) Net income (loss) from continuing operations attributable to common stockholders $ 495.0 $ 61.2 $ (303.6) Per Share Data: Net income (loss) attributable to Coty Inc. per common share: Basic income (loss) from continuing operations $ 0.58 $ 0.07 $ (0.22) Basic income (loss) for Coty Inc. $ 0.58 $ 0.08 $ (0.40) Diluted income (loss) from continuing operations $ 0.57 $ 0.07 $ (0.22) Diluted income (loss) for Coty Inc. $ 0.57 $ 0.08 $ (0.40) Weighted-average common shares Basic 849.0 820.6 764.8 Diluted 886.5 834.1 764.8 (in millions) Year Ended June 30, 2023 2022 2021 Consolidated Statements of Cash Flows Data: 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) (in millions) As of June 30, 2023 2022 2021 Consolidated Balance Sheets Data: Cash and cash equivalents $ 246.9 $ 233.3 $ 253.5 Total assets 12,661.6 12,116.1 13,691.4 Total debt, net of discount 4,265.9 4,473.9 5,476.9 Total Coty Inc. stockholders’ equity 3,811.1 3,154.5 2,860.7 33 Non-GAAP Financial Measures To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures for continuing operations and Coty Inc. including Adjusted operating income (loss), Adjusted EBITDA, Adjusted net income (loss), and Adjusted net income (loss) attributable to Coty Inc. to common stockholders (collectively, the “Adjusted Performance Measures”).
NET REVENUES In fiscal 2022, net revenues increased 15%, or $674.5, to $5,304.4 from $4,629.9 in fiscal 2021, reflecting a positive price and mix impact of 10%, an increase in unit volume of 6%, partially offset by a negative foreign currency exchange translation impact of 1%.
In fiscal 2022, net revenues increased 15%, or $674.5, to $5,304.4 from $4,629.9 in fiscal 2021, reflecting a positive price and mix impact of 10%, an increase in unit volume of 6%, partially offset by a negative foreign currency exchange translation impact of 1%.
Consumer Beauty In fiscal 2022, net revenues in the Consumer Beauty segment increased 7%, or $127.4, to $2,036.5 from $1,909.1 in fiscal 2021, reflecting an increase in unit volume of 5%, and a positive price and mix impact of 3%, partially offset by a negative foreign currency exchange translation impact of 1%.
In fiscal 2022, net revenues in the Consumer Beauty segment increased 7%, or $127.4, to $2,036.5 from $1,909.1 in fiscal 2021, reflecting an increase in unit volume of 5%, and a positive price and mix impact of 3%, partially offset by a negative foreign currency exchange translation impact of 1%.
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS In fiscal 2022, operating income from continuing operations was $240.9 compared to a loss of $48.6 in fiscal 2021. Operating income as a percentage of net revenues, improved to 4.5% in fiscal 2022 as compared to Operating loss as a percentage of net revenues of (1.0)% in fiscal 2021.
In fiscal 2022, operating income from continuing operations was $240.9 compared to a loss of $48.6 in fiscal 2021. Operating income as a percentage of net revenues, improved to 4.5% in fiscal 2022 as compared to Operating loss as a percentage of net revenues of (1.0)% in fiscal 2021.
We believe that adjusted net income (loss) attributable to Coty Inc. provides an enhanced understanding of our performance.
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.
In fiscal 2021, the Company incurred losses of $13.8 due to the write-off of deferred financing fees related to the Wella sale, primarily offset by pension curtailment gains of $6.9 as a result of the Transformation Plan, which significantly reduced the expected years of future service for employees participating in our non-U.S. pension plans.
In fiscal 2021, the Company incurred losses of $13.8 47 due to the write-off of deferred financing fees related to the Wella sale, primarily offset by pension curtailment gains of $6.9 as a result of the Transformation Plan, which significantly reduced the expected years of future service for employees participating in our non-U.S. pension plans.
Consequently, our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance. • Stock-based compensation: Although stock-based compensation is a key incentive offered to our employees, we have excluded the effect of these expenses from the calculation of adjusted operating income and adjusted EBITDA.
Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance. • Stock-based compensation: Although stock-based compensation is a key incentive offered to our employees, we have excluded the effect of these expenses from the calculation of adjusted operating income and adjusted EBITDA.
Foreign Currency Exchange Risk Management 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.
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.
The positive effective income tax rate in fiscal 2021 is primarily due to a preliminary benefit of $234.4 recorded as a result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the Company’s relocation of the main principal location from Geneva to Amsterdam.
The effective income tax rate in fiscal 2021 is primarily due to a preliminary benefit of $234.4 recorded as a result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the Company’s relocation of the main principal location from Geneva to Amsterdam.
Deferred taxes are recorded at currently enacted statutory tax rates and are adjusted as enacted tax rates change. 58 A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized based on currently available evidence.
Deferred taxes are recorded at currently enacted statutory tax rates and are adjusted as enacted tax rates change. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized based on currently available evidence.
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.
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
(b) See a description of adjustments under “Adjusted Operating Income (Loss) from Continuing Operations for Coty Inc.” (c) In fiscal 2022 and 2021 , the amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
(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.
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 53 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. We periodically enter into interest rate swap agreements to facilitate our interest rate management activities.
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.
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.
We identify our reporting units by assessing whether the components of our reporting segments constitute businesses for which 55 discrete financial information is available and management of each reporting unit regularly reviews the operating results of those components.
We identify our reporting units by assessing whether the components of our reporting segments constitute businesses for which discrete financial information is available and management of each reporting unit regularly reviews the operating results of those components.
Long-Lived Assets Long-lived assets, including tangible and intangible assets with finite lives, are amortized over their respective lives to their estimated residual values and are also reviewed for impairment whenever certain triggering events may indicate 57 impairment.
Long-Lived Assets Long-lived assets, including tangible and intangible assets with finite lives, are amortized over their respective lives to their estimated residual values and are also reviewed for impairment whenever certain triggering events may indicate impairment.
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.
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.
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. 33 • 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. 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.
OTHER EXPENSE (INCOME), NET In fiscal 2022, net other income was $409.9 of net other income, primarily related to a favorable adjustment for the unrealized gain in the Wella investment of $403.9.
In fiscal 2022, net other income was $409.9, primarily related to a favorable adjustment for the unrealized gain in the Wella investment of $403.9.
Total cash paid in the transaction totaled $200.0. For additional information on our prior period activity from fiscal year 2021, see Note 4—Business Combinations, Asset Acquisitions and Divestitures in the notes to our Consolidated Financial Statements. Dispositions During fiscal 2022, we did not enter into any business dispositions.
Total cash paid in the transaction totaled $200.0. For additional information on our prior period activity from fiscal year 2022, see Note 4—Business Combinations, Asset Acquisitions and Divestitures in the notes to our Consolidated Financial Statements. Dispositions During fiscal 2023 and 2022, we did not enter into any business dispositions.
When explaining such changes from period to period and to maintain a consistent basis between periods, we exclude the financial contribution of: (i) the acquired brands or businesses in the current year period until we have twelve months of comparable financial results and (ii) the divested brands or businesses or early terminated brands in the prior year period, to maintain comparable financial results with the current fiscal year period.
When explaining such changes from period to period and to maintain a consistent basis between periods, we exclude the financial contribution of: (i) the acquired brands or businesses in the current year period until we have twelve months of comparable financial results, and (ii) the divested brands or businesses or early terminated brands or markets exited in the prior year period, to maintain comparable financial results with the current fiscal year period.
Restructuring costs are initially 42 based on estimates which may differ from actuals due to various factors including more than expected employee attrition and final negotiated severance packages. On May 11, 2020 we announced an expansion of the Turnaround Plan to further reduce fixed costs, the Transformation Plan.
Restructuring costs are initially based on estimates which may differ from actuals due to various factors including more than expected employee attrition and final negotiated severance packages. On May 11, 2020 we 43 announced an expansion of the Turnaround Plan to further reduce fixed costs, the Transformation Plan.
As of June 30, 2022, we are in the early stages of administrative action and expect the judicial process in Brazil to take a number of years to conclude. Derivative Financial Instruments and Hedging Activities We are exposed to foreign currency exchange fluctuations and interest rate volatility through our global operations.
As of June 30, 2023, we are in the early stages of administrative action and expect the judicial process in Brazil to take a number of years to conclude. Derivative Financial Instruments and Hedging Activities We are exposed to foreign currency exchange fluctuations and interest rate volatility through our global operations.
The table also excludes $142.4 of preferred stock, which is reflected in Convertible Series B Preferred Stock in the Consolidated Balance Sheet as of June 30, 2022. Given the provisions of the associated Put rights, Convertible Series B Preferred Stock is redeemable outside of our control upon certain change of control events and is recorded in temporary equity.
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.
All adjustments are reflected in Corporate, except for amortization and asset impairment charges on goodwill, regional indefinite-lived intangible assets, and finite-lived intangible assets, which are reflected in the Prestige and Consumer Beauty segments. 41 Adjusted Operating Income (Loss) and Adjusted EBITDA from Continuing Operations for Coty Inc.
All adjustments are reflected in Corporate, except for amortization and asset impairment charges on goodwill, regional indefinite-lived intangible assets, and finite-lived intangible assets, which are reflected in the Prestige and Consumer Beauty segments. 42 Adjusted Operating Income (Loss) and Adjusted EBITDA from Continuing Operations for Coty Inc.
This amount includes $(4.9) reported in selling, general and administrative expenses, which is a result of changes in estimate, and $8.3 reported in cost of sales due to an increase in accelerated depreciation as part of Transformation Plan, in the Consolidated Statement of Operations.
This amount includes $8.3 reported in cost of sales due to an increase in accelerated depreciation as part of Transformation Plan, and a credit of $(4.9) reported included in selling, general and administrative expenses, which is a result of changes in estimate, in the Consolidated Statement of Operations.
Our principal uses of cash are to fund planned operating expenditures, capital expenditures, business structure realignment expenditures, interest payments, acquisitions, dividends, share repurchases and any principal payments on debt. Working capital movements are influenced by the sourcing of materials related to the production of products.
Our principal uses of cash are to fund planned operating expenditures, capital expenditures, interest payments, dividends, share repurchases, any principal payments on debt, and from time to time, acquisitions, and business structure realignment expenditures. Working capital movements are influenced by the sourcing of materials related to the production of products.
Consumer Beauty In fiscal 2022, operating income for Consumer Beauty was $9.5 compared to a income of $26.9 in fiscal 2021.
In fiscal 2022, operating income for Consumer Beauty was $9.5 compared to income of $26.9 in fiscal 2021.
Included within 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 • We incurred business structure realignment costs of $11.2 primarily related to our Transformation Plan and certain other programs.
(d) In fiscal 2022, the amount includes a net gain on the exchange of Series B Preferred Stock partially offset by the amortization of basis differences in certain equity method investments and pension curtailment losses.
(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.
Acquisitions, divestitures and early license terminations that would impact the comparability of financial results between periods presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations are shown in the table below.
Acquisitions, divestitures, early license terminations, and market exits that would impact the comparability of financial results between periods presented in the Management’s Discussion and Analysis of Financial Condition and Results of Operations are shown in the table below.
In connection with our decision to wind down our operations in Russia, we recognized tax charges related to certain direct incremental impacts of our decision, which are reflected in this amount, in fiscal 2022.
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.
A 25 basis-point increase in our variable interest rate debt would have increased our interest costs by $40.7 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 $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.
Costs Related to Market Exit In fiscal 2022, we incurred costs related to our decision to wind down our business operations in Russia which are included in Selling, general and administrative expenses and Cost of sales in the Consolidated Statements of Operations. In fiscal 2021 and 2020, we did not recognize costs related to a market exit.
In fiscal 2022, we incurred costs of $45.9 related to our decision to wind down our business operations in Russia which are included in Selling, general and administrative expenses and Cost of sales in the Consolidated Statements of Operations. In fiscal 2021, we did not recognize costs related to a market exit.
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. Contractual Obligations and Commitments Our principal contractual obligations and commitments are presented below as of June 30, 2022.
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.
These actions involved selectively reducing the level of incentives and price reductions on certain products, limiting the frequency and number of shelf resets in the period, and better focusing on planning for new products. These increases were partially offset by lower net revenues from Beyoncé and Stetson as a result of license expiration.
These actions involved selectively reducing the level of incentives and price reductions on certain products, limiting the frequency and number of shelf resets in the period, and better focusing on planning for new products. 38 These increase s were partially offset by lower net revenues from Beyoncé and Stetson as a result of license expiration.
The fair values of the remaining indefinite-lived trademarks exceeded their carrying values by amounts ranging from 39% to 50%. Some of the inherent estimates and assumptions used in determining fair value of the indefinite-lived intangible assets are outside the control of management, including interest rates, cost of capital, tax rates, credit ratings and industry growth.
The fair values of the remaining indefinite-lived trademarks exceeded their carrying values by amounts ranging from 26% to 868%. Some of the inherent estimates and assumptions used in determining fair value of the indefinite-lived intangible assets are outside the control of management, including interest rates, cost of capital, tax rates, credit ratings and industry growth.
For additional information on our prior period business dispositions from fiscal years 2021 and 2020, see Note 4—Business Combinations, Asset Acquisitions and Divestitures in the notes to our Consolidated Financial Statements.
For additional information on our prior period business dispositions from fiscal year 2021, see Note 4—Business Combinations, Asset Acquisitions and Divestitures in the notes to our Consolidated Financial Statements.
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 for each of these noncontrolling interests.
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.
Remaining balances due from factors amounted to $11.2 and $6.3 as of June 30, 2022 and 2021, respectively. Business Combinations During fiscal 2022, we did not enter into any business combinations or asset acquisitions. During fiscal 2021, we completed the acquisition of a 20% ownership interest in KKW Holdings and the related collaboration agreement.
Remaining balances due from factors amounted to $14.2 and $11.2 as of June 30, 2023 and 2022, respectively. 51 Business Combinations During fiscal 2023 and 2022, we did not enter into any business combinations or asset acquisitions. During fiscal 2021, we completed the acquisition of a 20% ownership interest in KKW Holdings and the related collaboration agreement.
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 $191.8 as of June 30, 2022, 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 $218.6 as of June 30, 2023, as we are unable to predict when, or if, any payments would be made.
See Note 17—Income Taxes in the notes to our Consolidated Financial Statements for additional information on our uncertain tax benefits. The table excludes $69.8 of RNCI which is reflected in Redeemable noncontrolling interest in the Consolidated Balance Sheet as of June 30, 2022 related to our 25.0% RNCI in our subsidiary in the Middle East (“Middle East Subsidiary”).
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”).
As of June 30, 2022, in the event of a 10% unfavorable change in the prevailing market rates of hedged foreign currencies versus the U.S. dollar, the change in fair value of all foreign exchange forward contracts and cross currency contracts would result in a $147.8 decrease in the fair value of these forward contracts, which would be offset by an increase in the underlying foreign currency exposures.
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 we transform the Company, we continue to make progress on our strategic priorities, including stabilizing and growing our Consumer Beauty brands through leading innovation and improved execution, accelerating our Prestige fragrance business and ongoing expansion into Prestige cosmetics, building a comprehensive skincare portfolio leveraging existing brands, enhancing our e-commerce and DTC capabilities, expanding our presence in China through Prestige products and select Consumer Beauty brands, and establishing Coty as an industry leader in sustainability.
We continue to make progress on our strategic priorities, including stabilizing and growing our Consumer Beauty brands through leading innovation and improved execution, accelerating our Prestige fragrance business and ongoing expansion into Prestige cosmetics, building a comprehensive skincare portfolio leveraging existing brands, enhancing our e-commerce and 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.
We recorded foreign currency gains (losses) of $3.3, $(7.8) and $(18.0) in fiscal 2022, 2021 and 2020, respectively, resulting from non-financing foreign currency exchange transactions which are included in their associated expense type and are included in the Consolidated Statements of Operations.
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 estimate that an immediate, hypothetical 10% decline in our stock price would result in a $19.6 decrease in the fair value of these forward repurchase contracts and reduce our Income (loss) from continuing operations before income taxes.
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.
Returns represented 2%, 2% and 3% of gross revenue after customer discounts and allowances in fiscal 2022, 2021 and 2020, respectively. Trade spending activities recorded as a reduction to gross revenue after customer discounts and allowances represent 10%, 10%, and 11% in fiscal 2022, 2021 and 2020, respectively.
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.
When calculating any potential dilutive effect of stock options, Series A Preferred Stock, restricted stock and RSUs, the Company uses the treasury method and the if-converted method for the Convertible Series B Preferred Stock.
When calculating any potential dilutive effect of stock options, Series A Preferred Stock, restricted stock, PRSUs and RSUs, the Company uses the treasury method and the if-converted method for the Convertible Series B Preferred Stock and the Forward Repurchase Contracts.
During fiscal years 2022, 2021 and 2020, we recorded asset impairment charges of $2.4, $5.2 and $16.8, respectively, to Property and equipment, net and $1.0, $0.6 and $7.8, respectively to Operating lease right-of-use assets, primarily relating to the abandonment of equipment or leases no longer in use.
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.
Basis of Presentation of Acquisitions and Divestitures During the period when we complete an acquisition, divestiture or early license termination, the financial results of the current year period are not comparable to the financial results presented in the prior year period.
Basis of Presentation of Acquisitions, Divestitures, Terminations and Market Exit from Russia During the period when we complete an acquisition, divestiture, early license termination, or market exit, the financial results of the current year period are not comparable to the financial results presented in the prior year period.
Net gains (losses) of $10.0, $(6.8) and $(14.8) in fiscal 2022, 2021 and 2020, respectively, resulting from financing foreign exchange currency transactions are included in Interest expense, net in the Consolidated Statements of Operations.
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.
Off-Balance Sheet Arrangements We had undrawn letters of credit of $14.3 and $15.0 and bank guarantees of $17.2 and $31.2 as of June 30, 2022 and 2021, respectively. Critical Accounting Policies We prepare our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles.
Off-Balance Sheet Arrangements We had undrawn letters of credit of $7.2 and $14.3 and bank guarantees of $16.3 and $17.2 as of June 30, 2023 and 2022, respectively. Critical Accounting Policies We prepare our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles.
This amount includes $(0.4) reported in selling, general and administrative expenses, which is a result of changes in estimate, and $11.6 reported in cost of sales due to an increase in accelerated depreciation as part of Transformation Plan, in the Consolidated Statement of Operations.
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.
In addition to the above equity investments, we entered into certain forward repurchase contracts to start hedging for a potential $200.0 share buyback program in 2024. These forward repurchase contracts are accounted for at fair value, with changes in the fair value recorded in Other income, net within the Consolidated Statements of Operations.
In addition to the above equity investments, we entered into certain forward repurchase contracts to start hedging for two potential $200.0 and $196.0 share buyback programs, in 2024 and 2025, respectively. These forward repurchase contracts are accounted for at fair value, with changes in the fair value recorded in Other income, net within the Consolidated Statements of Operations.
Reconciliation of Reported Income (Loss) Before Income Taxes to Adjusted Income (Loss) Before Income Taxes and Effective Tax Rates from Continuing Operations: Year Ended June 30, 2022 Year Ended June 30, 2021 Year Ended June 30, 2020 (in millions) (Loss)/ income before income taxes (Benefit) provision for income taxes Effective tax rate (Loss)/ income before income taxes (Benefit) provision for income taxes Effective tax rate (Loss)/income before income taxes (Benefit)provision for income taxes Effective tax rate Reported income (loss) before income taxes $ 426.8 $ 164.8 38.6 % $ (239.8) $ (172.0) 71.7 % $ (1,467.6) $ (377.7) 25.7 % Adjustments to reported operating income (loss) (a) 374.6 484.8 1,093.1 Change in fair value of investment in Wella Business (b)(e) (403.9) (73.5) — Other adjustments (f) (2.4) 7.2 (16.4) Total Adjustments (b)(c)(d) (31.7) $ (55.3) 418.5 204.3 1,076.7 320.9 Adjusted income (loss) before income taxes $ 395.1 $ 109.5 27.7 % $ 178.7 $ 32.3 18.1 % $ (390.9) $ (56.8) 14.5 % (a) See a description of adjustments under “Adjusted Operating Income (Loss) for Coty Inc.” (b) The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax benefit/provision for adjusted income.
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.
Cash Flows Year Ended June 30, (in millions) 2022 2021 2020 Consolidated Statements of Cash Flows Data (a) : Net cash provided by (used in) operating activities $ 726.6 $ 318.7 $ (50.9) Net cash provided by (used in) investing activities 269.7 2,441.9 (833.4) Net cash (used in) provided by financing activities (1,034.0) (2,795.1) 877.3 (a) Balances presented herein represent the cash flows of 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.
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 $31.4 as of June 30, 2022. Accordingly, 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 $225.5 as of June 30, 2023. Management believes risk of material loss under these hedging contracts is remote.
Selling, general and administrative expenses as a percentage of net revenues increased to 54.3% in fiscal 2022 from 51.0% in fiscal 2021, or approximately 330 basis points.
In fiscal 2022, selling, general and administrative expenses increased 22%, or $518.1, to $2,881.3 from $2,363.2 in fiscal 2021. Selling, general and administrative expenses as a percentage of net revenues increased to 54.3% in fiscal 2022 from 51.0% in fiscal 2021, or approximately 330 basis points.
Trademarks are tested for impairment on a brand level basis. The trademarks’ fair values are based upon the income approach, primarily utilizing the relief from royalty methodology. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the trademark.
The trademarks’ fair values are based upon the income approach, primarily utilizing the relief from royalty methodology. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the trademark.
Operating loss for Corporate was $135.8, $233.6 and $426.0 in fiscal 2022, 2021 and 2020, respectively, as described under “Adjusted Operating Income” below.
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.
The loss on sale of the Wella Business was $246.4 in fiscal 2021. Factored into the loss on sale are the proceeds received from the sale of our majority interest in Wella, the book value of net assets sold and costs to sell.
Factored into the loss on sale are the proceeds received from the sale of our majority interest in Wella, the book value of net assets sold and costs to sell.
As a result of the May 1, 2020 annual impairment test, total impairments on indefinite-lived other intangible assets of $329.0 were recorded. On May 1, 2021, we performed our annual impairment testing of indefinite-lived other intangible assets and determined that no adjustments to carrying values were required.
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.
Net cash provided by (used in) investing activities Net cash provided by (used in) investing activities was $269.7, $2,441.9 and $(833.4) for fiscal 2022, 2021 and 2020, respectively.
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.
Equity Investment Risk Our equity investments are investments in equity securities of privately-held companies without readily determinable fair values, including an investment of approximately $830.0 that is valued using the fair value option and approximately $12.6 that is accounted for using the equity method as of June 30, 2022.
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.
See Note 26—Legal and Other Contingencies for more details on these tax assessments. In relation to the appeal of our Brazilian tax assessments, we have entered into surety bonds of R$135.2 million (approximately $26.1) as of June 30, 2022.
See Note 26—Legal and Other Contingencies for more details on these tax assessments. In relation to the appeal of our Brazilian tax assessments, we have entered into surety bonds of R$423.8 million (approximately $87.3) as of June 30, 2023.
Based on the annual impairment tested performed at May 1, 2022, we determined that the fair value of each of the reporting units exceeded their respective carrying values at that date by approximately 78.6% and 61.5% relating to the Prestige and Consumer Beauty reporting units, respectively.
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.
See “Overview—Non-GAAP Financial Measures.” Reconciliation of reported operating loss to adjusted operating (loss) income is presented below: Year Ended June 30, Change % (in millions) 2022 2021 2020 2022/2021 2021/2020 Reported operating income (loss) from continuing operations $ 240.9 $ (48.6) $ (1,236.5) >100% 96 % % of Net revenues 4.5 % (1.0 %) (26.2 %) Amortization expense 207.4 251.2 233.1 (17 %) 8 % Restructuring and other business realignment costs 4.7 67.0 339.1 (93 %) (80 %) Stock-based compensation 195.5 27.8 41.1 >100% (32 %) Costs related to acquisition and divestiture activities 14.7 138.8 157.3 (89 %) (12 %) Asset impairment charges 31.4 — 434.0 N/A (100 %) Gain on divestitures — — (111.5) N/A 100 % Costs related to market exit 45.9 — — N/A N/A Gain on sale of brand assets (9.5) — — N/A N/A Gains on sale of real estate (115.5) — — N/A N/A Total adjustments to reported operating loss 374.6 484.8 1,093.1 (23 %) (56) % Adjusted operating income (loss) from continuing operations $ 615.5 $ 436.2 $ (143.4) 41 % >100% % of Net revenues 11.6 % 9.4 % (3.0 %) Adjusted depreciation 289.8 325.8 334.2 (11 %) (3) % Adjusted EBITDA $ 905.3 $ 762.0 $ 190.8 19 % >100% % of Revenues 17.1 % 16.5 % 4.0 % 3.6 % >100% In fiscal 2022, adjusted operating income was $615.5 compared to a income of $436.2 in fiscal 2021.
See “Overview—Non-GAAP Financial Measures.” Reconciliation of reported operating loss to adjusted operating income (loss) is presented below: Year Ended June 30, Change % (in millions) 2023 2022 2021 2023/2022 2022/2021 Reported operating income (loss) from continuing operations $ 543.7 $ 240.9 $ (48.6) >100% >100% % of Net revenues 9.8 % 4.5 % (1.0 %) Amortization expense 191.8 207.4 251.2 (8 %) (17 %) Restructuring and other business realignment costs (6.3) 4.7 67.0 (93 %) Stock-based compensation 135.9 195.5 27.8 (30 %) >100% Costs related to acquisition and divestiture activities — 14.7 138.8 (100 %) (89 %) Asset impairment charges — 31.4 — (100 %) N/A (Gains) Costs related to market exit (17.0) 45.9 — N/A Gains on sale and termination of brand assets (104.4) (9.5) — N/A Gains on sale of real estate (4.9) (115.5) — 96 % N/A Total adjustments to reported operating loss 195.1 374.6 484.8 (48 %) (23) % Adjusted operating income from continuing operations $ 738.8 $ 615.5 $ 436.2 20 % 41 % % of Net revenues 13.3 % 11.6 % 9.4 % Adjusted depreciation 234.0 289.8 325.8 (19 %) (11) % Adjusted EBITDA $ 972.8 $ 905.3 $ 762.0 7 % 19 % % of Revenues 17.5 % 17.1 % 16.5 % 2.3 % 3.6 % In fiscal 2023, adjusted operating income was $738.8 compared to income of $615.5 in fiscal 2022.
The net amount utilized under the factoring facilities was $179.3 and $133.6 as of June 30, 2022 and 2021, respectively. The aggregate amount of trade receivable invoices factored on a worldwide basis amounted to $1,041.2 and $793.8 in fiscal 2022 and 2021, respectively.
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.
See “Overview—Non-GAAP Financial Measures.” Year Ended June 30, Change % (in millions) 2022 2021 2020 2022/2021 2021/2020 Net income (loss) from Coty Inc. net of noncontrolling interests $ 259.5 $ (201.3) $ (1,006.7) >100% 80 % Convertible Series B Preferred Stock dividends (a) (198.3) (102.3) (6.5) (94 %) Reported net income (loss) attributable to Coty Inc. 61.2 (303.6) (1,013.2) >100% 70 % Adjustments to reported operating income (b) 374.6 486.3 1,204.9 (23 %) (60 %) Adjustments to Loss on Sale of Business (6.1) 246.4 — N/A Change in fair value of investment in Wella Business (c) (403.9) (73.5) — N/A Adjustments to other expense (income) (d) (2.4) 7.2 (16.4) >100% Adjustments to noncontrolling interest (e) (7.0) (11.3) — 38 % N/A Change in tax provision due to adjustments to reported net (loss) income attributable to Coty Inc. 55.7 (170.0) (342.5) >100% 50 % Adjustment for deemed Series B Preferred Stock dividends related to the First and Second Exchanges 160.0 — — Adjusted net income (loss) attributable to Coty Inc. $ 232.1 $ 181.5 $ (167.2) 28 % >100% % of Net revenues 4.4 % 3.2 % (2.5 %) Per Share Data Adjusted weighted-average common shares Basic 820.6 764.8 759.1 Diluted (f) 834.1 764.8 759.1 Adjusted net income attributable to Coty Inc. per common share Basic $ 0.28 $ 0.24 $ (1.33) Diluted (a) $ 0.28 $ 0.24 $ (1.33) 46 (a) Diluted EPS is adjusted by the effect of dilutive securities, including awards under the Company's equity compensation plans and the convertible Series B Preferred Stock.
See “Overview—Non-GAAP Financial Measures.” Year Ended June 30, Change % (in millions) 2023 2022 2021 2023/2022 2022/2021 Net income (loss) from Coty Inc. net of noncontrolling interests $ 508.2 $ 259.5 $ (201.3) 96 % >100% Convertible Series B Preferred Stock dividends (a) (13.2) (198.3) (102.3) 93 % (94 %) Reported net income (loss) attributable to Coty Inc. 495.0 61.2 (303.6) >100% >100% Adjustments to reported operating income (b) 195.1 374.6 486.3 (48 %) (23 %) Adjustments to Loss on Sale of Business — (6.1) 246.4 100 % Change in fair value of investment in Wella Business (c) (230.0) (403.9) (73.5) 43 % Adjustments to other expense (income) (d) 0.2 (2.4) 7.2 >100% Adjustments to noncontrolling interest (e) (6.9) (7.0) (11.3) 1 % 38 % Change in tax provision due to adjustments to reported net income (loss) attributable to Coty Inc. 4.5 55.7 (170.0) (92 %) >100% Adjustment for deemed Series B Preferred Stock dividends related to the First and Second Exchanges — 160.0 — (100 %) N/A Adjusted net income attributable to Coty Inc. $ 457.9 $ 232.1 $ 181.5 97 % 28 % % of Net revenues 8.2 % 4.4 % 3.2 % Per Share Data Adjusted weighted-average common shares Basic 849.0 820.6 764.8 Diluted (a)(f) 862.8 834.1 764.8 Adjusted net income attributable to Coty Inc. per common share Basic $ 0.54 $ 0.28 $ 0.24 Diluted (a)(f) $ 0.53 $ 0.28 $ 0.24 (a) Diluted EPS is adjusted by the effect of dilutive securities, including awards under the Company's equity compensation plans, the convertible Series B Preferred Stock and the Forward Repurchase Contracts.
See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported operating income (loss) to Adjusted operating income is presented below, by segment: Year Ended June 30, 2022 (in millions) Reported (GAAP) Adjustments (a) Adjusted (Non-GAAP) Adjusted operating income (loss) from continuing operations Prestige $ 367.2 $ (162.9) $ 530.1 Consumer Beauty 9.5 (75.9) 85.4 Corporate (135.8) (135.8) — Total $ 240.9 $ (374.6) $ 615.5 Year Ended June 30, 2021 (in millions) Reported (GAAP) Adjustments (a) Adjusted (Non-GAAP) Adjusted operating income (loss) from continuing operations Prestige $ 158.1 $ (201.2) $ 359.3 Consumer Beauty 26.9 (50.0) 76.9 Corporate (233.6) (233.6) — Total $ (48.6) $ (484.8) $ 436.2 Year Ended June 30, 2020 (in millions) Reported (GAAP) Adjustments (a) Adjusted (Non-GAAP) Adjusted operating (loss) income from continuing operations Prestige $ (279.2) $ (293.0) $ 13.8 Consumer Beauty (531.3) (374.1) (157.2) Corporate (426.0) (426.0) — Total $ (1,236.5) $ (1,093.1) $ (143.4) (a) See a reconciliation of reported operating (loss) income to adjusted operating income and a description of the adjustments under “Adjusted Operating (Loss) Income from Continuing Operations for Coty Inc.” below.
See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported operating income (loss) to Adjusted operating income is presented below, by segment: Year Ended June 30, 2023 (in millions) Reported (GAAP) Adjustments (a) Adjusted (Non-GAAP) Adjusted operating income (loss) from continuing operations Prestige $ 483.7 $ 151.4 $ 635.1 Consumer Beauty 63.3 40.4 103.7 Corporate (3.3) 3.3 — Total $ 543.7 $ 195.1 $ 738.8 Year Ended June 30, 2022 (in millions) Reported (GAAP) Adjustments (a) Adjusted (Non-GAAP) Adjusted operating income (loss) from continuing operations Prestige $ 367.2 $ 162.9 $ 530.1 Consumer Beauty 9.5 75.9 85.4 Corporate (135.8) 135.8 — Total $ 240.9 $ 374.6 $ 615.5 Year Ended June 30, 2021 (in millions) Reported (GAAP) Adjustments (a) Adjusted (Non-GAAP) Adjusted operating income (loss) from continuing operations Prestige $ 158.1 $ 201.2 $ 359.3 Consumer Beauty 26.9 50.0 76.9 Corporate (233.6) 233.6 — Total $ (48.6) $ 484.8 $ 436.2 (a) See a reconciliation of reported operating income (loss) to adjusted operating income and a description of the adjustments under “Adjusted Operating Income (Loss) from Continuing Operations for Coty Inc.” below.
Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency information by translating current and prior-period results for entities reporting in currencies other than U.S. dollars into U.S. dollars using prior year foreign currency exchange rates.
We calculate constant currency information by translating current and prior-period results for entities reporting in currencies other than U.S. dollars into U.S. dollars using prior year foreign currency exchange rates.
(c) The total tax impact on adjustments in the current period includes a tax expense of $24.1 recorded as the result of the Company’s exit from Russia. 45 (d) The total tax impact on adjustments in the prior period includes a $234.4 benefit recorded as the result of the tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the relocation of our main principal location from Geneva to Amsterdam on July 1, 2020.
(d) The total tax impact on adjustments in fiscal 2021 includes a $234.4 benefit recorded as the result of the tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the relocation of our main principal location from Geneva to Amsterdam on July 1, 2020.
Stock-based compensation In fiscal 2022, stock-based compensation was $195.5 as compared with $27.8 in fiscal 2021. The increase in stock-based compensation is primarily related to the CEO grant made on June 30, 2021. In fiscal 2021, stock-based compensation was $27.8 as compared with $41.1 in fiscal 2020.
In fiscal 2022, stock-based compensation was $195.5 as compared with $27.8 in fiscal 2021. The increase in stock-based compensation is primarily related to the CEO grant made on June 30, 2021. In all reported periods, all costs related to stock-based compensation were reported in Corporate.
Adjusted depreciation expense In fiscal 2022, adjusted depreciation expense of $138.7 and $151.1 was reported in the Prestige and Consumer Beauty segments, respectively. In fiscal 2021, adjusted depreciation expense of $144.4 and $181.4 was reported in the Prestige and Consumer Beauty segments, respectively.
In fiscal 2022, adjusted depreciation expense of $138.7 and $151.1 was reported in the Prestige and Consumer Beauty segments, respectively. In fiscal 2021, adjusted depreciation expense of $144.4 and $181.4, was reported in the Prestige and Consumer Beauty segments, respectively. INTEREST EXPENSE, NET Net interest expense was $257.9, $224.0, and $235.1 in fiscal 2023, fiscal 2022 and fiscal 2021, respectively.
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 2022 or fiscal 2021. During fiscal year 2020 we recorded total goodwill impairment of $105.0.
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.
Inventory Inventories include items which are considered salable or usable in future periods, and are stated at the lower of cost or net realizable value, with cost being based on standard cost which approximates actual cost on a first-in, first-out basis.
These impairment charges are primarily recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations. Inventory Inventories include items which are considered salable or usable in future periods, and are stated at the lower of cost or net realizable value, with cost being based on standard cost which approximates actual cost on a first-in, first-out basis.
Our brands empower people to express themselves freely, creating their own visions of beauty; and we are committed to making a positive impact on the planet.
Our brands empower people to express themselves freely, creating their own visions of beauty; and we are committed to making a positive impact on the planet. We remain attentive to economic and geopolitical conditions that may materially impact our business.
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.
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.
During fiscal 2021, we completed the sale of a majority stake in the Wella Business and received cash proceeds of $2,451.7, and retained an initial ownership stake of 40% in Wella. As of June 30, 2022, we owned a 25.9% stake in the Wella Company.
During fiscal 2021, we completed the sale of a majority stake in the Wella Business (as discussed below). The Wella Business Divestiture During fiscal 2021, we completed the sale of a majority stake in the Wella Business and received cash proceeds of $2,451.7 and retained an initial ownership stake of 40% in Wella.
Gains on Sale of Real Estate In fiscal 2022, we recognized gains of $115.5 related to sale of real estate, which was reported in Corporate. In fiscal 2021 and 2020, we did not recognize any gain or loss on the sale of real estate.
In fiscal 2021, we did not recognize any gain or loss on the sale and termination of brand assets. Gains on Sale of Real Estate In fiscal 2023, we recognized gains of $4.9 related to sale of real estate, which was reported in Corporate.

… 232 more changes not shown on this page.

Other COTY 10-K year-over-year comparisons