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Business Wire 8-Feb-2019 6:30 AM
Second Quarter Results Show Improved Sequential Trends in Revenues and Profit
Coty Inc. (NYSE:COTY) today announced financial results for the second quarter of fiscal year 2019, ended December 31, 2018.
Results at a glance | Three Months EndedDecember 31, 2018 |
Six Months EndedDecember 31, 2018 |
|||||||||||||||||
Change YoY | Change YoY | ||||||||||||||||||
(in millions, except per share data) |
ReportedBasis |
Organic(LFL) |
ReportedBasis |
Organic(LFL) |
|||||||||||||||
Net revenues | $ | 2,511.2 | (4.8 | %) | 0.7% | $ | 4,542.5 | (6.8 | %) | (3.2%) | |||||||||
Operating (loss) income - reported | (804.6 | ) | NM | (825.3 | ) | NM | |||||||||||||
Operating income - adjusted* | 322.3 | (7 | %) | 463.1 | (15 | %) | |||||||||||||
Net (loss) income - reported | (960.6 | ) | NM | (972.7 | ) | NM | |||||||||||||
Net income - adjusted* | 181.9 | (23 | %) | 262.4 | (16 | %) | |||||||||||||
EPS (diluted) - reported | $ | (1.28 | ) | NM | $ | (1.30 | ) | NM | |||||||||||
EPS (diluted) - adjusted* | $ | 0.24 | (25 | %) | $ | 0.35 | (17 | %) | |||||||||||
* These measures, as well as "free cash flow," "adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)" and "net debt," are Non-GAAP Financial Measures. Refer to "Non-GAAP Financial Measures" for discussion of these measures. Net Income represents Net Income Attributable to Coty Inc. Reconciliations from reported to adjusted results can be found at the end of this release.
Overview
Revenues:
Gross Margin:
Operating Income:
Net Income:
Earnings Per Share (EPS):
Operating Cash Flow & Net Debt:
Management Comments
Commenting on the financial results, Pierre Laubies, Coty CEO said:
"Since I joined the company a few months ago, I have been thoroughly evaluating each part of our business, working to assess what has and has not worked, and where the opportunities lie. Within Coty, there are clear opportunities to improve how we run our company in order to enhance the quality of our business model, thereby giving us the time that we need to address our more strategic issues. I must stress that while we are confident that we can return Coty to a path of sustainable growth, we are also realistic that it will take time to achieve this outcome. Our Luxury and Professional Beauty divisions are growing reasonably well, but they cannot compensate completely for the difficult trajectory of our Consumer Beauty division. In Consumer Beauty, we need to earn our right to grow.
From a financial standpoint, gross margin improvement will become our key area of focus. Gross margin is the lifeblood of the business and we recognize that we must close the gap we have here versus our beauty peers. That means managing revenue and costs, improving product mix and range, simplifying our portfolio and formulations, and systemically deploying lean-inspired methodologies in our manufacturing and logistics operations. While we will deploy these principles whenever possible in the remainder of FY19, our immediate objective is to finalize a Strategic Plan, which will define our agenda for the medium term. I look forward to sharing more details on this plan in the coming months.
I have a great deal of confidence that the management team we have put into place is the right one to develop this plan, and that together with the broader Coty organization, we will be able to meet the objectives of driving gross margin improvement and sustained topline growth."
Outlook
As we focus on building a healthier business model, we anticipate a profit trend recovery in the second half of FY19. We expect that FY19 constant currency adjusted operating income will be moderately below FY18. We continue to expect positive free cash flow for FY19.
Second Quarter Fiscal 2019 Business Review by Segment
Luxury
Three Months Ended December 31, 2018 | Six Months Ended December 31, 2018 | |||||||||||
Actual |
Reported BasisYoY |
LFL | Actual |
Reported BasisYoY |
LFL | |||||||
Net Revenues | 1,017.5 | 7.0% | 10.8% | $1,810.4 | 5.5% | 5.0% | ||||||
Reported | Adjusted | Reported | Adjusted | |||||||||
Operating Income | 113.6 | 176.9 | 162.3 | 278.5 | ||||||||
Operating Margin | 11.2% | 17.4% | 9.0% | 15.4% | ||||||||
In 2Q19, reported Luxury net revenues of $1,017.5 million increased by 7.0% versus the prior year. On a LFL basis, Luxury net revenues increased by 10.8%, primarily driven by the addition of Burberry to the LFL base and solid growth of the core portfolio, despite ongoing impact from the supply chain disruption. We estimate that the Luxury division delivered mid single digit growth in 2Q19 and 1H19 after adjusting for the supply chain disruptions and excluding the impact of Burberry.
2Q19 sell-out was strong across our top brands with particularly good performances by Gucci, Marc Jacobs and Burberry. Net revenue growth was driven by Calvin Klein, Gucci, Marc Jacobs and Chloe. Tiffany's sell-out performance remained strong during the holiday period, despite lapping the brand's launch in the prior year. Hugo Boss revenues in 2Q19 declined as the brand was impacted by the supply chain disruptions.
The Luxury division delivered reported operating income of $113.6 million, an increase of 33% vs. the prior-year period. 2Q19 adjusted operating income was $176.9 million, reflecting very strong 41% growth from the prior year, driven by the reported net revenue growth and solid fixed cost reductions. The adjusted operating margin was 17.4%, an increase of over 400 bps versus 2Q18.
Consumer Beauty
Three Months Ended December 31, 2018 | Six Months Ended December 31, 2018 | |||||||||||
Actual |
Reported BasisYoY |
LFL | Actual |
Reported BasisYoY |
LFL | |||||||
Net Revenues | 967.8 | (15.0%) | (7.3)% | 1,796.6 | (17.7%) | (10.6)% | ||||||
Reported | Adjusted | Reported | Adjusted | |||||||||
Operating (Loss) Income | (906.9) | 54.1 | (925.5) | 68.9 | ||||||||
Operating Margin | (93.7)% | 5.6% | (51.5)% | 3.8% | ||||||||
2Q19 Consumer Beauty net revenues of $967.8 million declined 15.0% on a reported basis and declined 7.3% LFL. We estimate that the net impact of the supply chain disruptions was offset by the positive impact in 2Q19 from a required revenue recognition policy change, implying a high single digit underlying LFL decline in both 2Q19 and 1H19. This performance was broadly in-line with sell-out trends, as our brands were pressured by continued weakness in the mass beauty market, particularly in the U.S. and Europe, although we saw some moderation in the pace of our market share losses. The Consumer Beauty division continues to be affected by the indirect impacts of the supply chain disruptions, including customer penalties and increased promotions, which reduced net revenues.
By category, net revenue in color cosmetics declined mid single digits and retail hair declined high single digits. While CoverGirl and Clairol net revenues benefited from a favorable comparable due to the inventory depletion in the prior year ahead of the 3Q18 brand relaunches, sell-through continued to decline high single digits in 2Q19. Our U.S. brands experienced moderating market share losses in traditional retailers, share gains on Amazon, and improving innovation performance. Sally Hansen reported strong growth in the quarter, supported by innovation. The Wella Retail brand continued to gain share with strength in styling in developed markets and hair color in emerging markets. In Brazil, our local brands continue to drive strong revenue growth and market share gains.
During 2Q19, Younique revenues and profit remained pressured due to a decline in product sales and presenter sponsorship as we continue to refine our product offerings and compensation plan structure to drive improvements in presenter sales activity, recruitment and retention. Our loyalty and subscription programs gained traction in the quarter, driving growth in customer revenues, although weakness in active presenters more than offset this growth. In 3Q19, Younique launched a customizable skincare line, YOU·OLOGY.
Reported operating loss in 2Q19 of $906.9 million compared to reported operating income of $99.3 million in the prior year period, reflecting non-cash impairment charges of $832.5 million to the Consumer Beauty goodwill and $97.8 million to the trademarks of CoverGirl, Clairol, and two small regional brands. The Consumer Beauty division has experienced increased competitive and market pressure throughout the first half of fiscal 2019, which has resulted in lower than expected revenues and earnings. Additionally, the discount rate used in the impairment review associated with the division has also increased in the quarter. Based on these adverse factors, management determined that there were indications that the goodwill of the division as well as certain trademark intangible assets may be impaired and accordingly interim intangible asset and goodwill impairment tests were performed as of December 31, 2018.
The 2Q19 adjusted operating income of $54.1 million declined from $131.9 million in the prior year period, resulting in an adjusted operating margin of 5.6%. Despite reductions in fixed costs, the adjusted operating margin was pressured by net revenue contraction and gross margin pressure linked to the supply chain disruptions.
Professional Beauty
Three Months Ended December 31, 2018 | Six Months Ended December 31, 2018 | |||||||||||
Actual |
Reported BasisYoY |
LFL | Actual |
Reported BasisYoY |
LFL | |||||||
Net Revenues | 525.9 | (4.0%) | (0.8%) | 935.5 | (4.4%) | (1.6)% | ||||||
Reported | Adjusted | Reported | Adjusted | |||||||||
Operating Income | 73.8 | 91.1 | 78.8 | 114.9 | ||||||||
Operating Margin | 14.0% | 17.3% | 8.4% | 12.3% | ||||||||
Professional Beauty 2Q19 net revenues of $525.9 million declined by 4.0%, with LFL down 0.8%. The Professional Beauty division continued to be impacted by the supply chain disruptions in its North America warehouse, with OPI being disproportionately affected. Adjusting for these supply chain disruptions, which impacted revenues by over 2%, we estimate that the division had low single digit underlying net revenue growth, with ghd delivering solid growth on the back of strong innovation. We continue to see no underlying change to the strong customer demand for our brands in North America or to the overall health of our salon professional business.
Professional Beauty reported operating income of $73.8 million was flat to the prior year period, while adjusted operating income grew 1% to $91.1 million. The Professional Beauty division adjusted operating margin of 17.3% grew 80 bps, despite the supply chain impacts, driven by strong gross margin performance and good fixed cost reduction.
Second Quarter Fiscal 2019 Business Review by Geographic Region
Three Months Ended December 31, | ||||||||||||||
Net Revenues | Change | |||||||||||||
(in millions) | 2018 | 2017 |
ReportedBasis |
Organic(LFL) |
||||||||||
North America | $ | 742.2 | $ | 741.8 | — | % | 2 | % | ||||||
Europe | 1,201.6 | 1,297.6 | (7 | %) | (1 | %) | ||||||||
ALMEA | 567.4 | 598.2 | (5 | %) | 4 | % | ||||||||
Total | $ | 2,511.2 | $ | 2,637.6 | (5 | %) | 1 | % | ||||||
North America
Europe
ALMEA
Cash Flows
Other Company Developments
Other company developments include:
Conference Call
Coty Inc. will host a conference call at 8:00 a.m. (ET) today, February 8, 2019 to discuss its results. The dial-in number for the call is (866) 834-4311 in the U.S. or (720) 405-2213 internationally (conference passcode number: 1354018). The live audio webcast and presentation slides will be available at http://investors.coty.com. The conference call will be available for replay.
About Coty Inc.
Coty is one of the world's largest beauty companies with over $9 billion in revenue, an iconic portfolio of brands and a purpose to celebrate and liberate the diversity of consumers' beauty. We believe the beauty of humanity lies in the individuality of its people; beauty is at its best when authentic; and beauty should make you feel happy, never sad. As the global leader in fragrance, a strong number two in professional salon hair color & styling, and number three in color cosmetics, Coty operates three divisions: Consumer Beauty, which is focused on mass color cosmetics, mass retail hair coloring and styling products, body care and mass fragrances with brands such as COVERGIRL, Max Factor, Bourjois and Rimmel; Luxury, which is focused on prestige fragrances and skincare with brands such as Calvin Klein, Marc Jacobs, Hugo Boss, Gucci and philosophy; and Professional Beauty, which is focused on servicing salon owners and professionals in both hair and nail, with brands such as Wella Professionals, Sebastian Professional, OPI and ghd. Coty has 20,000 colleagues globally and its products are sold in over 150 countries. Coty and its brands are committed to a range of social causes as well as seeking to minimize its impact on the environment.
For additional information about Coty Inc., please visit www.coty.com.
Forward Looking Statements
Certain statements in this Earnings Release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, the Company's targets and outlook for future reporting periods (including the extent and timing of revenue and profit trends and the Consumer Beauty division's stabilization), future profit trends and return to profitable growth, future gross margins, its future operations and strategy (including brand relaunches and performance in emerging markets and channels), synergies, savings, performance, cost, timing and integration relating to our recent acquisitions (including The Procter & Gamble Company's beauty business (the "P&G Beauty Business")), ongoing and future cost efficiency and restructuring initiatives and programs (including timing and impact), finalization of a strategic plan, FY19 adjusted operating income, positive free cash flow and liquidity, future effective tax rates, timing and size of cash outflows and debt deleveraging, and impact and timing of supply chain disruptions and resolution thereof. These forward-looking statements are generally identified by words or phrases, such as "anticipate", "are going to", "estimate", "plan", "project", "expect", "believe", "intend", "foresee", "forecast", "will", "may", "should", "outlook", "continue", "temporary", "target", "aim", "potential" and similar words or phrases. These statements are based on certain assumptions and estimates that we consider reasonable, but are subject to a number of risks and uncertainties, many of which are beyond our control, which could cause actual events or results (including our financial condition, results of operations, cash flows and prospects) to differ materially from such statements, including:
When used herein, the term "includes" and "including" means, unless the context otherwise indicates, "including without limitation". More information about potential risks and uncertainties that could affect the Company's business and financial results is included under the heading "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2018 and other periodic reports the Company has filed and may file with the SEC from time to time.
All forward-looking statements made in this release are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this release, and the Company does not undertake any obligation, other than as may be required by applicable law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.
Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance unless expressed as such, and should only be viewed as historical data.
Non-GAAP Financial Measures
The Company operates on a global basis, with the majority of net revenues generated outside of the U.S. Accordingly, fluctuations in foreign currency exchange rates can affect results of operations. Therefore, to supplement financial results presented in accordance with GAAP, certain financial information is presented excluding the impact of foreign currency exchange translations to provide a framework for assessing how the underlying businesses performed excluding the impact of foreign currency exchange translations ("constant currency"). Constant currency information compares results between periods as if exchange rates had remained constant period-over-period, with the current period's results calculated at the prior-year period's rates. The Company calculates 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 constant foreign currency exchange rates. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate. The constant currency information presented may not be comparable to similarly titled measures reported by other companies. The Company discloses the following constant currency financial measures: net revenues, organic like-for-like (LFL) net revenues, adjusted gross profit and adjusted operating income.
The Company presents period-over-period comparisons of net revenues on a constant currency basis as well as on an organic (LFL) basis. The Company believes that organic (LFL) better enables management and investors to analyze and compare the Company's net revenues performance from period to period. For the period described in this release, the term "like-for-like" describes the Company's core operating performance, excluding the financial impact of (i) acquired brands or businesses in the current year period until we have twelve months of comparable financial results, (ii) divested brands or businesses or early terminated brands in the prior year period to maintain comparable financial results with the current fiscal year period and (iii) foreign currency exchange translations to the extent applicable. For a reconciliation of organic (LFL) period-over-period, see the table entitled "Reconciliation of Reported Net Revenues to Like-For-Like Net Revenues".
The Company presents operating income, operating income margin, gross profit, gross margin, effective tax rate, net income, net income margin, net revenues and EPS (diluted) on a non-GAAP basis and specifies that these measures are non-GAAP by using the term "adjusted". The Company believes these non-GAAP financial measures better enable management and investors to analyze and compare operating performance from period to period. In calculating adjusted operating income, operating income margin, gross profit, gross margin, effective tax rate, net income, net income margin and EPS (diluted), the Company excludes the following items:
The estimated supply chain impact to adjusted operating income only includes the direct impact on net revenues and the associated impact on cost of sales, while the Company assumed no impact from any other operating expenses.
The Company has provided a quantitative reconciliation of the difference between the non-GAAP financial measures and the financial measures calculated and reported in accordance with GAAP. For a reconciliation of adjusted gross profit to gross profit, adjusted EPS (diluted) to EPS (diluted), and adjusted net revenues to net revenues, see the table entitled "Reconciliation of Reported to Adjusted Results for the Consolidated Statements of Operations." For a reconciliation of adjusted operating income to operating income and adjusted operating income margin to operating income margin, see the tables entitled "Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income" and "Reconciliation of Reported Operating Income (Loss) to Adjusted Operating Income by Segment." For a reconciliation of adjusted effective tax rate and adjusted cash tax rate to effective tax rate, see the table entitled "Reconciliation of Reported (Loss) Income Before Income Taxes and Effective Tax Rates to Adjusted Income Before Income Taxes, Effective Tax Rates and Cash Tax Rates." For a reconciliation of adjusted net income and adjusted net income margin to net income (loss), see the table entitled "Reconciliation of Reported Net Income to Adjusted Net Income."
The Company also presents free cash flow, adjusted EBITDA and net debt. Management believes that these measures are useful for investors because it provides them with an important perspective on the cash available for debt repayment and other strategic measures and provides them with the same measures that management uses as the basis for making resource allocation decisions. Free cash flow is defined as net cash provided by operating activities, less capital expenditures, adjusted EBITDA is defined as adjusted operating income less depreciation and net debt is defined as total debt less cash and cash equivalents. For a reconciliation of Free Cash Flow, see the table entitled "Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow," for adjusted EBITDA, see the table entitled "Reconciliation of Adjusted Operating Income to Adjusted EBITDA" and for net debt, see the table entitled "Reconciliation of Total Debt to Net Debt."
These non-GAAP measures should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
To the extent that the Company provides guidance, it does so only on a non-GAAP basis and does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, including adjustments that could be made for restructuring, integration and acquisition-related expenses, amortization expenses, adjustments to inventory, and other charges reflected in our reconciliation of historic numbers, the amount of which, based on historical experience, could be significant.
COTY INC. | ||||||||||||||||
SUPPLEMENTAL SCHEDULES INCLUDING NON-GAAP FINANCIAL MEASURES | ||||||||||||||||
COTY INC. & SUBSIDIARIES | ||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months EndedDecember 31, |
Six Months EndedDecember 31, |
|||||||||||||||
(in millions, except per share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net revenues | $ | 2,511.2 | $ | 2,637.6 | $ | 4,542.5 | $ | 4,875.9 | ||||||||
Cost of sales | 956.7 | 1,024.9 | 1,765.8 | 1,899.1 | ||||||||||||
as % of Net revenues | 38.1 | % | 38.9 | % | 38.9 | % | 38.9 | % | ||||||||
Gross profit | 1,554.5 | 1,612.7 | 2,776.7 | 2,976.8 | ||||||||||||
Gross margin | 61.9 | % | 61.1 | % | 61.1 | % | 61.1 | % | ||||||||
Selling, general and administrative expenses | 1,284.0 | 1,319.2 | 2,406.3 | 2,510.3 | ||||||||||||
as % of Net revenues | 51.1 | % | 50.0 | % | 53.0 | % | 51.5 | % | ||||||||
Amortization expense | 88.5 | 89.6 | 181.0 | 167.8 | ||||||||||||
Restructuring costs | 21.5 | 21.7 | 37.0 | 32.9 | ||||||||||||
Acquisition-related costs | — | 7.0 | — | 61.1 | ||||||||||||
Asset impairment charges | 965.1 | — | 977.7 | — | ||||||||||||
Operating (loss) income | (804.6 | ) | 175.2 | (825.3 | ) | 204.7 | ||||||||||
as % of Net revenues | (32.0 | %) | 6.6 | % | (18.2 | %) | 4.2 | % | ||||||||
Interest expense, net | 68.3 | 60.3 | 132.4 | 126.7 | ||||||||||||
Other expense, net | 4.8 | 4.2 | 7.5 | 8.7 | ||||||||||||
(Loss) income before income taxes | (877.7 | ) | 110.7 | (965.2 | ) | 69.3 | ||||||||||
as % of Net revenues | (35.0 | %) | 4.2 | % | (21.2 | %) | 1.4 | % | ||||||||
Provision (benefit) for income taxes | 78.3 | (7.9 | ) | 0.9 | (33.2 | ) | ||||||||||
Net (loss) income | (956.0 | ) | 118.6 | (966.1 | ) | 102.5 | ||||||||||
as % of Net revenues | (38.1 | %) | 4.5 | % | (21.3 | %) | 2.1 | % | ||||||||
Net income (loss) attributable to noncontrolling interests | 0.6 | (1.9 | ) | 1.8 | (4.1 | ) | ||||||||||
Net income attributable to redeemable noncontrolling interests | 4.0 | 11.3 | 4.8 | 17.1 | ||||||||||||
Net (loss) income attributable to Coty Inc. | $ | (960.6 | ) | $ | 109.2 | $ | (972.7 | ) | $ | 89.5 | ||||||
as % of Net revenues | (38.3 | %) | 4.1 | % | (21.4 | %) | 1.8 | % | ||||||||
Net (loss) income attributable to Coty Inc. per common share: | ||||||||||||||||
Basic | $ | (1.28 | ) | $ | 0.15 | $ | (1.30 | ) | $ | 0.12 | ||||||
Diluted | $ | (1.28 | ) | $ | 0.15 | $ | (1.30 | ) | $ | 0.12 | ||||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 751.1 | 749.6 | 751.0 | 749.1 | ||||||||||||
Diluted | 751.1 | 752.7 | 751.0 | 752.5 | ||||||||||||
COTY INC.
SUPPLEMENTAL SCHEDULES INCLUDING NON-GAAP FINANCIAL MEASURES
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS FOR THE CONSOLIDATED STATEMENTS OF OPERATIONS
These supplemental schedules provide adjusted Non-GAAP financial information and a quantitative reconciliation of the difference between the Non-GAAP financial measure and the financial measure calculated and reported in accordance with GAAP.
Three Months Ended December 31, 2018 | ||||||||||||||||||||
(in millions) |
Reported(GAAP) |
Adjustments(a) |
Adjusted(Non-GAAP) |
Foreign CurrencyTranslation |
Adjusted Results atConstant Currency |
|||||||||||||||
Net revenues | $ | 2,511.2 | $ | 2,511.2 | $ | 83.7 | $ | 2,594.9 | ||||||||||||
Gross profit | 1,554.5 | 4.6 | 1,559.1 | 45.5 | 1,604.6 | |||||||||||||||
Gross margin | 61.9 | % | 62.1 | % | 61.8 | % | ||||||||||||||
Operating (loss) income | (804.6 | ) | 1,126.9 | 322.3 | 12.3 | 334.6 | ||||||||||||||
as % of Net revenues | (32.0 | %) | 12.8 | % | 12.9 | % | ||||||||||||||
Net (loss) income attributable to Coty Inc. | $ | (960.6 | ) | $ | 1,142.5 | $ | 181.9 | |||||||||||||
as % of Net revenues | (38.3 | %) | 7.2 | % | ||||||||||||||||
EPS (diluted) | $ | (1.28 | ) | $ | 0.24 | |||||||||||||||
Three Months Ended December 31, 2017 | ||||||||||||||||||||
(in millions) |
Reported(GAAP) |
Adjustments(a) |
Adjusted(Non-GAAP) |
|||||||||||||||||
Net revenues | $ | 2,637.6 | $ | 2,637.6 | ||||||||||||||||
Gross profit | 1,612.7 | 11.3 | 1,624.0 | |||||||||||||||||
Gross margin | 61.1 | % | 61.6 | % | ||||||||||||||||
Operating income | 175.2 | 173.1 | 348.3 | |||||||||||||||||
as % of Net revenues | 6.6 | % | 13.2 | % | ||||||||||||||||
Net income attributable to Coty Inc. | $ | 109.2 | $ | 128.0 | $ | 237.2 | ||||||||||||||
as % of Net revenues | 4.1 | % | 9.0 | % | ||||||||||||||||
EPS (diluted) | $ | 0.15 | $ | 0.32 | ||||||||||||||||
(a) See "Reconciliation of Reported Operating Income to Adjusted Operated Income" and "Reconciliation of Reported Net Income to Adjusted Net Income" for a detailed description of adjusted items. |
Six Months Ended December 31, 2018 | ||||||||||||||||||||
(in millions) |
Reported(GAAP) |
Adjustments(a) |
Adjusted(Non-GAAP) |
Foreign CurrencyTranslation |
Adjusted Results atConstant Currency |
|||||||||||||||
Net revenues | $ | 4,542.5 | $ | — | $ | 4,542.5 | $ | 140.9 | $ | 4,683.4 | ||||||||||
Gross profit | 2,776.7 | 9.8 | 2,786.5 | 74.1 | 2,860.6 | |||||||||||||||
Gross margin | 61.1 | % | 61.3 | % | 61.1 | % | ||||||||||||||
Operating (loss) income | (825.3 | ) | 1,288.4 | 463.1 | 19.7 | 482.8 | ||||||||||||||
as % of Net revenues | (18.2 | %) | 10.2 | % | 10.3 | % | ||||||||||||||
Net (loss) income attributable to Coty Inc. | $ | (972.7 | ) | $ | 1,235.1 | $ | 262.4 | |||||||||||||
as % of Net revenues | (21.4 | %) | 5.8 | % | ||||||||||||||||
EPS (diluted) | $ | (1.30 | ) | $ | 0.35 | |||||||||||||||
Six Months Ended December 31, 2017 | ||||||||||||||||||||
(in millions) |
Reported(GAAP) |
Adjustments(a) |
Adjusted(Non-GAAP) |
|||||||||||||||||
Net revenues | $ | 4,875.9 | $ | 4,875.9 | ||||||||||||||||
Gross profit | 2,976.8 | 25.3 | 3,002.1 | |||||||||||||||||
Gross margin | 61.1 | % | 61.6 | % | ||||||||||||||||
Operating income | 204.7 | 339.5 | 544.2 | |||||||||||||||||
as % of Net revenues | 4.2 | % | 11.2 | % | ||||||||||||||||
Net income attributable to Coty Inc. | $ | 89.5 | $ | 224.0 | $ | 313.5 | ||||||||||||||
as % of Net revenues | 1.8 | % | 6.4 | % | ||||||||||||||||
EPS (diluted) | $ | 0.12 | $ | 0.42 | ||||||||||||||||
(a) See "Reconciliation of Reported Operating Income to Adjusted Operated Income" and "Reconciliation of Reported Net Income to Adjusted Net Income" for a detailed description of adjusted items. |
RECONCILIATION OF REPORTED OPERATING (LOSS) INCOME TO ADJUSTED OPERATING INCOME
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||
(in millions) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||
Reported Operating (Loss) Income | (804.6 | ) | 175.2 | NM | (825.3 | ) | 204.7 | NM | ||||||||||
% of Net revenues | (32.0 | %) | 6.6 | % | (18.2 | %) | 4.2 | % | ||||||||||
Asset impairment charges (a) | 965.1 | — | N/A | 977.7 | — | N/A | ||||||||||||
Amortization expense (b) | 88.5 | 89.6 | (1 | %) | 181.0 | 167.8 | 8 | % | ||||||||||
Restructuring and other business realignment costs (c) | 73.3 | 75.6 | (3 | %) | 129.7 | 106.2 | 22 | % | ||||||||||
Costs related to acquisition activities (d) | — | 7.9 | (100 | %) | — | 65.5 | (100 | %) | ||||||||||
Total adjustments to Reported Operating Income | 1,126.9 | 173.1 | >100% | 1,288.4 | 339.5 | >100% | ||||||||||||
Adjusted Operating Income | 322.3 | 348.3 | (7 | %) | 463.1 | 544.2 | (15 | %) | ||||||||||
% of Net revenues | 12.8 | % | 13.2 | % | 10.2 | % | 11.2 | % | ||||||||||
(a) |
In the three months ended December 31, 2018 we incurred $965.1 of asset impairment charges primarily due to $832.5 related to goodwill, $90.8 related to indefinite-lived other intangible assets (mainly related to the CoverGirl and Clairol trademarks) and $7.0 related to finite-lived other intangible assets. Additionally, the Company identified indicators of impairment related to the philosophy trademark that is part of the Luxury reporting unit and recorded an asset impairment charge of $22.8. The Company also fully impaired a Corporate equity security investment and recorded an asset impairment charge of $12.0. | |
In three months ended December 31, 2017, we did not incur asset impairment charges. | ||
In the six months ended December 31, 2018 , we incurred $977.7 of asset impairment charges primarily due to $832.5 related to goodwill, $90.8 related to indefinite-lived other intangible assets (mainly related to the CoverGirl and Clairol trademarks) and $7.0 related to finite-lived other intangible assets. Additionally, the Company identified indicators of impairment related to the philosophy trademark that is part of the Luxury reporting unit and recorded an asset impairment charge of $22.8 and a $12.6 charge in the first quarter due to an acquired trademark associated with a terminated pre-existing license as a result of the acquisition. The Company also fully impaired a Corporate equity security investment and recorded an asset impairment charge of $12.0. | ||
In six months ended December 31, 2017, we did not incur asset impairment charges. | ||
(b) | In the three months ended December 31, 2018, amortization expense decreased to $88.5 from $89.6 in the three months ended December 31, 2017. In the three months ended December 31, 2018, amortization expense of $40.5, $30.7, and $17.3 was reported in the Luxury, Consumer Beauty and Professional Beauty segments, respectively. In the three months ended December 31, 2017, amortization expense of $40.3, $32.6, and $16.7 was reported in the Luxury, Consumer Beauty and Professional Beauty segments, respectively. | |
In the six months ended December 31, 2018, amortization expense increased to $181.0 from $167.8 in the six months ended December 31, 2017. In the three months ended December 31, 2018, amortization expense of $80.8, $64.1, and $36.1 was reported in the Luxury, Consumer Beauty and Professional Beauty segments, respectively. In the six months ended December 31, 2017, amortization expense of $73.5, $59.0, and $35.3 was reported in the Luxury, Consumer Beauty and Professional Beauty segments, respectively. | ||
(c) | In the three months ended December 31, 2018, we incurred restructuring and other business structure realignment costs of $73.3. We incurred Restructuring costs of $21.5 primarily related to Global Integration Activities and 2018 Restructuring Actions, included in the Condensed Consolidated Statements of Operations. We incurred business structure realignment costs of $51.8 primarily related to our Global Integration Activities and certain other programs. This amount primarily includes $47.2 in Selling, general and administrative expense and $4.6 in Cost of sales. In the three months ended December 31, 2017, we incurred restructuring and other business structure realignment costs of $75.6. We incurred Restructuring costs of $21.7 primarily related to Global Integration Activities, included in the Condensed Consolidated Statements of Operations. We incurred business structure realignment costs of $53.9 primarily related to our Global Integration Activities. This amount primarily includes $43.7 in Selling, general and administrative expense and $10.2 in Cost of sales. | |
In the six months ended December 31, 2018, we incurred restructuring and other business structure realignment costs of $129.7. We incurred Restructuring costs of $37.0 primarily related to Global Integration Activities and 2018 Restructuring Actions, included in the Condensed Consolidated Statements of Operations. We incurred business structure realignment costs of $92.7 primarily related to our Global Integration Activities and certain other programs. This amount primarily includes $82.9 in Selling, general and administrative expense and $9.8 in Cost of sales. In the six months ended December 31, 2017, we incurred restructuring and other business structure realignment costs of $106.2. We incurred Restructuring costs of $32.9 primarily related to Global Integration Activities, included in the Condensed Consolidated Statements of Operations. We incurred business structure realignment costs of $73.3 primarily related to our Global Integration Activities. This amount primarily includes $52.6 in Selling, general and administrative expense and $20.7 in Cost of sales. | ||
(d) | In the three months ended December 31, 2018, we did not incur costs related to acquisition activities. In the three months ended December 31, 2017, we incurred $7.9 of costs related to acquisition activities. We recognized Acquisition-related costs of $7.0, included in the Condensed Consolidated Statements of Operations. These costs may include finder's fees, legal, accounting, valuation, and other professional or consulting fees, and other internal costs which may include compensation related expenses for dedicated internal resources. We also incurred approximately $0.9 in Costs of sales primarily reflecting revaluation of acquired inventory in connection with the acquisition of the Burberry Beauty Business in the Condensed Consolidated Statements of Operations. | |
In the six months ended December 31, 2018, we did not incur costs related to acquisition activities. In the six months ended December 31, 2017, we incurred $65.5 of costs related to acquisition activities. We recognized Acquisition-related costs of $61.1, included in the Condensed Consolidated Statements of Operations. These costs were primarily incurred in connection with the acquisition of P&G Beauty Business. These costs include amounts paid for external consulting fees and internal costs for converting the data received from P&G during the transition period to satisfy the Company's internal and external financial reporting, regulatory and other requirements, as well as legal, accounting, and valuation services, and fees paid directly to P&G. We also incurred $3.5 and $0.9 in Costs of sales primarily reflecting revaluation of acquired inventory in connection with the acquisitions of Younique and the Burberry Beauty Business, respectively in the Condensed Consolidated Statements of Operations. | ||
RECONCILIATION OF REPORTED (LOSS) INCOME BEFORE INCOME TAXES AND EFFECTIVE TAX RATES TO ADJUSTED INCOME BEFORE INCOME TAXES, EFFECTIVE TAX RATES AND CASH TAX RATES
Three Months Ended December 31, 2018 | Three Months Ended December 31, 2017 | |||||||||||||||||||
(in millions) |
(Loss)IncomeBeforeIncomeTaxes |
Provision forTaxes |
Effective TaxRate |
IncomeBeforeIncomeTaxes |
(Benefit)Provision forTaxes |
Effective TaxRate |
||||||||||||||
Reported (Loss) Income Before Taxes | $ | (877.7 | ) | $ | 78.3 | (8.9)% | $ | 110.7 | $ | (7.9 | ) | (7.1)% | ||||||||
Adjustments to Reported Operating Income (a) (b) | 1,126.9 | (19.2 | ) | 173.1 | 37.2 | |||||||||||||||
Adjusted Income Before Taxes | $ | 249.2 | $ | 59.1 | 23.7% | $ | 283.8 | $ | 29.3 | 10.3% | ||||||||||
(a) |
See a description of adjustments under "Reconciliation of Reported Operating Income to Adjusted Operating Income". |
|
(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. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The benefit/provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non–GAAP measure of profitability. |
|
The adjusted effective tax rate was 23.7% for the three months ended December 31, 2018 compared to 10.3% for the three months ended December 31, 2017. The differences were primarily due to the resolution of a foreign uncertain tax position of approximately $43.0 in the prior period.
Six Months EndedDecember 31, 2018 | Six Months EndedDecember 31, 2017 | |||||||||||||||||||
(in millions) |
(Loss)BeforeIncomeTaxes |
Provision forIncomeTaxes |
Effective TaxRate |
IncomeBeforeIncomeTaxes |
(Benefit)Provision forIncomeTaxes |
Effective TaxRate |
||||||||||||||
Reported (Loss) Income Before Taxes | $ | (965.2 | ) | $ | 0.9 | (0.1)% | $ | 69.3 | $ | (33.2 | ) | (47.9)% | ||||||||
Adjustments to Reported Operating Income (a) (b) | 1,288.4 | 45.9 | 339.5 | 96.8 | ||||||||||||||||
Adjusted Income Before Taxes | $ | 323.2 | $ | 46.8 | 14.5% | $ | 408.8 | $ | 63.6 | 15.6% | ||||||||||
(a) | See a description of adjustments under "Reconciliation of Reported Operating Income to Adjusted Operating Income". | |
(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 expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability. | |
The adjusted effective tax rate was 14.5% for the six months ended December 31, 2018 compared to 15.6% for the six months ended December 31, 2017. The differences were primarily due to the resolution of foreign uncertain tax positions.
RECONCILIATION OF REPORTED NET (LOSS) INCOME TO ADJUSTED NET INCOME
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||||||||
(in millions) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||
Reported Net (Loss) Income Attributable to Coty Inc. | $ | (960.6 | ) | $ | 109.2 | NM | $ | (972.7 | ) | $ | 89.5 | NM | ||||||||||
% of Net revenues | (38.3 | %) | 4.1 | % | (21.4 | %) | 1.8 | % | ||||||||||||||
Adjustments to Reported Operating Income (a) | 1,126.9 | 173.1 | >100% | 1,288.4 | 339.5 | >100% | ||||||||||||||||
Adjustments to noncontrolling interests (b) | (3.6 | ) | (7.9 | ) | 54 | % | (7.4 | ) | (18.7 | ) | 60 | % | ||||||||||
Change in tax provision due to adjustments to Reported Net Income Attributable to Coty Inc. | 19.2 | (37.2 | ) | >100% | (45.9 | ) | (96.8 | ) | 53 | % | ||||||||||||
Adjusted Net Income Attributable to Coty Inc. | $ | 181.9 | $ | 237.2 | (23 | %) | $ | 262.4 | $ | 313.5 | (16 | %) | ||||||||||
% of Net revenues | 7.2 | % | 9.0 | % | 5.8 | % | 6.4 | % | ||||||||||||||
Per Share Data | ||||||||||||||||||||||
Adjusted weighted-average common shares | ||||||||||||||||||||||
Basic | 751.1 | 749.6 | 751.0 | 749.1 | ||||||||||||||||||
Diluted | 752.5 | 752.7 | 752.6 | 752.5 | ||||||||||||||||||
Adjusted Net Income Attributable to Coty Inc. per Common Share | ||||||||||||||||||||||
Basic | $ | 0.24 | $ | 0.32 | $ | 0.35 | $ | 0.42 | ||||||||||||||
Diluted | $ | 0.24 | $ | 0.32 | $ | 0.35 | $ | 0.42 | ||||||||||||||
(a) | See a description of adjustments under "Reconciliation of Reported Operating Income to Adjusted Operating Income". | |
(b) | The amounts represent the impact of non-GAAP adjustments to Net income attributable to noncontrolling interest related to the Company's majority-owned consolidated subsidiaries. The amounts are based on the relevant noncontrolling interest's percentage ownership in the related subsidiary, for which the non-GAAP adjustments were made. | |
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
Three Months Ended December 31, | Six Months Ended December 31, | |||||||||||||||
(in millions) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net cash provided by operating activities | $ | 319.6 | $ | 316.7 | $ | 237.7 | $ | 307.8 | ||||||||
Capital expenditures | (125.7 | ) | (120.8 | ) | (259.3 | ) | (232.2 | ) | ||||||||
Free cash flow | $ | 193.9 | $ | 195.9 | $ | (21.6 | ) | $ | 75.6 | |||||||
RECONCILIATION OF TOTAL DEBT TO NET DEBT
(in millions) | December 31, 2018 | ||
Total debt | $ | 7,906.0 | |
Cash | 417.5 | ||
Net debt | $ | 7,488.5 | |
RECONCILIATION OF ADJUSTED OPERATING INCOME TO ADJUSTED EBITDA
(in millions) |
Twelve Months EndedDecember 31, 2018 |
|||
Adjusted operating income(a) | $ | 919.5 | ||
Depreciation (b) | 377.4 | |||
Pension Adjustment (c) | (0.8 | ) | ||
Adjusted EBITDA | 1,296.9 | |||
a |
Adjusted operating income for the twelve months ended December 31, 2018 represents the summation of the adjusted operating income for each of the three months ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018. For a reconciliation of adjusted operating income to operating income for each of those periods, see the tables entitled "Reconciliation of Reported Operating Income to Adjusted Operating Income" and "Reconciliation of Reported Operating Income to Adjusted Operating Income by Segment" for each of those periods. |
|
b | The deprecation adjustment for the twelve months ended December 31, 2018 represents the summation of depreciation expense for each of the three months ended March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018 as adjusted by $4.0, $3.4, $1.8 and $1.6, respectively, for accelerated depreciation. | |
c | The pension expense adjustment for the twelve months ended December 31, 2018 represents the summation of the non-service cost components of net periodic pension cost for each of the three months ended December 31, 2017, March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018. | |
NET DEBT/ADJUSTED EBITDA
Twelve Months EndedDecember 31, |
||
Net Debt | 7,488.5 | |
EBITDA | 1,296.9 | |
Net Debt/Adjusted EBITDA | 5.77 | |
NET REVENUES AND ADJUSTED OPERATING INCOME BY SEGMENT
Three Months Ended December 31, | ||||||||||||||||||||||||||||
Net Revenues | Change |
Reported OperatingIncome (Loss) |
Adjusted OperatingIncome |
|||||||||||||||||||||||||
(in millions) | 2018 | 2017 |
ReportedBasis |
ConstantCurrency |
2018 | Change | 2018 | Change | ||||||||||||||||||||
Luxury | $ | 1,017.5 | $ | 951.2 | 7 | % | 10 | % | $ | 113.6 | 33 | % | $ | 176.9 | 41 | % | ||||||||||||
Consumer Beauty | 967.8 | 1,138.6 | (15 | %) | (11 | %) | (906.9 | ) | NM | 54.1 | (59 | %) | ||||||||||||||||
Professional | 525.9 | 547.8 | (4 | %) | (1 | %) | 73.8 | 0 | % | 91.1 | 1 | % | ||||||||||||||||
Corporate | — | — | N/A | — | % | (85.1 | ) | (3 | %) | 0.2 | (75 | %) | ||||||||||||||||
Total | $ | 2,511.2 | $ | 2,637.6 | (5 | %) | (2 | %) | $ | (804.6 | ) | NM | $ | 322.3 | (7 | %) | ||||||||||||
Six Months Ended December 31, | ||||||||||||||||||||||||||||
Net Revenues | Change |
Reported OperatingIncome |
Adjusted OperatingIncome |
|||||||||||||||||||||||||
(in millions) | 2018 | 2017 |
ReportedBasis |
ConstantCurrency |
2018 | Change | 2018 | Change | ||||||||||||||||||||
Luxury | $ | 1,810.4 | $ | 1,715.6 | 6 | % | 8 | % | $ | 162.3 | 14 | % | $ | 278.5 | 29 | % | ||||||||||||
Consumer Beauty | 1,796.6 | 2,182.0 | (18 | %) | (14 | %) | (925.5 | ) | NM | 68.9 | (69 | %) | ||||||||||||||||
Professional | 935.5 | 978.3 | (4 | %) | (2 | %) | 78.8 | 10 | % | 114.9 | 7 | % | ||||||||||||||||
Corporate | — | — | N/A | — | % | (140.9 | ) | 17 | % | 0.8 | (50 | %) | ||||||||||||||||
Total | $ | 4,542.5 | $ | 4,875.9 | (7 | %) | (4 | %) | $ | (825.3 | ) | NM | $ | 463.1 | (15 | %) | ||||||||||||
NET REVENUES BY GEOGRAPHIC REGION
Three Months Ended December 31, | ||||||||||||
Net Revenues | Change | |||||||||||
(in millions) | 2018 | 2017 | Reported Basis |
ConstantCurrency |
||||||||
North America | $ | 742.2 | $ | 741.8 | 0% | 0% | ||||||
Europe | 1,201.6 | 1,297.6 | (7%) | (4%) | ||||||||
ALMEA | 567.4 | 598.2 | (5%) | 2% | ||||||||
Total | $ | 2,511.2 | $ | 2,637.6 | (5%) | (2%) | ||||||
Six Months Ended December 31, | ||||||||||||
Net Revenues | Change | |||||||||||
(in millions) | 2018 | 2017 |
Reported Basis |
ConstantCurrency |
||||||||
North America | $ | 1,387.1 | $ | 1,494.3 | (7%) | (7%) | ||||||
Europe | 2,073.8 | 2,264.1 | (8%) | (6%) | ||||||||
ALMEA | 1,081.6 | 1,117.5 | (3%) | 4% | ||||||||
Total | $ | 4,542.5 | $ | 4,875.9 | (7%) | (4%) | ||||||
RECONCILIATION OF REPORTED OPERATING (LOSS) INCOME OPERATING INCOME BY SEGMENT
Three Months Ended December 31, 2018 | ||||||||||||||||||||
(in millions) |
Reported(GAAP) |
Adjustments (a) |
Adjusted(Non-GAAP) |
ForeignCurrencyTranslation |
AdjustedResults atConstantCurrency |
|||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||
Luxury | $ | 113.6 | $ | (63.3 | ) | $ | 176.9 | $ | 4.6 | $ | 181.5 | |||||||||
Consumer Beauty | (906.9 | ) | (961.0 | ) | 54.1 | 4.0 | 58.1 | |||||||||||||
Professional Beauty | 73.8 | (17.3 | ) | 91.1 | 3.7 | 94.8 | ||||||||||||||
Corporate | (85.1 | ) | (85.3 | ) | 0.2 | — | 0.2 | |||||||||||||
Total | $ | (804.6 | ) | $ | (1,126.9 | ) | $ | 322.3 | $ | 12.3 | $ | 334.6 | ||||||||
OPERATING MARGIN | ||||||||||||||||||||
Luxury | 11.2 | % | 17.4 | % | 17.4 | % | ||||||||||||||
Consumer Beauty | (93.7 | %) | 5.6 | % | 5.8 | % | ||||||||||||||
Professional Beauty | 14.0 | % | 17.3 | % | 17.4 | % | ||||||||||||||
Corporate | N/A | N/A | N/A | |||||||||||||||||
Total | (32.0 | %) | 12.8 | % | 12.9 | % | ||||||||||||||
Three Months Ended December 31, 2017 | ||||||||||||||||||||
(in millions) |
Reported(GAAP) |
Adjustments (a) |
Adjusted(Non-GAAP) |
|||||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||
Luxury | $ | 85.1 | $ | (40.3 | ) | $ | 125.4 | |||||||||||||
Consumer Beauty | 99.3 | (32.6 | ) | 131.9 | ||||||||||||||||
Professional Beauty | 73.5 | (16.7 | ) | 90.2 | ||||||||||||||||
Corporate | (82.7 | ) | (83.5 | ) | 0.8 | |||||||||||||||
Total | $ | 175.2 | $ | (173.1 | ) | $ | 348.3 | |||||||||||||
OPERATING MARGIN | ||||||||||||||||||||
Luxury | 8.9 | % | 13.2 | % | ||||||||||||||||
Consumer Beauty | 8.7 | % | 11.6 | % | ||||||||||||||||
Professional Beauty | 13.4 | % | 16.5 | % | ||||||||||||||||
Corporate | N/A | N/A | ||||||||||||||||||
Total | 6.6 | % | 13.2 | % | ||||||||||||||||
(a) | See "Reconciliation of Reported Operating Income to Adjusted Operated Income" for a detailed description of adjusted items. | |
Six Months Ended December 31, 2018 | ||||||||||||||||||||
(in millions) |
Reported(GAAP) |
Adjustments (a) |
Adjusted(Non-GAAP) |
ForeignCurrencyTranslation |
AdjustedResults atConstantCurrency |
|||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||
Luxury | $ | 162.3 | $ | (116.2 | ) | $ | 278.5 | $ | 8.0 | $ | 286.5 | |||||||||
Consumer Beauty | (925.5 | ) | (994.4 | ) | 68.9 | 6.4 | 75.3 | |||||||||||||
Professional Beauty | 78.8 | (36.1 | ) | 114.9 | 5.3 | 120.2 | ||||||||||||||
Corporate | (140.9 | ) | (141.7 | ) | 0.8 | — | 0.8 | |||||||||||||
Total | $ | (825.3 | ) | $ | (1,288.4 | ) | $ | 463.1 | $ | 19.7 | $ | 482.8 | ||||||||
OPERATING MARGIN | ||||||||||||||||||||
Luxury | 9.0 | % | 15.4 | % | 15.5 | % | ||||||||||||||
Consumer Beauty | (51.5 | %) | 3.8 | % | 4.0 | % | ||||||||||||||
Professional Beauty | 8.4 | % | 12.3 | % | 12.5 | % | ||||||||||||||
Corporate | N/A | N/A | N/A | |||||||||||||||||
Total | (18.2 | %) | 10.2 | % | 10.3 | % | ||||||||||||||
Six Months Ended December 31, 2017 | ||||||||||||||||||||
(in millions) |
Reported(GAAP) |
Adjustments (a) |
Adjusted(Non-GAAP) |
|||||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||
Luxury | $ | 141.8 | $ | (73.5 | ) | $ | 215.3 | |||||||||||||
Consumer Beauty | 161.2 | (59.0 | ) | 220.2 | ||||||||||||||||
Professional Beauty | 71.8 | (35.3 | ) | 107.1 | ||||||||||||||||
Corporate | (170.1 | ) | (171.7 | ) | 1.6 | |||||||||||||||
Total | $ | 204.7 | $ | (339.5 | ) | $ | 544.2 | |||||||||||||
OPERATING MARGIN | ||||||||||||||||||||
Luxury | 8.3 | % | 12.5 | % | ||||||||||||||||
Consumer Beauty | 7.4 | % | 10.1 | % | ||||||||||||||||
Professional Beauty | 7.3 | % | 10.9 | % | ||||||||||||||||
Corporate | N/A | N/A | ||||||||||||||||||
Total | 4.2 | % | 11.2 | % | ||||||||||||||||
RECONCILIATION OF REPORTED NET REVENUES TO LIKE-FOR-LIKE NET REVENUES
Three Months Ended December 31, 2018 vs. Three Months Ended December 31, 2017Net Revenue Change |
||||||||
|
||||||||
Net Revenues Change YoY | Reported Basis | Constant Currency |
Impact fromDivestitures1 |
Organic (LFL) | ||||
Luxury | 7% | 10% | (1)% | 11% | ||||
Consumer Beauty | (15)% | (11)% | (4)% | (7)% | ||||
Professional Beauty | (4)% | (1)% | —% | (1%) | ||||
Total Company | (5)% | (2)% | (3)% | 1% |
1 | Divestitures reflect the net revenue reduction from the termination of Guess and the divestitures of the license of Playboy and the license of Cerruti in the three months ended December 31, 2017. | |
Six Months Ended December 31, 2018 vs. Six Months Ended December 31, 2017Net Revenue Change |
||||||||
|
||||||||
Net Revenues Change YoY | Reported | Constant Currency |
Impact from theAcquisition andDivestitures 1 |
Organic (LFL) | ||||
Luxury | 6% | 8% | 3% | 5% | ||||
Consumer Beauty | (18)% | (14)% | (4)% | (10)% | ||||
Professional Beauty | (4%) | (2)% | —% | (2%) | ||||
Total Company | (7)% | (4)% | (1)% | (3)% | ||||
1 | Acquisitions reflect the net revenue contribution from the acquisition of Burberry in the three months ended September 30, 2018 and the net revenue reduction from the termination of Guess and the divestitures of the license of Playboy and the license of Cerruti in the six months ended December 31, 2017. | |
COTY INC. & SUBSIDIARIES | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
(in millions) |
December31, 2018 |
June 30,2018 |
||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 417.5 | $ | 331.6 | ||||
Restricted cash | 27.5 | 30.6 | ||||||
Trade receivables—less allowances of $72.8 and $81.8, respectively | 1,542.7 | 1,536.0 | ||||||
Inventories | 1,164.6 | 1,148.9 | ||||||
Prepaid expenses and other current assets | 562.1 | 603.9 | ||||||
Total current assets | 3,714.4 | 3,651.0 | ||||||
Property and equipment, net | 1,625.7 | 1,680.8 | ||||||
Goodwill | 7,665.0 | 8,607.1 | ||||||
Other intangible assets, net | 7,929.4 | 8,284.4 | ||||||
Deferred income taxes | 182.7 | 107.4 | ||||||
Other noncurrent assets | 153.5 | 299.5 | ||||||
TOTAL ASSETS | $ | 21,270.7 | $ | 22,630.2 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,818.9 | $ | 1,928.6 | ||||
Accrued expenses and other current liabilities | 1,738.8 | 1,844.4 | ||||||
Short-term debt and current portion of long-term debt | 255.7 | 218.9 | ||||||
Income and other taxes payable | 51.6 | 52.1 | ||||||
Total current liabilities | 3,865.0 | 4,044.0 | ||||||
Long-term debt, net | 7,560.9 | 7,305.4 | ||||||
Pension and other post-employment benefits | 519.6 | 533.3 | ||||||
Deferred income taxes | 840.6 | 842.5 | ||||||
Other noncurrent liabilities | 385.7 | 388.5 | ||||||
Total liabilities | 13,171.8 | 13,113.7 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
REDEEMABLE NONCONTROLLING INTERESTS | 487.6 | 661.3 | ||||||
EQUITY: | ||||||||
Preferred Stock | — | — | ||||||
Common Stock | 8.1 | 8.1 | ||||||
Additional paid-in capital | 10,734.9 | 10,750.8 | ||||||
Accumulated deficit | (1,729.7 | ) | (626.2 | ) | ||||
Accumulated other comprehensive income | 33.6 | 158.8 | ||||||
Treasury stock | (1,441.8 | ) | (1,441.8 | ) | ||||
Total Coty Inc. stockholders' equity | 7,605.1 | 8,849.7 | ||||||
Noncontrolling interests | 6.2 | 5.5 | ||||||
Total equity | 7,611.3 | 8,855.2 | ||||||
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | $ | 21,270.7 | $ | 22,630.2 | ||||
COTY INC. & SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
Six Months EndedDecember 31, |
||||||||
(in millions) | 2018 | 2017 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net (loss) income | $ | (966.1 | ) | $ | 102.5 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 367.7 | 350.5 | ||||||
Deferred income taxes | (55.9 | ) | (75.1 | ) | ||||
Provision for bad debts | 9.4 | 9.0 | ||||||
Provision for pension and other post-employment benefits | 18.2 | 22.2 | ||||||
Share-based compensation | 8.2 | 16.2 | ||||||
Asset impairment charges | 977.7 | — | ||||||
Non-cash restructuring charges | 23.8 | 0.2 | ||||||
Other | 26.4 | (5.3 | ) | |||||
Change in operating assets and liabilities, net of effects from purchase of acquired companies: | ||||||||
Trade receivables | (45.5 | ) | (246.6 | ) | ||||
Inventories | (35.2 | ) | (22.2 | ) | ||||
Prepaid expenses and other current assets | 19.7 | (47.6 | ) | |||||
Accounts payable | (28.6 | ) | 18.7 | |||||
Accrued expenses and other current liabilities | (87.4 | ) | 185.6 | |||||
Income and other taxes payable | 12.8 | 19.5 | ||||||
Other noncurrent assets | 24.7 | (14.9 | ) | |||||
Other noncurrent liabilities | (32.2 | ) | (4.9 | ) | ||||
Net cash provided by operating activities | 237.7 | 307.8 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Capital expenditures | (259.3 | ) | (232.2 | ) | ||||
Payment for business combinations and asset acquisitions, net of cash acquired | (40.8 | ) | (264.6 | ) | ||||
Proceeds from sale of asset | — | 2.8 | ||||||
Net cash used in investing activities | (300.1 | ) | (494.0 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net proceeds from short-term debt, original maturity less than three months | 39.7 | 71.5 | ||||||
Proceeds from revolving loan facilities | 1,076.6 | 1,437.0 | ||||||
Repayments of revolving loan facilities | (644.8 | ) | (1,166.4 | ) | ||||
Repayments of term loans and other long-term debt | (95.6 | ) | (95.5 | ) | ||||
Dividend payment | (188.4 | ) | (188.1 | ) | ||||
Net proceeds from issuance of Class A Common Stock and Series A Preferred Stock | 0.9 | 13.7 | ||||||
Net proceeds from foreign currency contracts | 2.4 | 8.2 | ||||||
Distributions to noncontrolling interests, redeemable noncontrolling interests and mandatorily redeemable financial instruments | (22.9 | ) | (40.0 | ) | ||||
Payment of debt issuance costs | (10.7 | ) | (4.0 | ) | ||||
Other | (3.5 | ) | (3.2 | ) | ||||
Net cash provided by financing activities | 153.7 | 33.2 | ||||||
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (8.5 | ) | 8.0 | |||||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 82.8 | (145.0 | ) | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period | 362.2 | 570.7 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period | $ | 445.0 | $ | 425.7 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | ||||||||
Cash paid during the period for interest | $ | 140.7 | $ | 129.4 | ||||
Cash received during the period for settlement of interest rate swaps | 43.2 | — | ||||||
Cash paid during the period for income taxes, net of refunds received | 57.6 | 57.5 | ||||||
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES: | ||||||||
Accrued capital expenditure additions | $ | 83.3 | $ | 72.6 | ||||
Non-cash contingent consideration for business combination | — | 5.0 | ||||||
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