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Business Wire 8-May-2019 6:30 AM
Third Quarter Results Show Solid Profit and Cash Delivery
Full Year FY19 Outlook Remains On Track with Expectations
Quarterly Dividend of $0.125 with Stock Dividend Election Program Introduced
Coty Inc. (NYSE:COTY) today announced financial results for the third quarter of fiscal year 2019, ended March 31, 2019.
Results at a glance | Three Months EndedMarch 31, 2019 | Nine Months EndedMarch 31, 2019 | ||||||||||||||||||||||||
Change YoY | Change YoY | |||||||||||||||||||||||||
(in millions, except per share data) |
ReportedBasis |
Organic(LFL) |
ReportedBasis |
Organic(LFL) |
||||||||||||||||||||||
Net revenues | $ | 1,990.6 | (10.4 | %) | (3.7 | %) | $ | 6,533.1 | (8.0 | %) | (3.3 | %) | ||||||||||||||
Operating (loss) income - reported | 85.5 | >100% | (739.8 | ) | NM | |||||||||||||||||||||
Operating income - adjusted* | 229.5 | — | % | 692.6 | (10 | %) | ||||||||||||||||||||
Net (loss) income - reported | (12.1 | ) | 84 | % | (984.8 | ) | NM | |||||||||||||||||||
Net income - adjusted* | 101.6 | 6 | % | 364.0 | (11 | %) | ||||||||||||||||||||
EPS (diluted) - reported | $ | (0.02 | ) | (80 | %) | $ | (1.31 | ) | NM | |||||||||||||||||
EPS (diluted) - adjusted* | $ | 0.13 | — | % | $ | 0.48 | (11 | %) | ||||||||||||||||||
* 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:
Dividend and Net Debt:
Management Comments
Commenting on the operating results, Pierre Laubies, Coty CEO said:
"The close of the third quarter comes only a few months after the new senior management team has been put into place, and I'm very pleased with how the new management team has coalesced. Third quarter results clearly indicate that supply issues are largely resolved and we expect very limited impact from supply chain disruption on the business in the remainder of fiscal 2019. Performance this quarter also shows the increased control that we now have over our cost structure, both in terms of general and administrative costs as well as proactive management of non-working A&CP. Taken together, these factors have allowed us to deliver solid adjusted operating income in-line with the expectations we laid out last quarter. Thus, while we have achieved good profit delivery, the weak top-line result demonstrates that there is still much to be done to turnaround the business. We must capitalize on the solid results of the Luxury and Professional Beauty divisions, and address the weakness of the Consumer Beauty division's performance via shelf productivity, product range simplification, and brand investment at scale. These are the main priorities of the strategic plan that we are completing and which we will start deploying as soon as fiscal 2020. We are more than ever convinced that the core business principles, which were outlined on the second quarter earnings call, are the most relevant levers to maximize value creation in the short and medium term."
Commenting on the financials, Pierre-Andre Terisse, Coty CFO said:
"Alongside the solid profit result, we achieved positive free cash flow in both the quarter and year-to-date, which reflects increased focus and prioritization in the business. As a result, we ended the quarter with our leverage under control. Having been immersed in the business for several months and deeply involved in the formulation of the strategic plan, I would like to confirm that, in the medium term, we are targeting a net debt to adjusted EBITDA ratio of less than 4 times, which will be achieved through a combination of EBITDA growth and net debt paydown. Consistent with this objective, Coty will maintain our quarterly dividend of $0.125 per share and initiate a stock dividend reinvestment program giving shareholders the option to receive dividends fully in cash or in a combination of 50% cash and 50% common stock. JAB has informed us that it will elect to receive its dividend in stock for half of its holdings until Coty has reached its medium term targeted leverage. We are also pleased with the successful completion of the Tender Offer in recent days and the transaction's underlying expression of confidence and support in Coty from JAB."
Outlook
We continue to expect that FY19 constant currency adjusted operating income will be moderately below FY18, implying a solid profit performance in the fourth quarter, despite expected continued weakness in top-line. We continue to expect positive free cash flow for FY19, with solid free cash flow generation in 4Q19.
Third Quarter Fiscal 2019 Business Review by Segment
Luxury
Three Months Ended March 31, 2019 | Nine Months Ended March 31, 2019 | ||||||||||||||||||
Actual |
Reported BasisYoY |
LFL | Actual |
Reported BasisYoY |
LFL | ||||||||||||||
Net Revenues | 729.2 | (3.1%) | 2.8% | $2,539.6 | 2.9% | 4.4% | |||||||||||||
Reported | Adjusted | Reported | Adjusted | ||||||||||||||||
Operating Income | 87.7 | 126.1 | 250.0 | 404.6 | |||||||||||||||
Operating Margin | 12.0% | 17.3% | 9.8% | 15.9% | |||||||||||||||
In 3Q19, reported Luxury net revenues of $729.2 million decreased by 3.1% versus the prior year. On a LFL basis, Luxury net revenues increased by 2.8%. We estimate that the required revenue recognition accounting change and supply chain disruptions negatively impacted revenues by approximately 1%.
Solid 3Q19 results were supported by continued strength in Burberry, Gucci and Calvin Klein, and the return to strong growth in Hugo Boss as the supply chain disruptions abated and the brand saw momentum behind the launch of Boss Bottled Infinite. The continued sell-out strength of Chloé Nomade and Marc Jacobs' Daisy drove sustained share gains for both brands. We recently announced the renewal of the Marc Jacobs fragrance license, reinforcing the strength and longevity of the Luxury brand portfolio. We also recently launched our new Gucci lipstick collection, which features a wide range of shades and finishes, and represents the first step in our re-launch of the Gucci make-up line.
The Luxury division delivered reported operating income of $87.7 million, an increase of 48% vs. the prior-year period. 3Q19 adjusted operating income was $126.1 million, reflecting very strong 26% growth from the prior year, driven by solid fixed cost reductions, cost of sales savings resulting from the supply chain integration programs and streamlining of non-working A&CP. The 3Q19 adjusted operating margin was 17.3%, an increase of 400 bps versus 3Q18. Despite close to $50 million in profit impact from supply chain disruptions and $12 million FX translation impact, the year-to-date Luxury adjusted operating income grew 28.2%, resulting in a 310 bps margin improvement to 15.9%.
Consumer Beauty
Three Months Ended March 31, 2019 | Nine Months Ended March 31, 2019 | ||||||||||||||||||
Actual |
Reported BasisYoY |
LFL | Actual |
Reported BasisYoY |
LFL | ||||||||||||||
Net Revenues | 840.3 | (17.8%) | (10.0)% | 2,636.9 | (17.7%) | (10.4)% | |||||||||||||
Reported | Adjusted | Reported | Adjusted | ||||||||||||||||
Operating (Loss) Income | 24.1 | 55.8 | (901.4) | 124.7 | |||||||||||||||
Operating Margin | 2.9% | 6.6% | (34.2)% | 4.7% | |||||||||||||||
3Q19 Consumer Beauty net revenues of $840.3 million declined 17.8% on a reported basis and declined 10.0% LFL. We estimate that the required revenue recognition policy change and supply chain disruptions impacted revenues by approximately 3%. Excluding these temporary factors, this performance continues to be broadly in-line with sell-out trends, which are declining high single digits as our brands face share losses and continued weakness in the global mass beauty category, particularly in the U.S. and Europe.
By category, and adjusting for negative impact of the revenue recognition accounting change, net revenue in color cosmetics declined high single digits and was consistent with the retail performance. Sell-out in Cover Girl, Rimmel and Max Factor cosmetics brands was in line with our category average, while Sally Hansen delivered low single digit sell-out growth and share gains in the U.S. Net revenues in retail hair also declined high single digits, though sell-out performance was strong in ALMEA and Wella Retail gained share across multiple markets. Body care revenues improved year over year as we lapped an easy comparable from 3Q18 when body care net revenues were temporarily depressed as a result of our pricing intervention in Brazil, which significantly impacted shipments of Brazil local body care brands. During the quarter, we saw solid share gains in both Brazil local brands and the adidas body care portfolio.
Younique revenues and profit declined during 3Q19 driven by lower presenter sponsorship, although Younique's customizable skincare line, YOU·OLOGY, was launched during the quarter and is off to a solid start.
Reported operating loss in 3Q19 of $24.1 million compared to reported operating income of $64.2 million in the prior year period. The 3Q19 adjusted operating income of $55.8 million declined from $97.3 million in the prior year period, resulting in an adjusted operating margin of 6.6%. Despite reductions in fixed costs, the adjusted operating margin was impacted by net revenue contraction and gross margin pressure, driven by both the negative impact from the change in accounting for revenue recognition and regional mix linked to Brazil.
Professional Beauty
Three Months Ended March 31, 2019 | Nine Months Ended March 31, 2019 | ||||||||||||||||||
Actual |
Reported BasisYoY |
LFL | Actual |
Reported BasisYoY |
LFL | ||||||||||||||
Net Revenues | 421.1 | (6.1%) | (0.6%) | 1,356.6 | (4.9%) | (1.3)% | |||||||||||||
Reported | Adjusted | Reported | Adjusted | ||||||||||||||||
Operating Income | 30.7 | 47.3 | 109.5 | 162.2 | |||||||||||||||
Operating Margin | 7.3% | 11.2% | 8.1% | 12.0% | |||||||||||||||
Professional Beauty 3Q19 net revenues of $421.1 million declined by 6.1%, with LFL down 0.6%, including minor impact from both supply chain and the revenue recognition accounting change. The modest decline was driven by weakness in North America, due to lingering impacts from Coty's supply chain disruptions, and trade inventory reductions at certain key customers. With service levels now largely restored for OPI, the brand returned to solid growth, and we continued to enjoy very strong momentum in ghd due to the product launch of the ghd Glide hot-brush in the quarter and the continued success of the Platinum+ styler.
Professional Beauty reported operating income of $30.7 million increased from $11.4 million in the prior year period, while adjusted operating income grew 57% to $47.3 million. The Professional Beauty division adjusted operating margin of 11.2% grew 450 bps, driven by strong gross margin performance and good fixed cost reduction. Despite over $20 million in profit impact from supply chain disruptions and $8 million negative FX impact, the year-to-date Professional Beauty adjusted operating income grew 18.2%, resulting in 240 bps margin improvement to 12.0%.
Third Quarter Fiscal 2019 Business Review by Geographic Region
Three Months Ended March 31, | |||||||||||||||||||
Net Revenues | Change | ||||||||||||||||||
(in millions) | 2019 | 2018 |
ReportedBasis |
Organic(LFL) |
|||||||||||||||
North America | $ | 611.7 | $ | 713.5 | (14 | %) | (13 | %) | |||||||||||
Europe | 837.9 | 976.0 | (14 | %) | (5 | %) | |||||||||||||
ALMEA | 541.0 | 533.2 | 1 | % | 11 | % | |||||||||||||
Total | $ | 1,990.6 | $ | 2,222.7 | (10 | %) | (4 | %) | |||||||||||
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, May 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: 2479048). 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 strategic planning, 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), the Company's future operations and strategy, 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), strategic transactions (including mergers and acquisitions, joint ventures, investments, divestitures, licenses and portfolio rationalizations), 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, finalization of a strategic plan and the anticipated priorities of the Company's new senior management, the dividend reinvestment program, and the future impact of U.S. tax laws including the base erosion anti-abuse tax and the global low-taxed income rules. 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 MEASURESCOTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) |
|||||||||||||||||||||
Three Months EndedMarch 31, |
Nine Months EndedMarch 31, |
||||||||||||||||||||
(in millions, except per share data) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Net revenues | $ | 1,990.6 | $ | 2,222.7 | $ | 6,533.1 | $ | 7,098.6 | |||||||||||||
Cost of sales | 741.2 | 812.3 | 2,507.0 | 2,711.4 | |||||||||||||||||
as % of Net revenues | 37.2 | % | 36.5 | % | 38.4 | % | 38.2 | % | |||||||||||||
Gross profit | 1,249.4 | 1,410.4 | 4,026.1 | 4,387.2 | |||||||||||||||||
Gross margin | 62.8 | % | 63.5 | % | 61.6 | % | 61.8 | % | |||||||||||||
Selling, general and administrative expenses | 1,070.5 | 1,251.6 | 3,476.8 | 3,761.9 | |||||||||||||||||
as % of Net revenues | 53.8 | % | 56.3 | % | 53.2 | % | 53.0 | % | |||||||||||||
Amortization expense | 86.7 | 92.8 | 267.7 | 260.6 | |||||||||||||||||
Restructuring costs | 6.7 | 42.7 | 43.7 | 75.6 | |||||||||||||||||
Acquisition-related costs | — | 2.6 | — | 63.7 | |||||||||||||||||
Asset impairment charges | — | — | 977.7 | — | |||||||||||||||||
Operating income (loss) | 85.5 | 20.7 | (739.8 | ) | 225.4 | ||||||||||||||||
as % of Net revenues | 4.3 | % | 0.9 | % | (11.3 | %) | 3.2 | % | |||||||||||||
Interest expense, net | 72.0 | 72.6 | 204.4 | 199.3 | |||||||||||||||||
Other expense, net | 17.5 | 3.8 | 25.0 | 12.5 | |||||||||||||||||
(Loss) income before income taxes | (4.0 | ) | (55.7 | ) | (969.2 | ) | 13.6 | ||||||||||||||
as % of Net revenues | (0.2 | %) | (2.5 | %) | (14.8 | %) | 0.2 | % | |||||||||||||
Provision (benefit) for income taxes | — | 4.4 | 0.9 | (28.8 | ) | ||||||||||||||||
Net (loss) income | (4.0 | ) | (60.1 | ) | (970.1 | ) | 42.4 | ||||||||||||||
as % of Net revenues | (0.2 | %) | (2.7 | %) | (14.8 | %) | 0.6 | % | |||||||||||||
Net income (loss) attributable to noncontrolling interests | 2.3 | 1.1 | 4.1 | (3.0 | ) | ||||||||||||||||
Net income attributable to redeemable noncontrolling interests | 5.8 | 15.8 | 10.6 | 32.9 | |||||||||||||||||
Net (loss) income attributable to Coty Inc. | $ | (12.1 | ) | $ | (77.0 | ) | $ | (984.8 | ) | $ | 12.5 | ||||||||||
as % of Net revenues | (0.6 | %) | (3.5 | %) | (15.1 | %) | 0.2 | % | |||||||||||||
Net (loss) income attributable to Coty Inc. per common share: | |||||||||||||||||||||
Basic | $ | (0.02 | ) | $ | (0.10 | ) | $ | (1.31 | ) | $ | 0.02 | ||||||||||
Diluted | $ | (0.02 | ) | $ | (0.10 | ) | $ | (1.31 | ) | $ | 0.02 | ||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||||
Basic | 751.4 | 750.1 | 751.1 | 749.4 | |||||||||||||||||
Diluted | 751.4 | 750.1 | 751.1 | 753.1 | |||||||||||||||||
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 March 31, 2019 | ||||||||||||||||||||||||||
(in millions) |
Reported(GAAP) |
Adjustments(a) |
Adjusted(Non-GAAP) |
Foreign CurrencyTranslation |
Adjusted Results atConstant Currency |
|||||||||||||||||||||
Net revenues | $ | 1,990.6 | $ | 1,990.6 | $ | 109.6 | $ | 2,100.2 | ||||||||||||||||||
Gross profit | 1,249.4 | 2.2 | 1,251.6 | 64.6 | 1,316.2 | |||||||||||||||||||||
Gross margin | 62.8 | % | 62.9 | % | 62.7 | % | ||||||||||||||||||||
Operating income | 85.5 | 144.0 | 229.5 | 11.5 | 241.0 | |||||||||||||||||||||
as % of Net revenues | 4.3 | % | 11.5 | % | 11.5 | % | ||||||||||||||||||||
Net (loss) income attributable to Coty Inc. | $ | (12.1 | ) | $ | 113.7 | $ | 101.6 | |||||||||||||||||||
as % of Net revenues | (0.6 | %) | 5.1 | % | ||||||||||||||||||||||
EPS (diluted) | $ | (0.02 | ) | $ | 0.13 | |||||||||||||||||||||
Three Months Ended March 31, 2018 | ||||||||||||||||||||||||||
(in millions) | Reported(GAAP) | Adjustments(a) | Adjusted(Non-GAAP) | |||||||||||||||||||||||
Net revenues | $ | 2,222.7 | $ | 2,222.7 | ||||||||||||||||||||||
Gross profit | 1,410.4 | 18.0 | 1,428.4 | |||||||||||||||||||||||
Gross margin | 63.5 | % | 64.3 | % | ||||||||||||||||||||||
Operating income | 20.7 | 207.9 | 228.6 | |||||||||||||||||||||||
as % of Net revenues | 0.9 | % | 10.3 | % | ||||||||||||||||||||||
Net income attributable to Coty Inc. | $ | (77.0 | ) | $ | 173.2 | $ | 96.2 | |||||||||||||||||||
as % of Net revenues | (3.5 | %) | 4.3 | % | ||||||||||||||||||||||
EPS (diluted) | $ | (0.10 | ) | $ | 0.13 | |||||||||||||||||||||
(a) See "Reconciliation of Reported Operating (Loss) Income to Adjusted Operated Income" and "Reconciliation of Reported Net (Loss) Income to Adjusted Net Income" for a detailed description of adjusted items. |
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Nine Months Ended March 31, 2019 | ||||||||||||||||||||||||||
(in millions) | Reported(GAAP) | Adjustments(a) | Adjusted(Non-GAAP) | Foreign CurrencyTranslation |
Adjusted Results atConstant Currency |
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Net revenues | $ | 6,533.1 | $ | — | $ | 6,533.1 | $ | 250.5 | $ | 6,783.6 | ||||||||||||||||
Gross profit | 4,026.1 | 12.0 | 4,038.1 | 138.8 | 4,176.9 | |||||||||||||||||||||
Gross margin | 61.6 | % | 61.8 | % | 61.6 | % | ||||||||||||||||||||
Operating (loss) income | (739.8 | ) | 1,432.4 | 692.6 | 31.2 | 723.8 | ||||||||||||||||||||
as % of Net revenues | (11.3 | %) | 10.6 | % | 10.7 | % | ||||||||||||||||||||
Net (loss) income attributable to Coty Inc. | $ | (984.8 | ) | $ | 1,348.8 | $ | 364.0 | |||||||||||||||||||
as % of Net revenues | (15.1 | %) | 5.6 | % | ||||||||||||||||||||||
EPS (diluted) | $ | (1.31 | ) | $ | 0.48 | |||||||||||||||||||||
Nine Months Ended March 31, 2018 | ||||||||||||||||||||||||||
(in millions) | Reported(GAAP) | Adjustments(a) | Adjusted(Non-GAAP) | |||||||||||||||||||||||
Net revenues | $ | 7,098.6 | $ | 7,098.6 | ||||||||||||||||||||||
Gross profit | 4,387.2 | 43.3 | 4,430.5 | |||||||||||||||||||||||
Gross margin | 61.8 | % | 62.4 | % | ||||||||||||||||||||||
Operating income | 225.4 | 547.4 | 772.8 | |||||||||||||||||||||||
as % of Net revenues | 3.2 | % | 10.9 | % | ||||||||||||||||||||||
Net income attributable to Coty Inc. | $ | 12.5 | $ | 397.2 | $ | 409.7 | ||||||||||||||||||||
as % of Net revenues | 0.2 | % | 5.8 | % | ||||||||||||||||||||||
EPS (diluted) | $ | 0.02 | $ | 0.54 | ||||||||||||||||||||||
(a) See "Reconciliation of Reported Operating (Loss) Income to Adjusted Operated Income" and "Reconciliation of Reported Net (Loss) 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 March 31, | Nine Months Ended March 31, | ||||||||||||||||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||||
Reported Operating (Loss) Income | 85.5 | 20.7 | >100% | (739.8 | ) | 225.4 | NM | ||||||||||||||||||
% of Net revenues | 4.3 | % | 0.9 | % | (11.3 | %) | 3.2 | % | |||||||||||||||||
Amortization expense (a) | 86.7 | 92.8 | (7 | %) | 267.7 | 260.6 | 3 | % | |||||||||||||||||
Restructuring and other business realignment costs (b) | 57.3 | 111.0 | (48 | %) | 187.0 | 217.2 | (14 | %) | |||||||||||||||||
Costs related to acquisition activities (c) | — | 4.1 | (100 | %) | — | 69.6 | (100 | %) | |||||||||||||||||
Asset impairment charges (d) | — | — | N/A | 977.7 | — | N/A | |||||||||||||||||||
Total adjustments to Reported Operating Income | 144.0 | 207.9 | (31 | %) | 1,432.4 | 547.4 | >100% | ||||||||||||||||||
Adjusted Operating Income | 229.5 | 228.6 | — | % | 692.6 | 772.8 | (10 | %) | |||||||||||||||||
% of Net revenues | 11.5 | % | 10.3 | % | 10.6 | % | 10.9 | % | |||||||||||||||||
(a) |
In the three months ended March 31, 2019, amortization expense decreased to $86.7 from $92.8 in the three months ended March 31, 2018. In the three months ended March 31, 2019, amortization expense of $38.4, $31.7, and $16.6 was reported in the Luxury, Consumer Beauty and Professional Beauty segments, respectively. In three months ended March 31, 2018, amortization expense of $41.0, $33.1, and $18.7 was reported in the Luxury, Consumer Beauty, and Professional Beauty segments, respectively. | |
In the nine months ended March 31, 2019, amortization expense increased to $267.7 from $260.6 in the nine months ended March 31, 2018. In the nine months ended March 31, 2019, amortization expense of $119.2, $95.8, and $52.7 was reported in the Luxury, Consumer Beauty and Professional Beauty segments, respectively. In the nine months ended March 31, 2018, amortization expense of $114.5, $92.1, and $54.0 was reported in the Luxury, Consumer Beauty, and Professional Beauty segments, respectively. | ||
(b) |
In the three months ended March 31, 2019, we incurred restructuring and other business structure realignment costs of $57.3. We incurred Restructuring costs of $6.7 primarily related to our global integration activities and 2018 restructuring actions, included in the Condensed Consolidated Statements of Operations. We incurred business structure realignment costs of $50.6 primarily related to our global integration activities and certain other programs. This amount primarily includes $48.4 in Selling, general and administrative expense and $2.2 in Cost of sales in the Condensed Consolidated Statements of Operations. In the three months ended March 31, 2018, we incurred restructuring and other business structure realignment costs of $111.0. We incurred Restructuring costs of $42.7 primarily related to our global integration activities and 2018 restructuring actions, included in the Condensed Consolidated Statements of Operations. We incurred business structure realignment costs of $68.3 primarily related to our global integration activities and certain other programs. This amount primarily includes $51.8 in Selling, general and administrative expense and $16.5 in Cost of sales. | |
(c) |
In the nine months ended March 31, 2019, we incurred restructuring and other business structure realignment costs of $187.0. We incurred Restructuring costs of $43.7 primarily related to our global integration activities and 2018 restructuring actions, included in the Condensed Consolidated Statements of Operations. We incurred business structure realignment costs of $143.3 primarily related to our global integration activities and certain other programs. This amount primarily includes $131.3 in Selling, general and administrative expense and $12.0 in Cost of sales. In the nine months ended March 31, 2018, we incurred restructuring and other business structure realignment costs of $217.2. We incurred Restructuring costs of $75.6 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 $141.6 primarily related to our Global Integration Activities and certain other programs. This amount primarily includes $104.4 in Selling, general and administrative expense and $37.2 in Cost of sales. | |
(d) |
In the three months ended March 31, 2019, we did not incur costs related to acquisition activities. In the three months ended March 31, 2018, we incurred $4.1 of costs related to acquisition activities. We recognized acquisition-related costs of $2.6 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 $1.5 in cost 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 nine months ended March 31, 2019 we did not incur costs related to acquisition activities. In the nine months ended March 31, 2018, we incurred $69.6 of costs related to acquisition activities. We recognized acquisition-related costs of $63.7 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 $2.4 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. | ||
(e) |
In the three months ended March 31, 2019 and in the three months ended March 31, 2018, we did not incur any asset impairment charges. | |
In the nine months ended March 31, 2019, we incurred $977.7 of asset impairment charges primarily due to a $12.6 charge in the first quarter due to an acquired luxury division trademark associated with a terminated pre-existing license as a result of the acquisition, $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 in the Consumer Beauty Division, as described and recorded in Asset impairment charges in the Consolidated Statements of Operations. 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 the nine months ended March 31, 2018, we did not incur any asset impairment charges. | ||
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 March 31, 2019 | Three Months Ended March 31, 2018 | ||||||||||||||||||||||||||||
(in millions) |
(Loss)IncomeBeforeIncomeTaxes |
Provision forTaxes |
Effective TaxRate |
(Loss)IncomeBeforeIncomeTaxes |
Provision forTaxes |
Effective TaxRate |
|||||||||||||||||||||||
Reported (Loss) Before Taxes | $ | (4.0 | ) | $ | — | — | % | $ | (55.7 | ) | $ | 4.4 | (7.9 | )% | |||||||||||||||
Adjustments to Reported Operating Income (a) (c) | 144.0 | 38.6 | 207.9 | 31.8 | |||||||||||||||||||||||||
Other Adjustments (b) (c) | 12.7 | 0.8 | — | — | |||||||||||||||||||||||||
Adjusted Income Before Taxes | $ | 152.7 | $ | 39.4 | 25.8 | % | $ | 152.2 | $ | 36.2 | 23.8 | % | |||||||||||||||||
(a) |
See a description of adjustments under "Reconciliation of Reported Operating (Loss) Income to Adjusted Operating Income". | |
(b) |
In the three months ended March 31, 2019, the Company incurred legal and advisory services of $12.7 rendered in connection with the evaluation of the tender offer initiated by certain of our shareholders. | |
(c) |
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 25.8% for the three months ended March 31, 2019 compared to 23.8% for the three months ended March 31, 2018. The differences were primarily due to the jurisdictional mix of income.
Nine Months EndedMarch 31, 2019 | Nine Months EndedMarch 31, 2018 | ||||||||||||||||||||||||||||
(in millions) |
(Loss)IncomeBeforeIncomeTaxes |
Provision forIncomeTaxes |
Effective TaxRate |
IncomeBeforeIncomeTaxes |
(Benefit)Provision forIncomeTaxes |
Effective TaxRate |
|||||||||||||||||||||||
Reported (Loss) Income Before Taxes | $ | (969.2 | ) | $ | 0.9 | (0.1 | )% | $ | 13.6 | $ | (28.8 | ) | (211.8 | )% | |||||||||||||||
Adjustments to Reported Operating Income (a) (c) | 1,432.4 | 84.5 | 547.4 | 128.6 | |||||||||||||||||||||||||
Other Adjustments (b) (c) | 12.7 | 0.8 | — | — | |||||||||||||||||||||||||
Adjusted Income Before Taxes | $ | 475.9 | $ | 86.2 | 18.1 | % | $ | 561.0 | $ | 99.8 | 17.8 | % | |||||||||||||||||
(a) |
See a description of adjustments under "Reconciliation of Reported Operating (Loss) Income to Adjusted Operating Income". | |
(b) |
In the three months ended March 31, 2019, the Company incurred legal and advisory services of $12.7 rendered in connection with the evaluation of the tender offer initiated by certain of our shareholders | |
(c) |
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 18.1% for the nine months ended March 31, 2019 compared to 17.8% for the nine months ended March 31, 2018. 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 March 31, | Nine Months Ended March 31, | ||||||||||||||||||||||||||||
(in millions) | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||||||||||||
Reported Net (Loss) Income Attributable to Coty Inc. | $ | (12.1 | ) | $ | (77.0 | ) | 84 | % | $ | (984.8 | ) | $ | 12.5 | NM | |||||||||||||||
% of Net revenues | (0.6 | %) | (3.5 | %) | (15.1 | %) | 0.2 | % | |||||||||||||||||||||
Adjustments to Reported Operating Income (a) | 144.0 | 207.9 | (31 | %) | 1,432.4 | 547.4 | >100% | ||||||||||||||||||||||
Adjustments to Other Expense (b) | 12.7 | — | N/A | 12.7 | — | N/A | |||||||||||||||||||||||
Adjustments to noncontrolling interests (b) | (3.6 | ) | (2.9 | ) | (24 | %) | (11.0 | ) | (21.6 | ) | 49 | % | |||||||||||||||||
Change in tax provision due to adjustments to Reported NetIncome Attributable to Coty Inc. |
(39.4 | ) | (31.8 | ) | (24 | %) | (85.3 | ) | (128.6 | ) | 34 | % | |||||||||||||||||
Adjusted Net Income Attributable to Coty Inc. | $ | 101.6 | $ | 96.2 | 6 | % | $ | 364.0 | $ | 409.7 | (11 | %) | |||||||||||||||||
% of Net revenues | 5.1 | % | 4.3 | % | 5.6 | % | 5.8 | % | |||||||||||||||||||||
Per Share Data | |||||||||||||||||||||||||||||
Adjusted weighted-average common shares | |||||||||||||||||||||||||||||
Basic | 751.4 | 750.1 | 751.1 | 749.4 | |||||||||||||||||||||||||
Diluted | 753.9 | 754.0 | 753.0 | 753.1 | |||||||||||||||||||||||||
Adjusted Net Income Attributable to Coty Inc. per Common Share | |||||||||||||||||||||||||||||
Basic | $ | 0.14 | $ | 0.13 | $ | 0.48 | $ | 0.55 | |||||||||||||||||||||
Diluted | $ | 0.13 | $ | 0.13 | $ | 0.48 | $ | 0.54 | |||||||||||||||||||||
(a) | See a description of adjustments under "Reconciliation of Reported Operating (Loss) Income to Adjusted Operating Income". | |
(b) | In the three months ended March 31, 2019, the Company incurred legal and advisory services of $12.7 rendered in connection with the evaluation of the tender offer initiated by certain of our shareholders. | |
(c) | 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 March 31, | Nine Months Ended March 31, | ||||||||||||||||||||
(in millions) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Net cash provided by operating activities | $ | 213.7 | $ | (118.9 | ) | $ | 451.4 | $ | 188.9 | ||||||||||||
Capital expenditures | (71.6 | ) | (86.5 | ) | (330.9 | ) | (318.7 | ) | |||||||||||||
Free cash flow | $ | 142.1 | $ | (205.4 | ) | $ | 120.5 | $ | (129.8 | ) | |||||||||||
RECONCILIATION OF TOTAL DEBT TO NET DEBT
(in millions) | March 31, 2019 | ||||
Total debt | $ | 7,772.3 | |||
Cash and cash equivalents | 384.1 | ||||
Net debt | $ | 7,388.2 | |||
RECONCILIATION OF ADJUSTED OPERATING INCOME TO ADJUSTED EBITDA
(in millions) |
Twelve Months EndedMarch 31, 2019 |
|||||
Adjusted operating income(a) | $ | 922.1 | ||||
Depreciation (b) | 377.1 | |||||
Pension Adjustment (c) | (1.2 | ) | ||||
Adjusted EBITDA | 1,298.0 | |||||
a | Adjusted operating income for the twelve months ended March 31, 2019 represents the summation of the adjusted operating income for each of the three months ended June 30, 2018, September 30, 2018, December 31, 2018 and March 31, 2019. 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 depreciation adjustment for the twelve months ended March 31, 2019 represents the summation of depreciation expense for each of the three months ended June 30, 2018, September 30, 2018, December 31, 2018 and March 31, 2019 as adjusted by $3.3, $1.8, $1.5 and $0.2, respectively, for accelerated depreciation. | |
c | The pension expense adjustment for the twelve months ended March 31, 2019 represents the summation of the non-service cost components of net periodic pension cost for each of the three months ended June 30, 2018, September 30, 2018, December 31, 2018 and March 31, 2019. | |
NET DEBT/ADJUSTED EBITDA
Twelve Months EndedMarch 31, 2019 |
||||
Net Debt | 7,388.2 | |||
EBITDA | 1,298.0 | |||
Net Debt/Adjusted EBITDA | 5.69 | |||
NET REVENUES AND ADJUSTED OPERATING INCOME BY SEGMENT
Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||
Net Revenues | Change |
Reported OperatingIncome (Loss) |
Adjusted OperatingIncome |
||||||||||||||||||||||||||||||||||
(in millions) | 2019 | 2018 |
ReportedBasis |
ConstantCurrency |
2019 | Change | 2019 | Change | |||||||||||||||||||||||||||||
Luxury | $ | 729.2 | $ | 752.5 | (3 | %) | 2 | % | $ | 87.7 | 48 | % | $ | 126.1 | 26 | % | |||||||||||||||||||||
Consumer Beauty | 840.3 | 1,021.7 | (18 | %) | (13 | %) | 24.1 | (62 | %) | 55.8 | (43 | %) | |||||||||||||||||||||||||
Professional | 421.1 | 448.5 | (6 | %) | (1 | %) | 30.7 | >100% | 47.3 | 57 | % | ||||||||||||||||||||||||||
Corporate | — | — | N/A | — | % | (57.0 | ) | 50 | % | 0.3 | (63 | %) | |||||||||||||||||||||||||
Total | $ | 1,990.6 | $ | 2,222.7 | (10 | %) | (6 | %) | $ | 85.5 | >100% | $ | 229.5 | — | % | ||||||||||||||||||||||
Nine Months Ended March 31, | |||||||||||||||||||||||||||||||||||||
Net Revenues | Change |
Reported OperatingIncome |
Adjusted OperatingIncome |
||||||||||||||||||||||||||||||||||
(in millions) | 2019 | 2018 |
ReportedBasis |
ConstantCurrency |
2019 | Change | 2019 | Change | |||||||||||||||||||||||||||||
Luxury | $ | 2,539.6 | $ | 2,468.1 | 3 | % | 6 | % | $ | 250.0 | 24 | % | $ | 404.6 | 28 | % | |||||||||||||||||||||
Consumer Beauty | 2,636.9 | 3,203.7 | (18 | %) | (14 | %) | (901.4 | ) | NM | 124.7 | (61 | %) | |||||||||||||||||||||||||
Professional | 1,356.6 | 1,426.8 | (5 | %) | (1 | %) | 109.5 | 32 | % | 162.2 | 18 | % | |||||||||||||||||||||||||
Corporate | — | — | N/A | — | % | (197.9 | ) | 30 | % | 1.1 | (54 | %) | |||||||||||||||||||||||||
Total | $ | 6,533.1 | $ | 7,098.6 | (8 | %) | (5 | %) | $ | (739.8 | ) | NM | $ | 692.6 | (10 | %) | |||||||||||||||||||||
NET REVENUES BY GEOGRAPHIC REGION
Three Months Ended March 31, | |||||||||||||||||||
Net Revenues | Change | ||||||||||||||||||
(in millions) | 2019 | 2018 |
Reported Basis |
ConstantCurrency |
|||||||||||||||
North America | $ | 611.7 | $ | 713.5 | (14 | %) | (14 | %) | |||||||||||
Europe | 837.9 | 976.0 | (14 | %) | (7 | %) | |||||||||||||
ALMEA | 541.0 | 533.2 | 1 | % | 8 | % | |||||||||||||
Total | $ | 1,990.6 | $ | 2,222.7 | (10 | %) | 6 | % | |||||||||||
Nine Months Ended March 31, | |||||||||||||||||||
Net Revenues | Change | ||||||||||||||||||
(in millions) | 2019 | 2018 |
Reported Basis |
ConstantCurrency |
|||||||||||||||
North America | $ | 1,998.8 | $ | 2,207.8 | (9 | %) | (9 | %) | |||||||||||
Europe | 2,911.7 | 3,240.1 | (10 | %) | (6 | %) | |||||||||||||
ALMEA | 1,622.6 | 1,650.7 | (2 | %) | 5 | % | |||||||||||||
Total | $ | 6,533.1 | $ | 7,098.6 | (8 | %) | (5 | %) | |||||||||||
RECONCILIATION OF REPORTED OPERATING INCOME (LOSS) TO ADJUSTED OPERATING INCOME BY SEGMENT
Three Months Ended March 31, 2019 | ||||||||||||||||||||||||||
(in millions) | Reported(GAAP) | Adjustments (a) |
Adjusted(Non-GAAP) |
ForeignCurrencyTranslation |
AdjustedResults atConstantCurrency |
|||||||||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||||||||
Luxury | $ | 87.7 | $ | (38.4 | ) | $ | 126.1 | $ | 4.1 | $ | 130.2 | |||||||||||||||
Consumer Beauty | 24.1 | (31.7 | ) | 55.8 | 4.9 | 60.7 | ||||||||||||||||||||
Professional Beauty | 30.7 | (16.6 | ) | 47.3 | 2.3 | 49.6 | ||||||||||||||||||||
Corporate | (57.0 | ) | (57.3 | ) | 0.3 | 0.2 | 0.5 | |||||||||||||||||||
Total | $ | 85.5 | $ | (144.0 | ) | $ | 229.5 | $ | 11.5 | $ | 241.0 | |||||||||||||||
OPERATING MARGIN | ||||||||||||||||||||||||||
Luxury | 12.0 | % | 17.3 | % | 17.0 | % | ||||||||||||||||||||
Consumer Beauty | 2.9 | % | 6.6 | % | 6.8 | % | ||||||||||||||||||||
Professional Beauty | 7.3 | % | 11.2 | % | 11.1 | % | ||||||||||||||||||||
Corporate | N/A | N/A | N/A | |||||||||||||||||||||||
Total | 4.3 | % | 11.5 | % | 11.5 | % | ||||||||||||||||||||
Three Months Ended March 31, 2018 | ||||||||||||||||||||||||||
(in millions) | Reported(GAAP) | Adjustments (a) | Adjusted(Non-GAAP) | |||||||||||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||||||||
Luxury | $ | 59.4 | $ | (41.0 | ) | $ | 100.4 | |||||||||||||||||||
Consumer Beauty | 64.2 | (33.1 | ) | 97.3 | ||||||||||||||||||||||
Professional Beauty | 11.4 | (18.7 | ) | 30.1 | ||||||||||||||||||||||
Corporate | (114.3 | ) | (115.1 | ) | 0.8 | |||||||||||||||||||||
Total | $ | 20.7 | $ | (207.9 | ) | $ | 228.6 | |||||||||||||||||||
OPERATING MARGIN | ||||||||||||||||||||||||||
Luxury | 7.9 | % | 13.3 | % | ||||||||||||||||||||||
Consumer Beauty | 6.3 | % | 9.5 | % | ||||||||||||||||||||||
Professional Beauty | 2.5 | % | 6.7 | % | ||||||||||||||||||||||
Corporate | N/A | N/A | ||||||||||||||||||||||||
Total | 0.9 | % | 10.3 | % | ||||||||||||||||||||||
(a) | See "Reconciliation of Reported Operating (Loss) Income to Adjusted Operated Income" for a detailed description of adjusted items. | |
Nine Months Ended March 31, 2019 | ||||||||||||||||||||||||||
(in millions) | Reported(GAAP) | Adjustments (a) | Adjusted(Non-GAAP) | Foreign CurrencyTranslation |
AdjustedResults atConstantCurrency |
|||||||||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||||||||
Luxury | $ | 250.0 | $ | (154.6 | ) | $ | 404.6 | $ | 12.1 | $ | 416.7 | |||||||||||||||
Consumer Beauty | (901.4 | ) | (1,026.1 | ) | 124.7 | 11.3 | 136.0 | |||||||||||||||||||
Professional Beauty | 109.5 | (52.7 | ) | 162.2 | 7.6 | 169.8 | ||||||||||||||||||||
Corporate | (197.9 | ) | (199.0 | ) | 1.1 | 0.2 | 1.3 | |||||||||||||||||||
Total | $ | (739.8 | ) | $ | (1,432.4 | ) | $ | 692.6 | $ | 31.2 | $ | 723.8 | ||||||||||||||
OPERATING MARGIN | ||||||||||||||||||||||||||
Luxury | 9.8 | % | 15.9 | % | 16.0 | % | ||||||||||||||||||||
Consumer Beauty | (34.2 | %) | 4.7 | % | 4.9 | % | ||||||||||||||||||||
Professional Beauty | 8.1 | % | 12.0 | % | 12.1 | % | ||||||||||||||||||||
Corporate | N/A | N/A | N/A | |||||||||||||||||||||||
Total | (11.3 | %) | 10.6 | % | 10.7 | % | ||||||||||||||||||||
Nine Months Ended March 31, 2018 | ||||||||||||||||||||||||||
(in millions) | Reported(GAAP) | Adjustments (a) | Adjusted(Non-GAAP) | |||||||||||||||||||||||
OPERATING INCOME (LOSS) | ||||||||||||||||||||||||||
Luxury | $ | 201.2 | $ | (114.5 | ) | $ | 315.7 | |||||||||||||||||||
Consumer Beauty | 225.4 | (92.1 | ) | 317.5 | ||||||||||||||||||||||
Professional Beauty | 83.2 | (54.0 | ) | 137.2 | ||||||||||||||||||||||
Corporate | (284.4 | ) | (286.8 | ) | 2.4 | |||||||||||||||||||||
Total | $ | 225.4 | $ | (547.4 | ) | $ | 772.8 | |||||||||||||||||||
OPERATING MARGIN | ||||||||||||||||||||||||||
Luxury | 8.2 | % | 12.8 | % | ||||||||||||||||||||||
Consumer Beauty | 7.0 | % | 9.9 | % | ||||||||||||||||||||||
Professional Beauty | 5.8 | % | 9.6 | % | ||||||||||||||||||||||
Corporate | N/A | N/A | ||||||||||||||||||||||||
Total | 3.2 | % | 10.9 | % | ||||||||||||||||||||||
(a) | See "Reconciliation of Reported Operating Income to Adjusted Operated Income" for a detailed description of adjusted items. | |
RECONCILIATION OF REPORTED NET REVENUES TO LIKE-FOR-LIKE NET REVENUES
|
Three Months Ended March 31, 2019 vs. Three Months Ended March
31, 2018
Net Revenue Change |
|||||||||||||||||||
Net Revenues Change YoY | Reported Basis | Constant Currency |
Impact fromDivestitures1 |
Organic (LFL) | ||||||||||||||||
Luxury | (3)% | 2% | (1)% | 3% | ||||||||||||||||
Consumer Beauty | (18)% | (13)% | (3)% | (10)% | ||||||||||||||||
Professional Beauty | (6)% | (1)% | —% | (1%) | ||||||||||||||||
Total Company | (10)% | (6)% | (2)% | (4)% | ||||||||||||||||
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 March 31, 2018. | |
Nine Months Ended March 31, 2019 vs. Nine Months Ended March 31,
2018
Net Revenue Change |
||||||||||||||||||||
Net Revenues Change YoY | Reported | Constant Currency |
Impact from theAcquisition andDivestitures 1 |
Organic (LFL) | ||||||||||||||||
Luxury | 3% | 6% | 2% | 4% | ||||||||||||||||
Consumer Beauty | (18)% | (14)% | (4)% | (10)% | ||||||||||||||||
Professional Beauty | (5%) | (1)% | —% | (1%) | ||||||||||||||||
Total Company | (8)% | (5)% | (2)% | (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 nine months ended March 31, 2018. | |
COTY INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) |
|||||||||||
(in millions) | March 31, 2019 | June 30, 2018 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 384.1 | $ | 331.6 | |||||||
Restricted cash | 36.1 | 30.6 | |||||||||
Trade receivables—less allowances of $64.3 and $81.8, respectively | 1,211.6 | 1,536.0 | |||||||||
Inventories | 1,183.5 | 1,148.9 | |||||||||
Prepaid expenses and other current assets | 587.2 | 603.9 | |||||||||
Total current assets | 3,402.5 | 3,651.0 | |||||||||
Property and equipment, net | 1,609.2 | 1,680.8 | |||||||||
Goodwill | 7,618.8 | 8,607.1 | |||||||||
Other intangible assets, net | 7,791.3 | 8,284.4 | |||||||||
Deferred income taxes | 183.3 | 107.4 | |||||||||
Other noncurrent assets | 151.5 | 299.5 | |||||||||
TOTAL ASSETS | $ | 20,756.6 | $ | 22,630.2 | |||||||
LIABILITIES AND EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 1,844.0 | $ | 1,928.6 | |||||||
Accrued expenses and other current liabilities | 1,488.0 | 1,844.4 | |||||||||
Short-term debt and current portion of long-term debt | 196.7 | 218.9 | |||||||||
Income and other taxes payable | 50.1 | 52.1 | |||||||||
Total current liabilities | 3,578.8 | 4,044.0 | |||||||||
Long-term debt, net | 7,490.9 | 7,305.4 | |||||||||
Pension and other post-employment benefits | 518.2 | 533.3 | |||||||||
Deferred income taxes | 836.0 | 842.5 | |||||||||
Other noncurrent liabilities | 378.0 | 388.5 | |||||||||
Total liabilities | 12,801.9 | 13,113.7 | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||
REDEEMABLE NONCONTROLLING INTERESTS | 452.2 | 661.3 | |||||||||
EQUITY: | |||||||||||
Preferred Stock | 0.1 | — | |||||||||
Common Stock | 8.1 | 8.1 | |||||||||
Additional paid-in capital | 10,674.6 | 10,750.8 | |||||||||
Accumulated deficit | (1,741.8 | ) | (626.2 | ) | |||||||
Accumulated other comprehensive income | (1.5 | ) | 158.8 | ||||||||
Treasury stock | (1,441.8 | ) | (1,441.8 | ) | |||||||
Total Coty Inc. stockholders' equity | 7,497.7 | 8,849.7 | |||||||||
Noncontrolling interests | 4.8 | 5.5 | |||||||||
Total equity | 7,502.5 | 8,855.2 | |||||||||
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | $ | 20,756.6 | $ | 22,630.2 | |||||||
COTY INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
|||||||||||
Nine Months EndedMarch 31, | |||||||||||
(in millions) | 2019 | 2018 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net (loss) income | $ | (970.1 | ) | $ | 42.4 | ||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 550.3 | 543.5 | |||||||||
Deferred income taxes | (57.5 | ) | (157.7 | ) | |||||||
Provision for bad debts | 7.8 | 15.4 | |||||||||
Provision for pension and other post-employment benefits | 27.3 | 33.3 | |||||||||
Share-based compensation | 7.8 | 26.1 | |||||||||
Asset impairment charges | 977.7 | — | |||||||||
Non-cash restructuring charges | 27.8 | 0.9 | |||||||||
Other | 28.6 | 15.3 | |||||||||
Change in operating assets and liabilities, net of effects from purchase of acquired companies: | |||||||||||
Trade receivables | 290.1 | (33.5 | ) | ||||||||
Inventories | (59.4 | ) | (101.3 | ) | |||||||
Prepaid expenses and other current assets | (7.5 | ) | (76.2 | ) | |||||||
Accounts payable | (5.3 | ) | (80.2 | ) | |||||||
Accrued expenses and other current liabilities | (344.1 | ) | (27.4 | ) | |||||||
Income and other taxes payable | (3.8 | ) | 64.6 | ||||||||
Other noncurrent assets | 19.4 | (7.2 | ) | ||||||||
Other noncurrent liabilities | (37.7 | ) | (69.1 | ) | |||||||
Net cash provided by operating activities | 451.4 | 188.9 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Capital expenditures | (330.9 | ) | (318.7 | ) | |||||||
Payment for business combinations and asset acquisitions, net of cash acquired | (40.8 | ) | (265.5 | ) | |||||||
Proceeds from sale of asset | 0.7 | 3.5 | |||||||||
Net cash used in investing activities | (371.0 | ) | (580.7 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Net (repayments of) proceeds from short-term debt, original maturity less than three months | (17.1 | ) | 5.1 | ||||||||
Proceeds from revolving loan facilities | 1,587.4 | 2,298.1 | |||||||||
Repayments of revolving loan facilities | (1,106.8 | ) | (1,535.8 | ) | |||||||
Repayments of term loans and other long-term debt | (142.5 | ) | (150.6 | ) | |||||||
Dividend payment | (282.8 | ) | (281.9 | ) | |||||||
Net proceeds from issuance of Class A Common Stock and Series A Preferred Stock | 2.0 | 20.0 | |||||||||
Net payments of foreign currency contracts | (6.5 | ) | (2.7 | ) | |||||||
Proceeds from noncontrolling interests | — | 0.2 | |||||||||
Distributions to noncontrolling interests, redeemable noncontrolling interests and mandatorily redeemablefinancial instruments |
(34.3 | ) | (54.0 | ) | |||||||
Payment of debt issuance costs | (10.7 | ) | (4.0 | ) | |||||||
Other | (5.4 | ) | (3.5 | ) | |||||||
Net cash (used in) provided by financing activities | (16.7 | ) | 290.9 | ||||||||
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (5.7 | ) | 16.7 | ||||||||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 58.0 | (84.2 | ) | ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period | 362.2 | 570.7 | |||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period | $ | 420.2 | $ | 486.5 | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: | |||||||||||
Cash paid during the period for interest | $ | 195.8 | $ | 194.2 | |||||||
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 | 88.4 | 83.9 | |||||||||
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES: | |||||||||||
Accrued capital expenditure additions | $ | 97.3 | $ | 104.3 | |||||||
Non-cash contingent consideration for business combination | — | 5.0 | |||||||||
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