UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
 
Form 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                    TO          
COMMISSION FILE NUMBER 001-35964
 
 
 
COTY INC.
(Exact name of registrant as specified in its charter)
Delaware
 
13-3823358
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
350 Fifth Avenue, New York, NY
 
10118
(Address of principal executive offices)
 
(Zip Code)
(212) 389-7300
Registrant’s telephone number, including area code
 
 
 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes ý      No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes ý      No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer   ý
 
Accelerated filer   ¨
 
Non-accelerated filer   ¨
 
Smaller reporting company   ¨
 
 
 
Emerging growth company   ¨
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes ¨     No ý
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Class A Common Stock, $0.01 par value
COTY
New York Stock Exchange
At May 1, 2019, 751,398,085 shares of the registrant’s Class A Common Stock, $0.01 par value, were outstanding.
 



COTY INC.
INDEX TO FORM 10-Q
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
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

Gross profit
1,249.4

 
1,410.4

 
4,026.1

 
4,387.2

Selling, general and administrative expenses
1,070.5

 
1,251.6

 
3,476.8

 
3,761.9

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

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

Provision (benefit) for income taxes

 
4.4

 
0.9

 
(28.8
)
Net (loss) income
(4.0
)
 
(60.1
)
 
(970.1
)
 
42.4

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

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


See notes to Condensed Consolidated Financial Statements.


1

Table of Contents

COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
 
2019
 
2018
 
2019
 
2018
Net (loss) income
$
(4.0
)
 
$
(60.1
)
 
$
(970.1
)
 
$
42.4

Other comprehensive (loss) income:
 

 
 

 
 

 
 

Foreign currency translation adjustment
(18.6
)
 
247.4

 
(127.5
)
 
518.5

Net unrealized derivative (loss) gain on cash flow hedges, net of taxes of $3.4 and $1.5, and $8.9 and $(2.5) during the three and nine months ended, respectively
(11.0
)
 
6.9

 
(28.7
)
 
14.2

Pension and other post-employment benefits adjustment, net of tax of $2.0 and $(0.7), and $0.6 and $(0.7) during the three and nine months ended, respectively
(5.6
)
 
(2.3
)
 
(4.0
)
 
(0.7
)
Total other comprehensive (loss) income, net of tax
(35.2
)
 
252.0

 
(160.2
)
 
532.0

Comprehensive (loss) income
(39.2
)
 
191.9

 
(1,130.3
)
 
574.4

Comprehensive income (loss) attributable to noncontrolling interests:
 

 
 

 
 

 
 

Net income (loss)
2.3

 
1.1

 
4.1

 
(3.0
)
Foreign currency translation adjustment
(0.1
)
 
(0.2
)
 
0.1

 
0.3

Total comprehensive income (loss) attributable to noncontrolling interests
2.2

 
0.9

 
4.2

 
(2.7
)
Comprehensive income attributable to redeemable noncontrolling interests:
 
 
 
 
 
 
 
Net income
5.8

 
15.8

 
10.6

 
32.9

Comprehensive (loss) income attributable to Coty Inc.
$
(47.2
)
 
$
175.2

 
$
(1,145.1
)
 
$
544.2


See notes to Condensed Consolidated Financial Statements.

2

Table of Contents

COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
 
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 (See Note 18)


 


REDEEMABLE NONCONTROLLING INTERESTS
452.2

 
661.3

EQUITY:
 

 
 

Preferred Stock, $0.01 par value; 20.0 shares authorized, 10.2 and 5.0 issued and 8.4 and 5.0 outstanding, respectively, at March 31, 2019 and June 30, 2018
0.1

 

Class A Common Stock, $0.01 par value; 1,000.0 shares authorized, 816.4 and 815.8 issued and 751.4 and 750.7 outstanding, respectively, at March 31, 2019 and June 30, 2018
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—at cost, shares: 65.0 at March 31, 2019 and June 30, 2018
(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

See notes to Condensed Consolidated Financial Statements.

3

Table of Contents

COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND
REDEEMABLE NONCONTROLLING INTERESTS
For the Three and Nine Months Ended March 31, 2019
(In millions, except per share data)
(Unaudited)
 
Preferred Stock
 
Class A
Common Stock
 
Additional
Paid-in Capital
 
(Accumulated Deficit)
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Total Coty Inc.
Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
 
Redeemable
Noncontrolling Interests
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
 
 
 
BALANCE as previously reported—July 1, 2018
5.0

 
$

 
815.8

 
$
8.1

 
$
10,750.8

 
$
(626.2
)
 
$
158.8

 
65.0

 
$
(1,441.8
)
 
$
8,849.7

 
$
5.5

 
$
8,855.2

 
$
661.3

Adjustment due to the adoption of ASU No. 2016-16 (See Note 2)


 


 


 


 


 
(112.6
)
 


 


 


 
(112.6
)
 


 
(112.6
)
 


Adjustment due to the adoption of ASC 606 (See Note 3)
 
 
 
 
 
 
 
 
 
 
(18.2
)
 
 
 
 
 
 
 
(18.2
)
 
 
 
(18.2
)
 
 
BALANCE as adjusted—July 1, 2018
5.0

 
$

 
815.8

 
$
8.1

 
$
10,750.8

 
$
(757.0
)
 
$
158.8

 
65.0

 
$
(1,441.8
)
 
$
8,718.9

 
$
5.5

 
$
8,724.4

 
$
661.3

Exercise of employee stock options and restricted stock units
 
 
 
 

 

 
0.7

 
 
 
 
 
 
 
 
 
0.7

 
 
 
0.7

 
 
Share-based compensation expense
 
 
 
 
 
 
 
 
6.4

 
 
 
 
 
 
 
 
 
6.4

 
 
 
6.4

 
 
Dividends ($0.125 per common share)
 
 
 
 
 
 
 
 
(94.0
)
 
 
 
 
 
 
 
 
 
(94.0
)
 
 
 
(94.0
)
 
 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
(12.1
)
 
 
 
 
 
 
 
(12.1
)
 
1.2

 
(10.9
)
 
0.8

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
(48.0
)
 
 
 
 
 
(48.0
)
 
0.2

 
(47.8
)
 


Distribution to noncontrolling interests, net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
(1.3
)
 
(1.3
)
 
(4.3
)
Additional redeemable noncontrolling interests due to employee grants (See Note 17)


 


 


 


 
(1.6
)
 


 


 


 


 
(1.6
)
 


 
(1.6
)
 
1.6

Adjustment of redeemable noncontrolling interests to redemption value
 
 
 
 
 
 
 
 
37.2

 
 
 
 
 
 
 
 
 
37.2

 
 
 
37.2

 
(37.2
)
BALANCE—September 30, 2018
5.0

 
$

 
815.8

 
$
8.1

 
$
10,699.5

 
$
(769.1
)
 
$
110.8

 
65.0

 
$
(1,441.8
)
 
$
8,607.5

 
$
5.6

 
$
8,613.1

 
$
622.2

Cancellation of Preferred Stock
(3.1
)
 

 


 


 


 


 


 


 


 

 


 

 


Exercise of employee stock options and restricted stock units


 


 
0.4

 

 
0.2

 


 


 


 


 
0.2

 


 
0.2

 


Shares withheld for employee taxes


 


 


 


 
(1.3
)
 


 


 


 


 
(1.3
)
 


 
(1.3
)
 


Share-based compensation expense


 


 


 


 
4.4

 


 


 


 


 
4.4

 


 
4.4

 


Dividends ($0.125 per Common Share)
 
 
 
 
 
 
 
 
(94.6
)
 
 
 
 
 
 
 
 
 
(94.6
)
 
 
 
(94.6
)
 
 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
(960.6
)
 
 
 
 
 
 
 
(960.6
)
 
0.6

 
(960.0
)
 
4.0

Other comprehensive loss
 
 
 
 
 
 
 
 
 
 
 
 
(77.2
)
 
 
 
 
 
(77.2
)
 
 
 
(77.2
)
 
 
Distribution to noncontrolling interests, net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 
(11.9
)
Adjustment of redeemable noncontrolling interests to redemption value
 
 
 
 
 
 
 
 
126.7

 
 
 
 
 
 
 
 
 
126.7

 
 
 
126.7

 
(126.7
)
BALANCE—December 31, 2018
1.9

 
$

 
816.2

 
$
8.1

 
$
10,734.9

 
$
(1,729.7
)
 
$
33.6

 
65.0

 
$
(1,441.8
)
 
$
7,605.1

 
$
6.2

 
$
7,611.3

 
$
487.6

Issuance of Preferred Stock
6.9

 
0.1

 


 


 
0.6

 


 


 


 


 
0.7

 


 
0.7

 


Cancellation of Preferred Stock
(0.4
)
 

 


 


 

 


 


 


 


 

 


 

 


Exercise of employee stock options and restricted stock units


 


 
0.2

 

 
0.5

 


 


 


 


 
0.5

 


 
0.5

 


Shares withheld for employee taxes


 


 


 


 
(0.1
)
 


 


 


 


 
(0.1
)
 


 
(0.1
)
 


Share-based compensation expense


 


 


 


 
(0.5
)
 


 


 


 


 
(0.5
)
 


 
(0.5
)
 


Dividends ($0.125 per Common Share)


 


 


 


 
(94.7
)
 


 


 


 


 
(94.7
)
 


 
(94.7
)
 



4

Table of Contents

Net income (loss)


 


 


 


 


 
(12.1
)
 


 


 


 
(12.1
)
 
2.3

 
(9.8
)
 
5.8

Other comprehensive loss


 


 


 


 


 


 
(35.1
)
 


 


 
(35.1
)
 
(0.1
)
 
(35.2
)
 


Distribution to noncontrolling interests, net


 


 


 


 


 


 


 


 


 

 
(3.6
)
 
(3.6
)
 
(8.3
)
Additional redeemable noncontrolling interests due to employee grants and other adjustments


 


 


 


 
0.9

 


 


 


 


 
0.9

 


 
0.9

 
0.1

Adjustment of redeemable noncontrolling interests to the higher of its redemption value or carrying value


 


 


 


 
33.0

 


 


 


 


 
33.0

 


 
33.0

 
(33.0
)
BALANCE—March 31, 2019
8.4

 
$
0.1

 
816.4

 
$
8.1

 
$
10,674.6

 
$
(1,741.8
)
 
$
(1.5
)
 
65.0

 
$
(1,441.8
)
 
$
7,497.7

 
$
4.8

 
$
7,502.5

 
$
452.2


See notes to Condensed Consolidated Financial Statements.

5

Table of Contents

COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND
REDEEMABLE NONCONTROLLING INTERESTS
For the Three and Nine Months Ended March 31, 2018
(In millions, except per share data)
(Unaudited)
 
Preferred Stock
 
Class A
Common Stock
 
Additional
Paid-in Capital
 
(Accumulated Deficit)
 
Accumulated Other Comprehensive Income
 
Treasury Stock
 
Total Coty Inc.
Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
 
Redeemable
Noncontrolling Interests
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Shares
 
Amount
 
 
 
 
BALANCE as previously reported—July 1, 2017
4.2

 
$

 
812.9

 
$
8.1

 
$
11,203.2

 
$
(459.2
)
 
$
4.4

 
65.0

 
$
(1,441.8
)
 
$
9,314.7

 
$
3.0

 
$
9,317.7

 
$
551.1

Adjustment due to the adoption of ASU No. 2016-09
 
 
 
 
 
 
 
 
 
 
8.3

 
 
 
 
 
 
 
8.3

 
 
 
8.3

 
 
BALANCE as adjusted—July 1, 2017
4.2

 
$

 
812.9

 
$
8.1

 
$
11,203.2

 
$
(450.9
)
 
$
4.4

 
65.0

 
$
(1,441.8
)
 
$
9,323.0

 
$
3.0

 
$
9,326.0

 
$
551.1

Exercise of employee stock options and restricted stock units and related tax benefits
 
 
 
 
1.5

 

 
11.2

 
 
 
 
 
 
 
 
 
11.2

 
 
 
11.2

 
 
Shares withheld for employee taxes
 
 
 
 
 
 
 
 
(3.1
)
 
 
 
 
 
 
 
 
 
(3.1
)
 
 
 
(3.1
)
 
 
Share-based compensation expense
 
 
 
 
 
 
 
 
8.1

 
 
 
 
 
 
 
 
 
8.1

 
 
 
8.1

 
 
Dividends ($0.125 per common share)
 
 
 
 
 
 
 
 
(94.3
)
 
 
 
 
 
 
 
 
 
(94.3
)
 
 
 
(94.3
)
 
 
Net (loss) income
 
 
 
 
 
 
 
 
 
 
(19.7
)
 
 
 
 
 
 
 
(19.7
)
 
(2.2
)
 
(21.9
)
 
5.8

Other comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
239.1

 
 
 
 
 
239.1

 
0.6

 
239.7

 
 
Distribution to noncontrolling interests, net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 
(6.4
)
Dilution of redeemable noncontrolling interest due to additional contribution
 
 
 
 
 
 
 
 
17.0

 
 
 
 
 
 
 
 
 
17.0

 
 
 
17.0

 
(17.0
)
Adjustment of redeemable noncontrolling interests to redemption value
 
 
 
 
 
 
 
 
(29.0
)
 
 
 
 
 
 
 
 
 
(29.0
)
 
 
 
(29.0
)
 
29.0

BALANCE—September 30, 2017
4.2

 
$

 
814.4

 
$
8.1

 
$
11,113.1

 
$
(470.6
)
 
$
243.5

 
65.0

 
$
(1,441.8
)
 
$
9,452.3

 
$
1.4

 
$
9,453.7

 
$
562.5

Issuance of Preferred Stock
1.0

 

 
 
 
 
 

 
 
 
 
 
 
 
 
 

 
 
 

 
 
Exercise of employee stock options and restricted stock units and related tax benefits
 
 
 
 
0.4

 
 
 
2.5

 
 
 
 
 
 
 
 
 
2.5

 
 
 
2.5

 
 
Shares withheld for employee taxes
 
 
 
 
 
 
 
 
(0.3
)
 
 
 
 
 
 
 
 
 
(0.3
)
 
 
 
(0.3
)
 
 
Share-based compensation expense
 
 
 
 
 
 
 
 
9.0

 
 
 
 
 
 
 
 
 
9.0

 
 
 
9.0

 
 
Dividends ($0.125 per common share)
 
 
 
 
 
 
 
 
(94.4
)
 
 
 
 
 
 
 
 
 
(94.4
)
 
 
 
(94.4
)
 
 
Net income (loss)
 
 
 
 
 
 
 
 
 
 
109.2

 
 
 
 
 
 
 
109.2

 
(1.9
)
 
107.3

 
11.3

Other comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
40.4

 
 
 
 
 
40.4

 
(0.1
)
 
40.3

 
 
Distribution to noncontrolling interests, net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 
(25.3
)
Additional redeemable noncontrolling interests due to employee grants (See Note 17)
 
 
 
 
 
 
 
 
(8.3
)
 
 
 
 
 
 
 
 
 
(8.3
)
 
 
 
(8.3
)
 
8.3

Proceeds from redeemable noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 
0.2

Adjustment of redeemable noncontrolling interests to redemption value
 
 
 
 
 
 
 
 
(81.3
)
 
 
 
 
 
 
 
 
 
(81.3
)
 
 
 
(81.3
)
 
81.3

BALANCE—December 31, 2017
5.2

 
$

 
814.8

 
$
8.1

 
$
10,940.3

 
$
(361.4
)
 
$
283.9

 
65.0

 
$
(1,441.8
)
 
$
9,429.1

 
$
(0.6
)
 
$
9,428.5

 
$
638.3

Cancellation of Preferred Stock
(0.2
)
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 
 
Exercise of employee stock options and restricted stock units and related tax benefits
 
 
 
 
0.7

 

 
6.3

 
 
 
 
 
 
 
 
 
6.3

 
 
 
6.3

 
 

6

Table of Contents

Shares withheld for employee taxes
 
 
 
 
 
 
 
 
(0.1
)
 
 
 
 
 
 
 
 
 
(0.1
)
 
 
 
(0.1
)
 
 
Share-based compensation expense
 
 
 
 
 
 
 
 
8.7

 
 
 
 
 
 
 
 
 
8.7

 
 
 
8.7

 
 
Dividends ($0.125 per common share)
 
 
 
 
 
 
 
 
(94.6
)
 
 
 
 
 
 
 
 
 
(94.6
)
 
 
 
(94.6
)
 
 
Net (loss) income
 
 
 
 
 
 
 
 
 
 
(77.0
)
 
 
 
 
 
 
 
(77.0
)
 
1.1

 
(75.9
)
 
15.8

Other comprehensive income
 
 
 
 
 
 
 
 
 
 
 
 
252.2

 
 
 
 
 
252.2

 
(0.2
)
 
252.0

 
 
Distribution to noncontrolling interests, net
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 
(14.0
)
Additional redeemable noncontrolling interests due to employee grants (See Note 17)
 
 
 
 
 
 
 
 
0.9

 
 
 
 
 
 
 
 
 
0.9

 
 
 
0.9

 
(0.9
)
Adjustment of redeemable noncontrolling interests to redemption value
 
 
 
 
 
 
 
 
(26.2
)
 
 
 
 
 
 
 
 
 
(26.2
)
 
 
 
(26.2
)
 
26.2

BALANCE—March 31, 2018
5.0

 
$

 
815.5

 
$
8.1

 
$
10,835.3

 
$
(438.4
)
 
$
536.1

 
65.0

 
$
(1,441.8
)
 
$
9,499.3

 
$
0.3

 
$
9,499.6

 
$
665.4


See notes to Condensed Consolidated Financial Statements.

7

Table of Contents

COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Nine Months Ended
March 31,
 
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 redeemable financial instruments
(34.3
)
 
(54.0
)
Payment of debt issuance costs
(10.7
)
 
(4.0
)
All 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 (See Note 13)
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 (see Note 5)

 
5.0


See notes to Condensed Consolidated Financial Statements.

8

Table of Contents

COTY INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
($ in millions, except per share data)
(Unaudited)

1. DESCRIPTION OF BUSINESS
Coty Inc. and its subsidiaries (collectively, the “Company” or “Coty”) manufacture, market, sell and distribute branded beauty products, including fragrances, color cosmetics, hair care products and skin & body related products throughout the world. Coty is a global beauty company with a rich entrepreneurial history and an iconic portfolio of brands.
The Company operates on a fiscal year basis with a year-end of June 30. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year. For example, references to “fiscal 2019” refer to the fiscal year ending June 30, 2019. When used in this Quarterly Report on Form 10-Q, the term “includes” and “including” means, unless the context otherwise indicates, including without limitation.
The Company’s sales generally increase during the second fiscal quarter as a result of increased demand associated with the holiday season. Financial performance, working capital requirements, sales, cash flows and borrowings generally experience variability during the three to six months preceding the holiday season. Product innovations, new product launches and the size and timing of orders from the Company’s customers may also result in variability. The Company also generally experiences an increase in sales during its fourth fiscal quarter in its Professional Beauty segment as a result of higher demand prior to the summer holiday season.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited interim Condensed Consolidated Financial Statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and include the Company’s consolidated domestic and international subsidiaries. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements and accompanying footnotes should be read in conjunction with the Company’s Consolidated Financial Statements as of and for the year ended June 30, 2018. In the opinion of management, all adjustments, of a normal recurring nature, considered necessary for a fair presentation have been included in the Condensed Consolidated Financial Statements. The results of operations for the three and nine months ended March 31, 2019 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending June 30, 2019. All dollar amounts (other than per share amounts) in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.
Restricted Cash
Restricted cash represents funds that are not readily available for general purpose cash needs due to contractual limitations. Restricted cash is classified as a current or long-term asset based on the timing and nature of when or how the cash is expected to be used or when the restrictions are expected to lapse. As of March 31, 2019 and June 30, 2018, the Company had restricted cash of $36.1 and $30.6, respectively, included in Restricted cash in the Condensed Consolidated Balance Sheets. The Restricted cash balance as of March 31, 2019 primarily provides collateral for certain bank guarantees on rent, customs and duty accounts and also consists of collections on factored receivables that remain unremitted to the factor as of March 31, 2019. Restricted cash is included as a component of Cash, cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Significant accounting policies that contain subjective management estimates and assumptions include those related to revenue recognition, the market value of inventory, the fair value of acquired assets and liabilities associated with acquisitions, pension benefit costs, the assessment of goodwill, other intangible assets and long-lived assets for impairment, income taxes and the fair value of redeemable noncontrolling interests. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the Condensed Consolidated Financial Statements in future periods.

9

Table of Contents

Tax Information
The effective income tax rate for the three months ended March 31, 2019 and 2018 was 0.0% and (7.9)%, respectively, and (0.1)% and (211.8)% for the nine months ended March 31, 2019 and 2018, respectively. The negative effective tax rate in the three months ended March 31, 2018 and the nine months ended March 31, 2019 results from reporting losses before income taxes and a provision for income taxes. The negative effective tax rate in the nine months ended March 31, 2018 results from reporting income before taxes and a benefit for income taxes. The change in effective tax rate for the three months ended March 31, 2019, as compared to the prior period, is primarily due to the impact of the Tax Act (as described below) in the prior period. The change in effective tax rate for the nine months ended March 31, 2019, as compared to the prior year period, is primarily due to the resolution of foreign uncertain tax positions of approximately $43.0 in the prior period.
The effective income tax rates vary from the U.S. federal statutory rate of 21% due to the effect of (i) jurisdictions with different statutory rates, (ii) adjustments to the Company’s unrealized tax benefits (“UTBs”) and accrued interest, (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes.
On December 22, 2017, “H.R.1”, formerly known as the “Tax Cuts and Jobs Act” (“Tax Act”) was enacted. The Tax Act significantly revises the U.S. corporate income tax system by, amongst other things, reducing the federal tax rate on U.S. earnings to 21%, implementing a modified territorial tax system and imposing a one-time deemed repatriation tax on historical earnings generated by foreign subsidiaries that have not been repatriated to the U.S.
On December 22, 2017, the Securities and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the enactment date of the Tax Act for companies to complete the accounting under ASC 740. The Company recorded its initial estimate of the impact of the Tax Act in fiscal 2018. This estimate was a charge of approximately $41.0 as a result of utilizing tax attributes (e.g., net operating losses and foreign tax credits) to fully offset the cash impact of the one-time deemed repatriation tax. During the second quarter of fiscal 2019, the Company finalized its calculation of the impact of the Tax Act and no additional adjustments were required.
The Tax Act requires a U.S. shareholder of a foreign corporation to include in income its global intangible low-taxed income (“GILTI”). In general, GILTI is described as the excess of a U.S. shareholder’s total net foreign income over a deemed return on tangible assets. As a result of recently released Financial Accounting Standards Board (“FASB”) guidance, an entity may choose to recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or an entity can elect to treat GILTI as a period cost and include it in the tax expense of the year it is incurred. As such, the Company has elected to treat the tax on GILTI as a tax expense in the year it is incurred rather than recognizing deferred taxes. The Company has estimated the impact from GILTI for fiscal 2019 to be immaterial. Additionally, the Tax Act created the Base Erosion Anti-Abuse Tax (“BEAT”), a new minimum tax on taxable income adjusted for certain base erosion payments. The Company does not presently expect that it will be subject to the minimum tax imposed by the BEAT provisions for fiscal 2019.
As of March 31, 2019 and June 30, 2018, the gross amount of UTBs was $303.4 and $303.6, respectively. As of March 31, 2019, the total amount of UTBs that, if recognized, would impact the effective income tax rate is $118.7. As of March 31, 2019 and June 30, 2018, the liability associated with UTBs, including accrued interest and penalties, was $134.9 and $135.4, respectively, which was recorded in Income and other taxes payable and Other non-current liabilities in the Condensed Consolidated Balance Sheets. The total interest and penalties recorded in the Condensed Consolidated Statements of Operations related to UTBs was $0.6 and $(0.2) for the three months ended March 31, 2019 and 2018, respectively, and $3.2 and $1.9 for the nine months ended March 31, 2019 and 2018, respectively. The total gross accrued interest and penalties recorded in the Condensed Consolidated Balance Sheets as of March 31, 2019 and June 30, 2018 was $16.1 and $13.1, respectively. On the basis of the information available as of March 31, 2019, it is reasonably possible that a decrease of up to $23.2 in UTBs may occur within 12 months as a result of projected resolutions of global tax examinations and a potential lapse of the applicable statutes of limitations.
Factoring of Receivables
On March 19, 2019, the Company entered into an Uncommitted Receivables Purchase Agreement (the “Receivables Purchase Agreement”) with a financial institution, with an aggregate facility limit of $150.0. Eligible trade receivables are purchased by the financial institution for cash at net invoice value less a factoring fee. Pursuant to Receivables Purchase Agreement, the Company acts as collections agent for the financial institution and is responsible for the collection, and remittance to the financial institution, of all customer payments related to trade receivables factored under this arrangement. For certain customer receivables factored, the Company will retain a recourse obligation of up to 10 percent of the respective invoice’s net invoice value, payable to the financial institution if the customer’s payment is not received by the contractual due date.
The Company accounts for trade receivable transfers under the Receivables Purchase Agreement as sales and derecognizes the sold receivables from the Condensed Consolidated Balance Sheets. The fair value of sold receivables approximated their

10

Table of Contents

book value due to their short-term nature. The Company estimated that the fair value of its servicing responsibilities was not material. Cash received from the selling of receivables under the Receivables Purchase Agreement are presented as a change in trade receivables within the operating activities section of the Condensed Consolidated Statements of Cash Flows.
During the three and nine months ended March 31, 2019, total trade receivables factored under the Receivables Purchase Agreement, net of collections, was $109.1, which reflects the timing of certain trade receivables factored late in the third quarter. Gross trade receivables factored under the Receivables Purchase Agreement during the three and nine months ended March 31, 2019 totaled $134.6.
Recently Adopted Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which implements a common revenue model that will enhance comparability across industries and require enhanced disclosures. The Company adopted this new standard on July 1, 2018. See Note 3Revenue Recognition for more information on the effects of the adoption of this standard.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The Company adopted the standard in the first quarter of fiscal 2019 using the modified retrospective transition method and recognized tax expense, as an adjustment to the July 1, 2018 accumulated deficit balance of $7.6 and $120.8 that were previously deferred in Prepaid expenses and other current assets and Other noncurrent assets, respectively. The recognition of this tax expense was partially offset by a previously unrecognized deferred tax asset of $15.8, resulting in a cumulative-effect adjustment of $112.6 as an increase to the July 1, 2018 accumulated deficit balance.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides an updated model for determining if acquired assets and liabilities constitute a business. In a business combination, the acquired assets and liabilities are recognized at fair value and goodwill could be recognized. In an asset acquisition, the assets are allocated value based on relative fair value and no goodwill is recognized. The ASU narrows the definition of a business. The Company adopted the standard in the first quarter of fiscal 2019 on a prospective basis. The adoption of this guidance did not have an impact on the Company’s Condensed Consolidated Financial Statements.
In January 2017, the FASB issued ASU No. 2017-04, IntangiblesGoodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating step two from the goodwill impairment test. The Company early adopted the ASU during the first quarter of fiscal 2019. As of July 1, 2018, the adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
In March 2017, the FASB issued ASU No. 2017-07, CompensationRetirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU No. 2017-07”), which requires employers to report the service cost component of net periodic benefit cost in the same line item or items as other compensation costs arising from services rendered by the underlying employees during the period. The other components of net periodic benefit cost are required to be reported separately and outside of operating income. In addition, only the service cost component would be eligible for capitalization in assets. The new guidance also allows a practical expedient that permits employers to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Company adopted this standard during the first quarter of fiscal 2019 and retrospectively applied it to each prior period presented. In doing so, as a practical expedient, the Company used the prior comparative period Employee Benefit Plans footnote (see Note 12).
The following table presents our results under our historical method of accounting and as adjusted to reflect our adoption of ASU No. 2017-07:
 
Three Months Ended
March 31, 2018
 
Nine Months Ended
March 31, 2018
 
As Previously Reported
 
Effect of Adoption of ASU No. 2017-07
 
As Adjusted
 
As Previously Reported
 
Effect of Adoption of ASU No. 2017-07
 
As Adjusted
Cost of sales
$
812.4

 
$
(0.1
)
 
$
812.3

 
$
2,711.7

 
$
(0.3
)
 
$
2,711.4

Selling, general and administrative expenses
1,252.3

 
(0.7
)
 
1,251.6

 
3,764.0

 
(2.1
)
 
3,761.9

Operating income
19.9

 
0.8

 
20.7

 
223.0

 
2.4

 
225.4

Other expense, net
3.0

 
0.8

 
3.8

 
10.1

 
2.4

 
12.5

Net income
(60.1
)
 

 
(60.1
)
 
42.4

 

 
42.4


11

Table of Contents

In May 2017, the FASB issued ASU No. 2017-09, CompensationStock Compensation (Topic 718): Scope of Modification Accounting, which narrows the scope of changes in grant terms that would require modification accounting. The Company adopted this standard during the first quarter of fiscal 2019 on a prospective basis. The adoption did not have an effect on the Company’s Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-15, IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350-40), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company adopted the standard in the first quarter of fiscal 2019 on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, which modified the disclosure requirements by removing, modifying and clarifying disclosures related to defined benefit plans. The amendment will be effective for the Company in fiscal 2021 with early adoption permitted. The Company is evaluating the impact this guidance will have on the Company’s Condensed Consolidated Financial Statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modified the disclosure requirements by removing, modifying and adding disclosures related to fair value measurements. The amendment will be effective for the Company in fiscal 2021 with early adoption permitted. The Company is evaluating the impact this guidance will have on the Company’s Condensed Consolidated Financial Statements and related disclosures.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”), which requires that a financial asset (or a group of financial assets) measured at an amortized cost basis be presented at the net amount expected to be collected. This approach to estimating credit losses applies to most financial assets measured at amortized cost and certain other instruments, including but not limited to, trade and other receivables. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies the scope of the guidance in ASU No. 2016-13. The amendment will be effective for the Company in fiscal 2021 with early adoption permitted. The Company is evaluating the impact this guidance will have on the Company’s Condensed Consolidated Financial Statements and related disclosures.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Lessees and lessors have the option to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach or to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.
Additionally, in December 2018, the FASB issued ASU No. 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors, which provides lessors the election to consider certain sales and similar taxes as lessee costs and exclude them from consideration in the contract, requires lessors to exclude certain lessor costs paid directly to third parties from expenses and related revenues, and requires the allocation of certain variable payments to the lease and nonlease components when changes in facts and circumstances related to the payments occur.
The new leasing guidance will be effective for the Company in fiscal 2020 with early adoption permitted. The Company has an implementation team in place that is performing a comprehensive evaluation of the impact the standard will have on the Company’s Condensed Consolidated Financial Statements and related disclosures. The evaluation includes assessing the Company’s lease portfolio, the implementation of new software to meet reporting requirements and the impact to business processes. Based on the current status of the evaluation, management believes the adoption of the new standard will have a significant impact on the Condensed Consolidated Balance Sheets. The Company expects to finalize its evaluation and assessment as required by the new leases standard and quantify the balance sheet impact upon adoption at July 1, 2019 during the fourth quarter of fiscal 2019. Upon adoption, the Company’s lease liability will be based on the present value of such payments and the related right-of-use asset will be based on the lease liability, adjusted for initial direct costs, prepaid lease payments and lease incentives received. The Company plans to adopt the new standard when it becomes effective in the fiscal 2020 first quarter using the modified retrospective transition approach for leases that exist at adoption and will not restate the prior comparative periods.

12

Table of Contents

3. REVENUE RECOGNITION
Adoption of ASC 606, Revenue from Contracts with Customers
On July 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers and all related amendments (the “New Revenue Standard”) using the modified retrospective method applied to those contracts which were not completed as of July 1, 2018. Results for reporting periods beginning after July 1, 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 605, Revenue Recognition.
The Company recorded a net increase to its accumulated deficit as of July 1, 2018 (as presented below) due to the cumulative impact of adopting the New Revenue Standard, with the impact primarily related to the timing of accrual for certain customer incentives and markdowns at the time of sell-in and reclassification of certain marketing fixtures expense as a reduction of gross revenue.
The cumulative effects of the revenue accounting changes on the Company's Condensed Consolidated Balance Sheet as of July 1, 2018 were as follows:
 
June 30, 2018
 
Adjustments
 
July 1, 2018
ASSETS
 
 
 
 
 
Property and equipment, net
$
1,680.8

 
$
(6.2
)
 
$
1,674.6

Deferred income taxes
107.4

 
0.6

 
108.0

Other noncurrent assets
299.5

 
6.9

 
306.4

 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accrued expenses and other current liabilities
$
1,844.4

 
$
20.7

 
$
1,865.1

Deferred income taxes
842.5

 
(1.2
)
 
841.3

Accumulated deficit
(626.2
)
 
(18.2
)
 
(644.4
)
The following table summarizes the impacts of adopting the New Revenue Standard on the Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2019:
 
As reported (New Revenue Standard)
 
Current period adjustments
 
As adjusted (previous revenue standard)
Net revenues
$
1,990.6

 
$
25.6

 
$
2,016.2

Selling, general and administrative expenses
1,070.5

 
1.0

 
1,071.5

Net (loss) income
(4.0
)
 
18.4

 
14.4

Net (loss) income attributable to Coty Inc.
(12.1
)
 
18.6

 
6.5

 
 
 
 
 
 
Net (loss) income attributable to Coty Inc. per common share:
 
 
 
 
 
Basic
$
(0.02
)
 
$
0.03

 
$
0.01

Diluted
(0.02
)
 
0.03

 
0.01


13

Table of Contents

The following table summarizes the impacts of adopting the New Revenue Standard on the Condensed Consolidated Statements of Operations for the Nine Months Ended March 31, 2019:
 
As reported (New Revenue Standard)
 
Current period adjustments
 
As adjusted (previous revenue standard)
Net revenues
$
6,533.1

 
$
8.9

 
$
6,542.0

Selling, general and administrative expenses
3,476.8

 
2.3

 
3,479.1

Net (loss) income
(970.1
)
 
5.0

 
(965.1
)
Net (loss) income attributable to Coty Inc.
(984.8
)
 
5.0

 
(979.8
)
 
 
 
 
 
 
Net (loss) income attributable to Coty Inc. per common share:
 
 
 
 
 
Basic
$
(1.31
)
 
$
0.01

 
$
(1.30
)
Diluted
(1.31
)
 
0.01

 
(1.30
)
Revenue Recognition Accounting Policy
For periods after July 1, 2018, revenue is recognized at a point in time and/or over time when control of the promised goods or services is transferred to the Company’s customers, which usually occurs upon delivery. Revenue is recognized in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those goods or services. At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer to the customer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. The Company’s revenue contracts principally represent a performance obligation to sell its beauty products to trade customers and are satisfied when control of promised goods and services is transferred to the customers.
Net revenues comprise gross revenues less customer discounts and allowances, actual and expected returns (estimated based on an analysis of historical experience and position in product life cycle) and various trade spending activities. Trade spending activities represent variable consideration promised to the customer and primarily relate to advertising, product promotions and demonstrations, some of which involve cooperative relationships with customers. The costs of trade spend activities are estimated using the expected value method considering all reasonably available information, including contract terms with the customer, the Company’s historical experience and its current expectations of the scope of the activities, and is reflected in the transaction price when sales are recorded.
The Company’s payment terms vary by the type and location of its customers and the products offered. The term between invoicing and when payment is due is not significant.
The Company’s sales return accrual reflects seasonal fluctuations, including those related to the holiday season in its second quarter. This accrual is a subjective critical estimate that has a direct impact on reported net revenues, and is calculated based on history of actual returns, estimated future returns and information provided by retailers regarding their inventory levels. In addition, as necessary, specific accruals may be established for significant future known or anticipated events. The types of known or anticipated events that the Company has considered, and will continue to consider, include the financial condition of our customers, store closings by retailers, changes in the retail environment, and our decision to continue to support new and existing brands.
The Company accounts for certain customer store fixtures as other assets. Such fixtures are amortized using the straight-line method over the period of 3 to 5 years as a reduction of revenue.
For the presentation of the Company’s revenues disaggregated by segment and product category see Note 4Segment Reporting.
4. SEGMENT REPORTING
The Company’s organizational structure is category focused, putting the consumers first, by specifically targeting how and where they shop and what and why they purchase. Operating and reportable segments (referred to as “segments”) reflect the way the Company is managed and for which separate financial information is available and evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company has designated its Chief Executive Officer as the CODM.
The Company has the following three divisions which represent its operating segments and reportable segments:

14

Table of Contents

Luxury — primarily focused on prestige fragrances, premium skin care and premium color cosmetics;
Consumer Beauty — primarily focused on color cosmetics, retail hair coloring and styling products, mass fragrance, mass skin care and body care;
Professional Beauty — primarily focused on hair and nail care products for professionals.
Certain revenues and shared costs and the results of corporate initiatives are managed outside of the three segments by Corporate. The items within Corporate relate to corporate-based responsibilities and decisions and are not used by the CODM to measure the underlying performance of the segments. Corporate primarily includes restructuring and realignment costs, costs related to acquisition activities and certain other expense items not attributable to ongoing operating activities of the segments.
With the adoption of ASU No. 2017-07 (see Note 2Summary of Significant Accounting Policies), the non-service cost components of net periodic benefit cost have been removed from consolidated operating expenses and included in consolidated other expense, net. For segment reporting, however, all components of net periodic benefit cost are included in segment operating results as these components continue to comprise the basis on which the CODM analyzes segment results. In order to reconcile the total of segment operating income (loss) to consolidated operating income (loss), reclassification adjustments related to the non-service costs components have been included in Corporate in the table below.
With the exception of goodwill and acquired intangible assets, the Company does not identify or monitor assets by segment. The Company does not present assets by reportable segment since various assets are shared between reportable segments. The allocation of goodwill and acquired intangible assets by segment is presented in Note 9Goodwill and Other Intangible Assets, net.
 
Three Months Ended
March 31,
 
Nine Months Ended
March 31,
SEGMENT DATA
2019
 
2018
 
2019
 
2018
Net revenues:
 
 
 
 
 
 
 
Luxury
$
729.2

 
$
752.5