UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
☒
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDEDDECEMBER 31, 20172023
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 NUMBER001-35964
COTY INC.
(Exact name of registrant as specified in its charter)
Delaware13-3823358
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)No.)
350 Fifth Avenue,
 New York, NYNY10118
(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes ý      No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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 filerý
☒
Accelerated filer¨☐
Non-accelerated filer   ¨
☐(Do not check if a smaller reporting company)
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 classTrading symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.01 par valueCOTYNew York Stock Exchange
At February 1, 2018, 749,864,475January 31, 2024, 895,168,882 shares of the registrant’s Class A Common Stock, $0.01 par value, were outstanding.




COTY INC.
INDEX TO FORM 10-Q
Page
1
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4
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8
3033
5657
5657
57
57
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59



Table of Contents
PART I. FINANCIAL INFORMATION

Item 1.CondensedConsolidated Financial Statements

COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended
December 31,		 Six Months Ended
December 31,		 Three Months Ended
December 31,		Six Months Ended
December 31,
2017 2016 2017 2016 2023202220232022
Net revenues$2,637.6
 $2,296.7
 $4,875.9
 $3,376.9
Cost of sales1,025.0
 892.3
 1,899.3
 1,337.1
Gross profit1,612.6
 1,404.4
 2,976.6
 2,039.8
Selling, general and administrative expenses1,319.9
 1,170.2
 2,511.7
 1,649.1
Amortization expense89.6
 95.2
 167.8
 116.4
Restructuring costs21.7
 15.8
 32.9
 23.2
Acquisition-related costs7.0
 135.9
 61.1
 217.4
Operating income (loss)174.4
 (12.7) 203.1
 33.7
Operating income
Operating income
Operating income
Interest expense, net60.3
 57.9
 126.7
 98.3
Other expense (income), net3.4
 (0.6) 7.1
 0.7
Income (loss) before income taxes110.7
 (70.0) 69.3
 (65.3)
Benefit for income taxes(7.9) (122.1) (33.2) (127.2)
Other income, net
Income before income taxes
Provision for income taxes
Net income118.6
 52.1
 102.5
 61.9
Net (loss) income attributable to noncontrolling interests(1.9) 2.5
 (4.1) 10.7
Net income
Net income
Net income (loss) attributable to noncontrolling interests
Net income attributable to redeemable noncontrolling interests11.3
 2.8
 17.1
 4.4
Net income attributable to Coty Inc.$109.2
 $46.8
 $89.5
 $46.8
Net income attributable to Coty Inc. per common share: 
  
  
  
Basic$0.15
 $0.06
 $0.12
 $0.09
Diluted0.15
 0.06
 0.12
 0.09
Amounts attributable to Coty Inc.
Net income attributable to Coty Inc.
Net income attributable to Coty Inc.
Net income attributable to Coty Inc.
Convertible Series B Preferred Stock dividends
Net income attributable to common stockholders
Net income attributable to common stockholders
Net income attributable to common stockholders
Earnings per common share:
Earnings per common share:
Earnings per common share:  
Earnings per common share - basic
Earnings per common share - basic
Earnings per common share - basic
Earnings per common share - diluted
Weighted-average common shares outstanding: 
  
  
  
Weighted-average common shares outstanding:  
Basic749.6
 746.6
 749.1
 539.8
Diluted752.7
 752.4
 752.5
 545.8
See notes to Condensed Consolidated Financial Statements.

1

Table of Contents
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)(Unaudited)
Three Months Ended
December 31,		 Six Months Ended
December 31,
Three Months Ended
December 31,		Three Months Ended
December 31,		Six Months Ended
December 31,
2017 2016 2017 2016 2023202220232022
Net income$118.6
 $52.1
 $102.5
 $61.9
Other comprehensive income: 
  
  
  
Other comprehensive income (loss):Other comprehensive income (loss):  
Foreign currency translation adjustment32.0
 (90.4) 271.1
 (96.3)
Net unrealized derivative gains on cash flow hedges, net of taxes of $(3.9) and $(8.8), and $(4.0) and $(8.7) during the three and six months ended, respectively7.4
 33.4
 7.3
 41.9
Pension and other post-employment benefits adjustment, net of tax of $0.0 and $(5.0), and $0.0 and $(5.8) during the three and six months ended, respectively0.9
 4.9
 1.6
 10.1
Net unrealized derivative gain (loss) on cash flow hedges, net of taxes of $0.3 and $1.2, and $(0.4) and $0.7 during the three and six months ended, respectively
Pension and other post-employment benefits adjustment, net of tax of $(0.4) and $(0.8), and $0.5 and $0.0 during the three and six months ended, respectively
Total other comprehensive income (loss), net of tax40.3
 (52.1) 280.0
 (44.3)
Comprehensive income158.9
 —
 382.5
 17.6
Comprehensive (loss) income attributable to noncontrolling interests: 
  
  
  
Net (loss) income(1.9) 2.5
 (4.1) 10.7
Comprehensive income attributable to noncontrolling interests:Comprehensive income attributable to noncontrolling interests:  
Net income (loss)
Foreign currency translation adjustment(0.1) (0.5) 0.5
 (0.5)
Total comprehensive (loss) income attributable to noncontrolling interests(2.0) 2.0
 (3.6) 10.2
Total comprehensive income (loss) attributable to noncontrolling interests
Comprehensive income attributable to redeemable noncontrolling interests:       
Net income11.3
 2.8
 17.1
 4.4
Net income
Net income
Foreign currency translation adjustment—
 —
 —
 —
Total comprehensive income attributable to redeemable noncontrolling interests11.3
 2.8
 17.1
 4.4
Comprehensive income (loss) attributable to Coty Inc.$149.6
 $(4.8) $369.0
 $3.0
Total comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Coty Inc.
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)
 December 31,
2017		 June 30,
2017
ASSETS 
  
Current assets: 
  
Cash and cash equivalents$400.1
 $535.4
Restricted cash25.6
 35.3
Trade receivables—less allowances of $90.6 and $58.5, respectively1,743.9
 1,470.3
Inventories1,155.3
 1,052.6
Prepaid expenses and other current assets554.3
 487.9
Total current assets3,879.2
 3,581.5
Property and equipment, net1,647.3
 1,632.1
Goodwill8,864.9
 8,555.5
Other intangible assets, net8,550.7
 8,425.2
Deferred income taxes199.1
 72.6
Other noncurrent assets304.4
 281.3
TOTAL ASSETS$23,445.6
 $22,548.2
LIABILITIES AND EQUITY 
  
Current liabilities:

 

Accounts payable$1,758.6
 $1,732.1
Accrued expenses and other current liabilities2,007.3
 1,796.4
Short-term debt and current portion of long-term debt295.9
 209.1
Income and other taxes payable94.0
 66.0
Total current liabilities4,155.8
 3,803.6
Long-term debt, net7,145.8
 6,928.3
Pension and other post-employment benefits571.3
 549.2
Deferred income taxes933.9
 924.9
Other noncurrent liabilities572.0
 473.4
Total liabilities13,378.8
 12,679.4
COMMITMENTS AND CONTINGENCIES (Note 17)

 

REDEEMABLE NONCONTROLLING INTERESTS638.3
 551.1
EQUITY: 
  
Preferred Stock, $0.01 par value; 20.0 shares authorized, 5.2 and 4.2 issued and outstanding, respectively, at December 31, 2017 and June 30, 2017—
 —
Class A Common Stock, $0.01 par value; 1,000.0 shares authorized, 814.8 and 812.9 issued, respectively, and 749.8 and 747.9 outstanding, respectively, at December 31, 2017 and June 30, 2017
8.1
 8.1
Additional paid-in capital10,940.3
 11,203.2
Accumulated deficit(361.4) (459.2)
Accumulated other comprehensive income283.9
 4.4
Treasury stock—at cost, shares: 65.0 at December 31, 2017 and June 30, 2017(1,441.8) (1,441.8)
Total Coty Inc. stockholders’ equity9,429.1
 9,314.7
Noncontrolling interests(0.6) 3.0
Total equity9,428.5
 9,317.7
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY$23,445.6
 $22,548.2
 December 31,
2023		June 30,
2023
ASSETS  
Current assets:  
Cash and cash equivalents$450.0 $246.9 
Restricted cash33.5 36.9 
Trade receivables—less allowances of $23.1 and $23.2, respectively500.2 360.9 
Inventories775.5 853.4 
Prepaid expenses and other current assets662.4 553.6 
Total current assets2,421.6 2,051.7 
Property and equipment, net705.9 712.9 
Goodwill4,021.9 3,987.9 
Other intangible assets, net3,739.5 3,798.0 
Equity investments1,084.2 1,068.9 
Operating lease right-of-use assets289.8 286.7 
Deferred income taxes597.5 589.9 
Other noncurrent assets155.3 165.6 
TOTAL ASSETS$13,015.7 $12,661.6 
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY  
Current liabilities:
Accounts payable$1,462.9 $1,444.7 
Accrued expenses and other current liabilities1,194.6 1,042.0 
Short-term debt and current portion of long-term debt8.9 57.9 
Current operating lease liabilities61.5 65.6 
Income and other taxes payable123.1 126.6 
Total current liabilities2,851.0 2,736.8 
Long-term debt, net3,682.9 4,178.2 
Long-term operating lease liabilities251.6 247.5 
Pension and other post-employment benefits283.0 280.7 
Deferred income taxes746.8 659.7 
Other noncurrent liabilities343.1 325.4 
Total liabilities8,158.4 8,428.3 
COMMITMENTS AND CONTINGENCIES (See Note 17)
CONVERTIBLE SERIES B PREFERRED STOCK, $0.01 par value; 1.0 shares authorized; 0.1 and 0.1 issued and outstanding at December 31, 2023 and June 30, 2023, respectively
142.4 142.4 
REDEEMABLE NONCONTROLLING INTERESTS102.2 93.5 
EQUITY:  
Preferred Stock, $0.01 par value; 20.0 shares authorized, 1.0 issued and outstanding at December 31, 2023 and June 30, 2023
— — 
Class A Common Stock, $0.01 par value; 1,250.0 shares authorized, 961.7 and 919.3 issued and 895.1 and 852.8 outstanding at December 31, 2023 and June 30, 2023, respectively
9.6 9.1 
Additional paid-in capital11,273.5 10,898.6 
Accumulated deficit(4,805.4)(4,987.9)
Accumulated other comprehensive loss(606.6)(662.4)
Treasury stock—at cost, shares: 66.6 and 66.5 at December 31, 2023 and June 30, 2023, respectively
(1,446.3)(1,446.3)
Total Coty Inc. stockholders’ equity4,424.8 3,811.1 
Noncontrolling interests187.9 186.3 
Total equity4,612.7 3,997.4 
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY$13,015.7 $12,661.6 
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 Six Months Ended December 31, 20172023
(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, 20174.2
 $—
 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 2016-09 (see Note 2)

 

 

 

 

 8.3
 

 

 

 8.3
 

 8.3
 

BALANCE as adjusted—July 1, 20174.2
 $—
 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
Issuance of Preferred Stock1.0
 —
                      
Exercise of employee stock options and restricted stock units    1.9
 —
 13.7
         13.7
   13.7
  
Shares withheld for employee taxes        (3.4)         (3.4)   (3.4)  
Share-based compensation expense        17.1
         17.1
   17.1
  
Dividends ($0.250 per Common Share)        (188.7)         (188.7)   (188.7)  
Net income (loss)          89.5
       89.5
 (4.1) 85.4
 17.1
Other comprehensive income            279.5
     279.5
 0.5
 280.0
 

Distribution to noncontrolling interests, net                  —
   —
 (31.7)
Dilution of redeemable noncontrolling interest due to additional contribution (See Note 16)        17.0
         17.0
   17.0
 (17.0)
Additional redeemable noncontrolling interests due to employee grants (See Note 16)

 

 

 

 (8.3) 

 

 

 

 (8.3) 

 (8.3) 8.3
Proceeds from redeemable noncontrolling interests                  —
   —
 0.2
Adjustment of redeemable noncontrolling interests to redemption value        (110.3)         (110.3)   (110.3) 110.3
BALANCE—December 31, 20175.2
 $—
 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

 Preferred Stock
Class A
Common Stock
Stock to be issued
Additional
Paid-in Capital
Receivable from sale of stock(Accumulated Deficit)Accumulated Other Comprehensive (Loss) IncomeTreasury Stock
Total Coty Inc.
Stockholders’ Equity
Noncontrolling InterestsTotal Equity
Redeemable
Noncontrolling Interests
Convertible Series B Preferred Stock
 SharesAmountSharesAmountSharesAmount
BALANCE—July 1, 20231.0 $— 919.3 $9.1 $— $10,898.6 $— $(4,987.9)$(662.4)66.5 $(1,446.3)$3,811.1 $186.3 $3,997.4 $93.5 $142.4 
Issuance of Class A Common Stock in connection with global offering, net of offering costs30.0 0.3 31.5 311.2 (348.5)(5.5)(5.5)
Exercise of employee stock options and restricted stock units5.2 0.1 (0.1)— — 
Shares withheld for employee taxes(0.8)(0.8)(0.8)
Share-based compensation expense30.2 30.2 30.2 
Equity Investment contribution for share-based compensation0.7 0.7 0.7 
Changes in dividends accrued— — — 
Dividends Accrued - Convertible Series B Preferred Stock(3.3)(3.3)(3.3)3.3 
Dividends Paid - Convertible Series B Preferred Stock— — (3.3)
Net income1.6 1.6 1.1 2.7 7.5 
Other comprehensive loss(115.0)(115.0)— (115.0)(0.1)
Adjustment of redeemable noncontrolling interests to redemption value2.3 2.3 2.3 (2.3)
BALANCE—September 30, 20231.0 $— 954.5 $9.5 $31.5 $11,238.8 $(348.5)$(4,986.3)$(777.4)66.5 $(1,446.3)$3,721.3 $187.4 $3,908.7 $98.6 $142.4 
Issuance of Class A Common Stock in connection with global offering, net of offering costs3.0 (31.5)30.9 348.5 347.9 347.9 
Reacquired Class A Common Stock for employee taxes0.1 — — 
Exercise of employee stock options and restricted stock units4.2 0.1 11.2 11.3 11.3 
Shares withheld for employee taxes(17.3)(17.3)(17.3)
Share-based compensation expense19.9 19.9 19.9 
Equity Investment contribution for share-based compensation0.6 0.6 0.6 
Changes in dividends accrued— — — 
Dividends Accrued - Convertible Series B Preferred Stock(3.3)(3.3)(3.3)3.3 
Dividends Paid - Convertible Series B Preferred Stock— — (3.3)
Net income180.9 180.9 0.5 181.4 4.6 
Other comprehensive income170.8 170.8 170.8 0.2 
Distribution to noncontrolling interests, net— — (8.5)
Adjustment of redeemable noncontrolling interests to redemption value(7.3)(7.3)(7.3)7.3 
BALANCE—December 31, 20231.0 $— 961.7 $9.6 $— $11,273.5 $— $(4,805.4)$(606.6)66.6 $(1,446.3)$4,424.8 $187.9 $4,612.7 $102.2 $142.4 
See notes to Condensed Consolidated Financial Statements.

4
Table of Contents
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND
REDEEMABLE NONCONTROLLING INTERESTS
For the Three and Six Months Ended December 31, 20162022
(In millions, except per share data)
(Unaudited)
 Preferred Stock 
Class A
Common Stock
 
Class B
Common Stock
 
Additional
Paid-in Capital
 (Accumulated Deficit) 
Accumulated
Other
Comprehensive Loss
 Treasury Stock 
Total Coty Inc.
Stockholders’ Equity
 Noncontrolling Interests Total Equity 
Redeemable
Noncontrolling Interests
 Shares Amount Shares Amount Shares Amount    Shares Amount    
BALANCE—July 1, 20161.7
 —
 138.7
 $1.4
 262.0
 $2.6
 $2,038.4
 $(37.0) $(239.7) 63.6
 $(1,405.5) $360.2
 $6.9
 $367.1
 $73.3
Issuance of Class A Common Stock for business combination    409.7
 4.1
     9,624.5
         9,628.6
   9,628.6
  
Issuance of Preferred Stock1.0
 —
                          
Conversion of Class B to Class A Common Stock    262.0
 2.6
 (262.0) (2.6)           —
   —
  
Purchase of Class A Common Stock                  1.4
 (36.3) (36.3)   (36.3)  
Exercise of employee stock options and restricted stock units and related tax benefits    1.6
 —
  
  
 13.6
  
  
  
  
 13.6
  
 13.6
  
Share-based compensation expense     
  
  
  
 8.9
  
  
  
  
 8.9
  
 8.9
  
Dividends ($0.40 per common share)     
  
  
  
 (187.3)  
  
  
  
 (187.3)  
 (187.3)  
Net income     
  
  
  
  
 46.8
  
  
  
 46.8
 10.7
 57.5
 4.4
Other comprehensive loss     
  
  
  
  
  
 (43.8)  
  
 (43.8) (0.5) (44.3) 

Distribution to noncontrolling interests, net     
  
  
  
 —
  
  
  
  
 —
 

 —
 (3.5)
Adjustment of redeemable noncontrolling interests to redemption value     
  
  
  
 2.4
  
  
  
  
 2.4
  
 2.4
 (2.4)
Repurchase of redeemable noncontrolling interests                            (0.9)
BALANCE—December 31, 20162.7
 —
 812.0
 $8.1
 —
 $—
 $11,500.5
 $9.8
 $(283.5) 65.0
 $(1,441.8) $9,793.1
 $17.1
 $9,810.2
 $70.9

 Preferred StockClass A
Common Stock		Additional
Paid-in Capital		(Accumulated Deficit)Accumulated Other Comprehensive (Loss) IncomeTreasury StockTotal Coty Inc.
Stockholders’ Equity		Noncontrolling InterestsTotal EquityRedeemable
Noncontrolling Interests		Convertible Series B Preferred Stock
 SharesAmountSharesAmountSharesAmount
BALANCE—July 1, 20221.5 $— 905.5 $9.0 $10,805.8 $(5,496.1)$(717.9)66.3 $(1,446.3)$3,154.5 $191.3 $3,345.8 $69.8 $142.4 
Reacquired Class A Common Stock for employee taxes0.1— — 
Exercise of employee stock options and restricted stock units10.2 — — — 
Shares withheld for employee taxes(1.1)(1.1)(1.1)
Share-based compensation expense31.4 31.4 31.4 
Dividends accrued- Convertible Series B Preferred Stock(3.3)(3.3)(3.3)3.3 
Dividends paid - Convertible Series B Preferred Stock— — (3.3)
Net (loss) income128.6 128.6 — 128.6 5.9 
Other comprehensive loss(266.2)(266.2)— (266.2)(0.2)
Adjustment of redeemable noncontrolling interests to redemption value6.2 6.2 6.2 (6.2)
Equity investment contribution for share-based compensation1.7 1.7 1.7 
BALANCE—September 30, 20221.5 $— 915.7 $9.0 $10,840.7 $(5,367.5)$(984.1)66.4 $(1,446.3)$3,051.8 $191.3 $3,243.1 $69.3 $142.4 
Reacquired Class A Common Stock for employee taxes— — 
Exercise of employee stock options and restricted stock units3.2 0.1 (0.1)— — 
Shares withheld for employee taxes(10.5)(10.5)(10.5)
Share-based compensation expense33.6 33.6 33.6 
Changes in dividends accrued0.1 0.1 0.1 
Dividends accrued- Convertible Series B Preferred Stock(3.3)(3.3)(3.3)3.3 
Dividends paid - Convertible Series B Preferred Stock— — (3.3)
Net income (loss)238.3 238.3 (1.4)236.9 4.5 
Other comprehensive loss216.0 216.0 0.3 216.3 0.3 
Distribution to noncontrolling interests, net— — — — 
Adjustment of redeemable noncontrolling interests to redemption value4.4 4.4 4.4 (4.4)
Equity investment contribution for share-based compensation1.0 1.0 1.0 
BALANCE—December 31, 20221.5 $— 918.9 $9.1 $10,865.9 $(5,129.2)$(768.1)66.4 $(1,446.3)$3,531.4 $190.2 $3,721.6 $69.7 $142.4 
See notes to Condensed Consolidated Financial Statements.

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COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended
December 31,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income$196.2 $375.9 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization212.2 210.4 
Non-cash lease expense31.3 32.1 
Deferred income taxes78.4 84.6 
Releases for bad debts, net(0.2)(15.8)
Provision for pension and other post-employment benefits5.0 4.6 
Share-based compensation49.9 65.3 
(Gains) losses on disposals of long-term assets, net(0.1)4.7 
Realized and unrealized gains from equity investments, net(15.3)(208.0)
Foreign exchange effects18.0 24.8 
Unrealized gains on forward repurchase contracts, net(18.8)(19.4)
Other23.5 13.6 
Change in operating assets and liabilities  
Trade receivables(139.6)(45.7)
Inventories81.9 (55.3)
Prepaid expenses and other current assets(47.5)(55.2)
Accounts payable23.2 227.2 
Accrued expenses and other current liabilities138.7 75.1 
Operating lease liabilities(30.4)(33.5)
Income and other taxes payable(0.7)12.2 
Other noncurrent assets(10.9)(13.3)
Other noncurrent liabilities13.3 (38.9)
Net cash provided by operating activities608.1 645.4 
CASH FLOWS FROM INVESTING ACTIVITIES:  
Capital expenditures(121.1)(102.1)
Proceeds from sale of long-term assets and license terminations1.7 56.9 
Net cash used in investing activities(119.4)(45.2)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Proceeds from revolving loan facilities1,134.0 612.0 
Repayments of revolving loan facilities(1,347.0)(806.1)
Proceeds from issuance of other long-term debt1,284.3 — 
Repayments of term loans and other long-term debt(1,613.5)(188.6)
Dividend payments on Class A Common Stock and Series B Preferred Stock(6.8)(7.1)
Proceeds from issuance of Class A Common Stock in connection with global offering, net of offering costs343.9 — 
Net proceeds from issuance of Class A Common Stock11.0 — 
Net proceeds from (payments of) foreign currency contracts0.4 (133.5)
Payments related to forward repurchase contracts(24.0)— 
Distributions to noncontrolling interests and redeemable noncontrolling interests(8.5)— 
Payment of deferred financing fees(39.5)— 
All other(20.2)(13.3)
Net cash used in financing activities(285.9)(536.6)
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 Six Months Ended
December 31,
 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES: 
  
Net income$102.5
 $61.9
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Depreciation and amortization350.5
 230.3
Deferred income taxes(75.1) (111.2)
Provision for bad debts9.0
 5.8
Provision for pension and other post-employment benefits22.2
 28.5
Share-based compensation16.2
 9.1
Other(5.1) (2.7)
Change in operating assets and liabilities, net of effects from purchase of acquired companies: 
  
Trade receivables(246.6) (293.7)
Inventories(22.2) 103.3
Prepaid expenses and other current assets(47.6) 22.6
Accounts payable18.7
 322.6
Accrued expenses and other current liabilities185.6
 369.8
Income and other taxes payable19.5
 (59.0)
Other noncurrent assets(14.9) 11.4
Other noncurrent liabilities(4.9) (35.3)
Net cash provided by operating activities307.8
 663.4
CASH FLOWS FROM INVESTING ACTIVITIES: 
  
Capital expenditures(232.2) (198.2)
Payment for business combinations, net of cash acquired(264.6) (143.8)
Proceeds from sale of asset2.8
 —
Net cash used in investing activities(494.0) (342.0)
CASH FLOWS FROM FINANCING ACTIVITIES: 
  
Proceeds from short-term debt, original maturity more than three months—
 5.6
Repayments of short-term debt, original maturity more than three months—
 (5.8)
Net proceeds (repayments) of short-term debt, original maturity less than three months71.5
 (39.5)
Proceeds from revolving loan facilities1,437.0
 934.4
Repayments of revolving loan facilities(1,166.4) (1,384.4)
Proceeds from term loans—
 1,075.0
Repayments of term loans(95.5) (55.7)
Dividend payment(188.1) (185.8)
Net proceeds from issuance of Class A Common Stock and Series A Preferred Stock13.7
 13.6
Payments for employee taxes related to net settlement of equity awards (see Note 2)(3.4) —
Payments for purchases of Class A Common Stock held as Treasury Stock—
 (36.3)
Net proceeds from foreign currency contracts8.2
 14.8
Purchase of additional noncontrolling interests—
 (9.8)
Proceeds from noncontrolling interests0.2
 —
Distributions to noncontrolling interests, redeemable noncontrolling interests and mandatorily redeemable financial instruments(40.0) (3.5)
Payment of deferred financing fees(4.0) (23.4)
Net cash provided by financing activities33.2
 299.2
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS8.0
 (28.8)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(145.0) 591.8
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period570.7
 372.4
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period$425.7
 $964.2
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: 
  

Cash paid during the period for interest$129.4
 $79.5
Cash paid during the period for income taxes, net of refunds received57.5
 38.4
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES: 
  
Accrued capital expenditure additions$72.6
 $56.2
Non-cash Common Stock issued for business combination—
 9,628.6
Non-cash debt assumed for business combination—
 1,941.8
Non-cash contingent consideration for business combination (see Note 4)5.0
 —

EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH(3.1)(15.1)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH199.7 48.5 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period283.8 263.8 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period$483.5 $312.3 
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:  
Cash paid during the period for interest$96.2 $121.7 
Net cash paid for income taxes37.8 27.3 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:  
Accrued capital expenditure additions$85.5 $85.3 
See notes to Condensed Consolidated Financial Statements.

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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.products throughout the world. Coty is a global beauty company with a strategic vision to be a new global leaderrich entrepreneurial history and challenger in the beauty industry.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 2018”2024” refer to the fiscal year ending June 30, 2018.2024. 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 revenuessales generally increase during the second fiscal quarter as a result of increased demand associated with the winter holiday season. WorkingFinancial performance, working capital requirements, sales, and cash flows and borrowings generally experience variability during the three to six months buildup preceding the holiday season. Product innovations, new product launches and the size and timing of certain orders from the Company’s customers may also result in variability. The Company also generally experiences higher 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, 2017.2023. 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 six months ended December 31, 20172023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending June 30, 2018.2024. 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 December 31, 2023 and June 30, 2023, the Company had restricted cash of $33.5 and $36.9, respectively, included in Restricted cash in the Condensed Consolidated Balance Sheets. The Restricted cash balance as of December 31, 2023 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 December 31, 2023. Restricted cash is included as a component of Cash, cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows.
Equity Investments
The Company elected the fair value option to account for its investment in Rainbow JVCO LTD and subsidiaries (together, "Wella" or the “Wella Company”) to align with the Company’s strategy for this investment. The fair value is updated on a quarterly basis. The investment is classified within Level 3 in the fair value hierarchy because the Company estimates the fair value of the investment using a combination of the income approach, the market approach and private transactions, when applicable. Changes in the fair value of equity investment under the fair value option are recorded in Other income, net within the Condensed Consolidated Statements of Operations (see Note 6—Equity Investments).
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 marketnet realizable value of inventory, the fair value of acquired assets and liabilities associated with acquisitions, pension benefit costs,equity investments, the assessment of goodwill, other intangible assets and long-lived assets for
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impairment and income taxes and the fair value of redeemable noncontrolling interests.taxes. 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.
Tax Information
The effective income tax rate for the three and six months ended December 31, 20172023 and 20162022 was (7.1)%27.7% and 174.4%13.8%, respectively, and (47.9)%36.4% and 194.8%22.4%, respectively. The change in the effective tax rate for the three months ended December 31, 2023, as compared with the three months ended December 31, 2022, is primarily due to the foreign exchange loss recognized on repatriation of funds in the prior year that were previously taxed. The change in the effective tax rate for the six months ended December 31, 2017 and 2016, respectively. The decrease in the effective tax rate2023, as compared towith the same periods in fiscal 2017 is primarily the result of (i) the resolution of foreign uncertain tax positions of approximately $43.0 ($41.8 in tax and $1.2 in interest) in the three and six months ended December 31, 2017 and (ii) the release2022, is primarily due to an expense of a valuation allowance of $111.2$24.3 in the U.S.current period recognized on the revaluation of the Company's deferred tax liabilities due to a tax rate increase enacted in the three and six months ended December 31, 2016 as a result of The Procter & Gamble Company’s (“P&G”) Beauty Business acquisition.Switzerland.
The effective income tax rates vary from the U.S. federal statutory rate of approximately 28%21% due to the effect of (i) jurisdictions with different statutory rates, including impacts of rate changes, (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. As of January 1, 2018, the

U.S. federal statutory rate decreased from 35% to 21%. As the Company has a June 30 fiscal year-end, the lower rate will be phased in, resulting in a blended rate of approximately 28% for the fiscal year ending June 30, 2018.
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 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. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.
In connection with the Company’s initial analysis of the impact of the Tax Act, the Company estimates the overall impact to be neutral from both a cash and financial statement perspective for fiscal 2018. The Company expects to fully offset the cash impact of the one-time deemed repatriation tax with tax attributes (e.g., net operating loss carryforwards, foreign tax credits, etc.). The expense in the financial statements as a result of utilizing these tax attributes of approximately $300.0 is expected to be offset by the tax benefit estimated on the revaluation of its deferred taxes of approximately $300.0. For various reasons that are discussed more fully below, the Company has not completed its accounting for the income tax effects of certain elements of the Tax Act. Where the Company was able to make reasonable estimates of the effects of elements for which the analysis is not yet complete, provisional adjustments were recorded. These provisional estimates may be affected by other elements related to the Tax Act, including, but not limited to, the state tax effect of adjustments made to federal temporary differences, confirming the amount of foreign earnings that have not been repatriated to the U.S., division of these earnings between cash and non-liquid assets, and validating the amount of tax attributes available.
As the Company finalizes the analysis of the impact of the Tax Act, additional adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized.
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 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.
As of December 31, 20172023 and June 30, 2017,2023, the gross amount of UTBs was $260.6$229.7 and $257.9,$235.5, respectively. As of December 31, 2017,2023, the total amount of UTBs that, if recognized, would impact the effective income tax rate is $224.0.$180.0. As of December 31, 20172023 and June 30, 2017,2023, the liability associated with UTBs, including accrued interest and penalties, was $231.3$215.6 and $154.6,$218.6, respectively, which was recorded in Income and other taxes payable and Other non-currentnoncurrent liabilities in the Condensed Consolidated Balance Sheets. The total interest and penalties recorded in the Condensed Consolidated Statements of Operations related to UTBs was $1.0$0.7 and $0.8$0.1 for the three months ended December 31, 20172023 and 2016,2022, respectively, and $2.1$2.0 and $1.0$1.4 for the six months ended December 31, 20172023 and 2016,2022, respectively. The total gross accrued interest and penalties recorded in the Condensed Consolidated Balance Sheets as of December 31, 20172023 and June 30, 20172023 was $13.0$35.1 and $11.7,$33.1, respectively. On the basis of the information available as of December 31, 2017,2023, it is reasonably possible that a decrease of up to $8.8$26.5 in UTBs may occur within 12twelve months as a result of projected resolutions of global tax examinations and a potential lapse of the applicable statutes of limitations.

Russia Market Exit
Recently Adopted Accounting Pronouncements
DuringIn connection with the first quarterCompany’s Board of fiscal 2018,Director’s decision to wind down operations in Russia, the Company adoptedrecognized total pre-tax losses in the amended Financial Accounting Standard Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of accounting for share-based payment transactions. The adoption of the ASU did not have a material impact on the Company’s Condensed Consolidated Financial Statements. The primary impactStatements of Operations of $0.0 and $0.1, respectively, in the new standard was the recognition of previously unrecognized excess tax benefits as an $8.3 cumulative-effect adjustment to Accumulated deficit as of July 1, 2017 to reflect a modified retrospective application. Prospectively, the excess tax benefits will be recorded as a component of Income tax expense as required, whereas they were previously recorded in Additional paid-in capital (“APIC”). Additionally, the ASU required that $3.4 related to shares withheld for employee taxes to be reported in Cash flows from financing activities for thethree and six months ended December 31, 2017 with an insignificant impact to prior periods. 
In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which simplifies the measurement of inventories by requiring inventory to be measured at the lower of cost and net realizable value, rather than at the lower of cost or market. Net realizable value is defined as the estimated selling price2023. The Company recognized total pre-tax gains in the ordinary courseCondensed Consolidated Statements of business, less reasonably predictable costsOperations of completion, disposal,$16.8 and transportation. $15.7, respectively, in the three and six months ended December 31, 2022.
The Company adopted ASU No. 2015-11 duringanticipates that it will incur an immaterial amount of additional costs through completion of the first quarterwind down. Additionally, management anticipates derecognizing the cumulative translation adjustment balance pertaining to the Russian subsidiary. The Company has substantially completed the exit of fiscal 2018. The adoptionits commercial activities in Russia. However, the Company anticipates that the process related to the liquidation of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements.Russian legal entity will take an extended period of time.
Recently IssuedRecent Accounting Pronouncements
In August 2017,December 2023, the FASBFinancial Accounting Standards Board ("FASB") issued ASU No. 2017-12, Derivatives and HedgingAccounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 815)740): Targeted Improvements to Accounting for Hedging Activities, Income Tax Disclosures, which provided guidance for improvementsexpands income tax disclosure requirements to accounting for hedging activities under ASC 815.include additional information related to the rate reconciliation of our effective tax rates to statutory rates, as well as additional disaggregation of taxes paid. The amendments better align an entity’s risk management activitiesin the ASU also remove disclosures related to certain unrecognized tax benefits and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendment will bedeferred taxes. ASU 2023-09 is effective for the Company in fiscal 2020 with2026. The amendments may be applied prospectively or retrospectively, and early adoption is permitted. The Company is evaluatingcurrently assessing the impact this guidance will haveof the requirements on the Company’s Consolidated Financial Statements and relatedits disclosures.
In May 2014,November 2023, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers2023-07, Segment Reporting (Topic 606),280): Improvements to Reportable Segment Disclosures, which implements a common revenue model that will enhance comparability across industries and requireexpands reportable segment disclosure requirements, primarily through enhanced disclosures.disclosures about significant segment expenses. The new standard introduces a five step principles based process to determine the timing and amount of revenue ultimately expected to be recorded. In March 2016, the FASB issued authoritative guidance amending certain portions of this standard to clarify the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued authoritative guidance amending certain portions of this standard to clarify the considerations for identifying performance obligations and to clarify the implementation guidance for revenue recognized from licensing arrangements. In May 2016, the FASB issued authoritative guidance amending certain portions of the standard to narrow the scope over, or to provide practical expedients, for assessing pending collectibility, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The Company will adopt the standard on July 1, 2018 using the modified retrospective transition method of adoption. The Company’s preliminary evaluation indicated that the adoption impact is expected to be primarily related to the timing of certain accruals associated with customer incentives and potential reclassifications of certain costs between Selling, general and administrative expenses and expenses recorded as a reduction of revenue resulting from changesamendments in the accounting treatment of store fixtures under the new standard. The Company continues to finalize its assessment of the final impact of this ASU on the Company’s Consolidated Financial Statements and related disclosures.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requiresrequire that a lessee recognizepublic entity discloses, on an annual and interim basis, significant segment expenses that are regularly provided to an entity's chief operating decision maker ("CODM"), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the assets and liabilities that arise from operating leases. A lessee should recognize in its balance sheet a liabilityCODM when deciding how to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying assetallocate resources. Annual disclosures are required 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 lessorsCompany in fiscal 2025. Interim disclosures are required to recognizefor periods within fiscal years beginning in the first quarter of fiscal 2026. Retrospective application is required for all prior periods presented, and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company plans to adopt the standard on July 1, 2019.early adoption is permitted. The Company is incurrently assessing the early stages of its evaluationimpact of the standardrequirements on its consolidated financial statements and has an implementation team in place that is performing an evaluationdisclosures.
9
Table of the impact this standard will have on the Company’s Consolidated Financial Statements and related disclosures.Contents

3. SEGMENT REPORTING
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”)Company's CODM in deciding how to allocate resources and assess performance. The Company has designated its Chief Executive Officer ("CEO") as the CODM.

The Company has the following three divisions which represent its operating segments and reportable segments:
Luxury — primarily focused on prestige fragrances, premium skin care and premium 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 revenuesincome and shared costs and the results of corporate initiatives are managed outsideby Corporate. Corporate primarily includes stock compensation expense, restructuring and realignment costs, costs related to acquisition, divestiture and early license termination activities, and impairments of long-lived assets, goodwill and intangibles that are not attributable to ongoing operating activities of the three segments by Corporate. The items withinsegments. Corporate relate to corporate-based responsibilities and decisions andcosts are not used by the CODM to measure the underlying performance of the segments. Corporate primarily includes restructuring costs, costs related to acquisition activities and certain other expense items not attributable to ongoing operating activities of the segments.
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 8—7—Goodwill and Other Intangible Assets, net.
Three Months Ended
December 31,		Six Months Ended
December 31,
SEGMENT DATA2023202220232022
Net revenues:
Prestige$1,122.6 $957.7 $2,187.3 $1,821.2 
Consumer Beauty605.0 565.9 1,181.7 1,092.4 
Total$1,727.6 $1,523.6 $3,369.0 $2,913.6 
Operating income (loss):
Prestige200.6 164.4 422.2 335.0 
Consumer Beauty60.4 49.4 92.4 81.1 
Corporate(24.3)(14.5)(80.4)(44.9)
Total$236.7 $199.3 $434.2 $371.2 
Reconciliation:
Operating income236.7 199.3 434.2 371.2 
Interest expense, net60.1 61.0 129.9 126.9 
Other income, net(80.8)(141.9)(4.2)(240.1)
Income before income taxes$257.4 $280.2 $308.5 $484.4 
 Three Months Ended
December 31,		 Six Months Ended
December 31,
SEGMENT DATA2017 2016 2017 2016
Net revenues:       
Luxury$951.2
 $835.0
 $1,715.6
 $1,284.0
Consumer Beauty1,138.6
 1,001.7
 2,182.0
 1,573.6
Professional Beauty547.8
 460.0
 978.3
 519.3
Total$2,637.6
 $2,296.7
 $4,875.9
 $3,376.9
Operating income (loss):       
Luxury$85.1
 $66.6
 $141.8
 $142.7
Consumer Beauty99.3
 62.9
 161.2
 115.6
Professional Beauty73.5
 83.3
 71.8
 99.7
Corporate(83.5) (225.5) (171.7) (324.3)
Total$174.4
 $(12.7) $203.1
 $33.7
Reconciliation:       
Operating income (loss)$174.4
 $(12.7) $203.1
 $33.7
Interest expense, net60.3
 57.9
 126.7
 98.3
Other expense (income), net3.4
 (0.6) 7.1
 0.7
Income (loss) before income taxes$110.7
 $(70.0) $69.3
 $(65.3)
Presented below are the percentage of revenues associated with the Company’s product categories:
Three Months Ended
December 31,		Six Months Ended
December 31,
PRODUCT CATEGORY2023202220232022
Fragrance64.3 %62.2 %63.8 %60.8 %
Color Cosmetics24.1 25.6 24.3 26.6 
Body Care, Skin & Other11.6 12.2 11.9 12.6 
Total100.0 %100.0 %100.0 %100.0 %
10
 Three Months Ended
December 31,		 Six Months Ended
December 31,
PRODUCT CATEGORY2017 2016 2017 2016
Fragrance40.7% 40.8% 39.1% 42.3%
Color Cosmetics24.1
 24.3
 26.3
 27.3
Hair Care24.5
 23.8
 24.2
 16.3
Skin & Body Care10.7
 11.1
 10.4
 14.1
Total Coty Inc.100.0% 100.0% 100.0% 100.0%

Table of Contents

4. BUSINESS COMBINATIONS
P&G Beauty Business Acquisition
On October 1, 2016, the Company acquired the P&G Beauty Business in order to further strengthen the Company’s position in the global beauty industry. The purchase price was $11,570.4 and consisted of $9,628.6 of total equity consideration and $1,941.8 of assumed debt.
The Company issued 409.7 million shares of common stock to the former holders of Galleria Co. (“Galleria”) (which held the assets of the P&G Beauty Business) common stock, together with cash in lieu of fractional shares. Coty Inc. is considered to be the acquiring company for accounting purposes.
The Company has finalized the valuation of assets acquired and liabilities assumed for the P&G Beauty Business acquisition. The Company recognized certain measurement period adjustments as disclosed below during the quarter ended September 30, 2017. The measurement period for the P&G Beauty Business acquisition closed at the end of the first quarter of fiscal 2018.
The following table summarizes the allocation of the purchase price to the net assets of the P&G Beauty Business as of the October 1, 2016 acquisition date:
 
Estimated
fair value as previously reported (a)
 
Measurement period adjustments (b)
 Final fair value as adjusted Estimated
useful life
(in years)
Cash and cash equivalents$387.6
 $—
 $387.6
  
Inventories465.5
 —
 465.5
  
Property, plant and equipment742.9
 (16.9) 726.0
 3 - 40
Goodwill5,528.4
 35.5
 5,563.9
 Indefinite
Trademarks — indefinite1,575.0
 —
 1,575.0
 Indefinite
Trademarks — finite747.7
 —
 747.7
 10 - 30
Customer relationships1,074.2
 18.8
 1,093.0
 2 - 26
License agreements2,299.0
 12.0
 2,311.0
 4 - 30
Product formulations183.8
 (10.0) 173.8
 5 - 28
Other net working capital(23.2) —
 (23.2)  
Net other assets (liabilities)64.6
 (33.7) 30.9
  
Unfavorable contract liabilities(130.0) —
 (130.0)  
Pension liabilities(404.1) —
 (404.1)  
Deferred tax liability, net(941.0) (5.7) (946.7)  
Total purchase price$11,570.4
 $—
 $11,570.4
  
(a) As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The business combination was completed in fiscal 2017.
(b) The Company recorded measurement period adjustments in the first quarter of fiscal 2018. The measurement period adjustments related to Customer relationships, License agreements and Product formulations, collectively, of $20.8, were a result of changes in assumptions that were used at the date of acquisition for valuation purposes including allocation of costs and synergies. The measurement period adjustments related to Property, plant and equipment and Net other assets of ($16.9) and ($33.7), respectively, primarily related to obtaining new facts and circumstances about acquired assets and liabilities that existed at the acquisition date. The decrease to Deferred tax liability, net was primarily a result of the change of the jurisdictional allocation of the tangible and intangible assets. All measurement period adjustments were offset against Goodwill.
Goodwill is primarily attributable to the anticipated company-specific synergies and economies of scale expected from the operations of the combined company. The synergies include certain cost savings, operating efficiencies, and leverage of the acquired brand recognition to be achieved as a result of the P&G Beauty Business acquisition. Goodwill is not expected to be deductible for tax purposes. Goodwill of $1,889.8, $3,188.1 and $486.0 is allocated to the Luxury, Consumer Beauty and Professional Beauty segments, respectively. The allocation of goodwill to segments was based on the relative fair values of expected future cash flows.

ghd Acquisition
On November 21, 2016, the Company completed the acquisition of 100% of the equity interest of Lion/Gloria Topco Limited which held the net assets of ghd (“ghd”) which stands for “Good Hair Day”, a premium brand in high-end hair styling appliances. The ghd acquisition further strengthens the Company’s professional hair category and is included in the Professional Beauty segment’s results after the acquisition date. The total cash consideration paid net of acquired cash and cash equivalents was £430.2 million, the equivalent of $531.5, at the time of closing.
The Company has finalized the valuation of assets acquired and liabilities assumed for the ghd acquisition. The Company recognized certain measurement period adjustments as disclosed below during the six months ended December 31, 2017. The measurement period for the ghd acquisition closed on November 21, 2017.
The following table summarizes the allocation of the purchase price to the net assets of ghd as of the November 21, 2016 acquisition date:
 
Estimated
fair value as previously reported (a)
 
Measurement period adjustments (b)
 Final fair value as adjusted Estimated
useful life
(in years)
Cash and cash equivalents$7.1
 $—
 $7.1
  
Inventories79.6
 —
 79.6
  
Property, plant and equipment10.0
 —
 10.0
 3 - 10
Goodwill174.4
 24.6
 199.0
 Indefinite
Indefinite-lived other intangible assets163.8
 (14.8) 149.0
 Indefinite
Customer relationships36.6
 (2.3) 34.3
 11 - 25
Technology146.6
 (17.2) 129.4
 11 - 17
Other net working capital(16.6) 4.7
 (11.9)  
Net other assets0.9
 (0.9) —
  
Deferred tax liability, net(63.9) 5.9
 (58.0)  
Total purchase price$538.5
 $—
 $538.5
  
(a) As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The business combination was completed in fiscal 2017.
(b) The Company recorded measurement period adjustments in the first and second quarters of fiscal 2018. The measurement period adjustments related to decreases to Technology, Indefinite-lived other intangible assets and Customer relationships of $17.2, $14.8 and $2.3, respectively, and a decrease to the deferred tax liability of $5.9 were a result of changes in assumptions that were used at the date of acquisition for valuation purposes. The measurement period adjustments related to Other net working capital of $4.7 were a result of obtaining new facts and circumstances about acquired accrued expenses that existed as of the acquisition date. All measurement period adjustments were offset against Goodwill.
Goodwill is not expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating ghd’s products into the Company’s existing sales channels. Goodwill of $49.0, $42.0 and $108.0 is allocated to the Luxury, Consumer Beauty and Professional Beauty segments, respectively. The allocation of goodwill to the segments were due to the reduction in corporate and regional overhead allocated to these segments due to the addition of the ghd acquisition.
Younique Acquisition
On February 1, 2017, the Company completed its acquisition of 60% of the membership interest in Foundation, LLC (“Foundation”) which held the net assets of Younique, LLC, a Utah limited liability company (“Younique”), for cash consideration of $600.0, net of acquired cash and assumed debt, and an additional payment of $7.5 for working capital adjustments paid in the six months ended December 31, 2017. The existing Younique membership holders contributed their 100% membership interest in Younique to Foundation in exchange for a 40% membership interest in Foundation and $607.5 of cash consideration. Younique strengthens the Consumer Beauty segment’s product offerings. The Company accounts for the noncontrolling interest portion of the acquisition as a redeemable noncontrolling interest.
The Company estimated the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. The preliminary fair values are substantially complete with the exception of accrued expenses and goodwill. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price

adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized.
The following table summarizes the estimated allocation of the purchase price to the net assets of Younique as of the February 1, 2017 acquisition date:
 
Estimated fair value as previously reported (a)
 
Measurement period adjustments (b)
 Estimated fair value as adjusted Estimated useful life (in years)
Cash and cash equivalents$17.5
 $—
 $17.5
  
Inventories88.1
 —
 88.1
  
Property, plant and equipment67.1
 —
 67.1
 3 - 8
Goodwill575.3
 (0.2) 575.1
 Indefinite
Trademark — finite123.0
 —
 123.0
 20
Product formulations0.6
 —
 0.6
 5
Customer relationships197.0
 —
 197.0
 7 - 10
Other net working capital(27.7) 0.2
 (27.5)  
Short-term and long-term debt(1.2) —
 (1.2)  
Total equity value1,039.7
 —
 1,039.7
  
        
Redeemable noncontrolling interest415.9
 —
 415.9
  
Net cash and debt acquired16.3
 —
 16.3
  
Total purchase price$607.5
 $—
 $607.5
  
(a) As previously reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. The business combination was completed in fiscal 2017.
(b) The Company recorded measurement period adjustments in the first and second quarters of fiscal 2018 to account for an increase in the estimated other net working capital of $0.2 as of the February 1, 2017 acquisition date. This adjustment is offset against Goodwill.
Goodwill is expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from certain manufacturing and supply chain cost savings. Goodwill of $95.0, $420.1 and $60.0 is allocated to the Luxury, Consumer Beauty and Professional Beauty segments, respectively. The allocation of goodwill to the segments were due to the reduction in corporate and regional overhead allocated to these segments due to the addition of the Younique acquisition.
Burberry Beauty Business Acquisition
On October 2, 2017, the Company acquired the exclusive global license rights and other related assets for the Burberry Limited (“Burberry”) luxury fragrances, cosmetics and skincare business (the “Burberry Beauty Business”). The Burberry Beauty Business acquisition is expected to further strengthen the Company’s position in the global beauty industry. Total purchase consideration, after post-closing adjustments, was £187.1 million, the equivalent of $250.1, at the time of closing. Included in the purchase price was cash consideration of £183.3 million, the equivalent of $245.1, at the time of closing, in addition to £3.8 million, the equivalent of $5.0, of estimated contingent consideration, at the time of closing.
The future contingent consideration payments will range from zero to £16.7 million and will be payable on a quarterly basis to Burberry as certain items of inventory transferred to the Company at the acquisition date are subsequently used or sold. The amount of the contingent consideration recorded was estimated as of the acquisition date and is subject to change based on the related inventory usage. The fair value of the contingent consideration was determined by estimating the future inventory usage and corresponding payments over a four-year period, with the contingent payments being made in each of the respective years. The estimate of the contingent consideration payable is recorded in Other noncurrent liabilities in the Condensed Consolidated Balance Sheet.
The Company estimated the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on information currently available. The Company is still evaluating the fair value of the assets and liabilities assumed from the Burberry Beauty Business acquisition. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized.

The following table summarizes the estimated allocation of the purchase price to the net assets of the Burberry Beauty Business as of the October 2, 2017 acquisition date:
 Estimated
fair value		 Estimated
useful life
(in years)
Inventories$55.1
  
Property, plant and equipment5.8
 1 - 3
License and distribution rights129.7
 3 - 15
Goodwill68.2
  Indefinite
Net other liabilities(8.7)  
Total purchase price$250.1
  
Goodwill is expected to be deductible for tax purposes. The goodwill is attributable to expected synergies resulting from integrating the Burberry Beauty Business products into the Company’s existing sales channels.
For the three and six months ended December 31, 2017, Net revenues and Net income of the Burberry Beauty Business included in the Company’s Condensed Consolidated Statements of Operations from the date of acquisition were $8.2 and $(9.8), respectively.
Unaudited Pro Forma Information
The unaudited pro forma financial information in the table below summarizes the combined results of the Company and the P&G Beauty Business and Younique (the “Pro Forma Acquisitions”) as though the companies had been combined on July 1, 2015. The three and six months ended December 31, 2016 include pro forma adjustments for all of the Pro Forma Acquisitions.
The pro forma adjustments include incremental amortization of intangible assets and depreciation of property, plant and equipment, based on allocated fair values of each asset as well as costs related to financing the Pro Forma Acquisitions. The unaudited pro forma information also includes non-recurring acquisition-related costs. Pro forma adjustments were tax-effected at the Company’s statutory rates. For the pro forma basic and diluted earnings per share calculation, 409.7 million shares issued in connection with the P&G Beauty Business acquisition were considered as if issued on July 1, 2015. The pro forma information is presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if the Pro Forma Acquisitions had taken place on July 1, 2015 or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings. The pro forma information for the three and six months ended December 31, 2016 is as follows:
 Three Months Ended
December 31,		 Six Months Ended December 31,


2016 (a)
 
2016 (a)
Pro forma Net revenues$2,394.6
 $4,584.2
Pro forma Net income (loss)123.9
 8.5
Pro forma Net income (loss) attributable to Coty Inc.118.6
 (6.0)
Pro forma Net income (loss) attributable to Coty Inc. per common share:   
Basic$0.16
 $(0.01)
Diluted$0.16
 $(0.01)
(a) The pro forma information for the three months ended December 31, 2016 excluded $134.9 of non-recurring acquisition-related costs and excluded $36.5 of amortization of inventory step up. The pro forma information for the six months ended December 31, 2016 excluded $316.6 of non-recurring acquisition-related costs and excluded $36.5 of amortization of inventory step up.

5. ACQUISITION-RELATED COSTS
Acquisition-related costs, which are expensed as incurred, represent non-restructuring costs directly related to acquiring and integrating an entity, for both completed and contemplated acquisitions. These costs can include finder’s fees, legal, accounting, valuation, other professional or consulting fees, including fees related to transitional services, and other internal costs which can include compensation related expenses for dedicated internal resources. The Company recognized acquisition-related costs of $7.0 and $135.9 for the three months ended December 31, 2017 and 2016, respectively, and $61.1 and $217.4

for the six months ended December 31, 2017 and 2016, respectively, which have been recorded in Acquisition-related costs in the Condensed Consolidated Statements of Operations. Acquisition-related costs incurred during the three months ended December 31, 2017 and 2016 were primarily related to the Burberry Beauty Business and P&G Beauty Business acquisitions, respectively. Acquisition-related costs incurred during both the six months ended December 31, 2017 and 2016 were primarily related to the P&G Beauty Business acquisition.

6. RESTRUCTURING COSTS
Restructuring costs for the three and six months ended December 31, 20172023 and 20162022 are presented below:
Three Months Ended
December 31,		Six Months Ended
December 31,
2023202220232022
Other Restructuring Actions$6.1 $— $34.7 $— 
Transformation Plan(0.4)(2.9)(0.6)(4.1)
Total$5.7 $(2.9)$34.1 $(4.1)
Other Restructuring Actions
 Three Months Ended
December 31,		 Six Months Ended
December 31,
 2017 2016 2017 2016
Global Integration Activities$27.1
 $13.6
 $36.9
 $13.6
Acquisition Integration Program(3.3) 1.4
 (3.3) 4.6
Other Restructuring(2.1) 0.8
 (0.7) 5.0
Total$21.7
 $15.8
 $32.9
 $23.2
Global Integration Activities
In connection with the acquisitionThe Company continues to analyze our cost structure and evaluate opportunities to streamline operations through a range of the P&G Beauty Business, thesmaller initiatives and other cost reduction activities to optimize operations in select businesses. The Company has incurred cumulative restructuring charges of $36.0 related to approved initiatives through December 31, 2023, which have been recorded in Corporate. The liability balances were $35.7 (including certain actions that were accrued during fiscal 2023) and anticipates$0.0 at December 31, 2023 and June 30, 2023 respectively. The Company currently estimates that itthe total remaining accrual of $35.7 will continueresult in cash expenditures of approximately $5.8, $15.4 and $14.5 in fiscal 2024, 2025 and thereafter, respectively.
Transformation Plan
The Company previously announced a four-year plan to drive substantial improvement and optimization in the Company's businesses, under which the Company expected to incur restructuring and related costs aimed at integrating and optimizing the combined organization (“Global Integration Activities”(the “Transformation Plan”).
, which is now substantially complete. Of the expected costs, the Company has incurred cumulative restructuring charges of $401.1$214.9 related to approved initiatives through December 31, 2017,2023, which have been recorded in Corporate. The following table presents aggregate restructuring charges for the program:
 Severance and Employee Benefits Third-Party Contract Terminations Fixed Asset Write-offs Other Exit Costs Total
Fiscal 2017$333.9
 $22.4
 $4.6
 $3.3
 $364.2
Fiscal 201824.2
 9.4
 0.2
 3.1
 36.9
Cumulative through December 31, 2017$358.1
 $31.8
 $4.8
 $6.4
 $401.1
Over the next two fiscal years, the Company expects to incur approximately $130.0 of additional restructuring charges pertaining to the approved actions. Of the $130.0 of additional restructuring charges, the Company currently anticipates spending equal amounts related to employee termination benefits, fixed asset write-offs, third-party contract terminations and other costs to exit facilities and relocate employees.
The related liability balance and activity for the Global Integration Activities restructuring costs are presented below:
 Severance and
Employee
Benefits		 Third-Party
Contract
Terminations		 Fixed Asset Write-offs Other
Exit
Costs		 Total
Program
Costs
Balance—July 1, 2017$310.8
 $14.9
 $—
 $2.8
 $328.5
Restructuring charges30.4
 9.4
 0.2
 3.1
 43.1
Payments(68.0) (5.4) —
 (2.4) (75.8)
Changes in estimates(6.2) —
 —
 —
 (6.2)
Non-cash utilization—
 —
 (0.2) —
 (0.2)
Effect of exchange rates17.4
 (0.1) —
 —
 17.3
Balance—December 31, 2017$284.4
 $18.8
 $—
 $3.5
 $306.7
The Company currently estimates that the total remaining accrual of $306.7 will result in cash expenditures of approximately $161.8, $135.5, $8.2 and $1.2 in fiscal 2018, 2019, 2020 and 2021, respectively.
Acquisition Integration Program
In the first quarter of fiscal 2016, the Company’s Board of Directors (the “Board”) approved an expansion to a restructuring program in connection with the acquisition of Bourjois (the “Acquisition Integration Program”).  Actions associated with the program were initiated after the acquisition of Bourjois and were substantially completed during fiscal 2017

with cash payments continuing through fiscal 2020. The Company incurred $56.6 of restructuring costs life-to-date as of December 31, 2017, which have been recorded in Corporate.
The related liability balance and activity for the Acquisition Integration Program costs are presented below:
 Severance and
Employee
Benefits		 Third-Party
Contract
Terminations		 Other
Exit
Costs		 Total
Program
Costs
Balance—July 1, 2017$24.8
 $1.5
 $4.1
 $30.4
Restructuring charges—
 —
 2.1
 2.1
Payments(16.5) —
 (1.2) (17.7)
Changes in estimates (a)
(5.4) —
 —
 (5.4)
Effect of exchange rates0.8
 —
 0.2
 1.0
Balance—December 31, 2017$3.7
 $1.5
 $5.2
 $10.4
(a)The decrease in severance and employee benefits is primarily attributable to favorable settlements with restructured employees.
The Company currently estimates that the total remaining accrual of $10.4 will result in cash expenditures of approximately $6.2, $2.6 and $1.6 in fiscal 2018, 2019 and 2020, respectively.
Other Restructuring
The Company executed a number of other restructuring activities during 2013 and 2014, which focused primarily on work-force reductions around a new organizational structure, and other productivity initiatives related to the integration of supply chain and selling activities. These programs are substantially completed. The Company incurred expenses of $(0.7) and $5.0 during the six months ended December 31, 2017 and 2016, respectively. The related liability balances were $4.7$6.5 and $10.1$10.0 at December 31, 20172023 and June 30, 2017,2023, respectively. The Company currently estimates that the total remaining accrual of $4.7 will result in cash expenditures in fiscal 2018.
In connection with the acquisition of the P&G Beauty Business, the Company assumed restructuring liabilities of approximately $21.7 at October 1, 2016. The Company estimates that the remaining accrual of $12.0 at December 31, 2017$6.5 will result in cash expenditures of $6.2, $4.6approximately $3.8 and $1.2$2.7 in fiscal 2018, 20192024 and 2020,2025, respectively.
7.5. INVENTORIES
Inventories as of December 31, 20172023 and June 30, 20172023 are presented below:
December 31,
2023		June 30,
2023
Raw materials$212.1 $224.1 
Work-in-process12.7 15.6 
Finished goods550.7 613.7 
Total inventories$775.5 $853.4 

11
 December 31,
2017		 June 30,
2017
Raw materials$305.3
 $256.4
Work-in-process22.6
 33.4
Finished goods827.4
 762.8
Total inventories$1,155.3
 $1,052.6
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6. EQUITY INVESTMENTS
8.The Company's equity investments, classified as Equity investments in the Condensed Consolidated Balance Sheets are represented by the following:
December 31,
2023		June 30,
2023
Equity method investments:
KKW Holdings (a)
$7.2 $8.9 
Equity investments at fair value:
Wella (b)
1,077.0 1,060.0 
Total equity investments$1,084.2 $1,068.9 
(a)On January 4, 2021, the Company completed its purchase of 20% of the outstanding equity of KKW Holdings. The Company accounts for this minority investment under the equity method, given it has the ability to exercise significant influence over, but not control, the investee. The carrying value of the Company’s investment includes basis differences allocated to amortizable intangible assets.
The Company recognized $0.9 and $1.1, respectively, during the three months ended December 31, 2023 and 2022 and $1.7 and $2.0, respectively, during the six months ended December 31, 2023 and 2022 representing its share of the investee’s net loss in Other income, net within the Condensed Consolidated Statements of Operations.
(b)As of December 31, 2023 and June 30, 2023, the Company's stake in Wella was 25.9%.
On July 18, 2023, the Company announced that it had entered into a binding letter of intent to sell a 3.6% stake in Wella to an investment firm for $150.0. Subsequently, the Company and investment firm mutually agreed not to pursue the proposed transaction and entered into a termination letter in October 2023.
The following table presents summarized financial information of the Company’s equity method investees for the period ending December 31, 2023. Amounts presented represent combined totals at the investee level and not the Company’s proportionate share:
Three Months Ended
December 31,		Six Months Ended
December 31,
2023202220232022
Summarized Statements of Operations information:
Net revenues$703.9 $660.6 $1,341.2 $1,257.2 
Gross profit472.1 420.3 898.9 814.9 
Operating income79.6 55.5 124.5 116.5 
Income before income taxes24.2 0.3 17.4 20.3 
Net income (loss)74.2 (1.5)57.5 14.5 
The following table summarizes movements in equity investments with fair value option that are classified within Level 3 for the period ended December 31, 2023. There were no internal movements to or from Level 3 and Level 1 or Level 2 for the period ended December 31, 2023.
Equity investments at fair value:
Balance as of June 30, 2023$1,060.0 
Total gains included in earnings17.0 
Balance as of December 31, 2023$1,077.0 
12
Table of Contents
Level 3 significant unobservable inputs sensitivity
The following table summarizes the significant unobservable inputs used in Level 3 valuation of the Company's investments carried at fair value as of December 31, 2023. Included in the table are the inputs or range of possible inputs that have an effect on the overall valuation of the financial instruments.
Fair valueValuation techniqueUnobservable
input		Range
Equity investments at fair value$1,077.0 Discounted cash flowsDiscount rate
10.45% (a)
Growth rate
1.8% - 9.2% (a)
Market multipleRevenue multiple
2.1x – 2.3x (b)
EBITDA multiple
10.4x – 13.9x (b)
(a)The primary unobservable inputs used in the fair value measurement of the Company's equity investments with fair value option, when using a discounted cash flow method, are the discount rate and revenue growth rate. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. The Company estimates the discount rate based on the investees' projected cost of equity and debt. The revenue growth rate is forecasted for future years by the investee based on their best estimates. Significant increases (decreases) in the revenue growth rate in isolation would result in a significantly higher (lower) fair value measurement.
(b)The primary unobservable inputs used in the fair value measurement of the Company's equity investments with fair value option, when using a market multiple method, are the revenue multiple and EBITDA multiple. Significant increases (decreases) in the revenue multiple or EBITDA multiple in isolation would result in a significantly higher (lower) fair value measurement. The market multiples are derived from a group of guideline public companies.
7. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
Goodwill as of December 31, 20172023 and June 30, 20172023 is presented below:

PrestigeConsumer BeautyTotal
Gross balance at June 30, 2023$6,279.2 $1,748.8 $8,028.0 
Accumulated impairments(3,110.3)(929.8)(4,040.1)
Net balance at June 30, 2023$3,168.9 $819.0 $3,987.9 
Changes during the period ended December 31, 2023
Foreign currency translation27.1 6.9 34.0 
Gross balance at December 31, 2023$6,306.3 $1,755.7 $8,062.0 
Accumulated impairments(3,110.3)(929.8)(4,040.1)
Net balance at December 31, 2023$3,196.0 $825.9 $4,021.9 
 Luxury Consumer Beauty Professional Beauty Total
Gross balance at June 30, 2017$3,496.8
 $4,732.0
 $967.5
 $9,196.3
Accumulated impairments(403.7) (237.1) —
 (640.8)
Net balance at June 30, 2017$3,093.1
 $4,494.9
 $967.5
 $8,555.5
        
Changes during the period ended December 31, 2017:       
Acquisitions (a)
68.2
 —
 —
 68.2
Measurement period adjustments (b)
(140.3) 222.7
 (22.5) 59.9
Foreign currency translation55.9
 99.8
 25.6
 181.3
        
Gross balance at December 31, 2017$3,480.6
 $5,054.5
 $970.6
 $9,505.7
Accumulated impairments(403.7) (237.1) —
 (640.8)
Net balance at December 31, 2017$3,076.9
 $4,817.4
 $970.6
 $8,864.9
13
(a) Includes goodwill resulting from the Burberry Beauty Business acquisition (Refer to Note 4—Business Combinations).
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(b) Includes measurement period adjustments in connection with the P&G Beauty Business, ghd and Younique acquisitions (Refer to Note 4—Business Combinations).
Other Intangible Assets, net
Other intangible assets, net as of December 31, 20172023 and June 30, 20172023 are presented below:
December 31,
2023		June 30,
2023
Indefinite-lived other intangible assets$957.4 $950.8 
Finite-lived other intangible assets, net2,782.1 2,847.2 
Total Other intangible assets, net$3,739.5 $3,798.0 
 December 31, 2017 June 30,
2017
Indefinite-lived other intangible assets$3,210.1
 $3,186.9
Finite-lived other intangible assets, net5,340.6
 5,238.3
Total Other intangible assets, net$8,550.7
 $8,425.2
The changes in the carrying amount of indefinite-lived other intangible assets are presented below:
TrademarksTotal
Gross balance at June 30, 2023$1,895.7 $1,895.7 
Accumulated impairments(944.9)(944.9)
Net balance at June 30, 2023$950.8 $950.8 
Changes during the period ended December 31, 2023
Foreign currency translation6.6 6.6 
Gross balance at December 31, 2023$1,902.3 $1,902.3 
Accumulated impairments(944.9)(944.9)
Net balance at December 31, 2023$957.4 $957.4 
 Luxury Consumer Beauty Professional Beauty Total
Gross balance at June 30, 2017$409.8
 $1,696.4
 $1,278.5
 $3,384.7
Accumulated impairments(118.8) (75.9) (3.1) (197.8)
Net balance at June 30, 2017291.0
 1,620.5
 1,275.4
 3,186.9
        
Changes during the period ended December 31, 2017:       
Measurement period adjustments (a)
—
 —
 (14.8) (14.8)
Foreign currency translation12.3
 15.9
 9.8
 38.0
        
Gross balance at December 31, 2017422.1
 1,712.3
 1,273.5
 3,407.9
Accumulated impairments(118.8) (75.9) (3.1) (197.8)
Net balance at December 31, 2017$303.3
 $1,636.4
 $1,270.4
 $3,210.1
(a) Includes measurement period adjustments in connection with the ghd acquisition (Refer to Note 4—Business Combinations).

Intangible assets subject to amortization are presented below:
 Cost Accumulated Amortization Accumulated Impairment Net
June 30, 2017       
License agreements$3,148.4
 $(653.3) $—
 $2,495.1
Customer relationships1,937.3
 (375.0) (5.5) 1,556.8
Trademarks1,001.1
 (141.0) —
 860.1
Product formulations389.3
 (63.0) —
 326.3
Total$6,476.1
 $(1,232.3) $(5.5) $5,238.3
December 31, 2017       
License agreements (a)(b)
$3,385.0
 $(724.6) $—
 $2,660.4
Customer relationships (a)(b)
2,002.5
 (447.5) (5.5) 1,549.5
Trademarks1,004.9
 (164.8) —
 840.1
Product formulations and technology (a)
370.4
 (79.8) —
 290.6
Total$6,762.8
 $(1,416.7) $(5.5) $5,340.6
(a)Includes measurement period adjustments in connection with the P&G Beauty Business and ghd acquisitions during the six months ended December 31, 2017 (Refer to Note 4—Business Combinations).
(b)Includes License agreement of $112.3 and Customer relationships of $17.4 resulting from the Burberry Beauty Business acquisition during the six months ended December 31, 2017 (Refer to Note 4—Business Combinations).
CostAccumulated AmortizationAccumulated ImpairmentNet
June 30, 2023
License agreements and collaboration agreements$3,756.2 $(1,282.6)$(19.6)$2,454.0 
Customer relationships750.6 (505.9)(5.5)239.2 
Trademarks313.0 (180.6)(0.5)131.9 
Product formulations and technology85.6 (63.5)— 22.1 
Total$4,905.4 $(2,032.6)$(25.6)$2,847.2 
December 31, 2023
License agreements and collaboration agreements$3,798.8 $(1,372.5)$(19.6)$2,406.7 
Customer relationships755.3 (522.4)(5.5)227.4 
Trademarks314.1 (187.5)(0.5)126.1 
Product formulations and technology86.5 (64.6)— 21.9 
Total$4,954.7 $(2,147.0)$(25.6)$2,782.1 
Amortization expense was $89.6$48.3 and $95.1$47.6 for the three months ended December 31, 20172023 and 2016,2022, respectively and $167.8$96.9 and $116.4$94.9 for the six months ended December 31, 20172023 and 2016,2022, respectively.
8. LEASES
The Company leases office facilities under non-cancelable operating leases with terms generally ranging between 4 and 25 years. The Company utilizes these leased office facilities for use by its employees in countries in which the Company conducts its business. Leases are negotiated with third parties and, in some instances contain renewal, expansion and termination options. The Company also subleases certain office facilities to third parties when the Company no longer intends to utilize the space. None of the Company’s leases restricts the payment of dividends or the incurrence of debt or additional lease obligations, or contain significant purchase options.
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The following chart provides additional information about the Company’s operating leases:
Three Months Ended
December 31,		Six Months Ended
December 31,
Lease Cost:2023202220232022
Operating lease cost$18.7 $19.3 $37.8 $38.5 
Short-term lease cost0.5 0.3 0.8 0.5 
Variable lease cost8.9 8.2 19.6 16.8 
Sublease income(4.5)(3.9)(8.4)(7.7)
Net lease cost$23.6 $23.9 $49.8 $48.1 
Other information:
Operating cash outflows from operating leases$(18.0)$(18.7)$(37.2)$(40.4)
Right-of-use assets obtained in exchange for lease obligations$17.7 $6.2 $32.7 $13.8 
Weighted-average remaining lease term - real estate6.9 years7.4 years
Weighted-average discount rate - real estate leases4.42 %4.07 %
Future minimum lease payments for the Company’s operating leases are as follows:
Fiscal Year Ending June 30,
2024, remaining$38.4 
202569.3 
202660.2 
202751.4 
202836.4 
Thereafter112.1 
Total future lease payments367.8 
Less: imputed interest(54.7)
Total present value of lease liabilities313.1 
Current operating lease liabilities61.5 
Long-term operating lease liabilities251.6 
Total operating lease liabilities$313.1 
Table excludes obligations for leases with original terms of twelve months or less, which have not been recognized as right-of-use assets or liabilities in the Condensed Consolidated Balance Sheets.
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9. DEBT
The Company’s debt balances consisted of the following as of December 31, 20172023 and June 30, 2017,2023, respectively:
December 31,
2023		June 30,
2023
Short-term debt$6.0 $— 
Senior Secured Notes
2026 Dollar Senior Secured Notes due April 2026650.0 900.0 
2026 Euro Senior Secured Notes due April 2026774.4 761.0 
2028 Euro Senior Secured Notes due September 2028553.2 — 
2029 Dollar Senior Secured Notes due January 2029500.0 500.0 
2030 Dollar Senior Secured Notes due July 2030750.0 — 
2018 Coty Credit Agreement
2023 Coty Revolving Credit Facility due July 2028— — 
2021 Coty Revolving Credit Facility due April 2025— 228.9 
2018 Coty Term B Facility due April 2025— 1,183.7 
Senior Unsecured Notes
2026 Dollar Notes due April 2026323.0 473.0 
2026 Euro Notes due April 2026199.5 196.0 
Brazilian Credit Facilities— 31.9 
Other long-term debt and finance lease obligations5.7 7.1 
Total debt3,761.8 4,281.6 
Less: Short-term debt and current portion of long-term debt(8.9)(57.9)
Total Long-term debt3,752.9 4,223.7 
Less: Unamortized financing fees and discounts on long-term debt(70.0)(45.5)
Total Long-term debt, net$3,682.9 $4,178.2 
 December 31, 2017 June 30,
2017
Short-term debt$13.5
 $3.7
Galleria Credit Agreement   
Galleria Revolving Credit Facility due September 2021365.0
 —
Galleria Term Loan A Facility due September 2021932.5
 944.3
Galleria Term Loan B Facility due September 2023997.5
 1,000.0
Coty Credit Agreement   
Coty Revolving Credit Facility due October 2020 (a)
777.0
 810.0
Coty Term Loan A Facility due October 20201,751.6
 1,792.8
Coty Term Loan A Facility due October 2021926.3
 950.6
Coty Term Loan B Facility due October 20221,753.0
 1,712.5
Other long-term debt and capital lease obligations1.4
 1.7
Total debt7,517.8
 7,215.6
Less: Short-term debt and current portion of long-term debt(295.9) (209.1)
Total Long-term debt7,221.9
 7,006.5
Less: Unamortized debt issuance costs (b)
(66.3) (67.6)
Less: Discount on Long-term debt(9.8) (10.6)
Total Long-term debt, net$7,145.8
 $6,928.3
Short-Term Debt
(a)Includes a $62.0 swingline loan outstandingThe Company maintains short-term lines of credit and other short-term debt with financial institutions around the world. As of December 31, 2023, total short-term debt increased by $6.0 from nil as of June 30, 2023. In addition, the Company had undrawn letters of credit of $4.1 and $7.2, and bank guarantees of $20.7 and $16.3 as of December 31, 2017.
(b) Consists of unamortized debt issuance costs of $15.4 and $17.5 for the Coty Revolving Credit Facility, $29.7 and $33.2 for the Coty Term Loan A Facility and $11.0 and $11.3 for the Coty Term Loan B Facility as of December 31, 20172023 and June 30, 2017,2023, respectively. Consists

Long-Term Debt
of unamortized debt issuance costs of $4.4for the Galleria Revolving Credit Facility as of December 31, 2017, and $2.7 and $2.7 for the Galleria Term Loan A Facility and $3.1 and $3.0 for the Galleria Term Loan B Facility as of December 31, 2017 and June 30, 2017, respectively. Unamortized debt issuance costs of $4.2 for the Galleria Revolving Credit Facility was classified as Other noncurrent assets in the Condensed Consolidated Balance Sheets as of June 30, 2017.Recent Developments
Coty Credit AgreementCash Tender Offers
On October 27, 2015,December 7, 2023, the Company completed its previously announced cash tender offers and redeemed $150.0 of the Company's 2026 Dollar Notes (as defined below) and $250.0 of the Company's 2026 Dollar Senior Secured Notes (as defined below).
Refinancing Amendment
On July 11, 2023, the Company entered into a Credit Agreement (the “Coty Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent. Thean amendment to the 2018 Coty Credit Agreement provides forthat (i) refinanced all of the existing $2,000.0 of revolving credit commitments and the outstanding loans made pursuant thereto (the "2021 Coty Revolving Credit Facility") with two new tranches of senior secured credit facilities comprised of (i) a revolving credit facilitycommitments, one in an aggregate principal amount up to $1,500.0 (the “Coty Revolving Credit Facility”) which includes up to $80.0of $1,670.0 available in swingline loans available for short term borrowings, (ii) a $1,750.0 term loan A facility (“Coty Term Loan A Facility”)U.S. dollars and (iii) a term loan B facility comprising of a $500.0 tranchecertain other currencies and a €665.0 million tranche (“Coty Term Loan B Facility”). The Coty Term Loan B Facility was issued at a 0.50% discount. The proceeds of the Coty Credit Agreement were primarily used to refinance the Company’s previously existing debt, which included the 2015 Credit Agreement due March 2018 and other facilities of Coty Inc.
On April 8, 2016, the Company entered intoin an Incremental Assumption Agreement and Amendment No. 1 (the “Incremental Credit Agreement”) to the Coty Credit Agreement. The Incremental Credit Agreement provides for an additional €140.0 million in loans under the Coty Term Loan A Facility and an additional €325.0 million in loans under the Coty Term Loan B Facility (the “Incremental Term Loans”). The proceeds of the Incremental Term Loans were used to partially repay outstanding balances under the Coty Revolving Credit Facility. The terms of the €140.0 million and €325.0 million portions of the Incremental Term Loans are substantially the same as the respective existing Coty Term Loan A Facility and Euro denominated portion of the Coty Term Loan B Facility.
On October 28, 2016, the Company entered into an Incremental Assumption Agreement and Refinancing Amendment (the “Incremental and Refinancing Agreement”), which amended the Coty Credit Agreement. The Incremental and Refinancing Agreement provides for: (i) an additional Coty Term Loan A Facility in aggregate principal amount of $975.0€300.0 million available in loans (the “Incremental Term A Facility”euros, maturing in July 2028 (together, the "2023 Coty Revolving Credit Facility"), (ii) provided for a credit spread adjustment of 0.10% for all interest periods, with respect to Secured Overnight Financing Rate ("SOFR") loans,
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(iii) added Fitch as a relevant rating agency for purposes of the collateral release provisions and determining applicable interest rates and fees and (iv) provided that certain covenants will cease to apply during a collateral release period.
Offering of Senior Secured Notes
On July 26, 2023, the Company issued an additional Coty Term Loan B Facility in aggregate principal amount of $100.0 in loans (the “Incremental Term B Facility”) and (iii) a refinancing$750.0 of the previously existing USD and Euro denominated6.625% senior secured notes due 2030 (“2030 Dollar Senior Secured Notes”). Coty Term Loan B Facility loans (the “Refinancing Facilities”) under the Coty Credit Agreement.
The loans made under the Incremental Term A Facility have terms that are substantially identical to the existing Coty Term Loan A Facility except that the loans will mature on the date that is five years after October 28, 2016. The loans under the Incremental Term B Facility and the Refinancing Facilities have substantially identical terms as the term B loans existing under the Coty Credit Agreement prior to effectivenessreceived net proceeds of the Incremental and Refinancing Agreement, except that, among other things: (i) the interest rate with respect to the USD denominated tranche of the Refinancing Facilities and the Incremental Term B Facility will be, at the Company’s option, either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin of 2.50% or an alternate base rate (“ABR”) equal to the highest of (1) JPMorgan Chase Bank N.A.’s prime rate, (2) the federal funds rate plus 0.50% and (3) one-month LIBOR plus 1.00%, in each case plus an applicable margin of 1.50% and (ii) the LIBOR floor with respect to the LIBOR loans under the Incremental Term B Facility and the Refinancing Facilities is 0.00%.
The Company recognized $13.0 of deferred debt issuance costs$740.6 in connection with the Incremental and Refinancing Agreement.
Theoffering of the 2030 Dollar Senior Secured Notes. In accordance with the 2018 Coty Credit Agreement is(as defined below), as amended, the net proceeds received from this offering were utilized to pay down the outstanding balance of the U.S. dollar and euro portions of the 2018 Coty Term B Facility, as defined below, by $715.5 and €22.6 million (approximately $25.1), respectively, in addition to related fees and expenses thereto.
On September 19, 2023, the Company issued an aggregate principal amount of €500.0 million of 5.750% senior secured notes due 2028 ("2028 Euro Senior Secured Notes") in a private offering. Coty received net proceeds of €493.8 million in connection with the offering of the 2028 Euro Senior Secured Notes. In accordance with the 2018 Coty Credit Agreement (as defined below), as amended, the net proceeds received from this offering were utilized to pay down a portion of the borrowings outstanding under the 2023 Coty Revolving Credit Facility, without a reduction in commitment. Coty used cash on hand to pay the related fees and expenses to this offering.
2018 Term B Facility Repayment
On August 3, 2023, the Company repaid €408.0 million (approximately $446.1) of the debt outstanding under the 2018 Term B Facility.
Paydown of Brazilian Credit Facility
On October 5, 2023, a wholly-owned subsidiary of the Company utilized cash on hand to fully paid down the U.S. Dollar-denominated credit facility in Brazil in the amount of $31.9.
Senior Secured Notes
On April 21, 2021, the Company issued an aggregate principal amount of $900.0 of 5.00% senior secured notes due 2026 (the “2026 Dollar Senior Secured Notes”). Coty received gross proceeds of $900.0 in connection with the offering of the 2026 Dollar Senior Secured Notes.
On June 16, 2021, the Company issued an aggregate principal amount of €700.0 million of 3.875% senior secured notes due 2026 (the “2026 Euro Senior Secured Notes”) in a private offering. Coty received gross proceeds of €700.0 million in connection with the offering of the 2026 Euro Senior Secured Notes.
On November 30, 2021, the Company issued an aggregate principal amount of $500.0 of 4.75% senior secured notes due 2029 ("2029 Dollar Senior Secured Notes" and, together with the 2026 Euro Senior Secured Notes, 2028 Euro Senior Secured Notes, 2029 Dollar Senior Secured Notes and 2030 Dollar Senior Secured Notes, the “Senior Secured Notes”). Coty received gross proceeds of $500.0 in connection with the offering of the 2029 Dollar Senior Secured Notes.
See the above Recent Developments section for the issuances of the 2028 Euro Senior Secured Notes and 2030 Dollar Senior Secured Notes.
Coty used the gross proceeds of the offerings of the Senior Secured Notes to repay a portion of the term loans outstanding under the existing credit facilities and to pay related fees and expenses thereto.
The Senior Secured Notes are senior secured obligations of Coty and are guaranteed on a senior secured basis by Coty Inc.’seach of Coty’s wholly-owned domestic subsidiaries that guarantees Coty’s obligations under its existing senior secured credit facilities and are secured by first priority liens on the same collateral that secures Coty’s obligations under its existing senior secured credit facilities, as described above. The Senior Secured Notes and the guarantees are equal in right of payment with all of Coty’s and the guarantors’ respective existing and future senior indebtedness and are pari passu with all of Coty’s and the guarantors’ respective existing and future indebtedness that is secured by a first priority lien on substantiallythe collateral, including the existing senior secured credit facilities, to the extent of the value of such collateral. For the 2028 Euro Senior Secured Notes and the 2030 Dollar Senior Secured Notes, the collateral security and certain covenants will be released upon the respective Senior Secured Notes achieving investment grade ratings from two out of the three ratings agencies.
Optional Redemption
Applicable Premium
The indentures governing the Senior Secured Notes specify the Applicable Premium (as defined in the respective indentures) to be paid upon early redemption of some or all of Coty Inc.the Senior Secured Notes prior to, and its wholly-owned domestic subsidiaries’ assets, in each case subject to certain carve outson or after, April 15, 2023 for the 2026 Euro Senior Secured Notes and exceptions.2026 Dollar Senior Secured Notes, September 15, 2025 for the 2028 Euro Senior
Scheduled Amortization
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Secured Notes, January 15, 2025 for the 2029 Dollar Senior Secured Notes and July 15, 2026 for the 2030 Dollar Senior Secured Notes (the "Early Redemption Dates").
The Applicable Premium related to the respective Senior Secured Notes on any redemption date and as calculated by the Company makes quarterlyis the greater of:
(1)1.0% of the then outstanding principal amount of the respective Senior Secured Notes; and
(2)the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of such respective Senior Secured Notes that would apply if such respective notes were redeemed on the respective Early Redemption Dates, (such redemption price is expressed as a percentage of the principal amount being set forth in the table appearing in the Redemption Pricing section below), plus (ii) all remaining scheduled payments of 1.25%interest due on the respective Senior Secured Notes to and including the respective Early Redemption Dates, (excluding accrued but unpaid interest, if any, to, but excluding, the redemption date), with respect to each of subclause (i) and (ii), computed using a discount rate equal to the Treasury Rate in the case of the initial2026 Dollar Senior Secured Notes, 2029 Dollar Senior Secured Notes and 2030 Dollar Senior Secured Notes, or Bund Rate in the case of the 2026 Euro Senior Secured Notes and the 2028 Euro Senior Secured Notes (both Treasury Rate and Bund Rate as defined in the respective indentures) as of such redemption date plus 50 basis points; over (b) the principal amount of the respective Senior Secured Notes.
Redemption Pricing
At any time and from time to time prior to the Early Redemption Dates, the Company may redeem some or all of the respective notes at redemption prices equal to 100% of the respective principal amounts being redeemed plus the Applicable Premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates.
At any time on or after the Early Redemption Dates, the Company may redeem some or all of the respective notes at the redemption prices (expressed in percentage of principal amount) set forth below, plus accrued and unpaid interest, if any, to, but excluding, the redemption dates, if redeemed during the twelve-month period beginning on respective dates of each of the years indicated below:
Price
For the period beginning2026 Dollar Senior Secured Notes2026 Euro Senior Secured Notes2028 Euro Senior Secured Notes2029 Dollar Senior Secured Notes2030 Dollar Senior Secured Notes
YearApril 15,September 15,January 15,July 15,
2024101.250%100.969%N/AN/AN/A
2025100.000%100.000%102.875%102.375%N/A
2026N/AN/A101.438%101.188%103.313%
2027N/AN/A100.000%100.000%101.656%
2028 and thereafterN/AN/A100.000%100.000%100.000%
2018 Coty Credit Agreement
On April 5, 2018, the Company entered into an amended and restated credit agreement (the "2018 Coty Credit Agreement"), which, as previously disclosed, was amended most recently in July 2023.
As amended and restated through July 2023, the 2018 Coty Credit Agreement provides for (a) the incurrence by the Company of (1) a senior secured term A facility in an aggregate principal amount of the(i) $1,000.0 denominated in U.S. dollars and (ii) €2,035.0 million denominated in euros (the “2018 Coty Term Loan A Facility (including with respect to its Incremental Term A loans), as well as 0.25% of the initialFacility”) and (2) a senior secured term B facility in an aggregate principal amount of the(i) $1,400.0 denominated in U.S. dollars and (ii) €850.0 million denominated in euros (the “2018 Coty Term LoanB Facility”) and (b) the incurrence by the Company and Coty B.V., a Dutch subsidiary of the Company (the “Dutch Borrower” and, together with the Company, the “Borrowers”), of the 2023 Coty Revolving Credit Facility (together with the 2018 Coty Term A Facility and the 2018 Coty Term B Facility, (includingthe "Coty Credit Facilities"). See the above Recent Developments section for information on the revolver refinancing made in July 2023.
The 2018 Coty Credit Agreement, as amended, provides that with respect to its refinancedthe 2023 Coty Revolving Credit Facility, up to $150.0 is available for letters of credit and Incremental Term B loans).
Galleriaup to $150.0 is available for swing line loans. The 2018 Coty Credit Agreement,
On October 1, 2016, as amended, also permits, subject to certain terms and conditions, the incurrence of incremental facilities thereunder in an aggregate amount of (i) $1,700.0 plus (ii) an unlimited amount if the First Lien Net Leverage Ratio (as defined in the 2018 Coty Credit Agreement, as amended), at the closingtime of incurrence of such incremental facilities and after giving effect thereto on a pro forma basis, is less than or equal to 3.00 to 1.00.
The obligations of the P&G Beauty Business acquisition,Company under the 2018 Coty Credit Agreement, as amended, are guaranteed by the material wholly-owned subsidiaries of the Company assumedorganized in the debt facilities availableU.S., subject to certain exceptions (the “Guarantors”) and the
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obligations of the Company and the Guarantors under the Galleria2018 Coty Credit Agreement, (the “Galleria Credit Agreement”) which was initially entered into by Galleria on January 26, 2016. The Galleria Credit Agreement provides for senior secured credit facilities comprised of (i) a $2,000.0 five year term loan A facility (“Galleria Term Loan A Facility”), (ii) a $1,000.0 seven year term loan B facility (“Galleria Term Loan B Facility”) and (iii) a $1,500.0 five year revolving credit facility (“Galleria Revolving Facility”). The Galleria Term Loan B Facility was issued at a 0.50% discount. In connection with the closing of the P&G Beauty Business acquisition, the Company assumed $1,941.8 of aggregate debt outstanding consisting of $944.3 Galleria Term Loan A Facility, $995.0 Galleria Term Loan B Facility, net of a discount and $0.0 outstanding under the Galleria Revolving Facility, as well as $2.5 in assumed fees

payable. At the closing of the P&G Beauty Business acquisition, the remaining unused loan commitments for the Galleria Term Loan A Facility expired.
The Company recognized $11.4 of deferred debt issuance costs in connection with the Galleria Credit Agreement.
The Galleria Credit Agreement is guaranteed by Coty Inc. and its wholly-owned domestic subsidiaries (other than Galleria) andamended, are secured by a perfected first priority lien (subject to permitted liens) on substantially all of Coty Inc.the assets of the Company and its wholly-owned domestic subsidiaries’ assets, in each casethe Guarantors, subject to certain carve outsexceptions. The Dutch Borrower does not guarantee the obligations of the Company under the 2018 Coty Credit Agreement or grant any liens on its assets to secure any obligations under the 2018 Coty Credit Agreement.
As previously disclosed, the Company utilized proceeds from certain transactions to pay down portions of the outstanding balances of the 2018 Coty Term A Facility and exceptions.2018 Coty Term B Facility, in accordance to the 2018 Coty Credit Agreement, as amended. No balances remain outstanding under the 2018 Coty Term A Facility or 2018 Coty Term B Facility as of September 30, 2023. See the above Recent Developments section for information on the prepayments made on the 2018 Coty Term B Facility during the six months ended December 31, 2023.
Scheduled AmortizationSenior Unsecured Notes
On April 5, 2018 the Company issued, at par, $550.0 of 6.50% senior unsecured notes due 2026 (the “2026 Dollar Notes”), €550.0 million of 4.00% senior unsecured notes due 2023 (the “2023 Euro Notes”) and €250.0 million of 4.75% senior unsecured notes due 2026 (the “2026 Euro Notes” and, together with the 2023 Euro Notes, the “Euro Notes,” and the Euro Notes together with the 2026 Dollar Notes, the “Senior Unsecured Notes”) in a private offering.
The Senior Unsecured Notes are senior unsecured debt obligations of the Company and will be pari passu in right of payment with all of the Company’s existing and future senior indebtedness (including the Coty Credit Facilities). The Senior Unsecured Notes are guaranteed, jointly and severally, on a senior basis by the Guarantors. The Senior Unsecured Notes are senior unsecured obligations of the Company and are effectively junior to all existing and future secured indebtedness of the Company to the extent of the value of the collateral securing such secured indebtedness. The related guarantees are senior unsecured obligations of each Guarantor and are effectively junior to all existing and future secured indebtedness of such Guarantor to the extent of the value of the collateral securing such indebtedness.
The 2026 Dollar and Euro Notes will mature on April 15, 2026. The 2026 Dollar Notes will bear interest at a rate of 6.50% per annum. The 2026 Euro Notes will bear interest at a rate of 4.75% per annum. Interest on the 2026 Dollar and Euro Notes is payable semi-annually in arrears on April 15 and October 15 of each year.
The Company makes quarterly payments of 1.25% and 0.25%redeemed the 2023 Euro Notes on April 15, 2022. On December 7, 2022, the Company redeemed $77.0 of the initial aggregate principal amounts2026 Dollar Notes and €69.7 million (approximately $72.2) of the Galleria Term Loan A Facility and Galleria Term Loan B Facility, respectively. The remaining balance2026 Euro Notes.
Upon the occurrence of certain change of control triggering events with respect to a series of Senior Unsecured Notes, the Company will be required to offer to repurchase all or part of the initial aggregateSenior Unsecured Notes of such series at 101% of their principal amountsamount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date applicable to such Senior Unsecured Notes.
The Senior Unsecured Notes contain customary covenants that place restrictions in certain circumstances on, among other things, incurrence of liens, entry into sale or leaseback transactions, sales of all or substantially all of the Galleria Term Loan A FacilityCompany’s assets and Galleria Term Loan B Facility will be payable oncertain merger or consolidation transactions. The Senior Unsecured Notes also provide for customary events of default.
Deferred Financing Costs
The Company wrote off unamortized deferred issuance fees and discounts of $2.2 and $0.8 during the maturity date for each facility, respectively.three months ended December 31, 2023 and 2022, respectively, and $7.4 and $0.8 during the six months ended December 31, 2023 and 2022, respectively, which were recorded in Other income, net in the Condensed Consolidated Statement of Operations. Additionally, the Company capitalized deferred issuance fees of $0.0 and $0.0 during the three months ended December 31, 2023 and 2022, respectively and $40.4 and $0.0 during the six months ended December 31, 2023 and 2022.
Interest
The 2018 Coty Credit Agreement and Galleria Credit Agreement facilities will bear interest at rates equal to, at the Company’s option, either:
LIBOR(1)SOFR of the applicable qualified currency, of which the Company can elect the applicable one, two, three, six or twelve month rate, plus the applicable margin; or
ABR(2)Alternate base rate (“ABR”) plus the applicable margin.
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In the case of the 2023 Coty Revolving Credit Facility, Coty Term Loan A Facilities, Galleria Revolving Facility and Galleria Term Loan A Facility, the applicable margin means the lesser of a percentage per annum to be determined in accordance with athe leverage-based pricing grid and the debt rating-based grid below:
Pricing TierTotal Net Leverage Ratio:SOFR plus:Alternative Base Rate Margin:
1.0Greater than or equal to 4.75:12.000%1.000%
2.0Less than 4.75:1 but greater than or equal to 4.00:11.750%0.750%
3.0Less than 4.00:1 but greater than or equal to 2.75:11.500%0.500%
4.0Less than 2.75:1 but greater than or equal to 2.00:11.250%0.250%
5.0Less than 2.00:1 but greater than or equal to 1.50:11.125%0.125%
6.0Less than 1.50:11.000%—%
Pricing TierDebt Ratings
(S&P/Fitch/Moody’s):		SOFR plus:Alternative Base Rate Margin:
5.0Less than BB+/Ba12.000%1.000%
4.0BB+/Ba11.750%0.750%
3.0BBB-/Baa31.500%0.500%
2.0BBB/Baa21.250%0.250%
1.0BBB+/Baa1 or higher1.125%0.125%
Pricing Tier Total Net Leverage Ratio: LIBOR plus: Alternative Base Rate Margin:
1.0 Greater than or equal to 5.00:1 2.000% 1.000%
2.0 Less than 5.00:1 but greater than or equal to 4.00:1 1.750% 0.750%
3.0 Less than 4.00:1 but greater than or equal to 2.75:1 1.500% 0.500%
4.0 Less than 2.75:1 but greater than or equal to 2.00:1 1.250% 0.250%
5.0 Less than 2.00:1 but greater than or equal to 1.50:1 1.125% 0.125%
6.0 Less than 1.50:1 1.000% —%

In the case of the USD portion of the Coty Term Loan B Facility, the applicable margin means 2.50% per annum, in the case of LIBOR loans, and 1.50% per annum, in the case of ABR loans. In the case of the Euro portion of the Coty Term Loan B Facility, the applicable margin means 2.75% per annum, in the case of EURIBOR loans. In the case of the Galleria Term Loan B Facility, the applicable margin means 3.00% per annum, in the case of LIBOR loans, and 2.00% per annum, in the case of ABR loans. With respect to the Galleria Term Loan B Facility, in no event will (i) LIBOR be deemed to be less than 0.75% per annum and (ii) ABR be deemed to be less than 1.75% per annum.
Fair Value of Debt
December 31, 2023June 30, 2023
Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Senior Secured Notes$3,227.6 $3,251.9 $2,161.0 $2,066.9 
2018 Coty Credit Agreement— — 1,412.6 1,393.5 
Senior Unsecured Notes522.5 522.7 669.0 661.5 
Brazilian Credit Facilities— — 31.9 32.2 
 December 31, 2017 June 30, 2017
 Carrying
Amount		 Fair
Value		 Carrying
Amount		 Fair
Value
Galleria Credit Agreement$2,295.0
 $2,300.3
 $1,944.3
 $1,944.0
Coty Credit Agreement5,207.9
 5,219.9
 5,265.9
 5,275.4
The fair value of the 2023 Coty Revolving Credit Facility is equal to its carrying value, as the Company has the ability to repay the outstanding principal at par value at any time. The Company uses the market approach to determine the fair value of the Coty Credit Agreement and the Galleria Credit Agreement.its other debt instruments. The Company obtains marketfair values for comparable instruments from independent pricing services and infersor utilizes the U.S. dollar SOFR curve to determine the fair value of these debt instruments. Based on the assumptions used to value these liabilities at fair value, these debt instruments are categorized aas Level 2 in the fair value hierarchy.

Debt Maturities Schedule
Aggregate maturities of the Company’s long-term debt, including the current portion of long-term debt and excluding capitalshort-term debt and finance lease obligations as of December 31, 2017,2023, are presented below:
Fiscal Year Ending June 30,
2024, remaining$— 
2025— 
20261,946.9 
2027— 
2028— 
Thereafter1,803.2 
Total$3,750.1 
Fiscal Year Ending June 30, 
2018, remaining$109.8
2019219.6
2020219.6
20212,412.7
20221,915.7
Thereafter2,625.5
Total$7,502.9
Debt Covenants
The Company is required to comply with certain2018 Coty Credit Agreement contains affirmative and negative covenants. The negative covenants contained within the Coty Credit Agreementinclude, among other things, limitations on debt, liens, dispositions, investments, fundamental changes, restricted payments and the Galleria Credit Agreement (collectively the “Debt Agreements”).affiliate
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transactions. With certain exceptions as described below, the Debt Agreements include2018 Coty Credit Agreement, as amended, includes a financial covenant that requires the Companyus to maintain a Total Net Leverage Ratio (as defined below), equal to or less than the ratios shown below for each respective test period.
Quarterly Test Period Ending
Total Net Leverage Ratio(a)
December 31, 20172023 through July 11, 20285.00 to 1.00
March 31, 20184.75 to 1.00
June 30, 20184.75 to 1.00
September 30, 20184.50 to 1.00
December 31, 20184.50 to 1.00
March 31, 20194.25 to 1.00
June 30, 20194.25 to 1.00
September 30, 20194.00 to 1.00
December 31, 20194.00 to 1.00
March 31, 20204.00 to 1.00
June 30, 20204.00 to 1.00
September 30, 20204.00 to 1.00
(a) Total Net Leverage Ratio means, as of any date of determination, the ratio of: (a) (i) Total Indebtedness minus (ii) unrestricted cash and Cash Equivalents of the Parent Borrower and its Restricted Subsidiaries as determined in accordance with GAAP to (b) Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”)EBITDA for the most recently ended Test Period (each of the defined terms, including Adjusted EBITDA, used within the definition of Total Net Leverage Ratio have the meanings ascribed to them within the Debt Agreements)2018 Coty Credit Agreement, as amended). Adjusted EBITDA, as defined in the 2018 Coty Credit Agreement, as amended, includes certain add backs related to cost savings, unusual events such as COVID-19, operating expense reductions and future unrealized synergies subject to certain limits and conditions as specified in the 2018 Coty Credit Agreement, as amended.
In the four fiscal quarters following the closing of any Material Acquisition (as defined in the Debt Agreements)2018 Coty Credit Agreement, as amended), including the fiscal quarter in which such Material Acquisition occurs, the maximum Total Net Leverage Ratio shall be the lesser of (i) 5.95 to 1.00 and (ii) 1.00 higher than the otherwise applicable maximum Total Net Leverage Ratio for such quarter (as set forth in the table above). Immediately after any such four fiscal quarter period, there shall be at least two consecutive fiscal quarters during which the Company's Total Net Leverage Ratio is no greater than the maximum Total Net Leverage Ratio that would otherwise have been required in the absence of such Material Acquisition, regardless of whether any additional Material Acquisitions are consummated during such period. Following the acquisition of Younique and the Burberry Beauty Business, the Total Net Leverage Ratio applicable for the period ending December 31, 2017 is 5.95 to 1.00.
As of December 31, 2017,2023, the Company was in compliance with all covenants contained within the Debt Agreements.
On November 8, 2017, the Company entered into amendments to the2018 Coty Credit Agreement, and the Galleria Credit Agreement, which amended the definition of Adjusted EBITDA. Each amendment allowed for the extension of the period during which certain synergies and cost savings can be incorporated in the financial covenant calculations under the respective agreements.as amended.

10. INTEREST EXPENSE, NET
Interest expense, net for the three and six months ended December 31, 20172023 and 20162022, respectively, is presented below:
Three Months Ended
December 31,		Six Months Ended
December 31,
2023202220232022
Interest expense$61.7 $65.0 $128.5 $122.6 
Foreign exchange losses, net of derivative contracts2.3 2.1 10.5 14.0 
Interest income(3.9)(6.1)(9.1)(9.7)
Total interest expense, net$60.1 $61.0 $129.9 $126.9 

21
 Three Months Ended
December 31,		 Six Months Ended
December 31,
 2017 2016 2017 2016
Interest expense$69.6
 $59.2
 $137.0
 $98.9
Foreign exchange (gains) losses, net of derivative contracts(6.9) (0.1) (5.9) 1.2
Interest income(2.4) (1.2) (4.4) (1.8)
Total interest expense, net$60.3
 $57.9
 $126.7
 $98.3

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11. EMPLOYEE BENEFIT PLANS
The components of net periodic benefit cost for pension plans and other post-employment benefit plans recognized in the Condensed Consolidated Statements of Operations are presented below:
Three Months Ended December 31,
Pension PlansOther Post-
Employment Benefits
U.S.InternationalTotal
20232022202320222023202220232022
Service cost— — 1.3 1.2 0.1 0.2 1.4 1.4 
Interest cost0.2 0.2 3.2 2.7 0.4 0.4 3.8 3.3 
Expected return on plan assets— — (1.2)(0.9)— — (1.2)(0.9)
Amortization of prior service credit— — — — (0.1)(0.1)(0.1)(0.1)
Amortization of net (gain) loss(0.2)(0.7)(0.6)(0.2)(0.6)(0.5)(1.4)(1.4)
Net periodic benefit cost (credit)— (0.5)2.7 2.8 (0.2)— 2.5 2.3 
Six Months Ended December 31,
Pension PlansOther Post-
Employment Benefits
U.S.InternationalTotal
20232022202320222023202220232022
Service cost— — 2.6 2.4 0.2 0.4 2.8 2.8 
Interest cost0.4 0.4 6.4 5.4 0.8 0.8 7.6 6.6 
Expected return on plan assets— — (2.4)(1.8)— — (2.4)(1.8)
Amortization of prior service credit— — — — (0.2)(0.2)(0.2)(0.2)
Amortization of net (gain) loss(0.4)(1.4)(1.2)(0.4)(1.2)(1.0)(2.8)(2.8)
Net periodic benefit cost (credit)— (1.0)5.4 5.6 (0.4)— 5.0 4.6 
 Three Months Ended December 31,
 Pension Plans 
Other Post-
Employment Benefits
  
 U.S. International  Total
 2017 2016 2017 2016 2017 2016 2017 2016
Service cost$—
 $—
 $9.8
 $7.1
 $0.5
 $0.6
 $10.3
 $7.7
Interest cost0.1
 0.6
 3.1
 2.1
 0.6
 0.5
 3.8
 3.2
Expected return on plan assets—
 (0.4) (1.9) (1.5) —
 —
 (1.9) (1.9)
Amortization of prior service cost (credit)—
 —
 0.1
 0.1
 (1.4) (1.5) (1.3) (1.4)
Amortization of net loss (gain)(0.1) 0.5
 0.4
 1.1
 (0.1) —
 0.2
 1.6
Settlement loss recognized—
 12.8
 —
 —
 —
 —
 —
 12.8
Net periodic benefit cost (credit)$—
 $13.5
 $11.5
 $8.9
 $(0.4) $(0.4) $11.1
 $22.0
 Six Months Ended December 31,
 Pension Plans 
Other Post-
Employment Benefits
  
 U.S. International  Total
 2017 2016 2017 2016 2017 2016 2017 2016
Service cost$—
 $—
 $19.6
 $9.1
 $1.0
 $0.9
 $20.6
 $10.0
Interest cost0.3
 1.3
 6.2
 2.7
 1.2
 0.9
 7.7
 4.9
Expected return on plan assets—
 (0.9) (3.8) (1.8) —
 —
 (3.8) (2.7)
Amortization of prior service cost (credit)—
 —
 0.2
 0.2
 (2.8) (3.0) (2.6) (2.8)
Amortization of net loss (gain)(0.3) 1.0
 0.7
 2.2
 (0.1) —
 0.3
 3.2
Settlement loss recognized—
 15.9
 —
 —
 —
 —
 —
 15.9
Net periodic benefit cost (credit)$—
 $17.3
 $22.9
 $12.4
 $(0.7) $(1.2) $22.2
 $28.5
12. DERIVATIVE INSTRUMENTS
Foreign Exchange Risk
The Company is exposed to foreign currency exchange fluctuations through its global operations. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in foreign exchange rates by creating offsetting positions through the use of derivative instruments and also by designating foreign currency denominated borrowings and cross-currency swaps as hedges of net investments in foreign subsidiaries. The Company expects that through hedging, any gain or loss on the derivative instruments would generally offset the expected increase or decrease in the value of the underlying forecasted transactions.
As of December 31, 2023 and June 30, 2023, the notional amount of the outstanding forward foreign exchange contracts designated as cash flow hedges were $26.6 and $28.0, respectively.
The Company also uses certain derivatives not designated as hedging instruments consisting primarily of foreign currency forward contracts and cross-currency swaps to hedge intercompany transactions and foreign currency denominated external debt. Although these derivatives were not designated for hedge accounting, the overall objective of mitigating foreign currency exposure is the same for all derivative instruments. For derivatives not designated as hedging instruments, changes in fair value are recorded in the line item in the Condensed Consolidated Statements of Operations to which the derivative relates. As of December 31, 2023 and June 30, 2023, the notional amounts of these outstanding non-designated foreign currency forward and cross-currency swap contracts were $1,828.4 and $1,653.5, respectively.
Interest Rate Risk
The Company is exposed to interest rate fluctuations related to its variable rate debt instruments. The Company may reduce its exposure to fluctuations in the cash flows associated with changes in the variable interest rates by entering into offsetting positions through the use of derivative instruments, such as interest rate swap contracts. The interest rate swap contracts result in recognizing a fixed interest rate for the portion of the Company’s variable rate debt that was hedged. This will reduce the negative and positive impact of increases in the variable rates over the term of the contracts. Hedge effectiveness of interest rate swap contracts is based on a long-haul hypothetical derivative methodology and includes all changes in value.
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As of December 31, 2017 and June 30, 2017,2023, the Company had interest rate swap contracts designated as effective hedges in the notional amount of $2,000.0.$200.0, which were fully terminated in December 2023 for a cash receipt of $2.1. As the forecasted interest expense under the original swap agreements is still probable, the related gain in accumulated other comprehensive income (loss) ("AOCI/L") will be amortized over the remaining life of the swaps. These interest rate swaps had been designated and qualified as cash flow hedges and were highly effective prior to termination.

Net Investment Hedge
Foreign currency gains and losses on borrowings designated as a net investment hedge, except ineffective portions, are reported in the cumulative translation adjustment (“CTA”) component of AOCI/(L), along with the foreign currency translation adjustments on those investments. As of December 31, 2023 and June 30, 2023, the nominal exposures of foreign currency denominated borrowings designated as net investment hedges were €907.8 million and €701.3 million, respectively. The designated hedge amounts were considered highly effective.
Forward Repurchase Contracts
In June 2022, December 2022, and November 2023, the Company entered into certain forward repurchase contracts to start hedging for potential $200.0, $196.0, and $250.0 share buyback programs, in 2024, 2025, and 2026, respectively. These forward repurchase contracts are accounted for at fair value, with changes in the fair value recorded in Other income, net in the Condensed Consolidated Statements of Operations. Refer to Note 13—Equity and Convertible Preferred Stock.
Derivative and non-derivative financial instruments which are designated as hedging instruments:
The accumulated loss on foreign currency borrowings classified as net investment hedges in the foreign currency translation adjustment component of Accumulated other comprehensive income (loss) (“AOCI/(L)”) was $(56.7)$(22.1) and $(23.7)$(12.2) as of December 31, 20172023 and June 30, 2017,2023, respectively.
In September 2020, the Company terminated its net investment cross-currency swap derivative with a notional amount of $550.0 in exchange for a cash payment of $37.6. The loss related to this termination of $(37.6) is included in AOCI/(L) as of December 31, 2023 and June 30, 2023, and will remain until the sale or substantial liquidation of the underlying net investments.
The amount of gains and losses recognized in Other comprehensive income (loss) (“OCI”) in the Condensed Consolidated Balance Sheets related to the Company’s derivative and non-derivative financial instruments which are designated as hedging instruments is presented below:
Gain (Loss) Recognized in OCIThree Months Ended
December 31,		Six Months Ended
December 31,
2023202220232022
Foreign exchange forward contracts$(1.1)$(0.4)$— $1.3 
Interest rate swap contracts(1.1)0.1 (0.1)1.8 
Net investment hedges(27.6)(31.4)(9.9)(36.7)
Gain (Loss) Recognized in OCIThree Months Ended
December 31,		 Six Months Ended
December 31,
 2017 2016 2017 2016
Foreign exchange forward contracts$0.3
 $0.1
 $(0.2) $0.6
Interest rate swap contracts11.0
 40.2
 11.5
 45.3
Net investment hedge(10.9) 45.9
 (33.0) 38.1
As of December 31, 2017, all of the Company’s remaining foreign currency forward contracts designated as hedges were highly effective. The accumulated gain on derivative instruments classified as cash flow hedges in AOCI/(L), net of tax, was $19.9$1.1 and $12.6$0.7 as of December 31, 20172023 and June 30, 2017,2023, respectively. The estimated net gain related to these effective hedges that is expected to be reclassified from AOCI/(L) into earnings net of tax, within the next twelve months is $6.5.$0.7. As of December 31, 2023, all of the Company's remaining foreign currency forward contracts designated as hedges were highly effective.
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The amount of gains and losses reclassified from AOCI/(L) to the Condensed Consolidated Statements of Operations related to the Company’s derivative financial instruments which are designated as hedging instruments is presented below:
Condensed Consolidated Statements of Operations
Classification of Gain (Loss) Reclassified from AOCI/(L)		Three Months Ended
December 31,		 Six Months Ended
December 31,
 2017 2016 2017 2016
Foreign exchange forward contracts:       
Net revenues$0.2
 $0.9
 $0.4
 $1.6
Cost of sales0.4
 0.3
 0.5
 0.3
Interest rate swap contracts:       
Interest expense$(0.6) $(3.1) $(0.9) $(6.6)
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow Hedging RelationshipsThree Months Ended December 31,
20232022
Cost of salesInterest expense, netCost of salesInterest expense, net
Foreign exchange forward contracts:
Amount of gain (loss) reclassified from AOCI into income$(1.4)$— $(0.1)$— 
Interest rate swap contracts:
Amount of gain (loss) reclassified from AOCI into income— 0.6 — 4.9 
Location and Amount of Gain (Loss) Recognized in Income on Cash Flow Hedging RelationshipsSix Months Ended December 31,
20232022
Cost of salesInterest expense, netCost of salesInterest expense, net
Foreign exchange forward contracts:
Amount of gain (loss) reclassified from AOCI into income$(2.1)$— $(1.6)$— 
Interest rate swap contracts:
Amount of gain (loss) reclassified from AOCI into income— 1.2 — 6.7 
Derivatives not designated as hedging:
The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments is presented below:
Condensed Consolidated Statements of Operations
Classification of Gain (Loss) Recognized in Operations		Three Months Ended
December 31,		Six Months Ended
December 31,
2023202220232022
Foreign exchange contractsSelling, general and administrative expenses$(0.2)$(0.1)$(0.1)$(0.1)
Foreign exchange contractsInterest expense, net32.1 (45.1)2.7 (79.3)
Foreign exchange and forward repurchase contractsOther income, net72.1 57.7 (3.6)5.7 
Condensed Consolidated Statements of Operations
Classification of Gain (Loss) Recognized in Operations		Three Months Ended
December 31,		 Six Months Ended
December 31,
 2017 2016 2017 2016
Selling, general and administrative expenses$0.3
 $0.2
 $(0.9) $0.4
Interest expense, net5.0
 12.1
 13.1
 10.0
Other expense, net(0.2) (0.4) —
 (0.4)
13. EQUITY AND CONVERTIBLE PREFERRED STOCK
Common Stock
As of December 31, 2017,2023, the Company’s common stock consisted of Class A Common Stock with a par value of $0.01 per share. The holders of Class A Common Stock are entitled to one vote per share. As of December 31, 2017,2023, total authorized shares of Class A Common Stock was 1,000.01,250.0 million and total outstanding shares of Class A Common Stock was 749.8895.1 million.
The Company’s largest stockholder is JAB Cosmetics B.V. (“JABC”), which owns approximately 38% of Coty’s Class A shares as of December 31, 2017. Both JABCOn September 29, 2023 and the shares ofOctober 2, 2023, the Company held by JABC are indirectly controlled by Lucresca SE, Agnaten SE and JAB Holdings B.V. (“JAB”). During the six months ended December 31, 2017, JABC acquired 10.8issued a total of 33.0 million shares of Class A common stock, par value $0.01 per share, at a public offering price of $10.80 (or €10.28) per share in a global offering (the “Offering”). The Company also announced the admission to listing and trading of its Common Stock in open market purchases on the New York Stock Exchange. professional segment of the Euronext Paris.
The Company did not receive any proceedsreceived $348.4 from thesethe Offering, net of $10.0 of underwriting fees. Additionally, the Company incurred $6.0 in other professional fees. The underwriting fees and other professional fees incurred in connection with the Offering were incremental costs directly attributable to the issuance and thus were presented as a reduction of Equity in the Condensed Consolidated Balance Sheets.
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The Company's Majority Stockholder
Immediately after the Offering and taking into account the proxy agreement entered into on September 29, 2023 by and among JAB Beauty B.V. ("JAB"), Mr. Peter Harf, the Company's Chairman, and HFS Holdings S.à r.l, (“HFS”), which is beneficially owned by Mr. Harf, JAB, the Company’s largest stockholder, may be deemed to beneficially own approximately 53% of Coty’s Class A Common Stock. This is inclusive of all voting interests of HFS, including its shares of Series B Preferred Stock on an if converted basis.
The Company’s CEO, Sue Nabi, was granted a one-time sign-on award of restricted stock purchases conducted by JABC.units on June 30, 2021. On October 29, 2021 and September 18, 2023, JAB completed the transfer of 10.0 million and 5.0 million shares of Common Stock, respectively, to Ms. Nabi pursuant to an equity transfer agreement. See Note 14—Share-Based Compensation Plans for additional information.

Series A and A-1 Preferred Stock
As of December 31, 2017,2023, total authorized shares of preferred stock are 20.0 million. The only classThere are two classes of Preferred Stock, that is outstanding as of December 31, 2017 is the Series A Preferred Stock and Series A-1 Preferred Stock, both with a par value of $0.01 per share.
As of December 31, 2017, total authorized2023, there were 1.0 million shares of Series A and no shares of Series A-1 Preferred Stock are 6.5 millionauthorized, issued and total outstanding shares ofoutstanding. Series A Preferred Stock are 5.2 million. Theand Series AA-1 Preferred Stock isare not entitled to receive any dividends and hashave no voting rights except as required by law.
As of December 31, 2023, the Company has $0.1 Series A Preferred Stock were accounted for partially as a liability and partially as equity as of December 31, 2017.
Of the 5.2 million outstanding shares of Series A Preferred Stock, 1.0 million shares vested on March 27, 2017, 1.7 million shares vest on April 15, 2020, 1.0 million shares vest on November 25, 2021, 0.5 million shares vest on February 16, 2022 and 1.0 million vest on November 16, 2022. As of December 31, 2017, the Company classified $2.0 Series A Preferred Stock as equity, and $4.4 as a liability recorded in Other noncurrentAccrued expenses and other current liabilities in the Condensed Consolidated Balance Sheet.
Convertible Series B Preferred Stock
On May 11, 2020, the Company entered into an Investment Agreement with KKR Rainbow Aggregator L.P. ("KKR Aggregator"), relating to the issuance and sale by the Company to KKR Aggregator of up to 1,000,000 shares of the Company’s new Convertible Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), for an aggregate purchase price of up to $1,000.0, or $1,000 per share (the “Issuance”). The Company completed the issuances and sales of the Series B Preferred Stock on May 26, 2020 and July 31, 2020. On November 16, 2020, KKR Aggregator and affiliated investment funds agreed to sell 146,057 shares of Series B Preferred Stock, to HFS. The transaction closed on August 27, 2021.
As a result of various conversions and exchanges of KKR Aggregator's shares of the Series B Preferred Stock, as of December 31, 2021, Kohlberg Kravis Roberts & Co. L.P. and its affiliates ("KKR") has fully redeemed/exchanged all of their Series B Preferred Stock.
Cumulative preferred dividends accrue daily on the Series B Preferred Stock at a rate of 9.0% per year. During the three months ended December 31, 2023 and 2022, the Board of Directors declared dividends on the Series B Preferred Stock of $3.3 and paid accrued dividends of $3.3. During the six months ended December 31, 2023 and 2022, the Board of Directors declared dividends on the Series B Preferred Stock of $6.6 and paid accrued dividends of $6.6. As of December 31, 2023 and June 30, 2023, the Series B Preferred Stock had outstanding accrued dividends of $3.3.
Treasury Stock -
Share Repurchase Program
Since February 2014, the Board has authorized the Company to repurchase its Class A Common Stock under approved repurchase programs. On February 3, 2016, the Board authorized the Company to repurchase up to $500.0 of its Class A Common Stock, and on November 13, 2023, the Board increased the Company's share repurchase authorization by an additional $600.0 (the “Incremental“Share Repurchase Program”). Subject to certain restrictions on repurchases of shares through September 30, 2018 imposed by the tax matters agreement, dated October 1, 2016, as amended, between the Company and P&G entered into in connection with the P&G Beauty Business acquisition, repurchasesRepurchases may be made from time to time at the Company’s discretion, based on ongoing assessments of the capital needs of the business, the market price of its Class A Common Stock, and general market conditions. For the three and six months ended December 31, 2017,2023, the Company did not repurchase any shares of its Class A Common Stock.Stock under the Share Repurchase Program. As of December 31, 2017,2023, the Company had $396.8authority for $996.8 remaining under the IncrementalShare Repurchase Program.
DividendsIn June 2022, December 2022 and November 2023, the Company entered into forward repurchase contracts (the “Forward” and together the “Forwards”) with three large financial institutions (“Counterparties”) to start hedging for potential $200.0, $196.0 and $250.0 share buyback programs in 2024, 2025 and 2026, respectively.
As part of the Forward agreements, the Company will pay interest on the outstanding underlying notional amount of the Forwards held by the Counterparties during the contract periods. The followinginterest rates are variable, based on the United States secured overnight funding rate (“SOFR”) plus a spread. The weighted average interest rate plus applicable spread for the June 2022, December 2022, and November 2023 Forward transactions were 9.7%, 9.8% and 8.2%, respectively, as of December 31, 2023.
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Since the Forwards permit a net cash settlement alternative in addition to the physical settlement, the Company accounted for the Forwards initially and subsequently at their fair value, with changes in the fair value recorded in Other income, net in the Condensed Consolidated Statement of Operations. See Note 12—Derivative Instruments for additional information.
Dividends
On April 29, 2020, the Board of Directors suspended the payment of dividends on Common Stock. No dividends on Common Stock were declared duringfor the six monthsperiod ended December 31, 2017:2023.
Declaration Date Dividend Type Dividend Per Share Holders of Record Date Dividend Value Dividend Payment Date Dividends Paid 
Dividends Payable (a)
Fiscal 2018
August 22, 2017 Quarterly $0.125
 September 1, 2017 $94.4
 September 14, 2017 $93.6
 $0.8
November 9, 2017 Quarterly $0.125
 November 30, 2017 $94.6
 December 14, 2017 $93.7
 $0.9
Fiscal 2018   $0.250
   $189.0
   $187.3
 $1.7
(a) The dividend payable is the value of the remainingchange in dividends payable upon settlement of the RSUs and phantom units outstanding as of the Holders of Record Date. Dividends payable areaccrued recorded as Accrued expense and other current liabilities and Other noncurrent liabilitiesto APIC in the Condensed Consolidated Balance Sheet.
TheSheet as of December 31, 2023 and 2022 was nil and $0.1, respectively, which represent dividends no longer expected to vest as a result of forfeitures of outstanding restricted stock units (“RSUs”). In addition, the Company decreased the dividend accrual recorded in a prior period by $0.8made payments of $0.3 and $0.7, of which $0.1 and $0.2 related to adjustemployee taxes, for the payment of previously accrued dividends on RSUs that vested during the six months ended December 31, 2017. Additionally, the Company decreased the dividend accrual recorded in a prior period by $0.3 to adjust for accrued dividends on RSUs no longer expected to vest, which was recorded as an increase to APIC in the Condensed Consolidated Balance Sheet as of December 31, 2017. 2023 and 2022, respectively.
Total accrued dividends on unvested RSUs and phantom units of $0.9 and $3.9 are included in Accrued expenses and other current liabilities are $0.8 and Other noncurrent liabilities, respectively, in the Condensed Consolidated Balance Sheet$1.0 as of December 31, 2017.2023 and June 30, 2023, respectively. In addition, accrued dividends of $0.0 and $0.1 are included in Other noncurrent liabilities as of December 31, 2023 and June 30, 2023, respectively.


Accumulated Other Comprehensive Income (Loss)
Foreign Currency Translation Adjustments
Gain (loss) on Cash Flow HedgesLoss on Net Investment HedgeOther Foreign Currency Translation Adjustments
Pension and Other Post-Employment Benefit Plans (a)
Total
Balance—July 1, 2023$0.7 $(49.8)$(667.9)$54.6 $(662.4)
Other comprehensive (loss) income before reclassifications(0.1)(9.9)66.8 1.0 57.8 
Net amounts reclassified from AOCI/(L)0.5 — — (2.5)(2.0)
Net current-period other comprehensive income (loss)0.4 (9.9)66.8 (1.5)55.8 
Balance—December 31, 2023$1.1 $(59.7)$(601.1)$53.1 $(606.6)
   Foreign Currency Translation Adjustments    
 Gain on Cash Flow Hedges Loss on Net Investment Hedges Other Foreign Currency Translation Adjustments Pension and Other Post-Employment Benefit Plans Total
Balance—July 1, 2017$12.6
 $(23.7) $(20.8) $36.3
 $4.4
Other comprehensive (loss) income before reclassifications7.2
 (33.0) 303.6
 1.6
 279.4
Net amounts reclassified from AOCI/(L)0.1
 —
 —
 —
 0.1
Net current-period other comprehensive (loss)
income		7.3
 (33.0) 303.6
 1.6
 279.5
Balance—December 31, 2017$19.9
 $(56.7) $282.8
 $37.9
 $283.9

   Foreign Currency Translation Adjustments    
 Gain (Loss) on Cash Flow Hedges Gain (Loss) on Net Investment Hedges Other Foreign Currency Translation Adjustments Pension and Other Post-Employment Benefit Plans Total
Balance—July 1, 2016$(28.9) $(2.5) $(164.0) $(44.3) $(239.7)
Other comprehensive (loss) income before reclassifications39.6
 38.1
 (133.9) 0.4
 (55.8)
Net amounts reclassified from AOCI/(L)2.3
 —
 —
 9.7
 12.0
Net current-period other comprehensive (loss)
income		41.9
 38.1
 (133.9) 10.1
 (43.8)
Balance—December 31, 2016$13.0
 $35.6
 $(297.9) $(34.2) $(283.5)

14. SHARE-BASED COMPENSATION PLANS
Total share-based compensation expense was $9.9 and $6.8 for the three months ended December 31, 2017 and 2016, respectively, and $18.0 and $12.4 for(a) For the six months ended December 31, 20172023, other comprehensive income before reclassifications of $1.0 and 2016, respectively, whichnet amounts reclassified from AOCI/(L) related to pensions and other post-employment benefit plans included amortization of prior service credits and actuarial losses of $3.0, net of tax of $0.5.
Foreign Currency Translation Adjustments
Loss on Cash Flow HedgesGain (loss) on Net Investment HedgeOther Foreign Currency Translation AdjustmentsPension and Other Post-Employment Benefit PlansTotal
Balance—July 1, 2022$4.3 $4.1 $(770.8)$44.5 $(717.9)
Other comprehensive income (loss) before reclassifications1.1 (36.7)(8.8)1.3 (43.1)
Net amounts reclassified from AOCI/(L)(4.1)— — (3.0)(7.1)
Net current-period other comprehensive loss(3.0)(36.7)(8.8)(1.7)(50.2)
Balance—December 31, 2022$1.3 $(32.6)$(779.6)$42.8 $(768.1)
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14. SHARE-BASED COMPENSATION PLANS
Share-based compensation expense is includedrecognized on a straight-line basis over the requisite service period. Total share-based compensation is shown in Selling, generalthe table below:
Three Months Ended
December 31,		Six Months Ended
December 31,
2023202220232022
Equity plan expense (a)
$19.9 $33.6 $50.1 $65.0 
Liability plan (income) expense0.3 0.6 (0.2)0.3 
Fringe expense3.1 1.5 3.1 1.5 
Total share-based compensation expense$23.3 $35.7 $53.0 $66.8 
(a) Equity plan share-based compensation expense was recorded to additional paid in capital and administrative expensespresented in the Condensed Consolidated Statements of Operations. Equity.
As of December 31, 2017,2023, the total unrecognized share-based compensation expense related to unvested stock options, Series A Preferred Stock, and restricted stock, restricted stock units and other share awards, and performance restricted stock units ("PRSUs") is $43.4, $8.4$0.2, $4.9, $164.3, and $87.0,$34.8, respectively. The unrecognized share-based compensation expense related to unvested stock options, Series A Preferredrestricted stock, and restricted stock units and other share awards, and PRSUs, is expected to be recognized over a weighted-average period of 4.35, 2.740.57, 2.17, 3.60 and 3.712.62 years, respectively.
Restricted ShareStock Units and Other Share Awards
The Company granted approximately 0.44.5 million and 3.8 millionshares of RSUs and other share awards during the three and six months ended December 31, 2017,2023. The Company recognized share-based compensation expense of $19.3 and $34.1 for the three months ended December 31, 2023 and 2022, respectively, withof which $5.2 and $23.6 related to Ms. Nabi's award, as described below. The Company recognized share-based compensation expense of $48.7 and $64.8 for the six months ended December 31, 2023 and 2022, respectively, of which $26.2 and $47.1 related to Ms. Nabi's award.
Performance Restricted Stock Units
The Company granted 1.6 and 3.7 million shares of PRSUs, during the three and six months ended December 31, 2023. The Company recognized share-based compensation expense of $3.2 and $0.4 for the three months ended December 31, 2023 and 2022, respectively, of which $1.7 and $0.0 related to Ms. Nabi's award, as described below. The Company recognized share-based compensation expense of $3.8 and $0.4 for the six months ended December 31, 2023 and 2022, respectively, of which $1.8 and $0.0 related to Ms. Nabi's award, as described below.
Long-term Equity Program for CEO
The Company’s CEO, Sue Nabi, was granted a weighted-average grant date fair value per shareone-time sign-on award of $16.53, which vestsrestricted stock units (the “Award”) on the fifth anniversary of the grant date.June 30, 2021. The RSUs granted are accompanied by dividend equivalent rightsAward vested and as such, were valued at the closing market pricesettled in 10.0 million shares of the Company’s Class A Common Stock, par value $0.01 per share, on each of August 31, 2021, August 31, 2022 and August 31, 2023. The Company recognized the share-based compensation expense, on a straight-line basis over the vesting period, based on the fair value on the grant date. The amount of compensation cost recognized at each vesting date must at least equal the portion of the award legally vested.
In connection with this Award, on October 29, 2021 and September 18, 2023, JAB, the Company’s largest stockholder and a wholly-owned subsidiary of JAB Holding Company S.à r.l., completed the transfer of 10.0 million and 5.0 million shares of Class A Common Stock, respectively, to Ms. Nabi.
On August 31, 2023 and 2022, the Company issued 5.0 million and 10.0 million shares of Class A Common Stock, respectively, to Ms. Nabi in connection with the third and second vesting of the Award.
Pursuant to the term of the amended employment agreement on May 4, 2023, the Company granted Ms. Nabi a one-time award of 10,416,667 RSUs and will grant a total of 10,416,665 PRSUs in five equal tranches over the next five years. These two awards will vest periodically over the next seven years in accordance with the terms discussed below.
Ms. Nabi's 10,416,667 RSUs will vest and settle in shares of the Company’s Class A Common Stock, par value $0.01 per share over five years on the following vesting schedule: (i) 15% on September 1, 2024, (ii) 15% on September 1, 2025, (iii) 20% on September 1, 2026, (iv) 20% on September 1, 2027; and (v) 30% on September 1, 2028, in each case subject to Ms. Nabi’s continued employment through the applicable vesting date. The Company will recognize approximately $109.6 of share-based compensation expense, on a straight-line basis over the vesting period, based on the fair value on the grant date, net of forfeitures. The amount of compensation cost recognized at each vesting date must at least equal the portion of the award legally vested.
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The first tranche of Ms. Nabi's PRSU award of 2,083,333 shares shall fully vest on September 1, 2026, subject to the achievement of three-year performance objectives determined by the Board on September 28, 2023 (the grant date) and subject to Ms. Nabi’s continued employment. The next four tranches of 2,083,333 PRSUs will be granted on or around each September 1 of 2024 through 2027, which shall vest on the third-year anniversary of the respective grant date, subject in each case to the achievement of three-year performance objectives to be determined by the Board. The Company will recognize share-based compensation expense associated with these PRSUs, on a straight-line basis over the vesting period, based on the fair value on the grant date when it is probable that the performance condition will be achieved.
In the event that JAB and Ms. Nabi sell shares of Common Stock for cash in a privately negotiated transaction, subject to Board approval, the Company will grant Ms. Nabi new options to acquire shares of Common Stock (the “Reload Options”) in an amount equal to the number of shares sold by Ms. Nabi in such transaction. The Reload Options will have a strike price equal to the greater of the volume weighted average price for shares at the time of the relevant transaction and the fair market value on the date of grant. The potential expense attributed to the reload options will be recognized when the reload options are granted.
Restricted Stock
The Company granted 0.3 million shares of restricted stock, during the three and six months ended December 31, 2023. The Company recognized share-based compensation expense of $6.6$0.6 and $5.6$0.7 for the three months ended December 31, 20172023 and 2016,2022, respectively, and $12.5$1.1 and $8.4$1.2 for the six months ended December 31, 20172023 and 2016,2022, respectively.
Series A Preferred Stock and Series A-1 Preferred Stock
The Company granted 1.0 millionno shares of Series A Preferred Stock or Series A-1 Preferred Stock during the three and six months ended December 31, 2017 and 2016, respectively.2023. The Company recognized share-based compensation (income) expense of $0.7$(0.1) and $(0.5)$0.2 for the three months ended December 31, 20172023 and 2016,2022, respectively, and $(0.4)$(0.7) and $(0.7)$(0.2) for the six months ended December 31, 20172023 and 2016,2022, respectively.

Non-Qualified Stock Options
The Company granted 4.8 millionno non-qualified stock options during the three and six months ended December 31, 2017.2023. The Company recognized share-based compensation expense of $2.6$0.3 and $1.7$0.3 for the three months ended December 31, 20172023 and 2016,2022, respectively, and $5.9$0.1 and $4.7$0.6 for the six months ended December 31, 20172023 and 2016,2022, respectively.
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15. NET INCOME ATTRIBUTABLE TO COTY INC. PER COMMON SHARE
Reconciliation between the numerators and denominators of the basic and diluted income per share (“EPS”) computations is presented below:
 Three Months Ended
December 31,		 Six Months Ended
December 31,
 2017 2016 2017 2016
 (in millions, except per share data)
Net income attributable to Coty Inc.$109.2
 $46.8
 $89.5
 $46.8
Weighted-average common shares outstanding—Basic749.6
 746.6
 749.1
 539.8
Effect of dilutive stock options and Series A Preferred Stock (a)
1.2
 2.7
 1.4
 3.2
Effect of restricted stock and RSUs (b)
1.9
 3.1
 2.0
 2.8
Weighted-average common shares outstanding—Diluted752.7
 752.4
 752.5
 545.8
Net income attributable to Coty Inc. per common share:       
Basic$0.15
 $0.06
 $0.12
 $0.09
Diluted0.15
 0.06
 0.12
 0.09
Three Months Ended
December 31,		Six Months Ended
December 31,
2023202220232022
Amounts attributable to Coty Inc.:
Net income attributable to Coty Inc.$180.9 $238.3 $182.5 $366.9 
Convertible Series B Preferred Stock dividends(3.3)(3.3)(6.6)(6.6)
Net income attributable to common stockholders$177.6 $235.0 $175.9 $360.3 
Weighted-average common shares outstanding:
Weighted-average common shares outstanding—Basic892.8 850.8 873.6 846.4 
Effect of dilutive stock options and Series A Preferred Stock (a)
— — 0.1 — 
Effect of restricted stock and RSUs (b)
6.3 12.3 9.6 14.4 
Effect of Convertible Series B Preferred Stock (c)
23.7 23.7 — 23.7 
Effect of Forward Repurchase Contracts (d)
— — — — 
Weighted-average common shares outstanding—Diluted922.8 886.8 883.3 884.5 
Earnings per common share:
Earnings per common share - basic$0.20 $0.28 $0.20 $0.43 
Earnings per common share - diluted (e)
0.20 0.27 0.20 0.42 
(a)
(a) For the three months ended December 31, 2023 and 2022, outstanding stock options and Series A Preferred Stock with purchase or conversion rights to purchase 3.9 million and 5.8 million shares of Common Stock, respectively, were anti-dilutive and excluded from the computation of diluted EPS. For the six months ended December 31, 2023 and 2022, outstanding stock options and Series A Preferred Stock with purchase or conversion rights to purchase 2.9 million and 6.0 million weighted average shares of Common Stock, respectively, were anti-dilutive and excluded from the computation of diluted EPS.
(b) For the three months ended December 31, 2023 and 2022, there were 3.9 million and nil anti-dilutive RSUs, respectively, excluded from the computation of diluted EPS. For the six months ended December 31, 2023 and 2022, there were 2.0 million and nil weighted average anti-dilutive RSUs, respectively, excluded from the computation of diluted EPS.
(c) For the six months ended December 31, 2023 there were 23.7 million dilutive shares of Convertible Series B Preferred Stock excluded from the computation of diluted EPS as their inclusion would be anti-dilutive.
(d) For the three and six months ended December 31, 2023 and 2022, respectively, shares for the Forward Repurchase Contracts were excluded from the computation of diluted EPS as Coty is in the position to receive shares from the counterparties and as such their inclusion would be anti-dilutive.
(e) Diluted EPS is adjusted by the effect of dilutive securities, including awards under the Company's equity compensation plans, the convertible Series B Preferred Stock, and the Forward Repurchase Contracts. When calculating any potential dilutive effect of stock options, Series A Preferred Stock, restricted stock, RSUs and PRSUs, the Company uses the treasury method and the if-converted method for the Convertible Series B Preferred Stock and the Forward Repurchase Contracts.The treasury method typically does not adjust the net income attributable to Coty Inc., while the if-converted method requires an adjustment to reverse the impact of the preferred stock dividends of $3.3 and $3.3, respectively, and to reverse the impact of fair market value gains for contracts with the option to settle in shares or cash of $44.4 and $44.3, respectively, if dilutive, for the three months ended December 31, 2023 and 2022 on net income applicable to common stockholders during the period. The if-converted method requires an adjustment to reverse the impact of the preferred stock dividends of $6.6 and $6.6, respectively, and to reverse the impact of fair market value gains for contracts with the option to settle in shares or cash of $0.2 and $6.8, respectively, if dilutive, for the six months ended December 31, 2023 and 2022 on net income applicable to common stockholders during the period.
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For the three and six months ended December 31, 2017, outstanding stock options and Series A Preferred Stock with purchase or conversion rights to purchase 15.3 million and 13.6 million shares of common stock, respectively, were excluded in the computation of diluted EPS as their inclusion would be anti-dilutive. For the three and six months ended December 31, 2016, outstanding stock options and Series A Preferred Stock with purchase or conversion rights to purchase 10.8 million and 6.4 million shares of common stock, respectively, were excluded from the computation of diluted EPS as their inclusion would be anti-dilutive.
(b)
For the three and six months ended December 31, 2017, 2.6 million and 4.1 million of outstanding RSUs, respectively, were excluded in the computation of diluted EPS as their inclusion would be anti-dilutive. For the three and six months ended December 31, 2016, 1.1 million and 0.6 million of outstanding RSUs, respectively, were excluded from the computation of diluted EPS as their inclusion would be anti-dilutive.
16. MANDATORILY REDEEMABLE FINANCIAL INTERESTS AND REDEEMABLE NONCONTROLLING INTERESTS
Mandatorily Redeemable Financial Interest
United Arab Emirates Joint Venture (“U.A.E. JV”)
The Company is required under a shareholders agreement (the “U.A.E. Shareholders Agreement”) to purchase all of the shares held by the noncontrolling interest holder equal to 25% of the U.A.E. JV at the termination of the agreement. The Company has determined such shares to be a Mandatorily Redeemable Financial Instrument (“MRFI”) that is recorded as a liability. The liability is calculated based upon a pre-determined formula in accordance with the U.A.E. Shareholders Agreement. As of December 31, 2017 and June 30, 2017, the liability amounted to $5.7 and $5.2, of which $4.7 and $4.7, respectively, was recorded in Other noncurrent liabilities and $1.0 and $0.5, respectively, was recorded in Accrued expenses and other current liabilitiesSubsidiary in the Condensed Consolidated Balance Sheet.
Southeast Asian subsidiary
On May 23, 2017, the Company entered into the Sale of Shares and Termination Deed (the “Termination Agreement”) to purchase the remaining 49% noncontrolling interest from the noncontrolling interest holder of a certain Southeast Asian subsidiary for a purchase price of $45.0. Additionally, all remaining retained earnings will be paid out as dividends prior to the purchase. The payment and termination will be effective on June 30, 2019. As a result of the Termination Agreement, the noncontrolling interest balance is recorded as an MRFI. The MRFI balance will be accreted to the redemption value until the effective date of the purchase with changes in the balance being reflected in Other expense, net in the Condensed Consolidated Statements of Operations.

Middle East
As of December 31, 2017 and June 30, 2017,2023, the MRFI liability amounted to $46.7 and $49.3, respectively, of which $43.0 and $41.7, respectively, was recorded in Other noncurrent liabilities and $3.7 and $7.6, respectively, was recorded in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheet.
Redeemable Noncontrolling Interests
As of December 31, 2017, the redeemable noncontrolling interests (“RNCI”) consisted of a 25.0% interest in a subsidiary in the United Arab Emirates and a 40.7% interest in the consolidated subsidiaries related to the Younique acquisition. See Note 4—Business Combinations.
Younique
On February 1, 2017, after the close of the acquisition, the pre-acquisition Younique membership holders had a 40% membership interest in Foundation. On October 15, 2017, shares of Foundation were issued to employees of Younique under a stock ownership program and incentive stock grants were granted, resulting in a 0.7% increase to the noncontrolling interest ownership percentage. The impact of the additional shares was recorded as an increase to RNCI of $8.5, a decrease in APIC of $8.3 and cash proceeds of $0.2. The Company accounts for the 40.7% noncontrolling interest portion of Foundation as RNCI due to the noncontrolling interest holder’s right to put their shares to the Company in certain circumstances. While Foundation is a majority-owned consolidated subsidiary, the Company records income tax expense based on the Company’s 59.3% membership interest in Foundation due to its treatment as a partnership for U.S. income tax purposes. Accordingly, Foundation’s net income attributable to RNCI is equal to the 40.7% noncontrolling interest of Foundation’s net income excluding a provision for income taxes. On December 22, 2017, the Tax Act was enacted, which included a reduction of the U.S. corporate tax rate. The tax rate change was the primary driver of a $79.2 adjustment to the fair value of the RNCI balance for the quarter. The Company recognized $574.8 and $481.6 as the redeemable noncontrolling interest balances as of December 31, 2017 and June 30, 2017, respectively.
Subsidiary in the United Arab Emirates
On May 31, 2017, the Company and the non-controlling interest holder in the Company’s subsidiary in the United Arab Emirates (“Middle East Subsidiary”had a 25% ownership share. The Company adjusts the redeemable noncontrolling interests (“RNCI”) amendedto redemption value at the shareholder agreement governing the Company’s Middle East Subsidiary. Asend of July 1, 2017, the amendment reduced the percentage of the noncontrolling interest holders’ shareeach reporting period with changes recognized as adjustments to 25% in exchange for Coty contributing the local distribution rights for the brands acquiredAPIC. The Company recognized $102.2 and $93.5 as part of the P&G Beauty Business acquisition to the joint venture’s portfolio of brands. This resulted in a dilution of the RNCI that resulted in a decreasebalances as of the RNCIDecember 31, 2023 and an increase of APIC of $17.0.June 30, 2023, respectively.
17. COMMITMENTS AND CONTINGENCIES
Legal Matters
The Company is involved, from time to time, in various litigation, and administrative and other legal proceedings, (includingincluding regulatory and/or governmental actions)actions, incidental or related to its business, including consumer class or collective action,actions, personal injury (mostly involving allegations related to alleged asbestos in the Company’s talc-based cosmetic products), intellectual property, competition, compliance and advertising claims litigation and disputes, among others (collectively, “Legal Proceedings”). While the Company cannot predict any final outcomes relating thereto, management believes that the outcome of current Legal Proceedings shouldwill not have a material effect upon its business, prospects, financial condition, results of operations, or cash flows noror the trading price of the Company’s securities. However, management’s assessment of the Company’s current Legal Proceedings especially those related to its recently completed acquisitions, is ongoing, and could change in light of the discovery of additional facts with respect to Legal Proceedings pending against the Company not presently known to the Company, further legal analysis, or determinations by judges, arbitrators, juries or other finders of fact or deciders of law which are not in accord with management’s evaluation of the probable liability or outcome of such Legal Proceedings. From time to time, the Company is in discussions with regulators, including discussions initiated by the Company, about actual or potential violations of law in order to remediate or mitigate associated legal or compliance risks.
Noncontrolling Interestsrisks and Redeemable Noncontrolling Interests
Refer to Note 16—Mandatorily Redeemable Financial Interests and Redeemable Noncontrolling Interests for commitments and contingencies related to certain interestsliabilities or penalties. As the outcomes of such proceedings are unpredictable, the Company holdscan give no assurance that the results of any such proceedings will not materially affect its reputation, business, prospects, financial condition, results of operations, cash flows or the trading price of its securities.
Brazilian Tax Assessments
The Company’s Brazilian subsidiaries receive tax assessments from local, state and federal tax authorities in Brazil from time to time. Current open tax assessments as of December 31, 2017.2023 are:

Assessment receivedType of assessmentType of TaxTax period impacted
Estimated amount, including interest and penalties as of
December 31, 2023
Mar-18State sales tax credits, which the Treasury Office of the State of Goiás considers as improperly registeredICMS2016-2017
R$0.0 million (approximately $0.0) (a)
Aug-20ICMS2017-2019R$700.2 million (approximately $144.3)
Oct-20Federal excise taxes, which the Treasury Office of the Brazil’s Internal Revenue Service considers as improperly calculatedIPI2016-2017R$423.0 million (approximately $87.2)
Nov-22IPI2018-2019R$569.2 million (approximately $117.3)
Nov-20State sales taxes, which the Treasury Office of the State of Minas Gerais considers as improperly calculatedICMS2016-2019R$220.3 million (approximately $45.4)
Jun-21State sales tax, which the Treasury Office of the State of Goiás considers as improperly calculatedICMS2016-2020R$65.9 million (approximately $13.6)
(a) During the fourth quarter of fiscal 2023, the ICMS assessment received in March 2018 had an unfavorable decision at administrative instance. The Company paid the R$1.1 million (approximately $0.2) penalty in August 2023 and the case closed. The Company does not believe the outcome of this decision will weigh on other pending cases as the case factors for other open ICMS assessments are different.
The Minas Gerais State tax ICMS assessment received in November 2020 is currently at the judicial process. For the Goiás State tax ICMS assessment received in August 2020, the Company has in parallel a judicial case about an additional claim for fees over the tax incentive, for which the Company received an unfavorable ruling and has filed an appeal. In the first quarter of fiscal 2024, the Company filed a motion for clarification as a step before potentially appealing to a Brazilian higher court, which was denied. In December 2023, the Company filed appeals to be remitted to the Special and Supreme Brazilian Courts and, in parallel, filed a motion to grant the suspension of the state's ability to collect the above tax incentives to the Goiás State
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Court. These motions are under consideration at the state court level. All other cases are currently in the administrative process. The Company expects that cases may move from the administrative to the judicial process, although the exact timing is uncertain. For cases in the judicial process, the Company will be required to make a judicial deposit or enter into a surety bond for the disputed tax assessment, interest and penalties. The judicial process in Brazil is likely to take a number of years to conclude. The Company is seeking favorable judicial and administrative decisions on the tax enforcement actions filed by the tax authorities for these assessments. The Company believes it has meritorious defenses and it has not recognized a loss for these assessments as the Company does not believe a loss is probable.
Due to the fiscal environment in Brazil, the possibility of further tax assessments related to the same or similar matters cannot be ruled out.
18. SUBSEQUENT EVENTRELATED PARTY TRANSACTIONS
Quarterly DividendWella
On February 8, 2018,December 22, 2021, the Company announcedentered into an agreement with Rainbow UK Bidco Limited (“KKR Bidco”) (an affiliate of funds and/or separately managed accounts advised and/or managed by KKR), related to post-closing adjustments to the purchase consideration for the Coty’s Professional and Retail Hair businesses, including the Wella, Clairol, OPI and ghd brands, (together, the “Wella Business”). In relation to this agreement, the Company recognized a quarterly cash dividendgain of $0.125 per share$1.9 and $8.5, in the three and six months ended December 31, 2023, and $12.5 and $26.4, in the three and six months ended December 31, 2022, respectively, which is reported in Other income, net in the Condensed Consolidated Statements of Operations.
As of December 31, 2023, Coty owned 25.9% of the Wella Company as an equity investment and performs certain services to Wella. Refer to Note 6— Equity Investments.
In connection with the sale of the Wella Business, the Company and Wella entered into a Transitional Services Agreement (“TSA”). Subject to the terms of this TSA, the Company will perform services for Wella in exchange for related service fees. Such services include billing and collecting from Wella customers, certain logistics and warehouse services, as well as other administrative and systems support. The Company and Wella have mutually agreed to end the contracted TSA services on January 31, 2022. The Company and Wella have also entered into other manufacturing arrangements to facilitate the Wella Business transition in the U.S. and Brazil. TSA fees and other fees earned were $0.8 and $2.7, respectively, for the three months ended December 31, 2023 and $0.7 and $2.0, respectively, for the three months ended December 31, 2022. TSA fees and other fees earned were $1.8 and $5.0, respectively, for the six months ended December 31, 2023 and $1.5 and $4.1, respectively, for the six months ended December 31, 2022. The TSA fees are principally invoiced on a cost plus basis. The TSA fees and other fees were included in Selling, general and administrative expenses and Cost of sales, respectively, in the Company's Condensed Consolidated Statement of Operations.
The Company also entered into an agreement with Wella to provide management, consulting and financial services to Wella and its Common Stock, RSUsdirect and phantom units.indirect divisions, subsidiaries, parent entities and controlled affiliates (in assisting it in the management of its business). The dividend will beCompany earned $0.3 and $0.6 in the three and six months ended December 31, 2023, respectively, and $0.3 and $0.6 in the three and six months ended December 31, 2022, respectively, which are reflected in Other income, net in the Condensed Consolidated Statements of Operations.
As of December 31, 2023, accounts receivable from and accounts payable on March 15, 2018 to holdersWella of record of Common Stock$102.7 and $8.2, respectively, were included in Prepaid expenses and other current assets and Accrued expenses and other current liabilities, respectively, in the Company's Condensed Consolidated Balance Sheets. Additionally, as of February 28, 2018.December 31, 2023, the Company has accrued $34.0 related to long-term payables due to Wella included in Other noncurrent liabilities in the Company's Condensed Consolidated Balance Sheet.

In accordance with the separation agreement with Wella, Coty shall retain and be solely responsible for any amounts payable to former Coty employees transferred to Wella (“Wella employees”), who participated in the Coty Long-Term Incentive Plan. The Wella employees will continue to participate and vest on the current terms for the remaining vesting period after the separation. As such, Coty will continue to recognize the share-based compensation expense for Wella employees until the existing equity awards reach their vesting date. For the three and six months ended December 31, 2023 and 2022, Coty recorded $0.6 and $1.0, respectively, and $1.3 and $2.7, respectively, of share-based compensation expense related to Wella employees, which was presented as part of Other income, net in the Condensed Consolidated Statements of Operations.
The Company has certain sublease arrangements with Wella after the sale. The Company reported sublease income from Wella of $2.0 and $2.3, respectively, and $4.1 and $4.7, respectively, for the three and six months ended December 31, 2023 and 2022.
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19. SUBSEQUENT EVENTS
The Company evaluated the effect of events and transactions subsequent to the condensed consolidated balance sheet date of December 31, 2023 through the date of issuance of the Condensed Consolidated Financial Statements and determined that no subsequent events have occurred that require recognition in the Condensed Consolidated Financial Statements or disclosure in the notes to the Condensed Consolidated Financial Statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the financial condition and results of operations of Coty Inc. and its consolidated subsidiaries, should be read in conjunction with the information contained in the Condensed Consolidated Financial Statements and related notes included elsewhere in this document, and in our other public filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the fiscal year ended June 30, 20172023 (“Fiscal 20172023 Form 10-K”). When used in this discussion, the terms “Coty,” the “Company,” “we,” “our,” or “us” mean, unless the context otherwise indicates, Coty Inc. and its majority and wholly-owned subsidiaries. Also, 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 following report includes certain non-GAAP financial measures. See “Overview—Non-GAAP Financial Measures” for a discussion of non-GAAP financial measures and how they are calculated.
All dollar amounts in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated.

More information about potential risks and uncertainties that could affect our 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 this Quarterly Report on Form 10-Q and other periodic reports we have filed and may file with the SEC from time to time.
Forward LookingForward-looking Statements
Certain statements in this Form 10-Q 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, establishingstrategic planning, targets and outlook for future reporting periods (including the Company as a global leaderextent and challengertiming of revenue, expense and profit trends and changes in beauty,operating cash flows and cash flows from operating activities and investing activities), the wind down of the Company’s operations in Russia (including timing and expected impact), the Company’s future operations and financial performancestrategy (including brand relaunchesthe expected implementation and returning to profitable top line growth and other revenue trends)related impact of its strategic priorities), ongoing and future cost efficiency, optimization and restructuring initiatives and programs, expectations of the impact of inflationary pressures and the timing, presentationmagnitude and costimpact of future cost savingpricing actions to offset inflationary costs, strategic transactions (including their expected timing and impact), expectations and/or restructuring plans mergerswith respect to joint ventures (including Wella and acquisitions, divestituresthe timing and brand rationalization, synergiessize of any related divestiture, distribution or return of capital), the Company’s capital allocation strategy and payment of dividends (including suspension of dividend payments and the duration thereof and any plans to resume cash dividends on common stock or to continue to pay dividends in cash on preferred stock) and expectations for stock repurchases, investments, licenses and portfolio changes, product launches, relaunches or rebranding (including the expected timing cost and amountor impact thereof), growth fromsynergies, savings, performance, cost, timing and future performanceintegration of acquisitions, future cash flows, liquidity and borrowing capacity (including any refinancing or deleveraging activities), timing and size of cash outflows and debt deleveraging, the successtiming and extent of any future impairments, and synergies, savings, impact, cost, timing and implementation of the integrationCompany’s ongoing strategic transformation agenda (including operational and organizational structure changes, operational execution and simplification initiatives, fixed cost reductions, continued process improvements and supply chain changes), the impact, cost, timing and implementation of e-commerce and digital initiatives, the expected impact, cost, timing and implementation of sustainability initiatives (including progress, plans and goals), the impact of COVID-19 or similar public health events, the expected impact of geopolitical risks including the ongoing war in Ukraine and/or the armed conflict in the Middle East (including the Red Sea conflict) on our business operations, sales outlook and strategy, the expected impact of global supply chain challenges and/or inflationary pressures (including as a result of the Procterwar in Ukraine and/or armed conflict in the Middle East including the Red Sea conflict) and Gamble Beauty Businessexpectations regarding future service levels and other recent acquisitions, performance in digital and e-commerce, future dividends, fiscal year and subsequent effective tax rates,inventory levels, the future impact of the Tax Actdual-listing of our Class A Common Stock on Euronext Paris, and any outlook for future reporting periods, including results and performance for the reminderpriorities of the fiscal year.senior management. 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”, “goal” 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:including risks and uncertainties relating to:

•our ability to achievesuccessfully implement our global business strategies,multi-year strategic transformation agenda and compete effectively in the beauty industry, and achieve the benefits contemplated by our strategic transactions, includinginitiatives (including revenue growth, cost control, gross margin growth and debt deleveraging) and successfully implement our joint venturesstrategic priorities (including stabilizing our consumer beauty brands through leading innovation and recent acquisitions, improved execution, accelerating our prestige fragrance brands and ongoing expansion into prestige cosmetics, building a comprehensive skincare portfolio, enhancing our e-commerce and direct-to-consumer (“DTC”) capabilities, expanding our presence in China through prestige products and select consumer beauty brands, and establishing Coty as an industry leader in sustainability) in each case within the expected time frame or at all;
use
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Table of estimates and assumptions in preparing our financial statements, including with regard to revenue recognition, stock compensation expense, income taxes, purchase price allocations, the assessment of goodwill, other intangible assets and long-lived assets for impairment, the market value of inventory, pension expense and the fair value of acquired assets and liabilities associated with acquisitions;Contents
managerial, integration, operational, regulatory, legal and financial risks, including management of cash flows, and expenses and costs (including one-time costs and capital expenses) associated with our strategic transactions and internal reorganizations, including current and future business realignment activities;
the continued integration of the P&G Beauty Business and other recent acquisitions with our business, operations, systems, financial data and culture and the ability to realize synergies, reduce costs and realize other potential efficiencies and benefits (including through the Company’s restructuring and business realignment programs) at the levels and at the costs and within the time frames currently contemplated or at all;
•our ability to anticipate, gauge and respond to market trends and consumer preferences, which may change rapidly, and the market acceptance of new products, including new products in our skincare and prestige cosmetics portfolios, any relaunched or rebranded products execution of new launches, and the anticipated costs and discounting associated with such relaunches and rebrands;rebrands, and consumer receptiveness to our current and future marketing philosophy and consumer engagement activities (including digital marketing and media), and our ability to effectively manage our production and inventory levels in response to demand;
•use of estimates and assumptions in preparing our financial statements, including with regard to revenue recognition, income taxes (including the expected timing and amount of the release of any tax valuation allowance), the assessment of goodwill, other intangible and long-lived assets for impairments, the market value of inventory, and the fair value of the equity investment;
•the impact of any future impairments;
•managerial, transformational, operational, regulatory, legal and financial risks, including diversion of management attention to and management of cash flows, expenses and costs associated with our transformation agenda, our global business strategies, the integration and management of the strategic partnerships with Kylie Jenner and Kim Kardashian, and future strategic initiatives, and, in particular, our ability to manage and execute many initiatives simultaneously including any resulting complexity, employee attrition or diversion of resources;
•the timing, costs and impacts of divestitures and the amount and use of proceeds from any such transactions;
•future divestitures and the impact thereof on, and future acquisitions, new licenses and joint ventures and the integration thereof with, our business, operations, systems, financial data and culture and the ability to realize synergies, manage supply chain challenges and other business disruptions, reduce costs (including through our cash efficiency initiatives), avoid liabilities and realize potential efficiencies and benefits (including through our restructuring initiatives) at the levels and at the costs and within the time frames contemplated or at all;
•increased competition, consolidation among retailers, shifts in consumers’ preferred distribution and marketing channels (including to digital and prestige channels), distribution and shelf-space resets or reductions, compression of go-to-market cycles, changes in product and marketing requirements by retailers, reductions in retailer inventory levels and order lead-times or changes in purchasing patterns, impact from COVID-19 or similar public health events on retail revenues, and other changes in the retail, e-commerce and wholesale environment in which we do business and sell our products;products and our ability to respond to such changes (including our ability to expand our digital, direct-to-consumer and e-commerce capabilities within contemplated timeframes or at all);
changes in law (including the Tax Act), regulations and policies and/or the enforcement thereof that affect our business, financial performance, operations or its products;
•our and our brand partners'joint ventures’, business partners’ and licensors'licensors’ abilities to obtain, maintain and protect the intellectual property rights, including trademarks, brand names and other intellectual property used in our and their respective businesses, productsprotect our and software, and their and our other business partners (including suppliers, customers, and talent) and licensors’ abilities to protect their respective reputations (including those of our and their executives or influencers) and public goodwill, as well asand defend claims by third parties for infringement of intellectual property rights;

successfully divesting•any change to our capital allocation and/or discontinuing non-core brands (including associated post-closing reduction programs)cash management priorities, including any change in our dividend policy and to rationalizing wholesale distribution by reducing the amount of product diversion to the value and mass channels;any change in our stock repurchase plans;
•any unanticipated problems, liabilities or integration or other challenges associated with ana past or future acquired business, joint ventures or strategic partnerships, which could result in increased risk ofor new, unanticipated or unknown liabilities, including with respect to environmental, competition and other regulatory, compliance or legal matters;matters, and specifically in connection with the strategic partnerships with Kylie Jenner and Kim Kardashian, risks related to the entry into a new distribution channel, the potential for channel conflict, risks of retaining customers and key employees, difficulties of integration (or the risks associated with limiting integration) and management of the partnerships, our relationships with Kylie Jenner and Kim Kardashian, our ability to protect trademarks and brand names, litigation, investigations by governmental authorities, and changes in law, regulations and policies that affect King Kylie LLC (“King Kylie”) and/or KKW Holdings, LLC’s (“KKW Holdings”) business or products, including risk that direct selling laws and regulations may be modified, interpreted or enforced in a manner that results in a negative impact to King Kylie and/or KKW Holdings’ business model, revenue, sales force or business;
•our international operations and joint ventures, including enforceability and effectiveness of itsour joint venture agreements and reputational, compliance, regulatory, economic and foreign political risks, including difficulties and costs associated with maintaining compliance with a broad variety of complex domesticlocal and international regulations;
•our dependence on certain licenses (especially in the Luxury division),fragrance category) and our ability to renew expiring licenses on favorable terms or at all;
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•our dependence on entities performing outsourced functions, including outsourcing of distribution functions, and third-party manufacturers, logistics and supply chain suppliers, and other suppliers, including third partythird-party software providers, web-hosting and e-commerce providers;
•administrative, product development and other difficulties in meeting the expected timing of market expansions, product launches, re-launches and marketing efforts;efforts, including in connection with new products in our skincare and prestige cosmetics portfolios;
•changes in the demand for our products due to declining or depressed global or regional economic conditions, and declines in consumer confidence or spending, whether related to the economy (such as austerity measures, tax increases, high fuel costs, or higher unemployment), wars and other hostilities and armed conflicts, natural or other disasters, weather, pandemics, security concerns, terrorist attacks or other factors;
•global political and/or economic uncertainties, disruptions or major regulatory or policy changes, and/or the enforcement thereof that affect our business, financial performance, operations or products, including the impact of Brexit, the war in Ukraine and any escalation or expansion thereof, armed conflict in the Middle East,the current U.S. administration and recentfuture elections, changes in the U.S. tax code;code and/or tax regulations in other jurisdictions where we operate, and recent changes and future changes in tariffs, retaliatory or trade protection measures, trade policies and other international trade regulations in the U.S., the European Union, and Asia and in other regions where we operate, potential regulatory limits on payment terms in the European Union, future changes in sanctions regulations, regulatory uncertainty impacting the wind-down of our business in Russia, and recent and future changes in regulations impacting the beauty industry, including regulatory measures addressing products, formulations, raw materials and packaging;
•currency exchange rate volatility and currency devaluation and/or inflation;
•our ability to implement and maintain pricing actions to effectively mitigate increased costs and inflationary pressures, and the reaction of customers or consumers to such pricing actions;
•the number, type, outcomes (by judgment, order or settlement) and costs of current or future legal, compliance, tax, regulatory or administrative proceedings, investigations and/or litigation;litigation, including product liability cases (including asbestos and talc-related litigation for which indemnities and/or insurance may not be available), distributor or licensor litigation, and compliance, litigation or investigations relating to our joint ventures or strategic partnerships;
•our ability to manage seasonal factors and other variability and to anticipate future business trends and needs;
•the impact of COVID-19 (or future similar events), including demand for the Company’s products, illness, quarantines, government actions, facility closures, store closures or other restrictions in connection with the COVID-19 pandemic, and the extent and duration thereof, related impact on our ability to meet customer needs and on the ability of third parties on which we rely, including our suppliers, customers, contract manufacturers, distributors, contractors, commercial banks and joint-venture partners, to meet their obligations to us, in particular collections from customers, and the ability to successfully implement measures to respond to such impacts;
•disruptions in the availability and distribution of raw materials and components needed to manufacture our products, and our ability to effectively manage our production and inventory levels in response to supply challenges;
•disruptions in operations, sales and in other areas, including due to disruptions in our supply chain, restructurings and other business alignment activities, manufacturing or information technology systems, labor disputes, extreme weather and natural disasters, impact from COVID-19 or similar public health events, the outbreak of war or hostilities (including the war in Ukraine and consolidationarmed conflict in the Middle East, including the Red Sea conflict, and any escalation or expansion thereof), the impact of our legal entities,global supply chain footprintchallengesor other disruptions in the international flow of goods, and information technology systems;the impact of such disruptions on our ability to generate profits, stabilize or grow revenues or cash flows, comply with our contractual obligations and accurately forecast demand and supply needs and/or future results;
•our ability to adapt our business to address climate change concerns, including through the implementation of new or unproven technologies or processes, and to respond to increasing governmental and regulatory measures relating to environmental, social and governance matters, including expanding mandatory and voluntary reporting, diligence and disclosure, as well as new taxes (including on energy and plastic), and the impact of such measures on our costs, business operations and strategy;
•restrictions imposed on us through our license agreements, and credit facilities and senior unsecured bonds or other material contracts, our ability to generate cash flow to repay, refinance or recapitalize debt and otherwise comply with our debt instruments, and changes in the manner in which we finance our debt and future capital needs including potential acquisitions;;
•increasing dependency on information technology, including as a result of remote working practices, and our abilityor the ability of any of the third-party service providers we use to support our business, to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, including ransomware attacks, costs
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and timing of implementation and effectiveness of any upgrades or other changes to information technology systems, inability to controland the qualitycost of compliance or level of detail of financial data provided by third parties, and our failure to comply with any privacy or data security laws (including the EUEuropean Union General Data Protection Regulation)Regulation (the “GDPR”), the California Consumer Privacy Act and similar state laws, the Brazil General Data Protection Law, and the China Data Security Law and Personal Information Protection Law) or to protect against theft of customer, employee and corporate sensitive information;information;
•our ability to attract and retain key personnel including during timesand the impact of integration, transition and restructurings;senior management transitions;
•the distribution and sale by third parties of counterfeit and/or gray market versions of our products;
•the impact of our ongoing strategic transformation agenda and continued process improvements on our relationships with key customers and suppliers and certain material contracts;
•our relationship with JAB Beauty B.V., as our majority stockholder, and its affiliates, and any related conflicts of interest or litigation;
•our relationship with KKR, whose affiliate KKR Bidco, is an investor in the Wella Business, and any related conflicts of interest or litigation;
•future sales of a significant number of shares by our majority stockholder or the perception that such sales could occur; and
•other factors described elsewhere in this document and from time to time in documents that we file with the SEC.SEC from time to time.

When used in this Quarterly Report on Form 10-Q, the term “includes” and “including” means, unless the context otherwise indicates, “including without limitation”. More information about potential risks and uncertainties that could affect our business and financial results is included under the heading “Risk Factors” and “—Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q and other periodic reports we have filed and may file with the SEC from time to time, including our Fiscal 2017 Form 10-K.

time.
All forward-looking statements made in this document are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this document, and we do 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.

Industry, Ranking and Market Data
Unless otherwise indicated, information contained in this Quarterly Report on Form 10-Q concerning our industry and the marketmarkets in which we operate, including our general expectations about our industry, market position, market opportunity and market size,sizes, is based on data from various sources including internal data and estimates as well as third-party sources widely available to the public, such as independent industry publications, government publications, reports by market research firms or other published independent sources and on our assumptions based on that data and other similar sources. We did not fund and are not otherwise affiliated with the third-party sources that we cite. Industry publications and other published sources generally state that the information contained therein has been obtained from third-party sources believed to be reliable. Internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which we operate and management’s understanding of industry conditions, and such information has not been verified by any

independent sources. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we generally believe the market, industry and other information included in this Quarterly Report on Form 10-Q to be the most recently available and to be reliable, such information is inherently imprecise and we have not independently verified any third-party information or verified that more recent information is not available.
Our fiscal year ends on 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 2018”2024” refer to the fiscal year ending June 30, 2018.2024. Any reference to a year not preceded by “fiscal” refers to a calendar year.

OVERVIEW
We are one of the world’s largest beauty companies, with an iconic portfolio of brands across fragrance, color cosmetics, and skin and body care. Our strategic priorities include stabilizing and growing our Consumer Beauty brands through leading innovation and improved execution, accelerating our Prestige fragrance business and ongoing expansion into Prestige cosmetics, building a comprehensive skincare portfolio leveraging existing brands, enhancing our e-commerce and Direct-to-Consumer (“DTC”) capabilities, expanding our presence in China and travel retail through Prestige products and select Consumer Beauty brands, and establishing Coty as an industry leader in sustainability. Our brands empower people to express themselves freely, creating their own visions of beauty; and we are committed to making a positive impact on the planet.
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Our products are sold in over 120 countries and territories. As a geographically diverse company we are susceptible to global beauty companyeconomic trends, geopolitical conflicts, domestic and foreign governmental policies, and changes in foreign exchange rates. In particular, economic conditions in China have had, and are expected to continue to have, an impact on our strategic initiatives, including our growth agenda in the region for Prestige products and our strategic vision is to be a new global leader and challengerskincare business implementation. In addition, as the conflict in the beauty industry.Red Sea continues to develop, we have implemented alternate transport routes and have purchased safety stock to mitigate impacts on the flow of goods. We manufacture, market, sellremain attentive to economic and distribute branded beauty products, including fragrances, color cosmetics, hair care productsgeopolitical conditions that may materially impact our business. We continue to explore and skin & body related products throughoutimplement risk mitigation strategies in the world.face of these unfolding conditions and remain agile in adapting to changing circumstances. Such conditions have or may have global implications which may impact the future performance of our business in unpredictable ways.
We consistently introduce new productsexpect that our net revenue for fiscal year 2024 will grow in the high single digits to low double digits versus the prior year, excluding the impact of foreign exchange, the Russia Market Exit and support new and established products through our focus on strategic advertising and merchandising, which we must continuously develop and evolve in responsethe early termination of the Lacoste fragrance license.
Order Fill Rates
Our ability to competitors’ new products and shifting consumer preferences in order to offset the gradual decline offulfill demand for our products that are lateris critical to our success. Through steps taken to improve order fill rates and mitigate the impact of supply chain constraints, we have seen sequential quarterly improvements in their lifecycles. The economics of developing, producing, launching, supportingour order fill rates on a company-wide basis. As a result, we achieved close to pre-COVID-19 service levels across our divisions during the second quarter.
Inflation
Inflationary trends in certain markets and discontinuing products impact the timing ofglobal supply chain challenges may negatively affect our sales and operating performance each period. We also continuously evaluate strategic transactionsperformance. The impact of inflation on material, logistical and new brand licenses in order to enhance our portfolio.
Business Overview
We operate in an environment of slow overall growth inother costs subsided during the segments and geographies insix months ended December 31, 2023, which we compete with increasing competitive pressure and changing consumer preferences. While luxury fragrances and skin care categories are experiencing strong growth, declines inwas primarily driven by a significant easing during the retail nail, mass color cosmetics and mass fragrances categories in the U.S. and certain key markets in Western Europesecond quarter. Inflation may continue to impact our business and financial results.
We experienced strong growth in our Luxury segment, sustained performance in our Professional segment and improving performance in our Consumer Beauty segment. However, in certain categories, our net revenues are declining faster thancosts, such as labor, however, we currently anticipate the category or despite category growth. We remain focused on stabilizing our business, particularly our Consumer Beauty segment, which has been affected by declines in distribution and reduction in shelf-space for certain brands. We continue addressing these challenges through brand repositioning, innovation, in-store execution and end-to-end digital capabilities.
Specifically, in connection with the P&G Beauty Business acquisition, we anticipated costs relatedoverall impact of inflation to restructuring, integrating and optimizing the combined organization (“Global Integration Activities”). Through December 31, 2017, we incurred life-to-date Global Integration Activities expenditures of approximately $975 million and $275 million of operating and capital expenditures, respectively, and we expect additional expenses to be incurred in future periods through fiscal 2021. Further, in connection with the acquisition of the P&G Beauty Business, we are implementing our plan through which we continue to target realizing approximately $750 millionease in the upcoming quarters of synergies driven by cost, procurement, supply chain and selling, general, and administrative savings through fiscal 2020. We realized cumulative synergies of approximately 20% in fiscal 2017, and we expect to cumulatively generate approximately 50% of the net synergies throughout fiscal 2018, approximately 80% through fiscal 2019 and the full $750 million through fiscal 2020.
We have also identified our non-core portfolio of brands, and are exploring alternatives for these brands, including divestiture. As we progress on our portfolio rationalization and continue to integrate the P&G Beauty Business and our other recent acquisitions, we are evaluating additional initiatives designed to simplify processes, reduce costs and improve organizational agility.

2024.
Non-GAAP Financial Measures
To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures for continuing operations and Coty Inc. including Adjusted operating income (loss), Adjusted EBITDA, Adjusted net income (loss), and Adjusted net income (loss) attributable to Coty Inc. and Adjusted net income attributable to Coty Inc. per common sharestockholders (collectively, the “Adjusted Performance Measures”). The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Three Months Ended December 31, 2017 As Compared To Three Months Ended December 31, 2016 and Six Months Ended December 31, 2017 As Compared To Six Months Ended December 31, 2016.” These non-GAAP financial measures should not be considered in isolation from, or as a substitute for or superior to, financial measures reported in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies, including companies in the beauty industry, may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
Despite the limitations of these non-GAAP financial measures, our management uses the Adjusted Performance Measures as key metrics in the evaluation of our performance preparation of ourand annual budgets and to benchmark performance of our business against our competitors. The following are examples of how these Adjusted Performance Measures are utilized by our management:
•strategic plans and annual budgets are prepared using the Adjusted Performance Measures;
•senior management receives a monthly analysis comparing budget to actual operating results that is prepared using the Adjusted Performance Measures; and
•senior management’s annual compensation is calculated, in part, by using some of the Adjusted Performance Measures.
In addition, our financial covenant compliance calculations under our debt agreements are substantially derived from these Adjusted Performance Measures.
Our management believes that Adjusted Performance Measures are useful to investors in their assessment of our operating performance and the valuation of the Company. In addition, these non-GAAP financial measures address questions we routinely receive from analysts and investors and, in order to ensure that all investors have access to the same data, our management has determined that it is appropriate to make this data available to all investors. The Adjusted Performance Measures exclude the impact of certain items (as further described below) and provide supplemental information regarding our operating performance. By disclosing these non-GAAP financial measures, our management intends to provide investors with a supplemental comparison of our operating results and trends for the periods presented. Our management believes these
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measures are also useful to investors as such measures allow investors to evaluate our performance using the same metrics that our management uses to evaluate past performance and prospects for future performance. We provide disclosure of the effects of these non-GAAP financial measures by presenting the corresponding measure prepared in conformity with GAAP in our financial statements, and by providing a reconciliation to the corresponding GAAP measure so that investors may understand the adjustments made in arriving at the non-GAAP financial measures and use the information to perform their own analyses.
Adjusted operating incomeincome/Adjusted EBITDA from continuing operations excludes restructuring costs and business structure realignment programs, amortization, acquisition-relatedacquisition- and divestiture-related costs and acquisition accounting impacts, stock-based compensation, and asset impairment charges and other adjustments as described below. For adjusted EBITDA, in addition to the preceding, we exclude adjusted depreciation as defined below. We do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance. They are primarily incurred to realign our operating structure and integrate new acquisitions, and implement divestitures of components of our business, and fluctuate based on specific facts and circumstances. Additionally, Adjusted net income attributable to Coty Inc. and Adjusted net income attributable to Coty Inc. per common share are adjusted for certain interest and other (income) expense items and preferred stock deemed dividends, as described below, and the related tax effects of each of the items used to derive Adjusted net income as such charges are not used by our management in assessing our operating performance period-to-period.
Adjusted Performance Measures reflect adjustments based on the following items:
•Costs related to acquisition and divestiture activities: We have excluded acquisition-relatedacquisition- and divestiture-related costs and acquisitionthe accounting impacts such as those related to transaction costs and costs associated with the revaluation of acquired inventory in connection with business combinations because these costs are unique to each transaction. Additionally, for divestitures, we exclude write-offs of assets that are no longer recoverable and contract related costs due to the divestiture. The nature and amount of such costs vary significantly based on the size and timing of the acquisitions and divestitures, and the maturities of the businesses being acquired.acquired or divested. Also, the size, complexity and/or volume of past acquisitions,transactions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of any future acquisitions.acquisitions or divestitures.
•Restructuring and other business realignment costs: We have excluded costs associated with restructuring and business structure realignment programs to allow for comparable financial results to historical operations and forward-looking guidance. In addition, the nature and amount of such charges vary significantly based on the size and timing of the

programs. By excluding the referenced expenses from our non-GAAP financial measures, our management is able to further evaluate our ability to utilize existing assets and estimate their long-term value. Furthermore, our management believes that the adjustment of these items supplementsupplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Asset impairment charges: We have excluded the impact of asset impairments as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Amortization expense: We have excluded the impact of amortization of finite-lived intangible assets, as such non-cash amounts are inconsistent in amount and frequency and are significantly impacted by the timing and/or size of acquisitions. Our management believes that the adjustment of these items supplementsupplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance. Although we exclude amortization of intangible assets from our non-GAAP expenses, our management believes that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in the amortization of additional intangible assets.
Interest•Gain on sale and other (income) expense:early license termination: We have excluded foreign currency impacts associated with acquisition-related forward contractsthe impact of gain on sale and debt financing related forward contractsearly license termination as the naturesuch amounts are inconsistent in amount and amount of such charges are not consistentfrequency and are significantly impacted by the timing and size of the sale and early license termination.
•Costs related to market exit: We have excluded the impact of direct incremental costs related to our decision to wind down our business operations in Russia. We believe that these direct and incremental costs are inconsistent and infrequent in nature. Consequently, our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Gains on sale of real estate: We have excluded the impact of gains on sale of real estate as such transactions.amounts are inconsistent in amount and frequency and are significantly impacted by the size of the sale. Our management believes
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that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Stock-based compensation: Although stock-based compensation is a key incentive offered to our employees, we have excluded the effect of these expenses from the calculation of adjusted operating income and adjusted EBITDA. This is due to their primarily non-cash nature; in addition, the amount and timing of these expenses may be highly variable and unpredictable, which may negatively affect comparability between periods.
•Depreciation and Adjusted depreciation: Our adjusted operating income excludes the impact of accelerated depreciation for certain restructuring projects that affect the expected useful lives of Property, Plant and Equipment, as such charges vary significantly based on the size and timing of the programs. Further, we have excluded adjusted depreciation, which represents depreciation expense net of accelerated depreciation charges, from our adjusted EBITDA. Our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Other (income) expense: We have excluded the impact of pension curtailment (gains) and losses and pension settlements as such events are triggered by our restructuring and other business realignment activities and the amount of such charges vary significantly based on the size and timing of the programs. Further, we have excluded the change in fair value of the investment in Wella, as well as expenses related to potential or actual sales transactions reducing equity investments, as our management believes these unrealized (gains) and losses do not reflect our underlying ongoing business, and the adjustment of such impact helps investors and others compare and analyze performance from period to period. We have excluded the gain on the exchange of Series B Preferred Stock. Such transactions do not reflect our operating results and we have excluded the impact as our management believes that the adjustment of these items supplements the GAAP information with a measure that can be used to assess the sustainability of our operating performance.
•Noncontrolling interests:interest: This adjustment represents the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interests based on the relevant non-controllingnoncontrolling interest percentage.
•Tax: This adjustment represents the impact of the tax effect of the pretax items excluded from Adjusted net income. The tax impact of the non-GAAP adjustments areis based on the tax rates related to the jurisdiction in which the adjusted items are received or incurred. Additionally, adjustments are made for the tax impact of any intra-entity transfer of assets and liabilities.
While acquiring brands and licenses comprises a part of our overall growth strategy, along with targeting organic growth opportunities, we•Deemed Preferred Stock Dividends: We have excluded acquisition-related costs and acquisition accounting impacts in connection with business combinations because these costs are uniquepreferred stock deemed dividends related to each transactionthe First Exchange and the amountSecond Exchange (as disclosed and frequencydefined in Note 27—Related Party Transactions in our Annual Report on Form 10-K for fiscal 2023) from our calculation of adjusted net income attributable to Coty Inc. These deemed dividends are nonmonetary in nature, the transactions were entered into to simplify our capital structure and do not consistentreflect our underlying ongoing business. Management believes that this adjustment helps investors and are significantly impacted by the timingothers compare and size ofanalyze our acquisitions. Our management assesses the success of an acquisition as a component of performance using a variety of indicators depending on the size and nature of the acquisition, including:
the scale of the combined company by evaluating consolidated and segment financial metrics;
the expansion of product offerings by evaluating segment, brand, and geographic performance and the respective strength of the brands;
the evaluation of market share expansion in categories and geographies;
the earnings per share accretion and substantial incremental free cash flow generation providing financial flexibility for us; and
the comparison of actual and projected results, including achievement of projected synergies, post integration; provided that timing for any such comparison will depend on the size and complexity of the acquisition.from period to period.
Constant Currency
We operate on a global basis, with the majority of our net revenues generated outside of the U.S. Accordingly, fluctuations in foreign currency exchange rates can affect our results of operations. Therefore, to supplement financial results presented in accordance with GAAP, certain financial information is presented in “constant currency”, excluding the impact of foreign currency exchange translations to provide a framework for assessing how our underlying businesses performed excluding the impact of foreign currency exchange translations. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency information by translating current and prior-period results for entities reporting in currencies other than U.S. dollars into U.S. dollars using prior year foreign currency exchange rates. The constant currency calculations do not adjust for the impact of revaluing specific transactions denominated in a currency that is different to the functional currency of that entity when exchange rates fluctuate. The constant currency information we present may not be comparable to similarly titled measures reported by other companies.
Basis of Presentation of Acquisitions, Divestitures, Terminations and Divestitures
We closed the following acquisitions during the periods presented in this Management’s Discussion and Analysis of Financial Condition and Results of Operations: (i) the P&G Beauty Business during the second quarter of fiscal 2017, (ii) ghd during the second quarter of fiscal 2017, (iii) Younique during the third quarter of fiscal 2017 and (iv) the global license rights and other assets related to the Burberry Beauty Business during the second quarter of fiscal 2018. In addition, we divested one of our fragrance brands in the third quarter of fiscal 2017, which had an inconsequential impact on our fiscal 2017 results.

Market Exit from Russia
During the period when we complete an acquisition, divestiture, early license termination, or divestiture,market exit, the financial results of the current year period are not comparable to the financial results presented in the prior year period. When explaining such changes from period to period and to maintain a consistent basis between periods, we exclude the financial contribution ofof: (i) the respectiveacquired brands or businesses that are acquired or divestedin the current year period until we have twelve months of comparable financial results. When used herein,results, and (ii) the term “Acquisitions” refers to the financial contributions during the period that are not comparable todivested brands or businesses or early terminated brands or markets exited in the prior year period, as a resultto maintain comparable financial results with the current fiscal year period. Acquisitions, divestitures, early license terminations, and market exits that would impact the comparability of financial results between periods presented in the acquisitions.Management’s Discussion and Analysis of Financial Condition and Results of Operations are shown in the table below.

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THREE MONTHS ENDED DECEMBER 31, 20172023 AS COMPARED TO THREE MONTHS ENDED DECEMBER 31, 20162022
NET REVENUES
In the three months ended December 31, 2017,2023, net revenues increased 15%13%, or $340.9,$204.0, to $2,637.6$1,727.6 from $2,296.7$1,523.6 in the three months ended December 31, 2016. The incremental2022. Excluding net revenuesrevenue from the acquisitions of Younique, ghd, and the Burberry Beauty Business comprised 8%second quarter of the total net revenues. Excluding the incremental net revenuesprior period from the Acquisitions, totalRussia, net revenues increased 7%,14% or $163.6,$209.7 to $2,444.3$1,727.6 from $1,517.9 in the three months ended December 31, 2017 from $2,280.7 in the three months ended December 31, 2016, reflecting a positive foreign currency exchange translation impact of 4%, an increase in unit volume of 4% and a negative price and mix impact of 1%.
Net Revenues by Segment
 Three Months Ended
December 31,		  
(in millions)2017 2016 Change %
NET REVENUES      
Luxury$951.2
  $835.0
 14%
Consumer Beauty1,138.6
  1,001.7
 14%
Professional Beauty547.8
  460.0
 19%
Total$2,637.6
  $2,296.7
 15%
Luxury
In the three months ended December 31, 2017, net revenues from the Luxury segment increased 14%, or $116.2, to $951.2 from $835.0 in the three months ended December 31, 2016. The acquisition of the Burberry Beauty Business comprised 1% of the total net revenues for the segment. Excluding the acquisition of the Burberry Beauty Business, net revenues from the Luxury segment increased 13%, or $108.0, to $943.0 in the three months ended December 31, 2017, from $835.0 in the three months ended December 31, 20162022, reflecting a positive price and mix impact of 6%, an increase in unit volume of 2%10% and a positive foreign currency exchange translation impact of 5%3%, and an increase in unit volume of 1%. The overall increase primarily reflects greaterin net revenues from fragrances. This increase was primarily driven by launchesreflects growth of the Tiffany & Coprestige fragrances, specifically Hugo Boss, Burberry, Calvin Klein, Chloe, Gucci and Davidoff. and Gucci Bloom fragrances.
Net revenues increased in our Consumer Beauty segment due to positive performance in the color cosmetics category, mass fragrance category, and the skin and body care category in Brazil.
The overall increase in net revenues reflects the continued success of our pricing and revenue management strategies, including the implementation of targeted price increases across our product portfolio. Volume growth across our fragrance portfolio, as well as in skin and body care products in Brazil, helped partially offset volume declines from certain brands in China due to macroeconomic conditions.
Geographically, except for China, net revenues in all major markets grew, led by the United States. Additionally, there was an increase in travel retail sales in all regions.
Digital and e-commerce sales growth also contributed to the increase in net revenues.
Net Revenues by Segment
Three Months Ended
December 31,
(in millions)20232022Change %
NET REVENUES
Prestige$1,122.6 $957.7 17 %
Consumer Beauty605.0 565.9 7 %
Total$1,727.6 $1,523.6 13 %
Prestige
In the three months ended December 31, 2017,2023, net revenues from the Prestige segment increased 17%, or $164.9 to $1,122.6 compared to $957.7 in the three months ended December 31, 2022. Excluding net revenue from the second quarter of the prior period from Russia, net revenues from the Prestige segment increased 17% or $166.9 to $1,122.6 from $955.7 in the three months ended December 31, 2022, reflecting a positive price and mix impact of 9%, an increase in unit volume of 6%, and a positive foreign currency exchange translation impact of 2%. The increase in net revenues primarily reflects:
(i)the continued success and growth of prestige fragrances, specifically Hugo Boss Boss Bottled and Boss the Scent, Burberry Goddess, Calvin Klein One and Euphoria, Chloe Signature, Gucci Guilty, and Davidoff Cool Water;
(ii)an increase in net revenues in key markets, primarily Travel Retail, Germany, the United States, and Australia, due to the significant improvement of fill rates from the prior period; and
(iii)an increase in net revenues due to positive pricing and mix impact as a result of global price increases and in line with the overall premiumization strategy.
These increases in net revenue were partially offset by:
(i)lower net revenues for the Lacoste brand in the current period, which was primarily due to the early license termination resulting in a wind down of sales through the end of the second quarter.
Consumer Beauty
In the three months ended December 31, 2023, net revenues from the Consumer Beauty segment increased 14%7%, or $136.9,$39.1, to $1,138.6$605.0 from $1,001.7$565.9 in the three months ended December 31, 2016. The acquisition of Younique comprised 11%2022. Excluding net revenue from the second quarter of the total net revenues for the segment. Excluding the net revenuesprior period from the acquisition of Younique,Russia, net revenues from the Consumer Beauty segment increased 3%,8% or $25.9,$42.8 to $1,027.6$605.0 from $562.2 in the three months ended December 31, 2017, from $1,001.7 in the three months ended December 31, 20162022, reflecting an increase in unit volumea positive price and mix impact of 5%, and a positive foreign currency exchange translation impact of 4%, and a negative price and mix impact of 6%3%. The increase in net revenues primarily reflects reflects:
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(i) higheran increase in net revenues from Max Factorcolor cosmetics brands, specifically Rimmel Manhattan, which was due to continued brand innovation, such as Lasting Finish foundation and Thrill Seeker mascara;
(ii)an increase in net revenues from the retail product linemass fragrance category primarily due to the continued success from the re-launch of Wella hair products, in part reflecting a positive impact David Beckham Instinct in the current year period from lower net revenuesfiscal year;
(iii)an increase in the prior year as a result of the timing of shipments by P&G prior to the closing of the acquisition of the P&G Beauty Business, (ii) higher net revenues from Guess, the skin and body care brands in partBrazil due to a renewed focus on brand buildingstrong category momentum and positive impact of pricing; and
(iv)an increase in the ALMEA region in the current year, and (iii) higher net revenues from deodorants in Brazil as a result of innovation and a successful relaunch of in-store marketing. These increases were partially offset by lower net revenues from CoverGirl as a result of increased markdowns and trade spending related to the brand relaunch in the second quarter of fiscal 2018 and Sally Hansendue to lower launch activity and declines in existingprice increases across the Consumer Beauty product lines.portfolio.

Professional BeautyCOST OF SALES
In the three months ended December 31, 2017, net revenues from the Professional Beauty segment2023, cost of sales increased 19%15%, or $87.8,$78.2, to $547.8$603.5 from $460.0$525.3 in the three months ended December 31, 2016. The incremental net revenues from the acquisition of ghd comprised 12% of the total net revenues for the segment. Excluding the incremental net revenues from the acquisition of ghd, net revenues from the Professional Beauty segment increased 7%, or $29.7, to $473.7 in the three months ended December 31, 2017, from $444.0 in the three months ended December 31, 2016, reflecting a positive foreign currency exchange translation impact of 5%, a positive price and mix impact of 3% and a decrease in unit volume of 1%. The increase in this segment primarily reflects higher net revenues from OPI driven by the innovative technology and launch of the OPI ProHealth GelColor System as well as an increase in the professional product line of Wella hair products due to the launch of Wellaplex. These increases were partially offset by declines in smaller hair care brands.
Net Revenues by Geographic Regions
In addition to our reporting segments, net revenues by geographic regions are as follows. We define our geographic regions as North America (comprising Canada and the United States), Europe and ALMEA (comprising Asia, Latin America, the Middle East, Africa and Australia):
 Three Months Ended
December 31,		  
(in millions)2017 2016 Change %
NET REVENUES      
North America$743.5
  $700.5
 6%
Europe1,289.1
  1,134.1
 14%
ALMEA605.0
  462.1
 31%
Total$2,637.6
  $2,296.7
 15%
North America
In the three months ended December 31, 2017, net revenues in North America increased 6%, or $43.0, to $743.5 from $700.5 in the three months ended December 31, 2016. Excluding the incremental net revenues from the Acquisitions, net revenues in North America decreased 7%, or $51.1, to $649.4 in the three months ended December 31, 2017 from $700.5 in the three months ended December 31, 2016, primarily due to lower net revenues in the U.S. from color cosmetics and retail hair products. The decline in color cosmetics primarily reflects lower net revenues from CoverGirl and Sally Hansen. CoverGirl net revenues were negatively impacted by increased markdowns and trade spending related to the brand relaunch in the second quarter of fiscal 2018. Sally Hansen net revenues declined due to lower launch activity and declines in existing product lines. Declines in net revenues from retail hair products were primarily driven by declines in Clairol due to lower sales during the holiday season and an increase in sales incentives. Decreases in the region were partially offset by the launches of the Tiffany & Co. and Gucci Bloom fragrance launches, which both showed strong performance in the U.S. There was no impact from foreign currency exchange translations in North America during the period.
Europe
In the three months ended December 31, 2017, net revenues in Europe increased 14%, or $155.0, to $1,289.1 from $1,134.1 in the three months ended December 31, 2016. Excluding the incremental net revenues from the Acquisitions, net revenues in Europe increased 8%, or $94.3, to $1,212.4 in the three months ended December 31, 2017 from $1,118.1 in the three months ended December 31, 2016, primarily due to: (i) incremental revenues from fragrances driven by the launches of the Tiffany & Co. and Gucci Bloom fragrances across the region resulting in higher net revenues in Western Europe including the U.K., Spain, and Germany, (ii) higher net revenues from mass fragrances across the region and (iii) higher net revenues from retail hair products driven by Wella retail hair products across the region. Excluding the impact of the Acquisitions and the positive foreign currency exchange translations impact of 8%, net revenues in Europe remained consistent with prior year.
ALMEA
In the three months ended December 31, 2017, net revenues in ALMEA increased 31%, or $142.9, to $605.0 from $462.1 in the three months ended December 31, 2016. Excluding the incremental net revenues from the Acquisitions, net revenues in ALMEA increased 26%, or $120.4, to $582.5 in the three months ended December 31, 2017 from $462.1 in the three months ended December 31, 2016, primarily due to primarily due to: (i) incremental net revenues from fragrances driven by the launches of the Tiffany & Co. and Gucci Bloom fragrances across the region resulting in higher net revenues in China and our travel retail and export businesses, (ii) higher net revenues from retail hair products driven by Wella and Clairol hair products in Brazil and (iii) higher revenues from color cosmetics driven by Max Factor in China. Excluding the impact of the Acquisitions and the positive foreign currency exchange translations impact of 2%, net revenues in ALMEA increased 24%.

COST OF SALES
In the three months ended December 31, 2017, cost of sales increased 15%, or $132.7, to $1,025.0 from $892.3 in the three months ended December 31, 2016.2022. Cost of sales as a percentage of net revenues remained consistent at 38.9%increased to 34.9% in the three months ended December 31, 2017 compared to three months ended December 31, 2016. Cost of sales as percentage of net revenues2023 from 34.5% in the three months ended December 31, 2017 was positively impacted by2022, resulting in a gross margin decrease of approximately 40 basis points, primarily reflecting:
(i)approximately 80 basis points related to an increase in designer license fees primarily due to favorable royalty activity in the acquisition of Younique, a higher margin businessprior period, which did not reoccur in fiscal 2017the current period; and continued contribution from our supply chain savings program. Offsetting these positive impacts were: (i) the negative impact of increased markdowns
(ii)approximately 80 basis points related to an increase in excess and trade spendingobsolescence costs primarily associated with the CoverGirl brand relaunchPrestige product portfolio.
These decreases were partially offset by:
(i)approximately 70 basis points related to a decrease in the second quartermanufacturing and material costs as a percentage of fiscal 2018, net revenues; and

(ii) theapproximately 40 basis points related to decreased freight costs.

The above reflects a moderate impact offrom inflation offset by a shift in sales volumes to lower margin Consumer Beauty products, and (iii) thepositive impact of a shift in Consumer Beauty regional sales volumes to ALMEA, a region with lower margin sales compared to North America and Europe.from pricing.



SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
In the three months ended December 31, 2017,2023, selling, general and administrative expenses increased 13%10%, or $149.7,$79.1, to $1,319.9$833.4 from $1,170.2$754.3 in the three months ended December 31, 2016.2022. Selling, general and administrative expenses as a percentage of net revenues decreased to 50.0%48.2% in the three months ended December 31, 20172023 from 51.0%49.5% in the three months ended December 31, 2016,2022, or approximately 100130 basis points. This decrease primarily reflects approximately 300reflects:
(i)100 basis points due to a decrease in stock-based compensation cost primarily related to lowera reduction in expense recognized in connection with awards granted to the CEO;
(ii)100 basis points due to a decrease in advertising and consumer promotion spending and approximately 20 basis points relatedpromotional costs primarily due to lower bad debt expense partially offset by approximately 140 basis points related to higher administrative costs and approximately 90 basis points related to negative foreign currency exchange translations impact. The lower advertising and consumer promotion spendinga decrease in working media investment as a percentage of net revenues is primarilyrevenues;
(iii)40 basis points due to favorable transactional impact from our exposure to foreign currency as a percentage of net revenues; and
(iv)40 basis points due to a shiftdecrease in timinglogistics costs as a percentage of investment scheduled fornet revenues.
These decreases were partially offset by the second halffollowing increases:
(i)70 basis points due to an increase in bad debt expense primarily related to a favorable activity in the prior period that did not reoccur in the current period;
(ii)50 basis points due to an accrual reversal associated with the resolution of fiscal 2018 for product relaunches of certain brands, including CoverGirla contingency in the prior period that did not reoccur in the current period; and the Clairol retail hair product line. The higher
(iii)30 basis points due to an increase in administrative costs as a percentage of net revenues are primarily due to incremental consulting costs and increased depreciationhigher compensation expense, partially offset by lower compensation-related expenses.depreciation expense related to fully depreciated IT equipment.

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OPERATING INCOME
In the three months ended December 31, 2017,2023, operating income increased by greater than 100%, or $187.1,was $236.7 compared to $174.4 from $(12.7)income of $199.3 in the three months ended December 31, 2016.2022. Operating margin, or operating income as a percentage of net revenues, increased to 6.6%13.7% in the three months ended December 31, 2023 as compared to 13.1% in the three months ended December 31, 2022. The increase in operating margin is primarily driven by a decrease in stock compensation expense and a decrease in advertising and consumer promotional costs as a percentage of revenues , partially offset by an increase in cost of goods sold as a percentage of net revenues and an increase in restructuring costs.
Operating Income (Loss) by Segment
Three Months Ended
December 31,
(in millions)20232022Change %
Operating income (loss)
Prestige$200.6 $164.4 22 %
Consumer Beauty60.4 49.4 22 %
Corporate(24.3)(14.5)(68)%
Total$236.7 $199.3 19 %
Prestige
In the three months ended December 31, 2023, operating income for Prestige was $200.6 compared to income of $164.4 in the three months ended December 31, 2022. Operating margin increased to 17.9% of net revenues in the three months ended December 31, 20172023 as compared to (0.6%)17.2% in the three months ended December 31, 2016. This margin increase of approximately 720 basis points reflects approximately 560 basis points related to lower acquisition related costs, 100 basis points related to lower selling, general2022, driven by a decrease in advertising and administrative expenses, and approximately 70 basis points related to lower amortizationconsumer promotional expense partially offset by approximately 10 basis points related to higher restructuring costs.
Operating Income by Segment
 Three Months Ended
December 31,		 Change %
(in millions)2017 2016 2017/2016
OPERATING INCOME (LOSS)     
Luxury$85.1
 $66.6
 28%
Consumer Beauty99.3
 62.9
 58%
Professional Beauty73.5
 83.3
 (12%)
Corporate(83.5) (225.5) 63%
Total174.4
 (12.7) >100%

Luxury
In the three months ended December 31, 2017, operating income for Luxury increased 28%, or $18.5, to $85.1 from $66.6 in the three months ended December 31, 2016. Operating margin increased to 8.9%as a percentage of net revenues, a decrease in the three months ended December 31, 2017 as compared to 8.0% in the three months ended December 31, 2016, primarily reflecting lower cost of salesamortization expense as a percentage of net revenues, and lower selling, general and administrative expensesa decrease in fixed costs as a percentage of net revenues, partially offset by higher amortization expensean increase in cost of goods sold as a percentage of net revenues.
Consumer Beauty
In the three months ended December 31, 2017,2023, operating income for Consumer Beauty increased 58%, or $36.4,was $60.4 compared to $99.3 from $62.9income of $49.4 in the three months ended December 31, 2016.2022. Operating margin increased to 8.7%10.0% of net revenues in the three months ended December 31, 20172023 as compared to 6.3%8.7% in the three months ended December 31, 2016, primarily reflecting lower selling, general2022, driven by a decrease in advertising and administrative expenses as a percentage of net revenues and lower amortization expenseconsumer promotional costs as a percentage of net revenues, partially offset by higher costan increase in costs of sales as a percentage of net revenues.
Professional Beauty
In the three months ended December 31, 2017, operating income for Professional Beauty decreased by 12%, or $9.8, to $73.5 from $83.3 in the three months ended December 31, 2016. Operating margin decreased to 13.4% of net revenues in the three months ended December 31, 2017 as compared to 18.1% in the three months ended December 31, 2016, primarily reflecting higher cost of salesgoods sold as a percentage of net revenues and higher selling, general and administrative expensesan increase in fixed costs as a percentage of net revenues.
Corporate
Corporate primarily includes corporateincome and expenses not directly relating to our operating activities. These items are included in Corporate since we consider them to be Corporate responsibilities, and these items are not used by our management to measure the underlying performance of the segments.
In the three months ended December 31, 2017,2023, the operating loss for Corporate was $(83.5)$24.3 compared to $(225.5)a loss of $14.5 in the three months ended December 31, 2016,2022, as described under “Adjusted Operating Income for Coty Inc.” below. The increase in the operating loss for Corporate was primarily driven by a gain recognized related to our market exit from Russia in the comparative period and higher restructuring costs, partially offset by a decrease in stock compensation expense.
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Adjusted Operating Income by Segment
We believe that Adjusted Operating Incomeadjusted operating income by segment further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported operating income to Adjusted Operating Incomeadjusted operating income is presented below, by segment:
Three Months Ended December 31, 2023
(in millions)Reported
(GAAP)
Adjustments (a)
Adjusted
(Non-GAAP)
Operating income
Prestige$200.6 $38.4 $239.0 
Consumer Beauty60.4 9.9 70.3 
Corporate(24.3)24.3 — 
Total$236.7 $72.6 $309.3 
Three Months Ended December 31, 2022
(in millions)Reported
(GAAP)
Adjustments (a)
Adjusted
(Non-GAAP)
Operating income
Prestige$164.4 $37.3 $201.7 
Consumer Beauty49.4 10.3 59.7 
Corporate(14.5)14.5 — 
Total$199.3 $62.1 $261.4 
 Three Months Ended December 31, 2017
(in millions)Reported
(GAAP)		 
Adjustments (a)
 Adjusted
(Non-GAAP)
OPERATING INCOME (LOSS)     
Luxury$85.1
 $(40.3) $125.4
Consumer Beauty99.3
 (32.6) 131.9
Professional Beauty73.5
 (16.7) 90.2
Corporate(83.5) (83.5) —
Total174.4
 (173.1) 347.5
 Three Months Ended December 31, 2016
(in millions)Reported
(GAAP)		 
Adjustments (a)
 Adjusted
(Non-GAAP)
OPERATING INCOME (LOSS)     
Luxury$66.6
 $(30.9) $97.5
Consumer Beauty62.9
 (47.6) 110.5
Professional Beauty83.3
 (16.7) 100.0
Corporate(225.5) (225.5) —
Total(12.7) (320.7) 308.0

(a)
(a)See a reconciliation of reported operating income to adjusted operating income and a description of the adjustments under “Adjusted Operating Income for Coty Inc.” below. All adjustments are reflected in Corporate, except for Amortization expense which is reflected in the Luxury, Consumer Beauty and Professional Beauty divisions.
Adjusted Operating Income for Coty Inc.” below. All adjustments are reflected in Corporate, except for amortization and asset impairment charges on goodwill, indefinite-lived intangible assets, and finite-lived intangible assets, which are reflected in the Prestige and Consumer Beauty segments.
Adjusted Operating Income and Adjusted EBITDA for Coty Inc.
We believe that Adjusted Operating Incomeadjusted operating income further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” Reconciliation of reported operating income (loss) to Adjusted Operating Incomeadjusted operating income is presented below:
 Three Months Ended
December 31,		 Change %
(in millions)2017 2016 2017/2016
Reported Operating Income (Loss)$174.4
 $(12.7) >100%
% of Net revenues6.6% (0.6%)  
Amortization expense89.6
 95.2
 (6%)
Restructuring and other business realignment costs75.6
 22.6
 >100%
Costs related to acquisition activities7.9
 190.1
 (96%)
Pension settlement charges—
 12.8
 (100%)
Total adjustments to reported Operating income173.1
 320.7
 (46%)
Adjusted operating income$347.5
 $308.0
 13%
% of Net revenues13.2% 13.4 %  
Three Months Ended
December 31,
(in millions)20232022Change %
Reported operating income$236.7 $199.3 19 %
% of net revenues13.7 %13.1 %
Amortization expense48.3 47.6 1 %
Restructuring and other business realignment costs4.0 (2.9)>100%
Stock-based compensation20.2 34.2 (41)%
Loss on sale of real estate0.1 — N/A
Early license termination and market exit costs— (16.8)100 %
Total adjustments to reported operating income$72.6 $62.1 17 %
Adjusted operating income$309.3 $261.4 18 %
% of net revenues17.9 %17.2 %
Adjusted depreciation57.1 56.2 2 %
Adjusted EBITDA$366.4 $317.6 15 %
% of net revenues21.2 %20.8 %
In the three months ended December 31, 2017,2023, adjusted operating income increased 13%, or $39.5,$47.9 to $347.5$309.3 from $308.0$261.4 in the three months ended December 31, 2016.2022. Adjusted operating margin decreasedincreased to 13.2%17.9% of net revenues in the three months ended December 31, 20172023 from 13.4%17.2% in the three months ended December 31, 2016,2022, primarily driven by approximately 200.0 basis points related to higher adjusted costa decrease in
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advertising and consumer promotional costs as a percentage of net revenues, partially offset by approximately 180.0 basis points relatedan increase in cost of goods sold as a percentage of net revenues. In the three months ended December 31, 2023, adjusted EBITDA increased $48.8 to lower adjusted selling, general and administrative expenses. Excluding$366.4 from $317.6 in the impactthree months ended December 31, 2022. Adjusted EBITDA margin increased to 21.2% of foreign currency exchange translations, adjusted operating income increased 9%.net revenues in the three months ended December 31, 2023 from 20.8% in the three months ended December 31, 2022.
Amortization Expense
In the three months ended December 31, 2017,2023, amortization expense decreasedincreased to $89.6$48.3 from $95.2$47.6 in the three months ended December 31, 2016, primarily as a result of the Acquisitions.2022. In the three months ended December 31, 2017,2023, amortization expense of $40.3, $32.6,$38.4 and $16.7$9.9 was reported in the Luxury,Prestige and Consumer Beauty and Professional Beauty segments, respectively. In the three months ended December 31, 2016,2022, amortization expense of $30.9, $47.6,$37.3 and $16.7$10.3 was reported in the Luxury,Prestige and Consumer Beauty, and Professional Beauty segments, respectively.
Restructuring and Other Business Realignment Costs
We incurred $520.0 of cash costs life-to-date related to our previously announced and substantially completed Transformation Plan as of December 31, 2023, which have been recorded in Corporate. In addition, we continue to analyze our cost structure and evaluate opportunities to streamline operations through a range of other cost reduction activities ("Other Restructuring Actions").
In the three months ended December 31, 2017,2023, we incurred restructuring and other business structure realignment costs of $75.6,$4.0, as follows:
•We incurred restructuring costs of $21.7$5.7 primarily related to the Global Integration Activities,Other Restructuring Actions, included in the Condensed Consolidated Statements of Operations.Operations; and
•We incurred a credit in business structure realignment costs of $53.9 primarily related to our Global Integration Activities and certain other programs. This amount includes $43.7$(1.7), which is reported in Selling,selling, general and administrative expenses and $10.2 reported in Cost of sales in the Condensed Consolidated Statements of Operations, primarily due to costs incurred for the realignment of the business due to the P&G Beauty Business.expenses.
In the three months ended December 31, 2016,2022, we incurred a credit in restructuring and other business structure realignment costs of $22.6,$(2.9) as follows:
•We incurred a credit in restructuring costs of $15.8$(2.9) primarily related to the Global Integration Activities, Organizational Redesign and Acquisition Integration Program costs,Transformation Plan due to the change in estimate, included in the Condensed Consolidated Statements of Operations.Operations; and
•We incurred no business structure realignment costs of $6.8 primarily related to our Organizational Redesign and certain other programs. Of this amount, $3.2 is included in Cost of goods sold, $2.2 is included in Selling, general and administrative expenses and $1.4 is included in Other expense in the Condensed Consolidated Statements of Operations.

costs.
In all reported periods, all restructuring and other business realignment costs were reported in Corporate.
Costs Related to Acquisition ActivitiesStock-Based Compensation
In the three months ended December 31, 2017, we incurred $7.9 of costs2023, stock-based compensation was $20.2 as compared with $34.2 in the three months ended December 31, 2022. The decrease in stock-based compensation is primarily related to acquisition activities. Wea reduction in expense recognized Acquisition-related costs of $7.0, included in the Condensed Consolidated Statements of Operations. These costs may include finder’s fees, legal, accounting, valuation, and other professional or consulting fees, and other internal costs which may include compensation related expenses for dedicated internal resources. We also incurred approximately $0.9 in Costs of sales primarily reflecting revaluation of acquired inventory in connection with awards granted to the acquisition of the Burberry Beauty Business in the Condensed Consolidated Statements of Operations.CEO.
In the three months ended December 31, 2016, we incurred $190.1 of costs related to acquisition activities. We recognized Acquisition-related costs of $135.9, included in the Condensed Consolidated Statements of Operations. These costs primarily consist of legal2023 and consulting fees in connection with the acquisition of the P&G Beauty Business. We also incurred $36.2 and $16.1 in Costs of sales primarily reflecting revaluation of acquired inventory in connection with the acquisition of the P&G Beauty Business and ghd, respectively, and $1.9 in Selling, general and administrative expense primarily related to P&G Beauty Business real estate in the Condensed Consolidated Statements of Operations three months ended December 31, 2016.
In all reported periods,2022, all costs related to acquisition activitiesstock-based compensation were reported in Corporate.
Pension settlement chargesEarly License Termination and Market Exit Costs
In the three months ended December 31, 2017, there were2023, we incurred no pension settlement charges.costs related to the early termination of a license and market exit activity.
In the three months ended December 31, 2016,2022, we incurredrecognized a chargegain of $12.8 in connection with the settlement of obligations$(16.8) related to the U.S. Del Laboratories, Inc. pension plan. The settlement of the plan was effectuated through the purchase of annuity contracts from a third-party insurance provider, effectively transferring the U.S. Del Laboratories, Inc. pension plan obligationour decision to the insurance provider, during the three months ended December 31, 2016. The settlement charge of $12.8,wind down our business in the three months ended December 31, 2016, is as a result of accelerating the recognition of losses previously deferred in other comprehensive income (loss).Russia.
INTEREST EXPENSE, NETAdjusted Depreciation Expense
In the three months ended December 31, 2017, Interest2023, adjusted depreciation expense of $27.2 and $29.9 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended December 31, 2022, adjusted depreciation expense of $26.8 and $29.4 was reported in the Prestige and Consumer Beauty segments, respectively.
INTEREST EXPENSE, NET
In the three months ended December 31, 2023, net interest expense was $60.3$60.1 as compared with $57.9$61.0 in the three months ended December 31, 2016. This increase is primarily due2022, remaining relatively flat compared to higher average debt balances outstanding under the Coty Credit Agreement and Galleria Credit Agreement, duringprior period.
OTHER INCOME
In the three months ended December 31, 2017.2023, other income was $80.8 as compared with other income of $141.9 in the three months ended December 31, 2022.
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Other income of $80.8 in the three months ended December 31, 2023 was comprised of net gains on forward repurchase contracts of $72.1, equity investment related impacts of $12.1, gains associated with earn-out provisions related to our sale of Wella of $1.9, partially offset by miscellaneous operating expense of $5.3.
Other income of $141.9 in the three months ended December 31, 2022 was comprised of equity investment related impacts of $73.9, net gains on forward repurchase contracts of $59.7, gains associated with earn-out provisions related to our sale of Wella of $12.5, partially offset by miscellaneous operating expense of $4.2.
The decrease in Other income is primarily due to a less favorable fair value adjustment related to our equity investment in the Wella Company compared to the prior period.
INCOME TAXES
The effective income tax rate for the three months ended December 31, 20172023 and 20162022 was (7.1%)27.7% and 174.4%13.8%, respectively. The decreasechange in the effective tax rate as compared to the same period in fiscal 2017 is primarily the result of (i) the resolution of foreign uncertain tax positions of approximately $43.0 ($41.8 in tax and $1.2 in interest) infor the three months ended December 31, 2017 and (ii) the release of a valuation allowance of $111.2 in the U.S. in2023, as compared with the three months ended December 31, 2016 as a result2022, is primarily due to the foreign exchange loss recognized on repatriation of funds in the P&G Beauty Business acquisition.prior year that were previously taxed.
The effective income tax rates vary from the U.S. federal statutory rate of approximately 28%21% due to the effect of (i) jurisdictions with different statutory rates, including impacts of rate changes, (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. As of January 1, 2018, the U.S. federal statutory rate decreased from 35% to 21%. As the Company has a June 30 fiscal year-end, the lower rate will be phased in, resulting in a blended rate of approximately 28% for the fiscal year ending June 30, 2018 (see Note 2—Summary of Significant Accounting Policies—Tax Information for more information on the U.S. tax law change). Our effective tax rate could fluctuate significantly and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates.

Reconciliation of Reported Income (Loss) Before Income Taxes to Adjusted Income Before Income Taxes and Effective Tax Rates:
 Three Months Ended
December 31, 2017		 Three Months Ended
December 31, 2016
(in millions)Income Before Income Taxes (Benefit) Provision for Income Taxes Effective Tax Rate (Loss) Income Before Income Taxes (Benefit) Provision for Income Taxes Effective Tax Rate
Reported Income (loss) before income taxes$110.7
 $(7.9) (7.1%) $(70.0) $(122.1) 174.4%
Adjustments to reported Operating income (a) (b)
173.1
 37.2
   320.7
 144.2
  
Adjusted Income before income taxes$283.8
 $29.3
 10.3% $250.7
 $22.1
 8.8%
Three Months Ended
December 31, 2023		Three Months Ended
December 31, 2022
(in millions) Income Before Income TaxesProvision for Income TaxesEffective Tax Rate Income Before Income TaxesProvision for Income TaxesEffective Tax Rate
Reported income before income taxes$257.4 $71.4 27.7 %$280.2 $38.8 13.8 %
Adjustments to reported operating income (a)
72.6 62.1 
Change in fair value of investment in Wella Business (c)
(13.0)(75.0)
Other adjustments (d)
0.2 0.2 
Total Adjustments (b)
59.8 6.6 (12.7)28.7 
Adjusted income before income taxes$317.2 $78.0 24.6 %$267.5 $67.5 25.2 %
(a)
(a)See a description of adjustments under “Adjusted Operating Income for Continuing Operations.”
(b)The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability.
(c)The amount represents the realized and unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
(d)For the three months ended December 31, 2023 and 2022, this primarily represents loss from our equity investment in KKW.
See a description of adjustments under “Adjusted Operating Income for Coty Inc.”
(b)
The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax 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 10.3%24.6% for the three months ended December 31, 20172023 compared to 8.8%25.2% for the three months ended December 31, 2016.2022. The differences were primarily due to the resolutionjurisdictional mix of foreign uncertain tax positionsincome.
NET INCOME (LOSS) ATTRIBUTABLE TO COTY INC.
Net income attributable to Coty Inc. was $180.9 in the three months ended December 31, 2017 and the release2023 as compared to net income of a valuation allowance of $111.2 in the U.S.$238.3 in the three months ended December 31, 2016 as a result of the P&G Beauty Business acquisition.
NET INCOME ATTRIBUTABLE TO COTY INC.
Net Income attributable to Coty Inc. was $109.22022. The decrease in the three months ended December 31, 2017 as compared to $46.8income was primarily driven by a less favorable fair value adjustment for our investment in the three months ended December 31, 2016. This increase primarily reflects higher operating income in three months ended December 31, 2017 partially offset by a higher tax benefitWella Company recorded in the three months ended December 31, 2016.current period.
We believe that Adjusted Net Income Attributableadjusted net income attributable to Coty Inc. provides an enhanced understanding of our performance. See “Overview—Non-GAAP Financial Measures.”

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Three Months Ended
December 31,
(in millions)20232022Change %
Net income from Coty Inc. net of noncontrolling interests$180.9 $238.3 (24)%
Convertible Series B Preferred Stock dividends (a)
(3.3)(3.3)— %
Reported net (loss) income attributable to Coty Inc.$177.6 $235.0 (24)%
% of net revenues10.3 %15.4 %
Adjustments to reported operating income (b)
72.6 62.1 17 %
Change in fair value of investment in Wella Company (c)
(13.0)(75.0)83 %
Adjustment to other expense (d)
0.2 0.2 — %
Adjustments to noncontrolling interests (e)
(1.7)(1.7)— %
Change in tax provision due to adjustments to reported net income attributable to Coty Inc.(6.6)(28.7)77 %
Adjusted net income attributable to Coty Inc.$229.1 $191.9 19 %
% of net revenues13.3 %12.6 % 
Per Share Data
Adjusted weighted-average common shares
Basic892.8 850.8 
Diluted (a)
922.8 886.8 
Adjusted net income attributable to Coty Inc. per common share
Basic$0.26 $0.23 
Diluted (a)
$0.25 $0.22 
(a)Adjusted Diluted EPS is adjusted by the effect of dilutive securities. For the three months ended December 31, 2023 and 2022, shares for the Forward Repurchase Contracts were excluded from the computation of adjusted diluted EPS as Coty is in the position to receive shares from the counterparties and as such their inclusion would be anti-dilutive. Accordingly, we did not reverse the impact of the fair market value gains for contracts with the option to settle in shares or cash of $44.4 and $44.3, respectively. For the three months ended December 31, 2023, as the Convertible Series B Preferred Stock was dilutive, an adjustment to reverse the impact of the preferred stock dividends of $3.3 was required. For the three months ended December 31, 2022, convertible Series B Preferred Stock (23.7 million weighted average dilutive shares) were anti-dilutive. Accordingly, we excluded these shares from the diluted shares and did not adjust the earnings for the related dividend of $3.3.
(b)See a description of adjustments under “Adjusted Operating Income for Continuing Operations."
(c)For the three months ended December 31, 2023 and 2022, the amount represents the unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
(d)For the three months ended December 31, 2023 and 2022, this primarily represents adjustments for equity loss from KKW.
(e)The amounts represent the after-tax impact of the non-GAAP adjustments included in net income attributable to noncontrolling interests based on the relevant noncontrolling interest percentage in the Condensed Consolidated Statements of Operations.

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 Three Months Ended
December 31,		 Change %
(in millions)2017 2016 2017/2016
Reported Net Income Attributable to Coty Inc.$109.2
 $46.8
 >100%
% of Net revenues4.1% 2.0%  
Adjustments to reported Operating income (a)
173.1
 320.7
 (46%)
Adjustments to Noncontrolling interests (b)
(7.9) —
 N/A
Change in tax provision due to adjustments to reported Net Income Attributable to Coty Inc.(37.2) (144.2) 74%
Adjusted net income attributable to Coty Inc.$237.2
 $223.3
 6%
% of Net revenues9.0% 9.7%  
Per Share Data     
Adjusted weighted-average common shares     
Basic749.6
 746.6
  
Diluted752.7
 752.4
  
Adjusted net income attributable to Coty Inc. per common share     
Basic$0.32
 $0.30
  
Diluted0.32
 0.30
  
(a)
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See a description of adjustments under “Adjusted Operating Income for Coty Inc.”
(b)
The amounts represent the impact of non-GAAP adjustments to Net income attributable to noncontrolling interest related to the Company’s majority-owned consolidated subsidiaries. The amounts are based on the relevant noncontrolling interest’s percentage ownership in the related subsidiary, for which the non-GAAP adjustments were made.

SIX MONTHS ENDED DECEMBER 31, 20172023 AS COMPARED TO SIX MONTHS ENDED DECEMBER 31, 2016
2022
NET REVENUES
In the six months ended December 31, 2023, net revenues increased 16%, or $455.4, to $3,369.0 from $2,913.6 in the six months ended December 31, 2022. Excluding net revenue from the first and second quarters of the prior period from Russia, net revenues increased 17% or $490.6 to $3,369.0 from $2,878.4 in the six months ended December 31, 2022, reflecting a positive price and mix impact of 13%, positive foreign currency exchange translation impact of 3%, and a increase in unit volume of 1%. The overall increase in net revenues reflects growth in our prestige fragrance category due to the continued success of fragrance brands, specifically Burberry, Hugo Boss, Calvin Klein, Gucci, Chloe, Marc Jacobs and Davidoff. The overall increase in net revenues for the Consumer Beauty segment was due to positive performance in the color cosmetics category, mass fragrance category, and the skin and body care category in Brazil.
The overall increase in net revenues reflects the continued success of our pricing and revenue management strategies, including the implementation of targeted price increases across our product portfolio. Volume growth across our fragrance portfolio, as well as in skin and body care products in Brazil, helped partially offset volume declines from certain color cosmetic and other body care brands in China due to macroeconomic conditions.
Geographically, except for China, net revenues in all major markets grew, led by the United States. Additionally, there was an increase in travel retail sales in the Europe, Americas and Asia Pacific regions.
Digital and e-commerce sales growth also contributed to the increase in net revenues.
Net Revenues by Segment
Six Months Ended
December 31,
(in millions)20232022Change %
NET REVENUES
Prestige$2,187.3 $1,821.2 20 %
Consumer Beauty1,181.7 1,092.4 8 %
Total$3,369.0 $2,913.6 16 %
Prestige
In the six months ended December 31, 2017,2023, net revenues from the Prestige segment increased 44%20%, or $1,499.0,$366.1, to $4,875.9$2,187.3 from $3,376.9$1,821.2 in the six months ended December 31, 2016. The acquisition2022. Excluding net revenue from the first and second quarters of the P&G Beauty Business comprised 21% of total net revenues for theprior period and the acquisitions of Younique, ghd and the Burberry Beauty Business combined comprised 7% of total net revenues for the period. The incremental net revenues in the first quarter of fiscal 2018 from the acquisition of the P&G Beauty Business in the prior year was the primary driver of the significant increase in total net revenues in all of our segments and geographic regions. Excluding the incrementalRussia, net revenues from the Acquisitions, total net revenuesPrestige segment increased 5%,21% or $159.0,$382.7 to $3,519.9$2,187.3 from $1,804.6 in the six months ended December 31, 2017 from $3,360.9 in the six months ended December 31, 2016, reflecting a positive foreign currency exchange translation impact of 4%, a positive price and mix impact of 2% and a decrease in unit volume of 1%.

Net Revenues by Segment
 Six Months Ended
December 31,		  
(in millions)2017 2016 Change %
NET REVENUES      
Luxury$1,715.6
  $1,284.0
 34%
Consumer Beauty2,182.0
  1,573.6
 39%
Professional Beauty978.3
  519.3
 88%
Total$4,875.9
  $3,376.9
 44%
Luxury
In the six months ended December 31, 2017, net revenues from the Luxury segment increased 34%, or $431.6, to $1,715.6 from $1,284.0 in the six months ended December 31, 2016. The incremental net revenues in the first quarter of fiscal 2018 from the acquisition of the P&G Beauty Business in the prior year comprised 17% of total net revenues for the segment, and the acquisition of the Burberry Beauty Business comprised 1% of the total net revenues for the segment for the six months ended December 31, 2017. Excluding the incremental net revenues from the Acquisitions, total net revenues from the Luxury segment increased 10%, or $128.6, to $1,412.6 in the six months ended December 31, 2017 from $1,284.0 in the six months ended December 31, 2016,2022, reflecting a positive price and mix impact of 5%10%, aan increase in unit volume of 8%, and positive foreign currency exchange translation impact of 4%,3%. The increase in net revenues primarily reflects:
(i)higher net revenues due to the continued success of Prestige fragrances, such as Burberry Goddess and Her, Hugo Boss Boss Bottled and Boss the Scent, Calvin Klein One, Eternity, and Euphoria, Gucci Guilty and Flora, Chloe Nomade and Signature, Marc Jacobs Daisy and Davidoff Cool Water;
(ii)an increase in unit volume of 1%. The increase primarily reflects greater net revenues in key markets, primarily the United States, Travel Retail, Germany, and Australia, due to the significant improvement of fill rates from fragrances driven by launchesthe prior period; and
(iii)an increase in net revenues due to positive pricing impact as a result of Tiffany & Co.global price increases and Gucci Bloom fragrances.in line with the overall premiumization strategy.
These increases in net revenue were partially offset by:
(i)lower net revenues for the Lacoste brand in the current period, which was primarily due to the early license termination resulting in a wind down of sales through the end of the second quarter.
Consumer Beauty
In the six months ended December 31, 2017,2023, net revenues from the Consumer Beauty segment increased 39%8%, or $608.4,$89.3, to $2,182.0$1,181.7 from $1,573.6$1,092.4 in the six months ended December 31, 2016. The incremental2022. Excluding net revenues inrevenue from the first quarter of fiscal 2018 from the acquisitionand second quarters of the P&G Beauty Business in the prior year comprised 18% of total net revenues for the segment, and the acquisition of Younique comprised 11% of the total net revenues for the segment. Excluding the incremental net revenuesperiod from the Acquisitions, totalRussia, net revenues from the Consumer Beauty segment remained consistent with the prior year period with an increase of $1.2increased 10% or $107.9 to $1,574.8$1,181.7 from $1,073.8 in the six months ended December 31, 2017 from $1,573.6 in the six months ended December 31, 2016,2022, reflecting a positive price and mix impact of 7%, and a positive foreign currency exchange translation impact of 3%, a negative price and mix impact of 2%, and a decrease in unit volume of 1%. The increase in net revenues primarily reflects reflects:
(i) higheran increase in net revenues from Max Factorcolor cosmetics brands, specifically Rimmel Manhattan, which was due to continued brand innovation, such as Lasting Finish foundation and Thrill Seeker mascara;
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(ii)an increase in net revenues from the retail product linemass fragrance category primarily due to the continued success from the re-launch of Wella hair products, David Beckham Instinct and innovation in part reflecting a positive impact Bruno Banani with the launch of Magnetic Man in the current year period from lowerfiscal year;
(iii)an increase in net revenues from the skin and body care brands in Brazil due to strong category momentum and positive impact of pricing; and
(iv)an increase in net revenues due to price increases across the prior yearConsumer Beauty product portfolio.
These increases in net revenue were partially offset by:
(i)a decrease in net revenues due to lower sales volume for Adidas primarily as a result of the timing of shipments prior to the closing of the acquisition of the P&G Beauty Business, (ii) higher net revenues from Guess, category slowdown in part due to a renewed focus on brand building in the ALMEA region in the current year, and (iii) higher net revenues from deodorants in Brazil as a result of innovation and a successful visual relaunch of in-store marketing. These increases were offset by lower net revenues from CoverGirl as result of increased markdowns and trade spending related to the brand relaunch in the second quarter of fiscal 2018 and Sally Hansen due to lower launch activity and declines in existing product lines.China.
Professional Beauty
COST OF SALES
In the six months ended December 31, 2017, net revenues from the Professional Beauty segment2023, cost of sales increased 88%17%, or $459.0,$176.4, to $978.3$1,203.0 from $519.3$1,026.6 in the six months ended December 31, 2016. The incremental net revenues in the first quarter of fiscal 2018 from the acquisition of the P&G Beauty Business in the prior year comprised 34% of the total net revenues for the segment, and incremental net revenues from the acquisition of ghd comprised 12% of the total net revenues for the segment in the six months ended December 31, 2017. Excluding the incremental net revenues from the Acquisitions, total net revenues from the Professional Beauty segment increased 6%, or $29.2, to $532.5 in the six months ended December 31, 2017 from $503.3 in the six months ended December 31, 2016, reflecting a positive price and mix impact of 2%, a positive foreign currency exchange translation impact of 4%, and no impact from unit volume. The increase in this segment primarily reflects higher net revenues from OPI driven by the innovative technology and launch of the OPI ProHealth GelColor System as well as an increase in the professional product line of Wella hair products due to the launch of Wellaplex. These increases were partially offset by declines in smaller hair care brands.
Net Revenues by Geographic Regions
In addition to our reporting segments, net revenues by geographic regions are as follows.

 Six Months Ended
December 31,		  
(in millions)2017 2016 Change %
NET REVENUES     
North America$1,492.4
 $1,044.9
 43%
Europe2,266.0
 1,581.0
 43%
ALMEA1,117.5
 751.0
 49%
Total$4,875.9
 $3,376.9
 44%
North America
In the six months ended December 31, 2017, net revenues in North America increased 43%, or $447.5, to $1,492.4 from $1,044.9 in the six months ended December 31, 2016, primarily due to the impact of the Acquisitions. Excluding the incremental net revenues from the Acquisitions, net revenues in North America decreased 5%, or $50.6, to $994.3 in the six months ended December 31, 2017 from $1,044.9 in the six months ended December 31, 2016, primarily due to lower net revenues in the U.S. from color cosmetics and retail hair. The decline in color cosmetics primarily reflects lower net revenues from CoverGirl and Sally Hansen. CoverGirl net revenues were negatively impacted by incremental sales incentives associated with a relaunch of the brand in the second quarter of fiscal 2018. Sally Hansen net revenue declines were due to lower launch activity and declines in existing product lines. Lower net revenues retail hair products were primarily driven by Clairol hair products due to lower sales during the holiday season and an increase in sales incentives. Decreases in the region were partially offset by a higher net revenues driven by the launches of the Tiffany & Co. and Gucci Bloom fragrances, which both showed strong performance in the U.S. There was no impact from foreign currency exchange translations during the period.
Europe
In the six months ended December 31, 2017, net revenues in Europe increased 43%, or $685.0, to $2,266.0 from $1,581.0 in the six months ended December 31, 2016, primarily due to the impact of the Acquisitions. Excluding the incremental net revenues from the Acquisitions, net revenues in Europe increased 6%, or $92.3, to $1,657.3 in the six months ended December 31, 2017 from $1,565.0 in the six months ended December 31, 2016, primarily due to: (i) incremental revenues from fragrances driven by the launches of the Tiffany & Co. and Gucci Bloom fragrances across the region resulting in higher net revenues in Western Europe including the U.K., Spain, and Germany, (ii) higher net revenues from mass fragrances across the region and (iii) higher net revenues from retail hair products driven by Wella hair products across the region.Excluding the impact of the Acquisitions and the positive foreign currency exchange translations impact of 6%, net revenues in Europe remained consistent with the prior year fiscal period.
ALMEA
In the six months ended December 31, 2017, net revenues in ALMEA increased 49%, or $366.5, to $1,117.5 from $751.0 in the six months ended December 31, 2016, primarily due to the impact of the Acquisitions. Excluding the incremental net revenues from the Acquisitions, net revenues in ALMEA increased 16%, or $117.3, to $868.3 in the six months ended December 31, 2017 from $751.0 in the six months ended December 31, 2016, primarily due to primarily due to: (i) incremental net revenues from fragrances driven by the launches of the Tiffany & Co. and Gucci Bloom fragrances across the region resulting in higher net revenues in China and our travel retail and export businesses, (ii) higher net revenues from retail hair products driven by Wella and Clairol hair products in Brazil and (iii) higher revenues from color cosmetics driven by Max Factor in China. Excluding the impact of the Acquisitions and the positive foreign currency exchange translations impact of 2%, net revenues in ALMEA increased 14%.
COST OF SALES
In the six months ended December 31, 2017, cost of sales increased 42%, or $562.2, to $1,899.3 from $1,337.1 in the six months ended December 31, 2016.2022. Cost of sales as a percentage of net revenues decreasedincreased to 39.0%35.7% in the six months ended December 31, 20172023 from 39.6%35.2% in the six months ended December 31, 2016,2022 resulting in a gross margin improvementdecrease of approximately 50 basis points primarily reflecting:
(i)approximately 70 basis points related to an increase in excess and obsolescence costs primarily associated with the Prestige product portfolio; and
(ii)approximately 60 basis points primarily reflectingrelated to an increase in designer license fees due to licensed Prestige brands comprising a larger portion of overall net revenues in the acquisitions of higher margin businessescurrent period as well as favorable royalty activity in fiscal 2017 including the P&G Beauty Business and Younique and contribution from our supply chain savings programprior period, which did not reoccur in the current period.
These increases were partially offset by:
(i) the negative impact of inventory buyback associated with distributor terminations relating to the acquisition of the P&G Beauty Business, (ii) the negative impact of the revaluation of acquired inventory from the Younique acquisition, (iii) the negative impact of accelerated depreciation of buildings and equipment associated with plant closuresapproximately 50 basis points related to decreased freight costs; and

(ii)approximately 30 basis points related to a decrease in manufacturing and material costs as a percentage of net revenues.
The above reflects the Global Integration Activities Program and (iv) the negative impact of increased markdowns and trade spending associated with the CoverGirl brand relaunch in the second quarter of fiscal 2018.
from inflation offset by a positive impact from pricing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In the six months ended December 31, 2017,2023, selling, general and administrative expenses increased 52.3%12%, or $862.6,$175.8, to $2,511.7$1,600.8 from $1,649.1$1,425.0 in the six months ended December 31, 2016.2022. Selling, general and administrative expenses as a percentage of net revenues increaseddecreased to 51.5%47.5% in the six months ended December 31, 20172023 from 48.8%48.9% in the six months ended December 31, 2016,2022, or approximately 270140 basis points. The increaseThis decrease was primarily reflects approximately 330due to:
(i)70 basis points due to a decrease in stock-based compensation cost primarily related to higher administrative costs and approximately 40a reduction in expense recognized in connection with awards granted to the CEO;
(ii)60 basis points relateddue to negative foreign currency exchange translations impact, partially offset by 100 basis points related to lower advertising and consumer promotion. The highera decrease in administrative costs as a percentage of net revenues are primarily due to: (i) compensation-relatedto lower depreciation expense related to fully depreciated IT equipment and lower costs associated with the new organizational structure of the Company asleased IT equipment;
(iii)40 basis points due to a result of the P&G Beauty Business acquisition, primarilydecrease in the Professional Beauty division where we acquired a large sales organization to service the salon business, (ii) increased depreciation expense, and (iii) incremental consulting costs. The lower advertising and consumer promotion spendingpromotional costs due to a reduction in working media investment as a percentage of net revenues is primarilyrevenues; and
(iv)40 basis points due to a shiftdecrease in timinglogistics costs as a percentage of investment scheduled fornet revenues.
These decreases were partially offset by the second halffollowing increases:
(i)50 basis points due to an increase in bad debt expense primarily related to a favorable activity in the prior period that did not reoccur in the current period; and
(ii)20 basis points due to an accrual reversal associated with the resolution of fiscal 2018 for product relaunchesa contingency in the prior period that did not reoccur in the current period.
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Table of certain brands, including CoverGirl and the Clairol retail hair product line.Contents
OPERATING INCOME (LOSS)
In the six months ended December 31, 2017,2023, operating income increased greater than 100%, or $169.4was $434.2 compared to $203.1 from $33.7income of $371.2 in the six months ended December 31, 2016.2022. Operating margin oras a percentage of net revenues, increased to 12.9% in the six months ended December 31, 2023 as compared to an operating income as a percentage of net revenues increased to 4.2%of 12.7% in the six months ended December 31, 20172022. The increase in operating margin is largely driven by lower fixed costs as compared to 1.0%a percentage of net revenues, a decrease in the six months ended December 31, 2016. This margin increasestock compensation expense as a percentage of approximately 320 basis points primarily reflects approximately 520 basis points related to lower acquisition-related costsnet revenues, a decrease in advertising and approximately 60 basis points related to lower costconsumer promotional expense as a percentage of salesnet revenues, partially offset by approximately 270 basis points related to higher selling, generalrestructuring costs in the current period and administrative expenses.an increase in cost of goods sold as a percentage of net revenues.
Operating Income (Loss) by Segment
Six Months Ended
December 31,
(in millions)20232022Change %
Operating income (loss)
Prestige$422.2 $335.0 26 %
Consumer Beauty92.4 81.1 14 %
Corporate(80.4)(44.9)(79)%
Total$434.2 $371.2 17 %
 Six Months Ended
December 31,		  
(in millions)2017 2016 Change %
OPERATING INCOME     
Luxury$141.8
 $142.7
 (1%)
Consumer Beauty161.2
 115.6
 39%
Professional Beauty71.8
 99.7
 (28%)
Corporate(171.7) (324.3) 47%
Total203.1
 33.7
 >100%
LuxuryPrestige
In the six months ended December 31, 2017,2023, operating income for Luxury decreased 1%, or $0.9,Prestige was $422.2 compared to $141.8 from $142.7income of $335.0 in the six months ended December 31, 2016.2022. Operating margin decreasedincreased to 8.3%19.3% of net revenues in the six months ended December 31, 20172023 as compared to 11.1%18.4% in the six months ended December 31, 2016,2022, driven primarily reflecting higher selling, general and administrative expensesby a decrease in fixed costs as a percentage of net revenues and higher amortizationa decrease in advertising and consumer promotional expense as a percentage of net revenues, partially offset by loweran increase in cost of salesgoods sold as a percentage of net revenues.
Consumer Beauty
In the six months ended December 31, 2017,2023, operating income for Consumer Beauty increased 39%, or $45.6,was $92.4 compared to $161.2 from $115.6income of $81.1 in the six months ended December 31, 2016.2022. Operating margin increased to 7.4%7.8% of net revenues in the six months ended December 31, 20172023 as compared to 7.3%7.4% in the six months ended December 31, 2016, primarily reflecting lower amortization2022, driven by a decrease in fixed costs as a percentage of net revenues and a decrease in advertising and consumer promotional expense as a percentage of net revenues, partially offset by higher selling, general and administrative expenses as a percentage of net revenues and higheran increase in cost of sales as a percentage of net revenues.
Professional Beauty
In the six months ended December 31, 2017, operating income for Professional Beauty decreased by 28%, or $27.9, to $71.8 from $99.7 in the six months ended December 31, 2016. Operating margin decreased to 7.3% of net revenues in the six months ended December 31, 2017 as compared to 19.2% in the six months ended December 31, 2016, primarily reflecting higher selling, general and administrative expenses as a percentage of net revenues and higher cost of salesgoods sold as a percentage of net revenues.
Corporate
Corporate primarily includes corporate expenses not directly related to our operating activities. These items are included in Corporate since we consider them to be Corporate responsibilities, and these items are not used by our management to measure the underlying performance of the segments.

In the six months ended December 31, 2017,2023, the operating loss for Corporate was $(171.7)$80.4 compared to $(324.3)a loss of $44.9 in the six months ended December 31, 2016,2022, as described under “Adjusted Operating Income for Coty Inc.” below. The increase to the operating loss for Corporate was primarily driven by an increase in restructuring costs in the current period.

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Adjusted Operating Income by Segment
We believe that Adjusted Operating Incomeincome by segment further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported Operating income to Adjusted Operating income is presented below, by segment:
Six Months Ended December 31, 2023
(in millions)Reported
(GAAP)
Adjustments (a)
Adjusted
(Non-GAAP)
Operating income
Prestige422.2 $77.1 $499.3 
Consumer Beauty92.4 19.8 112.2 
Corporate(80.4)80.4 — 
Total$434.2 $177.3 $611.5 
Six Months Ended December 31, 2022
(in millions)Reported
(GAAP)
Adjustments (a)
Adjusted
(Non-GAAP)
Operating income
Prestige335.0 $74.3 $409.3 
Consumer Beauty81.1 20.6 101.7 
Corporate(44.9)44.9 — 
Total$371.2 $139.8 $511.0 
(a)See a reconciliation of reported operating income to adjusted operating income and a description of the adjustments under “Adjusted Operating Income for Coty Inc.” below. All adjustments are reflected in Corporate, except for amortization and asset impairment charges on goodwill, regional indefinite-lived intangible assets, and finite-lived intangible assets, which are reflected in the Prestige and Consumer Beauty segments.
Adjusted Operating Income and Adjusted EBITDA for Coty Inc.
We believe that adjusted operating income further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported operating income to Adjusted Operating Incomeadjusted operating income is presented below, by segment:below:
Six Months Ended
December 31,
(in millions)20232022Change %
Reported operating income434.2 371.2 17 %
% of net revenues12.9 %12.7 %
Amortization expense96.9 94.9 2 %
Restructuring and other business realignment costs31.3 (3.7)>100%
Stock-based compensation49.9 65.3 (24)%
Gain on sale of real estate(1.6)(1.0)(60)%
Early license termination and market exit costs0.8 (15.7)>100%
Total adjustments to reported operating income$177.3 $139.8 27 %
Adjusted operating income$611.5 $511.0 20 %
% of net revenues18.2 %17.5 % 
Adjusted depreciation115.2 114.5 1 %
Adjusted EBITDA$726.7 $625.5 16 %
% of net revenues21.6 %21.5 %

 Six Months Ended December 31, 2017
(in millions)Reported
(GAAP)		 
Adjustments (a)
 Adjusted
(Non-GAAP)
OPERATING INCOME     
Luxury$141.8
 $(73.5) $215.3
Consumer Beauty161.2
 (59.0) 220.2
Professional Beauty71.8
 (35.3) 107.1
Corporate(171.7) (171.7) —
Total203.1
 (339.5) 542.6
 Six Months Ended December 31, 2016
(in millions)Reported
(GAAP)		 
Adjustments (a)
 Adjusted
(Non-GAAP)
OPERATING INCOME     
Luxury$142.7
 $(45.4) $188.1
Consumer Beauty115.6
 (52.4) 168.0
Professional Beauty99.7
 (18.6) 118.3
Corporate(324.3) (324.3) —
Total33.7
 (440.7) 474.4
(a)
See a reconciliation of reported operating income toIn the six months ended December 31, 2023, adjusted operating income and a description of the adjustments under “Adjusted Operating Income for Coty Inc.” below. All adjustments are reflected in Corporate, except for Amortization expense which is reflected in the Luxury, Consumer Beauty and Professional Beauty divisions.

Adjusted Operating Income for Coty Inc.
We believe that Adjusted Operating Income further enhances an investor’s understanding of our performance. See “Overview—Non-GAAP Financial Measures.” A reconciliation of reported operating income increased $100.5, to Adjusted Operating Income is presented below:
 Six Months Ended
December 31,		  
(in millions)2017 2016 Change %
Reported Operating Income$203.1
 $33.7
 >100%
% of Net revenues4.2% 1.0%  
Amortization expense167.8
 116.4
 44%
Restructuring and other business realignment costs106.2
 35.0
 >100%
Costs related to acquisition activities65.5
 273.4
 (76%)
Pension settlement charges—
 15.9
 (100%)
Total adjustments to reported Operating income339.5
 440.7
 (23%)
Adjusted Operating income$542.6
 $474.4
 14%
% of Net revenues11.1% 14.0%  

Adjusted operating income$611.5 from $511.0 in the six months ended December 31, 2017 increased 14%, or $68.2, to $542.6 from $474.4 in the six months ended December 31, 2016.2022. Adjusted operating margin decreasedincreased to 11.1%18.2% of net revenues in the six months ended December 31, 2017 as compared to 14.0%2023 from 17.5% in the six months ended December 31, 2016,2022. In the six months ended December 31, 2023,
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adjusted EBITDA increased $101.2 to $726.7 from $625.5 in the six months ended December 31, 2022. Adjusted EBITDA margin increased to 21.6% of net revenues in the six months ended December 31, 2023 from 21.5% in the six months ended December 31, 2022, primarily driven by approximately 240 basis points relateddue to higher adjusted selling, general and administrative expenses and approximately 50 basis points related to higher adjusted cost of salesa decrease in fixed costs as a percentage of net revenues and decrease in advertising and consumer promotional as a percentage of net revenues, partially offset by an increase in cost of goods sold as a percentage of net revenues.
Amortization Expense
In the six months ended December 31, 2017,2023, amortization expense increased to $167.8$96.9 from $116.4$94.9 in the six months ended December 31, 2016 primarily as a result of the Acquisitions.2022. In the six months ended December 31, 2017,2023, amortization expense of $73.5, $59.0,$77.1 and $35.3$19.8 was reported in the Luxury,Prestige and Consumer Beauty and Professional Beauty segments, respectively. In the six months ended December 31, 2016,2022, amortization expense of $45.4, $52.4,$74.3 and $18.6$20.6 was reported in the Luxury,Prestige and Consumer Beauty and Professional Beauty segments.
segments, respectively.
Restructuring and Other Business Realignment Costs
We incurred $520.0 of cash costs life-to-date related to our previously announced and substantially completed Transformation Plan as of December 31, 2023, which have been recorded in Corporate. In addition, we continue to analyze our cost structure and evaluate opportunities to streamline operations through a range of other cost reduction activities ("Other Restructuring Actions").
In the six months ended December 31, 2017,2023, we incurred restructuring and other business structure realignment costs of $106.2,$31.3, as follows:
•We incurred restructuring costs of $32.9$34.1 primarily related to the Global Integration Activities,Other Restructuring Actions, included in the Condensed Consolidated Statements of Operations.Operations; and
•We incurred a credit in business structure realignment costs of $73.3 primarily related to our Global Integration Activities, Organizational Redesign and certain other programs. Of this amount $52.6$(2.8) which is includedreported in Selling,selling, general and administrative expenses and $20.7 is included in Cost of sales, primarily due to costs incurred for the realignment of the business due to the P&G Beauty Business.expenses.
In the six months ended December 31, 2016,2022, we incurred a credit in restructuring and other business structure realignment costs of $35.0$(3.7) as follows:
•We incurred Restructuringa credit in restructuring costs of $23.2$(4.1) primarily related to the Global Integration Activities, Acquisition Integration Program and Organizational Redesign,Transformation Plan, included in the Condensed Consolidated Statements of Operations.
•We incurred business structure realignment costs of $11.8$0.4 primarily related to our Organizational Redesign. Of thisTransformation Plan and certain other programs. This amount $7.0 is includedincludes $0.9 reported in Cost of sales in the Condensed Consolidated Statement of Operations and a credit of $(0.5) reported in Selling, general and administrative expenses, $3.4 is included in Cost of sales, and $1.4 is included in Other expense in the Condensed Consolidated Statements of Operations.expenses.
In all reported periods, all restructuring and other business realignment costs were reported in Corporate.
Costs Related to Acquisition ActivitiesStock-based compensation
In the six months ended December 31, 2017, we incurred $65.5 of costs related to acquisition activities. We recognized Acquisition-related costs of $61.1, included2023, stock-based compensation was $49.9 as compared with $65.3 in the Condensed Consolidated Statements of Operations. These costs were primarily incurred in connection with the acquisition of P&G Beauty Business. These costs include amounts paid for external consulting fees and internal costs for converting the data received from P&G during the transition period to satisfy the Company’s internal and external financial reporting, regulatory and other requirements, as well as legal, accounting, and valuation services, and fees paid directly to P&G. We also incurred $3.5 and $0.9 in Costs of sales primarily reflecting revaluation of acquired inventory in connection with the acquisitions of Younique and the Burberry Beauty Business, respectively, in the Condensed Consolidated Statements of Operations.
In the six months ended December 31, 2016, we incurred $273.4 of costs2022. The decrease in stock-based compensation is primarily related to acquisition activities. Wea reduction in expense recognized Acquisition-related costs of $217.4, included in the Condensed Consolidated Statements of Operations. These costs primarily consist of legal and consulting fees in connection with awards granted to the acquisition of the P&G Beauty Business. We also incurred $36.2 and $16.1 in Costs of sales primarily reflecting revaluation of acquired inventory in connection with the acquisition of the P&G Beauty Business and ghd, respectively, and $3.7 in Selling, general and administrative expense primarily related to P&G Beauty Business real estate in the Condensed Consolidated Statements of Operations six months ended December 31, 2016.CEO.
In all reported periods, all costs related to acquisition activitiesstock-based compensation were reported in Corporate.
Pension Settlement ChargesGain on Sale of Real Estate
In the six months ended December 31, 2017, there were no pension settlement charges.2023 and 2022 we recognized gain of $(1.6) and $(1.0), respectively, related to sale of real estate.
Early License Termination and Market Exit Costs
In the six months ended December 31, 2016,2023, we incurred chargescosts of $15.9 in connection with the settlement of obligations$0.8 related to the U.S. Del Laboratories, Inc. pension plan. The settlementearly termination of the plan was effectuated through lump sum payments to eligible participants during the three months ended September 30, 2016, in addition to, the purchase of annuity contractsa license and market exit activity.

from a third-party insurance provider, effectively transferring the U.S. Del Laboratories, Inc. pension plan obligation to the insurance provider, duringIn the six months ended December 31, 2016. The settlement charge2022, we recognized a gain of $15.9, for$(15.7) related to our market exit from Russia.
Adjusted Depreciation Expense
In the six months ended December 31, 2016, is as a result2023, adjusted depreciation expense of accelerating the recognition of losses previously deferred in other comprehensive income (loss).
Pension settlement charges were$54.5 and $60.7 was reported in Corporate.the Prestige and Consumer Beauty segments, respectively. In the six months ended December 31, 2022, adjusted depreciation expense of $54.3 and $60.2 was reported in the Prestige and Consumer Beauty segments, respectively.
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INTEREST EXPENSE, NET
In the six months ended December 31, 2017,2023, net interest expense net was $126.7$129.9 as compared with $98.3$126.9 in the six months ended December 31, 2016.2022. This increase is primarily due to the impact of a higher average interest rate despite lower debt balances outstanding underin the Coty Credit Agreement and Galleria Credit Agreement, duringcurrent period.
OTHER INCOME
In the six months ended December 31, 2017.
OTHER EXPENSE (INCOME), NET
We incurred $7.12023, other income was $4.2 as compared to other income of expense and $0.7 of expense$240.1 in the six months ended December 31, 20172022.
Other income of $4.2 in the six months ended December 31, 2023 was comprised of equity investment related impacts of $15.3, gains associated with earn-out provisions related to our sale of Wella of $8.5, partially offset by miscellaneous operating expense of $16.0 and 2016, respectively. The otherloss on forward repurchase contracts of $3.6.
Other income of $240.1 in the six months ended December 31, 2022 was comprised of equity investment related impacts of $208.0, gains associated with earn-out provisions related to our sale of Wella of $26.4, net gains on forward repurchase contracts of $10.6, partially offset by miscellaneous operating expense of $4.9.
This decrease in Other income is primarily due to a less favorable fair value adjustment related to our equity investment in the Wella Company compared to the prior period and lower gains associated with earn-out provisions related to our sale of Wella as compared to the change in the Mandatorily Redeemable Financial Instrument (“MRFI”) balance associated with a certain Southeast Asian subsidiary.prior period.
INCOME TAXES
The effective income tax rate for the six months ended December 31, 20172023 and 20162022 was (47.9)%36.4% and 194.8%22.4%, respectively. The decreasechange in the effective tax rate as compared to the same period in fiscal 2017 is primarily the result of (i) the resolution of foreign uncertain tax positions of approximately $43.0 ($41.8 in tax and $1.2 in interest) infor the six months ended December 31, 2017 and (ii)2023, as compared to the releaseprior period is primarily due to an expense of a valuation allowance of $111.2$24.3 in the U.S.current period recognized on the revaluation of our deferred tax liabilities due to a tax rate increase enacted in the six months ended December 31, 2016 as a result of the P&G Beauty Business acquisition.Switzerland.
The effective income tax rates vary from the U.S. federal statutory rate of approximately 28%21% due to the effect ofof: (i) jurisdictions with different statutory rates, including impacts of rate changes, (ii) adjustments to our unrecognized tax benefits and accrued interest,interest; (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes. As of January 1, 2018, the U.S. federal statutory rate decreased from 35% to 21%. As the Company has a June 30 fiscal year-end, the lower rate will be phased in, resulting in a blended rate of approximately 28% for the fiscal year ending June 30, 2018 (see Note 2—Summary of Significant Accounting Policies—Tax Information for more information on the U.S. tax law change). Our effective tax rate could fluctuate significantly and could be adversely affected to the extent earnings are lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates.
Reconciliation of Reported Income (Loss) Before Income Taxes to Adjusted Income Before Income Taxes and Effective Tax Rates:
Six Months Ended
December 31, 2023		Six Months Ended
December 31, 2022
(in millions)Income Before Income TaxesProvision for Income TaxesEffective Tax RateIncome Before Income TaxesProvision
 for Income Taxes		Effective
Tax Rate
Reported income before income taxes$308.5 $112.3 36.4 %$484.4 $108.5 22.4 %
Other adjustments to reported operating income (a)
177.3 139.8 
Change in fair value of investment in Wella Business (c)
(17.0)(210.0)
Other adjustments (d)
4.1 0.4 
Total Adjustments (b)
164.4 33.7 (69.8)2.5 
Adjusted income before income taxes$472.9 $146.0 30.9 %$414.6 $111.0 26.8 %
(a)See a description of adjustments under “Adjusted Operating Income for Continuing Operations.”
(b)The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax expense/provision for adjusted income. In preparing the calculation, each adjustment to reported income is first analyzed to determine if the adjustment has an income tax consequence. The provision for taxes is then calculated based on the jurisdiction in which the adjusted items are incurred, multiplied by the respective statutory rates and offset by the increase or reversal of any valuation allowances commensurate with the non-GAAP measure of profitability.
(c)The amount represents the realized and unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
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 Six Months Ended
December 31, 2017		 Six Months Ended
December 31, 2016
(in millions)Income Before Income Taxes (Benefit) Provision for Income Taxes Effective Tax Rate (Loss) Income Before Income Taxes (Benefit) Provision for Income Taxes Effective Tax Rate
Reported Income (Loss) before income taxes$69.3
 $(33.2) (47.9%) $(65.3) $(127.2) 194.8%
Adjustments to reported Operating income (a)(b)
339.5
 96.8
   440.7
 186.7
  
Adjustments to Interest expense (b)(c)
—
 —
   1.4
 0.6
  
Adjusted Income before income taxes$408.8
 $63.6
 15.6% $376.8
 $60.1
 16.0%
(d)For the six months ended December 31, 2023, this primarily this primarily represents divestiture-related costs related to our equity investments and loss from our equity investment in KKW. For the six months ended December 31, 2022, this primarily represents adjustments for equity loss from KKW.
(a)
See a description of adjustments under “Adjusted Operating Income for Coty Inc.”.
(b)
The tax effects of each of the items included in adjusted income are calculated in a manner that results in a corresponding income tax 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.
(c)
See “Reconciliation of Reported Net (Loss) Income Attributable to Coty Inc. to Adjusted Net Income Attributable to Coty Inc.”
The adjusted effective tax rate was 15.6%30.9% for the six months ended December 31, 2023 compared to 16.0% in26.8% for the prior-year period.six months ended December 31, 2022. The differences were primarily due to an expense of $24.3 in the resolutioncurrent period recognized on the revaluation of foreign uncertainthe Company's deferred tax positionsliabilities due to a tax rate increase enacted in Switzerland.
NET INCOME ATTRIBUTABLE TO COTY INC.
Net income attributable to Coty Inc. was $182.5 in the six months ended December 31, 2017 and the release2023, as compared to net income of a valuation allowance of $111.2 in the U.S.$366.9 in the six months ended December 31, 2016 as a result of the P&G Beauty Business acquisition.

NET INCOME ATTRIBUTABLE TO COTY INC.
In the six months ended December 31, 2017,2022. This decrease in net income attributablewas primarily driven by a less favorable fair value adjustment related to Coty Inc. increased $42.7, to $89.5, from $46.8our investment in the six months ended December 31, 2016. This decrease primarily reflects higher operating income in the six months ended December 31, 2017, partially offset by higher interest expense and a lower tax benefit in the six months ended December 31, 2017 than in the six months ended December 31, 2016.Wella Company.
We believe that Adjusted Net Income Attributableadjusted net income attributable to Coty Inc. provides an enhanced understanding of our performance. See “Overview—Non-GAAP Financial Measures.”
Six Months Ended
December 31,
(in millions)20232022Change %
Net income from Coty Inc. net of noncontrolling interests182.5 366.9 (50)%
Convertible Series B Preferred Stock dividends (a)
(6.6)(6.6)— %
Reported net income attributable to Coty Inc.175.9 360.3 (51)%
% of net revenues5.2 %12.4 %
Adjustments to reported operating income (b)
177.3 139.8 27 %
Change in fair value of investment in Wella Company (c)
(17.0)(210.0)92 %
Adjustment to other expense (d)
4.1 0.4 >100%
Adjustments to noncontrolling interests (e)
(3.4)(3.4)— %
Change in tax provision due to adjustments to reported net income attributable to Coty Inc.(33.7)(2.5)<(100%)
Adjusted net income attributable to Coty Inc.303.2 284.6 7 %
% of net revenues9.0 %9.8 % 
Per Share Data
Adjusted weighted-average common shares
Basic873.6 846.4 
Diluted (a)
907.0 884.5 
Adjusted net income attributable to Coty Inc. per common share
Basic$0.35 $0.34 
Diluted (a)
$0.34 $0.33 
(a)Adjusted Diluted EPS is adjusted by the effect of dilutive securities. For the six months ended December 31, 2023 and 2022, shares for the Forward Repurchase Contracts were excluded from the computation of adjusted diluted EPS as Coty is in the position to receive shares from the counterparties and as such their inclusion would be anti-dilutive. Accordingly, we did not reverse the impact of the fair market value gains for contracts with the option to settle in shares or cash of $0.2 and $6.8, respectively. For the six months ended December 31, 2023 and 2022, as the Convertible Series B Preferred Stock was dilutive, an adjustment to reverse the impact of the preferred stock dividends of $6.6 and $6.6, respectively was required.
(b)See a description of adjustments under “Adjusted Operating Income for Continuing Operations”
(c)The amount represents the realized and unrealized (gain) loss recognized for the change in fair value of the investment in Wella.
(d)For the six months ended December 31, 2023, this primarily divestiture-related costs related to our equity investments and loss from our equity investment in KKW. For the six months ended December 31, 2022, this primarily represents loss from equity investment in KKW.
(e)The amounts represent the after-tax impact of the non-GAAP adjustments included in Net income (loss) attributable to noncontrolling interests based on the relevant noncontrolling interest percentage in the Condensed Consolidated Statements of Operations.
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 Six Months Ended
December 31,		  
(in millions)2017 2016 Change %
Reported net income attributable to Coty Inc.$89.5
 $46.8
 91%
% of Net revenues1.8% 1.4%  
Adjustments to reported Operating income (a)
339.5
 440.7
 (23%)
Adjustments to Interest expense (b)
—
 1.4
 N/A
Adjustments to Noncontrolling interests (c)
(18.7) —
 N/A
Change in tax provision due to adjustments to reported Net income attributable to Coty Inc.(96.8) (187.3) 48%
Adjusted net income attributable to Coty Inc.313.5
 301.6
 4%
% of Net revenues6.4% 8.9%  
Per Share Data     
Adjusted weighted-average common shares     
Basic749.1
 539.8
  
Diluted752.5
 545.8
  
Adjusted net income attributable to Coty Inc. per common share     
Basic$0.42
 $0.56
  
Diluted0.42
 0.55
  
(a)
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See a description of adjustments under “Adjusted Operating Income for Coty Inc.”
(b)
In the six months ended December 31, 2016, the amount represents a net loss of $1.4 incurred in connection with the Hypermarcas Brands and subsequent intercompany loans, included in Interest expense, net in the Condensed Consolidated Statements of Operations.
(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.

FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our primary sources of funds include cash expected to be generated from operations, borrowings from issuance of debt and committed and uncommitted lines of credit provided by banks and lenders in the U.S. and abroad. As of December 31, 2017, we had cash and cash equivalents of $400.1 compared with $535.4 as of June 30, 2017.
Our cash flows are subject to seasonal variation throughout the year, including demands on cash made during the three and six months buildup before the holiday seasonour first fiscal quarter in anticipation of higher global sales during the second fiscal quarter and strong cash generation in the second fiscal quarter as a result of increased demand by retailers associated with the holiday season.
Our principal uses of cash are to fund planned operating expenditures, capital expenditures, interest payments, acquisitions, dividends, share repurchases, and any principal payments on debt. The workingdebt, and from time to time, acquisitions, and business structure realignment expenditures. Working capital movements are based oninfluenced by the sourcing of materials related to the production of products within eachproducts. Cash and working capital management initiatives, including the phasing of vendor payments and factoring of trade receivables from time-to-time, may also impact the timing and amount of our segments.operating cash flows.
We remain focused on deleveraging our balance sheet using cash flows generated from our operations. We continue to take steps to permanently reduce our debt to reduce interest costs and improve our long-term profitability and cash flows. During the first quarter, we explored an opportunity to further deleverage by divesting a portion of our equity position in Wella to use the proceeds to repay our debt. On July 18, 2023, we announced that we had entered into a binding letter of intent to sell a 3.6% stake in Wella to an investment firm for $150.0. Subsequently, we and the investment firm mutually agreed not to pursue the proposed transaction and entered into a termination letter in October 2023. Our remaining 25.9% investment in Wella continues to give us the opportunity for further permanent debt reductions when our equity position is divested.
We continue to wind down the operations of our Russian subsidiary. We anticipate that we will incur an immaterial amount of additional costs through completion of the wind down, and future net cash costs of $10.0 to $20.0, which will be funded by our Russian subsidiary. The amount of future costs, including cash costs, will be subject to various factors, such as additional government regulation and the resolution of legal contingencies. We have substantially completed the exit of our commercial activities in Russia. However, we anticipate that the process related to the liquidation of the Russian legal entity will take an extended period of time.
Inflationary trends eased in the second quarter of fiscal 2024 and are expected to continue to ease in the coming quarters. Additionally, we continued to see improved order fill rates and achieved near pre-COVID-19 service levels in the second quarter and anticipate being able to maintain this level of service into the foreseeable future.
Debt Financing
We are in the process of deleveraging our company and improving the maturity mix of our debt, including through refinancing or repayment of a portion of our debt.
We have taken action to reduce variability in our interest payments including paying down variable interest rate debt outstanding under our 2018 Coty Term B Facility and issuing fixed rate bonds. As a result, all of the cash on hand, our ability to generate cash from operations and through access to our revolving credit facility and other lending sources, we believe we have sufficient liquidity to meet our ongoing needs on both a near term and long-term basis.

Debt
The balances consisted of the followingdebt was fixed rate debt as of December 31, 20172023 and June 30, 2017, respectively:our remaining floating-to-fixed interest rate swaps have been terminated.
 December 31, 2017 June 30,
2017
Short-term debt$13.5
 $3.7
Galleria Credit Agreement   
Galleria Revolving Credit Facility due September 2021365.0
 —
Galleria Term Loan A Facility due September 2021932.5
 944.3
Galleria Term Loan B Facility due September 2023997.5
 1,000.0
Coty Credit Agreement   
Coty Revolving Credit Facility due October 2020 (a)
777.0
 810.0
Coty Term Loan A Facility due October 20201,751.6
 1,792.8
Coty Term Loan A Facility due October 2021926.3
 950.6
Coty Term Loan B Facility due October 20221,753.0
 1,712.5
Other long-term debt and capital lease obligations1.4
 1.7
Total debt7,517.8
 7,215.6
Less: Short-term debt and current portion of long-term debt(295.9) (209.1)
Total Long-term debt7,221.9
 7,006.5
Less: Unamortized debt issuance costs (b)
(66.3) (67.6)
Less: Discount on Long-term debt(9.8) (10.6)
Total Long-term debt, net$7,145.8
 $6,928.3
(a) Includes a $62.0 swingline loan outstanding asIn the first quarter of December 31, 2017.
(b) Consists of unamortized debt issuance costs of $15.4 and $17.5 forfiscal 2024, we amended the Coty Revolving Credit Facility, $29.7 and $33.2 for the Coty Term Loan A Facility and $11.0 and $11.3 for the Coty Term Loan B Facility as of December 31, 2017 and June 30, 2017, respectively. Consists of unamortized debt issuance costs of $4.4for the Galleria Revolving Credit Facility as of December 31, 2017, and $2.7 and $2.7 for the Galleria Term Loan A Facility and $3.1 and $3.0 for the Galleria Term Loan B Facility as of December 31, 2017 and June 30, 2017, respectively. Unamortized debt issuance costs of $4.2 for the Galleria Revolving Credit Facility was classified as Other noncurrent assets in the Condensed Consolidated Balance Sheets as of June 30, 2017.
Coty Credit Agreement
On October 27, 2015, we entered into a Credit Agreement (the “Coty Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent.  The2018 Coty Credit Agreement provides for senior secured credit facilities comprisedand replaced our existing revolving commitments with two tranches of (i) a revolving credit facilitycommitments, having an aggregate principal amount of $1,670.0 available in U.S. dollars and certain other currencies and the other in an aggregate principal amount upof €300.0 million available in euros, and issued $750.0 and €500.0 million of senior secured notes due July 2030 and September 2028, respectively. The net proceeds received from the offerings were used to $1,500.0 (the “Coty Revolving Credit Facility”) which includes up to $80.0 in swingline loans available for short term borrowings, (ii) a $1,750.0 term loan A facility (“primarily pay down the outstanding balance of the U.S. dollar and euro portions of the 2018 Coty Term Loan A Facility”)B Facility by $715.5 and (iii) a term loan B facility comprising of a $500.0 tranche€22.6 million (approximately $25.1), respectively and a €665.0portion of the borrowings outstanding under our revolving credit facility. In August 2023, we repaid the €408.0 million tranche (“Coty(approximately $446.1) of the debt outstanding under the 2018 Term Loan B Facility”). The Coty Term Loan B Facility, was issued at a 0.50% discount. The proceedsthus repaying the facility in full.
In the second quarter of fiscal 2024, one of our wholly-owned subsidiaries utilized cash on hand to fully pay down the U.S. Dollar-denominated credit facility in Brazil in the amount of $31.9. Additionally, we completed cash tender offers on December 7, 2023, and redeemed $150.0 of the Coty Credit Agreement were primarily usedCompany's 2026 Dollar Notes and $250.0 of the Company's 2026 Dollar Senior Secured Notes. See Note 9—Debt in the notes to refinanceour Condensed Consolidated Financial Statements for additional information on our debt arrangements and prior period credit agreements, as well as definitions of capitalized terms.
We expect to continue to take actions to improve the Company’s previously existingmaturity mix of our debt which included the 2015 Credit Agreement due March 2018 and other facilitiesfrom time to time as market conditions permit.
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Table of Coty Inc.Contents
Equity Offering
On April 8, 2016,September 28, 2023, we entered into an Incremental Assumption Agreementagreement with a group of underwriters to issue and Amendment No. 1 (the “Incremental Credit Agreement”) to the Coty Credit Agreement. The Incremental Credit Agreement providessell 33.0 million shares of our Class A common stock, par value $0.01 per share (see Note 13—Equity and Convertible Preferred Stock for an additional €140.0 million in loans under the Coty Term Loan A Facility and an additional €325.0 million in loans under the Coty Term Loan B Facility (the “Incremental Term Loans”)information). TheWe used proceeds of approximately $348.4, net of underwriting fees, from this offering primarily to retire the Incremental Term Loans were used to partially repayprincipal amount of outstanding balances underdebt. Other uses included general corporate purposes, such as strategic investments in the Coty Revolving Credit Facility. The termsbusiness, working capital and capital expenditures. Settlement of the €140.0 million and €325.0 million portions of the Incremental Term Loans are substantially the same as the respective existing Coty Term Loan A Facility and Euro denominated portion of the Coty Term Loan B Facility.Offering occurred on October 2, 2023.
On October 28, 2016,Share Repurchases
In connection with our Share Repurchase Program, we entered into an Incremental Assumption Agreementforward repurchase contracts in June 2022, December 2022, and Refinancing Amendment (the “IncrementalNovember 2023 with three large financial institutions to start hedging for potential $200.0, $196.0 and Refinancing Agreement”), which amended$250.0 of share repurchases in 2024, 2025 and 2026, respectively.
We plan to physically settle the Coty Credit Agreement. June 2022 forward repurchase contracts by delivering approximately $200.0 cash in exchange for 27 million shares of our Class A Common Stock during the third quarter of fiscal 2024. We will continue to incur costs associated with these forward repurchase contracts before settlement. Such cash costs incurred in the current fiscal year to date for all forward repurchase contracts amounted to $24.0.
Factoring of Receivables
From time to time, we supplement the timing of our cash flows through the factoring of trade receivables. In this regard, we have entered into factoring arrangements with financial institutions.
The Incrementalnet amount utilized under the factoring facilities was $217.0 and Refinancing Agreement provides for: (i) an additional Coty Term Loan A Facility in$202.9 as of December 31, 2023 and June 30, 2023, respectively. The aggregate principal amount of $975.0trade receivable invoices factored on a worldwide basis amounted to $874.0 and $795.8 during the six months ended December 31, 2023 and 2022, respectively.
Cash Flows
Six Months Ended
December 31,
20232022
Condensed Consolidated Statements of Cash Flows Data:
(in millions)
Net cash provided by operating activities$608.1 $645.4 
Net cash used in investing activities(119.4)(45.2)
Net cash used in financing activities(285.9)(536.6)
Net cash provided by operating activities
Net cash provided by operating activities was $608.1 and $645.4 for the six months ended December 31, 2023 and 2022, respectively. The decrease in loans (the “Incremental Term A Facility”), (ii) an additional Coty Term Loan B Facilitycash provided by operating activities of $37.3 was primarily driven by lower net inflows from changes in aggregate principal amountworking capital, resulting from by changes in accounts payable due to timing of $100.0payments and vendor mix and changes in loans (the “Incremental Term B Facility”)trade receivables primarily due to higher net revenue and (iii)lower factored receivables year over year. Changes in inventories partially offset these impacts due to the prior year increase in inventory as a refinancingresult of strategic efforts to mitigate supply chain constraints combined with a current year decrease in inventory from higher net revenues. Changes in accrued expenses and other current and noncurrent liabilities also helped to offset the overall decrease in cash provided by operating activities primarily from the impact of lower payments for restructuring and interest related to timing of restructuring programs and changes to interest payment terms year over year.
Net cash used in investing activities
Net cash used in investing activities was $119.4 and $45.2 for the six months ended December 31, 2023 and 2022, respectively. The decrease in investing cash flows of $74.2 was primarily due to lower current year proceeds from the sale of long-lived assets and higher levels of capital expenditures year over year. The lower proceeds from sale of long-lived assets was primarily driven by the impact of the previously existing USDprior year collection of license termination fees which did not reoccur in the current year.
Net cash used in financing activities
Net cash used in financing activities during the six months ended December 31, 2023 and Euro denominated Coty Term Loan B Facility loans (the “Refinancing Facilities”) under2022 was $285.9 and $536.6, respectively. The decrease in cash used in financing activities of $250.7 was primarily driven by the Coty Credit Agreement.

The loans made undernet proceeds from the Incremental Termissuance of Class A Facility have terms that are substantially identical to the existing Coty Term Loan A Facility except that the loans will mature on the date that is five years after October 28, 2016. The loans under the Incremental Term B Facility and the Refinancing Facilities have substantially identical terms as the term B loans existing under the Coty Credit Agreement prior to effectiveness of the Incremental and Refinancing Agreement, except that, among other things: (i) the interest rate with respect to the USD denominated tranche of the Refinancing Facilities and the Incremental Term B Facility will be, our option, either the London Interbank Offered Rate (“LIBOR”) plus an applicable margin of 2.50% or an alternate base rate (“ABR”) equal to the highest of (1) JPMorgan Chase Bank N.A.’s prime rate, (2) the federal funds rate plus 0.50% and (3) one-month LIBOR plus 1.00%, in each case plus an applicable margin of 1.50% and (ii) the LIBOR floor with respect to the LIBOR loans under the Incremental Term B Facility and the Refinancing Facilities is 0.00%.
We recognized $13.0 of deferred debt issuance costsCommon Stock, mainly in connection with the Incrementalglobal offering, and Refinancing Agreement.lower cash payments in the current year due to realized losses on the Company's financing related foreign currency contracts. Such lower cash outflows were partially
The Coty
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offset primarily by higher repayments in the current year associated with the Company's Credit Agreement, is guaranteed by our wholly-owned domestic subsidiarieshigher payments for deferred financing fees and secured by a first priority lien on substantially all of our and our wholly-owned domestic subsidiaries’ assets,for the forward repurchase contracts in each case subject to certain carve outs and exceptions.the current year.
Scheduled Amortization
We make quarterly principal payments of 1.25% of the initial aggregate principal amount of the Coty Term Loan A Facility (including with respect to its Incremental Term A loans), as well as 0.25% of the initial aggregate principal amount of the Coty Term Loan B Facility (including with respect to its refinanced and Incremental Term B loans).
Galleria Credit AgreementDividends
On October 1, 2016, atApril 29, 2020, the closingBoard of Directors suspended the P&G Beauty Business acquisition,payment of dividends on Common Stock. As we assumedfocus on preserving cash, we expect to suspend the payment of dividends until we reach a Net debt facilities available under the Galleria Credit Agreement (the “Galleria Credit Agreement”) which was initially entered into by Galleria on January 26, 2016. The Galleria Credit Agreement provides for senior secured credit facilities comprised of (i) a $2,000.0 five year term loan A facility (“Galleria Term Loan A Facility”), (ii) a $1,000.0 seven year term loan B facility (“Galleria Term Loan B Facility”) and (iii) a $1,500.0 five year revolving credit facility (“Galleria Revolving Facility”). The Galleria Term Loan B Facility was issued at a 0.50% discount. In connection with the closing of the P&G Beauty Business acquisition, we assumed $1,941.8 of aggregate debt outstanding consisting of $944.3 Galleria Term Loan A Facility, $995.0 Galleria Term Loan B Facility, net of a discount and $0.0 outstanding under the Galleria Revolving Facility, as well as $2.5 in assumed fees payable. At the closing of the P&G Beauty Business acquisition, the remaining unused loan commitments for the Galleria Term Loan A Facility expired.
We recognized $11.4 of deferred debt issuance costs in connection with the Galleria Credit Agreement.
The Galleria Credit Agreement is guaranteed by us and our wholly-owned domestic subsidiaries (other than Galleria) and secured by a first priority lien on substantially all of our and our wholly-owned domestic subsidiaries’ assets, in each case subject to certain carve outs and exceptions.
Scheduled Amortization
We make quarterly payments of 1.25% and 0.25% of the initial aggregate principal amounts of the Galleria Term Loan A Facility and the Galleria Term Loan B Facility, respectively. The remaining balance of the initial aggregate principal amounts of the Galleria Term Loan A Facility and the Galleria Term Loan B Facility will be payable on the maturity date for each facility, respectively.
Interest
The Coty Credit Agreement and Galleria Credit Agreement facilities will bear interest at rates equal to, at our option, either:
LIBOR of the applicable qualified currency plus the applicable margin; or
ABR plus the applicable margin.
In the case of the Coty Revolving Credit Facility, Coty Term Loan A Facilities, Galleria Revolving Facility and Galleria Term Loan A Facility, the applicable margin means a percentage per annum to be determined in accordance with a leverage-based pricing grid below:

Pricing Tier Total Net Leverage Ratio: LIBOR plus: Alternative Base Rate Margin:
1.0 Greater than or equal to 5.00:1 2.000% 1.000%
2.0 Less than 5.00:1 but greater than or equal to 4.00:1 1.750% 0.750%
3.0 Less than 4.00:1 but greater than or equal to 2.75:1 1.500% 0.500%
4.0 Less than 2.75:1 but greater than or equal to 2.00:1 1.250% 0.250%
5.0 Less than 2.00:1 but greater than or equal to 1.50:1 1.125% 0.125%
6.0 Less than 1.50:1 1.000% —%
In the case of the USD portion of the Coty Term Loan B Facility, the applicable margin means 2.50% per annum, in the case of LIBOR loans, and 1.50% per annum, in the case of ABR loans. In the case of the Euro portion of the Coty Term Loan B Facility, the applicable margin means 2.75% per annum, in the case of EURIBOR loans. In the case of the Galleria Term Loan B Facility, the applicable margin means 3.00% per annum, in the case of LIBOR loans, and 2.00% per annum, in the case of ABR loans. With respect to the Galleria Term Loan B Facility, in no event will (i) LIBOR be deemed to be less than 0.75% per annum and (ii) ABR be deemed to be less than 1.75% per annum.
Debt Maturities Schedule
Our aggregate maturities of long-term debt, including current portion of long-term debt and excluding capital lease obligations as of December 31, 2017, are presented below:
Fiscal Year Ending June 30, 
2018, remaining$109.8
2019219.6
2020219.6
20212,412.7
20221,915.7
Thereafter2,625.5
Total$7,502.9
Debt Covenants
We are required to comply with certain affirmative and negative covenants contained within the Coty Credit Agreement and the Galleria Credit Agreement (collectively the “Debt Agreements”). With certain exceptions as described below, the Debt Agreements include a financial covenant that requires us to maintain a Total Net Leverage Ratio (as defined below), equal to or less than the ratios shown below for each respective test period.
Test Period Ending
Total Net Leverage Ratio(a)
December 31, 20175.00 to 1.00
March 31, 20184.75 to 1.00
June 30, 20184.75 to 1.00
September 30, 20184.50 to 1.00
December 31, 20184.50 to 1.00
March 31, 20194.25 to 1.00
June 30, 20194.25 to 1.00
September 30, 20194.00 to 1.00
December 31, 20194.00 to 1.00
March 31, 20204.00 to 1.00
June 30, 20204.00 to 1.00
September 30, 20204.00 to 1.00

(a) Total Net Leverage Ratio means, as of any date of determination, the ratio of: (a) (i) Total Indebtedness minus (ii) unrestricted cash and Cash Equivalents of the Parent Borrower and its Restricted Subsidiaries as determined in accordance with GAAP to (b) Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) forof 2x. Any determination to pay dividends in the most recently ended Test Period (eachfuture will be at the discretion of our Board of Directors.
Dividends on the Convertible Series B Preferred Stock are payable in cash, or by increasing the amount of accrued dividends on Convertible Series B Preferred Stock, or any combination thereof, at the sole discretion of the definedCompany. We expect to pay such dividends in cash on a quarterly basis, subject to the declaration thereof by our Board of Directors. The terms used withinof the definition of Total Net Leverage Ratio haveConvertible Series B Preferred Stock restrict our ability to declare cash dividends on our common stock until all accrued dividends on the meanings ascribed to them within the Debt Agreements).
In the four fiscal quarters following the closing of any Material Acquisition (as defined in the Debt Agreements), including the fiscal quarter in which such Material Acquisition occurs, the maximum Total Net Leverage Ratio shall be the lesser of (i) 5.95 to 1.00 and (ii) 1.00 higher than the otherwise applicable maximum Total Net Leverage Ratio for such quarter (as set forth in the table above). Immediately after any such four fiscal quarter period, there shall be at least two consecutive fiscal quarters during which our Total Net Leverage Ratio is no greater than the maximum Total Net Leverage Ratio that would otherwiseConvertible Series B Preferred Stock have been required in the absence of such Material Acquisition, regardless of whether any additional Material Acquisitions are consummated during such period. Following the acquisition of Younique and the Burberry Beauty Business, the Total Net Leverage Ratio applicable for the period ending December 31, 2017 is 5.95 to 1.00. As of December 31, 2017, we were in compliance with all covenants contained within the Debt Agreements.
On November 8, 2017, the Company entered into amendments to the Coty Credit Agreement and the Galleria Credit Agreement, which amended the definition of Adjusted EBITDA. Each amendment allowed for the extension of the period during which certain synergies and cost savings can be incorporated in the financial covenant calculations under the respective agreements.
Cash Flows
 Six Months Ended
December 31,


2017 2016
Condensed Consolidated Statements of Cash Flows Data:
(in millions)
   
Net cash provided by operating activities$307.8
 $663.4
Net cash used in investing activities(494.0) (342.0)
Net cash provided by financing activities33.2
 299.2
Net cash provided by operating activities
Net cash provided by operating activities was $307.8 and $663.4 for the six months ended December 31, 2017 and 2016, respectively. The decrease in cash inflows of $355.6 was primarily due to an increase in cash outflows related to working capital of $636.7, partially offset by an increase in net income after adjusting for non-cash items of $277.0. Working capital changes in the six months ended December 31, 2017 generated cash outflows of $112.1, compared with generating cash inflows of $524.6 in the six months ended December 31, 2016. The movement in the working capital changes resulted primarily from (i) an increase in accounts payable during the six months ended December 31, 2016 due to implementing significantly longer Coty payment terms to the vendors associated with the P&G Beauty Business, as compared to the prior P&G payment terms and (ii) an increase in accrued expenses and other current liabilities during the six months ended December 31, 2016 due to the establishment of accruals for the Global Integration Activities along with incrementally larger accruals resulting from the larger combined business subsequent to the acquisition of the P&G Beauty Business. The increase in net income after adjusting for non-cash items in the six months ended December 31, 2017, compared to same period in 2016, resulted primarily from higher net income and depreciation and amortization from recent acquisitions.
Net cash used in investing activities
Net cash used in investing activities was $(494.0) and $(342.0) for the six months ended December 31, 2017 and 2016, respectively. The increase in cash outflows of $152.0 was primarily due to higher cash payments for business combinations of $120.8 and increased capital expenditures of $34.0. The business combinations in the current period included $245.1 for the Burberry Beauty Business, $12.0 for other acquisitions and $7.5 of net working capital adjustments from the Younique acquisition previously accrued fordeclared and paid in the current period.cash.
Net cash provided by financing activities
Net cash provided by financing activities was $33.2For additional information on our dividends, see Note 13—Equity and $299.2 for the six months ended December 31, 2017 and 2016, respectively. The decrease in cash inflows of $266.0 was primarily due to lower net borrowings of short-term debt, the revolving loan facilities and term loans of $283.0 and higher distributions to noncontrolling interests and redeemable

noncontrolling interests of $28.2 in the current period. These amounts were partially offset by lower payments for deferred financing fees of $19.4 in the current period and no repurchases of Class A Common Stock held as TreasuryConvertible Preferred Stock in the current period, comparednotes to $36.3 in the prior period.
Dividends
The following dividends were declared during six months ended December 31, 2017:
Declaration Date Dividend Type Dividend Per Share Holders of Record Date Dividend Value Dividend Payment Date Dividends Paid 
Dividends Payable (a)
Fiscal 2018
August 22, 2017 Quarterly $0.125
 September 1, 2017 $94.4
 September 14, 2017 $93.6
 $0.8
November 9, 2017 Quarterly $0.125
 November 30, 2017 $94.6
 December 14, 2017 $93.7
 $0.9
Fiscal 2018   $0.250
   $189.0
   $187.3
 $1.7
(a) The dividend payable is the value of the remaining dividends payable upon settlement of the RSUs and phantom units outstanding as of the Holders of Record Date. Dividends payable are recorded as Accrued expenses and other current liabilities and Other noncurrent liabilities in theour Condensed Consolidated Balance Sheet.
As may be declared by the Board of Directors, we anticipate issuing future dividends on a quarterly basis.Financial Statements.
Treasury Stock - Share Repurchase Program
On February 3, 2016,For information on our Share Repurchase Program, see Note 13—Equity and Convertible Preferred Stock in the Board authorized usnotes to repurchase up to $500.0 of our Class A Common Stock (the “Incremental Repurchase Program”). Subject to certain restrictions on repurchases of shares through September 30, 2018 imposed by the tax matters agreement, dated October 1, 2016, as amended, between us and P&G entered into in connection with the P&G Beauty Business acquisition, repurchases may be made from time to time at our discretion, based on ongoing assessments of the capital needs of the business, the market price of our Class A Common Stock, and general market conditions. For the three and six months ended December 31, 2017, we did not repurchase any shares of our Class A Common Stock. As of December 31, 2017, we had $396.8 remaining under the Incremental Repurchase Program.Condensed Consolidated Financial Statements.
Commitments and Contingencies
Mandatorily See Note 16—Redeemable Financial Interest
United Arab Emirates Joint Venture (“U.A.E. JV”)
We are required under a shareholders agreement (the “U.A.E. Shareholders Agreement”) to purchase all of the shares held by the noncontrolling interest holder equal to 25% of the U.A.E. JV at the termination of the agreement. We have determined such shares to be an MRFI that is recorded as a liability. The liability is calculated based upon a pre-determined formula in accordance with the U.A.E Shareholders Agreement. As of December 31, 2017 and June 30, 2017, the liability amounted to $5.7 and $5.2, of which $4.7 and $4.7, respectively, was recorded in Other noncurrent liabilities and $1.0 and $0.5, respectively, was recorded in Accrued expenses and other current liabilitiesNoncontrolling Interests in the notes to our Condensed Consolidated Balance Sheet.
Southeast Asian subsidiary
On May 23, 2017, we entered into the Sale of Shares and Termination Deed (the “Termination Agreement”) to purchase the remaining 49% noncontrolling interest from the noncontrolling interest holder of a certain Southeast Asian subsidiaryFinancial Statements for a purchase price of $45.0. Additionally, all remaining retained earnings will be paid out as dividends prior to the purchase. The payment and termination will be effectiveinformation on June 30, 2019. As a result of the Termination Agreement, the noncontrolling interest balance is recorded as an MRFI. The MRFI balance will be accreted to the redemption value until the effective date of the purchase with changes in the balance being reflected in Other expense, net in the Condensed Consolidated Statements of Operations.
As of December 31, 2017 and June 30, 2017, the MRFI liability amounted to $46.7 and $49.3, respectively, of which $43.0 and $41.7, respectively, was recorded in Other noncurrent liabilities and $3.7 and $7.6, respectively, was recorded in Accrued expenses and other current liabilities in the Condensed Consolidated Balance Sheet.
Redeemable Noncontrolling Interests
As of December 31, 2017, the redeemable noncontrolling interests (“RNCI”) consisted of a 25.0% interest in aour subsidiary in the United Arab EmiratesMiddle East.
Legal Contingencies
For information on our litigation matters and a 40.7% interestBrazilian tax assessments, see Note 17—Commitments and Contingencies in the consolidated subsidiaries relatednotes to our Condensed Consolidated Financial Statements. In relation to the Younique acquisition. See Note 4—Business Combinations.

Younique
On February 1, 2017, after the closeappeal of the acquisition, the pre-acquisition Younique membership holders had a 40% membership interest in Foundation. On October 15, 2017, sharesour Brazilian tax assessments, we have entered into surety bonds of Foundation were issued to employees of Younique under a stock ownership program and incentive stock grants were granted, resulting in a 0.7% increase to the noncontrolling interest ownership percentage. The impact of the additional shares was recorded as an increase to RNCI of $8.5, a decrease in APIC of $8.3 and cash proceeds of $0.2. We account for the 40.7% noncontrolling interest portion of Foundation as RNCI due to the noncontrolling interest holder’s right to put their shares to us in certain circumstances. While Foundation is a majority-owned consolidated subsidiary, we record income tax expense based on our 59.3% membership interest in Foundation due to its treatment as a partnership for U.S. income tax purposes. Accordingly, Foundation’s net income attributable to RNCI is equal to the 40.7% noncontrolling interest of Foundation’s net income excluding a provision for income taxes. On December 22, 2017, the Tax Act was enacted, which included a reduction of the U.S. corporate tax rate. The tax rate change was the primary driver of a $79.2 adjustment to the fair value of the RNCI balance for the quarter. We recognized $574.8 and $481.6 as the redeemable noncontrolling interest balancesR$423.8 million (approximately $87.3) as of December 31, 2017 and June 30, 2017, respectively.
Subsidiary in the United Arab Emirates
On May 31, 2017, we, along with the non-controlling interest holder in our subsidiary in the United Arab Emirates (“Middle East Subsidiary”) amended the shareholder agreement governing our Middle East Subsidiary. As of July 1, 2017, the amendment reduced the percentage of the noncontrolling interest holders’ share to 25% in exchange for our contribution of the local distribution rights for the brands acquired as part of the P&G Beauty Business acquisition to the joint venture’s portfolio of brands. This resulted in a dilution of the RNCI that resulted in a decrease of the RNCI and an increase of APIC of $17.0.2023.
Off-Balance Sheet Arrangements
We had undrawn letters of credit of $5.4$4.1 and $5.5$7.2 and bank guarantees of $20.7 and $16.3 as of December 31, 20172023 and June 30, 2017,2023, respectively. We consider these letters of credit to be immaterial to the business.
Contractual Obligations
Our principal contractual obligations and commitments as of December 31, 2017June 30, 2023 are summarized in Item 7 - "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Contractual Obligations and Commitments,"” of our Fiscal 20172023 Form 10-K. Refer to Item 2 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Share Repurchases” above for discussion of the obligations related to our announced share repurchase during fiscal 2024. For the six months ended December 31, 2017,2023, there have been no other material changes in our contractual obligations outside the ordinary course of business.

Critical Accounting Policies
We believe that the critical accounting policies listed below involve our more significant judgments, assumptions and estimates and, therefore, could have the greatest potential impact on our Condensed Consolidated Financial Statements:
•Revenue RecognitionRecognition;
•Equity Investments;
•Goodwill, Other Intangible Assets and Long-Lived AssetsAssets;
Business Combinations•Inventory; and
Inventory
Pension Benefit Costs
•Income Taxes
Redeemable noncontrolling interestsTaxes.
As of December 31, 2017,2023, there have been no other material changes to the items disclosed as critical accounting policies and estimates in “Management“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II—Item 7 of our Fiscal 20172023 Form 10-K. Below are updated disclosures regarding the Company’s goodwill and intangible assets.
Goodwill
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Based on the annual impairment test performed at May 1, 2017, we determined that the fair values
Table of our reporting units exceeded their respective carrying values at that date by a range of approximately 11.5% to 81.9%. To determine the fair value of our reporting units, we have used expected growth rates that are in line with expected market growth rates for the respective product categories and include a discount rate of 7.75%. The impact of recent acquisitions of the P&G Beauty Business, ghd and Younique is significant to the reporting units as day one carrying values of the recently acquired assets represent 71.1%, 79.1% and 77.8% of total Luxury, Consumer Beauty and Professional Beauty reporting units’ carrying values, respectively as of the date of the test and on acquisition their carrying values approximate their fair values. Accordingly, the newly acquired assets initially did not have cushion and therefore lower the overall cushion for the reporting units as of May 1, 2017. The percentage by which the fair value of the Professional Beauty reporting unit exceeded its carrying value was 11.5%. For the ProfessionalContents

Beauty reporting unit, we determined that a 75 basis points increase in the discount rate from 7.75% to 8.5% would cause a decrease of the excess over carrying value from 11.5% to 1.3%. A decrease in the weighted average revenue growth rate (for fiscal 2017 to 2022) from 1.0% to 0.5% would result in a decrease to the excess over carrying value from 11.5% to 0.4%.
Other Intangible Assets
The carrying value of our indefinite-lived other intangible assets was $3,210.1 as of December 31, 2017, and is comprised of trademarks for the following brands: OPI of $668.1, philosophy of $281.1, Sally Hansen of $186.0, Galleria related trademarks of $1,575.0, ghd related trademarks of $162.3, and other brands totaling $337.6. As of May 1, 2017, we determined that the fair value of our Sally Hansen brand exceeded its carrying value by approximately 8% using projections that assumed weighted average revenue growth rates of approximately (1.0)% for fiscal 2017 to fiscal 2022 and a discount rate of 8.5%.  The fair value of the Sally Hansen trademark would fall below its carrying value if the weighted average annual growth rate decreased by approximately 49 basis points or the discount rate increased by 50 basis points. The fair value of one of our regional brands exceeded its carrying value of $13.0 by approximately 8% using projections that assumed weighted average revenue growth rates of approximately 3.5% for fiscal 2017 to 2022 and a discount rate of 13.5%.  The fair value of this regional brand would fall below its carrying value if the weighted average annual growth rate decreased by approximately 122 basis points or the discount rate increased by 150 basis points. The fair values of the remaining indefinite-lived trademarks exceeded their carrying values by amounts ranging from 19.0% to 92.0%.

Item 3. Quantitative and Qualitative Disclosures About Market Risk
See Note 12—Derivative Instruments for updates to our foreign currency risk management and interest rate risk management. There have been no material changes in market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of our Fiscal 20172023 Form 10-K.

Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer (the “CEO”) and our Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2017.2023. Based on the evaluation of our disclosure controls and procedures as of December 31, 2017,2023, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
Except as described below, thereThere were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) of the Exchange Act during the second fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We completed the acquisition of Younique on February 1, 2017. Younique accounted for 1.8% of our total assets as of December 31, 2017 and 4.3% of our total net sales for the six months ended December 31, 2017. As part of our ongoing integration of Younique, we are continuing to incorporate our controls and procedures into the Younique subsidiaries and to augment our company-wide controls to reflect the risks inherent in this acquisition.
Inherent Limitations on Effectiveness of Controls
Our management, including our CEO and CFO, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving our objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more

people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are involved, from time to time,For information on our legal matters, see Note 17—Commitments and Contingencies in various litigation and administrative and other legal proceedings (including regulatory and/or governmental actions) incidental or relatedthe notes to our business, including consumer class or collective action, personal injury, intellectual property, competition, and advertising claims litigation and disputes, among others (collectively, “Legal Proceedings”). While we cannot predict any final outcomes relating thereto, management believes that the outcome of current Legal Proceedings should not have a material effect upon our business, prospects, financial condition, results of operations, or cash flows, nor the trading price of our securities. However, management’s assessment of our Legal Proceedings, especially those related to our recently completed acquisitions, is ongoing, and could change in light of the discovery of additional facts with respect to Legal Proceedings pending against us not presently known to us or determinations by judges, arbitrators, juries or other finders of fact or deciders of law which are not in accord with management’s evaluation of the probable liability or outcome of such Legal Proceedings. From time to time, we are in discussions with regulators, including discussions initiated by us, about actual or potential violations of law in order to remediate or mitigate associated legal or compliance risks. As the outcomes of such proceedings are unpredictable, we can give no assurance that the results of any such Legal Proceedings will not materially affect our reputation, our business, prospects, financial condition, results of operations, or cash flows, nor the trading price of our securities.Condensed Consolidated Financial Statements.


Item 1A. Risk Factors.Factors.
We have disclosed information about the risk factors that could adversely affect our business in Part II,I, Item 1A under the heading “Risk Factors” ofin our Annual Report on Form 10-K for the fiscal year period ended June 30, 2017. There have been no material changes to these risk factors.2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The table below provides information with respect to purchases ofNo shares of our Class A Common Stock in the open market by JAB that settledwere repurchased during the fiscal quarter ended December 31, 2017.2023.
Item 5. Other Information
During the three months ended December 31, 2023, none of the Company’s directors or Section 16 reporting officers adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of the SEC’s Regulation S-K).
PeriodTotal Number of Shares Purchased
Average Price Paid per Share (a)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs (a)
October 1, 2017 - October 31, 2017—
—
—
—
November 1, 2017 - November 30, 20178,200,000
$16.88
—
—
December 1, 2017 - December 31, 2017—
—
—
—
Total8,200,000
$16.88
—
—
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(a) Excludes fees and commissions.
Table of Contents

Item 6. Exhibits, Financial Statement Schedules.
The exhibits listed below are filed as part of this Quarterly Report on Form 10-Q:
Exhibit NumberDescription
10.131.1
10.2
Side Letter, dated as of November 29, 2017, between Coty Services UK Limited and Camillo Pane.
10.3
Side Letter, dated November 29, 2017, between Coty Services UK Limited and Patrice de Talhouët.
21.1
List of significant subsidiaries.
31.1
Certification of Chief Executive Officer, pursuant to Rule 13a-14(a).
31.2
32.1
32.2
101.INS*Inline XBRL Instance Document.
101.SCH*Inline XBRL Taxonomy Extension Schema Document.
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
* Pursuant to applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating to the submission
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Table of interactive data files in such exhibits and are not subject to liability under any anti-fraud provisions of the federal securities laws as long as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.Contents
** Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementary to the Securities and Exchange Commission a copy of any omitted schedule or similar attachment upon request.


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COTY INC.
COTY INC.
Date: February 8, 20182024By:By:/s/Camillo PaneSue Nabi
Name: Camillo PaneSue Nabi
Title: Chief Executive Officer
(Principal Executive Officer)
/s/Laurent Mercier
/s/Patrice de TalhouëtName: Laurent Mercier
Name: Patrice de Talhouët
Title: Chief Financial Officer
(Principal Financial Officer)



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