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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 23, 2017
Coty Inc.
(Exact Name of Registrant as Specified in its Charter)
DE
001-35964
13-3823358
(State or other Jurisdiction
of Incorporation)
(Commission
File Number)
(I.R.S. Employer
Identification No.)
350 Fifth Avenue
New York, NY
10118
(Address of Principal Executive Offices)
(Zip Code)
Registrant’s telephone number, including area code: (212) 389-7300
(Former name or former address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 7.01.
Regulation FD Disclosure.
Coty Inc. (the “Company”) is providing supplemental unaudited historical combined financial information regarding the
financial performance of the combined company following the close of the previously disclosed transaction to acquire certain assets
and liabilities relating to The Procter & Gamble Company’s global fine fragrances, salon professional, cosmetics and retail hair color
businesses, along with select hair styling brands. The supplemental unaudited historical combined financial information is attached as
Exhibit 99.1 hereto and is incorporated herein by reference.
The Company is including non-GAAP financial information in the supplemental unaudited historical combined financial
information. Reconciliation of these non-GAAP financial measures to the nearest comparable GAAP financial measures are contained
in the supplemental unaudited historical combined financial information attached as Exhibit 99.1.
Forward-Looking Statements
Certain statements in this Form 8-K are “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect the Company’s current views with respect to, among other things, the
Company’s future operations and financial performance. These forward-looking statements are generally identified by words or
phrases, such as “anticipate”, “estimate”, “plan”, “project”, “expect”, “believe”, “intend”, “foresee”, “forecast”, “will”, “may”,
“should”, “outlook”, “continue”, “target”, “aim” and similar words or phrases. These statements are based on certain assumptions and
estimates that the Company considers reasonable and are subject to a number of risks and uncertainties, many of which are beyond the
control of the Company, which could cause actual events or results to differ materially from such statements, including:
·
·
·
the Company’s ability to achieve its global business strategy, compete effectively in the beauty industry and achieve the
benefits contemplated by its recent strategic transactions within the expected time frame;
use of estimates and assumptions in preparing the Company’s financial statements, including with regard to revenue
recognition, stock compensation expense, the market value of inventory and the fair value of acquired assets and liabilities
associated with acquisitions;
managerial, integration, operational, regulatory, legal and financial risks and expenses associated with the Company’s
strategic transactions generally and the Company’s recent acquisitions pending partnership specifically;
·
the integration of The Procter & Gamble Company’s (“P&G”) global fine fragrances, salon professional, cosmetics and
retail hair color businesses, along with select hair styling brands with the Company’s business, operations and culture and
the ability to realize synergies and other potential benefits within the time frames currently contemplated;
·
changes in law, regulations and policies that affect the Company’s business or products or the business or products of its
pending acquisition;
the Company’s and its brand partners' and licensors' ability to obtain, maintain and protect the intellectual property rights,
including trademarks, brand names and other intellectual property used in their respective businesses, products and software,
and their abilities to protect their respective reputations;
risks to the Company of claims by third parties for infringement on intellectual property rights;
the Company’s ability to successfully execute its announced intent to divest or discontinue non-strategic brands and to
rationalize wholesale distribution by reducing the amount of product diversion to the value and mass channels;
the Company’s ability to anticipate, gauge and respond to market trends and consumer preferences, which may change
rapidly, and the market acceptance of new products;
risks related to the Company’s international operations, including reputational, regulatory, economic and foreign political
risks;
the Company’s dependence on certain licenses, entities performing outsourced functions and third-party suppliers, including
third party software providers;
administrative, development and other difficulties in meeting the expected timing of market expansions, product launches
and marketing efforts;
global political and/or economic uncertainties or disruptions;
increased competition, consolidation among retailers, shifts in consumers’ preferred distribution channels and other changes
in the retail and wholesale environment in which the Company does business and sell their products;
disruptions in operations, including due to disruptions or consolidation in supply chain, manufacturing rights or information
systems, labor disputes and natural disasters;
restrictions imposed on the Company through its credit facilities and changes in the manner in which the Company finances
its debt and future capital needs, including potential acquisitions;
·
·
·
·
·
·
·
·
·
·
·
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·
increasing dependency on information technology and the Company's ability to protect against service interruptions, data
corruption, cyber-based attacks or network security breaches, costs and timing of implementation and effectiveness of any
upgrades to their respective information technology systems and failure by the Company to comply with any privacy or data
security laws or to protect against theft of customer, employee and corporate sensitive information;
·
·
the illegal distribution and sale by third parties of counterfeit versions of the Company’s products;
and other factors described elsewhere in this document and from time to time in documents that Coty files with the
Securities and Exchange Commission.
More information about potential risks and uncertainties that could affect the Company’s business and financial results is
included under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2016 and other periodic
reports the Company has filed and may file with the Securities and Exchange Commission from time to time.
All forward-looking statements made in this communication are qualified by these cautionary statements. These
forward-looking statements are made only as of the date of this communication, and the Company does not undertake any obligation,
other than as may be required by 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.
Item 9.01.
Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.
99.1
Description
Supplemental unaudited historical combined financial information.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized.
COTY INC.
(Registrant)
Date: January 23, 2017
By:
/s/ Patrice de Talhouët
Name: Patrice de Talhouët
Title: Chief Financial Officer
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COTY INC.
EXHIBIT INDEX
Exhibit No.
99.1
Description
Supplemental unaudited historical combined financial information.
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Exhibit 99.1
Supplemental Unaudited Historical Combined Financial Information
The following supplemental unaudited historical combined financial information have been prepared by Coty Inc. (“ Coty ”) to
give effect to the merger (the “ Merger ”) of Green Acquisition Sub Inc. (“ Merger Sub ”) with and into Galleria Co. (“ Galleria
Company ”), with Galleria Company surviving the merger and becoming a wholly owned subsidiary of Coty, as contemplated by the
Transaction Agreement, dated as July 8, 2015, as amended (the “ Transaction Agreement ”), by and among The Procter & Gamble
Company (“ P&G ”), Galleria Company, Coty and Merger Sub. The Merger was completed on October 1, 2016. As used herein, “
P&G Specialty Beauty Business ” refers to the business of P&G and its subsidiaries relating to P&G’s global fine fragrances, salon
professional, cosmetics and retail hair color businesses, along with select hair styling brands, excluding (i) the Dolce & Gabbana and
Christina Aguilera fragrance licenses (the “ Excluded Brands ”) that were not acquired by Coty in the Merger, and (ii) the Rochas,
Laura Biagiotti, Naomi Campbell and Giorgio Beverly Hills brands that were divested by P&G, and the Puma brand, which was
discontinued by P&G (the divested and discontinued brands together, the “ Divested Brands ”).
The supplemental unaudited historical combined financial information is presented giving effect to the completion of the
Merger as if it had occurred as of July 1, 2015, the beginning of the annual period presented. The supplemental unaudited historical
combined financial information is derived from P&G Specialty Beauty Business’ audited historical combined statements of operations
for the fiscal year ended June 30, 2016 with Coty’s audited historical statement of consolidated operations for the year ended June 30,
2016, and P&G Specialty Beauty Business’ unaudited interim condensed combined financial statements for the quarters presented
with Coty’s unaudited condensed consolidated financial statements for the quarters presented.
The combined financial information presented below is derived by adding the financial information for Coty and P&G
Specialty Beauty Business for the periods presented. The supplemental unaudited historical combined financial information has been
prepared for illustrative purposes only, and is not necessarily indicative of the operating results or financial position that would have
occurred if the Merger had been consummated on the date indicated, nor is necessarily indicative of the results of operations that may
be expected for any future period or date. Coty and P&G Specialty Beauty Business may have performed differently had they actually
been combined during the periods presented.
The supplemental unaudited historical combined financial information does not include any adjustments related to potential
profit improvements, potential cost savings or adjustments to fully conform to the accounting policies of Coty.
Combined Net Revenues:
For the
year ended
For the three months ended
(In millions)
September
30, 2015
December
31, 2015
March
30, 2016
June 30,
2016
June 30,
2016
Combined Net Revenues:
Luxury
Consumer Beauty
Professional Beauty
Total Combined Net Revenues
$765
$1,027
$393
$2,185
$904
$1,146
$413
$2,463
$631
$940
$365
$1,936
$629
$1,127
$414
$2,170
$2,929
$4,240
$1,585
$8,754
Coty Net Revenues(1):
Luxury
Consumer Beauty
Professional Beauty
Coty Net Revenues
$478
$569
$65
$1,112
$549
$597
$65
$1,211
$407
$488
$56
$951
$402
$609
$64
$1,075
$1,836
$2,263
$250
$4,349
P&G Specialty Beauty Business Net Revenues(2):
Luxury
Consumer Beauty
Professional Beauty
P&G Specialty Beauty Business Net Revenues:
$287
$458
$328
$1,073
$354
$550
$348
$1,252
$223
$453
$309
$985
$227
$518
$350
$1,095
$1,091
$1,979
$1,335
$4,405
1
(1) Includes the financial impact of Coty’s acquisition of 100% of the net assets of the personal care and beauty business of
Hypermarcas S.A. from February 1, 2016.
(2) Represents P&G Specialty Beauty Business net revenues excluding the Excluded Brands and the Divested Brands as set forth in
the table below.
(In millions)
Net revenues
Carve-Out of Excluded Brands and
Divested Brands
P&G Specialty Beauty Business Net
Revenues
Q1
$
1,219
$
(146)
$
1,073
FY 2016
Q3
Q2
1,404
$
1,092
(152)
$
1,252
Q4
$
1,196
(107)
$
985
FY Total
$
(101)
$
1,095
4,911
(506)
$
4,405
Combined Reported to Adjusted Operating Income:
To supplement the financial measures prepared in accordance with accounting principles generally accepted in the United States of
America (“GAAP”), Coty uses non-GAAP financial measures including Adjusted operating income. Coty believes these non-GAAP
financial measures better enable management and investors to analyze and compare operating performance from period to period.
Adjusted operating income excludes restructuring costs and business structure realignment programs, amortization expense,
acquisition-related costs, the impact of accounting modifications from liability plan accounting to equity plan accounting as a result of
amended and restated share-based compensation plans, asset impairment charges and other adjustments as described below. Reported
operating margin represents reported operating income as a percent of Net revenues. Adjusted operating margin represents Adjusted
operating income as a percent of Net revenues. Coty does not consider these items to be reflective of the Company’s 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 the Company’s operating structure and integrate new acquisitions, and fluctuate based on specific facts and
circumstances. These non-GAAP financial measures should not be considered in isolation, or as a substitute for, or superior to,
financial measures calculated in accordance with GAAP.
(In millions)
Combined Operating Income:
Luxury
Consumer Beauty
Professional Beauty
Corporate
Total Combined Operating Income
For the year ended June 30, 2016
Reported
Adjustments
Adjusted
(GAAP)
(Non-GAAP)
$260
$547
$159
($524)
$442
Combined Operating Margin:
Luxury
Consumer Beauty
Professional Beauty
Corporate
Total Combined Operating Margin
8.9%
12.9%
10.0%
N/A
5.0%
Coty Inc. Operating Income:
Luxury
Consumer Beauty
Professional Beauty
Corporate
Coty Inc. Operating Income
$229
$246
$68
($289)
$254
Coty Inc. Operating Margin:
Luxury
Consumer Beauty
Professional Beauty
Corporate
Total Combined Operating Margin
12.5%
10.9%
27.2%
N/A
5.8%
($50)
$15
$28
$524
$517
$210
$562
$187
$0
$959
7.2%
13.3%
11.8%
N/A
11.0%
$59
$12
$9
$289
$369
$288
$258
$77
$0
$623
15.7%
11.4%
30.8%
N/A
14.3%
2
P&G Specialty Beauty Business Operating Income:
Luxury
Consumer Beauty
Professional Beauty
Corporate
P&G Specialty Beauty Business Operating Income
$31
$301
$91
($235)
$188
P&G Specialty Beauty Business Operating Margin:
Luxury
Consumer Beauty
Professional Beauty
Corporate
P&G Specialty Beauty Business Operating Margin
2.8%
15.2%
6.8%
N/A
4.3%
($109)
$3
$19
$235
$148
($78)
$304
$110
$0
$336
(7.1%)
15.4%
8.2%
N/A
7.6%
Reconciliation of Reported Operating Income to Adjusted Operating Income:
For the year ended
June 30, 2016
(In millions)
Combined Reconciliation to Adjusted Operating Income:
Costs related to acquisition activities
Restructuring and other business realignment costs
Amortization expense
Termination fee
Asset impairment charges
Share-based compensation expense adjustment
Gain on sale of asset
Operating income of Excluded Brands and Divested Brands
Total Adjustments:
(i)
$252
$160
$106
$83
$54
$1
(25)
(114)
$517
(i)
(ii)
(iii)
(vii)
(iv)
(v)
(vi)
(viii)
Coty Inc. Reconciliation to Adjusted Operating Income:
Costs related to acquisition activities
Restructuring and other business realignment costs
Amortization expense
Share-based compensation expense adjustment
Asset impairment charges
Gain on sale of asset
Total Adjustments
$198
$110
$79
$1
$6
(25)
$369
(i)
(ii)
(iii)
(v)
(iv)
(vi)
P&G Specialty Beauty Business Reconciliation to Adjusted Operating Income:
Termination fee
Costs related to acquisition activities
Restructuring and other business realignment costs
Asset impairment charges
Amortization expense
Operating income of Excluded Brands and Divested Brands
Total Adjustments
$83
$54
$50
$48
$27
(114)
$148
(vii)
(i)
(ii)
(iv)
(iii)
(viii)
Cost related to acquisition activities: Coty excludes acquisition-related costs and acquisition accounting impacts such as those
related to transaction costs and costs associated with the revaluation of acquired inventory in connection with business
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combinations because these costs are unique to each transaction. The nature and amount of such costs vary significantly based
on the size and timing of the acquisitions and the maturities of the businesses being acquired. Also, the size, complexity and/or
volume of past acquisitions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity
and/or volume of any future acquisitions.
(ii)
Restructuring and other business realignment costs: Coty excludes 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 above referenced expenses from the non-GAAP financial measures, management is able to evaluate Coty’s ability to utilize
existing assets and estimate their long-term value. Furthermore, management believes that the adjustment of these items
supplement the GAAP information with a measure that can be used to assess the sustainability of Coty’s operating
performance.
(iii)
Amortization expense: Coty excludes 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. Management
believes that the adjustment of these items supplement the GAAP information with a measure that can be used to assess the
sustainability of Coty’s operating performance. Although Coty excludes amortization of intangible assets from the non-GAAP
expenses, 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.
(iv)
Asset impairment charges: Coty excludes 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. Management believes that the
adjustment of these items supplement the GAAP information with a measure that can be used to assess the sustainability of
Coty’s operating performance.
(v)
Share-based compensation expense adjustment: Coty excludes the impact of the fiscal 2013 accounting modification from
liability plan to equity plan accounting for the share-based compensation plans as well as other share-based compensation
transactions that are not reflective of the ongoing and planned pattern of recognition for such expense.
Gain on sale of assets: Coty has excluded costs associated with gains on sales of assets which are not part of Coty’s ongoing
business. The Company does not expect these items to occur, either as a result of the nature or size, as part of Coty’s normal
business on a regular basis. Coty’s management believes that the exclusion of such amounts allows management and readers of
the financial statements to further understand the financial results.
(vi)
(vii) Termination fee: Reflects adjustment to remove one-time termination fees as the fees relate to the termination and sale of Dolce
& Gabbana fragrance license which is excluded from the Merger.
(viii) Operating income of Excluded Brands and Divested Brands: Reflects adjustments to remove the results from the Excluded
Brands and the Divested Brands as these brands were not transferred with the P&G Specialty Beauty Business.
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