
Feb 8, 2022
- 2Q22 net revenues increased 12% on a reported and LFL basis. Net revenue trends were driven by solid growth in both Prestige and Consumer Beauty.
- Reported operating income was $244.0 million in 2Q22.
- 2Q22 adjusted operating income increased to $236.3 million, up from $203.0 million, with 70 bps of margin expansion to 15.0%.
- 2Q22 adjusted EBITDA of $311.9 million, increased 10%, with an adjusted EBITDA margin of 19.8%.
- 2Q22 reported EPS was $0.23. Adjusted EPS of $0.17, improved from $0.13 last year, including a 2 cent discrete tax benefit in the quarter.
- Cost reductions remained solid with approximately $40 million of additional reductions, bringing YTD total savings close to $100 million.
- 2Q22 free cash flow of $408.0 million improved by $18.6 million from last year driven by higher net income on a cash basis.
- Financial Net Debt in line with expectations at $4,454.2 million, which decreased sequentially, fueled by the free cash flow generation and bringing the financial leverage to 4.9x. Economic Net Debt totaled $3,279.2 million at quarter end.
- Entering Q3, Wella has completed a refinancing of its existing debt in order to fund a shareholder distribution, which should result in approximately $175 million of cash proceeds to Coty. The Company will utilize this distribution primarily to reduce existing financial net debt.
- 2Q22 reported net revenues of $1,578.2 million increased 12% year-over-year. LFL revenue increased 12%, driven by an 12% increase in both Prestige and Consumer Beauty.
- Year-to-date reported net revenues of $2,949.9 increased 16% year-over-year, including a positive FX impact of 1%. LFL revenue increased 16%, driven by LFL increases in Prestige of 21%, and Consumer Beauty of 8%.
- 2Q22 reported gross margin of 64.4% increased from 58.7% in the prior-year period, while adjusted gross margin of 64.6% increased from 58.7% in 2Q21. The increase was driven by positive intra-category mix-shift, including in both Prestige and Consumer Beauty, price and mix management, excess & obsolescence improvement, and better absorption on improved volumes.
- Year-to-date reported gross margin of 63.9% increased from 58.7%, while adjusted gross margin of 64.0% increased from 58.7% in 2Q21. The increase was due to positive mix-shift, including in both Prestige and Consumer Beauty, excess & obsolescence improvement, better absorption, and improved volumes.
- 2Q22 reported operating income of $244.0 million improved from a reported operating income of $17.0 million in the prior year due to a $59.7 million reduction in restructuring and other business realignment costs, a $44.8 million reduction in acquisition and divestiture related expenses, the real estate sale gain, and higher gross margin, partially offset by higher SG&A expenses stemming from increased marketing investment.
- 2Q22 adjusted operating income of $236.3 million rose from $203.0 million in the prior year, while the adjusted EBITDA of $311.9 million increased 10% from $284.5 million in the prior year. The increase was driven by a higher gross margin and continued fixed cost reductions, partially offset by higher A&CP expenses, primarily within working media. For 2Q22, the adjusted operating margin increased 70 bps to 15.0%, while the adjusted EBITDA margin was 19.8%.
- Year-to-date reported operating income from Continuing Operations of $261.2 million increased from a reported operating loss of $49.0 million due to lower restructuring and other business realignment costs, reduced acquisition and divestiture-related expenses, increased sales, the real estate gain, and a higher gross margin, partially offset by higher SG&A expenses. Year-to-date adjusted operating income for Continuing Operations increased 51% to $436.8 million, with a margin of 14.8%, while the adjusted EBITDA totaled $590.4 million with a margin of 20.0%.
- 2Q22 reported net income of $188.9 million improved from a net loss of $39.8 million in the prior year, primarily due to the $128.3 million change in fair value of investment in Wella and the aforementioned increase in reported operating income, partially offset by higher taxes compared to the year-ago period.
- The 2Q22 adjusted net income of $147.7 million increased from $102.3 million in the prior year period.
- Year-to-date reported net income of $291.9 million compared to net income of $56.1 million in the prior year. Year-to-date adjusted net income of $210.8 million increased from $92.5 million in the prior year.
- 2Q22 reported earnings per share of $0.23 improved from a reported loss per share of $(0.05) in the prior year.
- 2Q22 adjusted EPS of $0.17 improved from $0.13 in the prior year.
- Year-to-date reported earnings per share of $0.36 rose from $0.07 in the prior year.
- Year-to-date adjusted EPS of $0.26 increased from $0.12 in the prior year.
- 2Q22 cash from operations totaling $449.0 million improved from $430.1 million in the prior-year period, reflecting an increase in net income on a cash basis. First half operating cash flow totaled $734.7 million, an increase of $262.0 million from the same period of the prior year.
- 2Q22 free cash flow of $408.0 million improved from a free cash flow of $389.4 million in the prior year driven by the increase in operating cash flow of $18.9 million. First half free cash flow of $648.7 million increased by $287.6 million from the prior year.
- Financial Net Debt of $4,454.2 million on December 31, 2021 decreased from $4,955.1 million on September 30, 2021. The decrease was driven by the strong free cash flow generated in the quarter coupled with the sale of real estate assets.
- In 2Q22, Americas net revenues of $587.0 million, or 37% of Coty sales, increased 9% as reported and LFL. This was driven by strong growth of both Prestige and Consumer Beauty. The Prestige performance continued to benefit from particularly robust fragrance category trends in the U.S., coupled with the solid performance of Coty's recent fragrance innovations, with Gucci Flora the #1 fragrance launch in the U.S. and Canada, and Burberry Hero the #4 male launch in the U.S. for all of CY21. CoverGirl also exhibited strong growth, gaining market share in the quarter, while Sally Hansen also gained share.
- In 2Q22, EMEA net revenues of $795.0 million, or 50% of Coty sales, increased 12% as reported and 13% LFL. Similar to the Americas region, growth was fairly broad-based across both Prestige and Consumer Beauty.
- In 2Q22, Asia Pacific net revenues of $196.2 million, or 12% of Coty sales, increased 17% as reported and 16% LFL. Sales were driven by strong performance in China as well as the continued recovery in Travel Retail.
- On November 10, 2021, Coty announced the sale of KKR's remaining 2.4% ownership stake in Coty. This sale further simplifies Coty's capital structure and results in additional annual dividend cash savings of approximately $11 million.
- On November 16, 2021, Coty announced that Dr. Shimei Fan will join the Company as Chief Scientific Officer, beginning on January 3, 2022. From her prior experience, Shimei brings deep and invaluable expertise across three of Coty's strategic growth drivers: color cosmetics, skincare, and the Chinese beauty market.
- On November 17, 2021, Coty released its 2021 Sustainability Report. In the report, Coty shares its progress in advancing the Company's dedicated sustainability strategy, Beauty That lasts, during Coty's FY21.
- On November 18, 2021, Coty announced that it entered into a licensing agreement with Orveda, an ultra-premium skincare brand made in France. The diversity-owned haute-professional skincare combines the best of nature with cutting-edge biotechnology and dermatological benefits to help consumers achieve a healthy skin glow that rivals makeup.
- On November 18, 2021, Coty hosted an Investor Day, where it provided an update on the significant progress made across the Company's six strategic pillars, elaborated on key operational milestones, reported on its comprehensive transformation program, and announced its financial goals through FY25 and beyond.
- On November 30, 2021, Coty completed the issuance of $500 million of 4.750% senior secured notes due in 2029. The proceeds are net leverage neutral and have been used to repay all of the euro-denominated loans outstanding under Coty's existing senior secured "term A" credit facility and a portion of the amount outstanding under its senior secured revolving credit facility due in April 2023.
- Entering Q3, Wella has completed a refinancing of its existing debt in order to fund a shareholder distribution, which should result in approximately $175 million of cash proceeds to Coty. The Company intends to utilize this distribution plus excess cash on the balance sheet to redeem its 2023 EUR 550M unsecured bonds in full following the time that the bond call premium drops to par on April 15th 2022, thereby accelerating the Company's deleveraging trajectory.
Olga Levinzon, +1 212 389-7733
olga_levinzon@cotyinc.com
Media
Antonia Werther, +31 621 394495
Antonia_Werther@cotyinc.com
- 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, the availability and widespread distribution of a safe and effective vaccine, related impact on the Company's ability to meet customer needs and on the ability of third parties on which the Company relies, including its suppliers, customers, contract manufacturers, distributors, contractors, commercial banks and joint-venture partners, to meet their obligations to the Company, in particular collections from customers, the extent that government funding and reimbursement programs in connection with COVID-19 are available to the Company, and the ability to successfully implement measures to respond to such impacts;
- the Company’s ability to successfully implement its multi-year Transformation Plan, including its management realignment, reporting structure changes, operational and organizational changes, and the initiatives to further reduce the Company’s cost base, and to develop and achieve its global business strategies (including mix management, select price increases, more disciplined promotions, and foregoing low value sales), compete effectively in the beauty industry, achieve the benefits contemplated by its strategic initiatives (including revenue growth, cost control, gross margin growth and debt deleveraging) and successfully implement its strategic priorities (including innovation performance in prestige and mass channels, strengthening its positions in core markets, accelerating its digital and e-commerce capabilities, building on its skincare portfolio, and expanding its presence in China) in each case within the expected time frame or at all;
- 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, including new products related to Kylie Jenner’s or Kim Kardashian West’s existing beauty businesses, any relaunched or rebranded products and the anticipated costs and discounting associated with such relaunches and rebrands, and consumer receptiveness to our current and future marketing philosophy and consumer engagement activities (including digital marketing and media);
- use of estimates and assumptions in preparing the Company’s 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, the fair value of the equity investment, and the fair value of acquired assets and liabilities associated with acquisitions;
- 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 the Company's response to COVID-19, the Transformation Plan, the Wella TSA, the integration of the strategic partnerships with Kylie Jenner and Kim Kardashian West, and future strategic initiatives, and, in particular, the Company's 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 avoid future supply chain and other business disruptions, reduce costs (including through the Company’s 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 on retail revenues, and other changes in the retail, e-commerce and wholesale environment in which the Company does business and sells its products and the Company’s ability to respond to such changes (including its ability to expand its digital, direct-to-consumer and e-commerce capabilities within contemplated timeframes or at all);
- the Company and its joint ventures’, business partners’ and licensors’ abilities to obtain, maintain and protect the intellectual property used in its and their respective businesses, protect its and their respective reputations (including those of its and their executives or influencers), public goodwill, and defend claims by third parties for infringement of intellectual property rights;
- any change to the Company’s capital allocation and/or cash management priorities, including any change in the Company’s dividend policy or, if the Company's Board declares dividends, the Company’s stock dividend reinvestment program;
- any unanticipated problems, liabilities or integration or other challenges associated with a past or future acquired business, joint ventures or strategic partnerships which could result in increased risk or new, unanticipated or unknown liabilities, including with respect to environmental, competition and other regulatory, compliance or legal 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),ability to protect trademarks and brand names, litigation or investigations by governmental authorities, and changes in law, regulations and policies that affect 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 KKW Holdings’ business model, revenue, sales force or business;
- the Company’s international operations and joint ventures, including enforceability and effectiveness of its 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 local and international regulations;
- the Company’s dependence on certain licenses (especially in the fragrance category) and the Company’s ability to renew expiring licenses on favorable terms or at all;
- the Company’s 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-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, including in connection with new products related to Kylie Jenner’s or Kim Kardashian West’s existing beauty businesses;
- global political and/or economic uncertainties, disruptions or major regulatory or policy changes, and/or the enforcement thereof that affect the Company’s business, financial performance, operations or products, including the impact of Brexit (and related business or market disruption), the current U.S. administration, changes in the U.S. tax code, 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 the Company operates;
- currency exchange rate volatility and currency devaluation and/or inflation;
- 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, including litigation relating to the tender offer by Cottage Holdco B.V. (the “Cottage Tender Offer”) and 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 strategic partnerships;
- the Company’s ability to manage seasonal factors and other variability and to anticipate future business trends and needs;
- disruptions in operations, sales and in other areas, including due to disruptions in our supply chain, restructurings and other business alignment activities, the Wella divestiture and related carve-out and transition activities, manufacturing or information technology systems, labor disputes, extreme weather and natural disasters, impact from COVID-19 or similar global public health events, impact of global supply chain challenges, and the impact of such disruptions on the Company’s ability to generate profits, stabilize or grow revenues or cash flows, comply with its contractual obligations and accurately forecast demand and supply needs and/or future results;
- restrictions imposed on the Company through its license agreements, credit facilities and senior unsecured bonds or other material contracts, its ability to generate cash flow to repay, refinance or recapitalize debt and otherwise comply with its debt instruments, and changes in the manner in which the Company finances its debt and future capital needs;
- increasing dependency on information technology, including as a result of remote working in response to COVID-19, and the Company’s ability to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, including ransomware attacks, costs and timing of implementation and effectiveness of any upgrades or other changes to information technology systems, and the cost of compliance or the Company’s failure to comply with any privacy or data security laws (including the European Union General Data Protection Regulation, the California Consumer Privacy Act and the Brazil General Data Protection Law) or to protect against theft of customer, employee and corporate sensitive information;
- the Company's ability to attract and retain key personnel and the impact of senior management transitions and organizational structure changes;
- the distribution and sale by third parties of counterfeit and/or gray market versions of the Company’s products;
- the impact of the Transformation Plan as well as the Wella Transaction on the Company’s relationships with key customers and suppliers and certain material contracts;
- the Company’s relationship with Cottage Holdco B.V., as the Company’s majority stockholder, and its affiliates, and any related conflicts of interest or litigation;
- the Company’s 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 the Company’s majority stockholder or the perception that such sales could occur; and
- other factors described elsewhere in this document and in documents that the Company files with the SEC from time to time.
- Costs related to acquisition and divestiture activities: The Company excludes acquisition- and divestiture-related costs and the 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, the Company excludes 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 or divested. Also, the size, complexity and/or volume of past transactions, which often drives the magnitude of such expenses, may not be indicative of the size, complexity and/or volume of any future acquisitions or divestitures.
- Restructuring and other business realignment costs: The Company 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 referenced expenses from the non-GAAP financial measures, management is able to further evaluate the Company’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 the Company’s operating performance.
- Asset impairment charges: The Company 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. Our management believes that the adjustment of these items supplement 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 supplement 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.
- Loss/(Gain) on divestitures and Gain on sale of real estate: The Company excludes the impact of Loss/(gain) on divestitures and gain on sale of real estate as such amounts are inconsistent in amount and frequency and are significantly impacted by the size of divestitures and sale of real estate. Our management believes that the adjustment of these items supplement 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 supplement 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 write-off of deferred financing fees and discounts that resulted from the pay down of our term debt from the proceeds of the Wella sale, due to the requirements of the 2018 Coty Credit Agreement, as amended. Our management believes these costs do not reflect our underlying ongoing business, and the adjustment of such costs helps investors and others compare and analyze performance from period to period. We have also 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 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. The transaction was entered into to simplify our capital structure and do not reflect our underlying ongoing business.
- Noncontrolling 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-controlling 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 is 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.
- Deemed Preferred Stock Dividends: We have excluded preferred stock deemed dividends related to the First Exchange and the Second Exchange from our calculation of adjusted net income attributable to Coty Inc. These deemed dividends are non-monetary in nature, the transactions were entered into to simplify our capital structure and do not reflect our underlying ongoing business. Management believes that this adjustment helps investors and others compare and analyze our performance from period to period.
COTY INC.
SUPPLEMENTAL SCHEDULES INCLUDING NON-GAAP FINANCIAL MEASURES(a)
** Net income for Continuing Operations and Coty Inc. are net of the Convertible Series B Preferred Stock dividends.
SECOND QUARTER BY SEGMENT (CONTINUING OPERATIONS)
SECOND QUARTER FISCAL 2022 BY REGION
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS FOR THE CONSOLIDATED STATEMENTS OF OPERATIONS
(b) Discontinued operations for the fiscal year 2021 includes activity only through November 30, 2020, the date of the sale of the Wella Business.
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS FOR THE CONSOLIDATED STATEMENTS OF OPERATIONS
(b) Discontinued operations for the fiscal year 2021 includes activity only through November 30, 2020, the date of the sale of the Wella Business.
RECONCILIATION OF REPORTED OPERATING (LOSS) INCOME TO ADJUSTED OPERATING INCOME AND ADJUSTED EBITDA
In the six months ended December 31, 2021, amortization expense of $85.4 and $23.0 was reported in the Prestige and Consumer Beauty segments, respectively. In the six months ended December 31, 2020, amortization expense of $101.5 and $25.7 was reported in the Prestige and Consumer Beauty segments, respectively.
(b) In the three months ended December 31, 2021, we incurred a credit in restructuring and other business structure realignment costs of $(1.8). We incurred a credit in restructuring costs of $(4.1) primarily related to the Transformation Plan due to change in estimate, included in the Condensed Consolidated Statements of Operations; and business structure realignment costs of $2.3 primarily related to the Transformation Plan and certain other programs. This amount includes $(0.3) reported in Selling, general and administrative expenses, and $2.6 reported in Cost of sales in the Condensed Consolidated Statement of Operations. In the three months ended December 31, 2020, we incurred restructuring and other business structure realignment costs of $57.9. We incurred restructuring costs of $59.6 primarily related to the Transformation Plan, included in the Condensed Consolidated Statements of Operations; and credit in business structure realignment costs of $(1.7) primarily related to the Transformation Plan and certain other programs. This amount includes $(1.7) reported in Selling, general and administrative expenses, and nil reported in Cost of sales in the Condensed Consolidated Statement of Operations.
In the six months ended December 31, 2021, we incurred restructuring and other business structure realignment costs of $13.3. We incurred restructuring costs of $8.3 primarily related to the Transformation Plan, included in the Condensed Consolidated Statements of Operations; and business structure realignment costs of $5.0 primarily related to the Transformation Plan and certain other programs. This amount includes $(0.3) reported in Selling, general and administrative expenses, and $5.3 reported in Cost of sales in the Condensed Consolidated Statement of Operations.
In the six months ended December 31, 2020, we incurred restructuring and other business structure realignment costs of $92.3. We incurred restructuring costs of $89.7 primarily related to the Transformation Plan, included in the Condensed Consolidated Statements of Operations; and business structure realignment costs of $2.6 primarily related to the Transformation Plan and certain other programs. This amount includes $2.6 reported in Selling, general and administrative expenses, and nil reported in Cost of sales in the Condensed Consolidated Statement of Operations.
(c) In the three months ended December 31, 2021 and December 31, 2020, we incurred acquisition- and divestiture-related costs of $6.9 and $51.7, respectively. These costs were primarily associated with the Wella Transaction. In the six months ended December 31, 2021 and December 31, 2020, we incurred acquisition- and divestiture-related costs of $10.9 and $98.0, respectively. These costs were primarily associated with the Wella Transaction.
(d) In the three months ended December 31, 2021 we recognized gain of $91.7 related to sale of real estate. In the three months ended December 31, 2020, we did not recognize any gain related to sale of real estate.
In the six months ended December 31, 2021 we recognized gain of $92.7 related to sale of real estate. In the six months ended December 31, 2020, we did not recognize any gain related to sale of real estate.
(e) In the three months ended December 31, 2021, adjusted depreciation expense of $37.0 and $38.6 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended December 31, 2020, adjusted depreciation expense of $38.8 and $42.7 was reported in the Prestige and Consumer Beauty segments, respectively.
In the six months ended December 31, 2021, adjusted depreciation expense of $75.0 and $78.6 was reported in the Prestige and Consumer Beauty segments, respectively. In the three months ended December 31, 2020, adjusted depreciation expense of $72.9 and $89.5 was reported in the Prestige and Consumer Beauty segments, respectively.
RECONCILIATION OF REPORTED INCOME (LOSS) BEFORE INCOME TAXES AND EFFECTIVE TAX RATES TO ADJUSTED INCOME BEFORE INCOME TAXES AND ADJUSTED EFFECTIVE TAX RATES 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 recognized for the change in the fair value of the investment in Wella.
(d) For the three months ended December 31, 2021, this primarily represents a net gain on the exchange of Series B Preferred Stock closed on October 20, 2021. For the three months ended December 31, 2020, this primarily represents the write-off of deferred financing fees related to the Wella sale.
For the six months ended December 31, 2021, this primarily represents a net gain on the exchange of Series B Preferred Stock closed on October 20, 2021. For the six months ended December 31, 2020, this primarily represents the write-off of deferred financing fees related to the Wella sale and adjustments for pension curtailment gains.
(e) The total tax impact on adjustments in the prior period includes a $220.5 benefit recorded as the result of a tax rate differential on the deferred taxes recognized on the transfer of assets and liabilities, following the relocation of our main principal location from Geneva to Amsterdam on July 1, 2020.
RECONCILIATION OF REPORTED NET INCOME TO ADJUSTED NET INCOME (LOSS) FOR CONTINUING OPERATIONS
(b) The amounts represent the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interest based on the relevant noncontrolling interest percentage in the Condensed Consolidated Statements of Operations.
(c) Adjusted Diluted EPS is adjusted by the effect of dilutive securities, including awards under our equity compensation plans and the convertible Series B Preferred Stock. For the six months ended December 31, 2021, the convertible Series B Preferred Stock was antidilutive. Accordingly, we excluded the convertible Series B Preferred Stock from the diluted shares and did not adjust the earnings for the related dividend.
(d) The amount represents the realized and unrealized gain recognized for the change in the fair value of the investment in Wella.
(e) For the three months ended December 31, 2021, this primarily represents a net gain on the exchange of Series B Preferred Stock closed on October 20, 2021. For the three months ended December 31, 2020, this primarily represents the write-off of deferred financing fees related to the Wella sale.
For the six months ended December 31, 2021, this primarily represents a net gain on the exchange of Series B Preferred Stock closed on October 20, 2021. For the six months ended December 31, 2020, this primarily represents the write-off of deferred financing fees related to the Wella sale and adjustments for pension curtailment gains.
(f) For the three months ended December 31, 2021, this adjustment represents the deemed dividend from the Second Exchange that closed on November 30, 2021.
For the six months ended December 31, 2021, this adjustment represents the deemed dividend from the Second Exchange that closed on November 30, 2021 and the deemed dividend from the First Exchange that closed on October 20, 2021.
RECONCILIATION OF REPORTED NET INCOME TO ADJUSTED NET INCOME FOR COTY INC.
(b) The amounts represent the after-tax impact of the non-GAAP adjustments included in Net income attributable to noncontrolling interest based on the relevant noncontrolling interest percentage in the Condensed Consolidated Statements of Operations.
(c) Adjusted Diluted EPS is adjusted by the effect of dilutive securities, including awards under our equity compensation plans and the convertible Series B Preferred Stock. For the six months ended December 31, 2021, the convertible Series B Preferred Stock was antidilutive. Accordingly, we excluded the convertible Series B Preferred Stock from the diluted shares and did not adjust the earnings for the related dividend.
(d) The amount represents the realized and unrealized gain recognized for the change in the fair value of the investment in Wella.
(e) For the three months ended December 31, 2021, this primarily represents a net gain on the exchange of Series B Preferred Stock closed on October 20, 2021. For the three months ended December 31, 2020, this primarily represents the write-off of deferred financing fees related to the Wella sale.
For the six months ended December 31, 2021, this primarily represents a net gain on the exchange of Series B Preferred Stock closed on October 20, 2021. For the six months ended December 31, 2020, this primarily represents the write-off of deferred financing fees related to the Wella sale and adjustments for pension curtailment gains.
(f) For the three months ended December 31, 2021, this adjustment represents the deemed dividend from the Second Exchange that closed on November 30, 2021.
For the six months ended December 31, 2021, this adjustment represents the deemed dividend from the Second Exchange that closed on November 30, 2021 and the deemed dividend from the First Exchange that closed on October 20, 2021.
(g) This amount reflects certain purchase price working capital adjustments related to the sale of the Wella Business.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
RECONCILIATION OF TOTAL DEBT TO ECONOMIC NET DEBT
IMMEDIATE LIQUIDITY
RECONCILIATION OF ADJUSTED OPERATING INCOME TO ADJUSTED EBITDA
(b) Adjusted depreciation for the twelve months ended December 31, 2021 represents depreciation expense for continuing operations for the period, excluding accelerated depreciation.
FINANCIAL NET DEBT/ADJUSTED EBITDA
RECONCILIATION OF REPORTED NET REVENUES TO LIKE-FOR-LIKE NET REVENUES
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
COTY INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS