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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended
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Mar. 31, 2023
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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, 2022. In the opinion of management, all adjustments, of a normal recurring nature, considered necessary for a fair presentation have been included in the Condensed Consolidated Financial Statements. The results of operations for the three and nine months ended March 31, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending June 30, 2023. All dollar amounts (other than per share amounts) in the following discussion are in millions of United States (“U.S.”) dollars, unless otherwise indicated. Restricted Cash Restricted cash represents funds that are not readily available for general purpose cash needs due to contractual limitations. Restricted cash is classified as a current or long-term asset based on the timing and nature of when or how the cash is expected to be used or when the restrictions are expected to lapse. As of March 31, 2023 and June 30, 2022, the Company had restricted cash of $32.0 and $30.5, respectively, included in Restricted cash in the Condensed Consolidated Balance Sheets. The Restricted cash balance as of March 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 March 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 8—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 net realizable value of inventory, the fair value of acquired assets and liabilities associated with acquisitions, the fair value of equity investments, the assessment of goodwill, other intangible assets and long-lived assets for impairment and income 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 nine months ended March 31, 2023 and 2022 was 21.0% and 0.9%, respectively, and 22.1% and 23.2%, respectively. The change in the effective tax rate for the three months ended March 31, 2023, as compared with the three months ended March 31, 2022, was primarily due to fair value gains related to the investment in the Wella business in the prior period. The change in the effective tax rate for the nine months ended March 31, 2023, as compared with the nine months ended March 31, 2022, was primarily due to foreign exchange loss recognized on the current year repatriation of funds that were previously taxed as part of the Tax Cuts and Job Acts of 2017. The effective income tax rates vary from the U.S. federal statutory rate of 21% due to the effect of (i) jurisdictions with different statutory rates, (ii) adjustments to the Company’s unrealized tax benefits (“UTBs”) and accrued interest, (iii) non-deductible expenses, (iv) audit settlements and (v) valuation allowance changes. As of March 31, 2023 and June 30, 2022, the gross amount of UTBs was $237.1 and $251.6, respectively. As of March 31, 2023, the total amount of UTBs that, if recognized, would impact the effective income tax rate is $158.5. As of March 31, 2023 and June 30, 2022, the liability associated with UTBs, including accrued interest and penalties, was $189.8 and $191.8, respectively, which was recorded in Income and other taxes payable and Other noncurrent liabilities in the Condensed Consolidated Balance Sheets. The total interest and penalties recorded in the Condensed Consolidated Statements of Operations related to UTBs was $3.5 and $1.3 for the three months ended March 31, 2023 and 2022, respectively, and $4.9 and $1.0 for the nine months ended March 31, 2023 and 2022, respectively. The total gross accrued interest and penalties recorded in the Condensed Consolidated Balance Sheets as of March 31, 2023 and June 30, 2022 was $31.3 and $26.4, respectively. On the basis of the information available as of March 31, 2023, it is reasonably possible that a decrease of up to $18.3 in UTBs may occur within twelve months as a result of projected resolutions of global tax examinations and a potential lapse of the applicable statutes of limitations. Russia Market Exit In connection with the Company’s Board of Director’s decision to wind down operations in Russia, the Company recognized total pre-tax gains in the Condensed Consolidated Statements of Operations of $1.3 and $17.0, respectively, in the three and nine months ended March 31, 2023. These amounts are primarily related to a bad debt accrual release due to better than expected collections. The Company recognized $0.3 of income tax benefits associated with the decision to exit Russia in the three and nine months ended March 31, 2023. The Company anticipates incurring up to $7.5 of additional costs through completion of the wind down. Additionally, management anticipates derecognizing the cumulative translation adjustment balance pertaining to the Russian subsidiary. The Company has substantially completed its commercial activities in Russia. However, the Company anticipates that the process related to the liquidation of the Russian legal entity will take an extended period of time. Lacoste Fragrances License Termination On December 19, 2022, the Company entered into an agreement with Lacoste S.A.S, Sporloisirs S.A., and Lacoste Alligator S.A., (collectively, “Lacoste”) to early terminate the existing Lacoste fragrances licensing agreement, effective June 30, 2023. In exchange, Lacoste has agreed to make termination payments to the Company. During the second quarter of fiscal 2023, Lacoste advanced to the Company a portion of the termination payment totaling €52.5 million (approximately $55.6). The amount advanced to the Company has been reflected as deferred income, within Accrued expenses and other current liabilities, until the termination effective date, June 30, 2023. Recently Adopted Accounting Pronouncements In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments, which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease on the commencement date of the lease if specified criteria are met. The Company adopted this guidance in the first quarter of fiscal year 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements. Recently Issued Accounting Pronouncements The FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting in March 2020 and ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope in January 2021. The new guidance under these ASUs provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. On December 21, 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extended the period of time entities can utilize the reference rate reform relief guidance under ASU No. 2020-04 from December 31, 2022 to December 31, 2024. As of March 31, 2023, the Company has not applied any of the optional expedients or exceptions allowed under these ASUs, but will continue to monitor the effects of reference rate reform, if any, on any new or amended contracts through December 31, 2024. The Company does not believe that these ASUs will have a material impact on its consolidated financial position, results of operations or cash flows. The FASB issued ASU No. 2023-01, Leases (Topic 842) - Common Control Arrangements, which clarifies the accounting for leasehold improvements associated with common control leases. The guidance will be effective for the Company in fiscal 2025 with early adoption permitted. The Company does not expect this ASU will have a material effect on its consolidated financial position, results of operations or cash flows.

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