x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
__
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
13-3662953
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
|
|
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One New York Plaza, New York, New York
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10004
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
¨
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|
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Accelerated filer
¨
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Non-accelerated filer
x
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
¨
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||
|
|
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Emerging growth company
¨
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PART I - Financial Information
|
||
Item 1.
|
Financial Statements
|
|
|
Consolidated Balance Sheets as of March 31, 2017 (Unaudited) and December 31, 2016
|
|
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Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, 2017 and 2016
|
|
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Unaudited Consolidated Statement of Stockholder's Deficiency for the Three Months Ended March 31, 2017
|
|
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Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016
|
|
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Notes to Unaudited Consolidated Financial Statements
|
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
|
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
|
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Item 4.
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Controls and Procedures
|
|
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PART II - Other Information
|
||
Item 1.
|
Legal Proceedings
|
|
Item 1A.
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Risk Factors
|
|
Item 5.
|
Other Information
|
|
Item 6.
|
Exhibits
|
|
|
Signatures
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
|
(Unaudited)
|
|
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
121.5
|
|
|
$
|
186.8
|
|
Trade receivables, less allowance for doubtful accounts of $11.8 and $11.1 as of March 31, 2017 and December 31, 2016, respectively
|
375.7
|
|
|
423.9
|
|
||
Inventories
|
453.1
|
|
|
424.6
|
|
||
Prepaid expenses and other
|
106.7
|
|
|
84.9
|
|
||
Receivable from Revlon, Inc.
|
136.4
|
|
|
132.7
|
|
||
Total current assets
|
1,193.4
|
|
|
1,252.9
|
|
||
Property, plant and equipment, net of accumulated depreciation of $342.6 and $304.7 as of March 31, 2017 and December 31, 2016, respectively
|
322.7
|
|
|
320.5
|
|
||
Deferred income taxes
|
179.9
|
|
|
136.1
|
|
||
Goodwill
|
701.9
|
|
|
689.5
|
|
||
Intangible assets, net of accumulated amortization of $97.1 and $84.8 as of March 31, 2017 and December 31, 2016, respectively
|
611.8
|
|
|
636.6
|
|
||
Other assets
|
108.2
|
|
|
103.1
|
|
||
Total assets
|
$
|
3,117.9
|
|
|
$
|
3,138.7
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDER’S DEFICIENCY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Short-term borrowings
|
$
|
11.4
|
|
|
$
|
10.8
|
|
Current portion of long-term debt
|
59.0
|
|
|
18.1
|
|
||
Accounts payable
|
301.9
|
|
|
296.9
|
|
||
Accrued expenses and other
|
346.0
|
|
|
382.7
|
|
||
Total current liabilities
|
718.3
|
|
|
708.5
|
|
||
Long-term debt
|
2,660.6
|
|
|
2,663.1
|
|
||
Long-term pension and other post-retirement plan liabilities
|
185.9
|
|
|
184.1
|
|
||
Other long-term liabilities
|
84.1
|
|
|
89.8
|
|
||
Stockholder’s deficiency:
|
|
|
|
||||
RCPC preferred stock, par value $1.00 per share; 1,000 shares authorized; 546 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively
|
54.6
|
|
|
54.6
|
|
||
Common Stock, par value $1.00 per share; 10,000 shares authorized; 5,260 shares issued and outstanding as of March 31, 2017 and December 31, 2016
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
966.1
|
|
|
964.4
|
|
||
Accumulated deficit
|
(1,309.9
|
)
|
|
(1,274.1
|
)
|
||
Accumulated other comprehensive loss
|
(241.8
|
)
|
|
(251.7
|
)
|
||
Total stockholder’s deficiency
|
(531.0
|
)
|
|
(506.8
|
)
|
||
Total liabilities and stockholder’s deficiency
|
$
|
3,117.9
|
|
|
$
|
3,138.7
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
|
|
|
|
||||
Net sales
|
$
|
594.9
|
|
|
$
|
439.6
|
|
Cost of sales
|
265.1
|
|
|
153.9
|
|
||
Gross profit
|
329.8
|
|
|
285.7
|
|
||
Selling, general and administrative expenses
|
351.2
|
|
|
245.8
|
|
||
Acquisition and integration costs
|
17.5
|
|
|
0.5
|
|
||
Restructuring charges and other, net
|
1.2
|
|
|
1.3
|
|
||
Operating (loss) income
|
(40.1
|
)
|
|
38.1
|
|
||
Other expenses, net:
|
|
|
|
||||
Interest expense
|
35.0
|
|
|
21.0
|
|
||
Amortization of debt issuance costs
|
2.2
|
|
|
1.5
|
|
||
Foreign currency gains, net
|
(4.3
|
)
|
|
(3.4
|
)
|
||
Miscellaneous, net
|
1.2
|
|
|
0.3
|
|
||
Other expenses, net
|
34.1
|
|
|
19.4
|
|
||
(Loss) income from continuing operations before income taxes
|
(74.2
|
)
|
|
18.7
|
|
||
(Benefit from) provision for income taxes
|
(38.1
|
)
|
|
6.1
|
|
||
(Loss) income from continuing operations, net of taxes
|
(36.1
|
)
|
|
12.6
|
|
||
Income from discontinued operations, net of taxes
|
0.3
|
|
|
0.4
|
|
||
Net (loss) income
|
$
|
(35.8
|
)
|
|
$
|
13.0
|
|
Other comprehensive income:
|
|
|
|
|
|
||
Foreign currency translation adjustments, net of tax
(a)
|
4.7
|
|
|
2.7
|
|
||
Amortization of pension related costs, net of tax
(b)(c)
|
2.0
|
|
|
1.8
|
|
||
Pension curtailment gain, net of tax
(d)
|
2.6
|
|
|
—
|
|
||
Reclassification into earnings of accumulated losses from the de-designated 2013 Interest Rate Swap, net of tax
(e)
|
0.6
|
|
|
—
|
|
||
Revaluation of derivative financial instruments, net of reclassifications into earnings, net of tax
(f)
|
—
|
|
|
(0.9
|
)
|
||
Other comprehensive income, net
|
9.9
|
|
|
3.6
|
|
||
Total comprehensive (loss) income
|
$
|
(25.9
|
)
|
|
$
|
16.6
|
|
(a)
|
Net of tax expense of
$1.0 million
and
$0.1 million
for the
three months ended March 31, 2017
and
2016
, respectively.
|
(b)
|
Net of tax expense of
$0.4 million
and
$0.3 million
for
three months ended March 31, 2017
and
2016
, respectively.
|
(c)
|
This other comprehensive (loss) income component is included in the computation of net periodic benefit (income) costs. See Note
11
, “Pension and Post-Retirement Benefits,” for additional information regarding net periodic benefit (income) costs.
|
(d)
|
Net of tax expense of
$0.3 million
for the
three months ended March 31, 2017
.
|
(e)
|
Net of tax benefit of
$0.4 million
for the
three months ended March 31, 2017
.
|
(f)
|
Net of tax benefit of
$0.5 million
for the three months ended March 31,
2016
.
|
|
Preferred Stock
|
|
Additional Paid-In-Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive Loss
|
|
Total Stockholder’s Deficiency
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance, January 1, 2017
|
$
|
54.6
|
|
|
$
|
964.4
|
|
|
$
|
(1,274.1
|
)
|
|
$
|
(251.7
|
)
|
|
$
|
(506.8
|
)
|
Stock-based compensation amortization
|
|
|
1.7
|
|
|
|
|
|
|
1.7
|
|
||||||||
Net loss
|
|
|
|
|
(35.8
|
)
|
|
|
|
(35.8
|
)
|
||||||||
Other comprehensive income, net
(a)
|
|
|
|
|
|
|
9.9
|
|
|
9.9
|
|
||||||||
Balance, March 31, 2017
|
$
|
54.6
|
|
|
$
|
966.1
|
|
|
$
|
(1,309.9
|
)
|
|
(241.8
|
)
|
|
$
|
(531.0
|
)
|
(a)
|
See Note 13, “Accumulated Other Comprehensive Loss,” regarding the changes in the accumulated balances for each component of other comprehensive loss during the
three months ended March 31, 2017
.
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net (loss) income
|
$
|
(35.8
|
)
|
|
$
|
13.0
|
|
Adjustments to reconcile net (loss) income to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
37.1
|
|
|
25.9
|
|
||
Foreign currency gains from re-measurement
|
(4.7
|
)
|
|
(4.2
|
)
|
||
Amortization of debt discount
|
0.3
|
|
|
0.4
|
|
||
Stock-based compensation amortization
|
1.7
|
|
|
2.2
|
|
||
(Benefit from) provision for deferred income taxes
|
(38.1
|
)
|
|
2.0
|
|
||
Amortization of debt issuance costs
|
2.2
|
|
|
1.5
|
|
||
Loss on sale of certain assets
|
0.4
|
|
|
0.2
|
|
||
Pension and other post-retirement income
|
(0.1
|
)
|
|
(0.3
|
)
|
||
Change in assets and liabilities, net of acquisitions:
|
|
|
|
|
|||
Decrease (increase) in trade receivables
|
52.0
|
|
|
(23.1
|
)
|
||
Increase in inventories
|
(24.9
|
)
|
|
(23.9
|
)
|
||
Increase in prepaid expenses and other current assets
|
(23.6
|
)
|
|
(19.5
|
)
|
||
Increase (decrease) in accounts payable
|
5.6
|
|
|
(13.6
|
)
|
||
Decrease in accrued expenses and other current liabilities
|
(43.8
|
)
|
|
(47.4
|
)
|
||
Pension and other post-retirement plan contributions
|
(1.9
|
)
|
|
(1.9
|
)
|
||
Purchases of permanent displays
|
(10.2
|
)
|
|
(10.5
|
)
|
||
Other, net
|
(1.8
|
)
|
|
(0.6
|
)
|
||
Net cash used in operating activities
|
(85.6
|
)
|
|
(99.8
|
)
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Capital expenditures
|
(15.4
|
)
|
|
(7.4
|
)
|
||
Proceeds from the sale of certain assets
|
—
|
|
|
0.4
|
|
||
Net cash used in investing activities
|
(15.4
|
)
|
|
(7.0
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Net decrease in short-term borrowings and overdraft
|
(3.4
|
)
|
|
(10.6
|
)
|
||
Net borrowings under the 2016 Revolving Credit Facility
|
40.9
|
|
|
—
|
|
||
Repayments under the 2016 Term Loan Facility
|
(4.5
|
)
|
|
—
|
|
||
Repayments under the Old Acquisition Term Loan
|
—
|
|
|
(13.4
|
)
|
||
Prepayments under the 2011 Term Loan
|
—
|
|
|
(11.5
|
)
|
||
Payment of financing costs
|
(0.8
|
)
|
|
—
|
|
||
Tax withholdings related to net share settlements of restricted stock units and awards
|
(1.4
|
)
|
|
(2.6
|
)
|
||
Other financing activities
|
(0.4
|
)
|
|
(0.9
|
)
|
||
Net cash provided by (used in) financing activities
|
30.4
|
|
|
(39.0
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
5.3
|
|
|
1.1
|
|
||
Net decrease in cash and cash equivalents
|
(65.3
|
)
|
|
(144.7
|
)
|
||
Cash and cash equivalents at beginning of period
|
186.8
|
|
|
326.9
|
|
||
Cash and cash equivalents at end of period
|
$
|
121.5
|
|
|
$
|
182.2
|
|
Supplemental schedule of cash flow information:
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
||||
Interest
|
$
|
49.4
|
|
|
$
|
27.8
|
|
Income taxes, net of refunds
|
$
|
2.4
|
|
|
$
|
2.0
|
|
|
Estimated Fair Value as Previously Reported
(a)
|
|
Measurement Period Adjustments
|
|
Estimated Fair Value as Adjusted
|
||||||
Cash
|
$
|
41.1
|
|
|
|
|
$
|
41.1
|
|
||
Accounts Receivable
|
132.6
|
|
|
|
|
132.6
|
|
||||
Inventories
|
323.3
|
|
|
|
|
323.3
|
|
||||
Prepaid expenses and other current assets
|
30.7
|
|
|
|
|
30.7
|
|
||||
Property and equipment
|
91.2
|
|
|
|
|
91.2
|
|
||||
Deferred taxes, net
(b)
|
68.7
|
|
|
10.0
|
|
|
78.7
|
|
|||
Intangible assets
(c)
|
336.8
|
|
|
(15.4
|
)
|
|
321.4
|
|
|||
Goodwill
|
221.7
|
|
|
12.3
|
|
|
234.0
|
|
|||
Other assets
|
16.6
|
|
|
|
|
16.6
|
|
||||
Total assets acquired
|
$
|
1,262.7
|
|
|
$
|
6.9
|
|
|
$
|
1,269.6
|
|
Accounts payable
|
(116.0
|
)
|
|
|
|
(116.0
|
)
|
||||
Accrued expenses
(d)
|
(109.3
|
)
|
|
1.7
|
|
|
(107.6
|
)
|
|||
Other long-term liabilities
(e)
|
(3.1
|
)
|
|
(8.6
|
)
|
|
(11.7
|
)
|
|||
Total liabilities acquired
|
$
|
(228.4
|
)
|
|
$
|
(6.9
|
)
|
|
$
|
(235.3
|
)
|
Total consideration transferred
|
$
|
1,034.3
|
|
|
$
|
—
|
|
|
$
|
1,034.3
|
|
|
As Previously Reported
(a)
|
|
|
|
Adjusted
|
||||||||||
|
Estimated Fair Values
|
|
Remaining Useful Life at the Elizabeth Arden Acquisition Date (in years)
|
|
Measurement Period Adjustments
(b)
|
|
Estimated Fair Values
|
|
Remaining Useful Life at the Elizabeth Arden Acquisition Date
(in years) |
||||||
Trademarks, indefinite-lived
|
$
|
142.0
|
|
|
Indefinite
|
|
$
|
(103.0
|
)
|
|
39.0
|
|
|
Indefinite
|
|
Trademarks, finite-lived
|
15.0
|
|
|
15.0
|
|
87.6
|
|
|
102.6
|
|
|
5 - 20
|
|||
Technology
|
2.5
|
|
|
10.0
|
|
—
|
|
|
2.5
|
|
|
10.0
|
|||
Customer relationships
|
123.0
|
|
|
16.0
|
|
—
|
|
|
123.0
|
|
|
16.0
|
|||
License agreements
|
22.0
|
|
|
19.0
|
|
—
|
|
|
22.0
|
|
|
19.0
|
|||
Distribution rights
|
31.0
|
|
|
18.0
|
|
—
|
|
|
31.0
|
|
|
18.0
|
|||
Favorable lease commitments
|
1.3
|
|
|
3.0
|
|
—
|
|
|
1.3
|
|
|
3.0
|
|||
Total acquired intangible assets
|
$
|
336.8
|
|
|
|
|
$
|
(15.4
|
)
|
(b)
|
$
|
321.4
|
|
|
|
|
Unaudited Pro Forma Results
|
|||
|
Three Months Ended
|
|||
|
|
March 31, 2016
|
||
Net sales
|
|
$
|
631.5
|
|
Loss from continuing operations, before income taxes
|
|
$
|
(17.7
|
)
|
|
|
|
||
($ in millions)
|
|
March 31, 2016
(a)
|
||
Interest Expense
|
|
|
||
Pro forma interest on 2016 Senior Credit Facilities and 6.25% Senior Notes
|
|
$
|
26.9
|
|
Reversal of Elizabeth Arden’s historical interest expense
|
|
(6.5
|
)
|
|
Products Corporation's historical interest expense, as reflected in the historical consolidated financial statements
|
|
(12.5
|
)
|
|
Total Adjustment for Pro Forma Interest Expense
|
|
$
|
7.9
|
|
Debt issuance costs
|
|
|
||
Pro forma amortization of debt issuance costs
|
|
$
|
1.9
|
|
Products Corporation's historical amortization of debt issuance costs, as reflected in the historical consolidated financial statements
|
|
(1.1
|
)
|
|
Reversal of Elizabeth Arden’s historical amortization of debt issuance costs
|
|
(0.4
|
)
|
|
Total Adjustment for Pro Forma Amortization of Debt Issuance Costs
|
|
$
|
0.4
|
|
|
Restructuring Charges and Other, Net
|
|
|
|
|
|
|
||||||||||||||||
|
Employee Severance and Other Personnel Benefits
|
|
Other
|
|
Total Restructuring Charges
|
|
Inventory Adjustments
(a)
|
|
Other Related Charges
(b)
|
|
Total Restructuring and Related Charges
|
||||||||||||
Charges incurred through December 31, 2016
|
$
|
31.5
|
|
|
$
|
0.2
|
|
|
$
|
31.7
|
|
|
$
|
0.5
|
|
|
$
|
2.3
|
|
|
$
|
34.5
|
|
Charges incurred during the three months ended March 31, 2017
|
1.1
|
|
|
0.1
|
|
|
1.2
|
|
|
—
|
|
|
(0.1
|
)
|
|
1.1
|
|
||||||
Cumulative charges incurred through March 31, 2017
|
$
|
32.6
|
|
|
$
|
0.3
|
|
|
$
|
32.9
|
|
|
$
|
0.5
|
|
|
$
|
2.2
|
|
|
$
|
35.6
|
|
|
|
Charges incurred during the three months ended
|
|
Cumulative Charges incurred through
|
||||
|
|
March 31, 2017
|
|
March 31, 2017
|
||||
Elizabeth Arden
|
|
$
|
1.5
|
|
|
$
|
8.0
|
|
Consumer
|
|
(0.5
|
)
|
|
3.7
|
|
||
Professional
|
|
0.2
|
|
|
5.8
|
|
||
Unallocated Corporate Expenses
|
|
—
|
|
|
15.4
|
|
||
Total
|
|
$
|
1.2
|
|
|
$
|
32.9
|
|
|
|
|
|
|
|
|
Utilized, Net
|
|
|
||||||||||||||
Liability
Balance at January 1, 2017
|
|
(Income) Expense, Net
|
|
Foreign Currency Translation
|
|
Cash
|
|
Non-cash
|
|
Liability Balance at March 31, 2017
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
EA Integration Restructuring Program:
(a)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Employee severance and other personnel benefits
|
$
|
31.5
|
|
|
$
|
1.1
|
|
|
$
|
—
|
|
|
$
|
(3.7
|
)
|
|
$
|
—
|
|
|
$
|
28.9
|
|
Other
|
3.0
|
|
|
—
|
|
|
—
|
|
|
(1.4
|
)
|
|
(0.5
|
)
|
|
1.1
|
|
||||||
2015 Efficiency Program:
(c)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Employee severance and other personnel benefits
|
4.5
|
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
(0.1
|
)
|
|
3.8
|
|
||||||
Other
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
||||||
Other immaterial actions:
(b)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Employee severance and other personnel benefits
|
2.6
|
|
|
0.3
|
|
|
—
|
|
|
(0.5
|
)
|
|
—
|
|
|
2.4
|
|
||||||
Other
|
1.0
|
|
|
0.1
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
1.0
|
|
||||||
Total restructuring reserve
|
$
|
42.8
|
|
|
$
|
1.5
|
|
|
$
|
—
|
|
|
$
|
(6.3
|
)
|
|
$
|
(0.6
|
)
|
|
$
|
37.4
|
|
|
Cumulative Charges incurred through
|
||
|
March 31, 2017
|
||
Consumer
|
$
|
6.4
|
|
Professional
|
3.7
|
|
|
Unallocated Corporate Expenses
|
0.7
|
|
|
Total
|
$
|
10.8
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Net sales
|
$
|
—
|
|
|
$
|
—
|
|
Income from discontinued operations, before taxes
|
0.3
|
|
|
0.4
|
|
||
Provision for income taxes
|
—
|
|
|
—
|
|
||
Income from discontinued operations, net of taxes
|
0.3
|
|
|
0.4
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Cash and cash equivalents
|
$
|
1.7
|
|
|
$
|
1.7
|
|
Trade receivables, net
|
0.2
|
|
|
0.2
|
|
||
Total current assets
|
1.9
|
|
|
1.9
|
|
||
Total assets
|
$
|
1.9
|
|
|
$
|
1.9
|
|
|
|
|
|
||||
Accounts payable
|
$
|
0.5
|
|
|
$
|
0.5
|
|
Accrued expenses and other
|
3.3
|
|
|
3.3
|
|
||
Total current liabilities
|
3.8
|
|
|
3.8
|
|
||
Total liabilities
|
$
|
3.8
|
|
|
$
|
3.8
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Raw materials and supplies
|
$
|
90.2
|
|
|
$
|
72.9
|
|
Work-in-process
|
12.5
|
|
|
33.5
|
|
||
Finished goods
|
350.4
|
|
|
318.2
|
|
||
|
$
|
453.1
|
|
|
$
|
424.6
|
|
|
Consumer
|
|
Professional
|
|
Elizabeth Arden
|
|
Other
|
|
Total
|
||||||||||
Balance at January 1, 2017
|
$
|
227.5
|
|
|
$
|
240.3
|
|
|
$
|
221.7
|
|
|
$
|
—
|
|
|
$
|
689.5
|
|
Measurement Period Adjustments
(a)
|
—
|
|
|
—
|
|
|
12.3
|
|
|
—
|
|
|
12.3
|
|
|||||
Foreign currency translation adjustment
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|||||
Balance at March 31, 2017
|
$
|
227.5
|
|
|
$
|
240.4
|
|
|
$
|
234.0
|
|
|
$
|
—
|
|
|
$
|
701.9
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cumulative goodwill impairment charges
(b)
|
$
|
(9.7
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(16.7
|
)
|
|
$
|
(26.4
|
)
|
|
March 31, 2017
|
||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Weighted Average Useful Life (in Years)
|
||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
||||||
Trademarks and Licenses
|
$
|
266.6
|
|
|
$
|
(55.0
|
)
|
|
$
|
211.6
|
|
|
14
|
Customer relationships
|
248.3
|
|
|
(34.1
|
)
|
|
214.2
|
|
|
14
|
|||
Patents and Internally-Developed IP
|
20.7
|
|
|
(6.7
|
)
|
|
14.0
|
|
|
8
|
|||
Distribution rights
|
31.0
|
|
|
(1.0
|
)
|
|
30.0
|
|
|
17
|
|||
Other
|
1.3
|
|
|
(0.3
|
)
|
|
1.0
|
|
|
2
|
|||
Total finite-lived intangible assets
|
$
|
567.9
|
|
|
$
|
(97.1
|
)
|
|
$
|
470.8
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
||||||
Trade Names
|
$
|
141.0
|
|
|
$
|
—
|
|
|
$
|
141.0
|
|
|
|
Total indefinite-lived intangible assets
|
$
|
141.0
|
|
|
$
|
—
|
|
|
$
|
141.0
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total intangible assets
|
$
|
708.9
|
|
|
$
|
(97.1
|
)
|
|
$
|
611.8
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
December 31, 2016
|
||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Weighted Average Useful Life (in Years)
|
||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
||||||
Trademarks and Licenses
|
$
|
177.9
|
|
|
$
|
(47.9
|
)
|
|
$
|
130.0
|
|
|
13
|
Customer relationships
|
247.6
|
|
|
(30.1
|
)
|
|
217.5
|
|
|
14
|
|||
Patents and Internally-Developed IP
|
20.3
|
|
|
(6.1
|
)
|
|
14.2
|
|
|
8
|
|||
Distribution rights
|
31.0
|
|
|
(0.5
|
)
|
|
30.5
|
|
|
18
|
|||
Other
|
$
|
1.3
|
|
|
$
|
(0.2
|
)
|
|
$
|
1.1
|
|
|
3
|
Total finite-lived intangible assets
|
$
|
478.1
|
|
|
$
|
(84.8
|
)
|
|
$
|
393.3
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
||||||
Trade Names
|
$
|
243.3
|
|
|
$
|
—
|
|
|
$
|
243.3
|
|
|
|
Total indefinite-lived intangible assets
|
$
|
243.3
|
|
|
$
|
—
|
|
|
$
|
243.3
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total intangible assets
|
$
|
721.4
|
|
|
$
|
(84.8
|
)
|
|
$
|
636.6
|
|
|
|
|
Estimated Amortization Expense
|
||
2017
|
$
|
27.9
|
|
2018
|
39.0
|
|
|
2019
|
36.4
|
|
|
2020
|
35.6
|
|
|
2021
|
34.5
|
|
|
Thereafter
|
297.4
|
|
|
Total
|
$
|
470.8
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Compensation and related benefits
|
53.1
|
|
|
75.8
|
|
||
Advertising and promotional costs
|
78.4
|
|
|
66.7
|
|
||
Sales returns and allowances
|
50.8
|
|
|
51.9
|
|
||
Taxes
|
32.2
|
|
|
39.0
|
|
||
Restructuring reserve
|
36.5
|
|
|
38.0
|
|
||
Interest
|
9.7
|
|
|
24.4
|
|
||
Other
|
85.3
|
|
|
86.9
|
|
||
|
$
|
346.0
|
|
|
$
|
382.7
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
2016 Term Loan Facility: 2016 Term Loan due 2023, net of discounts and debt issuance costs
(a)
|
$
|
1,744.7
|
|
|
$
|
1,747.8
|
|
2016 Revolving Credit Facility, due 2021
(b)
|
40.9
|
|
|
—
|
|
||
6.25% Senior Notes due 2024, net of debt issuance costs
(c)
|
439.4
|
|
|
439.1
|
|
||
5.75% Senior Notes due 2021, net of debt issuance costs
(d)
|
494.1
|
|
|
493.8
|
|
||
Spanish Government Loan due 2025
(e)
|
0.5
|
|
|
0.5
|
|
||
|
2,719.6
|
|
|
2,681.2
|
|
||
Less current portion
(*)
|
(59.0
|
)
|
|
(18.1
|
)
|
||
|
$
|
2,660.6
|
|
|
$
|
2,663.1
|
|
•
|
Level 1: Fair valuing the asset or liability using observable inputs, such as quoted prices in active markets for identical assets or liabilities;
|
•
|
Level 2: Fair valuing the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and
|
•
|
Level 3: Fair valuing the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability.
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Derivatives:
|
|
|
|
|
|
|
|
||||||||
FX Contracts
(a)
|
$
|
1.3
|
|
|
$
|
—
|
|
|
$
|
1.3
|
|
|
$
|
—
|
|
Total assets at fair value
|
$
|
1.3
|
|
|
$
|
—
|
|
|
$
|
1.3
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivatives:
|
|
|
|
|
|
|
|
||||||||
FX Contracts
(a)
|
$
|
0.5
|
|
|
$
|
—
|
|
|
$
|
0.5
|
|
|
$
|
—
|
|
2013 Interest Rate Swap
(b)
|
3.5
|
|
|
—
|
|
|
3.5
|
|
|
—
|
|
||||
Total liabilities at fair value
|
$
|
4.0
|
|
|
$
|
—
|
|
|
$
|
4.0
|
|
|
$
|
—
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Derivatives:
|
|
|
|
|
|
|
|
||||||||
FX Contracts
(a)
|
$
|
2.3
|
|
|
$
|
—
|
|
|
$
|
2.3
|
|
|
$
|
—
|
|
Total assets at fair value
|
$
|
2.3
|
|
|
$
|
—
|
|
|
$
|
2.3
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Derivatives:
|
|
|
|
|
|
|
|
||||||||
FX Contracts
(a)
|
$
|
1.1
|
|
|
$
|
—
|
|
|
$
|
1.1
|
|
|
$
|
—
|
|
2013 Interest Rate Swap
(b)
|
4.7
|
|
|
—
|
|
|
4.7
|
|
|
—
|
|
||||
Total liabilities at fair value
|
$
|
5.8
|
|
|
$
|
—
|
|
|
$
|
5.8
|
|
|
$
|
—
|
|
(a)
|
The fair value of the Company’s foreign currency forward exchange contracts ("FX Contracts") was measured based on observable market transactions for similar transactions in actively quoted markets of spot and forward rates on the respective dates. See Note
10
, “Financial Instruments."
|
(b)
|
The fair value of Products Corporation's 2013 Interest Rate Swap (as hereinafter defined) was measured based on the implied forward rates from the U.S. Dollar three-month LIBOR yield curve on the respective dates. See Note
10
, “Financial Instruments.”
|
|
Fair Value
|
|
|
||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Carrying Value
|
||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt, including current portion
|
$
|
—
|
|
|
$
|
2,785.9
|
|
|
$
|
—
|
|
|
$
|
2,785.9
|
|
|
$
|
2,719.6
|
|
|
Fair Value
|
|
|
||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Carrying Value
|
||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt, including current portion
|
$
|
—
|
|
|
$
|
2,770.9
|
|
|
$
|
—
|
|
|
$
|
2,770.9
|
|
|
$
|
2,681.2
|
|
(a)
|
Fair Values of Derivative Financial Instruments in the Consolidated Balance Sheets:
|
|
Fair Values of Derivative Instruments
|
||||||||||||||||||
|
Assets
|
|
Liabilities
|
||||||||||||||||
|
Balance Sheet
|
|
March 31,
2017 |
|
December 31,
2016 |
|
Balance Sheet
|
|
March 31,
2017 |
|
December 31,
2016 |
||||||||
|
Classification
|
|
Fair Value
|
|
Fair Value
|
|
Classification
|
|
Fair Value
|
|
Fair Value
|
||||||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|||||||||||
FX Contracts
(ii)
|
Prepaid expenses and other
|
|
$
|
1.3
|
|
|
$
|
2.3
|
|
|
Accrued Expenses
|
|
$
|
0.5
|
|
|
$
|
1.1
|
|
2013 Interest Rate Swap
(i)
|
Prepaid expenses and other
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Accrued expenses and other
|
|
$
|
3.1
|
|
|
$
|
3.7
|
|
|
Other assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other long-term liabilities
|
|
$
|
0.4
|
|
|
$
|
1.0
|
|
|
Amount of Gain (Loss) Recognized in Other Comprehensive (Loss) Income
|
|||||||
Three Months Ended March 31,
|
||||||||
2017
|
|
2016
|
||||||
Derivatives designated as hedging instruments:
|
|
|
|
|||||
2013 Interest Rate Swap, net of tax
(a)
|
$
|
0.6
|
|
|
$
|
(0.9
|
)
|
(i)
|
Net of tax benefit of
$0.4 million
and
$0.5 million
for the three months ended March 31, 2017 and 2016, respectively.
|
|
Statement of Operations Classification
|
Amount of Gain (Loss) Recognized in Net (Loss) Income
|
|||||||
Three Months Ended March 31,
|
|||||||||
2017
|
|
2016
|
|||||||
Derivatives designated as hedging instruments:
|
|
|
|
||||||
2013 Interest Rate Swap
|
Interest Expense
|
$
|
(1.0
|
)
|
|
$
|
(1.1
|
)
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
||||||
FX Contracts
|
Foreign currency gain (loss), net
|
$
|
(0.4
|
)
|
|
$
|
(0.8
|
)
|
|
2013 Interest Rate Swap
|
Miscellaneous, net
|
$
|
0.2
|
|
|
$
|
—
|
|
|
Pension Plans |
|
Other
Post-Retirement Benefit Plans |
||||||||||||
|
Three Months Ended March 31,
|
||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net periodic benefit (income) costs:
|
|
||||||||||||||
Service cost
|
$
|
0.5
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
4.8
|
|
|
5.2
|
|
|
0.1
|
|
|
0.1
|
|
||||
Expected return on plan assets
|
(7.1
|
)
|
|
(7.8
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization of actuarial loss
|
2.4
|
|
|
2.1
|
|
|
0.1
|
|
|
—
|
|
||||
Curtailment gain
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
(0.2
|
)
|
|
(0.4
|
)
|
|
0.2
|
|
|
0.1
|
|
||||
Portion allocated to Revlon Holdings
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
$
|
(0.3
|
)
|
|
$
|
(0.4
|
)
|
|
$
|
0.2
|
|
|
$
|
0.1
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Net periodic benefit (income) costs:
|
|
|
|
||||
Cost of sales
|
$
|
(0.4
|
)
|
|
$
|
(0.8
|
)
|
Selling, general and administrative expense
|
0.3
|
|
|
0.5
|
|
||
|
$
|
(0.1
|
)
|
|
$
|
(0.3
|
)
|
|
Foreign Currency Translation
|
|
Actuarial (Loss) Gain on Post-retirement Benefits
|
|
Deferred Gain (Loss) - Hedging
|
|
Other
|
|
Accumulated Other Comprehensive Loss
|
||||||||||
Balance at January 1, 2017
|
$
|
(24.0
|
)
|
|
$
|
(224.4
|
)
|
|
$
|
(3.0
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
(251.7
|
)
|
Currency translation adjustment, net of tax of $1.0 million
|
4.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.7
|
|
|||||
Amortization of pension related costs, net of tax of $0.4 million
(a)
|
—
|
|
|
2.0
|
|
|
—
|
|
|
—
|
|
|
2.0
|
|
|||||
Amortization of deferred losses related to the de-designated 2013 Interest Rate Swap, net of tax benefit of $0.4 million
(b)
|
—
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|||||
Curtailment gain, net of tax of $0.3 million
(c)
|
—
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
2.6
|
|
|||||
Other comprehensive income
|
$
|
4.7
|
|
|
$
|
4.6
|
|
|
$
|
0.6
|
|
|
$
|
—
|
|
|
$
|
9.9
|
|
Balance at March 31, 2017
|
$
|
(19.3
|
)
|
|
$
|
(219.8
|
)
|
|
$
|
(2.4
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
(241.8
|
)
|
(a)
|
Amounts represent the change in accumulated other comprehensive loss as a result of the amortization of actuarial losses (gains) arising during each year related to the Company’s pension and other post-retirement plans. See Note 11, “Pension and Post-retirement Benefits,” for further discussion of the Company’s pension and other post-retirement plans.
|
(b)
|
Represents the amortization of deferred losses related to the de-designated 2013 Interest Rate Swap. See Note
10
, "Financial Instruments," for further discussion of the 2013 Interest Rate Swap.
|
(c)
|
As a result of the Elizabeth Arden Acquisition, the Company recognized
$2.6 million
in curtailment gains related to a foreign non-qualified defined benefit plan of Elizabeth Arden.
|
|
|
2013
Interest Rate Swap
|
||
Beginning accumulated losses at December 31, 2016
|
|
$
|
(3.0
|
)
|
Reclassifications into earnings (net of $0.4 million tax benefit)
(a)
|
|
0.6
|
|
|
Ending accumulated losses at March 31, 2017
|
|
$
|
(2.4
|
)
|
(a)
|
Reclassified to interest expense.
|
|
|
2013
Interest Rate Swap
|
||
Beginning accumulated losses at December 31, 2015
|
|
$
|
(3.8
|
)
|
Reclassifications into earnings (net of $0.4 million tax expense)
(a)
|
|
0.7
|
|
|
Change in fair value (net of $0.9 million tax benefit)
|
|
(1.6
|
)
|
|
Ending accumulated losses at March 31, 2016
|
|
$
|
(4.7
|
)
|
(a)
|
Reclassified to interest expense.
|
•
|
Consumer
- The Company’s Consumer segment is comprised of products that are marketed, distributed and sold in large volume retailers, chain drug and food stores, chemist shops, hypermarkets, general merchandise stores, the Internet/e-commerce, television shopping, department stores, one-stop shopping beauty retailers, specialty cosmetic stores and perfumeries in the U.S. and internationally under brands such as
Revlon
,
Almay
,
SinfulColors
and
Pure Ice
in cosmetics;
Revlon ColorSilk
in women’s hair color;
Revlon
in beauty tools; and
Mitchum
in anti-perspirant deodorants. The Consumer segment also includes a skin care line under the
Natural Honey
brand and hair color line under the
Llongueras
brand (licensed from a third party), that are sold in large volume retailers and other retailers, primarily in Spain, as well as
Cutex
nail care products.
|
•
|
Elizabeth Arden
- The Elizabeth Arden segment markets, distributes and sells fragrances, skin care and color cosmetics to prestige retailers, specialty stores, the mass retail channel, distributors, perfumeries, department stores, boutiques, travel retailers and other retailers in the U.S. and internationally, as well as direct sales to consumers via its Elizabeth Arden Red Door branded retail stores, Elizabeth Arden.com e-commerce business and Elizabeth Arden Red Door spa beauty salons and spas under brands such as
Skin Illuminating, SUPERSTART, Prevage, Eight Hour Cream, Elizabeth Arden Ceramide
and
Visible Difference
in the Elizabeth Arden skin care brands;
Elizabeth Arden Red Door, Elizabeth Arden 5th Avenue
,
Elizabeth Arden Green Tea
and
UNTOLD
in Elizabeth Arden fragrances;
Juicy Couture, John Varvatos
and
Wildfox Couture
in designer fragrances; and
Curve, Elizabeth Taylor
,
Britney Spears
,
Christina Aguilera
,
Halston,
Ed Hardy
,
Geoffrey Beene
,
Alfred Sung
,
Giorgio Beverly Hills
,
Lucky Brand
,
PS Fine Cologne for Men
,
White Shoulders
and
Jennifer Aniston
in heritage fragrances.
|
•
|
Professional
- The Company’s Professional segment markets, distributes and sells professional products primarily to hair and nail salons and professional salon distributors in the U.S. and internationally under brands such as
Revlon Professional
in hair color, hair care and hair treatments;
CND
in nail polishes and nail enhancements, including
CND Shellac
and
CND Vinylux
nail polishes; and
American Crew
in men’s grooming products. The Professional segment also includes a multi-cultural hair care line consisting of
Creme of Nature
hair care products, which are sold in both professional salons and in large volume retailers and other retailers, primarily in the U.S.
|
•
|
Other
- The Other segment includes the operating results of the CBB business and related purchase accounting for the CBB Acquisition. CBB develops, markets and distributes fragrances and other beauty products under various celebrity, lifestyle and fashion brands licensed from third parties, principally through department stores and selective distribution in international territories. The results included within the Other segment are not material to the Company’s consolidated results of operations.
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Segment Net Sales:
|
|
|
|
||||
Consumer
|
$
|
290.4
|
|
|
$
|
320.0
|
|
Elizabeth Arden
|
192.0
|
|
|
—
|
|
||
Professional
|
108.0
|
|
|
115.1
|
|
||
Other
|
4.5
|
|
|
4.5
|
|
||
Total
|
$
|
594.9
|
|
|
$
|
439.6
|
|
|
|
|
|
||||
Segment Profit:
|
|
|
|
||||
Consumer
|
$
|
32.9
|
|
|
$
|
58.4
|
|
Elizabeth Arden
|
14.3
|
|
|
—
|
|
||
Professional
|
16.1
|
|
|
25.6
|
|
||
Other
|
(1.3
|
)
|
|
(0.9
|
)
|
||
Total
|
$
|
62.0
|
|
|
$
|
83.1
|
|
|
|
|
|
||||
Reconciliation:
|
|
|
|
||||
Segment Profit
|
$
|
62.0
|
|
|
$
|
83.1
|
|
Less:
|
|
|
|
||||
Unallocated corporate expenses
|
27.4
|
|
|
14.2
|
|
||
Depreciation and amortization
|
37.1
|
|
|
25.9
|
|
||
Non-cash stock compensation expense
|
1.7
|
|
|
2.2
|
|
||
Non-Operating items:
|
|
|
|
||||
Restructuring and related charges
|
1.1
|
|
|
1.3
|
|
||
Acquisition and integration costs
|
17.5
|
|
|
0.5
|
|
||
Elizabeth Arden 2016 Business Transformation Program
|
0.4
|
|
|
—
|
|
||
Elizabeth Arden inventory purchase accounting adjustment, cost of sales
|
16.0
|
|
|
—
|
|
||
Deferred compensation related to CBB Acquisition
|
0.9
|
|
|
0.9
|
|
||
Operating (loss) income
|
(40.1
|
)
|
|
38.1
|
|
||
Less:
|
|
|
|
||||
Interest Expense
|
35.0
|
|
|
21.0
|
|
||
Amortization of debt issuance costs
|
2.2
|
|
|
1.5
|
|
||
Foreign currency losses, net
|
(4.3
|
)
|
|
(3.4
|
)
|
||
Miscellaneous, net
|
1.2
|
|
|
0.3
|
|
||
(Loss) income from continuing operations before income taxes
|
$
|
(74.2
|
)
|
|
$
|
18.7
|
|
|
Three Months Ended March 31,
|
||||||||||
|
2017
|
|
2016
|
||||||||
Geographic area:
|
|
|
|
|
|
|
|
||||
Net sales:
|
|
|
|
|
|
|
|
||||
United States
|
$
|
288.9
|
|
|
49%
|
|
$
|
247.7
|
|
|
56%
|
International
|
306.0
|
|
|
51%
|
|
191.9
|
|
|
44%
|
||
|
$
|
594.9
|
|
|
|
|
$
|
439.6
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||
Long-lived assets, net:
|
|
|
|
|
|
|
|||||
United States
|
$
|
1,486.3
|
|
|
85%
|
|
$
|
1,494.3
|
|
|
85%
|
International
|
258.3
|
|
|
15%
|
|
255.4
|
|
|
15%
|
||
|
$
|
1,744.6
|
|
|
|
$
|
1,749.7
|
|
|
|
|
Three Months Ended March 31,
|
||||||||||
|
2017
|
|
2016
|
||||||||
Classes of similar products:
|
|
|
|
|
|
|
|
||||
Net sales:
|
|
|
|
|
|
|
|
||||
Color cosmetics
|
$
|
213.7
|
|
|
36%
|
|
$
|
223.5
|
|
|
51%
|
Hair care
|
126.2
|
|
|
21%
|
|
132.1
|
|
|
30%
|
||
Fragrance
|
141.2
|
|
|
24%
|
|
12.5
|
|
|
3%
|
||
Beauty care
|
61.0
|
|
|
10%
|
|
68.5
|
|
|
15%
|
||
Skin care
|
52.8
|
|
|
9%
|
|
3.0
|
|
|
1%
|
||
|
$
|
594.9
|
|
|
|
|
$
|
439.6
|
|
|
|
Condensed Consolidating Balance Sheets
|
|||||||||||||||||||
As of March 31, 2017
|
|||||||||||||||||||
|
Products Corporation
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
0.9
|
|
|
$
|
5.9
|
|
|
$
|
114.7
|
|
|
$
|
—
|
|
|
$
|
121.5
|
|
Trade receivables, less allowances for doubtful accounts
|
82.9
|
|
|
94.4
|
|
|
198.4
|
|
|
—
|
|
|
375.7
|
|
|||||
Inventories
|
113.4
|
|
|
158.4
|
|
|
181.3
|
|
|
—
|
|
|
453.1
|
|
|||||
Prepaid expenses and other
|
166.4
|
|
|
21.6
|
|
|
55.1
|
|
|
—
|
|
|
243.1
|
|
|||||
Intercompany receivables
|
968.2
|
|
|
824.5
|
|
|
135.8
|
|
|
(1,928.5
|
)
|
|
—
|
|
|||||
Investment in subsidiaries
|
1,600.3
|
|
|
15.6
|
|
|
—
|
|
|
(1,615.9
|
)
|
|
—
|
|
|||||
Property, plant and equipment, net
|
148.9
|
|
|
79.6
|
|
|
94.2
|
|
|
—
|
|
|
322.7
|
|
|||||
Deferred income taxes
|
62.1
|
|
|
(1.3
|
)
|
|
119.1
|
|
|
—
|
|
|
179.9
|
|
|||||
Goodwill
|
188.7
|
|
|
264.0
|
|
|
249.2
|
|
|
—
|
|
|
701.9
|
|
|||||
Intangible assets, net
|
47.8
|
|
|
147.3
|
|
|
416.7
|
|
|
—
|
|
|
611.8
|
|
|||||
Other assets
|
53.4
|
|
|
26.7
|
|
|
28.1
|
|
|
—
|
|
|
108.2
|
|
|||||
Total assets
|
$
|
3,433.0
|
|
|
$
|
1,636.7
|
|
|
$
|
1,592.6
|
|
|
$
|
(3,544.4
|
)
|
|
$
|
3,117.9
|
|
LIABILITIES AND STOCKHOLDER’S DEFICIENCY
|
|||||||||||||||||||
Short-term borrowings
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11.4
|
|
|
$
|
—
|
|
|
$
|
11.4
|
|
Current portion of long-term debt
|
58.9
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
59.0
|
|
|||||
Accounts payable
|
109.1
|
|
|
80.0
|
|
|
112.8
|
|
|
—
|
|
|
301.9
|
|
|||||
Accrued expenses and other
|
166.6
|
|
|
48.8
|
|
|
130.6
|
|
|
—
|
|
|
346.0
|
|
|||||
Intercompany payables
|
741.8
|
|
|
710.7
|
|
|
476.0
|
|
|
(1,928.5
|
)
|
|
—
|
|
|||||
Long-term debt
|
2,660.1
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
2,660.6
|
|
|||||
Other long-term liabilities
|
227.5
|
|
|
23.6
|
|
|
18.9
|
|
|
—
|
|
|
270.0
|
|
|||||
Total liabilities
|
3,964.0
|
|
|
863.1
|
|
|
750.3
|
|
|
(1,928.5
|
)
|
|
3,648.9
|
|
|||||
Stockholder’s deficiency
|
(531.0
|
)
|
|
773.6
|
|
|
842.3
|
|
|
(1,615.9
|
)
|
|
(531.0
|
)
|
|||||
Total liabilities and stockholder’s deficiency
|
$
|
3,433.0
|
|
|
$
|
1,636.7
|
|
|
$
|
1,592.6
|
|
|
$
|
(3,544.4
|
)
|
|
$
|
3,117.9
|
|
Condensed Consolidating Balance Sheets
|
|||||||||||||||||||
As of December 31, 2016
|
|||||||||||||||||||
|
Products Corporation
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
20.0
|
|
|
$
|
34.3
|
|
|
$
|
132.5
|
|
|
$
|
—
|
|
|
$
|
186.8
|
|
Trade receivables, less allowances for doubtful accounts
|
104.6
|
|
|
104.8
|
|
|
214.5
|
|
|
—
|
|
|
423.9
|
|
|||||
Inventories
|
96.8
|
|
|
150.5
|
|
|
177.3
|
|
|
—
|
|
|
424.6
|
|
|||||
Prepaid expenses and other
|
155.3
|
|
|
15.1
|
|
|
47.2
|
|
|
—
|
|
|
217.6
|
|
|||||
Intercompany receivables
|
790.1
|
|
|
635.7
|
|
|
127.8
|
|
|
(1,553.6
|
)
|
|
—
|
|
|||||
Investment in subsidiaries
|
1,610.1
|
|
|
3.0
|
|
|
—
|
|
|
(1,613.1
|
)
|
|
—
|
|
|||||
Property, plant and equipment, net
|
142.1
|
|
|
84.0
|
|
|
94.4
|
|
|
—
|
|
|
320.5
|
|
|||||
Deferred income taxes
|
26.2
|
|
|
(1.1
|
)
|
|
111.0
|
|
|
—
|
|
|
136.1
|
|
|||||
Goodwill
|
188.7
|
|
|
251.7
|
|
|
249.1
|
|
|
—
|
|
|
689.5
|
|
|||||
Intangible assets, net
|
49.0
|
|
|
149.1
|
|
|
438.5
|
|
|
—
|
|
|
636.6
|
|
|||||
Other assets
|
50.8
|
|
|
29.4
|
|
|
22.9
|
|
|
—
|
|
|
103.1
|
|
|||||
Total assets
|
$
|
3,233.7
|
|
|
$
|
1,456.5
|
|
|
$
|
1,615.2
|
|
|
$
|
(3,166.7
|
)
|
|
$
|
3,138.7
|
|
LIABILITIES AND STOCKHOLDER’S DEFICIENCY
|
|||||||||||||||||||
Short-term borrowings
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10.8
|
|
|
$
|
—
|
|
|
$
|
10.8
|
|
Current portion of long-term debt
|
18.0
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
18.1
|
|
|||||
Accounts payable
|
99.7
|
|
|
90.7
|
|
|
106.5
|
|
|
—
|
|
|
296.9
|
|
|||||
Accrued expenses and other
|
183.0
|
|
|
63.5
|
|
|
136.2
|
|
|
—
|
|
|
382.7
|
|
|||||
Intercompany payables
|
554.5
|
|
|
530.9
|
|
|
468.2
|
|
|
(1,553.6
|
)
|
|
—
|
|
|||||
Long-term debt
|
2,662.6
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
2,663.1
|
|
|||||
Other long-term liabilities
|
222.7
|
|
|
20.3
|
|
|
30.9
|
|
|
—
|
|
|
273.9
|
|
|||||
Total liabilities
|
3,740.5
|
|
|
705.4
|
|
|
753.2
|
|
|
(1,553.6
|
)
|
|
3,645.5
|
|
|||||
Stockholder’s deficiency
|
(506.8
|
)
|
|
751.1
|
|
|
862.0
|
|
|
(1,613.1
|
)
|
|
(506.8
|
)
|
|||||
Total liabilities and stockholder’s deficiency
|
$
|
3,233.7
|
|
|
$
|
1,456.5
|
|
|
$
|
1,615.2
|
|
|
$
|
(3,166.7
|
)
|
|
$
|
3,138.7
|
|
Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
|
|||||||||||||||||||
Three months ended March 31, 2017
|
|||||||||||||||||||
|
Products Corporation
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net Sales
|
$
|
161.9
|
|
|
$
|
162.3
|
|
|
$
|
271.8
|
|
|
$
|
(1.1
|
)
|
|
$
|
594.9
|
|
Cost of sales
|
63.2
|
|
|
77.3
|
|
|
125.7
|
|
|
(1.1
|
)
|
|
265.1
|
|
|||||
Gross profit
|
98.7
|
|
|
85.0
|
|
|
146.1
|
|
|
—
|
|
|
329.8
|
|
|||||
Selling, general and administrative expenses
|
118.8
|
|
|
84.2
|
|
|
148.2
|
|
|
—
|
|
|
351.2
|
|
|||||
Acquisition and integration costs
|
16.2
|
|
|
0.8
|
|
|
0.5
|
|
|
—
|
|
|
17.5
|
|
|||||
Restructuring charges and other, net
|
(2.3
|
)
|
|
1.5
|
|
|
2.0
|
|
|
—
|
|
|
1.2
|
|
|||||
Operating loss
|
(34.0
|
)
|
|
(1.5
|
)
|
|
(4.6
|
)
|
|
—
|
|
|
(40.1
|
)
|
|||||
Other expense (income):
|
|
|
|
|
|
|
|
|
|
||||||||||
Intercompany interest, net
|
(2.0
|
)
|
|
0.3
|
|
|
1.7
|
|
|
—
|
|
|
—
|
|
|||||
Interest expense
|
34.9
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
35.0
|
|
|||||
Amortization of debt issuance costs
|
2.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.2
|
|
|||||
Foreign currency (gains) losses, net
|
(0.5
|
)
|
|
0.4
|
|
|
(4.2
|
)
|
|
—
|
|
|
(4.3
|
)
|
|||||
Miscellaneous, net
|
(23.0
|
)
|
|
0.1
|
|
|
24.1
|
|
|
—
|
|
|
1.2
|
|
|||||
Other expenses, net
|
11.6
|
|
|
0.8
|
|
|
21.7
|
|
|
—
|
|
|
34.1
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Loss from continuing operations before income taxes
|
(45.6
|
)
|
|
(2.3
|
)
|
|
(26.3
|
)
|
|
—
|
|
|
(74.2
|
)
|
|||||
(Benefit from) provision for income taxes
|
(37.6
|
)
|
|
0.3
|
|
|
(0.8
|
)
|
|
—
|
|
|
(38.1
|
)
|
|||||
Loss from continuing operations, net of taxes
|
(8.0
|
)
|
|
(2.6
|
)
|
|
(25.5
|
)
|
|
—
|
|
|
(36.1
|
)
|
|||||
Income from discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
0.3
|
|
|
—
|
|
|
0.3
|
|
|||||
Equity in (loss) income of subsidiaries
|
$
|
(27.8
|
)
|
|
$
|
2.3
|
|
|
$
|
—
|
|
|
$
|
25.5
|
|
|
$
|
—
|
|
Net loss
|
$
|
(35.8
|
)
|
|
$
|
(0.3
|
)
|
|
$
|
(25.2
|
)
|
|
$
|
25.5
|
|
|
$
|
(35.8
|
)
|
Other comprehensive income (loss)
|
9.9
|
|
|
(3.5
|
)
|
|
2.8
|
|
|
0.7
|
|
|
9.9
|
|
|||||
Total comprehensive loss
|
$
|
(25.9
|
)
|
|
$
|
(3.8
|
)
|
|
$
|
(22.4
|
)
|
|
$
|
26.2
|
|
|
$
|
(25.9
|
)
|
Condensed Consolidating Statements of Operations and Comprehensive Income
|
|||||||||||||||||||
Three months ended March 31, 2016
|
|||||||||||||||||||
|
Products Corporation
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Net Sales
|
$
|
198.7
|
|
|
$
|
83.0
|
|
|
$
|
158.2
|
|
|
$
|
(0.3
|
)
|
|
$
|
439.6
|
|
Cost of sales
|
62.2
|
|
|
30.4
|
|
|
61.6
|
|
|
(0.3
|
)
|
|
153.9
|
|
|||||
Gross profit
|
136.5
|
|
|
52.6
|
|
|
96.6
|
|
|
—
|
|
|
285.7
|
|
|||||
Selling, general and administrative expenses
|
124.0
|
|
|
35.6
|
|
|
86.2
|
|
|
—
|
|
|
245.8
|
|
|||||
Acquisition and integration costs
|
0.4
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.5
|
|
|||||
Restructuring charges and other, net
|
0.2
|
|
|
0.6
|
|
|
0.5
|
|
|
—
|
|
|
1.3
|
|
|||||
Operating income
|
11.9
|
|
|
16.4
|
|
|
9.8
|
|
|
—
|
|
|
38.1
|
|
|||||
Other (income) expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Intercompany interest, net
|
(2.3
|
)
|
|
0.3
|
|
|
2.0
|
|
|
—
|
|
|
—
|
|
|||||
Interest expense
|
20.9
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
21.0
|
|
|||||
Amortization of debt issuance costs
|
1.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|||||
Foreign currency losses (gains), net
|
0.3
|
|
|
0.3
|
|
|
(4.0
|
)
|
|
—
|
|
|
(3.4
|
)
|
|||||
Miscellaneous, net
|
(22.2
|
)
|
|
7.0
|
|
|
15.5
|
|
|
—
|
|
|
0.3
|
|
|||||
Other (income) expenses, net
|
(1.8
|
)
|
|
7.6
|
|
|
13.6
|
|
|
—
|
|
|
19.4
|
|
|||||
Income (loss) from continuing operations before income taxes
|
13.7
|
|
|
8.8
|
|
|
(3.8
|
)
|
|
—
|
|
|
18.7
|
|
|||||
(Benefit from) provision for income taxes
|
(4.7
|
)
|
|
13.4
|
|
|
(2.6
|
)
|
|
—
|
|
|
6.1
|
|
|||||
Income (loss) from continuing operations
|
18.4
|
|
|
(4.6
|
)
|
|
(1.2
|
)
|
|
—
|
|
|
12.6
|
|
|||||
Income from discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
|||||
Equity in (loss) income of subsidiaries
|
(5.4
|
)
|
|
(5.9
|
)
|
|
—
|
|
|
11.3
|
|
|
—
|
|
|||||
Net income (loss)
|
$
|
13.0
|
|
|
$
|
(10.5
|
)
|
|
$
|
(0.8
|
)
|
|
$
|
11.3
|
|
|
$
|
13.0
|
|
Other comprehensive income (loss)
|
3.6
|
|
|
(4.4
|
)
|
|
(2.8
|
)
|
|
7.2
|
|
|
3.6
|
|
|||||
Total comprehensive income (loss)
|
$
|
16.6
|
|
|
$
|
(14.9
|
)
|
|
$
|
(3.6
|
)
|
|
$
|
18.5
|
|
|
$
|
16.6
|
|
Condensed Consolidating Statements of Cash Flows
|
|||||||||||||||||||
Three Months Ended March 31, 2017
|
|||||||||||||||||||
|
Products Corporation
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash used in operating activities
|
$
|
(41.3
|
)
|
|
$
|
(27.1
|
)
|
|
$
|
(17.2
|
)
|
|
$
|
—
|
|
|
$
|
(85.6
|
)
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash used in investing activities
|
(11.0
|
)
|
|
(0.6
|
)
|
|
(3.8
|
)
|
|
—
|
|
|
(15.4
|
)
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net decrease in short-term borrowings and overdraft
|
(0.7
|
)
|
|
(0.7
|
)
|
|
(2.0
|
)
|
|
—
|
|
|
(3.4
|
)
|
|||||
Repayments under the 2016 Term Loan Facility
|
(4.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4.5
|
)
|
|||||
Net borrowings under the 2016 Revolving Credit Facility
|
40.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40.9
|
|
|||||
Payment of financing costs
|
(0.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|||||
Tax withholdings related to net share settlements of restricted stock units and awards
|
(1.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.4
|
)
|
|||||
Other financing activities
|
(0.3
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.4
|
)
|
|||||
Net cash provided by (used in) financing activities
|
33.2
|
|
|
(0.7
|
)
|
|
(2.1
|
)
|
|
—
|
|
|
30.4
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
5.3
|
|
|
—
|
|
|
5.3
|
|
|||||
Net decrease in cash and cash equivalents
|
(19.1
|
)
|
|
(28.4
|
)
|
|
(17.8
|
)
|
|
—
|
|
|
(65.3
|
)
|
|||||
Cash and cash equivalents at beginning of period
|
$
|
20.0
|
|
|
$
|
34.3
|
|
|
$
|
132.5
|
|
|
$
|
—
|
|
|
$
|
186.8
|
|
Cash and cash equivalents at end of period
|
$
|
0.9
|
|
|
$
|
5.9
|
|
|
$
|
114.7
|
|
|
$
|
—
|
|
|
$
|
121.5
|
|
Condensed Consolidating Statements of Cash Flows
|
|||||||||||||||||||
Three Months Ended March 31, 2016
|
|||||||||||||||||||
|
Products Corporation
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash used in operating activities
|
$
|
(49.5
|
)
|
|
$
|
(27.8
|
)
|
|
$
|
(22.5
|
)
|
|
$
|
—
|
|
|
$
|
(99.8
|
)
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures
|
(5.4
|
)
|
|
(0.4
|
)
|
|
(1.6
|
)
|
|
—
|
|
|
(7.4
|
)
|
|||||
Proceeds from the sale of certain assets
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|||||
Net cash used in investing activities
|
(5.4
|
)
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
(7.0
|
)
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net (decrease) increase in short-term borrowings and overdraft
|
(10.8
|
)
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
(10.6
|
)
|
|||||
Repayments under the Acquisition Term Loan
|
(13.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13.4
|
)
|
|||||
Prepayments under the 2011 Term Loan
|
(11.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11.5
|
)
|
|||||
Tax withholdings related to net share settlements of restricted stock units and awards
|
(2.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.6
|
)
|
|||||
Other financing activities
|
(0.8
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.9
|
)
|
|||||
Net cash (used in) provided by financing activities
|
(39.1
|
)
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
(39.0
|
)
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
(0.1
|
)
|
|
1.2
|
|
|
—
|
|
|
1.1
|
|
|||||
Net decrease in cash and cash equivalents
|
(94.0
|
)
|
|
(27.9
|
)
|
|
(22.8
|
)
|
|
—
|
|
|
(144.7
|
)
|
|||||
Cash and cash equivalents at beginning of period
|
$
|
141.5
|
|
|
$
|
93.0
|
|
|
$
|
92.4
|
|
|
$
|
—
|
|
|
$
|
326.9
|
|
Cash and cash equivalents at end of period
|
$
|
47.5
|
|
|
$
|
65.1
|
|
|
$
|
69.6
|
|
|
$
|
—
|
|
|
$
|
182.2
|
|
•
|
$105.4 million
of higher SG&A expenses, primarily driven by the inclusion of the SG&A expenses of the Elizabeth Arden segment;
|
•
|
$17.0 million
increase in acquisition and integration costs, primarily related to the Elizabeth Arden Acquisition; and
|
•
|
a
$14.0 million
increase in interest expense incurred during the first quarter of 2017 primarily as a result of the debt-related transactions completed during the third quarter of 2016 in connection with financing the Elizabeth Arden Acquisition and the complete refinancing and repayment of Products Corporation’s then-existing 2011 term loan (the "2011 Term Loan") and 2013 term loan (the "Old Acquisition Term Loan" and together with the 2011 Term Loan, the "Old Term Loan Facility") that was incurred in connection with completing the October 2013 acquisition of The Colomer Group Participations, S.L. (the "Colomer Acquisition”);
|
•
|
a
$44.2 million
decrease in the provision for income taxes primarily due to the pretax loss from continuing operations in the first quarter of 2017; and
|
•
|
$44.1 million
of higher gross profit in the first quarter of 2017, primarily due to the inclusion of gross profit of the Elizabeth Arden segment, partially offset by lower gross profit within the Consumer and Professional segments.
|
•
|
The Consumer segment is comprised of the Company's consumer brands, which primarily include
Revlon
,
Almay
,
SinfulColors
and
Pure Ice
in color cosmetics;
Revlon ColorSilk
in women’s hair color;
Revlon
in beauty tools; and
Mitchum
in anti-perspirant deodorants. The Company’s principal customers for its consumer products include large volume retailers, chain drug and food stores, chemist shops, hypermarkets, general merchandise stores, the Internet/e-commerce, television shopping, department stores, one-stop shopping beauty retailers, specialty cosmetics stores and perfumeries in the U.S. and internationally. The Consumer segment also includes a skin care line under the
Natural Honey
brand and a hair color line under the
Llongueras
brand (licensed from a third party) sold to large volume retailers and other retailers, primarily in Spain, which were acquired as part of the Colomer Acquisition, as well as
Cutex
nail care products, which (combined with other
Cutex
businesses that the Company acquired in 1998) were acquired as part of the October 2015 and May 2016 acquisitions of the
Cutex
businesses and related assets in the U.S. (the "Cutex U.S. Acquisition") and in certain international territories (the "Cutex International Acquisition" and together with the Cutex U.S. Acquisition, the "Cutex Acquisitions"), respectively.
|
•
|
The Elizabeth Arden segment includes the operating results of the Elizabeth Arden business and related purchase accounting for the Company's September 2016 Elizabeth Arden Acquisition. Elizabeth Arden is a global prestige beauty products company with an iconic portfolio of prestige fragrance, skin care and cosmetic brands, which includes the
Elizabeth Arden
skin care brands, color cosmetics and fragrances; designer fragrances such as
Juicy Couture
,
John Varvatos
and
Wildfox Couture
;
and heritage fragrances such as
Curve
,
Elizabeth Taylor
,
Britney Spears
and
Christina Aguilera
.
|
•
|
The Professional segment is comprised primarily of the Company's professional brands, which include
Revlon Professional
in hair color and hair care;
CND
-
branded products
in nail polishes and nail enhancements; and
American Crew
in men’s grooming products, all of which are sold worldwide to professional salons. The Company’s principal customers for its professional products include hair and nail salons and distributors to professional salons in the U.S. and internationally. The Professional segment also includes a multi-cultural hair care line consisting of
Creme of Nature
hair care products sold to professional salons, large volume retailers and other retailers, primarily in the U.S.
|
•
|
The Other segment primarily includes the operating results of the CBBeauty Group and certain of its related entities, which the Company acquired in April 2015 (collectively "CBB" and such transaction, the "CBB Acquisition"). CBB develops, markets and distributes fragrances and other beauty products under various celebrity, lifestyle and fashion brands licensed from third parties, principally through department stores and selective distribution in international territories.
|
|
Net Sales
|
|
Segment Profit
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
Three Months Ended March 31,
|
|
Change
|
|
XFX Change
(a)
|
|
Three Months Ended March 31,
|
|
Change
|
|
XFX Change
(a)
|
||||||||||||||||||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||||||||||||
Consumer
|
$
|
290.4
|
|
|
$
|
320.0
|
|
|
$
|
(29.6
|
)
|
|
(9.3
|
)%
|
|
$
|
(29.1
|
)
|
|
(9.1
|
)%
|
|
$
|
32.9
|
|
|
$
|
58.4
|
|
|
$
|
(25.5
|
)
|
|
(43.7
|
)%
|
|
$
|
(25.8
|
)
|
|
(44.2
|
)%
|
Elizabeth Arden
|
192.0
|
|
|
—
|
|
|
192.0
|
|
|
N.M.
|
|
|
192.0
|
|
|
N.M.
|
|
|
14.3
|
|
|
—
|
|
|
14.3
|
|
|
N.M.
|
|
|
14.3
|
|
|
N.M.
|
|
||||||||
Professional
|
108.0
|
|
|
115.1
|
|
|
(7.1
|
)
|
|
(6.2
|
)%
|
|
(5.6
|
)
|
|
(4.9
|
)%
|
|
16.1
|
|
|
25.6
|
|
|
(9.5
|
)
|
|
(37.1
|
)%
|
|
(9.5
|
)
|
|
(37.1
|
)%
|
||||||||
Other
|
4.5
|
|
|
4.5
|
|
|
—
|
|
|
—
|
%
|
|
0.7
|
|
|
15.6
|
%
|
|
(1.3
|
)
|
|
(0.9
|
)
|
|
(0.4
|
)
|
|
(44.4
|
)%
|
|
(0.6
|
)
|
|
(66.7
|
)%
|
||||||||
Total
|
$
|
594.9
|
|
|
$
|
439.6
|
|
|
$
|
155.3
|
|
|
35.3
|
%
|
|
$
|
158.0
|
|
|
35.9
|
%
|
|
$
|
62.0
|
|
|
$
|
83.1
|
|
|
$
|
(21.1
|
)
|
|
(25.4
|
)%
|
|
$
|
(21.6
|
)
|
|
(26.0
|
)%
|
|
Three Months Ended March 31,
|
|
Change
|
|
XFX Change
(a)
|
||||||||||||||||
|
2017
|
|
2016
|
|
$
|
|
%
|
|
$
|
|
%
|
||||||||||
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
North America
|
$
|
175.3
|
|
|
$
|
214.8
|
|
|
$
|
(39.5
|
)
|
|
(18.4
|
)%
|
|
$
|
(39.9
|
)
|
|
(18.6
|
)%
|
International
|
115.1
|
|
|
105.2
|
|
|
9.9
|
|
|
9.4
|
%
|
|
10.8
|
|
|
10.3
|
%
|
||||
Elizabeth Arden
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
North America
|
$
|
100.1
|
|
|
$
|
—
|
|
|
$
|
100.1
|
|
|
N.M.
|
|
|
$
|
100.1
|
|
|
N.M.
|
|
International
|
91.9
|
|
|
—
|
|
|
91.9
|
|
|
N.M.
|
|
|
91.9
|
|
|
N.M.
|
|
||||
Professional
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
North America
|
$
|
43.5
|
|
|
$
|
53.6
|
|
|
$
|
(10.1
|
)
|
|
(18.8
|
)%
|
|
$
|
(10.3
|
)
|
|
(19.2
|
)%
|
International
|
64.5
|
|
|
61.5
|
|
|
3.0
|
|
|
4.9
|
%
|
|
4.7
|
|
|
7.6
|
%
|
||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
North America
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
—
|
|
|
—
|
%
|
International
|
4.5
|
|
|
4.5
|
|
|
—
|
|
|
—
|
%
|
|
0.7
|
|
|
15.6
|
%
|
||||
Total Net Sales
|
$
|
594.9
|
|
|
$
|
439.6
|
|
|
$
|
155.3
|
|
|
35.3
|
%
|
|
$
|
158.0
|
|
|
35.9
|
%
|
|
Three Months Ended March 31,
|
|
Change
|
||||||||
|
2017
|
|
2016
|
|
2017 vs. 2016
|
||||||
Gross profit
|
$
|
329.8
|
|
|
$
|
285.7
|
|
|
$
|
44.1
|
|
Percentage of net sales
|
55.4
|
%
|
|
65.0
|
%
|
|
(9.6
|
)%
|
•
|
the inclusion of gross profit from the Elizabeth Arden Acquisition, which increased gross profit by $99.7 million, however decreased gross profit as a percentage of net sales by 1.9 percentage points;
|
•
|
additional inventory costs as a result of the recognition of an increase in the fair value of inventory acquired in the Elizabeth Arden Acquisition, which reduced gross profit by $16.0 million and reduced gross profit as a percentage of net sales by 3.1 percentage points;
|
•
|
unfavorable volume, which decreased gross profit by $15.5 million, with no impact on gross profit as a percentage of net sales;
|
•
|
higher promotional allowances, primarily within the Consumer segment, which decreased gross profit by $15.2 million and decreased gross profit as a percentage of net sales by 2.9 percentage points;
|
•
|
unfavorable product mix, which decreased gross profit by $4.9 million and decreased gross profit as a percentage of net sales by 0.9 percentage points; and
|
•
|
the unfavorable impact of less overhead absorption during the first quarter of 2017, which decreased gross profit by $3.7 million and decreased gross profit as a percentage of net sales by 0.7 percentage points.
|
|
Three Months Ended March 31,
|
|
Change
|
||||||||
|
2017
|
|
2016
|
|
2017 vs. 2016
|
||||||
SG&A expenses
|
$
|
351.2
|
|
|
$
|
245.8
|
|
|
$
|
105.4
|
|
•
|
the inclusion of SG&A expenses in the Elizabeth Arden segment as a result of the Elizabeth Arden Acquisition, which contributed
$112.8 million
to the increase in SG&A expenses;
|
•
|
a $5.1 million decrease in brand support expenses, primarily within the Consumer segment.
|
|
Three Months Ended March 31,
|
|
Change
|
||||||||
|
2017
|
|
2016
|
|
2017 vs. 2016
|
||||||
Acquisition Costs
|
0.6
|
|
|
$
|
0.5
|
|
|
$
|
0.1
|
|
|
Integration Costs
|
16.9
|
|
|
—
|
|
|
16.9
|
|
|||
Total acquisition and integration costs
|
$
|
17.5
|
|
|
$
|
0.5
|
|
|
$
|
17.0
|
|
|
Three Months Ended March 31,
|
|
Change
|
||||||||
|
2017
|
|
2016
|
|
2017 vs. 2016
|
||||||
Restructuring charges and other, net
|
$
|
1.2
|
|
|
$
|
1.3
|
|
|
$
|
(0.1
|
)
|
|
Three Months Ended March 31,
|
|
Change
|
||||||||
|
2017
|
|
2016
|
|
2017 vs. 2016
|
||||||
Interest expense
|
$
|
35.0
|
|
|
$
|
21.0
|
|
|
$
|
14.0
|
|
|
Three Months Ended March 31,
|
|
Change
|
||||||||
|
2017
|
|
2016
|
|
2017 vs. 2016
|
||||||
Foreign currency gains, net
|
$
|
(4.3
|
)
|
|
$
|
(3.4
|
)
|
|
$
|
(0.9
|
)
|
|
Three Months Ended March 31,
|
|
Change
|
||||||||
|
2017
|
|
2016
|
|
2017 vs. 2016
|
||||||
(Benefit from) provision for income taxes
|
$
|
(38.1
|
)
|
|
$
|
6.1
|
|
|
$
|
(44.2
|
)
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Net cash used in operating activities
|
$
|
(85.6
|
)
|
|
$
|
(99.8
|
)
|
Net cash used in investing activities
|
(15.4
|
)
|
|
(7.0
|
)
|
||
Net cash provided by (used in) financing activities
|
30.4
|
|
|
(39.0
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
5.3
|
|
|
1.1
|
|
•
|
$40.9 million
of borrowings under the 2016 Revolving Credit Facility;
|
•
|
$4.5 million
of repayments under the 2016 Term Loan facility; and
|
•
|
a
$3.4 million
decrease in short-term borrowings and overdraft.
|
•
|
a $23.2 million required excess cash flow prepayment made under the Amended Term Loan Facility; and
|
•
|
$1.7 million of scheduled amortization payments on the Acquisition Term Loan; and
|
•
|
a $10.6 million decrease in short-term borrowings and overdraft.
|
|
Expected Maturity Date for the Year Ended December 31,
|
|
|
|||||||||||||||||||||||||||||
|
(dollars in millions, except for rate information)
|
|
|
|||||||||||||||||||||||||||||
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
|
Fair Value March 31, 2017
|
||||||||||||||||
Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Short-term variable rate (third-party - various currencies)
|
|
$
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10.2
|
|
|
$
|
10.2
|
|
||||||||||
Average interest rate
(a)
|
|
3.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Short-term fixed rate (third party - EUR)
|
|
$
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.2
|
|
|
$
|
1.2
|
|
||||||||||
Average interest rate
|
|
11.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Long-term fixed rate (third party - USD)
|
|
|
|
|
|
|
|
|
|
$
|
500.0
|
|
|
$
|
450.0
|
|
|
$
|
950.0
|
|
|
$
|
951.3
|
|
||||||||
Average interest rate
|
|
|
|
|
|
|
|
|
|
5.75
|
%
|
|
6.25
|
%
|
|
|
|
|
||||||||||||||
Long-term fixed rate (third party - EUR)
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
0.5
|
|
|
$
|
0.5
|
|
Average interest rate
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
|
|
|
||||||||||
Long-term variable rate (third party - USD)
(b)
|
|
$
|
54.4
|
|
|
$
|
18.0
|
|
|
$
|
18.0
|
|
|
$
|
18.0
|
|
|
$
|
18.0
|
|
|
$
|
1,705.5
|
|
|
$
|
1,831.9
|
|
|
$
|
1,834.1
|
|
Average interest rate
(a)(c)
|
|
3.9
|
%
|
|
5.0
|
%
|
|
5.2
|
%
|
|
5.4
|
%
|
|
5.5
|
%
|
|
5.7
|
%
|
|
|
|
|
||||||||||
Total debt
|
|
$
|
65.9
|
|
|
$
|
18.1
|
|
|
$
|
18.1
|
|
|
$
|
18.1
|
|
|
$
|
518.1
|
|
|
$
|
2,155.5
|
|
|
$
|
2,793.8
|
|
|
$
|
2,797.3
|
|
(a)
|
Weighted average variable rates are based upon implied forward rates from the U.S. Dollar LIBOR and Euribor yield curves at
March 31, 2017
.
|
(b)
|
Includes total quarterly amortization payments required within each year under the 2016 Term Loan Facility.
|
(c)
|
At
March 31, 2017
, the interest rate for the 2016 Term Loan Facility was the Eurodollar Rate (as defined in the 2016 Term Loan Agreement) plus 3.50% per annum (with the Eurodollar Rate not to be less than 0.75%).
|
Forward Contracts (“FC”)
|
|
Average Contractual Rate
$/FC
|
|
U.S. Dollar Equivalent Notional Amount
|
|
Contract Value
March 31, 2017
|
|
Asset (Liability) Fair Value
March 31, 2017
|
||||||
Sell British Pound/Buy USD
|
|
1.2648
|
|
25.8
|
|
|
25.9
|
|
|
0.1
|
|
|||
Sell Canadian Dollars/Buy USD
|
|
0.7553
|
|
24.5
|
|
|
24.6
|
|
|
0.1
|
|
|||
Sell Australian Dollars/Buy USD
|
|
0.7490
|
|
18.7
|
|
|
18.5
|
|
|
(0.2
|
)
|
|||
Buy Mexican Peso/Sell USD
|
|
0.0499
|
|
10.2
|
|
|
10.8
|
|
|
0.6
|
|
|||
Sell Euro/Buy USD
|
|
1.0816
|
|
10.2
|
|
|
10.3
|
|
|
0.1
|
|
|||
Sell USD/Buy Swiss Franc
|
|
1.0131
|
|
9.6
|
|
|
9.6
|
|
|
—
|
|
|||
Sell Japanese Yen/Buy USD
|
|
0.0091
|
|
7.4
|
|
|
7.5
|
|
|
0.1
|
|
|||
Sell South African Rand/Buy USD
|
|
0.0725
|
|
6.3
|
|
|
6.2
|
|
|
(0.1
|
)
|
|||
Sell DKK/Buy USD
|
|
6.9171
|
|
4.0
|
|
|
4.0
|
|
|
—
|
|
|||
Buy Australian Dollars/Sell NZ dollars
|
|
1.0629
|
|
3.8
|
|
|
3.9
|
|
|
0.1
|
|
|||
Buy Euro/Sell British Pound
|
|
0.8618
|
|
2.8
|
|
|
2.8
|
|
|
—
|
|
|||
Sell New Zealand Dollars/Buy USD
|
|
0.7088
|
|
1.4
|
|
|
1.4
|
|
|
—
|
|
|||
Total forward contracts
|
|
|
|
$
|
124.7
|
|
|
$
|
125.5
|
|
|
$
|
0.8
|
|
(i)
|
the Company's future financial performance and/or sales growth, including, without limitation, the Company's anticipation of achieving growth through opportunities presented by the combined Company's expanded sales channels and geographies, a broadened product portfolio and cost synergy opportunities;
|
(ii)
|
the effect on sales of decreased consumer spending in response to weak economic conditions or weakness in the consumption of beauty care products in the Consumer, Elizabeth Arden, Professional and/or Other segments; adverse changes in foreign currency exchange rates, foreign currency controls and/or government-mandated pricing controls; decreased sales of the Company’s products as a result of increased competitive activities by the Company’s competitors and/or decreased performance by third party suppliers, changes in consumer purchasing habits, including with respect to retailer preferences and/or among sales channels; inventory management by the Company's customers; space reconfigurations or reductions in display space by the Company's customers; changes in pricing, marketing, advertising and/or promotional strategies by the Company's customers; less than anticipated results from the Company’s existing or new products or from its advertising, promotional, pricing and/or marketing plans; or if the Company’s expenses, including, without limitation, for pension expense under its benefit plans, acquisition and acquisition-related integration costs, capital expenditures, costs related to the Company’s synergy and integration programs in connection with the Elizabeth Arden Acquisition, restructuring and severance costs, costs related to litigation, advertising, promotional and marketing activities, or for sales returns related to any reduction of space by the Company's customers, product discontinuances or otherwise, exceed the anticipated level of expenses;
|
(iii)
|
the Company's belief that the continued execution of its business strategy could include taking advantage of additional opportunities to reposition, repackage or reformulate one or more brands or product lines, launching additional new products, acquiring businesses or brands (including through licensing transactions, if any), divesting or discontinuing non-core business lines (which may include exiting certain territories), further refining its approach to retail merchandising and/or taking further actions to optimize its manufacturing, sourcing and organizational size and structure, including optimizing the Colomer Acquisition, the CBB Acquisition, the Cutex Acquisitions (including the Company's belief that such acquisition enhances and complements the Company's existing brand portfolio of nail care products) and/or the Elizabeth Arden Acquisition, any of which, the intended purpose would be to create value through improving the Company's financial performance, could result in the Company making investments and/or recognizing charges related to executing against such opportunities, which activities may be funded with cash on hand, funds available under the 2016 Revolving Credit Facility and/or other permitted additional sources of capital, which actions could increase the Company’s total debt;
|
(iv)
|
the Company’s belief that it is building a combined organization that is entrepreneurial, agile and boldly creative, with a passion for beauty, that it has strategic brand builders developing a diverse portfolio of iconic brands that delight consumers around the world wherever and however they shop for beauty and that it strives to be an ethical company that values inclusive leadership and is committed to sustainable and responsible growth and the Company’s belief in its strategy that is based on three key pillars: (a) strengthening our portfolio of brands
by:
continuing to develop the leadership and aspiration for our flagship brands; Revlon, Elizabeth Arden and Almay; continuing to develop our product offerings across beauty segments with a focus on large and/or fast growing categories; leveraging our creativity, insights and agility to accelerate innovation to develop trend-relevant and first-of-its kind beauty solutions; delighting our customers with high performing products, superior services and unique experiences that exceed their expectations; and continuing to communicate our brand's heritage, expertise and purpose to create authentic, meaningful and lasting connections with consumers of all ages; (b) strategically expanding consumer's access to our brands by: taking steps to ensure that consumers have real-time access to our brands wherever and however they shop for beauty; strengthening and diversifying our channels, especially direct to consumer; accelerating our development in high-growth channels, with a focus on specialty, e-commerce and m-commerce; continuing to win in traditional channels (including mass, drug, selective and department stores) and expanding our combined reach into travel retail; and strengthening our position in the U.S., to ensure our growth base, and expanding into untapped geographic regions, with a focus on growth in Asia; and (c) developing a cost structure that fuels investment in our brands by: growing profitably and improving our operating performance; aligning our strategic investments behind the biggest growth opportunities and innovation that differentiates our brands; continuing to improve our category mix by shifting toward higher gross margin categories (e.g., skin care and fragrance); reducing product returns, markdowns and inventory levels; and continuing to optimize our resource allocation;
|
(v)
|
the effect of restructuring activities, restructuring costs and charges, the timing of restructuring payments and the benefits from such activities; including, without limitation, the Company’s expectation (a) that the 2015 Efficiency Program will drive certain organizational efficiencies across the Company's Consumer and Professional segments and reduce general and administrative expenses within the Consumer and Professional segments; and that cash payments related to the 2015 Efficiency Program will total approximately
$12 million
, including
$0.2 million
for capital expenditures (which capital expenditures are excluded from total restructuring and related charges expected to be recognized for the 2015 Efficiency Program), of which
$6.1 million
was paid through 2016,
$6.7 million
was paid through March 31, 2017 and the remaining balance is expected to be paid in the remainder of 2017;
|
(vi)
|
the Company’s expectation that operating revenues, cash on hand and funds available for borrowing under Products Corporation's 2016 Revolving Credit Facility and other permitted lines of credit will be sufficient to enable the Company to cover its operating expenses for 2017, including the cash requirements referred to in item (viii) below, and the Company's beliefs that (a) the cash generated by its domestic operations and availability under the 2016 Revolving Credit Facility and other permitted lines of credit should be sufficient to meet its domestic liquidity needs for at least the next 12 months, and (b) restrictions and/or taxes on repatriation of foreign earnings will not have a material effect on the Company's liquidity during such period;
|
(vii)
|
the Company’s expected principal sources of funds, including operating revenues, cash on hand and funds available for borrowing under Products Corporation's 2016 Revolving Credit Facility and other permitted lines of credit, as well as the availability of funds from the Company taking certain measures, including, among other things, reducing discretionary spending;
|
(viii)
|
the Company's expected principal uses of funds, including amounts required for the payment of operating expenses, including expenses in connection with the continued execution of the Company’s business strategy; payments in connection with the Company’s synergy and integration programs related to the Elizabeth Arden Acquisition (including, without limitation, for the EA Integration Restructuring Program); payments in connection with the Company's purchases of permanent wall displays; capital expenditure requirements; debt service payments and costs; cash tax payments; pension and other post-retirement benefit plan contributions; payments in connection with the Company's restructuring programs; business and/or brand acquisitions (including, without limitation, through licensing transactions, if any); severance not otherwise included in the Company’s restructuring programs; debt and/or equity repurchases, if any; costs related to litigation; and payments in connection with discontinuing non-core business lines and/or exiting and/or entering certain territories and/or channels of trade (including, without limitation, that the Company may also, from time to time, seek to retire or purchase its outstanding debt obligations and/or equity in open market purchases, block trades, privately negotiated purchase transactions or otherwise and may seek to refinance some or all of its indebtedness based upon market conditions and that any such retirement or purchase of debt and/or equity may be funded with operating cash flows of the business or other sources and will depend upon prevailing market conditions, liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material); and its estimates of the amount and timing of such operating and other expenses;
|
(ix)
|
matters concerning the Company's market-risk sensitive instruments, including that any risk of loss under its derivative instruments arising from any non-performance by any of the counterparties is remote;
|
(x)
|
the Company's expectation to efficiently manage its working capital, including, among other things, initiatives intended to optimize inventory levels over time; centralized procurement to secure discounts and efficiencies; prudent management of trade receivables and accounts payable; and controls on general and administrative spending; and the Company’s belief that in the ordinary course of business, its source or use of cash from operating activities may vary on a quarterly basis as a result of a number of factors, including the timing of working capital flows;
|
(xi)
|
the Company’s expectations regarding its future net periodic benefit cost for its U.S. and international defined benefit plans;
|
(xii)
|
the Company's expectation that its tax provision and effective tax rate in any individual quarter and year-to-date period will vary and may not be indicative of the Company's tax provision and effective tax rate for the full year;
|
(xiii)
|
the Company belief the allegations contained in the Second Consolidated Amended Class Action Complaint are without merit and its plans to vigorously defend against them and its belief that the outcome of all pending legal proceedings in the aggregate is not reasonably likely to have a material adverse effect on the Company’s business, prospects, results of operations, financial condition and/or cash flows, but that in light of the uncertainties involved in legal proceedings generally, the ultimate outcome of a particular matter could be material to the Company’s operating results for a particular period depending on, among other things, the size of the loss or the nature of the liability imposed and the level of the Company’s income for that particular period;
|
(xiv)
|
certain estimates used by management in estimating the fair value of the assets acquired in the Elizabeth Arden Acquisition; and
|
(xv)
|
the Company's expected benefits and other impacts from the Elizabeth Arden Acquisition, including, without limitation: (a) as a result of the EA Integration Restructuring Program, as well as other actions related to integrating the Elizabeth Arden organization into the Company’s business, achieving annualized synergies and cost reductions of approximately $190 million over a multi-year period, with approximately $50 million to $60 million of synergies and cost reductions expected to benefit 2017 from the EA Integration Restructuring Program; (b) incurring, over a multi-year period, approximately $100 million to $110 million of integration-related capital expenditures and approximately $70 million to $80 million of non-restructuring integration costs related to these actions; and (c) in connection with implementing the EA Integration Restructuring Program: (1) consolidating offices, eliminating certain duplicative activities and streamlining back-office support (which are designed to reduce the Company’s SG&A expenses) and eliminating approximately
350
positions worldwide and (2) recognizing approximately
$65 million
to
$75 million
of the EA Integration Restructuring Charges (all of which are expected to be cash payments), consisting of: (i) approximately
$40 million
to
$50 million
of employee-related costs, including severance, retention and other contractual termination benefits; (ii) approximately
$15 million
of lease termination costs; and (iii) approximately
$10 million
of other related charges.
|
(i)
|
unanticipated circumstances or results affecting the Company's financial performance and or sales growth, including decreased consumer spending in response to weak economic conditions or weakness in the consumption of beauty care products in the Consumer, Elizabeth Arden, Professional and/or Other segments; adverse changes in foreign currency exchange rates, foreign currency controls and/or government-mandated pricing controls; decreased sales of the Company's products as a result of increased competitive activities by the Company's competitors and/or decreased performance by third party suppliers; changes in consumer preferences, such as reduced consumer demand for the Company's color cosmetics and other current products, including new product launches; changes in consumer purchasing habits, including with respect to retailer preferences and/or among sales channels; lower than expected customer acceptance or consumer acceptance of, or less than anticipated results from, the Company’s existing or new products; higher than expected restructuring or severance costs, acquisition costs and/or acquisition-related integration costs and capital expenditures, including, without limitation, synergy and integration program costs and expenses related to the Elizabeth Arden Acquisition; higher than expected pension expense and/or cash contributions under its benefit plans, costs related to litigation, advertising, promotional and/or marketing expenses or lower than expected results from the Company’s advertising, promotional, pricing and/or marketing plans; higher than expected sales returns related to any reduction of space by the Company's customers, product discontinuances or otherwise or decreased sales of the Company’s existing or new products; actions by the Company’s customers, such as inventory management and greater than anticipated space reconfigurations or reductions in display space and/or product discontinuances or a greater than expected impact from pricing, marketing, advertising and/or promotional strategies by the Company's customers; and changes in the competitive environment and actions by the Company's competitors, including, among other things, business combinations, technological breakthroughs, implementation of new pricing strategies, new product offerings, increased advertising, promotional and marketing spending and advertising, promotional and/or marketing successes by competitors;
|
(ii)
|
in addition to the items discussed in (i) above, the effects of and changes in economic conditions (such as continued volatility in the financial markets, inflation, monetary conditions and foreign currency fluctuations, foreign currency controls and/or government-mandated pricing controls, as well as in trade, monetary, fiscal and tax policies in international markets) and political conditions (such as military actions and terrorist activities);
|
(iii)
|
unanticipated costs or difficulties or delays in completing projects associated with the continued execution of the Company’s business strategy or lower than expected revenues or the inability to create value through improving our financial performance as a result of such strategy, including lower than expected sales, or higher than expected costs, including as may arise from any additional repositioning, repackaging or reformulating of one or more brands or product lines, launching of new product lines, including higher than expected expenses, including for sales returns, for launching its new products, acquiring businesses or brands (including through licensing transactions, if any), divesting or discontinuing non-core business lines (which may include exiting certain territories), further refining its approach to retail merchandising and/or difficulties, delays or increased costs in connection with taking further actions to optimize the Company’s manufacturing, sourcing, supply chain or organizational size and structure, including optimizing the Colomer Acquisition, the CBB Acquisition, the Cutex Acquisitions and/or the Elizabeth Arden Acquisition (including difficulties or delays in and/or the Company’s inability to integrate the Elizabeth Arden business which could result in less than expected synergies and/or cost reductions, more than expected costs to achieve the expected synergies and/or cost reductions or delays in achieving the expected synergies and/or cost reductions and/or less than expected benefits from the EA Integration Restructuring Program, more than expected costs in implementing such program and/or difficulties or delays, in whole or in part, in executing the EA Integration Restructuring Program), as well as the unavailability of cash on hand and/or funds under the 2016 Revolving Credit Facility or from other permitted additional sources of capital to fund such potential activities;
|
(iv)
|
(A) difficulties, delays in or less than expected results from the Company’s efforts to build a combined organization that is entrepreneurial, agile and boldly creative with a passion for beauty, having strategic brand builders developing a diverse portfolio of iconic brands that delight consumers around the world wherever and however they shop for beauty and striving to be an ethical company that values inclusive leadership and is committed to sustainable and responsible growth, such as due to, among other things, less than effective product development, less than expected acceptance of its new or existing products by consumers, salon professionals and/or other customers, less than expected acceptance of its advertising, promotional, pricing and/or marketing plans and/or brand communication by consumers, salon professionals and/or customers, less than expected investment in advertising, promotional and/or marketing activities or greater than expected competitive investment, less than expected levels of advertising, promotional and/or marketing activities for its new product launches and/or less than expected levels of execution with its customers or higher than expected costs and expenses; and/or (B) difficulties, delays in or less than expected results from the Company’s efforts to strengthen its portfolio of brands, strategically expand consumer's access to the Company’s brands and/or develop a cost structure that fuels investment in the Company’s brands, such as due to less than expected investment behind such activities, less than effective new product development and/or advertising, marketing or promotional programs, less than expected success in expanding geographically, into new channels and/or expanding the Company’s digital capabilities and/or less than expected results from the Company’s efforts to reduce costs, including, without limitation, due to higher than expected sales returns such as those that may be related to actions by the Company’s customers, such as inventory management or greater than anticipated space reconfigurations or reductions in display space;
|
(v)
|
difficulties, delays or unanticipated costs or charges or less than expected cost reductions and other benefits resulting from the Company's restructuring activities, such as greater than anticipated costs or charges or less than anticipated cost reductions or other benefits from the 2015 Efficiency Program and/or the EA Integration Restructuring Program and/or the risk that such programs may not satisfy the Company’s objectives;
|
(vi)
|
lower than expected operating revenues, cash on hand and/or funds available under the 2016 Revolving Credit Facility and/or other permitted lines of credit or higher than anticipated operating expenses, such as referred to in clause (viii) below, and/or less than anticipated cash generated by the Company's domestic operations or unanticipated restrictions or taxes on repatriation of foreign earnings;
|
(vii)
|
the unavailability of funds under Products Corporation's 2016 Revolving Credit Facility or other permitted lines of credit; or from difficulties, delays in or the Company's inability to take other measures, such as reducing discretionary spending;
|
(viii)
|
higher than expected operating expenses, sales returns, working capital expenses, integration and/or synergy costs related to the Elizabeth Arden Acquisition, permanent wall display costs, capital expenditures, debt service payments, cash tax payments, cash pension plan contributions, other post-retirement benefit plan contributions and/or net periodic benefit costs for the pension and other post-retirement benefit plans, restructuring costs, (including, without limitation, in connection with implementing the EA Integration Restructuring Program), severance and discontinued operations not otherwise included in the Company’s restructuring programs, debt and/or equity repurchases, costs related to litigation and/or payments in connection with business and/or brand acquisitions (including, without limitation, through licensing transactions, if any), and discontinuing non-core business lines and/or exiting and/or entering certain territories and/or channels of trade;
|
(ix)
|
interest rate or foreign exchange rate changes affecting the Company and its market-risk sensitive financial instruments and/or difficulties, delays or the inability of the counterparty to perform such transactions;
|
(x)
|
difficulties, delays or the inability of the Company to efficiently manage its cash and working capital;
|
(xi)
|
lower than expected returns on pension plan assets and/or lower discount rates, which could result in higher than expected cash contributions, higher net periodic benefit costs and/or less than expected net periodic benefit income;
|
(xii)
|
unexpected significant variances in the Company's tax provision, effective tax rate and/or unrecognized tax benefits;
|
(xiii)
|
unanticipated adverse effects on the Company’s business, prospects, results of operations, financial condition and/or cash flows as a result of unexpected developments with respect to the Company's legal proceedings;
|
(xiv)
|
changes in the fair values of the assets acquired in the Elizabeth Arden Acquisition due to, among other things, unanticipated future performance of the acquired licenses and/or other brands; and/or
|
(xv)
|
difficulties with, delays in and/or the Company’s inability to achieve, in whole or in part, or within the expected timeframe the expected benefits from the Elizabeth Arden Acquisition, such as (a) the Company’s or the Elizabeth Arden’s respective businesses experiencing disruptions due to management’s focus on executing the business integration activities and/or due to employee uncertainty during the integration transition period or other factors making it more difficult to maintain relationships with customers, suppliers, employees and other business partners; (b) the Company being unable to successfully implement, in whole or in part, its integration strategies, including the possibility that the expected synergies and cost reductions from the Elizabeth Arden Acquisition will not be realized or will not be realized within the expected time period; (c) difficulties, delays or the inability of the Company to successfully complete the EA Integration Restructuring Program, in whole or in part, which could result in less than expected operating and financial benefits from such actions; (d) difficulties, delays or the inability of the Company to realize, in whole or in part, the anticipated benefits from the EA Integration Restructuring Program, such as difficulties with, delays in or the Company’s inability to generate certain reductions in its SG&A and/or eliminate certain positions; (e) delays in completing the EA Integration Restructuring Program, which could reduce the benefits realized from such activities; (f) higher than anticipated restructuring charges and/or payments in connection with completing the EA Integration Restructuring Program and/or changes in the expected timing of such charges and/or payments; and/or (g) difficulties with, delays in and/or the Company’s inability to achieve, in whole or in part, or within the expected timeframe approximately $190 million of multi-year annualized synergies and cost reductions and approximately $50 million to $60 million of synergies and cost reductions to benefit 2017, such as due to the Company being unable to successfully implement integration strategies and/or changes in the timing of realizing such synergies and cost reductions, such as due to less than anticipated liquidity to fund such activities and/or more than expected capital expenditures, non-restructuring integration costs or other costs to achieve the expected synergies and/or cost reductions.
|
*4.1
|
Second Supplemental Indenture, dated as of February 13, 2017, by and among Products Corporation, Cutex, Inc. (a subsidiary of Products Corporation), the other Subsidiary Guarantors (as defined in the 6.25% Senior Notes Indenture) and U.S. Bank National Association, as trustee under the 6.25% Senior Notes Indenture.
|
*4.2
|
Fifth Supplemental Indenture, dated as of February 13, 2017, by and among Cutex, Inc., Products Corporation, the other Guarantors (as defined in the 5.75% Senior Notes Indenture) and U.S. Bank National Association, as trustee under the 5.75% Senior Notes Indenture.
|
10.1
|
Employment Agreement, dated as of April 17, 2017, between Revlon, Products Corporation and Christopher Peterson (incorporated by reference to Revlon's Current Report on Form 8-K filed with the SEC on April 17, 2017).
|
*31.1
|
Certification of Fabian T. Garcia, Chief Executive Officer, dated May 5, 2017, pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.
|
*31.2
|
Certification of Juan R. Figuereo, Chief Financial Officer, dated May 5, 2017, pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act.
|
32.1 (furnished herewith)
|
Certification of Fabian T. Garcia, Chief Executive Officer, dated May 5, 2017, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2 (furnished herewith)
|
Certification of Juan R. Figuereo, Chief Financial Officer, dated May 5, 2017, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
*101.INS
|
XBRL Instance Document
|
*101.SCH
|
XBRL Taxonomy Extension Schema
|
*101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
*101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
*101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
*101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
Revlon Consumer Products Corporation
|
||||
(Registrant)
|
||||
|
|
|
|
|
By: /s/ Fabian T. Garcia
|
|
By: /s/ Juan R. Figuereo
|
|
By: /s/ Siobhan Anderson
|
Fabian T. Garcia
|
|
Juan R. Figuereo
|
|
Siobhan Anderson
|
President,
|
|
Chief Financial Officer
|
|
Senior Vice President,
|
Chief Executive Officer and
|
|
|
|
Chief Accounting Officer,
|
Director
|
|
|
|
Corporate Controller, Treasurer
|
|
|
|
|
and Investor Relations
|
By:
|
/s/ Yossi Almani
|
By:
|
/s/ Yossi Almani
|
By:
|
/s/ Yossi Almani
|
By:
|
/s/ Yossi Almani
|
By:
|
/s/ Richard H. Prokosch
|
1.
|
I have reviewed this quarterly report on Form 10-Q (the "Report") of Revlon Consumer Products Corporation (the "Registrant");
|
2.
|
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
|
4.
|
The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
5.
|
The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
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1.
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I have reviewed this quarterly report on Form 10-Q (the "Report") of Revlon Consumer Products Corporation (the "Registrant");
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2.
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Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
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4.
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The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
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5.
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The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
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