View:
Download DOC
Download PDF
Download XLS
Download XBRL
Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
(Mark One)
 
[x]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended September 30, 2019
 
 
OR
 
 
[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from__________________ to _______________
 

Commission File Number
 
Registrant; State of Incorporation; Address and Telephone Number
 
 
 
IRS Employer Identification No.
1-11178
 
Revlon, Inc.
 
 
 
13-3662955
 
 
Delaware
 
 
 
 
 
 
 
 
 
 
 
 
 
One New York Plaza
 
 
 
 
 
 
New York, New York 10004
 
 
 
 
 
 
212-527-4000
 
 
 
 
 
 
 
 
 
 
 
33-59560
 
Revlon Consumer Products Corporation
 
 
 
13-3662953
 
 
Delaware
 
 
 
 
 
 
 
 
 
 
 
 
 
One New York Plaza
 
 
 
 
 
 
New York, New York 10004
 
 
 
 
 
 
212-527-4000
 
 
 
 
 
 
 
 
 
 
 
Securities registered pursuant to Section 12(b) or 12(g) of the Act:
 
 
 
 
 
 
 
 
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Revlon, Inc.
 
Class A Common Stock
 
REV
 
New York Stock Exchange
Revlon Consumer Products Corporation
 
None
 
N/A
 
N/A


Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Revlon, Inc.
Yes x
No ¨
Revlon Consumer Products Corporation
Yes ¨   
No x   


Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨


Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



 
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
Smaller Reporting Company
 
Emerging Growth Company
Revlon, Inc.
Yes ¨ No x
 
Yes x No ¨
 
Yes ¨ No x
 
Yes x No ¨
 
Yes ¨ No x
Revlon Consumer Products Corporation
Yes ¨ No x
 
Yes ¨ No x
 
Yes x No ¨
 
Yes x No ¨
 
Yes ¨ No x
If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨


Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Act).
Revlon, Inc.
Yes ¨  
No x   
Revlon Consumer Products Corporation
Yes ¨  
No x   


Number of shares of common stock outstanding as of September 30, 2019:
Revlon, Inc. Class A Common Stock:
53,035,412
Revlon Consumer Products Corporation Common Stock:
5,260

At such date, (i) 46,223,321 shares of Revlon, Inc. Class A Common Stock were beneficially owned by MacAndrews & Forbes Incorporated and certain of its affiliates; and (ii) all shares of Revlon Consumer Products Corporation Common Stock were held by Revlon, Inc.

Revlon Consumer Products Corporation meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format applicable to Revlon Consumer Products Corporation.




REVLON, INC. AND SUBSIDIARIES
REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
INDEX

PART I - Financial Information
Item 1.
 
 
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II - Other Information
Item 1.
Item 1A.
Item 5.
Item 6.
 
 
 
 
 



3
Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements of Revlon, Inc. and Subsidiaries

REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share and per share amounts)
 
September 30, 2019
 
December 31, 2018
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
60.7

 
$
87.3

Trade receivables, less allowance for doubtful accounts of $12.4 and $15.6 as of September 30, 2019 and December 31, 2018, respectively
454.9

 
431.3

Inventories
522.0

 
523.2

Prepaid expenses and other assets
155.9

 
152.0

Total current assets
1,193.5

 
1,193.8

Property, plant and equipment, net of accumulated depreciation of $474.9 and $425.2 as of September 30, 2019 and December 31, 2018, respectively
413.7

 
354.5

Deferred income taxes
159.3

 
131.8

Goodwill
673.4

 
673.9

Intangible assets, net of accumulated amortization of $217.7 and $187.3 as of September 30, 2019 and December 31, 2018, respectively
496.7

 
532.0

Other assets
122.9

 
130.8

Total assets
$
3,059.5

 
$
3,016.8

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
 
 
 
Current liabilities:
 
 
 
Short-term borrowings
$
5.1

 
$
9.3

Current portion of long-term debt
363.5

 
348.1

Accounts payable
322.3

 
332.1

Accrued expenses and other current liabilities
368.3

 
430.9

Total current liabilities
1,059.2

 
1,120.4

Long-term debt
2,906.6

 
2,727.7

Long-term pension and other post-retirement plan liabilities
162.0

 
169.0

Other long-term liabilities
159.2

 
56.5

Stockholders’ deficiency:
 
 
 
Class A Common Stock, par value $0.01 per share: 900,000,000 shares authorized; 56,800,236 and 55,556,466 shares issued as of September 30, 2019 and December 31, 2018, respectively
0.5

 
0.5

Additional paid-in capital
1,071.5

 
1,063.8

Treasury stock, at cost: 1,624,719 and 1,533,320 shares of Class A Common Stock as of September 30, 2019 and December 31, 2018, respectively
(33.5
)
 
(31.9
)
Accumulated deficit
(2,038.5
)
 
(1,855.0
)
Accumulated other comprehensive loss
(227.5
)
 
(234.2
)
Total stockholders’ deficiency
(1,227.5
)
 
(1,056.8
)
Total liabilities and stockholders’ deficiency
$
3,059.5

 
$
3,016.8





See Accompanying Notes to Unaudited Consolidated Financial Statements


4
Table of Contents

REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(dollars in millions, except share and per share amounts)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net sales
$
596.8

 
$
655.4

 
$
1,720.2

 
$
1,822.9

Cost of sales
269.0

 
305.0

 
750.7

 
807.2

      Gross profit
327.8

 
350.4

 
969.5

 
1,015.7

Selling, general and administrative expenses
308.1

 
340.8

 
973.2

 
1,087.1

Acquisition and integration costs
0.1

 
3.4

 
0.7

 
12.0

Restructuring charges and other, net
2.9

 
3.9

 
11.6

 
13.9

Loss on disposal of minority investment
—

 
—

 
—

 
20.1

      Operating income (loss)
16.7

 
2.3

 
(16.0
)
 
(117.4
)
Other expenses:
 
 
 
 
 
 
 
   Interest expense
50.2

 
46.4

 
145.7

 
129.1

   Amortization of debt issuance costs
3.7

 
3.8

 
10.4

 
9.1

   Foreign currency losses, net
7.6

 
1.1

 
9.0

 
10.7

   Miscellaneous, net
1.7

 
0.4

 
7.6

 
0.6

      Other expenses
63.2

 
51.7

 
172.7

 
149.5

Loss from continuing operations before income taxes
(46.5
)
 
(49.4
)
 
(188.7
)
 
(266.9
)
Benefit from income taxes
(2.1
)
 
(38.7
)
 
(3.2
)
 
(43.1
)
Loss from continuing operations, net of taxes
(44.4
)
 
(10.7
)
 
(185.5
)
 
(223.8
)
(Loss) income from discontinued operations, net of taxes
(0.3
)
 
(0.4
)
 
2.0

 
(0.1
)
Net loss
$
(44.7
)
 
$
(11.1
)
 
$
(183.5
)
 
$
(223.9
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
   Foreign currency translation adjustments
(1.8
)
 
(4.9
)
 
(0.5
)
 
(12.3
)
   Amortization of pension related costs, net of tax(a)(b)
2.3

 
2.3

 
7.2

 
6.5

Reclassification into earnings of accumulated losses from the de-designated 2013 Interest Rate Swap, net of tax(c)
—

 
—

 
—

 
0.7

Other comprehensive income (loss), net
0.5

 
(2.6
)
 
6.7

 
(5.1
)
Total comprehensive loss
$
(44.2
)
 
$
(13.7
)
 
$
(176.8
)
 
$
(229.0
)
 
 
 
 
 
 
 
 
Basic (loss) earnings per common share:
 
 
 
 
 
 
 
Continuing operations
$
(0.84
)
 
$
(0.20
)
 
$
(3.50
)
 
$
(4.24
)
Discontinued operations
—

 
(0.01
)
 
0.04

 
—

Net loss
$
(0.84
)
 
$
(0.21
)
 
$
(3.46
)
 
$
(4.24
)
 
 
 
 
 
 
 
 
Diluted (loss) earnings per common share:
 
 
 
 
 
 
 
Continuing operations
$
(0.84
)
 
$
(0.20
)
 
$
(3.50
)
 
$
(4.24
)
Discontinued operations
—

 
(0.01
)
 
0.04

 
—

Net loss
$
(0.84
)
 
$
(0.21
)
 
$
(3.46
)
 
$
(4.24
)
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
      Basic
53,129,004

 
52,834,879

 
53,057,154

 
52,777,883

      Diluted
53,129,004

 
52,834,879

 
53,057,154

 
52,777,883


(a) 
Net of tax expense of $0.3 million and $0.3 million for the three months ended September 30, 2019 and 2018, respectively, and net of tax expense of $0.9 million and $0.8 million for the nine months ended September 30, 2019 and 2018, respectively.
(b) 
This amount is included in the computation of net periodic benefit costs (income). See Note 11, "Pension and Post-Retirement Benefits," for additional information regarding net periodic benefit costs (income).
(c) Net of tax benefit of nil for the three months ended September 30, 2018 and $0.5 million for the nine months ended September 30, 2018.




See Accompanying Notes to Unaudited Consolidated Financial Statements

5
Table of Contents

REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY
(dollars in millions, except share and per share amounts)
 
Common Stock
 
Additional Paid-In Capital
 
Treasury Stock
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
Total Stockholders’ Deficiency
 
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2019
$
0.5

 
$
1,063.8

 
$
(31.9
)
 
$
(1,855.0
)
 
$
(234.2
)
 
$
(1,056.8
)
Treasury stock acquired, at cost (a)
—

 
—

 
(1.6
)
 
—

 
—

 
(1.6
)
Stock-based compensation amortization
—

 
0.4

 
—

 
—

 
—

 
0.4

Net loss
—

 
—

 
—

 
(75.1
)
 
—

 
(75.1
)
Other comprehensive income, net (b)    
—

 
—

 
—

 
—

 
0.9

 
0.9

Balance, March 31, 2019
0.5

 
1,064.2

 
(33.5
)
 
(1,930.1
)
 
(233.3
)
 
(1,132.2
)
Treasury stock acquired, at cost (a)
—

 
—

 
—

 
—

 
—

 
—

Stock-based compensation amortization
—

 
3.4

 
—

 
—

 
—

 
3.4

Net loss
—

 
—

 
—

 
(63.7
)
 
—

 
(63.7
)
Other comprehensive income, net (b)
—

 
—

 
—

 
—

 
5.3

 
5.3

Balance, June 30, 2019
0.5

 
1,067.6

 
(33.5
)
 
(1,993.8
)
 
(228.0
)
 
(1,187.2
)
Treasury stock acquired, at cost (a)
—

 
—

 
—

 
—

 
—

 
—

Stock-based compensation amortization
—

 
3.9

 
—

 
—

 
—

 
3.9

Net loss
—

 
—

 
—

 
(44.7
)
 
—

 
(44.7
)
Other comprehensive income, net (b)
—

 
—

 
—

 
—

 
0.5

 
0.5

Balance, September 30, 2019
$
0.5

 
$
1,071.5

 
$
(33.5
)
 
$
(2,038.5
)
 
$
(227.5
)
 
$
(1,227.5
)
 
Common Stock
 
Additional Paid-In Capital
 
Treasury Stock
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
Total Stockholders’ Deficiency
 
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2018
$
0.5

 
$
1,040.0

 
$
(21.7
)
 
$
(1,560.8
)
 
$
(228.4
)
 
$
(770.4
)
Treasury stock acquired, at cost (a)
—

 
—

 
(2.9
)
 
—

 
—

 
(2.9
)
Stock-based compensation amortization
—

 
7.7

 
—

 
—

 
—

 
7.7

Net loss
—

 
—

 
—

 
(90.3
)
 
—

 
(90.3
)
Other comprehensive income, net (b)
—

 
—

 
—

 
—

 
0.2

 
0.2

Balance, March 31, 2018
0.5

 
1,047.7

 
(24.6
)
 
(1,651.1
)
 
(228.2
)
 
(855.7
)
Treasury stock acquired, at cost (a)
—

 
—

 
(0.6
)
 
—

 
—

 
(0.6
)
Stock-based compensation amortization
—

 
0.8

 
—

 
—

 
—

 
0.8

Net loss
—

 
—

 
—

 
(122.5
)
 
—

 
(122.5
)
Other comprehensive loss, net (b)
—

 
—

 
—

 
—

 
(2.7
)
 
(2.7
)
Balance, June 30, 2018
0.5

 
1,048.5

 
(25.2
)
 
(1,773.6
)
 
(230.9
)
 
(980.7
)
Treasury stock acquired, at cost (a)
—

 
—

 
(0.1
)
 
—

 
—

 
(0.1
)
Stock-based compensation amortization
—

 
6.3

 
—

 
—

 
—

 
6.3

Net loss
—

 
—

 
—

 
(11.1
)
 
—

 
(11.1
)
Other comprehensive loss, net (b)
—

 
—

 
—

 
—

 
(2.6
)
 
(2.6
)
Balance, September 30, 2018
$
0.5

 
$
1,054.8

 
$
(25.3
)
 
$
(1,784.7
)
 
$
(233.5
)
 
$
(988.2
)

(a)
Pursuant to the share withholding provisions of the Fourth Amended and Restated Revlon, Inc. Stock Plan (as amended, the "Stock Plan"), the Company withheld an aggregate of nil and 5,493 shares of Revlon Class A Common Stock during the three months ended September 30, 2019 and 2018, respectively, and 85,607 and 167,297 shares of Revlon Class A Common Stock during the nine months ended September 30, 2019 and 2018, respectively, to satisfy certain minimum statutory tax withholding requirements related to the vesting of restricted shares and restricted stock units for certain senior executives and employees. These withheld shares were recorded as treasury stock using the cost method, at a weighted-average price per share of nil and $15.60 during the three months ended September 30, 2019 and 2018, respectively, and $18.86 and $21.42 during the nine months ended September 30, 2019 and 2018, respectively, based on the closing price of Revlon Class A Common Stock as reported on the New York Stock Exchange (the "NYSE") consolidated tape on each respective vesting date, for a total of nil and $0.1 million during the three months ended September 30, 2019 and 2018, respectively, and $1.6 million and $3.6 million during the nine months ended September 30, 2019 and 2018, respectively.

(b)
See Note 14, "Accumulated Other Comprehensive Loss," regarding the changes in the accumulated balances for each component of other comprehensive loss during the three and nine months ended September 30, 2019 and 2018, respectively.

See Accompanying Notes to Unaudited Consolidated Financial Statements

6
Table of Contents

REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
 
Nine Months Ended September 30,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net loss
$
(183.5
)
 
$
(223.9
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
   Depreciation and amortization
124.6

 
119.4

   Foreign currency losses from re-measurement
9.0

 
10.7

   Amortization of debt discount
1.2

 
0.9

   Stock-based compensation amortization
7.7

 
14.8

   Benefit from deferred income taxes
(19.0
)
 
(61.5
)
   Amortization of debt issuance costs
10.4

 
9.1

   Non-cash loss on disposal of minority investment
—

 
18.6

 Loss on sale of certain assets
0.2

 
0.6

   Pension and other post-retirement cost
6.3

 
2.0

   Change in assets and liabilities:
 
 
 
      Increase in trade receivables
(30.5
)
 
(7.0
)
      Increase in inventories
(4.9
)
 
(100.3
)
      Increase in prepaid expenses and other current assets
(5.5
)
 
(60.5
)
      Increase in accounts payable
9.1

 
39.3

      Decrease in accrued expenses and other current liabilities
(81.0
)
 
(1.6
)
      Pension and other post-retirement plan contributions
(7.8
)
 
(6.1
)
      Purchases of permanent displays
(28.4
)
 
(57.0
)
      Other, net
25.3

 
5.8

Net cash used in operating activities
(166.8
)
 
(296.7
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(20.0
)
 
(41.6
)
Net cash used in investing activities
(20.0
)
 
(41.6
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net (decrease) increase in short-term borrowings and overdraft
(22.4
)
 
2.3

Net borrowings under the Amended 2016 Revolving Credit Facility
13.4

 
251.3

Net borrowings under the 2019 Term Loan Facility
200.0

 
—

Net borrowings under the 2018 Foreign Asset-Based Term Loan
—

 
89.4

Repayments under the 2016 Term Loan Facility
(13.5
)
 
(13.5
)
Payment of financing costs
(13.4
)
 
(9.4
)
Tax withholdings related to net share settlements of restricted stock units and awards
(1.6
)
 
(3.6
)
Other financing activities
(0.9
)
 
0.1

Net cash provided by financing activities
161.6

 
316.6

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(1.4
)
 
(3.2
)
   Net decrease in cash, cash equivalents and restricted cash
(26.6
)
 
(24.9
)
   Cash, cash equivalents and restricted cash at beginning of period (a)
87.5

 
87.4

   Cash, cash equivalents and restricted cash at end of period (a)
$
60.9

 
$
62.5

Supplemental schedule of cash flow information:(b)
 
 
 
   Cash paid during the period for:
 
 
 
Interest
$
157.9

 
$
131.4

Income taxes, net of refunds
6.9

 
11.7


(a) These amounts include restricted cash of $0.2 million and $0.7 million as of September 30, 2019 and 2018, respectively, and $0.2 million and $0.3 million as of December 31, 2018 and 2017, respectively, which represent cash on deposit in lieu of a mandatory prepayment under the 2018 Foreign Asset-Based Term Facility, and cash on deposit to support outstanding undrawn letters of credit, which were included within other assets in the Company's consolidated balance sheets.
(b) See Note 5, "Leases," for supplemental disclosure of non-cash financing and investing activities in relation to the lease liabilities arising from obtaining right-of-use assets following the implementation of ASC Topic 842, Leases.



See Accompanying Notes to Unaudited Consolidated Financial Statements

7
Table of Contents


REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share and per share amounts)
 
September 30, 2019
 
December 31, 2018
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
60.7

 
$
87.3

Trade receivables, less allowance for doubtful accounts of $12.4 and $15.6 as of September 30, 2019 and December 31, 2018, respectively
454.9

 
431.3

Inventories
522.0

 
523.2

Prepaid expenses and other assets
151.9

 
148.0

Receivable from Revlon, Inc.
158.3

 
151.7

Total current assets
1,347.8

 
1,341.5

Property, plant and equipment, net of accumulated depreciation of $474.9 and $425.2 as of September 30, 2019 and December 31, 2018, respectively
413.7

 
354.5

Deferred income taxes
141.2

 
114.8

Goodwill
673.4

 
673.9

Intangible assets, net of accumulated amortization of $217.7 and $187.3 as of September 30, 2019 and December 31, 2018, respectively
496.7

 
532.0

Other assets
122.9

 
130.8

Total assets
$
3,195.7

 
$
3,147.5

 
 
 
 
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
 
 
 
Current liabilities:
 
 
 
Short-term borrowings
$
5.1

 
$
9.3

Current portion of long-term debt
363.5

 
348.1

Accounts payable
322.3

 
332.1

Accrued expenses and other current liabilities
371.6

 
434.7

Total current liabilities
1,062.5

 
1,124.2

Long-term debt
2,906.6

 
2,727.7

Long-term pension and other post-retirement plan liabilities
162.0

 
169.0

Other long-term liabilities
162.6

 
59.7

Stockholder's deficiency:
 
 
 
Products Corporation Preferred stock, par value $1.00 per share; 1,000 shares authorized; 546 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively
54.6

 
54.6

Products Corporation Common Stock, par value $1.00 per share; 10,000 shares authorized; 5,260 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively
—

 
—

Additional paid-in capital
996.0

 
988.4

Accumulated deficit
(1,921.1
)
 
(1,741.9
)
Accumulated other comprehensive loss
(227.5
)
 
(234.2
)
Total stockholder's deficiency
(1,098.0
)
 
(933.1
)
Total liabilities and stockholder's deficiency
$
3,195.7

 
$
3,147.5





See Accompanying Notes to Unaudited Consolidated Financial Statements


8
Table of Contents

REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(dollars in millions)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Net sales
$
596.8

 
$
655.4

 
$
1,720.2

 
$
1,822.9

Cost of sales
269.0

 
305.0

 
750.7

 
807.2

      Gross profit
327.8

 
350.4

 
969.5

 
1,015.7

Selling, general and administrative expenses
306.3

 
339.1

 
968.1

 
1,082.1

Acquisition and integration costs
0.1

 
3.4

 
0.7

 
12.0

Restructuring charges and other, net
2.9

 
3.9

 
11.6

 
13.9

Loss on disposal of minority investment
—

 
—

 
—

 
20.1

      Operating income (loss)
18.5

 
4.0

 
(10.9
)
 
(112.4
)
Other expenses:
 
 
 
 
 
 
 
   Interest expense
50.2

 
46.4

 
145.7

 
129.1

   Amortization of debt issuance costs
3.7

 
3.8

 
10.4

 
9.1

   Foreign currency losses, net
7.6

 
1.1

 
9.0

 
10.7

   Miscellaneous, net
1.7

 
0.4

 
7.6

 
0.6

      Other expenses
63.2

 
51.7

 
172.7

 
149.5

Loss from continuing operations before income taxes
(44.7
)
 
(47.7
)
 
(183.6
)
 
(261.9
)
Provision (benefit) from income taxes
(1.8
)
 
(38.2
)
 
(2.4
)
 
(42.0
)
Loss from continuing operations, net of taxes
(42.9
)
 
(9.5
)
 
(181.2
)
 
(219.9
)
(Loss) income from discontinued operations, net of taxes
(0.3
)
 
(0.4
)
 
2.0

 
(0.1
)
Net loss
$
(43.2
)
 
$
(9.9
)
 
$
(179.2
)
 
$
(220.0
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
   Foreign currency translation adjustments
(1.8
)
 
(4.9
)
 
(0.5
)
 
(12.3
)
   Amortization of pension related costs, net of tax(a)(b)
2.3

 
2.3

 
7.2

 
6.5

Reclassification into earnings of accumulated losses from the de-designated 2013 Interest Rate Swap, net of tax(c)
—

 
—

 
—

 
0.7

Other comprehensive income (loss), net
0.5

 
(2.6
)
 
6.7

 
(5.1
)
Total comprehensive loss
$
(42.7
)
 
$
(12.5
)
 
$
(172.5
)
 
$
(225.1
)
 
 
 
 
 
 
 
 

(a) 
Net of tax expense of $0.3 million and $0.3 million for the three months ended September 30, 2019 and 2018, respectively, and net of tax expense of $0.9 million and $0.8 million for the nine months ended September 30, 2019 and 2018, respectively.
(b) 
This amount is included in the computation of net periodic benefit costs (income). See Note 11, "Pension and Post-Retirement Benefits," for additional information regarding net periodic benefit costs (income).
(c) Net of tax benefit of nil for the three months ended September 30, 2018 and $0.5 million for the nine months ended September 30, 2018.





See Accompanying Notes to Unaudited Consolidated Financial Statements


9
Table of Contents

REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIENCY
(dollars in millions)
 
Preferred Stock
 
Additional Paid-In Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
Total Stockholder's Deficiency
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2019
$
54.6

 
$
988.4

 
$
(1,741.9
)
 
$
(234.2
)
 
$
(933.1
)
Stock-based compensation amortization
—

 
0.4

 
—

 
—

 
0.4

Net loss
—

 
—

 
(73.5
)
 
—

 
(73.5
)
Other comprehensive income, net (a)
—

 
—

 
—

 
0.9

 
0.9

Balance, March 31, 2019
54.6

 
988.8

 
(1,815.4
)
 
(233.3
)
 
(1,005.3
)
Stock-based compensation amortization
—

 
3.4

 
—

 
—

 
3.4

Net loss
—

 
—

 
(62.5
)
 
—

 
(62.5
)
Other comprehensive income, net (a)
—

 
—

 
—

 
5.3

 
5.3

Balance, June 30, 2019
54.6

 
992.2

 
(1,877.9
)
 
(228.0
)
 
(1,059.1
)
Stock-based compensation amortization
—

 
3.8

 
—

 
—

 
3.8

Net loss
—

 
—

 
(43.2
)
 
—

 
(43.2
)
Other comprehensive income, net (a)
—

 
—

 
—

 
0.5

 
0.5

Balance, September 30, 2019
$
54.6

 
$
996.0

 
$
(1,921.1
)
 
$
(227.5
)
 
$
(1,098.0
)

 
Preferred Stock
 
Additional Paid-In Capital
 
Accumulated Deficit
 
Accumulated Other Comprehensive Loss
 
Total Stockholder's Deficiency
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2018
$
54.6

 
$
971.2

 
$
(1,452.8
)
 
$
(228.4
)
 
$
(655.4
)
Stock-based compensation amortization
—

 
7.7

 
—

 
—

 
7.7

Net loss
—

 
—

 
(89.0
)
 
—

 
(89.0
)
Other comprehensive income, net (a)
—

 
—

 
—

 
0.2

 
0.2

Balance, March 31, 2018
54.6

 
978.9

 
(1,541.8
)
 
(228.2
)
 
(736.5
)
Stock-based compensation amortization
—

 
0.8

 
—

 
—

 
0.8

Net loss
—

 
—

 
(121.1
)
 
—

 
(121.1
)
Other comprehensive loss, net (a)
—

 
—

 
—

 
(2.7
)
 
(2.7
)
Balance, June 30, 2018
54.6

 
979.7

 
(1,662.9
)
 
(230.9
)
 
(859.5
)
Stock-based compensation amortization
—

 
6.3

 
—

 
—

 
6.3

Net loss
—

 
—

 
(9.9
)
 
—

 
(9.9
)
Other comprehensive loss, net (a)
—

 
—

 
—

 
(2.6
)
 
(2.6
)
Balance, September 30, 2018
$
54.6

 
$
986.0

 
$
(1,672.8
)
 
$
(233.5
)
 
$
(865.7
)

(a)
See Note 14, "Accumulated Other Comprehensive Loss," regarding the changes in the accumulated balances for each component of other comprehensive loss during the three and nine months ended September 30, 2019 and 2018, respectively.




See Accompanying Notes to Unaudited Consolidated Financial Statements


10
Table of Contents

REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
 
Nine Months Ended September 30,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net loss
$
(179.2
)
 
$
(220.0
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
   Depreciation and amortization
124.6

 
119.4

   Foreign currency losses from re-measurement
9.0

 
10.7

   Amortization of debt discount
1.2

 
0.9

   Stock-based compensation amortization
7.7

 
14.8

  Benefit from deferred income taxes
(17.8
)
 
(60.3
)
   Amortization of debt issuance costs
10.4

 
9.1

   Non-cash loss on disposal of minority investment
—

 
18.6

 Loss on sale of certain assets
0.2

 
0.6

   Pension and other post-retirement cost
6.3

 
2.0

   Change in assets and liabilities:
 
 
 
      Increase in trade receivables
(30.5
)
 
(7.0
)
      Increase in inventories
(4.9
)
 
(100.3
)
      Increase in prepaid expenses and other current assets
(12.2
)
 
(69.0
)
      Increase in accounts payable
9.1

 
39.3

      (Decrease) increase in accrued expenses and other current liabilities
(79.8
)
 
1.8

      Pension and other post-retirement plan contributions
(7.8
)
 
(6.1
)
      Purchases of permanent displays
(28.4
)
 
(57.0
)
      Other, net
25.3

 
5.8

Net cash used in operating activities
(166.8
)
 
(296.7
)
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(20.0
)
 
(41.6
)
Net cash used in investing activities
(20.0
)
 
(41.6
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net (decrease) increase in short-term borrowings and overdraft
(22.4
)
 
2.3

Net borrowings under the Amended 2016 Revolving Credit Facility
13.4

 
251.3

Net borrowings under the 2019 Term Loan Facility
200.0

 
—

Net borrowings under the 2018 Foreign Asset-Based Term Loan
—

 
89.4

Repayments under the 2016 Term Loan Facility
(13.5
)
 
(13.5
)
Payment of financing costs
(13.4
)
 
(9.4
)
Tax withholdings related to net share settlements of restricted stock units and awards
(1.6
)
 
(3.6
)
Other financing activities
(0.9
)
 
0.1

Net cash provided by financing activities
161.6

 
316.6

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(1.4
)
 
(3.2
)
   Net decrease in cash, cash equivalents and restricted cash
(26.6
)
 
(24.9
)
   Cash, cash equivalents and restricted cash at beginning of period (a)
87.5

 
87.4

   Cash, cash equivalents and restricted cash at end of period (a)
$
60.9

 
$
62.5

Supplemental schedule of cash flow information:(b)
 
 
 
   Cash paid during the period for:
 
 
 
Interest
$
157.9

 
$
131.4

Income taxes, net of refunds
6.9

 
11.7


(a) These amounts include restricted cash of $0.2 million and $0.7 million as of September 30, 2019 and 2018, respectively, and $0.2 million and $0.3 million as of December 31, 2018 and 2017, respectively, which represent cash on deposit in lieu of a mandatory prepayment under the 2018 Foreign Asset-Based Term Facility, and cash on deposit to support outstanding undrawn letters of credit, which were included within other assets in the Company's consolidated balance sheets.
(b) See Note 5, "Leases," for supplemental disclosure of non-cash financing and investing activities in relation to the lease liabilities arising from obtaining right-of-use assets following the implementation of ASC Topic 842, Leases.



See Accompanying Notes to Unaudited Consolidated Financial Statements

11
Table of Contents
COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)



1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revlon, Inc. ("Revlon" and together with its subsidiaries, the "Company") conducts its business exclusively through its direct wholly-owned operating subsidiary, Revlon Consumer Products Corporation ("Products Corporation") and its subsidiaries. Revlon is an indirect majority-owned subsidiary of MacAndrews & Forbes Incorporated (together with certain of its affiliates other than the Company, "MacAndrews & Forbes"), a corporation beneficially owned by Ronald O. Perelman. Mr. Perelman is Chairman of Revlon's and Products Corporation's Board of Directors.
The Company is a leading global beauty company with an iconic portfolio of brands that develops, manufactures, markets, distributes and sells an extensive array of color cosmetics; hair color, hair care and hair treatments; fragrances; skin care; beauty tools; men’s grooming products; anti-perspirant deodorants; and other beauty care products across a variety of distribution channels.
The Company operates in four reporting segments: Revlon; Elizabeth Arden; Portfolio; and Fragrances.
The accompanying Consolidated Financial Statements are unaudited. In management's opinion, all adjustments necessary for a fair presentation of the Company's financial information have been made. The Unaudited Consolidated Financial Statements include the Company's accounts after the elimination of all material intercompany balances and transactions.
The preparation of the Company's Unaudited Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affect amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the Unaudited Consolidated Financial Statements in the period they are determined to be necessary. Significant estimates made in the accompanying Unaudited Consolidated Financial Statements include, but are not limited to: allowances for doubtful accounts; inventory valuation reserves; expected sales returns and allowances; trade support costs; certain assumptions related to the valuation of acquired intangible and long-lived assets and the recoverability of goodwill, intangible and long-lived assets; income taxes, including deferred tax valuation allowances and reserves for estimated tax liabilities; restructuring costs; and certain estimates and assumptions used in the calculation of the net periodic benefit (income) costs and the projected benefit obligations for the Company’s pension and other post-retirement plans, including the expected long-term return on pension plan assets and the discount rate used to value the Company’s pension benefit obligations. The Unaudited Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and related notes contained in, respectively, Revlon's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and Products Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (collectively, the “Company’s 2018 Form 10-K").

The Company's results of operations and financial position for interim periods are not necessarily indicative of those to be expected for the full year.

Recently Evaluated and/or Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02" or "ASC 842"), which requires lessees to recognize a right-of-use asset and a related lease liability on the balance sheet for all leases, with the exception of short-term leases. The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to certain adjustments, such as initial direct costs. Leases will continue to be classified as either operating or finance leases in the income statement. This guidance is effective for annual periods beginning after December 15, 2018, with early adoption permitted. The Company adopted ASU No. 2016-02 beginning as of January 1, 2019, using a modified retrospective approach and applying the standard’s transition provisions at the effective date of January 1, 2019. In addition, the Company elected to apply the package of practical expedients identified under ASC 842. See Note 5, "Leases," for additional disclosures provided as a result of this ASU.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which gives entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act of 2017 (the "Tax Act") to retained earnings. The guidance was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Entities are required to make additional disclosures, regardless of whether they elect to reclassify stranded amounts of tax effects. The Company has elected not to adopt this amendment and will include required financial statement disclosures, as applicable. No impact is expected to the Company’s results of operations and/or financial condition.

12
Table of Contents
COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)



Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-15, "Internal Use Software (Subtopic 350-40) - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract," which requires a customer in a cloud computing hosting arrangement that is a service contract to follow the existing guidance in ASC 350-40 on internal-use software to determine which implementation costs are to be deferred and recognized as an asset and which costs are to be expensed as incurred. The new guidance: (i) specifies the financial statement presentation of capitalized implementation costs and the related amortization; (ii) will require entities to disclose the nature of hosting arrangements that are service contracts and the amount of implementation costs capitalized, amortized and impaired in each reporting period; and (iii) provides disclosures about significant judgments made when applying the guidance. Implementation costs that are recognized as an asset under the new guidance would be expensed over the term of the hosting arrangement. The term of the hosting arrangement would be the non-cancellable period of the arrangement and certain periods covered by options to renew the arrangement. The Company currently presents the capitalized cost of acquired software as a component of property, plant and equipment in its consolidated financial statements. This guidance is effective for annual periods beginning after December 15, 2019, with early adoption permitted, and may be applied either retrospectively or prospectively to all implementation costs incurred after adoption. The Company will adopt ASU No. 2018-15 prospectively, beginning as of January 1, 2020, and expects that this new guidance will not have a material impact on the Company’s results of operations, financial condition and/or financial statement disclosures.

In August 2018, the FASB issued ASU No. 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.” This new guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and requires certain additional disclosures. This guidance is effective for annual periods beginning after December 15, 2020, with early adoption permitted. The Company will adopt this guidance (on a retrospective basis for certain new additional disclosures), beginning as of January 1, 2021. While the Company is currently assessing the impact of this new pronouncement, the new guidance, which only affects disclosure items, is not expected to have a material impact on the Company’s results of operations, financial condition and/or financial statement disclosures.
 
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which was subsequently amended in November 2018 through ASU No. 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses." ASU No. 2016-13 will require entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financing receivables, debt securities and other instruments, which will result in earlier recognition of credit losses. Further, the new credit loss model will affect how entities in all industries estimate their allowance for losses for receivables that are current with respect to their payment terms. ASU No. 2018-19 further clarifies that receivables arising from operating leases are not within the scope of Subtopic 326. Instead, impairment from receivables of operating leases should be accounted for in accordance with Topic 842, Leases. In October 2019, after considering comments received, the FASB affirmed a proposal to defer the effective date of ASU No. 2016-13 for certain companies. Consequently, the FASB is expected to issue a final ASU in November 2019, which will result in the new guidance on credit losses for smaller reporting companies ("SRC") to be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This guidance will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., a modified-retrospective approach). Under the above-mentioned deferral, the Company expects to adopt ASU No. 2016-03, and the related ASU No. 2018-19 amendments, beginning as of January 1, 2023 and is in the process of assessing the impact, if any, that this new guidance is expected to have on the Company’s results of operations, financial condition and/or financial statement disclosures.


2. RESTRUCTURING CHARGES

2018 Optimization Restructuring Program

In November 2018, the Company announced that it was implementing the 2018 Optimization Restructuring Program (the "2018 Optimization Program") designed to streamline the Company’s operations, reporting structures and business processes, with the objective of maximizing productivity and improving profitability, cash flows and liquidity. In connection with implementing the 2018 Optimization Program, the Company expects to recognize approximately $30 million to $40 million of total pre-tax restructuring and related charges, consisting of employee-related costs, such as severance, pension and other termination costs, as well as other related charges. The Company also expects to incur approximately $10 million of additional capital expenditures. The Company expects the 2018 Optimization Program to be substantially completed by December 31, 2019.

13
Table of Contents
COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)



A summary of the 2018 Optimization Restructuring Charges incurred through September 30, 2019 is presented in the following table:
 
Restructuring Charges and Other, Net
 
 
 
 
 
 
 
Employee Severance and Other Personnel Benefits
 
Other Costs
 
Total Restructuring Charges
 
Inventory Adjustments(a)
 
Other Related Charges(b)
 
Total Restructuring and Related Charges
Charges incurred through December 31, 2018
$
4.5

 
$
—

 
$
4.5

 
$
—

 
$
1.2

 
$
5.7

Charges incurred during the nine months ended September 30, 2019
12.0

 
0.5

 
12.5

 
4.2

 
11.4

 
28.1

Cumulative charges incurred through September 30, 2019
$
16.5

 
$
0.5

 
$
17.0

 
$
4.2

 
$
12.6

 
$
33.8

(a) Inventory adjustments are recorded within cost of sales in the Company’s Consolidated Statement of Operations and Comprehensive Loss.
(b) Other related charges are recorded within SG&A in the Company’s Consolidated Statement of Operations and Comprehensive Loss.

A summary of the 2018 Optimization Restructuring Charges incurred through September 30, 2019 by reportable segment is presented in the following table:
 
 
Charges incurred during the nine months ended September 30, 2019
 
Cumulative charges incurred through September 30, 2019
Revlon
 
$
5.7

 
$
7.6

Elizabeth Arden
 
2.5

 
3.4

Portfolio
 
2.3

 
3.3

Fragrances
 
2.0

 
2.7

     Total
 
$
12.5

 
$
17.0


The Company expects that approximately 85% of these restructuring and related charges will be paid in cash, of which approximately $15.8 million were paid through September 30, 2019. Substantially all of the remaining balance is expected to be paid by the end of 2019, with any residual amount to be paid in 2020.

EA Integration Restructuring Program

In December 2016, in connection with integrating the Elizabeth Arden and Revlon organizations, the Company began the process of implementing certain integration activities, including consolidating offices, eliminating certain duplicative activities and streamlining back-office support (the "EA Integration Restructuring Program"). The EA Integration Restructuring Program was designed to reduce the Company’s cost of goods sold and SG&A expenses. The EA Integration Restructuring Program was substantially completed by December 31, 2018 and the Company expects to incur limited further charges under this program, primarily related to its exit from certain leased spaces. In connection with implementing the EA Integration Restructuring Program, the Company recognized $82.6 million of total pre-tax restructuring charges (the "EA Integration Restructuring Charges"), consisting of: (i) $72.6 million of employee-related costs, including severance, retention and other contractual termination benefits; (ii) $5.1 million of lease termination costs; and (iii) $4.9 million of other related charges. The Company expects that cash payments will total $80 million to $85 million in connection with the EA Integration Restructuring Charges, of which $72.0 million were paid through September 30, 2019. The remaining balance is expected to be substantially paid by the end of 2020.

14
Table of Contents
COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


A summary of the EA Integration Restructuring Charges incurred through September 30, 2019 is presented in the following table:
 
Restructuring Charges and Other, Net
 
 
 
 
 
 
 
Employee Severance and Other Personnel Benefits(a)
 
Lease Termination and Other Costs(b)
 
Total Restructuring Charges
 
Inventory Adjustments(c)
 
Other Related Charges(d)
 
Total Restructuring and Related Charges
Charges incurred through December 31, 2018
$
72.2

 
$
5.1

 
$
77.3

 
$
1.9

 
$
3.0

 
$
82.2

Charges incurred during the nine months ended September 30, 2019
0.4

 
—


0.4

 
—

 
—

 
0.4

Cumulative charges incurred through September 30, 2019
$
72.6

 
$
5.1

 
$
77.7

 
$
1.9

 
$
3.0

 
$
82.6

(a) Includes reversal of previously accrued restructuring charges during the three months ended September 30, 2019.
(b) Lease termination liabilities related to certain exited office space were adjusted following the implementation of ASC 842. See Note 5, "Leases," for additional information.
(c) Inventory adjustments are recorded within cost of sales in the Company’s Consolidated Statement of Operations and Comprehensive Loss.
(d) Other related charges are recorded within SG&A in the Company’s Consolidated Statement of Operations and Comprehensive Loss.
A summary of the EA Integration Restructuring Charges incurred through September 30, 2019 by reportable segment is presented in the following table:
 
 
Charges incurred during the nine months ended September 30, 2019
 
Cumulative charges incurred through September 30, 2019
Revlon
 
$
—

 
$
32.9

Elizabeth Arden
 
0.4

 
13.7

Portfolio
 
—

 
13.1

Fragrances
 
—

 
18.0

     Total
 
$
0.4

 
$
77.7


Restructuring Reserve

The liability balance and related activity for each of the Company's restructuring programs are presented in the following table:
 
 
 
 
 
 
 
Utilized, Net
 
 
Liability
Balance at January 1, 2019
 
Expense, Net
 
Foreign Currency Translation
 

Cash
 

Non-cash
 
Liability Balance at September 30, 2019
2018 Optimization Program:(a)
 
 
 
 
 
 
 
 
 
 
 
Employee severance and other personnel benefits
$
3.7

 
$
12.0

 
$
—

 
$
(6.8
)
 
$
—

 
$
8.9

Other
1.2

 
16.1

 
—

 
(8.2
)
 
—

 
9.1

Total 2018 Optimization Program
4.9

 
28.1

 
—

 
(15.0
)
 
—

 
18.0

 
 
 
 
 
 
 
 
 
 
 
 
EA Integration Restructuring Program:
 
 
 
 
 
 
 
 
 
 
 
Employee severance and other personnel benefits
13.8

 
0.4

 
(0.4
)
 
(7.7
)
 
—

 
6.1

Other(b)
4.2

 
—

 
—

 
(0.4
)
 
(3.5
)
 
0.3

Total EA Integration Restructuring Program
18.0

 
0.4

 
(0.4
)
 
(8.1
)
 
(3.5
)
 
6.4

 

 
 
 
 
 
 
 
 
 

Other individually immaterial actions:(c)

 
 
 
 
 
 
 
 
 
 
Employee severance and other personnel benefits
4.6

 
(1.4
)
 
—

 
(1.8
)
 
(1.1
)
 
0.3

Other
0.8

 
0.3

 
—

 
(0.4
)
 


 
0.7

Total other individually immaterial actions
5.4

 
(1.1
)
 
—

 
(2.2
)
 
(1.1
)
 
1.0

Total restructuring reserve
$
28.3

 
$
27.4

 
$
(0.4
)
 
$
(25.3
)
 
$
(4.6
)
 
$
25.4


(a) $15.6 million relates to other restructuring-related charges that were reflected within SG&A and cost of sales in the Company’s September 30, 2019 Consolidated Statement of Operations and Comprehensive Loss.

15
Table of Contents
COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


(b) Non-cash utilization relates to approximately $3.5 million of lease termination liabilities related to certain exited office space that were adjusted following the implementation of ASC 842. See Note 5, "Leases," for additional information.
(c) Consists primarily of the Company's other individually and collectively immaterial restructuring initiatives, including those in Denmark, Norway and Sweden.

As of September 30, 2019 and 2018, all of the restructuring reserve balances were included within accrued expenses and other current liabilities in the Company's Consolidated Balance Sheets.


3. DISCONTINUED OPERATIONS

In December 2013, the Company announced restructuring actions that primarily included exiting its direct manufacturing, warehousing and sales business operations in mainland China within the Revlon segment (the "December 2013 Program"). The December 2013 Program resulted in the elimination of approximately 1,100 positions in 2014, primarily in China. With the implementation of the December 2013 Program, the results of the China discontinued operations, which relate entirely to the Revlon segment, are included within income from discontinued operations, net of taxes. The summary comparative financial results of discontinued operations were as follows for the periods presented:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net sales
$
—

 
$
—

 
$
—

 
$
—

(Loss) income from discontinued operations, before taxes
(0.3
)
 
(0.4
)
 
2.0

 
(0.1
)
Provision for income taxes
—

 
—

 
—

 
—

(Loss) income from discontinued operations, net of taxes
(0.3
)
 
(0.4
)
 
2.0

 
(0.1
)

As of September 30, 2019 and December 31, 2018, assets and liabilities of the China discontinued operations included in the Consolidated Balance Sheets consisted of the following:
 
September 30,
 
December 31,
 
2019
 
2018
Cash and cash equivalents
$
1.0

 
$
1.1

Trade receivables, net
—

 
0.2

Total current assets
1.0

 
1.3

Total assets
$
1.0

 
$
1.3

 
 
 
 
Accounts payable
$
—

 
$
0.5

Accrued expenses and other
1.2

 
3.3

Total current liabilities
1.2

 
3.8

Total liabilities
$
1.2

 
$
3.8



16
Table of Contents
COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


4. INVENTORIES

As of September 30, 2019 and December 31, 2018, the Company's inventory balances consisted of the following:
 
September 30,
 
December 31,
 
2019
 
2018
Raw materials and supplies
$
130.0

 
$
143.5

Work-in-process
8.8

 
5.6

Finished goods
383.2

 
374.1

 
$
522.0

 
$
523.2



5. LEASES

Products Corporation leases facilities for executive offices, warehousing, research and development and sales operations and leases various types of equipment under operating and finance lease agreements. The majority of Products Corporation’s real estate leases, in terms of total undiscounted payments, are located in the U.S.
As disclosed in Note 1, in February 2016, the FASB issued ASU No. 2016-02, which requires that a lessee recognize, for both finance leases and operating leases, a liability to make lease payments (the lease liability) and a right-of-use (“ROU”) asset representing its right to use the underlying leased asset for the lease term. The lease liability is equal to the present value of the lease payments and the ROU asset is based on the lease liability, subject to certain adjustments, such as pre-payments, initial direct costs, lease incentives and accrued rent.
The Company adopted ASU No. 2016-02 beginning as of January 1, 2019, using a modified retrospective approach and applying the standard’s transition provisions at the effective date of January 1, 2019. The comparative information has not been restated and continues to be reported under the lease accounting standard in effect for those periods. Refer to Note 20, "Contingencies," in the Company's 2018 Form 10-K for detail of its minimum rental commitments at December 31, 2018 under legacy ASC 840, "Leases".
The standard had a material impact on the Company’s unaudited consolidated balance sheets but did not have an impact on the Company’s unaudited statements of operations and comprehensive loss and cash flows.
As of January 1, 2019, the Company's adoption of ASU No. 2016-02 resulted in:
•
the recognition of ROU assets for operating leases and finance leases of approximately $109.3 million and $1.5 million, respectively;
•
the recognition of lease liabilities for operating leases and finance leases of approximately $123.4 million and $1.4 million, respectively; and
•
a decrease of approximately $11.3 million in accrued rent (of which $10.7 million was recorded in other long-term liabilities and $0.6 million was recorded in accrued expenses and other current liabilities), a decrease of approximately $3.5 million in lease termination liabilities and a decrease of approximately $0.7 million in prepaid rent, due to adjustments to balances previously recorded on the unaudited condensed consolidated balance sheets upon transition from the legacy ASC 840 to ASC 842.

Upon adoption of ASU No. 2016-02, the Company elected the available practical expedients allowed by the guidance under:
•
ASC 842-10-15-37, by not separating lease components from non-lease components and instead accounting for all components as a single lease component for all of its classes of underlying assets, i.e., for any type of equipment leases and real estate leases; and
•
ASC 842-10-65-1, by not reassessing at the transition date: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases.


17
Table of Contents
COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


The Company determines if an arrangement is a lease at inception, considering whether the contract conveys a right to control the use of the identified asset for a period of time in exchange for consideration. Operating leases are included in operating lease ROU assets, recorded within “Property, Plant and Equipment”, and operating lease liabilities are recorded within either "Accrued expenses and other current liabilities" and/or "Other long-term liabilities" in the Company’s unaudited consolidated balance sheets. Finance leases are included in finance lease ROU assets recorded within “Property, Plant and Equipment”, and finance lease liabilities are recorded within either "Accrued expenses and other current liabilities" and/or "Other long-term liabilities" in the Company’s unaudited consolidated balance sheets.
As most of the Company’s leases do not provide the lease implicit rates, the Company uses its incremental borrowing rates as the discount rate, adjusted as applicable, based on the information available at the lease commencement dates to determine the present value of lease payments. The Company may use the lease implicit rate, when readily determinable, as the discount rate to determine the present value of lease payments. As of January 1, 2019, the Company used an average discount rate of approximately 16%, based on an estimate of the Company's incremental borrowing rates.
Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating lease payments is recognized on a straight-line basis over the applicable lease term.
At lease commencement, for initial measurement, variable lease payments that do not depend on an index or rate, if any, are excluded from lease payments. Subsequent to initial measurement, these variable payments are recognized when the event determining the amount of the variable consideration to be paid occurs. Leases with an initial lease term of 12 months or less are not included in the lease liability or ROU asset.
The following table includes disclosure related to the new ASC 842 lease standard, after application of the aforementioned practical expedients and short-term lease considerations: