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|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 |
|
|
For the quarterly period ended
March 31, 2010
|
||
|
OR
|
||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 |
|
|
For the transition period from
to
|
||
|
Delaware
(State or other jurisdiction of incorporation or organization) |
13-3662955
(I.R.S. Employer Identification No.) |
|
|
237 Park Avenue, New York, New York
(Address of principal executive offices) |
10017
(Zip Code) |
| Large accelerated filer o | Accelerated filer x | Non-accelerated filer o | Smaller reporting company o |
| 2 | ||||||||
| 3 | ||||||||
| 4 | ||||||||
| 5 | ||||||||
| 6 | ||||||||
| 30 | ||||||||
| 48 | ||||||||
| 50 | ||||||||
| 56 | ||||||||
| 57 | ||||||||
| 57 | ||||||||
| 59 | ||||||||
| EX-31.1 | ||||||||
| EX-31.2 | ||||||||
| EX-32.1 | ||||||||
| EX-32.2 | ||||||||
1
| Item 1. | Financial Statements |
|
March 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (Unaudited) | ||||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 35.8 | $ | 54.5 | ||||
|
Trade receivables, less allowance for doubtful accounts of $3.7
and $3.8 as of March 31, 2010 and December 31, 2009,
respectively
|
167.5 | 181.7 | ||||||
|
Inventories
|
115.6 | 119.2 | ||||||
|
Prepaid expenses and other
|
52.3 | 48.2 | ||||||
|
Total current assets
|
371.2 | 403.6 | ||||||
|
Property, plant and equipment, net
|
110.3 | 111.7 | ||||||
|
Other assets
|
101.7 | 96.3 | ||||||
|
Goodwill, net
|
182.6 | 182.6 | ||||||
|
Total assets
|
$ | 765.8 | $ | 794.2 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
|
Current liabilities:
|
||||||||
|
Short-term borrowings
|
$ | 2.1 | $ | 0.3 | ||||
|
Current portion of long-term debt
|
18.5 | 13.6 | ||||||
|
Accounts payable
|
73.5 | 82.4 | ||||||
|
Accrued expenses and other
|
213.2 | 213.0 | ||||||
|
Total current liabilities
|
307.3 | 309.3 | ||||||
|
Long-term debt
|
1,104.6 | 1,127.8 | ||||||
|
Long-term debt — affiliates
|
58.4 | 58.4 | ||||||
|
Redeemable preferred stock
|
48.0 | 48.0 | ||||||
|
Long-term pension and other post-retirement plan liabilities
|
210.8 | 216.3 | ||||||
|
Other long-term liabilities
|
63.9 | 68.0 | ||||||
|
Stockholders’ deficiency:
|
||||||||
|
Class B Common Stock, par value $.01 per share:
200,000,000 shares authorized; 3,125,000 shares issued
and outstanding as of March 31, 2010 and December 31,
2009, respectively
|
— | — | ||||||
|
Class A Common Stock, par value $.01 per share:
900,000,000 shares authorized; 50,015,690 and
50,021,063 shares issued as of March 31, 2010 and
December 31, 2009, respectively
|
0.5 | 0.5 | ||||||
|
Additional paid-in capital
|
1,008.5 | 1,007.2 | ||||||
|
Treasury stock, at cost: 528,717 and 385,677 shares of
Class A Common Stock as of March 31, 2010 and
December 31, 2009, respectively
|
(7.1 | ) | (4.7 | ) | ||||
|
Accumulated deficit
|
(1,876.5 | ) | (1,878.7 | ) | ||||
|
Accumulated other comprehensive loss
|
(152.6 | ) | (157.9 | ) | ||||
|
Total stockholders’ deficiency
|
(1,027.2 | ) | (1,033.6 | ) | ||||
|
Total liabilities and stockholders’ deficiency
|
$ | 765.8 | $ | 794.2 | ||||
2
|
Three Months Ended
|
||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Net sales
|
$ | 305.5 | $ | 303.3 | ||||
|
Cost of sales
|
108.7 | 111.0 | ||||||
|
Gross profit
|
196.8 | 192.3 | ||||||
|
Selling, general and administrative expenses
|
151.4 | 160.2 | ||||||
|
Restructuring costs and other, net
|
— | 0.5 | ||||||
|
Operating income
|
45.4 | 31.6 | ||||||
|
Other expenses (income):
|
||||||||
|
Interest expense
|
21.3 | 24.1 | ||||||
|
Interest expense — preferred stock dividends
|
1.6 | — | ||||||
|
Interest income
|
(0.2 | ) | (0.2 | ) | ||||
|
Amortization of debt issuance costs
|
1.7 | 1.4 | ||||||
|
Loss (gain) on early extinguishment of debt, net
|
9.7 | (7.0 | ) | |||||
|
Foreign currency losses, net
|
3.8 | 2.4 | ||||||
|
Miscellaneous, net
|
0.3 | 0.2 | ||||||
|
Other expenses, net
|
38.2 | 20.9 | ||||||
|
Income from continuing operations before income taxes
|
7.2 | 10.7 | ||||||
|
Provision for (benefit from) income taxes
|
5.0 | (2.0 | ) | |||||
|
Net income
|
$ | 2.2 | $ | 12.7 | ||||
|
Basic income per common share
|
$ | 0.04 | $ | 0.25 | ||||
|
Diluted income per common share
|
$ | 0.04 | $ | 0.25 | ||||
|
Weighted average number of common shares outstanding:
|
||||||||
|
Basic
|
51,872,502 | 51,522,434 | ||||||
|
Diluted
|
52,286,722 | 51,526,486 | ||||||
3
|
Accumulated
|
||||||||||||||||||||||||
|
Additional
|
Other
|
Total
|
||||||||||||||||||||||
|
Common
|
Paid-In-
|
Treasury
|
Accumulated
|
Comprehensive
|
Stockholders’
|
|||||||||||||||||||
| Stock | Capital | Stock | Deficit | Loss | Deficiency | |||||||||||||||||||
|
Balance, January 1, 2010
|
$ | 0.5 | $ | 1,007.2 | $ | (4.7 | ) | $ | (1,878.7 | ) | $ | (157.9 | ) | $ | (1,033.6 | ) | ||||||||
|
Treasury stock acquired, at
cost
(a)
|
(2.4 | ) | (2.4 | ) | ||||||||||||||||||||
|
Stock option compensation
|
1.3 | 1.3 | ||||||||||||||||||||||
|
Comprehensive income:
|
||||||||||||||||||||||||
|
Net income
|
2.2 | 2.2 | ||||||||||||||||||||||
|
Revaluation of financial derivative
instruments
(b)
|
1.7 | 1.7 | ||||||||||||||||||||||
|
Currency translation adjustment
|
0.8 | 0.8 | ||||||||||||||||||||||
|
Amortization of pension related
costs
(c)
|
2.8 | 2.8 | ||||||||||||||||||||||
|
Total comprehensive income
|
7.5 | |||||||||||||||||||||||
|
Balance, March 31, 2010
|
$ | 0.5 | $ | 1,008.5 | $ | (7.1 | ) | $ | (1,876.5 | ) | $ | (152.6 | ) | $ | (1,027.2 | ) | ||||||||
| (a) | Pursuant to the share withholding provisions of the Third Amended and Restated Revlon, Inc. Stock Plan (the “Stock Plan”), during the first quarter of 2010, certain employees, in lieu of paying withholding taxes on the vesting of certain restricted stock, authorized the withholding of an aggregate 143,040 shares of Revlon, Inc. Class A Common Stock to satisfy the minimum statutory tax withholding requirements related to such vesting. These shares were recorded as treasury stock using the cost method, at a weighted average price per share of $17.01 and $17.02, based on the closing price of Revlon, Inc. Class A Common Stock as reported on the NYSE consolidated tape on the respective vesting dates, for a total of $2.4 million. | |
| (b) | See Note 5, “Comprehensive Income,” and Note 9, “Financial Instruments,” in this Form 10-Q for details regarding the net amount of hedge accounting derivative losses recognized due to the Company’s use of derivative financial instruments and a reversal of net amounts accumulated in Accumulated Other Comprehensive Loss due to the discontinuance of hedge accounting on the 2008 Interest Rate Swap (as hereinafter defined) as a result of the 2010 Refinancing (as hereinafter defined). | |
| (c) | See Note 2, “Pension and Post-retirement Benefits,” and Note 5, “Comprehensive Income,” in this Form 10-Q for details on the change in Accumulated Other Comprehensive Loss as a result of the amortization of unrecognized prior service costs and actuarial losses (gains) arising during the first quarter of 2010. |
4
|
Three Months Ended
|
||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net income
|
$ | 2.2 | $ | 12.7 | ||||
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||
|
Depreciation and amortization
|
14.4 | 15.5 | ||||||
|
Amortization of debt discount
|
0.3 | 0.2 | ||||||
|
Stock compensation amortization
|
1.3 | 2.0 | ||||||
|
Loss (gain) on early extinguishment of debt, net
|
9.7 | (7.0 | ) | |||||
|
Amortization of debt issuance costs
|
1.7 | 1.4 | ||||||
|
Gain on sale of certain assets
|
— | (1.6 | ) | |||||
|
Pension and other post-retirement expense
|
3.8 | 7.4 | ||||||
|
Change in assets and liabilities:
|
||||||||
|
Decrease in trade receivables
|
6.7 | 6.7 | ||||||
|
Decrease (increase) in inventories
|
3.5 | (0.2 | ) | |||||
|
Increase in prepaid expenses and other current assets
|
(9.1 | ) | (6.6 | ) | ||||
|
Increase in accounts payable
|
8.8 | 16.2 | ||||||
|
Increase (decrease) in accrued expenses and other current
liabilities
|
8.7 | (10.5 | ) | |||||
|
Pension and other post-retirement plan contributions
|
(5.8 | ) | (4.6 | ) | ||||
|
Purchase of permanent displays
|
(10.7 | ) | (11.9 | ) | ||||
|
Other, net
|
(4.3 | ) | (2.4 | ) | ||||
|
Net cash provided by operating activities
|
31.2 | 17.3 | ||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Capital expenditures
|
(3.3 | ) | (2.1 | ) | ||||
|
Proceeds from the sale of certain assets
|
0.1 | 2.3 | ||||||
|
Net cash (used in) provided by investing activities
|
(3.2 | ) | 0.2 | |||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Net decrease in short-term borrowings and overdraft
|
(13.0 | ) | (4.0 | ) | ||||
|
Borrowings under the 2006 Revolving Credit Facility, net
|
— | 4.0 | ||||||
|
Borrowings under the 2010 Revolving Credit Facility, net
|
10.5 | — | ||||||
|
Repayments under the 2006 Term Loan Facility
|
(815.0 | ) | — | |||||
|
Borrowings under the 2010 Term Loan Facility
|
786.0 | — | ||||||
|
Repayment of long-term debt
|
— | (35.3 | ) | |||||
|
Payment of financing costs
|
(15.4 | ) | — | |||||
|
Net cash used in financing activities
|
(46.9 | ) | (35.3 | ) | ||||
|
CASH FLOWS FROM DISCONTINUED OPERATIONS ACTIVITIES:
|
||||||||
|
Net cash used in discontinued operating activities
|
— | (0.1 | ) | |||||
|
Net cash used in discontinued operations
|
— | (0.1 | ) | |||||
|
Effect of exchange rate changes on cash and cash equivalents
|
0.2 | (1.4 | ) | |||||
|
Net decrease in cash and cash equivalents
|
(18.7 | ) | (19.3 | ) | ||||
|
Cash and cash equivalents at beginning of period
|
54.5 | 52.8 | ||||||
|
Cash and cash equivalents at end of period
|
$ | 35.8 | $ | 33.5 | ||||
|
Supplemental schedule of cash flow information:
|
||||||||
|
Cash paid during the period for:
|
||||||||
|
Interest
|
$ | 12.5 | $ | 18.5 | ||||
|
Preferred stock dividends
|
$ | 1.6 | $ | — | ||||
|
Income taxes, net of refunds
|
$ | 2.5 | $ | 2.3 | ||||
|
Supplemental schedule of non-cash investing and financing
activities:
|
||||||||
|
Treasury stock received to satisfy minimum tax withholding
liabilities
|
$ | 2.4 | $ | 0.6 | ||||
5
| (1) | Description of Business and Basis of Presentation |
6
| (2) | Pension and Post-retirement Benefits |
|
Other
|
||||||||||||||||
|
Post-retirement
|
||||||||||||||||
| Pension Plans | Benefit Plans | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Net periodic benefit costs:
|
||||||||||||||||
|
Service cost
|
$ | 0.4 | $ | 2.1 | $ | — | $ | — | ||||||||
|
Interest cost
|
8.5 | 8.6 | 0.2 | 0.2 | ||||||||||||
|
Expected return on plan assets
|
(8.1 | ) | (6.7 | ) | — | — | ||||||||||
|
Amortization of prior service cost
|
— | (0.1 | ) | — | — | |||||||||||
|
Amortization of actuarial loss
|
2.7 | 3.3 | 0.1 | — | ||||||||||||
| 3.5 | 7.2 | 0.3 | 0.2 | |||||||||||||
|
Portion allocated to Revlon Holdings LLC
|
— | — | — | — | ||||||||||||
| $ | 3.5 | $ | 7.2 | $ | 0.3 | $ | 0.2 | |||||||||
7
| (3) | Inventories |
|
March 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
|
Raw materials and supplies
|
$ | 38.1 | $ | 42.7 | ||||
|
Work-in-process
|
11.6 | 12.0 | ||||||
|
Finished goods
|
65.9 | 64.5 | ||||||
| $ | 115.6 | $ | 119.2 | |||||
| (4) | Basic and Diluted Earnings Per Common Share |
|
Three Months Ended
|
||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
| (shares in millions) | ||||||||
|
Numerator:
|
||||||||
|
Net income
|
$ | 2.2 | $ | 12.7 | ||||
|
Denominator:
|
||||||||
|
Weighted average common shares outstanding — Basic
|
51.87 | 51.52 | ||||||
|
Effect of dilutive restricted stock
|
0.42 | 0.01 | ||||||
|
Weighted average common shares outstanding — Diluted
|
52.29 | 51.53 | ||||||
|
Earnings per share:
|
||||||||
|
Basic earnings per share
|
$ | 0.04 | $ | 0.25 | ||||
|
Diluted earnings per share
|
$ | 0.04 | $ | 0.25 | ||||
8
| (5) | Comprehensive Income |
|
Three Months Ended
|
||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Net income
|
$ | 2.2 | $ | 12.7 | ||||
|
Other comprehensive income:
|
||||||||
|
Revaluation of financial derivative
instruments
(a)
|
1.7 | 0.1 | ||||||
|
Currency translation adjustment
|
0.8 | 0.3 | ||||||
|
Amortization of pension related
costs
(b)
|
2.8 | 3.2 | ||||||
|
Total other comprehensive income
|
5.3 | 3.6 | ||||||
|
Comprehensive income
|
$ | 7.5 | $ | 16.3 | ||||
| (a) | The amount for the three months ended March 31, 2010 relates to (1) the reclassification of an unrecognized loss of $0.8 million on the 2008 Interest Rate Swap (as hereinafter defined) from Accumulated Other Comprehensive Loss into earnings due to the discontinuance of hedge accounting as a result of the 2010 Refinancing (See Note 9, “Financial Instruments,” in this Form 10-Q) and (2) the reversal of amounts recorded in Accumulated Other Comprehensive Loss pertaining to a net settlement payment of $0.9 million on the 2008 Interest Rate Swap. The amount for the three months ended March 31, 2009 relates to (1) net unrealized losses of $0.2 million on the 2008 Interest Rate Swap and the interest rate swap which expired in September 2009 (the “2007 Interest Rate Swap”) (See Note 11, “Financial Instruments,” to the Consolidated Financial Statements in Revlon, Inc.’s 2009 Form 10-K) and (2) the reversal of amounts recorded in Accumulated Other Comprehensive Loss pertaining to net settlement receipts of $0.8 million and net settlement payments of $1.1 million on the 2008 Interest Rate Swap and the 2007 Interest Rate Swap. | |
| (b) | The amounts represent the change in Accumulated Other Comprehensive Loss as a result of the amortization of actuarial losses arising during the first quarter of 2010 and 2009, respectively, related to the Company’s pension and other post-retirement benefit plans. |
| (6) | Restructuring Costs and Other, Net |
9
|
Balance
|
Balance
|
|||||||||||||||||||
|
as of
|
(Income)
|
as of
|
||||||||||||||||||
|
January 1,
|
Expenses,
|
Utilized, Net |
March 31,
|
|||||||||||||||||
| 2010 | Net | Cash | Noncash | 2010 | ||||||||||||||||
|
Employee severance and other personnel benefits:
|
||||||||||||||||||||
|
2008 Programs
|
$ | 0.3 | $ | — | $ | (0.2 | ) | $ | — | $ | 0.1 | |||||||||
|
2009 Programs
|
7.6 | — | (3.2 | ) | — | 4.4 | ||||||||||||||
| 7.9 | — | (3.4 | ) | — | 4.5 | |||||||||||||||
|
Lease exit
|
2.3 | — | (0.2 | ) | — | 2.1 | ||||||||||||||
|
Total restructuring costs and other, net
|
$ | 10.2 | $ | — | $ | (3.6 | ) | $ | — | $ | 6.6 | |||||||||
| (7) | Geographic, Financial and Other Information |
|
Three Months Ended
|
||||||||||||||||
| March 31, | ||||||||||||||||
| 2010 | 2009 | |||||||||||||||
|
Geographic area:
|
||||||||||||||||
|
Net sales:
|
||||||||||||||||
|
United States
|
$ | 182.1 | 60% | $ | 191.0 | 63% | ||||||||||
|
Outside of the United States
|
123.4 | 40% | 112.3 | 37% | ||||||||||||
| $ | 305.5 | $ | 303.3 | |||||||||||||
|
March 31,
|
December 31,
|
|||||||||||||||
| 2010 | 2009 | |||||||||||||||
|
Long-lived assets:
|
||||||||||||||||
|
United States
|
$ | 312.1 | 79% | $ | 308.6 | 79% | ||||||||||
|
Outside of the United States
|
82.5 | 21% | 82.0 | 21% | ||||||||||||
| $ | 394.6 | $ | 390.6 | |||||||||||||
10
|
Three Months Ended
|
||||||||||||||||
| March 31, | ||||||||||||||||
| 2010 | 2009 | |||||||||||||||
|
Classes of similar products:
|
||||||||||||||||
|
Net sales:
|
||||||||||||||||
|
Color cosmetics
|
$ | 193.7 | 63 | % | $ | 193.3 | 64 | % | ||||||||
|
Beauty care and fragrance
|
111.8 | 37 | % | 110.0 | 36 | % | ||||||||||
| $ | 305.5 | $ | 303.3 | |||||||||||||
| (8) | Fair Value Measurements |
| • | 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. |
11
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
|
Assets
|
||||||||||||||||
|
Derivatives:
|
||||||||||||||||
|
FX
Contracts
(a)
|
$ | 0.4 | $ | — | $ | 0.4 | $ | — | ||||||||
|
Total assets at fair value
|
$ | 0.4 | $ | — | $ | 0.4 | $ | — | ||||||||
|
Liabilities
|
||||||||||||||||
|
Derivatives:
|
||||||||||||||||
|
2008 Interest Rate
Swap
(b)
|
$ | 0.9 | $ | — | $ | 0.9 | $ | — | ||||||||
|
FX
Contracts
(a)
|
1.3 | — | 1.3 | — | ||||||||||||
|
Redeemable Preferred
Stock
(c)
|
0.2 | — | — | 0.2 | ||||||||||||
|
Total liabilities at fair value
|
$ | 2.4 | $ | — | $ | 2.2 | $ | 0.2 | ||||||||
| (a) | The fair value of the Company’s FX Contracts was measured based on observable market transactions of spot and forward rates at March 31, 2010. (See Note 9, “Financial Instruments,” in this Form 10-Q.) | |
| (b) | The fair value of the Company’s 2008 Interest Rate Swap was measured based on the three- month U.S. Dollar LIBOR index at the last receipt date, or January 19, 2010. | |
| (c) | In October 2009, Revlon, Inc. consummated its voluntary exchange offer (as amended, the “Exchange Offer”) in which, among other things, Revlon, Inc. issued to stockholders (other than MacAndrews & Forbes) 9,336,905 shares of its Preferred Stock in exchange for the same number of shares of Class A Common Stock tendered in the Exchange Offer. Upon consummation of the Exchange Offer, Revlon, Inc. initially recorded the Preferred Stock as a long-term liability at a fair value of $47.9 million, which was comprised of two components: |
| • | Liquidation Preference : Upon initial valuation of the Preferred Stock, the total amount to be paid by Revlon, Inc. at maturity is approximately $48.6 million, which represents the $5.21 liquidation preference for each of the 9,336,905 shares of Preferred Stock issued in the Exchange Offer (the “Liquidation Preference”). The Liquidation Preference was initially measured at fair value based on the yield to maturity of the $48.6 million portion of the Senior Subordinated Term Loan (as hereinafter defined) that was contributed to Revlon, Inc. by MacAndrews & Forbes (the “Contributed Loan”), adjusted for an estimated average subordination premium for subordinated note issues. The Liquidation Preference is subsequently measured at the present value of the amount to be paid at maturity, accruing interest cost using the rate implicit at the issuance date since both the amount to be paid and the maturity date are fixed. | |
| • | Change of Control Amount : Holders of the Preferred Stock are entitled to receive upon a change of control transaction (as defined in the certificate of designation of the Preferred Stock) through October 8, 2012, a pro rata portion of the equity value received in such transaction, capped at an amount that would provide aggregate cash payments of $12.00 per share over the term of the Preferred Stock. If the equity value received in the change of control transaction is greater than or equal to $12.00 per share, then each holder of Preferred Stock will be entitled to receive an amount equal to $12.00 minus the Liquidation Preference minus any paid and/or accrued and unpaid dividends on the Preferred Stock. If the per share equity value received in the change of control transaction is less than $12.00, then each holder of Preferred Stock is entitled to receive an amount |
12
| equal to such per share equity value minus the Liquidation Preference minus any paid and/or accrued and unpaid dividends on the Preferred Stock. If the per share equity value received in the change of control transaction does not exceed the Liquidation Preference plus any paid and/or accrued and unpaid dividends, then each holder of the Preferred Stock is not entitled to an additional payment upon any such change of control transaction (the foregoing payments being the “Change of Control Amount”). The fair value of the Change of Control Amount of the Preferred Stock, which is deemed to be a Level 3 liability, is based on the Company’s assessment of the likelihood of the occurrence of specified change of control transactions within three years of the consummation of the Exchange Offer. There was no change in the fair value of the Change in Control Amount from the initial valuation performed upon the October 2009 consummation of the Exchange Offer through March 31, 2010. |
| (9) | Financial Instruments |
13
| Fair Values of Derivative Instruments | ||||||||||||||||||||
| Assets | Liabilities | |||||||||||||||||||
|
Balance
|
March 31,
|
December 31,
|
March 31,
|
December 31,
|
||||||||||||||||
|
Sheet
|
2010
|
2009
|
Balance Sheet
|
2010
|
2009
|
|||||||||||||||
|
Derivatives:
|
Classification | Fair Value | Fair Value | Classification | Fair Value | Fair Value | ||||||||||||||
|
Derivatives designated as hedging instruments:
|
||||||||||||||||||||
|
2008 Interest Rate
Swap
(a)
|
Prepaid expenses | $ | — | $ | — | Accrued expenses | $ | — | $ | 1.8 | ||||||||||
|
Derivatives not designated as hedging instruments:
|
||||||||||||||||||||
|
2008 Interest Rate
Swap
(b)
|
Prepaid expenses | — | — | Accrued expenses | 0.9 | — | ||||||||||||||
|
FX
Contracts
(c)
|
Prepaid expenses | 0.4 | 0.1 | Accrued expenses | (1.3 | ) | 1.7 | |||||||||||||
| $ | 0.4 | $ | 0.1 | $ | (0.4 | ) | $ | 3.5 | ||||||||||||
14
| (a) | Effective March 11, 2010 (the closing date of the 2010 Refinancing), the 2008 Interest Rate Swap was no longer designated as a cash flow hedge. (See “Interest Rate Swap Transaction” in this Note 9.) |
| (b) | The fair value of the 2008 Interest Rate Swap at March 31, 2010 and December 31, 2009 was determined by using the three-month U.S. Dollar LIBOR index at the latest receipt date, or January 19, 2010, and October 16, 2009, respectively. |
| (c) | The fair values of the FX Contracts at March 31, 2010 and December 31, 2009 were determined by using observable market transactions of spot and forward rates at March 31, 2010 and December 31, 2009, respectively. |
|
Derivative Instruments Gain (Loss) Effect on Consolidated
|
||||||||||||||||||
| Statement of Operations as of March 31, | ||||||||||||||||||
|
Amount of
|
Amount of
|
|||||||||||||||||
|
Gain (Loss)
|
Gain (Loss)
|
|||||||||||||||||
|
Recognized
|
Reclassified
|
|||||||||||||||||
|
in
|
Income Statement
|
from OCI
|
||||||||||||||||
|
OCI
|
Classification
|
to Income
|
||||||||||||||||
|
(Effective
|
of Gain (Loss)
|
(Effective
|
||||||||||||||||
| Portion) |
Reclassified from
|
Portion) | ||||||||||||||||
| 2010 | 2009 | OCI to Income | 2010 | 2009 | ||||||||||||||
|
Derivatives designated as hedging instruments:
|
||||||||||||||||||
|
2008 Interest Rate
Swap
(a)
|
$ | — | $ | (5.3 | ) | Interest expense | $ | (0.9 | ) | $ | (0.3 | ) | ||||||
|
Amount of
|
Amount of
|
|||||||||||||||||
|
Gain (Loss)
|
Gain (Loss)
|
|||||||||||||||||
|
Recognized
|
Recognized
|
|||||||||||||||||
|
in Foreign
|
Income Statement
|
in Interest
|
||||||||||||||||
|
Currency
|
Classification
|
Expense
|
||||||||||||||||
|
Gains
|
of Gain (Loss)
|
(Ineffective
|
||||||||||||||||
| (Losses), Net |
Reclassified from
|
Portion) | ||||||||||||||||
| 2010 | 2009 | OCI to Income | 2010 | 2009 | ||||||||||||||
|
Derivatives not designated as hedging instruments:
|
||||||||||||||||||
|
FX Contracts
|
$ | (0.5 | ) | $ | 0.9 | Interest expense | $ | — | $ | — | ||||||||
|
2008 Interest Rate
Swap
(a)
|
— | — | Interest expense | (0.8 | ) | — | ||||||||||||
| $ | (0.5 | ) | $ | 0.9 | $ | (0.8 | ) | $ | — | |||||||||
| (a) | Effective March 11, 2010 (the closing date of the 2010 Refinancing), the 2008 Interest Rate Swap was no longer designated as a cash flow hedge. (See “Interest Rate Swap Transaction” in this Note 9.) |
15
| (10) | Long-term Debt and Redeemable Preferred Stock |
|
March 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
|
2010 Term Loan Facility due 2015, net of
discounts
(a)
|
$ | 786.1 | $ | — | ||||
|
2006 Term Loan Facility due
2012
(a)
|
— | 815.0 | ||||||
|
2010 Revolving Credit Facility due
2014
(a)
|
10.5 | — | ||||||
|
9
3
/
4
% Senior
Secured Notes due 2015, net of
discounts
(b)
|
326.5 | 326.4 | ||||||
|
Senior Subordinated Term Loan due
2014
(c)
|
58.4 | 58.4 | ||||||
| 1,181.5 | 1,199.8 | |||||||
|
Less current portion
|
(18.5 | ) | (13.6 | ) | ||||
| 1,163.0 | 1,186.2 | |||||||
|
Redeemable Preferred
Stock
(d)
|
48.0 | 48.0 | ||||||
| $ | 1,211.0 | $ | 1,234.2 | |||||
| (a) | On March 11, 2010 the Company consummated the 2010 Refinancing. The 2010 Refinancing, among other things, extended the maturity of Products Corporation’s 2006 Term Loan Facility and 2006 Revolving Credit Facility, each due January 2012, by entering into the 2010 Term Loan Facility due March 2015 and the 2010 Revolving Credit Facility due March 2014, respectively. (See below under “Recent Debt Reduction Transactions” in this Note 10.) |
| (b) | See Note 9, “Long-Term Debt and Redeemable Preferred Stock,” to the Consolidated Financial Statements in Revlon, Inc.’s 2009 Form 10-K for certain details regarding Products Corporation’s 9 3 / 4 % Senior Secured Notes which mature on November 15, 2015 (the “9 3 / 4 % Senior Secured Notes”) . |
| (c) | See Note 9, “Long-Term Debt and Redeemable Preferred Stock,” to the Consolidated Financial Statements in Revlon, Inc.’s 2009 Form 10-K for certain details regarding the $58.4 million principal amount of Senior Subordinated Term Loan which remains owing from Products Corporation to MacAndrews & Forbes (the “Non Contributed Loan”), which matures on October 8, 2014. |
| (d) | See Note 9, “Long-Term Debt and Redeemable Preferred Stock,” to the Consolidated Financial Statements in Revlon, Inc.’s 2009 Form 10-K for certain details regarding Revlon, Inc.’s redeemable Preferred Stock. |
| • | The 2010 Refinancing included refinancing Products Corporation’s term loan facility, which was scheduled to mature on January 15, 2012 and had $815.0 million aggregate principal amount outstanding at December 31, 2009 (the “2006 Term Loan Facility”), with a 5-year, $800.0 million term loan facility due March 11, 2015 (the “2010 Term Loan Facility”) under a second amended and restated term loan agreement dated March 11, 2010 (the “2010 Term Loan Agreement”), among Products Corporation, as borrower, the lenders party thereto, Citigroup Global Markets Inc. (“CGMI”), J.P. Morgan Securities Inc. (“JPM Securities”), Banc of America Securities LLC (“BAS”) and Credit Suisse Securities (USA) LLC (“Credit Suisse”), as joint lead arrangers, CGMI, JPM Securities, BAS, Credit Suisse and Natixis, New York Branch (“Natixis”), as joint bookrunners, JPMorgan Chase Bank, N.A. and Bank of America, N.A. as co-syndication agents, Credit Suisse and |
16
| Natixis as co-documentation agents, and Citicorp USA, Inc. (“CUSA”), as administrative agent and collateral agent. |
| • | The 2010 Refinancing also included refinancing Products Corporation’s 2006 revolving credit facility, which was scheduled to mature on January 15, 2012 and had nil outstanding borrowings at December 31, 2009, with a 4-year, $140.0 million asset-based, multi-currency revolving credit facility due March 11, 2014 (the “2010 Revolving Credit Facility” and, together with the 2010 Term Loan Facility, the “2010 Credit Facilities”) under a second amended and restated revolving credit agreement dated March 11, 2010 (the “2010 Revolving Credit Agreement” and, together with the 2010 Term Loan Agreement, the “2010 Credit Agreements”), among Products Corporation, as borrower, the lenders party thereto, CGMI and Wells Fargo Capital Finance, LLC (“WFS”), as joint lead arrangers, CGMI, WFS, BAS, JPM Securities and Credit Suisse, as joint bookrunners, and CUSA, as administrative agent and collateral agent. | |
| • | Products Corporation used the approximately $786 million of proceeds from the 2010 Term Loan Facility, which was drawn in full on the March 11, 2010 closing date and issued to lenders at 98.25% of par, plus approximately $31 million of available cash and approximately $20 million then drawn on the 2010 Revolving Credit Facility to refinance in full the $815.0 million of outstanding indebtedness under its 2006 Term Loan Facility and to pay approximately $7 million of accrued interest and approximately $15 million of fees and expenses incurred in connection with consummating the 2010 Refinancing, of which approximately $9 million was capitalized. |
17
18
19
20
21
| (11) | Income Taxes |
| (12) | Guarantor Financial Information |
22
23
|
Non-
|
||||||||||||||||||||
|
Products
|
Guarantor
|
Guarantor
|
||||||||||||||||||
| Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 1.7 | $ | 0.3 | $ | 33.8 | $ | — | $ | 35.8 | ||||||||||
|
Trade receivables, less allowances for doubtful accounts
|
82.1 | 11.4 | 74.0 | — | 167.5 | |||||||||||||||
|
Inventories
|
70.7 | 4.1 | 40.8 | — | 115.6 | |||||||||||||||
|
Prepaid expenses and other
|
67.7 | 5.6 | 26.3 | — | 99.6 | |||||||||||||||
|
Intercompany receivables
|
885.5 | 463.3 | 301.6 | (1,650.4 | ) | — | ||||||||||||||
|
Investment in subsidiaries
|
(257.0 | ) | (210.6 | ) | — | 467.6 | — | |||||||||||||
|
Property, plant and equipment, net
|
93.4 | 0.9 | 16.0 | — | 110.3 | |||||||||||||||
|
Other assets
|
61.6 | 2.3 | 31.7 | — | 95.6 | |||||||||||||||
|
Goodwill, net
|
150.6 | 30.0 | 2.0 | — | 182.6 | |||||||||||||||
|
Total assets
|
$ | 1,156.3 | $ | 307.3 | $ | 526.2 | $ | (1,182.8 | ) | $ | 807.0 | |||||||||
|
LIABILITIES AND STOCKHOLDER’S DEFICIENCY
|
||||||||||||||||||||
|
Short-term borrowings
|
$ | — | $ | 1.6 | $ | 0.5 | $ | — | $ | 2.1 | ||||||||||
|
Current portion of long-term debt
|
18.5 | — | — | — | 18.5 | |||||||||||||||
|
Accounts payable
|
45.4 | 4.6 | 23.5 | — | 73.5 | |||||||||||||||
|
Accrued expenses and other
|
141.2 | 7.6 | 60.8 | — | 209.6 | |||||||||||||||
|
Intercompany payables
|
512.9 | 629.5 | 508.0 | (1,650.4 | ) | — | ||||||||||||||
|
Long-term debt
|
1,104.6 | — | — | — | 1,104.6 | |||||||||||||||
|
Long-term debt — affiliates
|
107.0 | — | — | — | 107.0 | |||||||||||||||
|
Other long-term liabilities
|
209.7 | 14.4 | 50.6 | — | 274.7 | |||||||||||||||
|
Total liabilities
|
2,139.3 | 657.7 | 643.4 | (1,650.4 | ) | 1,790.0 | ||||||||||||||
|
Stockholder’s deficiency
|
(983.0 | ) | (350.4 | ) | (117.2 | ) | 467.6 | (983.0 | ) | |||||||||||
|
Total liabilities and Stockholder’s deficiency
|
$ | 1,156.3 | $ | 307.3 | $ | 526.2 | $ | (1,182.8 | ) | $ | 807.0 | |||||||||
24
|
Non-
|
||||||||||||||||||||
|
Products
|
Guarantor
|
Guarantor
|
||||||||||||||||||
| Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
ASSETS
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 27.4 | $ | 0.4 | $ | 26.7 | $ | — | $ | 54.5 | ||||||||||
|
Trade receivables, less allowances for doubtful accounts
|
81.1 | 15.5 | 85.1 | — | 181.7 | |||||||||||||||
|
Inventories
|
76.2 | 3.5 | 39.5 | — | 119.2 | |||||||||||||||
|
Prepaid expenses and other
|
60.1 | 4.3 | 26.5 | — | 90.9 | |||||||||||||||
|
Intercompany receivables
|
876.1 | 458.8 | 299.8 | (1,634.7 | ) | — | ||||||||||||||
|
Investment in subsidiaries
|
(254.0 | ) | (215.1 | ) | — | 469.1 | — | |||||||||||||
|
Property, plant and equipment, net
|
94.3 | 1.1 | 16.3 | — | 111.7 | |||||||||||||||
|
Other assets
|
56.8 | 2.7 | 30.4 | — | 89.9 | |||||||||||||||
|
Goodwill, net
|
150.6 | 30.0 | 2.0 | — | 182.6 | |||||||||||||||
|
Total assets
|
$ | 1,168.6 | $ | 301.2 | $ | 526.3 | $ | (1,165.6 | ) | $ | 830.5 | |||||||||
|
LIABILITIES AND STOCKHOLDER’S DEFICIENCY
|
||||||||||||||||||||
|
Short-term borrowings
|
$ | — | $ | — | $ | 0.3 | $ | — | $ | 0.3 | ||||||||||
|
Current portion of long-term debt
|
13.6 | — | — | — | 13.6 | |||||||||||||||
|
Accounts payable
|
55.8 | 5.0 | 21.6 | — | 82.4 | |||||||||||||||
|
Accrued expenses and other
|
133.2 | 9.5 | 66.2 | — | 208.9 | |||||||||||||||
|
Intercompany payables
|
510.2 | 625.6 | 498.9 | (1,634.7 | ) | — | ||||||||||||||
|
Long-term debt
|
1,127.8 | — | — | — | 1,127.8 | |||||||||||||||
|
Long-term debt — affiliates
|
107.0 | — | — | — | 107.0 | |||||||||||||||
|
Other long-term liabilities
|
214.8 | 15.7 | 53.8 | — | 284.3 | |||||||||||||||
|
Total liabilities
|
2,162.4 | 655.8 | 640.8 | (1,634.7 | ) | 1,824.3 | ||||||||||||||
|
Stockholder’s deficiency
|
(993.8 | ) | (354.6 | ) | (114.5 | ) | 469.1 | (993.8 | ) | |||||||||||
|
Total liabilities and Stockholder’s deficiency
|
$ | 1,168.6 | $ | 301.2 | $ | 526.3 | $ | (1,165.6 | ) | $ | 830.5 | |||||||||
25
|
Non-
|
||||||||||||||||||||
|
Products
|
Guarantor
|
Guarantor
|
||||||||||||||||||
| Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Net sales
|
$ | 208.5 | $ | 13.3 | $ | 115.8 | $ | (32.1 | ) | $ | 305.5 | |||||||||
|
Cost of sales
|
90.6 | 6.0 | 44.2 | (32.1 | ) | 108.7 | ||||||||||||||
|
Gross profit
|
117.9 | 7.3 | 71.6 | — | 196.8 | |||||||||||||||
|
Selling, general and administrative expenses
|
91.0 | 9.2 | 49.5 | — | 149.7 | |||||||||||||||
|
Restructuring costs and other, net
|
— | — | — | — | — | |||||||||||||||
|
Operating income (loss)
|
26.9 | (1.9 | ) | 22.1 | — | 47.1 | ||||||||||||||
|
Other expenses (income):
|
||||||||||||||||||||
|
Intercompany interest, net
|
0.8 | (0.4 | ) | 1.1 | — | 1.5 | ||||||||||||||
|
Interest expense
|
21.3 | 0.1 | — | — | 21.4 | |||||||||||||||
|
Interest income
|
— | — | (0.2 | ) | — | (0.2 | ) | |||||||||||||
|
Amortization of debt issuance costs
|
1.4 | — | — | — | 1.4 | |||||||||||||||
|
Loss on early extinguishment of debt, net
|
9.7 | — | — | — | 9.7 | |||||||||||||||
|
Foreign currency (gains) losses, net
|
(4.5 | ) | (0.4 | ) | 8.7 | — | 3.8 | |||||||||||||
|
Miscellaneous, net
|
(7.0 | ) | (3.5 | ) | 10.8 | — | 0.3 | |||||||||||||
|
Other expenses, net
|
21.7 | (4.2 | ) | 20.4 | — | 37.9 | ||||||||||||||
|
Income from continuing operations before income taxes
|
5.2 | 2.3 | 1.7 | — | 9.2 | |||||||||||||||
|
Provision for income taxes
|
— | 0.7 | 4.3 | — | 5.0 | |||||||||||||||
|
Income (loss) from continuing operations
|
5.2 | 1.6 | (2.6 | ) | — | 4.2 | ||||||||||||||
|
Equity in (loss) income of subsidiaries
|
(1.0 | ) | (4.0 | ) | — | 5.0 | — | |||||||||||||
|
Net income (loss)
|
$ | 4.2 | $ | (2.4 | ) | $ | (2.6 | ) | $ | 5.0 | $ | 4.2 | ||||||||
26
|
Non-
|
||||||||||||||||||||
|
Products
|
Guarantor
|
Guarantor
|
||||||||||||||||||
| Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
Net sales
|
$ | 215.2 | $ | 14.5 | $ | 104.3 | $ | (30.7 | ) | $ | 303.3 | |||||||||
|
Cost of sales
|
93.3 | 6.2 | 42.2 | (30.7 | ) | 111.0 | ||||||||||||||
|
Gross profit
|
121.9 | 8.3 | 62.1 | — | 192.3 | |||||||||||||||
|
Selling, general and administrative expenses
|
103.2 | 8.1 | 47.2 | — | 158.5 | |||||||||||||||
|
Restructuring costs and other, net
|
0.8 | 0.4 | (0.7 | ) | — | 0.5 | ||||||||||||||
|
Operating income (loss)
|
17.9 | (0.2 | ) | 15.6 | — | 33.3 | ||||||||||||||
|
Other expenses (income):
|
||||||||||||||||||||
|
Intercompany interest, net
|
(1.1 | ) | (0.5 | ) | 1.6 | — | — | |||||||||||||
|
Interest expense
|
24.1 | — | — | — | 24.1 | |||||||||||||||
|
Interest income
|
— | — | (0.2 | ) | — | (0.2 | ) | |||||||||||||
|
Amortization of debt issuance costs
|
1.4 | — | — | — | 1.4 | |||||||||||||||
|
Gain on repurchases of debt
|
(7.0 | ) | — | — | — | (7.0 | ) | |||||||||||||
|
Foreign currency losses (gains), net
|
0.6 | (0.1 | ) | 1.9 | — | 2.4 | ||||||||||||||
|
Miscellaneous, net
|
(21.2 | ) | 11.4 | 10.0 | — | 0.2 | ||||||||||||||
|
Other expenses, net
|
(3.2 | ) | 10.8 | 13.3 | — | 20.9 | ||||||||||||||
|
Income (loss) from continuing operations before income taxes
|
21.1 | (11.0 | ) | 2.3 | — | 12.4 | ||||||||||||||
|
(Benefit from) provision for income taxes
|
(21.5 | ) | 22.0 | (2.6 | ) | — | (2.1 | ) | ||||||||||||
|
Income (loss) from continuing operations
|
42.6 | (33.0 | ) | 4.9 | — | 14.5 | ||||||||||||||
|
Equity in (loss) income of subsidiaries
|
(28.1 | ) | 5.4 | — | 22.7 | — | ||||||||||||||
|
Net income (loss)
|
$ | 14.5 | $ | (27.6 | ) | $ | 4.9 | $ | 22.7 | $ | 14.5 | |||||||||
27
|
Non-
|
||||||||||||||||||||
|
Products
|
Guarantor
|
Guarantor
|
||||||||||||||||||
| Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
|
Net cash provided by (used in) operating activities
|
$ | 24.5 | $ | (0.7 | ) | $ | 7.0 | $ | — | $ | 30.8 | |||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||||||
|
Capital expenditures
|
(2.9 | ) | — | (0.4 | ) | — | (3.3 | ) | ||||||||||||
|
Proceeds from the sale of certain assets
|
— | — | 0.1 | — | 0.1 | |||||||||||||||
|
Net cash used in investing activities
|
(2.9 | ) | — | (0.3 | ) | — | (3.2 | ) | ||||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Net (decrease) increase in short-term borrowings and
overdraft
|
(13.8 | ) | 0.6 | 0.2 | — | (13.0 | ) | |||||||||||||
|
Borrowings under the 2010 Revolving Credit Facility, net
|
10.5 | — | — | — | 10.5 | |||||||||||||||
|
Repayments under the 2006 Term Loan Facility
|
(815.0 | ) | — | — | — | (815.0 | ) | |||||||||||||
|
Borrowings under the 2010 Term Loan Facility
|
786.0 | — | — | — | 786.0 | |||||||||||||||
|
Payment of financing costs
|
(15.0 | ) | — | — | — | (15.0 | ) | |||||||||||||
|
Net cash (used in) provided by financing activities
|
(47.3 | ) | 0.6 | 0.2 | — | (46.5 | ) | |||||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
— | — | 0.2 | — | 0.2 | |||||||||||||||
|
Net (decrease) increase in cash and cash equivalents
|
(25.7 | ) | (0.1 | ) | 7.1 | — | (18.7 | ) | ||||||||||||
|
Cash and cash equivalents at beginning of period
|
27.4 | 0.3 | 26.8 | — | 54.5 | |||||||||||||||
|
Cash and cash equivalents at end of period
|
$ | 1.7 | $ | 0.2 | $ | 33.9 | $ | — | $ | 35.8 | ||||||||||
28
|
Non-
|
||||||||||||||||||||
|
Products
|
Guarantor
|
Guarantor
|
||||||||||||||||||
| Corporation | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||||||||||
|
Net cash provided by (used in) operating activities
|
$ | 19.9 | $ | 2.8 | $ | (5.4 | ) | $ | — | $ | 17.3 | |||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||||||||||||
|
Capital expenditures
|
(1.6 | ) | — | (0.5 | ) | — | (2.1 | ) | ||||||||||||
|
Proceeds from the sale of certain assets including a non-core
trademark
|
— | — | 2.3 | — | 2.3 | |||||||||||||||
|
Net cash (used in) provided by investing activities
|
(1.6 | ) | — | 1.8 | — | 0.2 | ||||||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||||||||||||
|
Net (decrease) increase in short-term borrowings and
overdraft
|
(4.7 | ) | — | 0.7 | — | (4.0 | ) | |||||||||||||
|
Borrowings under the 2006 Revolving Credit Facility, net
|
4.0 | — | — | — | 4.0 | |||||||||||||||
|
Repayment of long-term debt
|
(35.2 | ) | — | (0.1 | ) | — | (35.3 | ) | ||||||||||||
|
Net cash (used in) provided by financing activities
|
(35.9 | ) | — | 0.6 | — | (35.3 | ) | |||||||||||||
|
Net cash used in discontinued operations
|
(0.1 | ) | — | — | — | (0.1 | ) | |||||||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
— | — | (1.4 | ) | — | (1.4 | ) | |||||||||||||
|
Net (decrease) increase in cash and cash equivalents
|
(17.7 | ) | 2.8 | (4.4 | ) | — | (19.3 | ) | ||||||||||||
|
Cash and cash equivalents at beginning of period
|
18.7 | 0.9 | 33.2 | — | 52.8 | |||||||||||||||
|
Cash and cash equivalents at end of period
|
$ | 1.0 | $ | 3.7 | $ | 28.8 | $ | — | $ | 33.5 | ||||||||||
29
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
30
| • | a $9.7 million loss on the early extinguishment of debt in the first quarter of 2010, as compared to the $7.0 million gain related to the early extinguishment of debt in the first quarter of 2009; | |
| • | a $7.0 million increase in the provision for income taxes; and | |
| • | $1.4 million of higher foreign currency losses; |
| • | $8.8 million of lower SG&A expenses; and | |
| • | $4.5 million of higher gross profit primarily due to a $2.3 million improvement in cost of sales and favorable foreign currency fluctuations. |
31
32
|
Three Months Ended
|
||||||||||||||||||||||||
| March 31, | Change | XFX Change (a) | ||||||||||||||||||||||
| 2010 | 2009 | $ | % | $ | % | |||||||||||||||||||
|
United States
|
$ | 182.1 | $ | 191.0 | $ | (8.9 | ) | (4.7 | )% | $ | (8.9 | ) | (4.7 | )% | ||||||||||
|
Asia Pacific
|
45.9 | 41.6 | 4.3 | 10.3 | (1.2 | ) | (2.9 | ) | ||||||||||||||||
|
Europe, Middle East and Africa
|
42.9 | 38.3 | 4.6 | 12.0 | (1.8 | ) | (4.7 | ) | ||||||||||||||||
|
Latin America
|
20.0 | 19.5 | 0.5 | 2.6 | 5.8 | 29.7 | ||||||||||||||||||
|
Canada
|
14.6 | 12.9 | 1.7 | 13.2 | (0.7 | ) | (5.4 | ) | ||||||||||||||||
|
Total Net Sales
|
$ | 305.5 | $ | 303.3 | $ | 2.2 | 0.7 | % | $ | (6.8 | ) | (2.2 | )% | |||||||||||
| (a) | XFX excludes the impact of foreign currency fluctuations. |
33
|
Three Months Ended
|
||||||||||||
| March 31, | ||||||||||||
| 2010 | 2009 | Change | ||||||||||
|
Gross profit
|
$ | 196.8 | $ | 192.3 | $ | 4.5 | ||||||
|
Percentage of net sales
|
64.4 | % | 63.4 | % | 1.0 | % | ||||||
| • | lower allowances on color cosmetics, which increased gross profit as a percentage of net sales by 1.4 percentage points; | |
| • | favorable foreign currency fluctuations which resulted in lower cost of goods in most international markets on goods purchased from the Company’s facility in Oxford, North Carolina, which increased gross profit as a percentage of net sales by 1.0 percentage points; | |
| • | decreased inventory obsolescence charges, which increased gross profit as a percentage of net sales by 0.6 percentage points; and | |
| • | favorable manufacturing efficiencies, primarily as a result of lower labor and material costs, partially offset by unfavorable overhead absorption, which combined increased gross profit as a percentage of net sales by 0.5 percentage points; |
| • | unfavorable changes in sales mix, which reduced gross profit as a percentage of net sales by 1.2 percentage points; and | |
| • | the unfavorable impact of cost of goods as a result of the devaluation of Venezuela’s local currency relative to the U.S. dollar as inventory is carried at historical dollar cost resulting in higher inventory value based on the exchange rate prior to such devaluation, which reduced gross profit as a percentage of net sales by 0.7 percentage points. |
|
Three Months Ended
|
||||||||||||
| March 31, | ||||||||||||
| 2010 | 2009 | Change | ||||||||||
|
SG&A expenses
|
$ | 151.4 | $ | 160.2 | $ | 8.8 | ||||||
34
| • | $8.4 million of lower advertising expenses primarily as a result of achieving lower advertising rates; and | |
| • | $4.9 million of lower compensation expenses as a result of the May 2009 Program; |
| • | unfavorable foreign currency fluctuations of $2.8 million. |
|
Three Months Ended
|
||||||||||||
| March 31, | ||||||||||||
| 2010 | 2009 | Change | ||||||||||
|
Restructuring costs and other, net
|
$ | — | $ | 0.5 | $ | 0.5 | ||||||
|
Three Months Ended
|
||||||||||||
| March 31, | ||||||||||||
| 2010 | 2009 | Change | ||||||||||
|
Interest expense
|
$ | 21.3 | $ | 24.1 | $ | 2.8 | ||||||
|
Interest expense — preferred stock dividends
|
1.6 | — | (1.6 | ) | ||||||||
35
|
Three Months Ended
|
||||||||||||
| March 31, | ||||||||||||
| 2010 | 2009 | Change | ||||||||||
|
Loss (gain) on early extinguishment of debt, net
|
$ | 9.7 | $ | (7.0 | ) | $ | (16.7 | ) | ||||
|
Three Months Ended
|
||||||||||||
| March 31, | ||||||||||||
| 2010 | 2009 | Change | ||||||||||
|
Foreign currency losses
|
$ | 3.8 | $ | 2.4 | $ | (1.4 | ) | |||||
| • | a $2.8 million one-time foreign currency loss related to the required re-measurement of the balance sheet of the Company’s subsidiary in Venezuela (“Revlon Venezuela”) during the first quarter of 2010 to reflect the impact of the devaluation of Venezuela’s local currency relative to the U.S. dollar, as Venezuela has been designated as a highly inflationary economy effective January 1, 2010 (See “Financial Condition, Liquidity and Capital Resources — Impact of Foreign Currency Translation — Venezuela” in this Form 10-Q); and | |
| • | foreign currency losses related to the Company’s outstanding foreign currency forward exchange contracts (“FX Contracts”) for the first quarter of 2010, as compared to foreign currency gains related to the Company’s FX Contracts for the first quarter of 2009; |
36
| • | the favorable impact of the revaluation of certain U.S. dollar-denominated intercompany payables from the Company’s foreign subsidiaries during the first quarter of 2010. |
|
Three Months Ended
|
||||||||||||
| March 31, | ||||||||||||
| 2010 | 2009 | Change | ||||||||||
|
Provision for (benefit from) income taxes
|
$ | 5.0 | $ | (2.0 | ) | $ | (7.0 | ) | ||||
|
Three Months Ended
|
||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Net cash provided by operating activities
|
$ | 31.2 | $ | 17.3 | ||||
|
Net cash (used in) provided by investing activities
|
(3.2 | ) | 0.2 | |||||
|
Net cash used in financing activities
|
(46.9 | ) | (35.3 | ) | ||||
37
38
39
40
41
42
43
44
45
| • | delaying the implementation of or revising certain aspects of the Company’s business strategy; | |
| • | reducing or delaying purchases of wall displays or advertising, promotional or marketing expenses; | |
| • | reducing or delaying capital spending; | |
| • | delaying, reducing or revising the Company’s restructuring programs; | |
| • | refinancing Products Corporation’s indebtedness; | |
| • | selling assets or operations; | |
| • | seeking additional capital contributions and/or loans from MacAndrews & Forbes, the Company’s other affiliates and/or third parties; | |
| • | selling additional Revlon, Inc. equity securities or debt securities of Revlon, Inc. or Products Corporation; or | |
| • | reducing other discretionary spending. |
46
|
Payments Due by Period
|
|||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||
|
Contractual Obligations
|
2010
|
||||||||||||||||||||
| As of March 31, 2010 | Total | Q2-Q4 | 2011-2012 | 2013-2014 | After 2014 | ||||||||||||||||
|
Long-term debt, including current
portion
(a)
|
$ | 1,140.5 | $ | 6.0 | $ | 16.0 | $ | 26.5 | $ | 1,092.0 | |||||||||||
|
Interest on long-term
debt
(b)
|
428.9 | 69.1 | 160.6 | 158.2 | 41.0 | ||||||||||||||||
| (a) | The Company classified $18.5 million of long-term debt as a current liability, which includes the $10.5 million drawn on the 2010 Revolving Credit Facility at March 31, 2010. Although the Company expects to temporarily repay the $10.5 million of borrowings under the 2010 Revolving Credit Facility during 2010, the Company is not contractually obligated to repay such amount until March 11, 2014, which is the maturity date of the 2010 Revolving Credit Facility. | |
| (b) | Consists of interest primarily on the $330.0 million in aggregate principal amount of the 9 3 / 4 % Senior Secured Notes and on the $800.0 million in aggregate principal amount outstanding under the 2010 Term Loan Facility through the respective maturity dates based upon assumptions regarding the amount of debt outstanding under the 2010 Credit Facilities and assumed interest rates. |
47
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
|
Expected Maturity Date for the year ended
|
||||||||||||||||||||||||||||||||
|
December 31,
|
Fair Value
|
|||||||||||||||||||||||||||||||
| (dollars in millions, except for rate information) |
March 31,
|
|||||||||||||||||||||||||||||||
| Debt | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | Total | 2010 | ||||||||||||||||||||||||
|
Short-term variable rate (various currencies)
|
$ | 2.1 | $ | 2.1 | $ | 2.1 | ||||||||||||||||||||||||||
|
Average interest
rate
(a)
|
8.3 | % | ||||||||||||||||||||||||||||||
|
Long-term fixed rate — third party ($US)
|
$ | 48.6 | (b) | $ | 330.0 | 378.6 | 389.0 | |||||||||||||||||||||||||
|
Average interest rate
|
12.75 | % | 9.75 | % | ||||||||||||||||||||||||||||
|
Long-term fixed rate — affiliates ($US)
|
$ | 58.4 | (c) | 58.4 | 56.4 | |||||||||||||||||||||||||||
|
Average interest rate
|
12.0 | % | ||||||||||||||||||||||||||||||
|
Long-term variable rate — third party ($US)
|
16.5 | $ | 8.0 | $ | 8.0 | 8.0 | 8.0 | 762.0 | 810.5 | 803.5 | ||||||||||||||||||||||
|
Average interest
rate
(a)(d)
|
4.4 | % | 6.0 | % | 6.2 | % | 6.6 | % | 6.7 | % | 7.0 | % | ||||||||||||||||||||
|
Total debt
|
$ | 18.6 | $ | 8.0 | $ | 8.0 | $ | 56.6 | $ | 66.4 | $ | 1,092.0 | $ | 1,249.6 | $ | 1,251.0 | ||||||||||||||||
| (a) | Weighted average variable rates are based upon implied forward rates from the U.S. Dollar LIBOR yield curves at March 31, 2010. | |
| (b) | Represents the $48.6 million to be paid by Revlon, Inc. at maturity for the Preferred Stock issued in the voluntary exchange offer consummated in October 2009 (i.e., the earlier of (i) October 8, 2013 and (ii) the consummation of certain change of control transactions), subject to Revlon, Inc. having sufficient surplus in accordance with Delaware law to effect such payments. Annual cash dividends of 12.75% on the Preferred Stock are payable quarterly over the four-year term of the Preferred Stock, subject to Revlon, Inc. having sufficient surplus or net profits in accordance with Delaware law to effect such payments. | |
| (c) | Represents the aggregate principal amount outstanding of the Non-Contributed Loan as of March 31, 2010 which loan matures on October 8, 2014 and bears interest at an annual rate of 12%, which is payable in arrears in cash on January 8, April 8, July 8, and October 8 of each year. | |
| (d) | Based upon the implied forward rate from the U.S. Dollar LIBOR yield curve at March 31, 2010, this reflects the impact of the 2008 Interest Rate Swap, covering $150.0 million notional amount under the former 2006 Term Loan Facility through the 2010 Refinancing and thereafter under the 2010 Term Loan Facility, which resulted in an effective weighted average interest rate of 7.1% at March 31, 2010. The 2010 Term Loan Facility bears interest at the Eurodollar Rate (as defined in the 2010 Term Loan Agreement) plus 4.00% per annum (provided that in no event shall the Eurodollar Rate be less than 2.00% per annum). |
48
|
Average
|
Original
|
Contract
|
||||||||||||||
|
Contractual
|
US Dollar
|
Value
|
Fair Value
|
|||||||||||||
|
Rate
|
Notional
|
March 31,
|
March 31,
|
|||||||||||||
|
Forward Contracts
|
$/FC | Amount | 2010 | 2010 | ||||||||||||
|
Sell Canadian Dollars /Buy USD
|
0.9440 | $ | 13.8 | $ | 13.2 | $ | (0.6 | ) | ||||||||
|
Sell Australian Dollars/Buy USD
|
0.8652 | 8.7 | 8.3 | (0.4 | ) | |||||||||||
|
Sell British Pounds/Buy USD
|
1.5671 | 6.4 | 6.6 | 0.2 | ||||||||||||
|
Sell South African Rand/Buy USD
|
0.1279 | 4.4 | 4.2 | (0.2 | ) | |||||||||||
|
Buy Australian Dollars/Sell New Zealand Dollars
|
1.2554 | 2.9 | 3.0 | 0.1 | ||||||||||||
|
Sell Euros/Buy USD
|
1.4025 | 0.2 | 0.2 | — | ||||||||||||
|
Sell New Zealand Dollars/Buy USD
|
0.7032 | 0.7 | 0.7 | — | ||||||||||||
|
Sell Hong Kong Dollars/Buy USD
|
0.1288 | 0.4 | 0.4 | — | ||||||||||||
|
Total forward contracts
|
$ | 37.5 | $ | 36.6 | $ | (0.9 | ) | |||||||||
|
Expected Maturity date for
|
Fair Value
|
|||||||||
| the year ended December 31, |
March 31,
|
|||||||||
|
Interest Rate Swap
Transaction
(a)
|
2010 | Total | 2010 | |||||||
|
Notional Amount
|
$150.0 | $ | 150.0 | $ | (0.9 | ) | ||||
|
Average Pay Rate
|
2.66% (b) | |||||||||
|
Average Receive Rate
|
3-month USD
LIBOR (b) |
|||||||||
| (a) | As of March 31, 2010, the Company had one floating-to-fixed interest rate swap, which expired on April 16, 2010, with a notional amount of $150.0 million initially relating to indebtedness under Products Corporation’s former 2006 Term Loan Facility (prior to its complete refinancing in March 2010) and which also related through its expiration in April 2010 to a notional amount of $150.0 million relating to indebtedness under Products Corporation’s 2010 Term Loan Facility. The 2008 Interest Rate Swap was initially designated as a cash flow hedge of the variable interest rate payments on Products Corporation’s former 2006 Term Loan Facility (prior to its complete refinancing in March 2010) under the Derivatives and Hedging Topic. However, as a result of the 2010 Refinancing, effective March 11, 2010 (the closing date of the 2010 Refinancing), the 2008 Interest Rate Swap no longer met the criteria specified under the Derivatives and Hedging Topic to allow for the deferral of the effective portion of unrecognized hedging gains or losses in other comprehensive income since the scheduled variable interest payment specified on the date originally documented at the inception of the hedge will not occur. (See “Financial Condition, Liquidity and Capital Resources — Interest Rate Swap Transaction” in this Form 10-Q.) | |
| (b) | Under the terms of the 2008 Interest Rate Swap, Products Corporation was required to pay to the counterparty a quarterly fixed interest rate of 2.66% on the $150.0 million notional amount (which, based upon the 4.0% applicable margin, effectively fixed the interest rate on such notional amount at 6.66% for the 2-year term of the swap), which commenced in July 2008, while receiving a variable interest rate payment from the counterparty equal to the three-month U.S. dollar LIBOR, which was approximately 0.25% on the latest receipt date, or January 19, 2010. |
49
| Item 4. | Controls and Procedures |
| (i) | the Company’s future financial performance; | |
| (ii) | the effect on sales of decreased consumer spending in response to weak economic conditions or weakness in the cosmetics category in the mass retail channel; adverse changes in currency exchange rates; decreased sales of the Company’s products as a result of increased competitive activities by the Company’s competitors, changes in consumer purchasing habits, including with respect to shopping channels; retailer inventory management; retailer space reconfigurations or reductions in retailer display space; changes in retailer pricing or promotional strategies; less than anticipated results from the Company’s existing or new products or from its advertising, promotional and/or marketing plans; or if the Company’s expenses, including, without limitation, for pension expense under its benefit plans, advertising, promotional and marketing activities or for sales returns related to any reduction of retail space, 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, further refining its approach to retail merchandising and/or taking further actions to optimize its manufacturing, sourcing and organizational size and structure, any of which, whose intended purpose would be to create value through profitable growth, could result in the Company making investments and/or recognizing charges related to executing against such opportunities; |
50
| (iv) | our expectations regarding our strategic goal to profitably grow our business and as to the business strategies employed to achieve this goal, which are: (a) continuing to build our strong brands by focusing on innovative, high-quality, consumer-preferred brand offering; effective consumer brand communication; appropriate levels of advertising and promotion; and superb execution with our retail partners; (b) continuing to develop our organizational capability through attracting, retaining and rewarding highly capable people and through performance management, development planning, succession planning and training; (c) continuing to drive common global processes which are designed to provide the most efficient allocation of our resources; (d) continuing to focus on increasing our operating profit and cash flow; and (e) continuing to improve our capital structure by focusing on strengthening our balance sheet and reducing debt; | |
| (v) | restructuring activities, restructuring costs and charges, the timing of restructuring payments and the benefits from such activities, including, without limitation, our expectation of annualized savings of approximately $30 million in 2010 and thereafter (inclusive of the approximately $15 million in 2009) from the May 2009 Program; | |
| (vi) | the Company’s expectation that operating revenues, cash on hand and funds available for borrowing under Products Corporation’s 2010 Revolving Credit Facility and other permitted lines of credit will be sufficient to enable the Company to cover its operating expenses for 2010, including the cash requirements referred to in item (viii) below; | |
| (vii) | the Company’s expected principal sources of funds, including operating revenues, cash on hand and funds available for borrowing under Products Corporation’s 2010 Revolving Credit Facility and other permitted lines of credit, as well as the availability of funds from refinancing Products Corporation’s indebtedness, selling assets or operations, capital contributions and/or loans from MacAndrews & Forbes, the Company’s other affiliates and/or third parties and/or the sale of additional equity securities of Revlon, Inc. or additional debt securities of Revlon, Inc. or Products Corporation; | |
| (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 purchases of permanent wall displays, capital expenditure requirements, restructuring programs, severance not otherwise included in the Company’s restructuring programs, debt service payments and costs, debt repurchases (including, without limitation, that the Company may also, from time to time, seek to retire or purchase its outstanding debt obligations in open market purchases, in privately negotiated transactions or otherwise and may seek to refinance some or all of its indebtedness based upon market conditions) and regularly scheduled pension and post-retirement benefit plan contributions and benefit payments, and its estimates of the amount and timing of its operating expenses, restructuring costs and payments, severance costs and payments, debt service payments (including payments required under Products Corporation’s debt instruments), debt repurchases, cash contributions to the Company’s pension plans and its other post-retirement benefit plans and benefit payments in 2010, purchases of permanent wall displays and capital expenditures; | |
| (ix) | matters concerning the Company’s market-risk sensitive instruments, including the Company’s expectations as to the counterparty’s performance, including that any loss arising from the non-performance by the counterparty would not be material; | |
| (x) | the Company’s plan to efficiently manage its cash and working capital, including, among other things, programs to reduce inventory levels over time; centralized purchasing to secure discounts and efficiencies in procurement; providing discounts to U.S. customers for more timely |
51
| (xi) | the Company’s expectations regarding its future pension expense, cash contributions and benefit payments under its benefit plans; | |
| (xii) | the Company’s expectation that the payment of the quarterly dividends on the Preferred Stock will be funded by cash interest payments to be received by Revlon, Inc. from Products Corporation on the Contributed Loan, subject to Revlon, Inc. having sufficient surplus or net profits in accordance with Delaware law, and its expectation of paying the liquidation preference of the Preferred Stock on October 8, 2013 with the cash payment to be received by Revlon, Inc. from Products Corporation in respect of the maturity of the Contributed Loan, subject to Revlon, Inc. having sufficient surplus in accordance with Delaware law; | |
| (xiii) | the Company’s expectations that interest expense throughout the remainder of 2010 will be impacted by higher weighted average borrowing rates as a result of the 2010 Refinancing; | |
| (xiv) | the Company’s expectations that consistent with the Company’s business strategy to build our strong brands, the Company currently intends to support its brands with increased advertising spending (as defined in Revlon, Inc.’s 2009 Form 10-K) in the second quarter of 2010, as compared to the second quarter of 2009; and | |
| (xv) | the Company’s expectations to temporarily repay the $10.5 million of borrowings drawn at March 31, 2010 under the 2010 Revolving Credit Facility during 2010. |
| (i) | unanticipated circumstances or results affecting the Company’s financial performance, including decreased consumer spending in response to weak economic conditions or weakness in the cosmetics category in the mass retail channel; 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 shopping channels; lower than expected retail customer acceptance or consumer acceptance of, or less |
52
| than anticipated results from, the Company’s existing or new products; higher than expected pension expense and/or cash contributions under its benefit plans and/or benefit payments, advertising, promotional and/or marketing expenses or lower than expected results from the Company’s advertising, promotional and/or marketing plans; higher than expected sales returns or decreased sales of the Company’s existing or new products; actions by the Company’s customers, such as retailer inventory management and greater than anticipated retailer space reconfigurations or reductions in retail space and/or product discontinuances or a greater than expected impact from retailer pricing or promotional strategies; and changes in the competitive environment and actions by the Company’s competitors, including business combinations, technological breakthroughs, new products offerings, increased advertising, promotional and marketing spending and advertising, promotional and/or marketing successes by competitors, including increases in share in the mass retail channel; |
| (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, 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 profitable growth 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 difficulties or delays, or higher than expected expenses, including for sales returns, in launching its new products, acquiring businesses or brands, 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; | |
| (iv) | difficulties, delays or unanticipated costs in achieving our strategic goal to profitably grow our business and as to the business strategies employed to achieve this goal, such as (a) difficulties, delays or our inability to build our strong brands, such as due to less than effective product development, less than expected acceptance of our new or existing products by consumers and/or retail customers, less than expected acceptance of our advertising, promotional and/or marketing plans by our consumers and/or retail customers, less than expected investment in advertising, promotional and/or marketing activities or greater than expected competitive investment, less than expected acceptance of our brand communication by consumers and/or retail partners, less than expected levels of advertising, promotional and/or marketing activities for our new product launches and/or less than expected levels of execution with our retail partners or higher than expected costs and expenses; (b) difficulties, delays or the inability to develop our organizational capability; (c) difficulties, delays or unanticipated costs in connection with our plans to drive our company to act globally, such as due to higher than anticipated levels of investment required to support and build our brands globally or less than anticipated results from our national and multi-national brands; (d) difficulties, delays or unanticipated costs in connection with our plans to improve our operating profit and cash flow, such as difficulties, delays or the inability to take actions intended to improve results in sales returns, cost of goods sold, general and administrative expenses, working capital management and/or sales growth; and/or (e) difficulties, delays or unanticipated costs in consummating, or our inability to consummate, transaction to improve our capital structure, strengthen our balance sheet and/or reduce debt, including higher than expected costs (including interest rates); | |
| (v) | difficulties, delays or unanticipated costs or less than expected savings and other benefits resulting from the Company’s restructuring activities, such as less than anticipated cost |
53
| (vi) | lower than expected operating revenues, cash on hand and/or funds available under the 2010 Revolving Credit Facility and/or other permitted lines of credit or higher than anticipated operating expenses, such as referred to in clause (viii) below; | |
| (vii) | the unavailability of funds under Products Corporation’s 2010 Revolving Credit Facility or other permitted lines of credit, or from refinancing indebtedness, selling assets or operations or from capital contributions and/or loans from MacAndrews & Forbes, the Company’s other affiliates and/or third parties and/or the sale of additional equity of Revlon, Inc. or debt securities of Revlon, Inc. or Products Corporation; | |
| (viii) | higher than expected operating expenses, sales returns, working capital expenses, permanent wall display costs, capital expenditures, restructuring costs, severance not otherwise included in the Company’s restructuring programs, debt service payments, debt repurchases, regularly scheduled cash pension plan contributions and/or post-retirement benefit plan contributions and/or benefit payments; | |
| (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 and/or pension expense; | |
| (xii) | difficulties, delays or the inability of the Company to pay the quarterly dividends or the liquidation preference on the Preferred Stock, such as due to the unavailability of funds from Products Corporation related to its payments to Revlon, Inc. under the Contributed Loan or the unavailability of sufficient surplus or net profits to make such dividend payments in accordance with Delaware law or the unavailability of sufficient surplus to make such liquidation preference payments in accordance with Delaware law; | |
| (xiii) | unexpected circumstances impacting the Company’s expectations that interest expense throughout the remainder of 2010 will be impacted by higher weighted average borrowing rates as a result of the 2010 Refinancing; |
| (xiv) | lower than expected, or other unanticipated changes in, advertising spending (as defined in Revlon, Inc.’s 2009 Form 10-K) to support its brands in the second quarter of 2010, as compared to the second quarter of 2009; and/or |
| (xv) | unexpected circumstances or other difficulties, delays or the inability of the Company to temporarily repay the $10.5 million of borrowings drawn at March 31, 2010 under the 2010 Revolving Credit Facility during 2010, which the Company is not contractually obligated to repay until March 11, 2014, which is the maturity date of the 2010 Revolving Credit Facility. |
54
55
| Item 1. | Legal Proceedings |
56
| Item 1A. | Risk Factors |
| Item 5. | Exhibits |
|
4.1
|
Second Amended and Restated Term Loan Agreement dated as of March 11, 2010 (the “2010 Term Loan Agreement”), among Products Corporation as borrower, the lenders party thereto, Citicorp USA, Inc. (“CUSA”) as administrative agent and collateral agent, JPMorgan Chase Bank, N.A. and Bank of America, N.A. as co-syndication agents, Credit Suisse Securities (USA) LLC (“Credit Suisse”) and Natixis, New York Branch (“Natixis”) as co-documentation agents, Citigroup Global Markets Inc. (“CGMI”), J.P. Morgan Securities Inc. (“JPM Securities”), Banc of America Securities LLC (“BAS”) and Credit Suisse as joint lead arrangers, and CGMI, JPM Securities, BAS, Credit Suisse and Natixis as joint bookrunners (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Products Corporation filed with the SEC on March 16, 2010 (the “Products Corporation March 16, 2010 Form 8-K”). | |
|
4.2
|
Second Amended and Restated Revolving Credit Agreement dated as of March 11, 2010 (the “2010 Revolving Credit Agreement” and together with the 2010 Term Loan Agreement, the “2010 Credit Agreements”), among Products Corporation as borrower, certain subsidiaries of Products Corporation from time to time party thereto as local borrowing subsidiaries, the lenders party thereto, CUSA as administrative agent and collateral agent, CGMI and Wells Fargo Capital Finance, LLC (“Wells Fargo”) as joint lead arrangers, and CGMI, Wells Fargo, BAS, JPM Securities and Credit Suisse as joint bookrunners (incorporated by reference to Exhibit 4.2 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.3
|
Third Amended and Restated Pledge and Security Agreement dated as of March 11, 2010 among Revlon, Inc., Products Corporation and certain domestic subsidiaries of Products Corporation in favor of CUSA, as collateral agent for the secured parties (incorporated by reference to Exhibit 4.3 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.4
|
Third Amended and Restated Intercreditor and Collateral Agency Agreement, dated as of March 11, 2010, among CUSA, as administrative agent for the lenders under the 2010 Credit Agreements, U.S. Bank National Association, as trustee for certain noteholders, CUSA, as collateral agent for the secured parties, Revlon, Inc., Products Corporation and certain domestic subsidiaries of Products Corporation (incorporated by reference to Exhibit 4.4 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.5
|
Amended and Restated Guaranty, dated as of March 11, 2010, by and among Revlon, Inc., Products Corporation and certain domestic subsidiaries of Products Corporation, in favor of CUSA, as collateral agent for the secured parties (incorporated by reference to Exhibit 4.5 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.6
|
Schedule of Borrowers; Denomination Currencies; Currency Sublimits; Maximum Sublimits; and Local Fronting Lenders under the 2010 Revolving Credit Agreement (incorporated by reference to Exhibit 4.6 to the Products Corporation March 16, 2010 Form 8-K). |
57
|
4.7
|
Form of Revolving Credit Note under the 2010 Revolving Credit Agreement (incorporated by reference to Exhibit 4.7 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.8
|
Third Amended and Restated Copyright Security Agreement, dated as of March 11, 2010, among Products Corporation and CUSA, as collateral agent for the secured parties (incorporated by reference to Exhibit 4.8 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.9
|
Third Amended and Restated Copyright Security Agreement, dated as of March 11, 2010, among Almay, Inc. and CUSA, as collateral agent for the secured parties (incorporated by reference to Exhibit 4.9 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.10
|
Third Amended and Restated Patent Security Agreement, dated as of March 11, 2010, among Products Corporation and CUSA, as collateral agent for the secured parties (incorporated by reference to Exhibit 4.10 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.11
|
Third Amended and Restated Trademark Security Agreement, dated as of March 11, 2010, among Products Corporation and CUSA, as collateral agent for the secured parties (incorporated by reference to Exhibit 4.11 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.12
|
Third Amended and Restated Trademark Security Agreement, dated as of March 11, 2010, among Charles Revson Inc. and CUSA, as collateral agent for the secured parties (incorporated by reference to Exhibit 4.12 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.13
|
Form of Term Loan Note under the 2010 Term Loan Agreement (incorporated by reference to Exhibit 4.13 to the Products Corporation March 16, 2010 Form 8-K). | |
|
4.14
|
Amended and Restated Term Loan Guaranty, dated as of March 11, 2010, by Revlon, Inc., Products Corporation and certain domestic subsidiaries of Products Corporation in favor of CUSA, as collateral agent for the secured parties (incorporated by reference to Exhibit 4.14 to the Products Corporation March 16, 2010 Form 8-K). | |
|
*31.1
|
Certification of Alan T. Ennis, Chief Executive Officer, dated April 29, 2010, pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act. | |
|
*31.2
|
Certification of Steven Berns, Chief Financial Officer, dated April 29, 2010, pursuant to Rule 13a-14(a)/15d-14(a) of the Exchange Act. | |
|
32.1
(furnished herewith) |
Certification of Alan T. Ennis, Chief Executive Officer, dated April 29, 2010, 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 Steven Berns, Chief Financial Officer, dated April 29, 2010, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| * | Filed herewith. |
58
|
By: /s/ Steven Berns
|
By: /s/ Gina M. Mastantuono | |||
|
Steven Berns
|
Gina M. Mastantuono | |||
|
Executive Vice President and
|
Senior Vice President, | |||
|
Chief Financial Officer
|
Corporate Controller and | |||
| Chief Accounting Officer |
59
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|