RESTRUCTURING CHARGES | 9 Months Ended |
Sep. 30, 2014 |
Restructuring Charges [Abstract] | ' |
RESTRUCTURING CHARGES | ' |
RESTRUCTURING CHARGES |
Integration Program |
In January 2014, the Company announced that it was implementing actions to integrate Colomer’s operations into the Company’s business, as well as additional restructuring actions identified to reduce costs across the Company’s businesses (all such actions, together, the “Integration Program”). |
The Company expects to recognize total restructuring charges, capital expenditures and related non-restructuring costs under the Integration Program of approximately $50 million in the aggregate over the periods described below. |
The Integration Program is designed to deliver cost reductions throughout the combined organization by generating synergies and operating efficiencies within the Company’s global supply chain and consolidating offices and back office support, and other actions designed to reduce selling, general and administrative ("SG&A") expenses. Certain actions that are part of the Integration Program are subject to consultations with employees, works councils or unions and governmental authorities. The Company expects to substantially complete the Integration Program by the end of 2015. |
The approximately $50 million of total expected non-restructuring costs, capital expenditures and restructuring charges under the Integration Program referred to above consist of the following: |
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1 | $12.5 million and $4.9 million of non-restructuring integration costs recognized in 2013 and for the nine months ended September 30, 2014, respectively. Such costs have been reflected within acquisition and integration costs in the Company's Consolidated Statements of Income and Comprehensive Income and are related to combining Colomer’s operations into the Company’s business; | | | | | | | | | | | | | | | | | | | | | | | | | | |
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2 | Expected integration-related capital expenditures of approximately $7 million, $3.3 million of which has been paid in the nine months ended September 30, 2014, approximately $1.9 million is expected to be paid during the remainder of 2014 and the remaining balance in 2015; and | | | | | | | | | | | | | | | | | | | | | | | | | | |
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3 | The Company expects total restructuring and related charges of approximately $26 million, $17.1 million of which was recognized for the nine months ended September 30, 2014. Approximately $4 million of charges are expected to be recognized during the remainder of 2014 and any remaining charges to be recognized in 2015. A summary of the restructuring and related charges incurred through September 30, 2014 and expected to be incurred for the Integration Program, are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| Restructuring Charges and Other, Net | | | | | | | | | | |
| Employee Severance and Other Personnel Benefits | | Other | | Total Restructuring Charges | | Inventory Write-offs and Other Manufacturing-Related Costs (a) | | Other Charges (b) | | Total Restructuring and Related Charges | | | | |
Charges incurred through the nine months ended September 30, 2014 | $ | 15.2 | | | $ | 1.2 | | | $ | 16.4 | | | $ | 0.2 | | | $ | 0.5 | | | $ | 17.1 | | | | | |
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Total expected charges | $ | 17.5 | | | $ | 3 | | | $ | 20.5 | | | $ | 2 | | | $ | 3.5 | | | $ | 26 | | | | | |
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(a) | Inventory write-offs and other manufacturing-related costs are recorded within cost of sales within the Company’s Consolidated Statements of Income and Comprehensive Income. | | | | | | | | | | | | | | | | | | | | | | | | | | |
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(b) | Other charges are recorded within SG&A expenses within the Company’s Consolidated Statements of Income and Comprehensive Income. | | | | | | | | | | | | | | | | | | | | | | | | | | |
Of the $17.1 million of restructuring and related charges recognized through the third quarter 2014, $7.3 million relate to the Consumer segment and $9.8 million relate to the Professional segment. |
The Company expects that cash payments related to the restructuring and related charges in connection with the Integration Program will total approximately $25 million, of which $6.4 million was paid during the nine months ended September 30, 2014, approximately $7 million is expected to be paid during the remainder of 2014 and the majority of the remaining balance is expected to be paid in 2015. |
December 2013 Program |
In December 2013, the Company announced restructuring actions that include exiting its business operations in China, as well as implementing other immaterial restructuring actions outside the U.S. that are expected to generate other operating efficiencies (the "December 2013 Program"). Certain of these restructuring actions are subject to consultations with employees, works councils or unions and governmental authorities and has resulted in the Company eliminating approximately 1,100 positions in 2014, primarily in China, which included eliminating in the first quarter of 2014 approximately 940 beauty advisors retained indirectly through a third-party agency. The charges incurred for the December 2013 Program relate entirely to the Consumer segment. |
A summary of the restructuring and related charges incurred through September 30, 2014 and expected to be incurred for the December 2013 Program, are as follows: |
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| Restructuring Charges and Other, Net | | | | | | | | |
| Employee Severance and Other Personnel Benefits | | Other | | Total Restructuring Charges | | Allowances and Returns | | Inventory Write-offs | | Other Charges | | Total Restructuring and Related Charges |
Charges incurred through December 31, 2013 | $ | 9.1 | | | $ | 0.5 | | | $ | 9.6 | | | $ | 7.4 | | | $ | 4 | | | $ | 0.4 | | | $ | 21.4 | |
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Adjustments recorded for the nine months ended September 30, 2014 (a) | (0.5 | ) | | (0.2 | ) | | (0.7 | ) | | (0.9 | ) | | (0.9 | ) | | — | | | (2.5 | ) |
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Cumulative charges incurred through September 30, 2014 | $ | 8.6 | | | $ | 0.3 | | | $ | 8.9 | | | $ | 6.5 | | | $ | 3.1 | | | $ | 0.4 | | | $ | 18.9 | |
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Total expected charges | $ | 8.6 | | | $ | 0.3 | | | $ | 8.9 | | | $ | 6.5 | | | $ | 3.1 | | | $ | 0.4 | | | $ | 18.9 | |
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(a) | Of the $2.5 million adjustments for the nine months ended September 30, 2014 related to the December 2013 Program, $2.3 million relates to the Company's exit of its business operations in China and is recorded within income (loss) from discontinued operations, net of taxes. See Note 4, "Discontinued Operations," for further discussion. The remaining $0.2 million is recorded in restructuring charges and other, net within income from continuing operations, net of taxes. | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Company expects cash payments related to the December 2013 Program to total approximately $17 million, of which $0.1 million was paid in 2013, $15.1 million was paid during the nine months ended September 30, 2014, and the majority of the remaining balance is expected to be paid during the remainder of 2014. |
September 2012 Program |
In September 2012, the Company announced a restructuring (the “September 2012 Program”), which primarily involved the Company exiting its owned manufacturing facility in France and its leased manufacturing facility in Maryland; rightsizing its organizations in France and Italy; and realigning its operations in Latin America and Canada. The charges incurred related to the September 2012 Program relate entirely to the Consumer segment. |
During the first nine months of 2013, the Company recorded charges related to the September 2012 Program of $2.2 million. Of the $2.2 million charge, $1.8 million was recorded in restructuring charges, $0.2 million was recorded in cost of sales and $0.2 million was recorded in SG&A expenses. The Company recognized cumulative charges of $27.2 million through December 31, 2013 related to the September 2012 Program, all of which relate to the Company's Consumer segment. There were no charges related to such program for the nine months ended September 30, 2014. |
The Company expects net cash payments to total approximately $25 million related to the September 2012 Program, of which $21.1 million was paid cumulatively through December 31, 2013, $3.2 million was paid during the nine months ended September 30, 2014 and the balance is expected to be paid during the remainder of 2014. |
Other Immaterial Actions |
During the first nine months of 2014, the Company recorded net charges totaling $1.9 million within restructuring charges and other, net, for other immaterial restructuring actions within the Consumer segment, primarily due to $2.2 million of charges related to employee-related costs, partially offset by a $0.3 million gain related to the sale of equipment. |
Restructuring Reserve |
The related liability balance and activity for the restructuring costs are presented below: |
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Balance | | (Income) Expense, Net | | Foreign Currency Translation | | Cash | | Non-cash | | Balance End of Year | | | | |
Beginning of Year | | | | |
Integration Program: | | | | | | | | | | | | | | | |
Employee severance and other personnel benefits | $ | — | | | $ | 15.2 | | | $ | — | | | $ | (5.1 | ) | | $ | — | | | $ | 10.1 | | | | | |
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Other | — | | | 1.2 | | | — | | | (1.0 | ) | | — | | | 0.2 | | | | | |
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December 2013 Program: | | | | | | | | | | | | | | | |
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Employee severance and other personnel benefits | 9 | | | (0.5 | ) | | (0.2 | ) | | (7.3 | ) | | 0.2 | | | 1.2 | | | | | |
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Other | 0.5 | | | (0.2 | ) | | — | | | (0.3 | ) | | — | | | — | | | | | |
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September 2012 Program: | | | | | | | | | | | | | | | |
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Employee severance and other personnel benefits | 2.7 | | | — | | | (0.1 | ) | | (2.4 | ) | | | | | 0.2 | | | | | |
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Other | 1.5 | | | — | | | — | | | (0.8 | ) | | — | | | 0.7 | | | | | |
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2014 Other Immaterial Actions: | | | | | | | | | | | | | | | |
Employee severance and other personnel benefits | — | | | 2.2 | | | (0.1 | ) | | (1.8 | ) | | — | | | 0.3 | | | | | |
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Other | — | | | — | | | — | | | — | | | — | | | — | | | | | |
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Total restructuring reserve | $ | 13.7 | | | $ | 17.9 | | | $ | (0.4 | ) | | $ | (18.7 | ) | | $ | 0.2 | | | $ | 12.7 | | | | | |
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Gain on sale of equipment for 2014 Other Immaterial Actions | | | (0.3 | ) | | | | | | | | | | | | |
Portion of restructuring benefits recorded within income (loss) from discontinued operations (a) | | | 0.5 | | | | | | | | | | | | | |
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Total restructuring charges and other, net, from continuing operations | | | $ | 18.1 | | | | | | | | | | | | | |
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(a) Refer to Note 4, "Discontinued Operations" for additional information regarding the Company's exit of its business operations in China. |
As of September 30, 2014, $12.2 million of the restructuring reserve balance was included within accrued expenses and other and $0.5 million was included within other long-term liabilities in the Company's Consolidated Balance Sheet. As of December 31, 2013, the entire restructuring reserve balance was included within accrued expenses and other in the Company's Consolidated Balance Sheet. |