BUSINESS COMBINATIONS

The Elizabeth Arden Acquisition

On September 7, 2016 (the "Elizabeth Arden Acquisition Date"), the Company completed the acquisition of Elizabeth Arden, Inc. ("Elizabeth Arden" and the "Elizabeth Arden Acquisition") for a total cash purchase price of $1,034.3 million pursuant to an agreement and plan of merger (the "Merger Agreement") by and among Revlon, Products Corporation, RR Transaction Corp. ("Acquisition Sub," then a wholly-owned subsidiary of Products Corporation), and Elizabeth Arden. On the Elizabeth Arden Acquisition Date, Elizabeth Arden merged (the “Merger”) with and into Acquisition Sub, with Elizabeth Arden surviving the Merger as a wholly-owned subsidiary of Products Corporation. Elizabeth Arden is a global prestige beauty products company with an iconic portfolio of brands that are highly complementary to the Company's existing brand portfolio and are sold worldwide. In North America, Elizabeth Arden’s principal customers include prestige retailers, specialty stores, the mass retail channel, distributors, department stores and other retailers, as well as direct sales to consumers via its Elizabeth Arden Red Door branded retail stores and ElizabethArden.com e-commerce business. Elizabeth Arden products are also sold through the Elizabeth Arden Red Door Spa beauty salons and spas. Internationally, Elizabeth Arden’s portfolio of owned and licensed brands is sold to perfumeries, boutiques, department stores, travel retailers and distributors.

Products Corporation financed the Elizabeth Arden Acquisition with the proceeds from (i) a 7-year $1,800.0 million senior secured term loan facility (the “2016 Term Loan Facility” and such agreement being the “2016 Term Loan Agreement”); (ii) $35.0 million of borrowings under a 5-year $400.0 million senior secured asset-based revolving credit facility (the “2016 Revolving Credit Facility” and such agreement being the “2016 Revolving Credit Agreement” and such facility, together with the 2016 Term Loan Facility, the “2016 Senior Credit Facilities” and such agreements being the "2016 Credit Agreements"); (iii) $450.0 million aggregate principal amount of Products Corporation’s 6.25% Senior Notes due 2024 (the “6.25% Senior Notes”); and (iv) approximately $126.7 million of cash on hand.

Elizabeth Arden's results of operations are included in the Company’s Consolidated Financial Statements commencing on the Elizabeth Arden Acquisition Date.

For the three months ended March 31, 2017 the Company incurred $17.2 million of acquisition and integration costs in the

Consolidated Statement of Operations and Comprehensive (Loss) Income, related to the Elizabeth Arden Acquisition, which consist of $0.3 million of acquisition costs and $16.9 million of integration costs. The acquisition costs primarily include legal and consulting fees to complete the Elizabeth Arden Acquisition. The integration costs consist of non-restructuring costs related to integrating Elizabeth Arden's operations into the Company's business.

Purchase Price Allocation

The Company accounted for the Elizabeth Arden Acquisition as a business combination during the third quarter of 2016. The table below summarizes the amounts recognized for assets acquired and liabilities assumed as of the Elizabeth Arden Acquisition Date, as well as adjustments made in the periods after the Elizabeth Arden Acquisition Date to the amounts initially recorded (the "Measurement Period Adjustments"). The effects of these Measurement Period Adjustments have been reflected in the Company's balance sheets as of December 31, 2016 and March 31, 2017, respectively, as each adjustment has been identified.

The total consideration of $1,034.3 million was recorded based on the respective estimated fair values of the net assets acquired on the Elizabeth Arden Acquisition Date with resulting goodwill, as follows:



	Estimated Fair Value as Previously Reported^(a)			Measurement Period Adjustments			Estimated Fair Value as Adjusted
Cash	$	41.1					$	41.1
Accounts Receivable	132.6						132.6
Inventories	323.3						323.3
Prepaid expenses and other current assets	30.7						30.7
Property and equipment	91.2						91.2
Deferred taxes, net ^(b)	68.7			10.0			78.7
Intangible assets^(c)	336.8			(15.4		)	321.4
Goodwill	221.7			12.3			234.0
Other assets	16.6						16.6
Total assets acquired	$	1,262.7		$	6.9		$	1,269.6
Accounts payable	(116.0		)				(116.0		)
Accrued expenses ^(d)	(109.3		)	1.7			(107.6		)
Other long-term liabilities^(e)	(3.1		)	(8.6		)	(11.7		)
Total liabilities acquired	$	(228.4	)	$	(6.9	)	$	(235.3	)
Total consideration transferred	$	1,034.3		$	—		$	1,034.3

^(a) As previously reported in Revlon's 2016 Form 10-K.

^(b) The Measurement Period Adjustments to deferred taxes, net, related to net increases in deferred tax assets as a result of the changes to the estimated fair values and remaining useful lives of acquired trade name intangible assets and the recognition of non-qualified benefit plan obligations of Elizabeth Arden, as discussed further below.

^(c)The Measurement Period Adjustments to intangible assets during the three months ended March 31, 2017 relate to a revised approach in the determination of the fair values for the acquired Elizabeth Arden trade names. During the first quarter of 2017, the Company obtained further clarity into the product portfolio acquired through the Elizabeth Arden Acquisition identifying that each brand has its own distinct profile, with its own defining attributes, as well as differing expected useful lives, which resulted in this revised approach. The Company valued the acquired trade names within the Elizabeth Arden product portfolio, including Visible Difference, Elizabeth Arden Ceramide, Prevage, Eight Hour Cream, Elizabeth Arden Red Door, Elizabeth Arden Green Tea, and Elizabeth Arden 5th Avenue. The Company determined the fair values of each acquired trade name using a risk-adjusted discounted cash flow approach, specifically the relief-from-royalty method. The relief-from-royalty method requires identifying the hypothetical cash flows generated by an assumed royalty rate that a third party would pay to license the trade names, and discounting them back to the Elizabeth Arden Acquisition Date. The royalty rate used in the valuation of each acquired trade name was based on a consideration of market rates for similar categories of assets.

The difference between the preliminary valuation of the Elizabeth Arden trade name and the sum of the fair values of the individual trade names within the Elizabeth Arden product portfolio resulted in an increase to goodwill of $15.4 million. As a result of the revised approach, the Company recognized amortization expense of approximately $1.8 million in its Unaudited Consolidated Statement of Operations and Comprehensive (Loss) Income during the first quarter of 2017 related to the amortization of the acquired trade names from the date of acquisition through December 31, 2016.

^(d) The Measurement Period Adjustments to accrued expenses during the three months ended March 31, 2017 relate to changes in estimated payments for acquisition related costs.

^(e) The Measurement Period Adjustments to other long-term liabilities during the three months ended March 31, 2017 relate to the recognition of the projected benefit obligation of a certain foreign non-qualified benefit plan of Elizabeth Arden.

The fair values of the net assets acquired in the Elizabeth Arden Acquisition were based on management’s preliminary estimate of the respective fair values of Elizabeth Arden’s net assets. The estimated fair values of net assets and resulting goodwill are subject to the Company finalizing its analysis of the fair value of Elizabeth Arden’s assets and liabilities as of the Elizabeth Arden Acquisition Date and may be adjusted upon completion of such analysis. In addition, information unknown at the time of the Elizabeth Arden Acquisition could result in adjustments to the respective fair values and resulting goodwill within the year following the Elizabeth Arden Acquisition Date.

In determining the fair values of net assets acquired in the Elizabeth Arden Acquisition and resulting goodwill, the Company considered, among other factors, the analyses of Elizabeth Arden's historical financial performance and an estimate of the future performance of the acquired business, as well as the intended use of the acquired assets.

The intangible assets acquired in the Elizabeth Arden Acquisition based on the estimate of the fair values of the identifiable intangible assets are as follows:



	As Previously Reported^(a)							Adjusted
	Estimated Fair Values		Remaining Useful Life at the Elizabeth Arden Acquisition Date (in years)	Measurement Period Adjustments ^(b)				Estimated Fair Values		Remaining Useful Life at the Elizabeth Arden Acquisition Date (in years)
Trademarks, indefinite-lived	$	142.0	Indefinite	$	(103.0	)		39.0		Indefinite
Trademarks, finite-lived	15.0		15.0	87.6				102.6		5 - 20
Technology	2.5		10.0	—				2.5		10.0
Customer relationships	123.0		16.0	—				123.0		16.0
License agreements	22.0		19.0	—				22.0		19.0
Distribution rights	31.0		18.0	—				31.0		18.0
Favorable lease commitments	1.3		3.0	—				1.3		3.0
Total acquired intangible assets	$	336.8		$	(15.4	)	^(b)	$	321.4

^(a) As previously reported in Revlon's 2016 Form 10-K.

^(b) The Measurement Period Adjustments to the Elizabeth Arden acquired trade names resulted in a $15.4 million increase to goodwill.

The Company recorded a $54.8 million deferred tax liability related to the $321.4 million of acquired intangible assets outlined in the above table. This deferred tax liability represents the tax effect of the difference between the $321.4 million estimated assigned fair value of the intangible assets and the $148.6 million tax basis of such assets.

The goodwill and intangible assets acquired in the Elizabeth Arden Acquisition are not expected to be deductible for income tax purposes.

Unaudited Pro Forma Results

The following table presents the Company's pro forma consolidated net sales and income from continuing operations, before income taxes for the three months ended March 31, 2016, respectively. The unaudited pro forma results include the historical consolidated statements of operations of the Company and Elizabeth Arden, giving effect to the Elizabeth Arden Acquisition and related financing transactions as if they had occurred at the beginning of the earliest period presented.



	Unaudited Pro Forma Results
	Three Months Ended
		March 31, 2016
Net sales		$	631.5
Loss from continuing operations, before income taxes		$	(20.0	)

The pro forma results, prepared in accordance with U.S. GAAP, include the following pro forma adjustments related to the Elizabeth Arden Acquisition:

(i) a $0.6 million pro forma decrease in depreciation as a result of the preliminary fair value adjustments to property and equipment;

(ii) a $1.5 million pro forma increase in amortization expense of acquired finite-lived intangible assets recorded in connection with the Elizabeth Arden Acquisition for the three months ended March 31, 2016; and

(iii) a pro forma increase in interest expense and amortization of debt issuance costs, related to financing the Elizabeth Arden Acquisition and related debt restructuring transactions as summarized in the following table:




($ in millions)	March 31, 2016^(a)
Interest Expense
Pro forma interest on 2016 Senior Credit Facilities and 6.25% Senior Notes	$	26.9
Reversal of Elizabeth Arden’s historical interest expense	(6.5		)
Company historical interest expense, as reflected in the historical consolidated financial statements	(12.5		)
Total Adjustment for Pro Forma Interest Expense	$	7.9
Debt issuance costs
Pro forma amortization of debt issuance costs	$	1.9
Company historical amortization of debt issuance costs, as reflected in the historical consolidated financial statements	(1.1		)
Reversal of Elizabeth Arden’s historical amortization of debt issuance costs	(0.4		)
Total Adjustment for Pro Forma Amortization of Debt Issuance Costs	$	0.4

^(a) 2016 pro forma adjustments are for the period January 1, 2016 through March 31, 2016.

The unaudited pro forma results do not include: (1) any incremental revenue generation, synergies or cost reductions that may be achieved as a result of the Elizabeth Arden Acquisition; or (2) the impact of non-operating or non-recurring items directly related to the Elizabeth Arden Acquisition. In addition, the unaudited pro forma results do not purport to project the future consolidated operating results of the combined company.