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Revlon, Inc. (NYSE:REV)

Q3 2011 Earnings Conference Call

October 27, 2011 09:30 ET

Executives

Elise Garofalo – Senior Vice President, Treasurer, and Investor Relations

Alan Ennis – President and Chief Executive Officer

Chris Elshaw – Executive Vice President and Chief Operating Officer

Steven Berns – Executive Vice President and Chief Financial Officer

Analysts

Carla Casella

David Wu

Grant Jordon

Operator

Good morning ladies and gentlemen, and welcome to Revlon’s Third Quarter 2011 Earnings Conference Call. At the request of Revlon, today’s conference call is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Ms. Elise Garofalo, Revlon’s Senior Vice President, Treasurer, and Investor Relations. You may begin.

Elise Garofalo – Senior Vice President, Treasurer, and Investor Relations

Thank you, (Ryan). Good morning everyone, and thanks for joining today’s call. Earlier today we released our results for the third quarter ended September 30, 2011. If you have not already accessed a copy of our third quarter earnings release, you can obtain one on our website at revloninc.com.

On the call with me this morning are Alan Ennis, Revlon’s President and Chief Executive Officer; Chris Elshaw, Executive Vice President and Chief Operating Officer; and Steven Berns, Executive Vice President and Chief Financial Officer.

Before I turn the call over to Alan, I would like to remind everyone of a few things. First, our discussion this morning might include forward-looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act. Information on factors that could affect the company’s results from time-to-time and cause them to differ materially from such forward-looking statements is set forth in the company’s filings with the SEC, including our 2010 Form 10-K and our 2011 third quarter 10-Q, which we expect to file over the next couple of days.

Next, our remarks today will include a discussion of adjusted EBITDA and free cash flow, both of which are non-GAAP measures. These non-GAAP measures are defined in the footnotes to our release and are also reconciled to their most directly comparable GAAP measures in the financial tables at the end of our release. And finally, as a remainder, our discussion this morning should not be copied or recorded.

With that, I will turn the call over to Alan.

Alan Ennis – President and Chief Executive Officer

Thank you, Elise and good morning everyone. As you know our strategic objective is to drive profitable growth and in our third quarter we continue to successfully execute the strategy. With regard to building our strong brands, during the third quarter we grew net sales by 3.6% excluding the impact of currency fluctuations. Our U.S. regions drove the increase with positive performance across our Revlon color cosmetics, Revlon ColorSilk, and Sinful Colors brands. Outside the U.S., our net sales declined in the quarter. However, on year-to-date basis most of our regions have grown year-over-year.

In addition our continued emphasis on innovation effective brand communication and in-store execution positively impacted our performance in the quarter. We are also extremely excited this quarter to announce the two of Hollywood’s most sought after actresses, Emma Stone and Olivia Wilde joined us as global brand ambassadors for our Revlon brand. These remarkable talented actresses personify the Revlon woman, glamorous, confident and bold, and will help us build meaningful connections with consumers.

Another key element of our strategy is to develop our organizational capability. To that end we’ve recently strengthened our global leadership team with the addition of Xavier Garijo as our Executive Vice President and Chief Supply Chain Officer. Xavier joins us with broad experience product space having served in key leadership roles at top consumer product companies. We are focused on more effectively globalizing our supply chain and I’m trilled to have someone of Xavier’s capability leading that efforts.

With regard to our strategic objectives of increasing our operating profit in cash flow and improving our capital structure, we continue to make progress as we sustain competitive operating margins reduced interest expense and generated positive free cash flow. While we remain focused on delivering profitable growth, we are extremely aware of the challenging global economic environment and so we continue to manage our resources carefully with the balance perspective on long-term growth and profitability. So taking a look at our performance so far this year, we have grown the top-line with sustained competitive margins and we are generating positive cash flow all of which we believe reflective the effectiveness of our strategy.

So with that, I’ll hand it over to Chris, he will talk about our marketplace performance.

Chris Elshaw – Executive Vice President and Chief Operating Officer

Thank you, Alan, and good morning everyone. Today I will review our net sales performance excluding the impacts of changes in foreign currencies by region and by brand. Total company net sales in the third quarter were $337.2 million, an increase of 3.6% versus a third quarter of last year. The increase was primarily driven by the inclusion of the net sales of simple colors and higher net sales of Revlon color cosmetics and Revlon ColorSilk hair color. Partially offset by lower net sales in Venezuela due to the June 2011 fire at tour facility there.

From the regional standpoints, in the United States net sales increased $18 million or 10.8% primarily due to the inclusion of net sales of Sinful Colors and higher net sales of Revlon color cosmetics and Revlon ColorSilk hair color. It is important to note that net sales in the U.S. region grew in the quarter, excluding the results of Sinful Colors. In Asia-Pacific, net sales decreased $1.3 million, or 2.4%. Lower net sales of Revlon color cosmetics in Japan and Australia and other beauty care products were partially offset by higher net sales of Revlon color cosmetics in China and certain distributor markets.

Economic uncertainty has negatively impacted the retail marketplace in Australia or in Japan although we continue to see growth in both China and the distributor markets. I would also like to point out that on a year-to-date basis net sales in the Asia-Pacific region are up almost 5% as compared to last year.

Moving on to Europe, Middle East and Africa, net sales decreased $1.4 million, or 2.8% in the quarter, primarily due to lower net sales of fragrances throughout most of the region. While in the first half of 2011, our net sales of fragrances drove year-over-year growth in the region, the promotional environment for this category became more aggressive in the third quarter, which negatively impacted net sales in the period. We are taking actions to remain competitive in the fragrance category.

As I mentioned last year, Revlon is official makeup partner for Britain and Ireland’s Net Top Model 2011, which is hosted by a brand ambassador Elle MacPherson. Jade Thompson was recently crowned this season’s winner and is the face of Revlon’s new Autumn/Winter 2011 trend collections designed by Revlon global artistic director Gucci Westman.

In Latin America, net sales decreased $2.8 million or 9.6%. This decrease was primarily due to lower net sales in Venezuela, where we have not fully resumed business since the June 2011 fire. Excluding Venezuela, net sales in the Latin America region increased primarily due to higher net sales of Revlon color cosmetics throughout the rest of the region and higher net sales of other beauty care products in Argentina.

In Canada, net sales decreased $1.1 million or 6.1% primarily due to lower net sales of Almay color cosmetics. As you know, we are focused on driving profitable growth and have various actions underway to address our business in Canada. Together with the leadership team there, we are very focused on optimizing our brand support mix and in-store execution across all of our customers.

Now, moving on to the performance by brand, starting with Revlon color cosmetics, total company net sales increased during the quarter as compared to prior year. With regard to our Revlon brand products in the face segment, the Revlon Age Defying franchise is growing as we continue to rollout globally our Age Defying with DNA Advantage Makeup. Our Revlon PhotoReady franchise also continues to be strong.

In the Eye segment, building upon our successful Revlon Grow Luscious Mascara launch, we introduced Grow Luscious Plumping Mascara and Lash Liner, which are being rolled out globally. These line extensions have added incremental sales the Grow Luscious franchise and we continue to be pleased with this performance. Also worthy of note is our customized franchise shadow with liner, which is offered in a range of expertly coordinated pallets that enable consumers to create and customize their look with ease. These unique pallets we use backstage at Fashion Week in the recent New York and London shows.

In the Lip segments, Revlon ColorBurst lipgloss which continues its global rollout is performing well in the marketplace and Just Bitten Lip Stain plus Balm has also been successfully rolled out.

And lastly in the Nail segments, net sales of both our core and new Nail business increased in the quarter and overall in 2010. The increased net sales were driven by Revlon’s new product offerings, notably our enhanced shade range and our expanded product portfolio, including Top Speed, and our Scented Nail collections, in addition to the positive performance of the nail bar concept.

Moving on to the Almay brand, net sales were essentially flat in the quarter as compared to prior year. We continue to build Almay’s call franchises namely Intense I and Smart Shade. Almay Intense I smoky eye kit, which was introduced early in 2011 is maintaining a very strong performance in Almay’s core U.S. and Canada markets. Also, adding to Almay’s award wining makeup remover line, we introduce new Almay makeup eraser sticks. These revolutionary cotton tip swabs are individually filled with gentle skin conditioning makeup remover to effortlessly erase smudges and smears around the eye.

With respect to our Revlon and Almay color cosmetics performance, we have stated a number of times that the key driver of our business is launching innovative high-quality consumer preferred products in the marketplace. Over the last several months, we are pleased to report that we have received a number of awards in recognition of our competitive levels of innovation. Specifically, three of our products won Allure’s 2011 Best of Beauty Awards, Revlon ColorBust lipstick, Revlon Grow Luscious Plumping Liner and Almay makeup eraser sticks.

Almay makeup eraser sticks were also recognized in Real Simple Magazine’s November edition as part of a pretty smart color, which is dedicated to the latest beauty products and tips that save time and money.

Lastly, our Almay’s Smart Shade Smart Balance pressed powder was named a winner in Shape Magazine’s eighth annual beauty awards as the best get gorgeous powder by the team of beauty experts. We believe these awards demonstrate the strength of our new product portfolio and help drive consumption. We are very pleased to receive the recognition that we are meeting the needs of consumers with so many of our products in 2011.

In women’s hair color, net sales of Revlon ColorSilk grew in the third quarter and we continue to expand distribution of Revlon ColorSilk including Revlon ColorSilk Luminista. Of note, Revlon ColorSilk was a gold award winner for the best permanent hair color for younger looking hair in Good Housekeeping Magazine’s second annual anti-aging awards.

In antiperspirant deodorants, net sales of Mitchum in the third quarter of 2011 were essentially unchanged year-over-year. Our new Mitchum advanced control solid antiperspirants containing fresh defense technology has been introduced in several countries and is positively impacting net sales in the period.

And finally, our Revlon beauty tools business continues to perform well in the face of softer demand in the category overall. Our Revlon beauty tools brand is the number one brand in the U.S. and Canada. Also this quarter, Revlon was active in the spring 2012 fashion weeks in New York and London and in Vogue’s Fashions Night Out. Revlon and its global artistic director Gucci Westman partnered to create beauty looks on the runway with Revlon’s newest products at four of the hottest fashion week shows, Oscar De La Renta, Rag & Bone, Luca Luca, and J. Mendel. Our participation in fashion week activities demonstrates as our new products are not only on trend that we establish and set the trends.

Now, I will turn it over to Stevens to walk you through the rest of our financial results for the quarter.

Steven Berns – Executive Vice President and Chief Financial Officer

Thank you, Chris and good morning everyone. As we have already discussed our net sales performance, I will start with gross margin performance in the quarter. In the third quarter of 2011, our gross margin was 63.5% versus 65.4% in the third quarter of 2010. Gross profit in the 2011 period was unfavorably impacted by product mix and higher allowances in part as we continue to optimize our mix of brand support between promotional allowances and advertising. These unfavorable impacts will partially offset by lower costs related to inventory obsolescence and sales returns as well as favorable foreign currency fluctuations.

SG&A expenses were flat versus the third quarter of 2010 as higher general and administrative expenses and the unfavorable impact of foreign currency fluctuations were offset by both lower advertising expenses and the benefit of business interruption insurance recoveries related to the fire in Venezuela. I will discuss the Venezuela business later in my remarks.

Operating income in the third quarter of 2011 was $44.8 million compared to $39.3 million in the same period last year. Adjusted EBITDA in the third quarter of 2011 was $60.3 million compared to $54.3 million in the same period a year ago. Operating income and adjusted EBITDA in the third quarter of 2011 benefited from higher net sales partially offset by higher cost of sales as compared to the same period last year.

As I have mentioned in previous earnings calls, we continue to focus on delivering competitive operating margins. In every period, there are a number of moving parts contributing to our operating margins, which is influenced by several factors including the mix of products sold, composition of brand support, and the timing and size of product launches just to name a few. Overall, we are pleased with our operating margins in third quarter and the year-to-date periods.

Interest expense in the quarter decreased $2.7 million to $20.4 million due to lower weighted average borrowing rates as a result of our 2011 refinancings. Tax expense in the third quarter was $22.1 million compared to a benefit from income taxes or $600,000 in the same period a year ago. Drivers of the higher tax provision and the effective tax rate in the period are detailed in our earnings release.

Let me take a moment though to note a few things as it relates to taxes. First, we continue to expect cash paid for income taxes to be approximately $20 million for the full year 2011. Our priority remains minimizing cash taxes and our cash tax guidance for the full year 2011 has not changed since we first provided such guidance on our earnings call in February of this year.

Second, as we discussed earlier this year, our effective tax rate would likely be higher in 2011 as compared to 2010. This is caused by the 2010 reduction of the valuation allowance for U.S. deferred tax assets. The reduction in the valuation allowance has not had any impact on our cash taxes paid. Lastly, our tax provision and our effective tax rate in any individual quarter can and will vary and may not be indicative of our tax provision and the effective tax rate for the full year.

Moving on, net income in the third quarter of 2011 was $100,000 or nil diluted share compare to net income of $12.5 million or $0.24 per diluted share in the same period last year. Net cash provided by operating activities in the third quarter were $16.9 million compared to $9.5 million in the same period last year. And free cash flow in the third quarter of 2011 was $13.3 million compared to $5.3 million in the same period a year ago.

Now, let me take a minute to update you on our situation in Venezuela. As you will call, our facility in Venezuela was destroyed by fire in June 2011. As a reminder, our subsidiary in Venezuela represented approximately 3% of our consolidated net sales in 2010. Prior to the fire approximately half of the net sales in Venezuela were sourced from our local production facility and the other half was imported from our U.S. manufacturing facility.

In August of this year, we resumed shipments to Venezuelan customers of product imported from our U.S. facility actions to address the local manufacturing products remain under review at this time. Additional details of the financial impact of the Venezuela fire and its impact on our business are included in today’s earnings release.

Now, moving on to the P&L for the first nine months of 2011, my commentary on net sales will exclude the impact of changes in foreign currency. Net sales in the first nine months of 2011 were approximately $1 billion, an increase of 4.8% compared to the first nine months of 2010. In the United States, net sales increased $37.7 million or 7.1%. In Asia-Pacific, net sales increased $7 million or 4.7%. In Europe, Middle East, and Africa, net sales were essentially unchanged year-over-year.

In Latin America, net sales increased $3.1 million or 4%. And lastly in Canada, net sales decreased $1.9 million or 3.6%. Operating income in the nine-month period was $137.3 million compared to $132 million in the first nine months of 2010. And adjusted EBITDA was $184.3 million compared to $177.1 million in the same period last year. Net income was $17 million or $0.32 per diluted share compared to $31.1 million or $0.60 per diluted share in the same period last year. The provision for income taxes was $32.4 million in the first nine months of 2011 compared to $9.2 million in the same period last year.

As a reminder, net income in the first nine months of 2011 included pre-tax charges of $11.3 million related to our May and June 2011 credit agreement refinancings, also net income in the first nine months of 2010 included pre-tax charges of $9.7 million associated with the March 2010 credit agreement refinancings.

Turning now to cash flow, year-to-date operating cash flow was $20.2 million compared to $50 million in the same period last year. Free cash flow year-to-date was $10.8 million compared to $38.8 million in the same period last year. Cash flow in the first nine months of 2011 included unfavorable changes in working capital primarily inventory. Also impacting year-to-date cash flow were $66.4 million of interest payments versus $59 million last year and $28.7 million of pension contributions as compared to $20.1 million in the first nine months of 2010.

On the liquidity front, our unutilized borrowing capacity and cash on hand as of September 30, 2011 was $156 million, which was comprised of $114.6 million available under our revolving credit facility and $42.3 million of available cash. Our revolver was undrawn as of September 30, 2011.

Now moving on to the balance of 2011 consistent with our historical factors, I am going to provide certain 2011 cash flow information, none of which has changed from the guidance we provided during our last earnings call. Capital expenditures are expected to be approximately $20 million. Permanent display expenditures are expected to be approximately $40 million. Pension plan contributions are expected to be approximately $30 million. Cash interest expense can be estimated by reference to our public filings, which detailed the composition of our capital structure and applicable interest rates. And lastly, cash paid for income taxes is expected to be approximately $20 million.

As a reminder, with respect to operating cash flow, in general, the timing of these cash flow items just noted as well as other working capital items can vary from quarter-to-quarter based on a number of factors. We continue to closely manage our key working capital accounts including receivables, payables, and inventory. This concludes our prepared remarks and we would now like to open up to call for your questions. Operator, please prompt the participants for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of (Carla Casella). Your line is open.

Carla Casella

Hi, I have one clarification question, on the Venezuela, the gain that you recorded in the quarter that $6.1 million, is that exactly offset by the charge in the quarter, so there should be no adjustment to EBITDA.

Steven Berns

Right. The $6.1 million represents the business interruption insurance in the period. And so that was $6.1 million for quarter in the third quarter offset costs incurred as well as estimated loss profits for the June through September period.

Carla Casella

Okay. So, it does equally match the cost? I guess I was wondering whether there was a mismatch in terms of the amount to understand whether the recurring SG&A was as reported or should the recurring SG&A be $6 million higher?

Steven Berns

So what we have business interruption losses represent losses for costs incurred as well as lost profits. And so the $6.1 million as you will see in our press release represents those costs that were incurred and loss profits for the period June through September, because we had not received any proceeds from the insurance company until the third quarter. And so all of it was – all of that $6.1 million representing four months, because the fire was on June 5, four months of activity was included in the 2011 third quarter. I would not look at the $6.1 million as a run rate of anything.

Carla Casella

Okay

Chris Elshaw

The one other point to clarify Carla just to build on what Steven is saying the insurance recoveries is reflected as a benefit within SG&A and it’s essentially designed to offset what the business would otherwise have achieved from profitability standpoint. The difference being that historically had the fire not occurred, we would have had sales and cost of sales and other line items in the P&L. So, gross profit would be higher, but essentially it flows in as a one line benefit with an SG&A.

Carla Casella

Okay, great. And then when do you have to revalue your pension for 2012? Do you have any outlook yet on terms of what your pension contribution or expense could be for next year?

Steven Berns

Yes, the revaluation is done on December 31 of each year and so that has not yet been completed. And as you are aware, it’s a function of the interest rate environment. And so because we don’t know what the interest rates will be at December 31 at this point in time. We do not have an estimate.

Carla Casella

Okay, great. And then as you look at the permanent display spending was a little bit lower in the quarter, but you maintained your full year guidance. So, I guess, it was just a timing issue, is that related to timing of new products as well?

Chris Elshaw

No, no, particularly the timing varies depending upon when we execute with retailers. So, you know sometimes these things shift within the retailers’ calendar, but it’s just a timing question.

Carla Casella

Okay, great. Thank you.

Steven Berns

Thanks, Carla.

Operator

Your next question comes from the line of (David Wu). Your line is now open.

David Wu

Hi, good morning everyone.

Steven Berns

Hi, David.

David Wu

I just have three questions. Hi. The first question in the U.S. you mentioned, excluding Sinful Colors, sales would have still been positive. Can you provide any color at all as to the magnitude was up low or mid single digits? And perhaps also just give us an update how the marketing initiatives, such as improving the permanent display wall layouts are tracking and also how that’s resonating with customers?

Chris Elshaw

So, we don’t breakout brand sales as you know suffice to say as we said in our earlier marks that excluding Sinful Colors net sales increased in the U.S. region primarily driven by Revlon cosmetics and Revlon ColorSilk. That’s the in-store we are constantly working on that as you probably know in the U.S. marketplace, there are two major updates a year, one is early in first quarter when retail has changed the in-store items and the other is around the middle of the year under the second update.

Steven Berns

All right. When we did the second update this year we made some changes. In addition we are constantly evolving and updating our promotional displays and I think we have been in the stores, you have seen in the second half some very impactful displays which we believe are important to attracting consumers.

David Wu

Great. I mean and secondly, how much did ad spending declined in the quarter and how are you planning for the fourth quarter?

Chris Elshaw

So, we don’t breakout the absolute number. Basically our ad spending is a function of our overall brand support mix. So, what happens is we constantly optimized depending upon retailers’ programs, new products, and we amend to make some optimizer mix between allowances, advertising, consumer promotion, etcetera.

David Wu

Okay. And, in terms of the fourth quarter, any sort of guidance you can give us?

Steven Berns

We don’t provide forward-looking guidance as you know.

David Wu

Right.

Steven Berns

And so we tell you when we get there.

David Wu

Okay, excellent. And then just lastly, I thought it was interesting you mentioned the promotional environment for fragrances in Europe got more aggressive in the quarter. Can you maybe provide more color on this, perhaps which channel or regions it impacted the most?

Chris Elshaw

Yeah, it was across mainly mass channels. But as you know in, outside of the U.S. the channels are less defined.

David Wu

Great.

Chris Elshaw

The products that we talk about are across most of our channels. So, whether it’s what you would think of those drug stores as well as what you think of is mass. But basically as we said in the first half, we were driving growth through that business. Competitive environment got really aggressive in the third quarter. We have been responding and we are taking action to make sure that we stay competitive.

David Wu

Excellent. I mean and just lastly just on Venezuela, so you talked about resuming distribution from the U.S. facility, but I want to know if you sort of stepped up the level of shipments to sort of compensate for the lack of distribution from the local facility or?

Chris Elshaw

So, just to clarify some of the point…

David Wu

Yeah.

Chris Elshaw

That Steven made earlier, so of the Venezuela business pre-fire.

David Wu

Right.

Chris Elshaw

Roughly half of those products were imported from our U.S. facility and what we have were manufactured at the local Venezuela facility that was destroyed by the fire. So, we didn’t have any shipments from June 2011 until the middle of August 2011 from the U.S. because we didn’t have a logistics provider sorted out. So, we have got that sorted out mid-August and so now we are back to normal levels, what I would call normal levels of importing products from the US. So that of course 50% of the business is back up and running?

David Wu

Is back right. So, you haven’t really stepped up, it hasn’t been more than 50% I guess to compensate for the other half?

Chris Elshaw

No, there are different product lines.

David Wu

Okay.

Chris Elshaw

What we have actually in Venezuela was specific to that markets, so they weren’t manufactured in Oxford at all.

David Wu

Got it. Thank you.

Chris Elshaw

Great.

Operator

Next question comes from the line of (Grant Jordon). Your line is now open.

Grant Jordon

Good morning. Thanks for taking the call.

Steven Berns

Good morning, Grant.

Grant Jordon

I just want to drilldown a little bit more on gross margin. You give us similar reasons why it declined in the quarter. How did it perform relative to what you expected going into the quarter?

Steven Berns

So, couple of things, so gross margin and I am going to talk to Steven a second, gross margin will very period-to-period depending on a variety of factors. What we are focused on primarily is operating margin and we believe we have delivered again competitive operating margins. The reason gross margin moves around period-to-period and the reason it did this so is because of the balance of brand support spending. And so as you know, promotion allowances and the cost of promotional activity is recorded as a deduction to arrive at net sales and therefore it impacts your gross margin that way.

So, as that spending increases, it will cause a decline in your gross margin rates, but as we do that we look at what we are spending in advertising and we reduced our advertising spends in the quarter by almost $9 million. And so it’s really and that’s a function of what’s happening in the marketplace. As Chris mentioned earlier, it’s a function of what the retailers are doing, it’s a function of what the consumers are doing and it’s a function of what the competitors are doing. And so that will move around period-to-period and so what we are focused on primarily is operating margin. And making sure that we delivering competitive operating margins.

And specifically Grant in the third quarter of 2011, gross margin was impacted unfavorably by higher allowances as Chris and Alan just touched on. And that reduced gross profit as a percentage of net sales by about 2 percentage points. We also had the impact of product mix and that reduced gross profit as a percentage of net sales by about 1%, 1.1 percentage points. However, there were some favorable items. And as Alan just mentioned, this will vary from period-to-period. This quarter, the favorable items related to we have lower costs related to inventory obsolescence and sales returns, which I mentioned in my prepared remarks and that increased gross profit as a percentage of net sales by about point 0.8 percentage points. And once again, we had favorable for our foreign currency fluctuations, was favorable by about 0.6 percentage points. So, once again, lots of moving parts and that will vary from period-to-period.

Grant Jordon

Okay. That’s helpful, particularly, the focus on the operating margin. Second question will be it seems like internationally you guys have been doing a great job in terms of top-line momentum and maybe lost a little bit of momentum this quarter. Can you talk about whether that is product specific due to competition or maybe some more macro factors playing in?

Chris Elshaw

Well, as we mentioned, there are some macro factors going on there. I made a couple of points. One, sales come very closer this quarter. So, we believe we should be looking at sales trends over time. On a year-to-date basis, total net sales were up 5% and were up in the U.S., Asia-Pacific, or Latin America while that remains flat. As regards Latin America, as we said, that’s really a result of Venezuela and excluding Venezuela the region is up. And we already talked about the fragrance business. In Asia-Pacific, as we mentioned is primarily driven by Japan and Australia while we have seen positive momentum in China and certain distributor markets in that region. So, I would say those among macroeconomic trends, the retail environment in those two markets has been more difficult recently.

Grant Jordon

Okay, great. Thank you.

Steven Berns

Thanks, Chris.

Operator

We have no further questions at this time. I would now like to turn the call back over to you Mr. Ennis.

Alan Ennis – President and Chief Executive Officer

Thank you, Ryan, thank you all for joining us conference call this morning. We look forward to speaking you when we report our fourth quarter results next year. Thank you.

Operator

This concludes today’s conference call. You may now disconnect.

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