- Company Name
- Revlon, Inc.
- Stock Symbol
- Class Period
- March 12, 2015 to March 28, 2019
- Motion Deadline
- July 13, 2019
- Eastern District of New York
The complaint charges Revlon and certain of its officers with violations of the Securities Exchange Act of 1934. Revlon manufactures, markets, distributes and sells beauty and personal care products worldwide.
The complaint alleges that throughout the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Revlon’s business and operations. Specifically, defendants failed to disclose that: (1) Revlon had failed to create measures to monitor its enterprise resource planning (“ERP”) system appropriately once implemented; (2) Revlon had failed to design, implement and consistently operate effective process-level controls to ensure that it appropriately (a) recorded and accounted for inventory, accounts receivable, net sales and cost of goods sold, (b) reconciled balance sheet accounts, (c) reviewed and approved the complete population of manual journal entries, and (d) used complete and accurate information in performing manual control, which constituted a material weakness in its internal controls over financial reporting; and (3) as a result of defendants’ poor preparation for and planning of the implementation of Revlon’s ERP system, the Company was unable to fulfill product shipments of approximately $64 million worth of net sales and would incur $53.6 million in incremental charges to remediate the decline in customer services levels. As a result of this information being withheld from the market, Revlon securities traded at artificially inflated prices during the Class Period, with its stock reaching a high price of more than $40 per share.
On March 18, 2019, Revlon filed a Form 12b-25 notification with the SEC disclosing that it would be unable to file its annual report for the fiscal year ended December 31, 2018 in a timely manner due to the identification of a material weakness in its internal controls relating to its ERP system. On this news, the price of Revlon stock fell nearly 7% to close at $18.02 per share on March 19, 2019.
Then on March 28, 2019, Revlon filed its annual report on Form 10-K for the year ended December 31, 2018, revealing further details about Revlon’s problems with its ERP system and its internal control weaknesses. According to the Form 10-K, in February 2018, the Company had “launched a new ERP system in the U.S., which caused [one of its] manufacturing facilit[ies] to experience service level disruptions that impacted the Company’s ability to manufacture certain quantities of finished goods and fulfill shipments to several large retail customers.” These disruptions also “caused the Company to incur expedited shipping fees and other unanticipated expenses in connection with actions that the Company implemented to remediate the decline in customer service levels.” As a result, the Company estimated that “this ERP launch resulted in the Company being unable to fulfill product shipments representing approximately $64 million of net sales during 2018 and incurring $53.6 million of incremental charges in 2018.” These disclosures caused the price of Revlon stock to decline $1.33 per share, or more than 6%, to close at $19.38 per share on March 29, 2019.