Revlon, Inc. (NYSE: REV) today announced its results for the
quarter ended September 30, 2019.
Quarter ended September 30, 2019 summary developments:1
- As Reported net sales were $596.8 million in the third quarter
of 2019, compared to $655.4 million during the prior-year period, a
decline of 8.9%. On a constant currency basis, net sales decreased
7.1% driven primarily by net sales declines in the Portfolio and
Revlon segments, partially offset by net sales growth in the
Elizabeth Arden segment. Revlon segment net sales declines were
primarily driven by retailers reducing inventory and overall
category declines.
- As Reported operating income improved to $16.7 million in the
third quarter of 2019, compared to $2.3 million during the
prior-year period. The higher operating income was driven primarily
by cost reductions related to the Company's cost optimization
initiatives and improved gross profit margin.
- As Reported net loss increased to $44.7 million in the third
quarter of 2019 versus a $11.1 million net loss in the prior-year
period. The higher net loss was driven primarily by a $36.6 million
decrease in the benefit from income taxes due in part to a
one-time, non-cash true-up associated with U.S. 2017 Tax Act in the
prior-year period and higher interest expense, partially offset by
the higher operating income described above.
- Adjusted EBITDA(a) in the third quarter of 2019 was $68.4
million which included the impact of $3.7 million of tariffs and
$2.0 million of negative foreign exchange. Excluding these items,
Adjusted EBITDA would have increased $1.7 million or approximately
2% versus the prior-year period's Adjusted EBITDA of $72.4
million.
"While we were disappointed with the negative results in the
North America business, we remain pleased with the momentum and
strong growth we are achieving in Elizabeth Arden and the expansion
of our businesses in China, travel retail and e-commerce. The
Revlon brand continued to be impacted by overall category declines
as well as customer inventory reductions and the planned management
of trade inventory levels. Despite top-line softness, we saw growth
in profitability across three of our four segments, as well as
improved cash flow usage resulting from our cost optimization
program which remains on track to deliver the previously-announced
cost reductions," said Debra Perelman, President and CEO of
Revlon.
1 The results discussed include the following measures: U.S. GAAP
(“As Reported”); and non-GAAP (“Adjusted”), which excludes certain
Non-Operating Items and EBITDA Exclusions (as defined in Footnote
(a)) from As Reported results. See footnote (a) for further
discussion of the Company’s Adjusted measures. Reconciliations of
As Reported results to Adjusted results are provided as an
attachment to this release. In addition, where indicated, the
Company analyzes and presents its results excluding the impact of
foreign currency translation (“XFX”). Unless otherwise noted, the
discussion is presented on an As Reported basis.
Third Quarter 2019
Results
Total Company Results
In calculating Adjusted results, adjustments were made for the
Non-Operating Items, and the EBITDA Exclusions in the case of
Adjusted EBITDA, in each case as described in footnote (a).
(USD millions, except per share data)
Three Months Ended September
30,
2019
2018
As Reported
Adjusted (*)
As Reported
Adjusted (*)
As Reported
Adjusted (*)
% Change
% Change
Net Sales
$
596.8
$
596.8
$
655.4
$
659.7
(8.9
)%
(9.5
)%
Gross Profit
327.8
329.0
350.4
367.0
(6.4
)%
(10.4
)%
Gross Margin
54.9
%
55.1
%
53.5
%
55.6
%
140bps
-50bps
Operating Income
$
16.7
$
25.6
$
2.3
$
26.0
N.M.
(1.5
)%
Net (Loss) Income
(44.7
)
(37.5
)
(11.1
)
7.3
N.M.
N.M.
Adjusted EBITDA
68.4
72.4
(5.5
)%
Diluted Loss per Common Share
$
(0.84
)
$
(0.71
)
$
(0.21
)
$
0.14
N.M.
N.M
(*) Refer to footnote (a) to this Earnings Release for a discussion
and reconciliation of our non-GAAP measures, including Adjusted Net
Sales, Adjusted Gross Profit, Adjusted Gross Profit Margin,
Adjusted Operating Income, Adjusted EBITDA, Adjusted Net Income
(Loss) and Adjusted Diluted Loss per Common Share.
Segment
Results
The Company operates in four reporting segments: Revlon;
Elizabeth Arden; Portfolio; and Fragrances:
Revlon - The Revlon segment is
comprised of the Company's flagship Revlon brands. Revlon segment
products are primarily marketed, distributed and sold in the mass
retail channel, large volume retailers, chain drug and food stores,
chemist shops, hypermarkets, general merchandise stores, e-commerce
sites, television shopping, department stores, professional hair
and nail salons, one-stop shopping beauty retailers and specialty
cosmetic stores in the U.S. and internationally under brands such
as Revlon in color cosmetics; Revlon ColorSilk and
Revlon Professional in hair color; and Revlon in
beauty tools.
Elizabeth Arden - The Elizabeth Arden
segment is comprised of the Company's Elizabeth Arden branded
products. The Elizabeth Arden segment markets, distributes and
sells fragrances, skin care and color cosmetics primarily to
prestige retailers, department and specialty stores, perfumeries,
boutiques, e-commerce sites, the mass retail channel, travel
retailers and distributors, as well as direct sales to consumers
via its Elizabeth Arden branded retail stores and
elizabetharden.com e-commerce websites, in the U.S. and
internationally, under brands such as Elizabeth Arden Ceramide,
Prevage, Eight Hour, SUPERSTART, Visible Difference and Skin
Illuminating in the Elizabeth Arden skin care brands; and
Elizabeth Arden White Tea, Elizabeth Arden Red Door, Elizabeth
Arden 5th Avenue and Elizabeth Arden Green Tea in
Elizabeth Arden fragrances.
Portfolio - The Company’s Portfolio
segment markets, distributes and sells a comprehensive line of
premium, specialty and mass products primarily to the mass retail
channel, hair and nail salons and professional salon distributors
in the U.S. and internationally and large volume retailers,
specialty and department stores under brands such as Almay
and SinfulColors in color cosmetics; American Crew in
men’s grooming products (which are also sold direct-to-consumer on
its americancrew.com website); CND in nail polishes, gel
nail color and nail enhancements; Mitchum in anti-perspirant
deodorants; Cutex nail care products; and Pure Ice in
nail polishes. The Portfolio segment also includes a multi-cultural
hair care line consisting of Creme of Nature hair care
products, which are sold in both professional salons and in large
volume retailers and other retailers, primarily in the U.S.; and a
body care line under the Natural Honey brand and a hair
color line under the Llongueras brand (licensed from a third
party) that are both sold in the mass retail channel, large volume
retailers and other retailers, primarily in Spain.
Fragrances - The Fragrances segment
includes the development, marketing and distribution of certain
owned and licensed fragrances, as well as the distribution of
prestige fragrance brands owned by third parties. These products
are typically sold to retailers in the U.S. and internationally,
including prestige retailers, specialty stores, e-commerce sites,
the mass retail channel, travel retailers and other international
retailers. The owned and licensed fragrances include brands such as
Juicy Couture (which are also sold direct-to-consumer on its
juicycouturebeauty.com website), Britney Spears, Elizabeth
Taylor, Curve, John Varvatos, Christina Aguilera, Giorgio
Beverly Hills, Ed Hardy, Charlie, Lucky Brand,
Paul Sebastian, Alfred Sung, Jennifer Aniston,
Mariah Carey, Halston, Geoffrey Beene, La
Perla, White Shoulders, AllSaints and Wildfox.
(USD millions)
Three Months Ended September
30,
Net Sales
As Reported
As Reported
2019
2018
% Change
XFX % Change
Revlon
$
217.3
$
249.5
(12.9
)%
(11.1
)%
Elizabeth Arden
123.2
122.1
0.9
%
3.4
%
Portfolio
118.2
138.4
(14.6
)%
(12.4
)%
Fragrances
138.1
145.4
(5.0
)%
(3.9
)%
Total
$
596.8
$
655.4
(8.9
)%
(7.1
)%
Three Months Ended September
30,
Segment Profit
As Reported
As Reported
2019
2018
% Change
XFX % Change
Revlon
$
7.3
$
36.8
(80.2
)%
(78.8
)%
Elizabeth Arden
12.5
6.6
89.4
%
98.5
%
Portfolio
14.4
2.1
N.M.
N.M.
Fragrances
34.2
26.9
27.1
%
28.6
%
Total
$
68.4
$
72.4
(5.5
)%
(2.8
)%
Revlon Segment
Revlon segment net sales in the third quarter of 2019 were
$217.3 million, a 12.9% (or 11.1% XFX) decrease compared to the
prior-year period, driven primarily by lower net sales of Revlon
color cosmetics due to retailer inventory management and overall
category declines, combined with increased promotionality,
primarily in North America.
Revlon segment profit in the third quarter of 2019 was $7.3
million, compared to $36.8 million in the prior-year period, driven
primarily by the segment's lower net sales, lower gross profit
margin and higher brand support.
Elizabeth Arden Segment
Elizabeth Arden segment net sales in the third quarter of 2019
were $123.2 million, a 0.9% (or 3.4% XFX) increase compared to the
prior-year period, driven by higher net sales of Elizabeth Arden
skin care products, including Ceramide and Prevage, primarily
internationally.
Elizabeth Arden segment profit in the third quarter of 2019 was
$12.5 million, compared to $6.6 million in the prior-year period,
primarily due to the segment's higher net sales and improved gross
profit margin.
Portfolio Segment
Portfolio segment net sales of $118.2 million in the third
quarter of 2019 decreased by 14.6% (or 12.4% XFX) compared to the
prior-year period, driven primarily by the segment's lower net
sales of Almay color cosmetics due to category declines and
increased promotionality, CND nail products as a result of cycling
against Shellac Luxe's launch during the prior-year period and Pure
Ice nail polishes following the termination of its primary source
of distribution.
Portfolio segment profit in the third quarter of 2019 was $14.4
million, compared to $2.1 million in the prior-year period,
primarily as a result of lower brand support and distribution
expenses, partially offset by the segment's lower net sales.
Fragrances Segment
Fragrances segment net sales of $138.1 million in the third
quarter of 2019 decreased by 5.0% (or 3.9% XFX) compared to the
prior-year period, driven primarily by the segment's lower net
sales of Juicy Couture and Britney Spears branded fragrances due to
timing of innovation, partially offset by higher net sales of Curve
branded fragrances.
Fragrances segment profit in the third quarter of 2019 was $34.2
million, compared to $26.9 million in the prior-year period,
primarily as a result of improved gross profit margin and lower
overhead expenses, brand support and distribution costs, partially
offset by the segment's lower net sales.
Geographic Net Sales
Overall, As Reported total net sales decreased by 8.9%, as
detailed below by segment for the Company's North America and
International Regions.
(USD millions)
Three Months Ended September
30,
2019 As Reported
2018 As Reported
As Reported % Change
As Reported XFX % Change
Net Sales:
Revlon
North America
$
100.0
$
123.1
(18.8
)%
(18.8
)%
International
117.3
126.4
(7.2
)%
(3.7
)%
Elizabeth Arden
North America
$
29.5
$
40.3
(26.8
)%
(26.6
)%
International
93.7
81.8
14.5
%
18.1
%
Portfolio
North America
$
71.4
$
88.1
(19.0
)%
(19.0
)%
International
46.8
50.3
(7.0
)%
(1.0
)%
Fragrances
North America
$
98.6
$
99.3
(0.7
)%
(0.6
)%
International
39.5
46.1
(14.3
)%
(10.8
)%
Total Net Sales
$
596.8
$
655.4
(8.9
)%
(7.1
)%
Total Net Sales Summary
North America
$
299.5
$
350.8
(14.6
)%
(14.6
)%
International
297.3
304.6
(2.4
)%
1.5
%
Revlon Segment
In North America, Revlon segment net sales of $100.0 million in
the third quarter of 2019 decreased by 18.8% compared to the
prior-year period, driven primarily by lower net sales of Revlon
color cosmetics due to customer inventory management, overall
category declines and higher levels of promotionality, as well as
lower net sales of Revlon-branded beauty tools within the U.S. mass
retail channel.
In International, Revlon segment net sales of $117.3 million in
the third quarter of 2019 decreased by 7.2% (or 3.7% XFX) compared
to the prior-year period, driven primarily by the segment's lower
net sales of Revlon ColorSilk hair color due to planned efforts to
manage trade inventory levels, and Revlon color cosmetics resulting
from customer inventory management, partially offset by growth in
Asia fueled by the e-commerce launch of Revlon color cosmetics in
China.
Elizabeth Arden Segment
In North America, Elizabeth Arden segment net sales were $29.5
million in the third quarter of 2019, a decrease of 26.8% (or 26.6%
XFX) compared to the prior-year period, driven in large part by
decreased net sales of Elizabeth Arden color cosmetics due to the
Company's planned SKU rationalization efforts as it prioritizes
more productive SKUs to increase profitability, as well as certain
retail store closures, partially offset by higher net sales of
Ceramide skin care products.
In International, Elizabeth Arden segment net sales of $93.7
million in the third quarter of 2019 increased by 14.5% (or 18.1%
XFX) compared to the prior-year period, driven primarily by higher
net sales of skin care products within the Company's Travel Retail
business and in Asia particularly in China.
Portfolio Segment
In North America, Portfolio segment net sales of $71.4 million
in the third quarter of 2019 decreased by 19.0% compared to the
prior-year period, driven primarily by lower net sales of Almay
color cosmetics, Pure Ice nail polishes following the termination
of its primary source of distribution and Mitchum anti-perspirant
deodorants.
In International, Portfolio segment net sales of $46.8 million
in the third quarter of 2019 decreased by 7.0% (or 1.0% XFX)
compared to the prior-year period, driven primarily by lower net
sales of CND nail products, partially offset by higher net sales of
Mitchum anti-perspirant deodorants.
Fragrances Segment
In North America, Fragrances segment net sales of $98.6 million
in the third quarter of 2019 decreased by 0.7% (or 0.6% XFX)
compared to the prior-year period, driven primarily by lower net
sales of Juicy Couture and Britney Spears branded fragrances,
partially offset by higher overall net sales within our mass
channel, including Curve and Elizabeth Taylor brands.
In International, Fragrances segment net sales of $39.5 million
in the third quarter of 2019 decreased by 14.3% (or 10.8% XFX)
compared to the prior-year period, driven primarily by the
segment's lower net sales of Juicy Couture and Britney Spears
branded fragrances due to timing of innovation.
Cash Flow
Net cash used in operating activities in the first nine months
of 2019 was $166.8 million, compared to $296.7 million in the
prior-year period, driven by the lower net loss and favorable
working capital changes, as well as one-time costs incurred in 2018
related to the remediation of the Company's ERP implementation.
Free cash flow(a) used in the first nine months of 2019 was $186.8
million, compared to $338.3 million used in the prior-year period,
driven by lower operating cash flow usage and lower capital
expenditures.
Liquidity Update
As of September 30, 2019, the Company had approximately $166.8
million of available liquidity, consisting of $60.7 million of
unrestricted cash and cash equivalents, as well as $81.2 million in
available borrowing capacity under the Amended 2016 Revolving
Credit Facility (which had $348.4 million drawn as of such date)
and $30.0 million in available borrowing capacity under the 2019
Senior Line of Credit (which was undrawn as of such date), less
float of $5.1 million.
2018 Optimization
Program
The Company remains on track to deliver the previously-announced
annualized cost reductions of between $125 million and $150 million
as a result of the Company's 2018 Optimization Program, and now
expects to realize between $90 million and $95 million of in-year
cost reductions during 2019, of which approximately $65 million had
been realized as of September 30, 2019. Approximately 50% of the
annualized cost reductions are expected to be realized within cost
of sales and the remainder in selling, general and administrative
expenses.
Third Quarter 2019
Results Conference Call
The Company will host a conference call with members of the
investment community today, November 8, 2019, at 8:30 A.M. EST to
discuss its third quarter 2019 financial results. Access to the
call is available to the public at www.revloninc.com.
Footnotes to Press
Release
(a) Non-GAAP Financial
Measures: EBITDA; Adjusted EBITDA; Adjusted net sales;
Adjusted operating loss/income; Adjusted net income/loss; Adjusted
gross profit; Adjusted gross profit margin; Adjusted diluted loss
per common share and free cash flow (together, the “Non-GAAP
Measures”) are non-GAAP financial measures. See the reconciliations
of such Non-GAAP Measures to their most directly comparable GAAP
measures in the accompanying financial tables, to the extent not
otherwise directly reconciled in the Company’s financial
results.
The Company defines EBITDA as income from continuing operations
before interest, taxes, depreciation, amortization, gains/losses on
foreign currency fluctuations, gains/losses on the early
extinguishment of debt and miscellaneous expenses (the foregoing
being the “EBITDA Exclusions”). The Company presents Adjusted
EBITDA to exclude the EBITDA Exclusions, as well as the impact of
non-cash stock-based compensation expense and certain other
non-operating items that are not directly attributable to the
Company's underlying operating performance (the “Non-Operating
Items”). The following table identifies the Non-Operating Items
excluded in the presentation of Adjusted EBITDA for all
periods:
(USD millions)
Q3 2019
Q3 2018
Income Adjustments to EBITDA
Non-Operating Items:
Non-cash stock-based compensation
expense
$
3.9
$
6.3
Restructuring and related charges
5.4
3.8
Acquisition and integration costs
0.1
3.4
Financial control remediation actions and
related charges
3.4
—
Oxford ERP system disruption-related
charges
—
16.5
Adjusted net loss and adjusted diluted loss per common share
exclude the after-tax impact of the Non-Operating Items from As
Reported net loss.
The Company excludes the EBITDA Exclusions and Non-Operating
Items, as applicable, in calculating the Non-GAAP Measures because
the Company's management believes that some of these items may not
occur in certain periods, the amounts recognized can vary
significantly from period to period and/or these items do not
facilitate an understanding of the Company's underlying operating
performance.
Free cash flow is defined as net cash provided by/used in
operating activities, less capital expenditures for property, plant
and equipment. Free cash flow excludes proceeds on sale of
discontinued operations. Free cash flow does not represent the
residual cash flow available for discretionary expenditures, as it
excludes certain expenditures such as mandatory debt service
requirements, which for the Company are significant.
The Company's management uses the Non-GAAP Measures as operating
performance measures, and in the case of free cash flow, as a
liquidity measure (in conjunction with GAAP financial measures), as
an integral part of its reporting and planning processes and to,
among other things: (i) monitor and evaluate the performance of the
Company's business operations, financial performance and overall
liquidity; (ii) facilitate management's internal comparisons of the
Company's historical operating performance of its business
operations; (iii) facilitate management's external comparisons of
the results of its overall business to the historical operating
performance of other companies that may have different capital
structures and debt levels; (iv) review and assess the operating
performance of the Company's management team and, together with
other operational objectives, as a measure in evaluating employee
compensation, including bonuses and other incentive compensation;
(v) analyze and evaluate financial and strategic planning decisions
regarding future operating investments; and (vi) plan for and
prepare future annual operating budgets and determine appropriate
levels of operating investments.
Management believes that the Non-GAAP Measures are useful to
investors to provide them with disclosures of the Company's
operating results on the same basis as that used by management.
Management believes that the Non-GAAP Measures provide useful
information to investors about the performance of the Company's
overall business because such measures eliminate the effects of
certain charges that are not directly attributable to the Company's
underlying operating performance. Additionally, management believes
that providing the Non-GAAP Measures enhances the comparability for
investors in assessing the Company’s financial reporting.
Management believes that free cash flow is useful for investors
because it provides them with an important perspective on the cash
available for debt service and other strategic measures, after
making necessary capital investments in property and equipment to
support the Company's ongoing business operations, and provides
them with the same measures that management uses as the basis for
making resource allocation decisions.
Accordingly, the Company believes that the presentation of the
Non-GAAP Measures, when used in conjunction with GAAP financial
measures, are useful financial analytical measures that are used by
management, as described above, and therefore can assist investors
in assessing the Company's financial condition, operating
performance and underlying strength. The Non-GAAP Measures should
not be considered in isolation or as a substitute for their
respective most directly comparable As Reported financial measures
prepared in accordance with GAAP, such as net income/loss,
operating income/loss, diluted earnings/loss per share or net cash
provided by (used in) operating activities. Other companies may
define such non-GAAP measures differently. Also, while EBITDA and
Adjusted EBITDA, as used in this release, are defined differently
than Adjusted EBITDA for the Company's credit agreements and
indentures, certain financial covenants in its borrowing
arrangements are tied to similar financial measures. These non-GAAP
financial measures should be read in conjunction with the Company's
financial statements and related footnotes filed with the SEC.
(b) Segment profit is defined as income from continuing
operations for each of the Company's Revlon, Elizabeth Arden,
Portfolio and Fragrances segments, excluding the EBITDA Exclusions.
Segment profit also excludes the impact of certain items that are
not directly attributable to the segments' underlying operating
performance, including the impact of the Non-Operating Items noted
above in footnote (a). The Company does not have any material
inter-segment sales.
FORWARD-LOOKING
STATEMENTS
Statements made in this press release, which are not historical
facts, are forward-looking and are provided pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements speak only as of the date they
are made and the Company undertakes no obligation to publicly
update any forward-looking statement, whether to reflect actual
results of operations; changes in financial condition; changes in
general U.S. or international economic or industry conditions
and/or conditions in the Company’s reportable segments; changes in
estimates, expectations or assumptions; or other circumstances,
conditions, developments and/or events arising after the issuance
of this press release, except for the Company's ongoing obligations
under the U.S. federal securities laws. Forward-looking statements
are subject to known and unknown risks and uncertainties and are
based on preliminary or potentially inaccurate estimates and
assumptions that could cause actual results to differ materially
from those expected or implied by the estimated financial
information. Such forward-looking statements include, among other
things, (i) the Company being pleased with the momentum and strong
growth that it is achieving in Elizabeth Arden and the expansion of
its businesses in China, travel retail and e-commerce; (ii) the
Company’s belief that it remains on track to deliver the
previously-announced annualized cost reductions of between $125
million and $150 million as part of the Company’s 2018 Optimization
Program, and its expectation to realize between $90 million and $95
million of in-year cost reductions during 2019 and that
approximately 50% of the annualized cost reductions are expected to
be realized within cost of sales and the remainder in selling,
general and administrative expenses; and (iii) with respect to
Elizabeth Arden color cosmetics, the Company’s plan that its SKU
rationalization efforts as it prioritizes more productive SKUs will
increase profitability. Actual results may differ materially from
the Company's forward-looking statements for a number of reasons,
including as a result of the risks and other items described in
Revlon’s filings with the SEC, including, without limitation, in
Revlon’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K and amendments thereto, if any,
filed with the SEC during 2018 and 2019 (which may be viewed on the
SEC’s website at http://www.sec.gov or on Revlon, Inc.’s website at
http://www.revloninc.com). Additional important factors that could
cause actual results to differ materially from those indicated by
the Company’s forward-looking statements include: (i) less than
expected results from Elizabeth Arden and/or the expansion of its
businesses in China, travel retail and e-commerce and/or
unanticipated circumstances or results that may adversely affect
the Company's financial performance and growth, such as due to
greater than expected adverse effects of the ongoing changes in the
U.S.’s trade policies with China; less than effective new product
innovation and development and/or greater than expected investments
or unanticipated costs to achieve such initiatives; greater than
anticipated declines in the brick-and-mortar retail channel or
those conditions occurring at a rate faster than anticipated; the
Company’s inability to address the pace and impact of the new
commercial landscape, such as its inability to further enhance its
e-commerce and social media capabilities and/or increase its
penetration of e-commerce and social media channels; difficulties,
delays and/or the Company's inability to (in whole or in part)
develop and implement effective content to enhance its online
retail position, improve its consumer engagement across social
media platforms and/or transform its technology and data to support
efficient management of its digital infrastructure; the Company
incurring greater than anticipated levels of expenses and/or debt
to facilitate the foregoing objectives, which could result in,
among other things, less than anticipated revenues and/or
profitability; decreased consumer spending in response to weak
economic conditions or weakness in the consumption of beauty
products in one or more of the Company's segments; adverse changes
in tariffs, foreign currency exchange rates, foreign currency
controls and/or government-mandated pricing controls; decreased
performance by third-party suppliers, whether due to shortages of
raw materials or otherwise, and/or supply disruptions at the
Company’s manufacturing facilities; 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 retailer preferences and/or among sales channels, such
as due to the continuing consumption declines in core beauty
categories in the mass retail channel in North America; lower than
expected customer acceptance or consumer acceptance of, or less
than anticipated results from, the Company’s existing or new
products; higher than expected retail store closures in the
brick-and-mortar channels where the Company sells its products, as
consumers continue to shift purchases to online and e-commerce
channels; lower than expected results from the Company’s
advertising, promotional, pricing and/or marketing plans; higher
than expected sales returns related to any reduction of space by
the Company's customers, product discontinuances or otherwise or
decreased sales of the Company’s existing or new products; actions
by the Company’s customers, such as greater than expected inventory
management and/or de-stocking, and greater than anticipated space
reconfigurations or reductions in display space and/or product
discontinuances or a greater than expected impact from pricing,
marketing, advertising and/or promotional strategies by the
Company's customers; and/or decreased sales of the Company's
products as a result of changes in the competitive environment and
increased competitive activities by the Company's competitors,
including, among other things, business combinations, technological
breakthroughs, implementation of new pricing strategies, new
product offerings, increased advertising, promotional and marketing
spending and advertising, promotional and/or marketing successes by
competitors; (ii) difficulties with, delays in or the Company’s
inability to successfully complete the actions underlying the 2018
Optimization Program, in whole or in part, which could result in
less than expected operating and financial benefits from such
actions, such as difficulties with, delays in or the Company’s
inability to generate reductions in its cost base and/or overhead
costs, higher than anticipated restructuring charges and/or
payments and/or changes in the expected timing of such charges
and/or payments, delays in completing the actions underlying the
2018 Optimization Program, which could reduce and/or defer the
benefits expected to be realized from such activities, less than
anticipated annualized cost reductions from the 2018 Optimization
Program and/or changes in the timing of realizing such cost
reductions, such as due to less than anticipated resources to fund
such activities and/or more than expected costs to achieve the
expected cost reductions; and/or (iii) less than anticipated
benefits, such as a less than anticipated increase in
profitability, resulting from the Company’s SKU rationalization
efforts as it prioritizes more productive SKUs within Elizabeth
Arden color cosmetics. Factors other than those referred to above
could also cause Revlon’s results to differ materially from
expected results. Additionally, the business and financial
materials and any other statement or disclosure on, or made
available through, Revlon’s website or other websites referenced
herein shall not be incorporated by reference into this press
release.
REVLON, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(dollars in millions, except
share and per share amounts)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
(Unaudited)
(Unaudited)
Net sales
$
596.8
$
655.4
$
1,720.2
$
1,822.9
Cost of sales
269.0
305.0
750.7
807.2
Gross profit
327.8
350.4
969.5
1,015.7
Selling, general and administrative
expenses
308.1
340.8
973.2
1,087.1
Acquisition and integration costs
0.1
3.4
0.7
12
Restructuring charges and other, net
2.9
3.9
11.6
13.9
Loss on disposal of minority
investment
—
—
—
20.1
Operating income (loss)
16.7
2.3
(16.0
)
(117.4
)
Other expenses:
Interest expense
50.2
46.4
145.7
129.1
Amortization of debt issuance costs
3.7
3.8
10.4
9.1
Foreign currency losses, net
7.6
1.1
9.0
10.7
Miscellaneous, net
1.7
0.4
7.6
0.6
Other expenses
63.2
51.7
172.7
149.5
Loss from continuing operations before
income taxes
(46.5
)
(49.4
)
(188.7
)
(266.9
)
Benefit from income taxes
(2.1
)
(38.7
)
(3.2
)
(43.1
)
Loss from continuing operations, net of
taxes
(44.4
)
(10.7
)
(185.5
)
(223.8
)
(Loss) income from discontinued
operations, net of taxes
(0.3
)
(0.4
)
2.0
(0.1
)
Net loss
$
(44.7
)
$
(11.1
)
$
(183.5
)
$
(223.9
)
Other comprehensive income (loss):
Foreign currency translation
adjustments
(1.8
)
(4.9
)
(0.5
)
(12.3
)
Amortization of pension related costs, net
of tax
2.3
2.3
7.2
6.5
Reclassification into earnings of
accumulated losses from the de-designated 2013 Interest Rate Swap,
net of tax
—
—
—
0.7
Other comprehensive income (loss), net
0.5
(2.6
)
6.7
(5.1
)
Total comprehensive loss
$
(44.2
)
$
(13.7
)
$
(176.8
)
$
(229.0
)
Basic (loss) earnings per common
share:
Continuing operations
$
(0.84
)
$
(0.20
)
$
(3.50
)
$
(4.24
)
Discontinued operations
—
(0.01
)
0.04
—
Net loss
$
(0.84
)
$
(0.21
)
$
(3.46
)
$
(4.24
)
Diluted (loss) earnings per common
share:
Continuing operations
$
(0.84
)
$
(0.20
)
$
(3.50
)
$
(4.24
)
Discontinued operations
—
(0.01
)
0.04
—
Net loss
$
(0.84
)
$
(0.21
)
$
(3.46
)
$
(4.24
)
Weighted average number of common shares
outstanding:
Basic
53,129,004
52,834,879
53,057,154
52,777,883
Diluted
53,129,004
52,834,879
53,057,154
52,777,883
REVLON, INC. AND
SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE
SHEETS
(dollars in millions)
September 30,
December 31,
2019
2018
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
60.7
$
87.3
Trade receivables, net
454.9
431.3
Inventories
522.0
523.2
Prepaid expenses and other current
assets
155.9
152.0
Total current assets
1,193.5
1,193.8
Property, plant and equipment, net
413.7
354.5
Deferred income taxes
159.3
131.8
Goodwill
673.4
673.9
Intangible assets, net
496.7
532.0
Other assets
122.9
130.8
Total assets
$
3,059.5
$
3,016.8
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY
Current liabilities:
Short-term borrowings
$
5.1
$
9.3
Current portion of long-term debt
363.5
348.1
Accounts payable
322.3
332.1
Accrued expenses and other current
liabilities
368.3
430.9
Total current liabilities
1,059.2
1,120.4
Long-term debt
2,906.6
2,727.7
Long-term pension and other
post-retirement plan liabilities
162.0
169.0
Other long-term liabilities
159.2
56.5
Total stockholders' deficiency
(1,227.5
)
(1,056.8
)
Total liabilities and stockholders'
deficiency
$
3,059.5
$
3,016.8
REVLON, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(dollars in millions)
Nine Months Ended
September 30,
2019
2018
(Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss
$
(183.5
)
$
(223.9
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
124.6
119.4
Foreign currency losses from
re-measurement
9.0
10.7
Amortization of debt discount
1.2
0.9
Stock-based compensation amortization
7.7
14.8
Benefit from deferred income taxes
(19.0
)
(61.5
)
Amortization of debt issuance costs
10.4
9.1
Non-cash loss on disposal of minority
investment
—
18.6
Loss on sale of certain assets
0.2
0.6
Pension and other post-retirement cost
6.3
2.0
Change in assets and liabilities:
Increase in trade receivables
(30.5
)
(7.0
)
Increase in inventories
(4.9
)
(100.3
)
Increase in prepaid expenses and other
current assets
(5.5
)
(60.5
)
Increase in accounts payable
9.1
39.3
Decrease in accrued expenses and other
current liabilities
(81.0
)
(1.6
)
Pension and other post-retirement plan
contributions
(7.8
)
(6.1
)
Purchases of permanent displays
(28.4
)
(57.0
)
Other, net
25.3
5.8
Net cash used in operating activities
(166.8
)
(296.7
)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures
(20.0
)
(41.6
)
Net cash used in investing activities
(20.0
)
(41.6
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net (decrease) increase in short-term
borrowings and overdraft
(22.4
)
2.3
Net borrowings under the Amended 2016
Revolving Credit Facility
13.4
251.3
Net borrowings under the 2019 Term Loan
Facility
200.0
—
Net borrowings under the 2018 Foreign
Asset-Based Term Loan
—
89.4
Repayments under the 2016 Term Loan
Facility
(13.5
)
(13.5
)
Payment of financing costs
(13.4
)
(9.4
)
Tax withholdings related to net share
settlements of restricted stock units and awards
(1.6
)
(3.6
)
Other financing activities
(0.9
)
0.1
Net cash provided by financing
activities
161.6
316.6
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(1.4
)
(3.2
)
Net decrease in cash, cash equivalents and
restricted cash
(26.6
)
(24.9
)
Cash, cash equivalents and restricted cash
at beginning of period
87.5
87.4
Cash, cash equivalents and restricted cash
at end of period
$
60.9
$
62.5
Supplemental schedule of cash flow
information:
Cash paid during the period for:
Interest
$
157.9
$
131.4
Income taxes, net of refunds
6.9
11.7
REVLON, INC. AND
SUBSIDIARIES
EBITDA AND ADJUSTED EBITDA
RECONCILIATION
(dollars in millions)
Three Months Ended September
30,
2019
2018
(Unaudited)
Reconciliation to net loss:
Net loss
$
(44.7
)
$
(11.1
)
Loss from discontinued operations, net of
taxes
(0.3
)
(0.4
)
Loss from continuing operations, net of
taxes
(44.4
)
(10.7
)
Interest expense
50.2
46.4
Amortization of debt issuance costs
3.7
3.8
Foreign currency losses, net
7.6
1.1
Benefit from income taxes
(2.1
)
(38.7
)
Depreciation and amortization
38.9
40.1
Miscellaneous, net
1.7
0.4
EBITDA
$
55.6
$
42.4
Non-operating items:
Non-cash stock-based compensation
expense
3.9
6.3
Restructuring and related charges
5.4
3.8
Acquisition and integration costs
0.1
3.4
Financial control remediation actions and
related charges
3.4
—
Oxford ERP system disruption-related
charges
—
16.5
Adjusted EBITDA
$
68.4
$
72.4
Nine Months Ended September
30,
2019
2018
(Unaudited)
Reconciliation to net loss:
Net loss
$
(183.5
)
$
(223.9
)
Income (loss) from discontinued
operations, net of taxes
2.0
(0.1
)
Loss from continuing operations, net of
taxes
(185.5
)
(223.8
)
Interest expense
145.7
129.1
Amortization of debt issuance costs
10.4
9.1
Foreign currency losses, net
9.0
10.7
Benefit from income taxes
(3.2
)
(43.1
)
Depreciation and amortization
124.6
119.4
Miscellaneous, net
7.6
0.6
EBITDA
$
108.6
$
2.0
Non-operating items:
Non-cash stock-based compensation
expense
7.7
14.8
Restructuring and related charges
27.4
14.8
Acquisition and integration costs
0.7
12.0
Financial control remediation actions and
related charges
9.8
—
Oxford ERP system disruption-related
charges
—
49.6
Loss on disposal of minority
investment
—
20.1
Adjusted EBITDA
$
154.2
$
113.3
REVLON, INC. AND
SUBSIDIARIES
SEGMENT PROFIT, ADJUSTED
EBITDA AND ADJUSTED OPERATING LOSS RECONCILIATION
(dollars in millions)
Three Months Ended September
30,
2019
2018
(Unaudited)
Segment Net Sales:
Revlon
$
217.3
$
249.5
Elizabeth Arden
123.2
122.1
Portfolio
118.2
138.4
Fragrances
138.1
145.4
Total Segment Net Sales
$
596.8
$
655.4
Segment Profit:
Revlon
$
7.3
$
36.8
Elizabeth Arden
12.5
6.6
Portfolio
14.4
2.1
Fragrances
34.2
26.9
Total Segment Profit/Adjusted
EBITDA
$
68.4
$
72.4
Reconciliation to loss from continuing
operations before income taxes:
Loss from continuing operations before
income taxes
$
(46.5
)
$
(49.4
)
Interest expense
50.2
46.4
Amortization of debt issuance costs
3.7
3.8
Foreign currency losses, net
7.6
1.1
Miscellaneous, net
1.7
0.4
Operating loss
16.7
2.3
Non-operating items:
Restructuring and related charges
5.4
3.8
Acquisition and integration costs
0.1
3.4
Financial control remediation actions and
related charges
3.4
—
Oxford ERP system disruption-related
charges
—
16.5
Adjusted Operating income (loss)
25.6
26.0
Non-cash stock-based compensation
expense
3.9
6.3
Depreciation and amortization
38.9
40.1
Adjusted EBITDA
$
68.4
$
72.4
REVLON, INC. AND
SUBSIDIARIES
SEGMENT PROFIT, ADJUSTED
EBITDA AND ADJUSTED OPERATING LOSS RECONCILIATION
(dollars in millions)
Nine Months Ended September
30,
2019
2018
(Unaudited)
Segment Net Sales:
Revlon
$
716.1
$
736.9
Elizabeth Arden
352.0
333.9
Portfolio
354.1
420.5
Fragrances
298.0
331.6
Total Segment Net Sales
$
1,720.2
$
1,822.9
Segment Profit:
Revlon
$
58.5
$
75.6
Elizabeth Arden
17.1
2.3
Portfolio
25.0
(5.8
)
Fragrances
53.6
41.2
Total Segment Profit/Adjusted
EBITDA
$
154.2
$
113.3
Reconciliation to loss from continuing
operations before income taxes:
Loss from continuing operations before
income taxes
$
(188.7
)
$
(266.9
)
Interest expense
145.7
129.1
Amortization of debt issuance costs
10.4
9.1
Foreign currency losses, net
9.0
10.7
Miscellaneous, net
7.6
0.6
Operating loss
(16.0
)
(117.4
)
Non-operating items:
Restructuring and related charges
27.4
14.8
Acquisition and integration costs
0.7
12.0
Financial control remediation actions and
related charges
9.8
—
Oxford ERP system disruption-related
charges
—
49.6
Loss on disposal of minority
investment
—
20.1
Adjusted Operating loss
21.9
(20.9
)
Non-cash stock-based compensation
expense
7.7
14.8
Depreciation and amortization
124.6
119.4
Adjusted EBITDA
$
154.2
$
113.3
REVLON, INC. AND
SUBSIDIARIES
ADJUSTED NET SALES
RECONCILIATION
(dollars in millions)
Three Months Ended September
30,
2019
2018
(Unaudited)
Net Sales
$
596.8
$
655.4
Non-operating items:
Oxford ERP system disruption-related
charges
—
4.3
Adjusted Net Sales
$
596.8
$
659.7
REVLON, INC. AND
SUBSIDIARIES
ADJUSTED NET SALES
RECONCILIATION
(dollars in millions)
Nine Months Ended September
30,
2019
2018
(Unaudited)
Net Sales
$
1,720.2
$
1,822.9
Non-operating items:
Oxford ERP system disruption-related
charges
—
10.1
Adjusted Net Sales
$
1,720.2
$
1,833.0
REVLON, INC. AND
SUBSIDIARIES
ADJUSTED GROSS PROFIT
RECONCILIATION
(dollars in millions)
Three Months Ended September
30,
2019
2018
(Unaudited)
Gross Profit
$
327.8
$
350.4
Non-operating items:
Restructuring and related charges
1.2
0.1
Oxford ERP system disruption-related
charges
—
16.5
Adjusted Gross Profit
$
329.0
$
367.0
Nine Months Ended September
30,
2019
2018
(Unaudited)
Gross Profit
$
969.5
$
1,015.7
Non-operating items:
Restructuring and related charges
4.2
0.4
Oxford ERP system disruption-related
charges
—
49.6
Adjusted Gross Profit
$
973.7
$
1,065.7
REVLON, INC. AND
SUBSIDIARIES
ADJUSTED NET LOSS AND ADJUSTED
DILUTED LOSS PER SHARE RECONCILIATION
(dollars in millions, except
share and per share amounts)
Three Months Ended September
30,
2019
2018
(Unaudited)
Reconciliation to net loss and diluted
loss per share:
Net loss
$
(44.7
)
$
(11.1
)
Non-operating items (after-tax):
Restructuring and related charges
4.6
3.2
Acquisition and integration costs
—
2.7
Financial control remediation actions and
related charges
2.6
—
Oxford ERP system disruption-related
charges
—
12.5
Adjusted net loss
$
(37.5
)
$
7.3
Net loss:
Diluted loss per common share
(0.84
)
(0.21
)
Adjustment to diluted loss per common
share
0.13
0.35
Adjusted diluted earnings (loss) per
common share
$
(0.71
)
$
0.14
U.S. GAAP weighted average number of
common shares outstanding:
Diluted
53,129,004
52,834,879
Nine Months Ended September
30,
2019
2018
(Unaudited)
Reconciliation to net loss and diluted
loss per share:
Net loss
$
(183.5
)
$
(223.9
)
Non-operating items (after-tax):
Restructuring and related charges
21.6
12.2
Acquisition and integration costs
0.5
9.4
Financial control remediation actions and
related charges
7.5
—
Oxford ERP system disruption-related
charges
—
37.6
Loss on disposal of minority
investment
—
15.5
Adjusted net loss
$
(153.9
)
$
(149.2
)
Net loss:
Diluted loss per common share
(3.46
)
(4.24
)
Adjustment to diluted loss per common
share
0.56
1.41
Adjusted diluted loss per common share
$
(2.90
)
$
(2.83
)
U.S. GAAP weighted average number of
common shares outstanding:
Diluted
53,057,154
52,777,883
REVLON, INC. AND
SUBSIDIARIES
FREE CASH FLOW
RECONCILIATION
(dollars in millions)
Nine Months Ended September
30,
2019
2018
(Unaudited)
Reconciliation to net cash used in
operating activities:
Net cash used in operating activities
$
(166.8
)
$
(296.7
)
Less capital expenditures
(20.0
)
(41.6
)
Free cash flow
$
(186.8
)
$
(338.3
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191108005092/en/
Investor Relations: 212-527-5230 or
Eric.warren@revlon.com
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