Revlon Announces Transformative 2020 Business Optimization Program and Refinancing Agreement

Announces New 2020 Business Optimization and Restructuring that Will Considerably Improve Profitability and Cash Flow – Expected to generate $200-$230 Million in Annualized Cost Reductions

Refinancing Commitment will Significantly Improve Capital Structure by Refinancing Debt including 2021 Senior Notes, Extending Maturities and Delivering New Funding for the Business 

Company Releases Preliminary Unaudited Fourth Quarter and Full-Year 2019 Financial Results Showing Year-Over-Year Growth in Operating Income and Profitability Despite Continued Market Headwinds

Company to Host Conference Call Tomorrow, March 10, 2020 at 8:30 a.m. EDT

NEW YORK–(BUSINESS WIRE)–Revlon, Inc. (NYSE: REV) (“Revlon” and together with its subsidiaries, the “Company”) today announced two important steps forward in strengthening the Company’s business, capital structure and foundation for future growth. First, the Company executed an agreement with Jefferies Finance LLC that will significantly enhance the Company’s capital structure by refinancing the Company’s Senior Notes due February 2021 and 2019 Term Loan, extend the Company’s near-term maturities and deliver new funding for the business.

Second, the Company announced a new Revlon 2020 Restructuring Program that is expected to generate significant annualized cost reductions of between $200 and $230 million by the end of 2022. The goal of the 2020 Program is to build a stronger global business operation, enhance the Company’s cost efficiency, and improve operating margin to continue accelerating the growth in operating income and profitability that the Company saw in 2019.

The Company also released preliminary and unaudited1 fourth quarter and full-year 2019 financial results and will host a conference call to discuss these significant milestones on March 10, 2020 at 8:30 a.m. EDT.

Revlon 2020 Restructuring Program and Cost Reductions

Building upon the successful 2018 Optimization Program by which the Company delivered $95 million of in-year cost reductions in 2019 ($125 million on an annualized basis), the Company is implementing a new worldwide organizational restructuring designed to reduce the Company’s selling, general and administrative expenses, improve the Company’s gross profit and Adjusted EBITDA and maximize productivity, cash flow and liquidity.

The new Revlon 2020 Restructuring Program is expected to deliver in the range of approximately $200 million to $230 million of annualized cost reductions by the end of 2022, with approximately 60% of these cost reductions to be realized from headcount reductions occurring in 2020.

The Revlon 2020 Restructuring Program includes rightsizing the organization and operating with more efficient workflows and processes that the Company implemented during the 2018 Optimization Program, such as streamlining support functions and distribution activities. The leaner organizational structure is also expected to improve communication flow and cross-functional collaboration, leveraging more efficient business processes.

In 2020, the Company expects to realize approximately $105 million to $115 million of in-year cost reductions and recognize approximately $55 million to $65 million of total pre-tax restructuring and related charges, consisting of employee-related costs, such as severance, retention and other contractual termination costs. In addition the Company expects restructuring charges in the range of $65 million to $75 million to be charged and paid in the period of 2021 to 2022. The Company expects that substantially all of these restructuring charges will be paid in cash generated by the business, with approximately $55 million to $65 million of the total charges expected to be paid in 2020, approximately $40 million to $45 million expected to be paid in 2021, with the balance expected to be paid in 2022.

Refinancing Agreement

The agreement reached with Jefferies to provide up to $850 million in new financing will be used to repay the 5.75% Senior Notes maturing in 2021 ($500 million outstanding), repay the 2019 Term Loan ($200 million outstanding) and provide additional funding for the Company. The Company plans to close the refinancing transaction in the second quarter.

Strategic Alternatives Review

The company also continues to work with Goldman Sachs on the strategic alternatives process which remains focused on exploring potential options for our portfolio and regional brands.

1See “Notices to Investors” below in the footnotes to this release.

Preliminary 2019 Fourth Quarter and Full Year Financial Results

The Company also released preliminary and unaudited financial results for the fourth quarter and full-year 2019 described below:2

  • As Reported net sales were $699.4 million in the fourth quarter of 2019, compared to $741.6 million during the prior-year period, a decline of 5.7%. On a constant currency basis, net sales decreased 4.8% driven primarily by net sales declines in the Fragrances and Revlon segments, partially offset by net sales growth in the Elizabeth Arden segment. As Reported net sales includes the negative impact of $13.2 million of excessive coupon redemptions that remain in dispute with a single U.S. mass retailer. Excluding this impact, net sales on a constant currency basis declined 3.0%.
  • As Reported operating income improved to $76.7 million in the fourth quarter of 2019, compared to $32.2 million during the prior-year period. The higher operating income was driven by $30.0 million in lower selling, general and administrative expenses due primarily to cost reductions related to the Company’s 2018 Optimization Program and a benefit from the prior-year non-recurring accelerated amortization related to Pure Ice brand intangible assets, a $26.6 million gain on the divestiture of certain regional brands and a $18.0 million benefit from prior-year non-recurring goodwill impairment charge, partially offset by lower gross profit margin. Adjusted operating income improved 13.7% to $73.2 million from $64.4 million in the prior-year period.
  • As Reported net income improved to $25.8 million in the fourth quarter of 2019 versus a $70.3 million net loss in the prior-year period. The higher net income was driven primarily by the $44.5 million improvement in operating income described above, a $41.9 million improvement in the benefit from income taxes driven primarily by a non-cash release of a foreign valuation allowance and a $16.0 million favorable foreign currency impact versus the prior-year period, partially offset by higher interest expense.
  • Adjusted EBITDA(a) in the fourth quarter of 2019 was $111.9 million which included the impact of $9.8 million of tariffs and $1.3 million of negative foreign exchange. Excluding these items, Adjusted EBITDA decreased $6.0 million, or approximately 5%, versus prior-year.

“The refinancing commitment and the launch of the new restructuring program are significant steps forward in the transformation of our business for the future and create a structure that is designed for success in today’s beauty industry. The Revlon 2020 Restructuring Program is expected to create a stronger global business operations model, enhance cost efficiency, and improve operating and profit margins to continue accelerating the growth in operating income and Adjusted EBITDA that we generated in 2019. With an improved capital structure, increased liquidity, and more efficient and streamlined business, I am more confident than ever in our ability to take on the opportunities within our industry and continue to deliver for our key stakeholders, global customers and most importantly our deeply dedicated consumers,” said Debra Perelman, President and CEO of Revlon.

2 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.

Fourth 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).

 

 

 

Three Months Ended December 31,

(Unaudited)

 

 

2019

 

2018

 

As Reported

 

Adjusted (*)

(USD millions, except per share data)

 

As Reported

 

Adjusted (*)

 

As Reported

 

Adjusted (*)

 

% Change

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

699.4

 

 

$

712.6

 

 

$

741.6

 

 

$

743.0

 

 

(5.7)

%

 

(4.1)

%

Gross Profit

 

397.9

 

 

411.9

 

 

431.8

 

 

435.8

 

 

(7.9)

%

 

(5.5)

%

Gross Margin

 

56.9

%

 

57.8

%

 

58.2

%

 

58.7

%

 

-130bps

 

-90bps

Operating Income

 

$

76.7

 

 

$

73.2

 

 

$

32.2

 

 

$

64.4

 

 

138.2

%

 

13.7

%

Net Income (Loss)

 

25.8

 

 

23.6

 

 

(70.3)

 

 

(45.7)

 

 

136.7

%

 

151.6

%

Adjusted EBITDA

 

 

 

111.9

 

 

 

 

124.6

 

 

 

 

(10.2)

%

Diluted Loss per Common Share

 

$

0.49

 

 

$

0.44

 

 

$

(1.33)

 

 

$

(0.86)

 

 

136.8

%

 

151.2

%

(*) 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; and Cutex in nail care products. 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 hair color line under the Llongueras brand (licensed from a third party) that is 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 and AllSaints.

 

 

 

Three Months Ended December 31,
(Unaudited)

 

 

Net Sales

 

 

As Reported

 

As Reported

(USD millions)

 

2019

 

2018

 

% Change

 

XFX
% Change

 

 

 

 

 

 

 

 

 

Revlon

 

$

242.7

 

 

$

261.4

 

 

(7.2)

%

 

(6.2)

%

Elizabeth Arden

 

$

168.0

 

 

$

156.3

 

 

7.5

%

 

8.6

%

Portfolio

 

$

133.7

 

 

$

144.1

 

 

(7.2)

%

 

(5.9)

%

Fragrances

 

$

155.0

 

 

$

179.8

 

 

(13.8)

%

 

(13.4)

%

Total

 

$

699.4

 

 

$

741.6

 

 

(5.7)

%

 

(4.8)

%

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,
(Unaudited)

 

 

Segment Profit

 

 

As Reported

 

As Reported

(USD millions)

 

2019

 

2018

 

% Change

 

XFX
% Change

 

 

 

 

 

 

 

 

 

Revlon

 

$

42.7

 

 

$

54.0

 

 

(20.9)

%

 

(19.8)

%

Elizabeth Arden

 

$

20.5

 

 

$

22.1

 

 

(7.2)

%

 

(5.9)

%

Portfolio

 

$

20.0

 

 

$

13.7

 

 

46.0

%

 

48.2

%

Fragrances

 

$

28.7

 

 

$

34.8

 

 

(17.5)

%

 

(17.2)

%

Total

 

$

111.9

 

 

$

124.6

 

 

(10.2)

%

 

(9.1)

%

Revlon Segment

Revlon segment net sales in the fourth quarter of 2019 were $242.7 million, a 7.2% (or 6.2% XFX) decrease compared to the prior-year period. Excluding the impact of $13.2 million of excessive coupon redemptions that remain in dispute, segment net sales on a constant currency basis declined 1.1%. The segment’s lower net sales were driven primarily by lower net sales of Revlon color cosmetics due to increased promotionality primarily in North America, lower net sales of Revlon ColorSilk hair color due to planned efforts to manage trade inventory levels, as well as overall category declines.

Revlon segment profit in the fourth quarter of 2019 was $42.7 million, compared to $54.0 million in the prior-year period, driven primarily by the segment’s lower net sales and lower gross profit margin.

Elizabeth Arden Segment

Elizabeth Arden segment net sales in the fourth quarter of 2019 were $168.0 million, a 7.5% (or 8.6% 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 fourth quarter of 2019 was $20.5 million, compared to $22.1 million in the prior-year period, primarily due to the segment’s higher brand support and lower gross profit margin, partially offset by higher net sales.

Portfolio Segment

Portfolio segment net sales of $133.7 million in the fourth quarter of 2019 decreased by 7.2% (or 5.9% XFX) compared to the prior-year period, driven primarily by the segment’s lower net sales of Mitchum products due to cycling against the prior year re-filling of retailer inventories after the ERP-related decline in customer service levels, partially offset by higher net sales of American Crew and Creme of Nature products.

Portfolio segment profit in the fourth quarter of 2019 improved to $20.0 million, compared to $13.7 million in the prior-year period, primarily as a result of lower overhead costs and brand support, as well as improved gross profit margin, partially offset by lower segment net sales.

Fragrances Segment

Fragrances segment net sales of $155.0 million in the fourth quarter of 2019 decreased by 13.8% (or 13.4% XFX) compared to the prior-year period, driven primarily by the overall softness in the U.S. mass fragrance category as well as the segment’s lower net sales of Juicy Couture and Elizabeth Taylor fragrances due in part to door closures and timing of innovation, partially offset by higher net sales of Christina Aguilera fragrances.

Fragrances segment profit in the fourth quarter of 2019 was $28.7 million, compared to $34.8 million in the prior-year period, primarily as a result of lower segment net sales and lower gross profit margin, partially offset by lower brand support and distribution costs.

Geographic Net Sales

Overall, As Reported total net sales decreased by 5.7%, (or 4.8% XFX), as detailed below by segment for the Company’s North America and International Regions.

 

 

 

Three Months Ended December 31,
(Unaudited)

 

 

(USD millions)

 

2019
As Reported

 

2018
As Reported

 

As Reported
% Change

 

As Reported XFX
% Change

 

 

Net Sales:

 

 

 

 

 

 

 

 

 

 

Revlon

 

 

 

 

 

 

 

 

 

 

North America

 

$

129.3

 

 

$

134.1

 

 

(3.6)

%

 

(3.6)

%

 

 

International

 

113.4

 

 

127.3

 

 

(10.9)

%

 

(9.0)

%

 

 

Elizabeth Arden

 

 

 

 

 

 

 

 

 

 

North America

 

$

36.5

 

 

$

39.4

 

 

(7.4)

%

 

(7.4)

%

 

 

International

 

131.5

 

 

116.9

 

 

12.5

%

 

13.9

%

 

 

Portfolio

 

 

 

 

 

 

 

 

 

 

North America

 

$

84.4

 

 

$

85.6

 

 

(1.4)

%

 

(1.4)

%

 

 

International

 

49.3

 

 

58.5

 

 

(15.7)

%

 

(12.5)

%

 

 

Fragrances

 

 

 

 

 

 

 

 

 

 

North America

 

$

110.8

 

 

$

129.0

 

 

(14.1)

%

 

(14.1)

%

 

 

International

 

44.2

 

 

50.8

 

 

(13.0)

%

 

(11.6)

%

 

 

Total Net Sales

 

$

699.4

 

 

$

741.6

 

 

(5.7)

%

 

(4.8)

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Net Sales Summary

 

 

 

 

 

 

 

 

North America

 

$

361.0

 

 

$

388.1

 

 

(7.0)

%

 

(7.0)

%

 

 

International

 

338.4

 

 

353.5

 

 

(4.3)

%

 

(2.3)

%

 

     

Revlon Segment

In North America, Revlon segment net sales of $129.3 million in the fourth quarter of 2019 decreased by 3.6% compared to the prior-year period, driven primarily by lower net sales of Revlon color cosmetics due to overall category declines, higher levels of promotionality, as well as lower net sales of Revlon beauty tools within the U.S. mass retail channel, partially offset by higher net sales of Revlon hair care products and pipe fill to support first quarter 2020 promotions.

In International, Revlon segment net sales of $113.4 million in the fourth quarter of 2019 decreased by 10.9% (or 9.0% 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 $36.5 million in the fourth quarter of 2019, a decrease of 7.4% (or 7.4% XFX) compared to the prior-year period, driven in large part by decreased net sales of Elizabeth Arden fragrances, partially offset by higher net sales of Ceramide skin care products.

In International, Elizabeth Arden segment net sales of $131.5 million in the fourth quarter of 2019 increased by 12.5% (or 13.9% 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 $84.4 million in the fourth quarter of 2019 decreased by 1.4% compared to the prior-year period, driven primarily by lower net sales of Mitchum anti-perspirant deodorants and CND nail products due to cycling against the launch of Shellac Luxe during the prior-year period, partially offset by higher net sales of American Crew products.

In International, Portfolio segment net sales of $49.3 million in the fourth quarter of 2019 decreased by 15.7% (or 12.5% XFX) compared to the prior-year period, due to cycling against the prior year re-filling of retailer inventories after the ERP-related decline in customer service levels, as well as lower net sales of local and regional brands.

Fragrances Segment

In North America, Fragrances segment net sales of $110.8 million in the fourth quarter of 2019 decreased by 14.1% (or 14.1% XFX) compared to the prior-year period, driven primarily by lower net sales of Juicy Couture and Elizabeth Taylor fragrances, partially offset by higher net sales of Charlie fragrances.

In International, Fragrances segment net sales of $44.2 million in the fourth quarter of 2019 decreased by 13.0% (or 11.6% XFX) compared to the prior-year period, driven primarily by the segment’s lower net sales of Juicy Couture fragrances due to the timing of innovation.

Cash Flow for the Full Year Period

Net cash used in operating activities in 2019 was $68.3 million, compared to $170.8 million in the prior-year period, driven by a 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 2019 was $97.3 million, compared to $228.0 million used in the prior-year period, with the improvement driven by lower operating cash flow usage and lower capital expenditures.

Liquidity Update

As of December 31, 2019, the Company had approximately $278.7 million of available liquidity, consisting of $104.3 million of unrestricted cash and cash equivalents, as well as $157.7 million in available borrowing capacity under the Amended 2016 Revolving Credit Facility (which had $272.4 million drawn as of such date) and $30.0 million in available borrowing capacity under the Amended 2019 Senior Line of Credit (which was undrawn as of such date), less float of $13.3 million.

Full Year 2019 Results

  • As Reported net sales were $2,419.6 million in 2019, compared to $2,564.5 million during the prior-year period, a decline of 5.7%. On a constant currency basis, net sales decreased 3.5% driven primarily by net sales declines in the Portfolio, Fragrances and Revlon segments, partially offset by net sales growth in the Elizabeth Arden segment.
  • As Reported operating income improved to $60.7 million in 2019, compared to a $85.2 million loss during the prior-year period. The higher operating income was driven primarily by cost reductions related to the Company’s cost optimization initiatives, a $46.7 million benefit in gain on divested assets versus prior-year period and lower integration and restructuring expenses, partially offset by lower net sales.
  • As Reported net loss decreased to $157.7 million in 2019 versus a $294.2 million net loss in the prior-year period. The lower net loss was driven primarily by the higher operating income described above, partially offset by higher interest expense.
  • Adjusted EBITDA(a) in 2019 was $266.1 million versus $237.9 million in 2018, an increase of 11.9% versus the prior-year period.
 

 

 

Year Ended December 31,

(Unaudited)

 

 

2019

 

2018

 

As Reported

 

Adjusted (*)

(USD millions, except per share data)

 

As Reported

 

Adjusted

(*)

 

As

Reported

 

Adjusted

(*)

 

% Change

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

2,419.6

 

 

$

2,432.8

 

 

$

2,564.5

 

 

$

2,576.0

 

 

(5.7)

%

 

(5.6)

%

Gross Profit

 

1,367.4

 

 

1,385.6

 

 

1,447.5

 

 

1,501.5

 

 

(5.5)

%

 

(7.7)

%

Gross Margin

 

56.5

%

 

57.0

%

 

56.4

%

 

58.3

%

 

10bps

 

-130bps

Operating Income (loss)

 

$

60.7

 

 

$

95.1

 

 

$

(85.2)

 

 

$

43.5

 

 

171.2

%

 

118.6

%

Net Loss

 

(157.7)

 

 

(130.3)

 

 

(294.2)

 

 

(194.9)

 

 

46.4

%

 

33.1

%

Adjusted EBITDA

 

 

 

266.1

 

 

 

 

237.9

 

 

 

 

11.9

%

Diluted Loss per Common Share

 

$

(2.97)

 

 

$

(2.45)

 

 

$

(5.57)

 

 

$

(3.69)

 

 

46.7

%

 

33.6

%

(*) 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.

Contacts

Investor Relations:
212-527-5230 or Eric.warren@revlon.com

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