Revlon, Inc. (NYSE:REV) today announced its results for the
quarter ended September 30, 2017.
Quarter ended September 30, 2017 Highlights1:
- As Reported net sales were $666.5
million, an increase of 10.2% compared to the prior-year period. On
a Pro Forma(a) basis, net sales decreased by 10.5%, or 11.6% XFX,
compared to the prior-year period.
- As Reported operating loss of $5.5
million, compared to operating income of $41.7 million in the
prior-year period. On a Pro Forma Adjusted(a) basis, operating
income was $14.2 million compared to $65.3 million in the
prior-year period.
- As Reported net loss was $32.4 million,
compared to As Reported net loss of $4.7 million in the prior-year
period. Adjusted(a) net loss was $19.9 million, compared to
Adjusted net income of $32.9 million in the prior-year period.
- Adjusted EBITDA(a) was $53.6 million,
compared to $112.9 million in the prior-year period, representing a
52.5% decrease. On a Pro Forma basis, Adjusted EBITDA decreased
48.9% compared to the prior-year period, primarily driven by net
sales declines in North America.
“Although we continue to achieve strong sales growth for our
core brands internationally, our overall results, which continue to
be impacted by the Company’s performance in the U.S., were
disappointing,” said Fabian Garcia, Revlon President and Chief
Executive Officer. “We continue to make strategic investments in
our capabilities to transform our business model with ongoing focus
on:
- Strengthening digital engagement with
consumers
- Driving e-commerce and online sales
growth
- Accelerating speed of innovation
Mr. Garcia continued, “Our long-term transformation initiatives
are designed to restore topline growth in the U.S. and support
our plans for profitable, global expansion and ensure that we have
the ability to successfully compete in a digitally-driven
landscape, strengthen social media engagement and align technology
platforms to support our strategy.”
1 The results discussed below include the
following measures: U.S. GAAP (“As Reported”); non-GAAP
(“Adjusted”), which excludes certain Non-Operating Items (as
defined in Footnote (a)) from As Reported results; and Non-GAAP pro
forma (“Pro Forma Adjusted”), which presents the Adjusted results
on a pro forma basis as if Revlon and Elizabeth Arden were a
combined company for all of the periods presented (“Pro Forma”).
See footnote (a) for further discussion of the Company’s Adjusted
and Pro Forma Adjusted measures. Reconciliations of As Reported
results to Pro Forma, Adjusted and Pro Forma 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”).
Third Quarter 2017
Results
Total Company Results
In calculating Adjusted results, adjustments were made for the
Non-Operating Items described in footnote (a).
(USD millions, except per share
data)
Three Months Ended September 30,
2017 2016
AsReported
Adjusted
AsReported
Adjusted
AsReported
Adjusted
Pro FormaAdjusted
% Change % Change
Pro Forma% Change
Net Sales $ 666.5 $ 666.5 $ 604.8
$
604.8
$
745.1 10.2% 10.2% (10.5)% Gross Profit 376.2 376.5 361.4 365.8
437.9 4.1% 2.9% (14.0)% Gross Margin 56.4 % 56.5 % 59.8 % 60.5 %
58.8 % -340bps -400bps -230bps Operating (loss) income $ (5.5 ) $
14.2 $ 41.7
$
82.6
$
65.3
(113.2)% (82.8)% (78.3)% Adjusted EBITDA 53.6 112.9 104.9 (52.5)%
(48.9)% Net (loss) income (32.4 ) (19.9 ) (4.7 ) 32.9
(589.4)%
(160.5)% Diluted (loss) earnings per common share $
(0.61 ) $ (0.38 ) $ (0.09 )
$
0.63
(577.8)%
(160.3)%
As Reported net sales were $666.5 million in the third quarter
of 2017, an increase of 10.2% compared to the prior-year period,
driven by the acquisition of Elizabeth Arden. On a Pro Forma basis,
net sales decreased by 10.5%, or 11.6% XFX, primarily due to sales
declines in the North America mass retail channel, which was
partially offset by strong international growth within the Consumer
segment.
As Reported gross margin was 56.4% in the third quarter of 2017,
compared to 59.8% in the prior-year period, driven by the addition
of the lower gross margin Elizabeth Arden business, as the Company
continues with the execution of insourcing integration strategies,
higher sales returns and incentives and unfavorable mix. On a Pro
Forma Adjusted basis, gross margin was 56.5% in the third quarter
of 2017, compared to 58.8% in the prior-year period, a decline of
230 basis points (“bps”) due to higher sales returns and incentives
and unfavorable mix, partially offset by the realization of
approximately $5 million of pro forma synergies within the
Elizabeth Arden segment.
As Reported operating loss was $5.5 million in the third quarter
of 2017, compared to operating income of $41.7 million in the
prior-year period, driven by the results of the drivers discussed
in As Reported gross margin above and higher SG&A costs and
restructuring charges, partially offset by lower acquisition and
integration costs. On an Adjusted basis, operating income was $14.2
million in the third quarter of 2017, compared to Pro Forma
Adjusted operating income of $65.3 million in the prior-year
period, a result of the drivers of the decline in Pro Forma
Adjusted gross margin discussed above, despite the realization of a
total of $18.0 million of pro forma synergies and cost
reductions.
As Reported net loss was $32.4 million in the third quarter of
2017, compared to a net loss of $4.7 million in the prior-year
period. This decline was primarily the result of the drivers
discussed in As Reported operating loss above. Adjusted net loss,
which excludes certain non-operating items, was $19.9 million in
the third quarter of 2017, compared to Adjusted net income of $32.9
million in the prior-year period, a $52.8 million decrease, driven
by the net sales declines in North America, coupled with higher
cost of goods.
Pro Forma Adjusted EBITDA in the third quarter of 2017 decreased
by 48.9% compared to the prior-year period, driven by the declines
in net sales, partially offset by realized pro forma synergies and
cost reductions of approximately $17 million.
Segment
Results
Net sales and segment profit for the Elizabeth Arden segment
include 2016 Pro Forma (a) results, as if Revlon and Elizabeth
Arden were a combined company for all of 2016. Segment profit is
defined in footnote (b) below. The Company excludes certain
unallocated corporate costs from the definition of segment profit.
See “Segment Profit Reconciliation” attached to this release.
(USD millions) Three Months Ended
September 30, Net Sales As Reported Pro Forma As
Reported Pro Forma 2017 2016 2016 % Change
XFX% Change
% Change
XFX% Change
Consumer $ 306.7 $ 342.8 $ 342.8
(10.5)% (10.9)% (10.5)% (10.9)% Elizabeth Arden 248.1 135.2 275.5
83.5% 83.5% (9.9)% (11.2)% Professional 107.0 118.8 118.8 (9.9)%
(12.3)% (9.9)% (12.3)% Other 4.7 8.0 8.0
(41.3)% (41.3)% (41.3)% (41.3)% Total $ 666.5 $ 604.8 $ 745.1 10.2%
9.5% (10.5)% (11.6)% Three Months Ended September 30,
Segment Profit (b) As Reported Pro Forma As Reported Pro Forma 2017
2016 2016 % Change
XFX% Change
% Change
XFX% Change
Consumer $ 33.0 $ 81.0 $ 81.0 (59.3)% (59.3)% (59.3)%
(59.3)% Elizabeth Arden 31.6 32.5 40.2 (2.8)% (2.8)% (21.4)%
(30.8)% Professional 18.9 23.7 23.7 (20.3)% (21.5)% (20.3)% (21.5)%
Other (1.0 ) (0.1 ) (0.1 ) (900.0)% (900.0)% (900.0)% (900.0)%
Total $ 82.5 $ 137.1
$ 144.8 (39.8)% (40.0)%
(43.0)% (45.9)%
Consumer Segment
Consumer segment net sales in the third quarter of 2017 were
$306.7 million, a decrease of 10.5%, or 10.9% XFX, compared to the
prior-year period, primarily driven by net sales declines in the
mass retail channel in North America due to continued softness in
consumption, inventory de-stocking by certain retail customers and
higher sales returns and incentives, which adversely impacted net
sales of Revlon color cosmetics and Almay color cosmetics. These
net sales declines were partially offset by growth in net sales of
the Revlon brand internationally.
Consumer segment profit decreased by 59.3% in the third quarter
of 2017 compared to the prior-year period, primarily due to lower
gross profit as a result of the net sales declines in North
America, higher returns and incentives, as well as higher brand
support expenses.
Elizabeth Arden Segment
Elizabeth Arden net sales in the third quarter of 2017 were
$248.1 million. On a Pro Forma basis, Elizabeth Arden net sales in
the third quarter of 2017 decreased 9.9%, or 11.2% XFX, driven by
lower net sales of heritage and designer fragrances, primarily
within the U.S. mass retail channel.
Elizabeth Arden segment profit in the third quarter of 2017 was
$31.6 million. On a Pro Forma basis, Elizabeth Arden segment profit
decreased 21.4%, or 30.8% XFX, primarily driven by lower net sales,
partially offset by lower cost of sales due to the realization of
supply chain synergies.
Professional Segment
Professional segment net sales in the third quarter of 2017 of
$107.0 million decreased by 9.9%, or 12.3% XFX, compared to the
prior-year period, driven by continued lower net sales of CND nail
products and American Crew men’s grooming products, as the Company
continues its efforts to tighten distribution and manage trade
inventory for the American Crew brand.
Professional segment profit decreased by 20.3%, or 21.5% XFX, in
the third quarter of 2017 compared to the prior-year period,
primarily resulting from lower gross profit driven by the declines
in net sales, partially offset by lower brand support.
Geographic Net Sales
Overall, net sales increased on an As Reported basis by 10.2%,
driven by the acquisition of Elizabeth Arden, as well as continued
strong international growth in the Consumer segment.
(USD millions) Three Months Ended
September 30,
2017As Reported
2016As Reported
2016Pro FormaAdjusted
As Reported% Change
As ReportedXFX% Change
Pro Forma% Change
Pro FormaXFX% Change
Net Sales: Consumer North America $ 157.5 $ 210.8 $
210.8 (25.3)% (25.5)% (25.3)% (25.5)% International 149.2
132.0 132.0 13.0% 12.3% 13.0% 12.3% Professional North America $
42.1 $ 56.1 $ 56.1 (25.0)% (25.3)% (25.0)% (25.3)% International
64.9 62.7 62.7 3.5% (0.6)% 3.5% (0.6)% Elizabeth Arden North
America $ 143.6 $ 87.6 $ 176.2 63.9% 63.9% (18.5)% (18.8)%
International 104.5 47.6 99.3 119.5% 119.5% 5.2% 2.3% Other North
America $ — $ — $ — N.M. N.M. N.M. N.M. International 4.7
8.0 8.0 (41.3)% (41.3)% (41.3)% (41.3)% Total
Net Sales $ 666.5 $ 604.8 $ 745.1 10.2% 9.5% (10.5)% (11.6)%
Total Net Sales Summary
North America $ 343.2 $ 354.5 $ 443.1 (3.2)%
(3.4)% (22.5)% (22.8)% International 323.3
250.3 302.0 29.2% 27.8%
7.1% 4.9%
Consumer Segment
In North America, Consumer segment net sales in the third
quarter of 2017 of $157.5 million decreased by 25.3%, or 25.5% XFX,
compared to the prior-year period, as the U.S. mass retail channel
was impacted by continuing declines across several beauty
categories, as well as higher sales returns and incentives, all of
which resulted in declines in net sales of the Revlon and Almay
brands.
In International, Consumer segment net sales in the third
quarter of 2017 of $149.2 million increased by 13.0%, or 12.3% XFX,
compared to the prior-year period, driven by higher net sales of
Revlon color cosmetics.
Elizabeth Arden Segment
In North America, Elizabeth Arden segment net sales were $143.6
million in the third quarter of 2017. On a Pro Forma basis,
Elizabeth Arden net sales decreased by 18.5%, or 18.8% XFX,
compared to the prior-year period, primarily due to decreases in
net sales of certain fragrances in the U.S. mass retail
channel.
In International, Elizabeth Arden segment net sales in the third
quarter of 2017 were $104.5 million. On a Pro Forma basis,
Elizabeth Arden net sales in the third quarter of 2017 increased by
5.2%, or 2.3% XFX, compared to the prior year-period, primarily
driven by higher net sales of Christina Aguilera fragrances in
Germany, as well as higher net sales of Elizabeth Arden branded
products in China and Travel Retail channels.
Professional Segment
In North America, Professional segment net sales in the third
quarter of 2017 of $42.1 million decreased by 25.0%, or 25.3% XFX,
compared to the prior-year period, primarily driven by continued
lower net sales of CND nail products and lower net sales of
American Crew men’s grooming products, as the Company continues its
efforts to tighten distribution and manage trade inventory for the
American Crew brand.
In International, Professional segment net sales in the third
quarter of 2017 of $64.9 million increased by 3.5%, but decreased
by 0.6% XFX, compared to the prior-year period, which was
essentially flat.
Elizabeth Arden Integration
Program
The Company delivered strong results on the restructuring and
integration of the Elizabeth Arden business (the “Elizabeth Arden
Integration”), realizing an additional $18 million of synergies and
cost reductions in the third quarter of 2017, totaling
approximately $42 million of synergies and cost reductions in the
first nine months of 2017. The Company remains on track to deliver
approximately $190 million of annualized synergies and cost
reductions by 2020, with $55 to $60 million of synergies and cost
reductions expected to benefit 2017.
In the third quarter of 2017, the Company incurred $9.3 million
of Elizabeth Arden Integration restructuring charges and $11.8
million of non-restructuring integration costs. In the first nine
months of 2017, the Company incurred $14.1 million of Elizabeth
Arden Integration restructuring charges and $37.3 million of
non-restructuring integration costs. In addition, the Company
funded approximately $22 million of integration-related capital
expenditures in the first nine months of 2017.
Cash Flow for the Nine Month
Period
Net cash used in operating activities in the first nine months
of 2017 was $274.2 million, compared to net cash used in operating
activities of $68.2 million in the same period last year. Free cash
flow used in the first nine months of 2017 was $343.7 million,
compared to $101.3 million used in the prior-year period. The
decrease in free cash flow in the first nine months of 2017,
compared to the first nine months of 2016, was primarily driven by
higher inventory investment, which is due in part to the
seasonality of the Elizabeth Arden business, higher payments for
interest, restructuring, acquisition and integration costs and
permanent displays, as well as higher capital expenditures. These
uses of cash were partially offset by favorable changes in accounts
receivable and accounts payable.
Liquidity Update
As of September 30, 2017, the Company had drawn $243.9
million on its Revolving Credit Facility and had $204.6 million of
liquidity, consisting of $79.0 million of unrestricted cash and
cash equivalents, as well as $125.6 million in available borrowing
capacity under the Revolving Credit Facility. The Company has
continued to repatriate cash to the U.S. using tax-effective
methods as part of continuing to effectively manage its working
capital needs.
Third Quarter 2017
Results Conference Call
The Company will host a conference call with members of the
investment community today, November 3, 2017, at 9:30 A.M. EDT
to discuss its third quarter 2017 results. Access to the call is
available to the public at www.revloninc.com.
Footnotes to Press
Release
(a) Non-GAAP Financial
Measures: Pro Forma Net Sales; EBITDA; Adjusted and Pro
Forma Adjusted EBITDA; Adjusted and Pro Forma Adjusted net (loss)
income from continuing operations, before income taxes; Adjusted
net (loss) income; Adjusted diluted (loss) earnings per common
share; and free cash flow (together, the “Non-GAAP Measures”) are
non-GAAP financial measures that are reconciled to their most
directly comparable GAAP measures in the accompanying financial
tables. Pro Forma financial information assumes the Elizabeth Arden
acquisition was completed on January 1, 2016 and its financial
results were included for all periods presented.
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 impact of non-cash stock compensation
expense, the EBITDA Exclusions 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 and Pro Forma Adjusted EBITDA for
all periods:
(USD millions)
Q3 2017 Q3 2016
Q3 2016Pro Forma
Adjusted
Income / (Loss) Adjustments to EBITDA
Non-Operating Items: Non-cash stock compensation expense $
1.5 $ 1.5 $ 2.6 Restructuring and related charges 6.6
0.5 0.5 Acquisition and integration costs 12.7 33.5 0.9 Elizabeth
Arden 2016 Business Transformation Program 0.1 1.7 3.7 Inventory
purchase accounting adjustments, cost of sales — 4.4 4.4 Deferred
consideration for CBB Acquisition 0.3 0.8
0.8
(USD millions)
YTD 2017 YTD 2016
YTD 2016Pro Forma
Adjusted
Income / (Loss) Adjustments to EBITDA
Non-Operating Items: Non-cash stock compensation expense $ 5.9 $
4.8 $ 8.7 Restructuring and related charges 12.3 2.3 2.3
Acquisition and integration costs 40.2 39.5 2.3 Elizabeth Arden
2016 Business Transformation Program 0.8 1.7 10.4 Inventory
purchase accounting adjustments, cost of sales 17.2 4.5 4.5
Deferred consideration for CBB Acquisition 2.0
2.6 2.6
Adjusted net (loss) income and adjusted diluted (loss) earnings
per common share exclude the after-tax impact of the Non-Operating
Items from As Reported Net Income (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 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, diluted earnings 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 Consumer, Elizabeth Arden,
Professional, and Other segments, excluding the EBITDA Exclusions.
Segment profit also excludes unallocated corporate expenses and 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). Unallocated
corporate expenses primarily relate to general and administrative
expenses related to the corporate administrative organization.
These expenses are recorded in unallocated corporate expenses as
these items are centrally directed and controlled. 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, including the estimates and assumptions used by the
Company in preparing the pro forma financial information referenced
in this press release, that could cause actual results to differ
materially from those expected or implied by the pro forma
financial information or the estimates and assumptions used in
preparing the pro forma financial information. Such forward-looking
statements include, among other things: (i) the Company’s plans to
continue to make strategic investments in its capabilities to
transform its business model with ongoing focus on (A)
strengthening digital engagement with consumers; (B) driving
e-commerce and online sales growth; and (C) accelerating speed of
innovation; (ii) the Company’s belief and expectation that its
long-term transformation initiatives are designed to restore
topline growth in the U.S. and support the Company’s plans for
profitable, global expansion and ensure that the Company has the
ability to successfully compete in a digitally-driven landscape,
strengthen social media engagement and align technology platforms
to support the Company’s strategy; (iii) the Company’s belief and
expectation that it remains on track to deliver approximately $190
million of annualized synergies and cost reductions by 2020, with
$55 to $60 million of synergies and cost reductions expected to
benefit 2017; and (iv) the Company’s belief and expectation that
its having continued to repatriate cash to the U.S. using
tax-effective methods is part of continuing to effectively manage
its working capital needs. Actual results may differ materially
from such 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 any amendments thereto filed
with the SEC during 2017 (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 risks and
uncertainties relating to: (i) greater than expected challenges and
difficulties in the retail environment and/or difficulties, delays
in or less than expected results from the Company’s strategic
investments in its capabilities to transform its business model,
such as due to less than expected investment behind such
activities, less than effective new product development and/or
advertising, marketing or promotional programs and/or less than
expected success in strengthening digital engagement with
consumers, driving e-commerce and online sales growth and/or
accelerating speed of innovation, as well as unanticipated costs or
difficulties and/or delays in completing such initiatives; (ii)
unanticipated circumstances or results affecting the Company's
financial performance and/or its ability to achieve its topline
growth and expansion plans, such as less than anticipated growth
due to, among other things, less than effective new product
innovation and development, less than expected customer and/or
consumer acceptance of the Company's new or existing products, its
advertising, promotional, pricing and/or marketing plans and/or
brand communication or social engagement, less than expected levels
of advertising, promotional, social engagement and/or marketing
activities, less than expected levels of investment for new product
launches, less than expected levels of execution with customers,
greater than expected competitive investment, difficulties and/or
delays in developing the ability to successfully compete in a
digitally-driven landscape and/or greater than expected challenges
and difficulties in the retail and e-commerce environment; (iii)
difficulties with, delays in and/or the Company’s inability to
achieve, in whole or in part, or within the expected timeframe, the
benefits of the Elizabeth Arden integration cost-synergy program,
such as (A) difficulties with, delays in and/or the Company’s
inability to realize, in whole or in part, between $55 million to
$60 million of synergies and cost reductions in 2017; (B)
difficulties with, delays in and/or the Company’s inability to
generate annualized synergies and cost reductions of approximately
$190 million by 2020, such as due to the inability to successfully
implement integration strategies or realize the anticipated
benefits of the Elizabeth Arden Acquisition; and/or (C) more than
expected restructuring and related charges in connection with
implementing the Elizabeth Arden Integration; and/or (iv)
difficulties, delays or the inability of the Company to effectively
manage its working capital needs, such as difficulties and/or
delays in continuing to repatriate cash to the U.S. using
tax-effective methods, lower than expected operating revenues, cash
on hand and/or funds available under the Company’s Revolving Credit
Facility and/or other permitted lines of credit, less than
anticipated cash generated by the Company's domestic operations or
unanticipated restrictions or taxes on repatriation of foreign
earnings and/or higher than expected operating expenses, sales
returns, working capital expenses, integration and/or synergy costs
related to the Elizabeth Arden Acquisition, permanent wall display
costs, capital expenditures, debt service payments, cash tax
payments, cash pension plan contributions, other post-retirement
benefit plan contributions and/or net periodic benefit costs for
the pension and other post-retirement benefit plans, restructuring
costs (including, without limitation, in connection with
implementing the Elizabeth Arden Integration), severance and
discontinued operations not otherwise included in the Company’s
restructuring programs, debt and/or equity repurchases, costs
related to litigation and/or payments in connection with business
and/or brand acquisitions (including, without limitation, through
licensing transactions, if any), and discontinuing non-core
business lines and/or exiting and/or entering certain territories
and/or channels of trade. 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)
INCOME
(dollars in millions, except share and
per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30, 2017 2016
2017 2016 (Unaudited) (Unaudited)
Net sales $ 666.5 $ 604.8 $ 1,907.1 $ 1,533.3 Cost of sales
290.3 243.4 823.6 568.8 Gross profit
376.2 361.4 1,083.5 964.5 Selling, general and administrative
expenses 362.6 285.7 1,075.3 792.8 Acquisition and integration
costs 12.7 33.5 40.2 39.5 Restructuring charges and other, net 6.4
0.5 11.3 2.3 Operating (loss) income
(5.5 ) 41.7 (43.3 ) 129.9 Other expenses:
Interest expense 38.6 27.4 110.3 69.3 Amortization of debt issuance
costs 2.3 1.7 6.8 4.6 Loss on early extinguishment of debt - 16.9 -
16.9 Foreign currency (gains) losses, net (3.1 ) 1.2 (16.8 ) 6.3
Miscellaneous, net 0.3 (0.6 ) 1.8 (0.1 ) Other
expenses 38.1 46.6 102.1 97.0 (Loss)
income from continuing operations before income taxes (43.6 ) (4.9
) (145.4 ) 32.9 (Benefit from) provision for income taxes (10.8 )
(0.4 ) (37.8 ) 16.0 (Loss) income from continuing
operations, net of taxes (32.8 ) (4.5 ) (107.6 ) 16.9 Income (loss)
from discontinued operations, net of taxes 0.4 (0.2 ) 1.3
(2.3 ) Net (loss) income $ (32.4 ) $ (4.7 ) $ (106.3 ) $
14.6 Other comprehensive income: Foreign currency
translation adjustments, net of tax (1.2 ) 2.7 5.3 8.0 Amortization
of pension related costs, net of tax 2.0 1.8 6.1 5.6 Pension
curtailment gain, net of tax - - 2.6 - Reclassification into
earnings of accumulated losses from the de-designated 2013 Interest
Rate Swap, net of tax 0.6 - 1.8 - Revaluation of derivative
financial instruments, net of reclassifications into earnings, net
of tax - 0.8 - 0.1 Other comprehensive
income 1.4 5.3 15.8 13.7 Total
comprehensive (loss) income $ (31.0 ) $ 0.6 $ (90.5 ) $ 28.3
Basic (loss) earnings per common share: Continuing
operations $ (0.62 ) $ (0.09 ) $ (2.04 ) $ 0.32 Discontinued
operations 0.01 (0.00 ) 0.02 (0.04 ) Net (loss)
income $ (0.61 ) $ (0.09 ) $ (2.02 ) $ 0.28 Diluted
(loss) earnings per common share: Continuing operations $ (0.62 ) $
(0.09 ) $ (2.04 ) $ 0.32 Discontinued operations 0.01 (0.00
) 0.02 (0.04 ) Net (loss) income $ (0.61 ) $ (0.09 ) $ (2.02
) $ 0.28 Weighted average number of common shares
outstanding: Basic 52,615,412 52,498,246 52,584,954
52,498,840 Diluted 52,615,412 52,498,246
52,584,954 52,617,740
REVLON,
INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE
SHEETS (dollars in millions) September
30, December 31, 2017 2016
(Unaudited) ASSETS Current assets: Cash and cash
equivalents $ 79.2 $ 186.8 Trade receivables, net 459.4 423.9
Inventories 555.4 424.6 Prepaid expenses and other 105.9
88.8 Total current assets 1,199.9 1,124.1 Property, plant
and equipment, net 349.1 320.5 Deferred income taxes 205.8 149.7
Goodwill 703.1 689.5 Intangible assets, net 600.9 636.6 Other
assets 109.0 103.1 Total assets $ 3,167.8 $
3,023.5
LIABILITIES AND STOCKHOLDERS'
DEFICIENCY Current liabilities: Short-term borrowings $ 11.8 $
10.8 Current portion of long-term debt 256.8 18.1 Accounts payable
344.4 296.9 Accrued expenses and other 345.4 382.9
Total current liabilities 958.4 708.7 Long-term debt 2,656.0
2,663.1 Long-term pension and other post-retirement plan
liabilities 179.8 184.1 Other long-term liabilities 75.5 82.4 Total
stockholders' deficiency (701.9 ) (614.8 ) Total liabilities and
stockholders' deficiency $ 3,167.8 $ 3,023.5
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in
millions) Nine Months Ended September 30,
2017 2016 (Unaudited) CASH FLOWS
FROM OPERATING ACTIVITIES: Net (loss) income $ (106.3 ) $ 14.6
Adjustments to reconcile net (loss) income to net cash used in
operating activities: Depreciation and amortization 111.7 81.0
Foreign currency (gains) losses from re-measurement (20.8 ) 5.5
Amortization of debt discount 0.9 1.1 Stock-based compensation
amortization 5.9 4.8 (Benefit from) provision for deferred income
taxes (53.2 ) 6.9 Loss on early extinguishment of debt - 16.9
Amortization of debt issuance costs 6.8 4.6 Loss on sale of certain
assets 1.5 0.2 Pension and other post-retirement cost (income) 1.9
(0.5 ) Change in assets and liabilities, net of acquisitions:
Increase in trade receivables (25.1 ) (112.0 ) (Increase) decrease
in inventories (121.6 ) 5.0 Increase in prepaid expenses and other
current assets (13.1 ) (20.0 ) Increase (decrease) in accounts
payable 36.4 (3.5 ) Decrease in accrued expenses and other current
liabilities (51.8 ) (36.9 ) Pension and other post-retirement plan
contributions (5.8 ) (6.0 ) Purchases of permanent displays (37.3 )
(25.9 ) Other, net (4.3 ) (4.0 ) Net cash used in operating
activities (274.2 ) (68.2 )
CASH FLOWS FROM INVESTING
ACTIVITIES: Capital expenditures (69.5 ) (33.1 ) Business
acquisitions, net of acquired cash - (1,028.7 ) Proceeds from the
sale of certain assets - 0.5 Net cash used in
investing activities (69.5 ) (1,061.3 )
CASH FLOWS FROM
FINANCING ACTIVITIES: Net increase (decrease) in short-term
borrowings and overdraft 1.2 (2.6 ) Net borrowings under the 2016
Revolving Credit Facility 243.9 65.4 Repayments under the 2016 Term
Loan Facility (13.5 ) - Repayments under the Old Acquisition Term
Loan - (15.1 ) Prepayments under the 2011 Term Loan - (11.5 )
Repayment of Old Acquisition Term Loan - (658.6 ) Repayment of 2011
Term Loan - (651.4 ) Borrowings under the 2016 Term Loan Facility -
1,791.0 Proceeds from the issuance of 6.25% Senior Notes - 450.0
Payment of financing costs (1.1 ) (61.5 ) Tax withholdings related
to net share settlements of restricted stock units and awards (2.5
) (2.6 ) Treasury stock purchased - (2.7 ) Other financing
activities (1.3 ) (2.2 ) Net cash provided by financing activities
226.7 898.2 Effect of exchange rate changes on cash
and cash equivalents 9.4 3.6 Net decrease in cash and
cash equivalents (107.6 ) (227.7 ) Cash and cash equivalents at
beginning of period 186.8 326.9 Cash and cash
equivalents at end of period $ 79.2 $ 99.2
Supplemental schedule of cash flow information: Cash paid during
the period for: Interest $ 124.5 $ 68.4 Income taxes, net of
refunds 11.1 19.4
REVLON, INC. AND
SUBSIDIARIES EBITDA AND ADJUSTED EBITDA RECONCILIATION
(dollars in millions) Three Months Ended
September 30, 2017 2016 (Unaudited)
Reconciliation to net loss: Net loss $ (32.4 ) $ (4.7 )
Income (loss) from discontinued operations, net of taxes 0.4
(0.2 ) Loss from continuing operations, net of taxes (32.8 ) (4.5 )
Interest expense 38.6 27.4 Amortization of debt issuance
costs 2.3 1.7 Loss on early extinguishment of debt - 16.9 Foreign
currency (gains) losses, net (3.1 ) 1.2 Miscellaneous, net 0.3 (0.6
) Benefit from income taxes (10.8 ) (0.4 ) Depreciation and
amortization 37.9 28.8 EBITDA $ 32.4 $ 70.5
Non-operating items: Non-cash stock compensation
expense 1.5 1.5 Restructuring and related charges 6.6 0.5
Acquisition and integration costs 12.7 33.5 Acquisition inventory
adjustments - 4.4 Deferred consideration for CBB acquisition 0.3
0.8 Elizabeth Arden 2016 Business Transformation program 0.1
1.7 Adjusted EBITDA $ 53.6 $ 112.9
Nine Months Ended September 30,
2017 2016 (Unaudited) Reconciliation to net
(loss) income: Net (loss) income $ (106.3 ) $ 14.6
Income (loss) from discontinued operations, net of taxes 1.3
(2.3 ) (Loss) income from continuing operations, net of taxes
(107.6 ) 16.9 Interest expense 110.3 69.3 Amortization of
debt issuance costs 6.8 4.6 Loss on early extinguishment of debt -
16.9 Foreign currency (gains) losses, net (16.8 ) 6.3
Miscellaneous, net 1.8 (0.1 ) (Benefit from) provision for income
taxes (37.8 ) 16.0 Depreciation and amortization 111.7 81.0
EBITDA $ 68.4 $ 210.9 Non-operating
items: Non-cash stock compensation expense 5.9 4.8 Restructuring
and related charges 12.3 2.3 Acquisition and integration costs 40.2
39.5 Acquisition inventory adjustments 17.2 4.5 Deferred
consideration for CBB acquisition 2.0 2.6 Elizabeth Arden 2016
Business Transformation program 0.8 1.7
Adjusted EBITDA $ 146.8 $ 266.3
REVLON, INC. AND SUBSIDIARIES SEGMENT PROFIT, ADJUSTED
EBITDA, ADJUSTED OPERATING INCOME (LOSS) AND PRO FORMA
RECONCILIATION (dollars in millions)
Three Months Ended September 30,
2017
Three Months Ended September 30, 2016 Revlon, Inc.
Revlon, Inc.
Elizabeth Arden Historical
7/1/16-9/6/16
Pro Forma Adjustments
Pro Forma Combined (Unaudited) (Unaudited)
Segment Net Sales: Consumer $ 306.7 $ 342.8 $ - $ - $ 342.8
Elizabeth Arden 248.1 135.2 140.3 - 275.5 Professional 107.0 118.8
- - 118.8 Other 4.7 8.0 -
- 8.0
Total Segment Net Sales
$ 666.5 $ 604.8 $
140.3 $ - $ 745.1
Segment Profit: Consumer $ 33.0 $ 81.0 $ - $ -
$ 81.0 Elizabeth Arden 31.6 32.5 7.7 - 40.2 Professional 18.9 23.7
- - 23.7 Other (1.0 ) (0.1 ) - -
(0.1 )
Total Segment Profit $
82.5 $ 137.1 $ 7.7
$ - $ 144.8
Unallocated Corporate Expenses $ 28.9 $ 24.2 $ 15.7
$ - $ 39.9
Total Adjusted EBITDA
$ 53.6 $ 112.9 $
(8.0 ) $ - $ 104.9
Reconciliation to loss from continuing operations
before income taxes: Loss from continuing operations before
income taxes $ (43.6 ) $ (4.9 ) $ (50.6 ) $ 53.6 $ (1.9 )
Interest expense 38.6 27.4 5.5 3.2 36.1 Amortization of debt
issuance costs 2.3 1.7 0.4 0.6 2.7 Loss on early extinguishment of
debt - 16.9 - - 16.9 Foreign currency (gains) losses, net (3.1 )
1.2 0.6 - 1.8 Miscellaneous, net 0.3 (0.6 )
- - (0.6 ) Operating (loss)
income (5.5 ) 41.7
(44.1 )
57.4 55.0 Non-operating items: Restructuring and related
charges 6.6 0.5 - - 0.5 Acquisition and integration costs 12.7 33.5
25.5 (58.1 ) 0.9 Acquisition inventory adjustments - 4.4 - - 4.4
Deferred consideration for CBB acquisition 0.3 0.8 - - 0.8
Elizabeth Arden 2016 Business Transformation program 0.1
1.7 2.0 -
3.7 Adjusted Operating income 14.2 82.6 (16.6 ) (0.7 ) 65.3
Non-cash stock compensation expense 1.5 1.5 1.1 - 2.6
Depreciation and amortization 37.9 28.8
7.5 0.7 37.0 Adjusted
EBITDA $ 53.6 $ 112.9 $ (8.0 ) $ - $ 104.9
REVLON, INC. AND SUBSIDIARIES
SEGMENT PROFIT, ADJUSTED EBITDA, ADJUSTED OPERATING INCOME
(LOSS) AND PRO FORMA RECONCILIATION (dollars in
millions)
Nine Months Ended September 30,
2017
Nine Months Ended September 30, 2016 Revlon, Inc.
Revlon, Inc.
Elizabeth Arden Historical
1/1/16-9/6/16
Pro Forma Adjustments
Pro Forma Combined (Unaudited) (Unaudited)
Segment Net Sales: Consumer $ 932.8 $ 1,022.3 $ - $ - $
1,022.3 Elizabeth Arden 639.3 135.2 524.9 - 660.1 Professional
320.4 357.2 - - 357.2 Other 14.6 18.6
- - 18.6
Total Segment
Net Sales $ 1,907.1 $
1,533.3 $ 524.9 $ -
$ 2,058.2 Segment Profit:
Consumer $ 134.5 $ 220.4 $ - $ - $ 220.4 Elizabeth Arden 65.5 32.5
41.2 - 73.7 Professional 44.5 73.4 - - 73.4 Other (2.5 )
(0.9 ) - - (0.9 )
Total Segment Profit $ 242.0 $
325.4 $ 41.2 $ -
$
366.6 Unallocated Corporate Expenses $ 95.2
$ 59.1 $ 51.2 $ - $ 110.3
Total Adjusted EBITDA $ 146.8 $
266.3 $ (10.0 ) $ -
$ 256.3 Reconciliation to loss from
continuing operations before income taxes: Loss from continuing
operations before income taxes $ (145.4 ) $ 32.9 $ (99.7 ) $ 38.0 $
(28.8 ) Interest expense 110.3 69.3 19.5 22.0 110.8
Amortization of debt issuance costs 6.8 4.6 1.3 1.5 7.4 Loss on
early extinguishment of debt - 16.9 - - 16.9 Foreign currency
(gains) losses, net (16.8 ) 6.3 0.6 - 6.9 Miscellaneous, net
1.8 (0.1 ) - -
(0.1 ) Operating (loss) income (43.3 ) 129.9
(78.3 )
61.5 113.1 Non-operating items: Restructuring and related
charges 12.3 2.3 - - 2.3 Acquisition and integration costs 40.2
39.5 27.5 (64.7 ) 2.3 Acquisition inventory adjustments 17.2 4.5 -
- 4.5 Deferred consideration for CBB acquisition 2.0 2.6 - - 2.6
Elizabeth Arden 2016 Business Transformation program 0.8
1.7 8.7 -
10.4 Adjusted Operating income 29.2 180.5 (42.1 ) (3.2 )
135.2 Non-cash stock compensation expense 5.9 4.8 3.9 - 8.7
Depreciation and amortization 111.7 81.0
28.2 3.2 112.4
Adjusted EBITDA $ 146.8 $ 266.3 $ (10.0 ) $ -
$ 256.3
REVLON,
INC. AND SUBSIDIARIES ADJUSTED GROSS PROFIT AND PRO FORMA
RECONCILIATION (dollars in millions)
Three Months Ended September 30,
2017
Three Months Ended September 30, 2016 Revlon, Inc.
Revlon, Inc.
Elizabeth Arden Historical
7/1/16-9/6/16
Pro Forma Adjustments
Pro Forma Combined (Unaudited) (Unaudited)
Gross Profit $ 376.2 $ 361.4 $ 70.6 $ (0.2 ) $ 431.8
Non-operating items: Restructuring and related charges 0.3 - - - -
Acquisition inventory adjustments - 4.4 - - 4.4 Elizabeth Arden
2016 Business Transformation program - - 1.7
- 1.7 Adjusted Gross Profit $ 376.5 $ 365.8 $
72.3 $ (0.2 ) $ 437.9
REVLON, INC. AND
SUBSIDIARIES ADJUSTED GROSS PROFIT AND PRO FORMA
RECONCILIATION (dollars in millions)
Nine Months Ended September 30,
2017
Nine Months Ended September 30, 2016 Revlon, Inc.
Revlon, Inc.
Elizabeth Arden Historical
1/1/16-9/6/16
Pro Forma Adjustments
Pro Forma Combined (Unaudited)
(Unaudited)
Gross Profit $ 1,083.5 $ 964.5 $ 268.0 $ (0.5 ) $ 1,232.0
Non-operating items: Restructuring and related charges 0.5 -
- - - Acquisition inventory adjustments 17.2 4.5 - - 4.5 Elizabeth
Arden 2016 Business Transformation program 0.3 -
4.3 - 4.3 Adjusted Gross Profit $
1,101.5 $ 969.0 $ 272.3 $ (0.5 ) $ 1,240.8
REVLON,
INC. AND SUBSIDIARIES ADJUSTED NET (LOSS) INCOME AND
ADJUSTED DILUTED (LOSS) EARNINGS PER SHARE RECONCILIATION
(dollars in millions, except share and
per share amounts)
Three Months Ended September
30, 2017 2016
(Unaudited)
Reconciliation to net loss and diluted loss per share: Net
loss $ (32.4 ) $ (4.7 ) Non-operating items (after-tax):
Loss on early extinguishment of debt - 12.0 Restructuring and
related charges 4.2 0.2 Acquisition and integration costs 8.0 20.7
Acquisition inventory adjustments - 2.8 Deferred consideration for
CBB acquisition 0.3 0.8 Elizabeth Arden 2016 Business
Transformation program - 1.1 Adjusted net
(loss) income $ (19.9 ) $ 32.9 Net Loss: Diluted loss
per common share (0.61 ) (0.09 ) Adjustment to diluted loss per
common share 0.23 0.72 Adjusted diluted (loss)
earnings per common share $ (0.38 ) $ 0.63
U.S. GAAP weighted average number of common shares outstanding:
Diluted 52,615,412 52,498,246
Nine Months Ended September 30, 2017
2016
(Unaudited)
Reconciliation to net (loss) income and diluted (loss) earnings
per share: Net (loss) income $ (106.3 ) $ 14.6
Non-operating items (after-tax): Loss on early extinguishment of
debt - 12.0 Restructuring and related charges 9.3 1.2 Acquisition
and integration costs 25.6 24.4 Acquisition inventory adjustments
12.7 2.9 Deferred consideration for CBB acquisition 2.0 2.6
Elizabeth Arden 2016 Business Transformation program 0.5 1.1
Adjusted net (loss) income $ (56.2 ) $ 58.8
Net (Loss) Income: Diluted (loss) earnings per common share
(2.02 ) 0.28 Adjustment to diluted (loss) earnings per common share
0.95 0.84 Adjusted diluted (loss) earnings per common
share $ (1.07 ) $ 1.12 U.S. GAAP weighted
average number of common shares outstanding: Diluted 52,584,954
52,617,740
REVLON, INC. AND
SUBSIDIARIES FREE CASH FLOW RECONCILIATION (dollars
in millions) Nine Months Ended
September 30, 2017 2016 (Unaudited)
Reconciliation to net cash used in operating activities:
Net cash used in operating activities $ (274.2 ) $ (68.2 )
Capital expenditures (69.5 ) (33.1 ) Free cash flow $
(343.7 ) $ (101.3 )
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For Revlon, Inc.Media Relations:Pamela Alabaster,
212-527-5863
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