Market Overview

Revlon Reports Second Quarter 2018 Results

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Revlon, Inc. (NYSE:REV) today announced its results for the quarter
ended June 30, 2018.

Quarter ended June 30, 2018 summary developments:1

  • As Reported net sales were $606.8 million in the second quarter of
    2018, compared to $645.7 million during the prior-year period. The
    change in net sales was primarily driven by approximately $30 million
    in net sales declines related to the Oxford, N.C. SAP service level
    disruptions impacting the Revlon and Portfolio segments, predominantly
    in the international market; and also the loss of certain licenses in
    2018 in the Fragrance segment. These declines were partially offset by
    net sales growth associated with new products in the Portfolio segment
    and global growth in the Elizabeth Arden segment.
  • As Reported operating loss was $58.0 million in the second quarter of
    2018, compared to operating income of $5.2 million in the prior-year
    period, driven by the $30 million net sales declines from the SAP
    service level disruptions; a $20.1 million loss, primarily non-cash,
    related to reacquiring certain iconic Elizabeth Arden trademark
    rights; and increased distribution costs driven by growth in Asia. On
    an Adjusted basis, operating loss was $4.7 million in the second
    quarter of 2018, which includes the $30 million negative impact of
    reduced net sales related to the SAP service level disruptions but
    excludes the impact of $23.1 million in charges related to the SAP
    service level disruptions and the $20.1 million charge associated with
    reacquiring certain Elizabeth Arden trademark rights, compared to
    operating income of $22.1 million in the prior-year period.
  • As Reported net loss was $122.5 million in the second quarter of 2018,
    compared to $36.5 million in the prior-year period. This decline was
    primarily the result of the impacts from the $30 million in reduced
    net sales due to the SAP service level disruptions, increased
    distribution costs driven by growth in Asia, as well as a negative
    foreign currency impact of $29.6 million when compared to the prior
    year quarter. These decreases were partially offset by a benefit from
    the provision for income taxes of $2.8 million in the second quarter
    of 2018, as compared to a provision for income taxes of $11.9 million
    in the prior year quarter.
  • Adjusted EBITDA(a) was $36.7 million, compared to $61.5
    million in the prior-year period, primarily driven by approximately
    $30 million in reduced net sales associated with the SAP service level
    disruptions noted above.

"Despite SAP service level disruptions at the Oxford, N.C. plant and
other broader market impacts, we are starting to see the positive
effects of our strategic investments on our growth priorities. Our
strategy continues to focus on strengthening our brands and enhancing
the avenues through which we communicate and connect with our consumers.
We are focused on ensuring broad availability of our products where the
consumer shops in both brick and mortar and online. We are seeing strong
growth in e-commerce and innovation, including a very positive response
to the launch of Flesh, our new in-house incubated brand. We
continue to build strategic capabilities and partnerships to position
the company to win over the long term," 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 (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.
 

Second Quarter 2018 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 June 30,
2018   2017  

As
Reported

 

Adjusted
(*)

As
Reported

 

Adjusted
(*)

As
Reported

 

Adjusted
(*)

% Change % Change
 
Net Sales $ 606.8 $ 612.6 $ 645.7 $ 645.7 (6.0)% (5.1)%
Gross Profit 347.2 369.5 377.3 378.8 (8.0)% (2.5)%
Gross Margin 57.2 % 60.3 % 58.4 % 58.7 % -120bps 160bps
Operating (Loss) Income (**) $ (58.0 ) $ (4.7 ) $ 5.2 $ 22.1 N.M. N.M.
Adjusted EBITDA 36.7 61.5 (40.3)%
Net Loss (122.5 ) (81.2 ) (36.5 ) (24.2 ) (235.6)% (235.5)%
Diluted Loss per Common Share     $ (2.32 )   $ (1.54 )   $ (0.70 )   $ (0.46 )   (231.4)%   (234.8)%
   

(*) 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 Operating
(Loss) Income, and Adjusted Net Loss.

(**) Adjusted Operating Loss for Q2 2018 includes the $30 million
negative impact of reduced net sales related to the SAP service
level disruptions but excludes the impact of $23.1 million in
charges related to the SAP service level disruptions and the $20.1
million loss, primarily non-cash, related to reacquiring certain
Elizabeth Arden trademark rights.
 

Segment Results

Effective January 1, 2018, the Company began reporting its results under
four new reporting segments: Revlon; Elizabeth Arden; Portfolio brands;
and Fragrances, as it began to operate under a new brand-centric
organizational structure built around four global brand teams. These
four reporting segments are:

Revlon - The Revlon segment is comprised of the Company's
flagship Revlon brands. The Revlon segment markets, distributes and
sells products primarily 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 salons, one-stop shopping beauty
retailers, specialty cosmetic stores and perfumeries in the U.S. and
internationally under brands such as Revlon in color cosmetics; Revlon
ColorSilk
and Revlon Professional in hair color; Revlon
in beauty tools; and Revlon in nail color.

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 business 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 brands - 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; CND in nail polishes and nail enhancements,
including CND Shellac and CND Vinylux nail polishes; Cutex
nail care products; Pure Ice in nail polishes; American
Crew
in men's grooming products; and Mitchum in
anti-perspirant deodorants. The Portfolio segment also includes a
multi-cultural hair care line consisting of Creme of Nature hair
care products, which are sold in professional salons, the mass retail
channel 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, John Varvatos, All Saints, La Perla,
Wildfox, Charlie, Curve, Elizabeth Taylor
, Britney Spears, Christina
Aguilera
, Shawn Mendes, Halston, Ed Hardy,
Geoffrey Beene, Alfred Sung, Giorgio Beverly Hills, Lucky
Brand
, Paul Sebastian, White Shoulders and Jennifer
Aniston
.

Effective January 1, 2018, segment profit includes the allocation of
corporate expenses, as these expenses are included in segment operating
performance. Segment profit has been adjusted for the prior-year period
to conform to this methodology.

           
(USD millions)         Three Months Ended June 30,
Net Sales
As Reported   As Reported
2018   2017 % Change  

XFX
% Change

   
Revlon $   258.3 $   289.5 (10.8)% (11.6)%
Elizabeth Arden 106.1 101.1 4.9% 1.9%
Portfolio Brands 147.6 143.4 2.9% 2.0%
Fragrances 94.8   111.7     (15.1)%   (16.3)%
Total $ 606.8 $ 645.7 (6.0)% (7.3)%
 
Three Months Ended June 30,
Segment Profit (b)
As Reported As Reported
2018 2017 % Change

XFX
% Change

 
Revlon $ 36.5 $ 53.9 (32.3)% (32.3)%
Elizabeth Arden (5.8 ) 1.1 N.M. N.M.
Portfolio Brands (5.1 ) (1.5 ) (240.0)% (240.0)%
Fragrances 11.1   8.0     38.8%   37.5%
Total         $   36.7     $   61.5       (40.3)%     (40.7)%

Revlon Segment

Revlon segment net sales in the second quarter of 2018 were $258.3
million, a 10.8% decrease compared to the prior-year period, driven by
lower net sales of Revlon color cosmetics and Revlon ColorSilk hair
color, primarily in the international markets due to the Oxford, N.C.
service level disruptions, in addition to consumption declines in North
America.

Revlon segment profit decreased by 32.3% in the second quarter of 2018
compared to the prior-year period, primarily due to the lower net sales.

Elizabeth Arden Segment

Elizabeth Arden segment net sales in the second quarter of 2018 were
$106.1 million, a 4.9% increase compared to the prior-year period,
primarily driven by higher net sales of Elizabeth Arden skin care
products, including Ceramide and Prevage, principally in international
markets.

Elizabeth Arden segment loss in the second quarter of 2018 was $5.8
million, compared to segment profit of $1.1 million in the prior-year
period, primarily due to higher distribution costs associated with
geographic mix and brand support expenses, partially offset by the
higher net sales.

Portfolio Segment

Portfolio segment net sales of $147.6 million in the second quarter of
2018 increased by 2.9% compared to the prior-year period, primarily
driven by higher net sales of Almay color cosmetics following the
relaunch of the brand and lower sales incentives, as well as higher net
sales of CND nail products as a result of Shellac nail polish innovation.

Portfolio segment loss in the second quarter of 2018 was $5.1 million,
compared to segment loss of $1.5 million in the prior-year period,
primarily as a result of higher brand support expenses, partially offset
by the higher net sales.

Fragrances Segment

Fragrances segment net sales of $94.8 million in the second quarter of
2018 decreased by 15.1% compared to the prior-year period, driven
primarily by the loss of certain licenses in 2018.

As a result of cost reductions associated with insourcing production
capabilities, Fragrances segment profit increased by 38.8% in the second
quarter of 2018 compared to the prior-year period, partially offset by
the lower net sales.

Geographic Net Sales

Overall, net sales decreased by 6.0%, as detailed below by segment for
the Company's North America and International Regions.

         
(USD millions)       Three Months Ended June 30,

2018
As Reported

 

2017
As Reported

 

As Reported
% Change

 

As Reported
XFX
% Change

Net Sales:
Revlon
North America $ 148.9 $ 160.9 (7.5)% (7.7)%
International 109.4 128.6 (14.9)% (16.5)%
Elizabeth Arden
North America $ 27.0 $ 29.1 (7.2)% (8.2)%
International 79.1 72.0 9.9% 6.0%
Portfolio Brands
North America $ 94.8 $ 80.2 18.2% 18.3%

International

52.8 63.2 (16.5)% (18.8)%
Fragrances
North America $ 61.2 $ 66.7 (8.2)% (8.2)%
International 33.6 45.0 (25.3)% (28.2)%
Total Net Sales $ 606.8 $ 645.7 (6.0)% (7.3)%
                     
 
Total Net Sales Summary            
North America 1 $ 331.9 $ 336.9 (1.5)% (1.7)%
International       274.9   308.8   (11.0)%   (13.4)%
1 As Reported net sales in North America includes the
impact of $5.8 million of costs related to the service level
disruptions at the Oxford, N.C. manufacturing facility.
 

Revlon Segment

In North America, Revlon segment net sales of $148.9 million in the
second quarter of 2018 decreased by 7.5% compared to the prior-year
period, primarily as a result of lower net sales of Revlon color
cosmetics due to consumption declines within the U.S. mass retail
channel and lower net sales of Revlon ColorSilk hair color.

In International, Revlon segment net sales of $109.4 million in the
second quarter of 2018 decreased by 14.9% compared to the prior-year
period, due to lower net sales of Revlon color cosmetics, primarily
resulting from the Oxford, N.C. service level disruptions.

Elizabeth Arden Segment

In North America, Elizabeth Arden segment net sales were $27.0 million
in the second quarter of 2018, a decrease of 7.2% compared to the
prior-year period, primarily due to the decrease in net sales of
Elizabeth Arden color cosmetics driven primarily by certain customer
store closures.

In International, Elizabeth Arden segment net sales of $79.1 million in
the second quarter of 2018 increased by 9.9% compared to the prior-year
period, primarily driven by higher net sales of skin care products
within the EMEA and Asia regions.

Portfolio Segment

In North America, Portfolio segment net sales of $94.8 million in the
second quarter of 2018 increased by 18.2% compared to the prior-year
period, primarily driven by higher net sales of Almay color cosmetics
and CND nail products.

In International, Portfolio segment net sales of $52.8 million in the
second quarter of 2018 decreased by 16.5% compared to the prior-year
period, primarily due to lower net sales of regional brands, as well as
the Oxford, N.C. service level disruptions.

Fragrances Segment

In North America, Fragrances segment net sales of $61.2 million in the
second quarter of 2018 decreased by 8.2% compared to the prior-year
period, primarily driven by the loss of certain licensed designer and
celebrity fragrances.

In International, Fragrances segment net sales of $33.6 million in the
second quarter of 2018 decreased by 25.3% compared to the prior-year
period, primarily due to the loss of certain licensed fragrance brands.

Cash Flow

Net cash used in operating activities in the first six months of 2018
was $190.1 million, compared to $139.2 million for the prior-year
period. Free cash flow used in the first six months of 2018 was $220
million, compared to $179 million used in the prior-year period. These
changes were primarily driven by the higher net loss attributed to lower
net sales as compared to the prior-year period, partially offset by
lower capital expenditures.

Liquidity Update

In June 2018, the Company entered into the 2018 Senior Unsecured Line of
Credit Agreement providing the Company with a $50 million senior
unsecured line of credit from MacAndrews & Forbes Incorporated, Revlon's
majority stockholder. After giving effect to such transaction, as of
June 30, 2018, the Company had approximately $106.5 million of available
liquidity, consisting of $81.6 million of unrestricted cash and cash
equivalents, $35.0 million of available borrowing capacity under the
2018 Senior Unsecured Line of Credit, as well as $6.5 million in
available borrowing capacity under the Revolving Credit Facility (which
had $376.7 million drawn as of such date), less float of $16.6 million.

In July 2018, the Company entered into the Asset-Based Term Loan
Agreement, which provides the Company with a euro-denominated €77
million term loan facility (or the equivalent of approximately $90
million). After giving effect to this transaction, the Company's
available liquidity as of July 31, 2018 was approximately $163.7
million, consisting of $81.3 million of unrestricted cash and cash
equivalents, $50 million of available borrowing capacity under the 2018
Senior Unsecured Line of Credit, as well as $46.5 million in available
borrowing capacity under the Revolving Credit Facility (which had $362.8
million drawn as of such date), less float of $14.1 million.

Second Quarter 2018 Results Conference Call

The Company will host a conference call with members of the investment
community today, August 9, 2018, at 8:30 A.M. NYC time to discuss its
second quarter 2018 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 loss; Adjusted gross profit; Adjusted
gross 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 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 for all periods:

           
(USD millions)     Q2 2018   Q2 2017
Income / (Loss) Adjustments to EBITDA      
Non-Operating Items:
Non-cash stock compensation expense $ 0.8 $ 2.7
Restructuring and related charges 5.5 4.6
Acquisition and integration costs 4.6 10.0
Oxford SAP disruption-related charges 23.1
Loss on disposal of minority investment 20.1
Acquisition inventory adjustments 1.2
Deferred consideration for CBB acquisition 0.8
Elizabeth Arden 2016 Business Transformation program       0.3
           
(USD millions) YTD 2018 YTD 2017
Income / (Loss) Adjustments to EBITDA      
Non-Operating Items:
Non-cash stock compensation expense $ 8.5 $ 4.4
Restructuring and related charges 11.0 5.7
Acquisition and integration costs 8.6 27.5
Oxford SAP disruption-related charges 33.1
Loss on disposal of minority investment 20.1
Acquisition inventory adjustments 17.2
Deferred consideration for CBB acquisition 1.7
Elizabeth Arden 2016 Business Transformation program       0.7
 

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 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
brands, 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
that: (i) the Company's belief that despite SAP service level
disruptions at the Oxford, N.C. plant and other broader market impacts,
that it is starting to see the positive effects of its strategic
investments on its growth priorities; (ii) the Company's plans to focus
on strengthening its brands, enhance the avenues through which it
communicates and connects with its consumers and ensure broad
availability of its products where the consumer shops in both brick and
mortar and online; (iii) the Company's belief that it is seeing strong
growth in e-commerce and innovation, including a very positive response
to the launch of Flesh; and (iv) the Company's belief that it
continues to build strategic capabilities and partnerships to position
the company to win over the long term. 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 any amendments thereto filed with the
SEC during 2017 and 2018 (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) less than
expected results from the Company's strategic investments on its growth
priorities and/or unanticipated circumstances or results affecting the
Company's financial performance and/or its ability to achieve its sales
growth priorities, such as less than anticipated growth due to, among
other things, less than effective new product innovation and development
and/or greater than expected investment to achieve such initiatives;
(ii) greater than expected challenges and difficulties in strengthening
the Company's brands, less than expected investment behind such
activities and/or less than expected success in strengthening digital
engagement with its consumers, as well as unanticipated costs or
difficulties and/or delays in completing such initiatives; (iii)
difficulties and/or delays in driving e-commerce and online sales growth
and/or accelerating speed of innovation, difficulties and/or delays in
developing the ability to successfully compete in a digitally-driven
landscape, greater than expected levels of investment to achieve such
initiatives and/or greater than expected challenges and difficulties in
the retail and e-commerce environment; and/or (iv) difficulties, delays
or the inability of the Company to build strategic capabilities and
partnerships to position the company to win over the long term, such as
due to less than expected customer and/or consumer acceptance of the
Company's new or existing products, its advertising, promotional,
pricing and/or marketing campaigns and/or brand communication or social
engagement and/or less than expected levels of execution with customers.
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
June 30,

Six Months Ended
June 30,

2018 2017 2018 2017
(Unaudited) (Unaudited)
 
Net sales $ 606.8 $ 645.7 $ 1,167.5 $ 1,240.6
Cost of sales 259.6   268.4   502.2     533.9  
Gross profit 347.2 377.3 665.3 706.7
Selling, general and administrative expenses 374.6 358.4 746.3 712.2
Acquisition and integration costs 4.6 10.0 8.6 27.5
Restructuring charges and other, net 5.9 3.7 10.0 4.9
Loss on disposal of minority investment 20.1     20.1    
Operating (loss) income (58.0 ) 5.2   (119.7 ) (37.9 )
 
Other expenses:
Interest expense 42.8 36.7 82.7 71.7
Amortization of debt issuance costs 3.0 2.3 5.3 4.5
Foreign currency losses (gains), net 20.2 (9.4 ) 9.6 (13.7 )
Miscellaneous, net 0.2   0.8   0.2   1.4  
Other expenses 66.2   30.4   97.8   63.9  
 
Loss from continuing operations before income taxes (124.2 ) (25.2 ) (217.5 ) (101.8 )
(Benefit from) provision for income taxes (2.8 ) 11.9   (4.4 ) (27.0 )
Loss from continuing operations, net of taxes (121.4 ) (37.1 ) (213.1 ) (74.8 )
(Loss) income from discontinued operations, net of taxes (1.1 ) 0.6   0.3   0.9  
Net loss $ (122.5 ) $ (36.5 ) $ (212.8 ) $ (73.9 )
 
Other comprehensive (loss) income:
Foreign currency translation adjustments, net of tax (4.9 ) 1.8 (7.4 ) 6.5
Amortization of pension related costs, net of tax 2.1 2.1 4.2 4.1
Pension curtailment, net of tax

2.6
Reclassification into earnings of accumulated losses from the
de-designated 2013 Interest Rate Swap, net of tax
0.1   0.6   0.7   1.2  
Other comprehensive (loss) income (2.7 ) 4.5   (2.5 ) 14.4  
Total comprehensive loss $ (125.2 ) $ (32.0 ) $ (215.3 ) $ (59.5 )
 
Basic (loss) earnings per common share:
Continuing operations $ (2.30 ) $ (0.70 ) $ (4.04 ) $ (1.42 )
Discontinued operations (0.02 )

0.01   0.01  
Net loss $ (2.32 ) $ (0.70 ) $ (4.03 ) $ (1.41 )
 
Diluted (loss) earnings per common share:
Continuing operations $ (2.30 ) $ (0.70 ) $ (4.04 ) $ (1.42 )
Discontinued operations (0.02 )

0.01   0.01  
Net loss $ (2.32 ) $ (0.70 ) $ (4.03 ) $ (1.41 )
 
Weighted average number of common shares outstanding:
Basic 52,823,326   53,096,935   52,748,913   52,569,473  
Diluted 52,823,326   53,096,935   52,748,913   52,569,473  
 

 
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in millions)
     
June 30, December 31,
2018 2017
(Unaudited)
 
ASSETS
Current assets:
Cash and cash equivalents $ 81.6 $ 87.1
Trade receivables, net 381.9 444.8
Inventories 565.4 497.9
Prepaid expenses and other current assets 165.9   113.4  
Total current assets 1,194.8 1,143.2
Property, plant and equipment, net 363.0 372.7
Deferred income taxes 161.2 138.0
Goodwill 692.2 692.5
Intangible assets, net 570.3 592.1
Other assets 110.4   118.4  
Total assets $ 3,091.9   $ 3,056.9  
 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings $ 29.8 $ 12.4
Current portion of long-term debt 388.0 170.2
Accounts payable 338.0 336.9
Accrued expenses and other current liabilities 432.3   412.8  
Total current liabilities 1,188.1 932.3
Long-term debt 2,649.3 2,653.7
Long-term pension and other post-retirement plan liabilities 167.2 172.8
Other long-term liabilities 68.0 68.5
Total stockholders' deficiency (980.7 ) (770.4 )
Total liabilities and stockholders' deficiency $ 3,091.9   $ 3,056.9  
 

 
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
    Six Months Ended
June 30,
2018   2017
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (212.8 ) $ (73.9 )
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 79.3 73.8
Foreign currency losses (gains) from re-measurement 9.8 (15.3 )
Amortization of debt discount 0.6 0.6
Stock-based compensation amortization 8.5 4.4
Benefit from deferred income taxes (26.0 ) (36.5 )
Amortization of debt issuance costs 5.3 4.5
Non-cash loss on disposal of minority investment 18.6
Loss on sale of certain assets 0.4 0.4
Pension and other post-retirement cost 1.2 1.1
Change in assets and liabilities, net of acquisitions:
Decrease in trade receivables 54.4 42.4
Increase in inventories (74.9 ) (85.9 )
Increase in prepaid expenses and other current assets (55.4 ) (29.0 )
Increase in accounts payable 10.9 47.0
Increase (decrease) in accrued expenses and other current liabilities 19.9 (42.0 )
Pension and other post-retirement plan contributions (3.8 ) (3.9 )
Purchases of permanent displays (35.6 ) (26.3 )
Other, net 9.5   (0.6 )
Net cash used in operating activities (190.1 ) (139.2 )
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (29.8 ) (39.6 )
Net cash used in investing activities (29.8 ) (39.6 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings and overdraft 13.2 (6.7 )
Net borrowings under the 2016 Revolving Credit Facility 219.7 87.5
Repayments under the 2016 Term Loan Facility (9.0 ) (9.0 )
Payment of financing costs (2.9 ) (0.9 )
Tax withholdings related to net share settlements of restricted
stock units and awards
(3.5 ) (2.5 )
Other financing activities (0.6 ) (1.0 )
Net cash provided by financing activities 216.9   67.4  
Effect of exchange rate changes on cash and cash equivalents (2.1 ) 8.3  
Net decrease in cash, cash equivalents and restricted cash (5.1 ) (103.1 )
Cash, cash equivalents and restricted cash at beginning of period 87.4   186.8  
Cash, cash equivalents and restricted cash at end of period $ 82.3   $ 83.7  
Supplemental schedule of cash flow information:
Cash paid (received) during the period for:
Interest $ 80.8 $ 70.5
Income taxes, net of refunds 6.5 8.0
 

 
REVLON, INC. AND SUBSIDIARIES
EBITDA AND ADJUSTED EBITDA RECONCILIATION
(dollars in millions)
     
Three Months Ended
June 30,
2018 2017
(Unaudited)
 
Reconciliation to net loss:
 
Net loss $ (122.5 ) $ (36.5 )
(Loss) income from discontinued operations, net of taxes (1.1 ) 0.6  
Loss from continuing operations, net of taxes (121.4 ) (37.1 )
 
Interest expense 42.8 36.7
Amortization of debt issuance costs 3.0 2.3
Foreign currency losses (gains), net 20.2 (9.4 )
(Benefit from) provision for income taxes (2.8 ) 11.9
Depreciation and amortization 40.6 36.7
Miscellaneous, net 0.2 0.8  
 
EBITDA $ (17.4 ) $ 41.9  
 
Non-operating items:
Non-cash stock compensation expense 0.8 2.7
Restructuring and related charges 5.5 4.6
Acquisition and integration costs 4.6 10.0
Oxford SAP disruption-related charges 23.1
Loss on disposal of minority investment 20.1
Acquisition inventory adjustments 1.2
Deferred consideration for CBB acquisition 0.8
Elizabeth Arden 2016 Business Transformation program   0.3  
 
Adjusted EBITDA $ 36.7   $ 61.5  
 
Six Months Ended
June 30,
2018 2017
(Unaudited)
 
Reconciliation to net loss:
 
Net loss $ (212.8 ) $ (73.9 )
Income from discontinued operations, net of taxes 0.3   0.9  
Loss from continuing operations, net of taxes (213.1 ) (74.8 )
 
Interest expense 82.7 71.7
Amortization of debt issuance costs 5.3 4.5
Foreign currency losses (gains), net 9.6 (13.7 )
Benefit from income taxes (4.4 ) (27.0 )
Depreciation and amortization 79.3 73.8
Miscellaneous, net 0.2   1.4  
 
EBITDA $ (40.4 ) $ 35.9  
 
Non-operating items:
Non-cash stock compensation expense 8.5 4.4
Restructuring and related charges 11.0 5.7
Acquisition and integration costs 8.6 27.5
Oxford SAP disruption-related charges 33.1
Loss on disposal of minority investment 20.1
Acquisition inventory adjustments 17.2
Deferred consideration for CBB acquisition 1.7
Elizabeth Arden 2016 Business Transformation program   0.7  
 
Adjusted EBITDA $ 40.9   $ 93.1  
 

 
REVLON, INC. AND SUBSIDIARIES
SEGMENT PROFIT, ADJUSTED EBITDA AND ADJUSTED OPERATING LOSS
RECONCILIATION
(dollars in millions)
     

Three Months Ended
June 30,

2018 2017
(Unaudited)
 
Segment Net Sales:
Revlon $ 258.3 $ 289.5
Elizabeth Arden 106.1 101.1
Portfolio Brands 147.6 143.4
Fragrances 94.8   111.7  
Total Segment Net Sales $ 606.8   $ 645.7  
 
Segment Profit:
Revlon $ 36.5 $ 53.9
Elizabeth Arden (5.8 ) 1.1
Portfolio Brands (5.1 ) (1.5 )
Fragrances 11.1     8.0  
Total Segment Profit/Adjusted EBITDA $ 36.7   $ 61.5  
 
Reconciliation to loss from continuing operations before income
taxes:
Loss from continuing operations before income taxes $ (124.2 ) $ (25.2 )
 
Interest expense 42.8 36.7
Amortization of debt issuance costs 3.0 2.3
Foreign currency losses (gains), net 20.2 (9.4 )
Miscellaneous, net 0.2   0.8  
Operating (loss) income (58.0 ) 5.2
 
Non-operating items:
Restructuring and related charges 5.5 4.6
Acquisition and integration costs 4.6 10.0
Oxford SAP disruption-related charges 23.1
Loss on disposal of minority investment 20.1
Acquisition inventory adjustments 1.2
Deferred consideration for CBB acquisition 0.8
Elizabeth Arden 2016 Business Transformation program   0.3  
Adjusted Operating (loss) income (4.7 ) 22.1
 
Non-cash stock compensation expense 0.8 2.7
Depreciation and amortization 40.6 36.7
   
Adjusted EBITDA $ 36.7   $ 61.5  
 

 
REVLON, INC. AND SUBSIDIARIES
SEGMENT PROFIT, ADJUSTED EBITDA AND ADJUSTED OPERATING LOSS
RECONCILIATION
(dollars in millions)
     

Six Months Ended
June 30,

2018 2017
(Unaudited)

 

Segment Net Sales:
Revlon $ 487.4 $ 533.3
Elizabeth Arden 211.8 196.8
Portfolio Brands 282.1 290.0
Fragrances 186.2   220.5  
Total Segment Net Sales $ 1,167.5   $ 1,240.6  
 
Segment Profit:
Revlon $ 38.8 $ 75.7
Elizabeth Arden (4.3 ) 0.7
Portfolio Brands (7.9 )
Fragrances 14.3   16.7  
Total Segment Profit/Adjusted EBITDA $ 40.9   $ 93.1  
 
Reconciliation to loss from continuing operations before income
taxes:
Loss from continuing operations before income taxes $ (217.5 ) $ (101.8 )
 
Interest expense 82.7 71.7
Amortization of debt issuance costs 5.3 4.5
Foreign currency gains, net 9.6 (13.7 )
Miscellaneous, net 0.2   1.4  
Operating loss (119.7 ) (37.9 )
 
Non-operating items:
Restructuring and related charges 11.0 5.7
Acquisition and integration costs 8.6 27.5
Oxford SAP disruption-related charges 33.1
Loss on disposal of minority investment 20.1
Acquisition inventory adjustments 17.2
Deferred consideration for CBB acquisition 1.7
Elizabeth Arden 2016 Business Transformation program   0.7  
Adjusted Operating loss (46.9 ) 14.9
 
Non-cash stock compensation expense 8.5 4.4
Depreciation and amortization 79.3 73.8
   
Adjusted EBITDA $ 40.9   $ 93.1  
 

 
REVLON, INC. AND SUBSIDIARIES
ADJUSTED NET SALES RECONCILIATION
(dollars in millions)
       
Three Months Ended
June 30,
2018 2017
(Unaudited)
 
Net Sales $ 606.8 $   645.7
 
Non-operating items:
Oxford SAP disruption-related charges 5.8  
 
Adjusted Net Sales $ 612.6   $   645.7
 
 
Six Months Ended
June 30,
2018 2017
(Unaudited)
 
Net Sales $ 1,167.5 $ 1,240.6
 
Non-operating items:

Oxford SAP disruption-related charges

5.8  
 
Adjusted Net Sales $ 1,173.3   $   1,240.6
 

 
REVLON, INC. AND SUBSIDIARIES
ADJUSTED GROSS PROFIT RECONCILIATION
(dollars in millions)
     

Three Months Ended
June 30,

2018 2017
(Unaudited)
 
Gross Profit $ 347.2 $   377.3
 
Non-operating items:
Restructuring and related charges (0.8 ) 0.2
Oxford SAP disruption-related charges 23.1
Acquisition inventory adjustments 1.2
Elizabeth Arden 2016 Business Transformation program 0.1
   
Adjusted Gross Profit $ 369.5   $   378.8
 
 

Six Months Ended
June 30,

2018 2017
(Unaudited)
 
Gross Profit $ 665.3 $ 706.7
 
Non-operating items:
Restructuring and related charges 0.3 0.2
Oxford SAP disruption-related charges 33.1
Acquisition inventory adjustments 17.2
Elizabeth Arden 2016 Business Transformation program 0.3
   
Adjusted Gross Profit $ 698.7   $   724.4
 

 
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
June 30,

2018 2017
(Unaudited)
 
Reconciliation to net loss and diluted loss per share:
Net loss $ (122.5 ) $ (36.5 )
 
Non-operating items (after-tax):
Restructuring and related charges 4.7 3.7
Acquisition and integration costs 3.6 6.7
Oxford SAP disruption-related charges 17.5
Loss on disposal of minority investment 15.5
Acquisition inventory adjustments 0.9
Deferred consideration for CBB acquisition 0.8
Elizabeth Arden 2016 Business Transformation program   0.2  
 
Adjusted net loss $ (81.2 ) $ (24.2 )
 
Net loss:
Diluted loss per common share (2.32 ) (0.70 )
Adjustment to diluted loss per common share 0.78     0.24  
Adjusted diluted loss per common share $ (1.54 ) $ (0.46 )
 
U.S. GAAP weighted average number of common shares outstanding:
Diluted 52,823,326   53,096,935  
 
 

Six Months Ended
June 30,

2018 2017
(Unaudited)
 
Reconciliation to net loss and diluted loss per share:
Net loss $ (212.8 ) $ (73.9 )
 
Non-operating items (after-tax):
Restructuring and related charges 9.0 5.1
Acquisition and integration costs 6.7 17.6
Oxford SAP disruption-related charges 25.1
Loss on disposal of minority investment 15.5
Acquisition inventory adjustments 12.7
Deferred consideration for CBB acquisition 1.7
Elizabeth Arden 2016 Business Transformation program   0.5  
 
Adjusted net (loss) income $ (156.5 ) $ (36.3 )
 
Net (loss) income:
Diluted loss per common share (4.03 ) (1.41 )
Adjustment to diluted loss per common share 1.06   0.72  
Adjusted diluted (loss) earnings per common share $ (2.97 ) $ (0.69 )
 
U.S. GAAP weighted average number of common shares outstanding:
Diluted 52,748,913   52,569,473  
 

 
REVLON, INC. AND SUBSIDIARIES
FREE CASH FLOW RECONCILIATION
(dollars in millions)
     

Six Months Ended
June 30,

2018 2017
(Unaudited)
 
Reconciliation to net cash used in operating activities:
 
Net cash used in operating activities $ (190.1 ) $ (139.2 )
 
Less capital expenditures (29.8 ) (39.6 )
   
Free cash flow $ (219.9 ) $ (178.8 )
 

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