Revlon Reports Second Quarter 2022 Results

NEW YORK–(BUSINESS WIRE)–Revlon, Inc. (NYSE: REV) today announced its results for the quarter ended June 30, 2022, in its Form 10-Q filed with the Securities and Exchange Commission. During the quarter, the Company commenced a voluntary Chapter 11 financial restructuring supported by $575 million of new money debtor-in-possession financing. Due to the pending Chapter 11 cases, the Company will not host an earnings call this quarter.

 

Second Quarter Financial Results¹

• As Reported net sales were $442.6 million in the second quarter of 2022, compared to $497.4 million during the prior-year period, a decrease of $54.8 million, or 11.0%.
• As Reported operating loss was $29.5 million in the second quarter of 2022, compared to an operating income of $14.5 million during the prior-year period, a decrease of $44.0 million. The lower operating income was driven primarily by lower As Reported net sales, a gross margin decline of -370bps, and impairment charges of $24.3 million, offset by $26.4 million in lower selling, general and administrative expenses (SG&A), and $5.3 million in lower restructuring charges. Adjusted operating income in the second quarter of 2022 decreased by $9.5 million to $18.7 million from $28.2 million over the prior-year period.
• Adjusted EBITDA^(a) in the second quarter of 2022 was $51.8 million, versus $63.9 million in the prior-year period. The lower Adjusted EBITDA was driven primarily by lower As Reported net sales and lower As Reported operating income.
• As Reported net loss was $275.6 million in the second quarter of 2022, versus a $67.7 million net loss in the prior-year period. The higher net loss was primarily driven by $158.3 million of charges related to the Company’s Chapter 11 filing, lower operating income, and higher foreign currency losses of $15.9 million, offset by $7.7 million in lower tax provisions and $4.4 million of lower interest expense over the prior-year period.
• Net cash used in operating activities in the second quarter of 2022 was $44.5 million, compared to a $39.3 million use of cash in the prior-year period. The increase in cash used in operating activities was primarily driven by a higher As Reported net loss offset by favorable working capital changes. Free cash flow^(a) in the second quarter of 2022 was a $49.0 million use of cash, compared to a $42.2 million use of cash in the prior-year period.
• As of June 30, 2022, the Company had approximately $311.2 million of available liquidity, consisting of $312.5 million of unrestricted cash and cash equivalents, less float of approximately $1.3 million.

¹ The results discussed include the following measures: U.S. GAAP (“As Reported”); and non-GAAP (“Adjusted”), which excludes certain Non-Operating Items and EBITDA Exclusions (as defined in Footnote (a)) from As Reported results. See footnote (a) for further discussion of the Company’s Adjusted measures. Reconciliations of As Reported results to Adjusted results are provided as an attachment to this release. In addition, where indicated, the Company analyzes and presents its results excluding the impact of foreign currency translation (“XFX”). Unless otherwise noted, the discussion is presented on an As Reported basis.

Financial Restructuring and Chapter 11 Process

• As previously announced, Revlon, Inc. and certain of its subsidiaries in the United States, Canada, and United Kingdom (the “Debtors”) filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code (the “Chapter 11 Cases”) on June 15, 2022, in the U.S. Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). The Company commenced the Chapter 11 Cases to implement a comprehensive financial restructuring of Revlon’s legacy capital structure and improve its long-term outlook.
• Pursuant to motions filed with the Bankruptcy Court, the Bankruptcy Court authorized the Debtors to conduct their business activities in the ordinary course.
• In connection with the Chapter 11 Cases, the Company has received $575 million of new money debtor-in-possession financing under a superpriority, senior secured and priming term loan credit facility from certain of its existing lenders (the “DIP Term Loan”). The Company also entered into a superpriority, senior secured and priming revolving credit facility. This facility will provide one tranche of $270 million in revolving commitments, subject to a refinancing of approximately $109 million of prepetition debt and a borrowing base limit, and a second tranche that refinances an additional $130 million in prepetition debt (along with the DIP Term Loan, the “DIP Financing”). The proceeds of the DIP Financing are being used to refinance certain of the Company’s debt obligations and for general corporate purposes. The DIP Financing is expected to provide sufficient liquidity to support the Company’s ordinary course operations. As of June 30, 2022, the Debtors had cash on hand of $312.5 million.
• Additional information, including court filings and other documents related to the court-supervised process, is available on the Company’s restructuring website at https://cases.ra.kroll.com/Revlon, by emailing revloninfo@ra.kroll.com or by calling (855) 631-5341 (toll free) or (646) 795-6968 (international).

About Revlon, Inc.

Revlon, Inc. is a leading global beauty company with a portfolio of iconic brands that transform the lives of women and men around the world. Our Company manufactures and markets color cosmetics, hair color and care, skincare, beauty care and fragrances through a diverse portfolio of 15+ brands sold in more than 150 countries.

Footnotes to Press Release

^(a) Non-GAAP Financial Measures: EBITDA; Adjusted EBITDA; Adjusted net sales; Adjusted operating loss/income; Adjusted net income/loss; Adjusted gross profit; Adjusted gross profit margin; Adjusted diluted loss per common share and free cash flow (together, the “Non-GAAP Measures”) are non-GAAP financial measures. See the reconciliations of such Non-GAAP Measures to their most directly comparable GAAP measures in the accompanying financial tables, to the extent not otherwise directly reconciled in the Company’s financial results.

The Company defines EBITDA as income from continuing operations before interest, taxes, depreciation, amortization, gains/losses on foreign currency fluctuations, gains/losses on the early extinguishment of debt and miscellaneous expenses (the foregoing being the “EBITDA Exclusions”). The Company presents Adjusted EBITDA to exclude the EBITDA Exclusions, as well as the impact of non-cash stock-based compensation expense and certain other non-operating items that are not directly attributable to the Company’s underlying operating performance (the “Non-Operating Items”). The following table identifies the Non-Operating Items excluded in the presentation of Adjusted EBITDA for all periods:

Adjusted net loss and adjusted diluted loss per common share exclude the after-tax impact of the Non-Operating Items from As Reported net loss.

The Company excludes the EBITDA Exclusions and Non-Operating Items, as applicable, in calculating the Non-GAAP Measures because the Company’s management believes that some of these items may not occur in certain periods, the amounts recognized can vary significantly from period to period and/or these items do not facilitate an understanding of the Company’s underlying operating performance.

Free cash flow is defined as net cash provided by/used in operating activities, less capital expenditures for property, plant and equipment. Free cash flow excludes proceeds on sale of discontinued operations. Free cash flow does not represent the residual cash flow available for discretionary expenditures, as it excludes certain expenditures such as mandatory debt service requirements, which for the Company are significant.

The Company’s management uses the Non-GAAP Measures as operating performance measures, and in the case of free cash flow, as a liquidity measure (in conjunction with GAAP financial measures), as an integral part of its reporting and planning processes and to, among other things: (i) monitor and evaluate the performance of the Company’s business operations, financial performance and overall liquidity; (ii) facilitate management’s internal comparisons of the Company’s historical operating performance of its business operations; (iii) facilitate management’s external comparisons of the results of its overall business to the historical operating performance of other companies that may have different capital structures and debt levels; (iv) review and assess the operating performance of the Company’s management team and, together with other operational objectives, as a measure in evaluating employee compensation, including bonuses and other incentive compensation; (v) analyze and evaluate financial and strategic planning decisions regarding future operating investments; and (vi) plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

Management believes that the Non-GAAP Measures are useful to investors to provide them with disclosures of the Company’s operating results on the same basis as that used by management. Management believes that the Non-GAAP Measures provide useful information to investors about the performance of the Company’s overall business because such measures eliminate the effects of certain charges that are not directly attributable to the Company’s underlying operating performance. Additionally, management believes that providing the Non-GAAP Measures enhances the comparability for investors in assessing the Company’s financial reporting. Management believes that free cash flow is useful for investors because it provides them with an important perspective on the cash available for debt service and other strategic measures, after making necessary capital investments in property and equipment to support the Company’s ongoing business operations, and provides them with the same measures that management uses as the basis for making resource allocation decisions.

Accordingly, the Company believes that the presentation of the Non-GAAP Measures, when used in conjunction with GAAP financial measures, are useful financial analytical measures that are used by management, as described above, and therefore can assist investors in assessing the Company’s financial condition, operating performance and underlying strength. The Non-GAAP Measures should not be considered in isolation or as a substitute for their respective most directly comparable As Reported financial measures prepared in accordance with GAAP, such as net income/loss, operating income/loss, diluted earnings/loss per share or net cash provided by (used in) operating activities. Other companies may define such non-GAAP measures differently. Also, while EBITDA and Adjusted EBITDA, as used in this release, are defined differently than Adjusted EBITDA for the Company’s credit agreements and indentures, certain financial covenants in its borrowing arrangements are tied to similar financial measures. These non-GAAP financial measures should be read in conjunction with the Company’s financial statements and related footnotes filed with the SEC.