SEC Filing | Revlon, Inc.

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rev-20200930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended September 30, 2020
			OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from__________________ to _______________

Commission File Number

Registrant; State of Incorporation; Address and Telephone Number

IRS Employer Identification No.

1-11178

Revlon, Inc.

13-3662955

Delaware

One New York Plaza

New York, New York 10004

212-527-4000

33-59650

Revlon Consumer Products Corporation

13-3662953

Delaware

One New York Plaza

New York, New York 10004

212-527-4000

Securities registered pursuant to Section 12(b) or 12(g) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Revlon, Inc.

Class A Common Stock

REV

New York Stock Exchange

Revlon Consumer Products Corporation

None

N/A

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.


Revlon, Inc.	Yes ☒	No ☐
Revlon Consumer Products Corporation	Yes ☐	No ☒

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

Emerging Growth Company

Revlon, Inc.

Yes ☐ No ☒

Yes ☒ No ☐

Yes ☐ No ☒

Yes

☒

No ☐

Yes

☐

No ☒

Revlon Consumer Products Corporation

Yes ☐ No ☒

Yes ☒ No ☐

Yes

☒

No ☐

Yes

☐

No ☒

If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Act).


Revlon, Inc.	Yes	☐	No ☒
Revlon Consumer Products Corporation	Yes	☐	No ☒

Number of shares of common stock outstanding as of September 30, 2020:


Revlon, Inc. Class A Common Stock:			53,330,303
Revlon Consumer Products Corporation Common Stock:			5,260

At such date, (i) 46,223,321 shares of Revlon, Inc. Class A Common Stock were beneficially owned by MacAndrews & Forbes Incorporated and certain of its affiliates; and (ii) all shares of Revlon Consumer Products Corporation ("Products Corporation") Common Stock were held by Revlon, Inc.

Products Corporation meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q as, among other things, all of Products Corporation's equity securities are owned directly by Revlon, Inc., which is a reporting company under the Securities Exchange Act of 1934, as amended, and which filed with the SEC on November 13, 2020 all of the material required to be filed pursuant to Section 13, 14 or 15(d) thereof. Products Corporation is therefore filing this Form 10-Q with a reduced disclosure format applicable to Products Corporation.

REVLON, INC. AND SUBSIDIARIES

INDEX


PART I - Financial Information
Item 1.	Financial Statements of Revlon, Inc. and Subsidiaries
	Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019	2
	Unaudited Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2020 and 2019	3
	Unaudited Consolidated Statement of Stockholders' Deficiency for the Three and Nine Months Ended September 30, 2020 and 2019	4
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	6
	Financial Statements of Revlon Consumer Products Corporation and Subsidiaries
	Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019	8
	Unaudited Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2020 and 2019	9
	Unaudited Consolidated Statement of Stockholders' Deficiency for the Three and Nine Months Ended September 30, 2020 and 2019	10
	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	11
	Combined Notes to Unaudited Consolidated Financial Statements	13
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	55
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	96
Item 4.	Controls and Procedures	97

PART II - Other Information
Item 1.	Legal Proceedings	105
Item 1A.	Risk Factors	105
Item 5.	Other Information	114
Item 6.	Exhibits	114
	Signatures

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REVLON, INC. AND SUBSIDIARIES

PART I - FINANCIAL INFORMATION

REVLON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(dollars in millions, except share and per share amounts)


	September 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	268.3	$	104.3
Trade receivables, less allowance for doubtful accounts of $12.4 and $11.4 as of September 30, 2020 and December 31, 2019, respectively	340.8		423.4
Inventories, net	525.5		448.4
Prepaid expenses and other assets	140.8		135.3
Total current assets	1,275.4		1,111.4
Property, plant and equipment, net of accumulated depreciation of $530.3 and $488.1 as of September 30, 2020 and December 31, 2019, respectively	355.8		408.6
Deferred income taxes	230.5		175.1
Goodwill	563.2		673.7
Intangible assets, net of accumulated amortization and impairment of $286.7 and $226.4 as of September 30, 2020 and December 31, 2019, respectively	435.9		490.7
Other assets	112.5		121.1
Total assets	$	2,973.3	$	2,980.6

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities:
Short-term borrowings	$	2.0	$	2.2
Current portion of long-term debt	704.5		288.0
Accounts payable	219.9		251.8
Accrued expenses and other current liabilities	387.9		414.9

Total current liabilities	1,314.3		956.9
Long-term debt	2,926.5		2,906.2
Long-term pension and other post-retirement plan liabilities	166.7		181.2
Other long-term liabilities	148.7		157.5

Stockholders’ deficiency:
Class A Common Stock, par value $0.01 per share: 900,000,000 shares authorized; 57,674,817 and 56,470,490 shares issued as of September 30, 2020 and December 31, 2019, respectively	0.5		0.5
Additional paid-in capital	1,080.5		1,071.9
Treasury stock, at cost: 1,771,032 and 1,625,580 shares of Class A Common Stock as of September 30, 2020 and December 31, 2019, respectively	(35.2)		(33.5)
Accumulated deficit	(2,397.9)		(2,012.7)
Accumulated other comprehensive loss	(230.8)		(247.4)
Total stockholders’ deficiency	(1,582.9)		(1,221.2)
Total liabilities and stockholders’ deficiency	$	2,973.3	$	2,980.6

See Accompanying Notes to Unaudited Consolidated Financial Statements

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REVLON, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(dollars in millions, except share and per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,

	2020		2019		2020		2019

Net sales	$	477.1	$	596.8	$	1,277.7	$	1,720.2
Cost of sales	234.3		269.0		600.7		750.7
Gross profit	242.8		327.8		677.0		969.5
Selling, general and administrative expenses	253.4		308.1		739.1		973.2
Acquisition, integration and divestiture costs	0.9		0.1		4.2		0.7
Restructuring charges and other, net	(0.7)		2.9		44.8		11.6
Impairment charges	—		—		144.1		—
Gain on divested assets	(1.1)		—		(0.5)		—
Operating (loss) income	(9.7)		16.7		(254.7)		(16.0)
Other expenses:
Interest expense, net	68.7		50.2		178.0		145.7

Amortization of debt issuance costs	7.8		3.7		17.8		10.4
Gain on early extinguishment of debt	(31.2)		—		(43.1)		—
Foreign currency (gains) losses, net	(9.8)		7.6		9.1		9.0
Miscellaneous, net	(2.6)		1.7		13.9		7.6
Other expenses	32.9		63.2		175.7		172.7
Loss from continuing operations before income taxes	(42.6)		(46.5)		(430.4)		(188.7)
Provision for (benefit from) income taxes	1.9		(2.1)		(45.2)		(3.2)
Loss from continuing operations, net of taxes	(44.5)		(44.4)		(385.2)		(185.5)
(Loss) income from discontinued operations, net of taxes	—		(0.3)		—		2.0
Net loss	$	(44.5)	$	(44.7)	$	(385.2)	$	(183.5)
Other comprehensive income (loss):
Foreign currency translation adjustments	2.2		(1.8)		7.3		(0.5)
Amortization of pension related costs, net of tax(a)(b)	2.8		2.3		9.3		7.2





Other comprehensive income, net	5.0		0.5		16.6		6.7
Total comprehensive loss	$	(39.5)	$	(44.2)	$	(368.6)	$	(176.8)

Basic and Diluted (loss) earnings per common share:
Continuing operations	$	(0.83)	$	(0.84)	$	(7.22)	$	(3.50)
Discontinued operations	—		—		—		0.04
Net loss	$	(0.83)	$	(0.84)	$	(7.22)	$	(3.46)






Weighted average number of common shares outstanding:
Basic	53,476,354		53,129,004		53,371,986		53,057,154
Diluted	53,476,354		53,129,004		53,371,986		53,057,154

(a) Net of a $0.5 million tax expense and $0.3 million of tax expense for the three months ended September 30, 2020 and 2019, respectively, and net of a $0.7 million tax benefit and $0.9 million of tax expense for the nine months ended September 30, 2020 and 2019, respectively.

(b) This amount is included in the computation of net periodic benefit costs (income). See Note 10, "Pension and Post-Retirement Benefits," for additional information regarding net periodic benefit costs (income).

See Accompanying Notes to Unaudited Consolidated Financial Statements

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REVLON, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY

(dollars in millions, except share and per share amounts)


	Common Stock		Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Deficiency

Balance, January 1, 2020	$	0.5	$	1,071.9	$	(33.5)	$	(2,012.7)	$	(247.4)	$	(1,221.2)
Treasury stock acquired, at cost (a)	—		—		(0.4)		—		—		(0.4)
Stock-based compensation amortization	—		2.4		—		—		—		2.4
Net loss	—		—		—		(213.9)		—		(213.9)
Other comprehensive (loss) income, net (b)	—		—		—		—		(2.7)		(2.7)
Balance, March 31, 2020	0.5		1,074.3		(33.9)		(2,226.6)		(250.1)		(1,435.8)
Treasury stock acquired, at cost (a)	—		—		(1.3)		—		—		(1.3)
Stock-based compensation amortization	—		1.1		—		—		—		1.1
Net loss	—		—		—		(126.8)		—		(126.8)
Other comprehensive (loss) income, net (b)	—		—		—		—		14.3		14.3
Balance, June 30, 2020	0.5		1,075.4		(35.2)		(2,353.4)		(235.8)		(1,548.5)





Treasury stock acquired, at cost (a)	—		—		—		—		—		—
Stock-based compensation amortization	—		5.1		—		—		—		5.1
Net loss	—		—		—		(44.5)		—		(44.5)
Other comprehensive (loss) income, net (b)	—		—		—		—		5.0		5.0
Balance, September 30, 2020	$	0.5	$	1,080.5	$	(35.2)	$	(2,397.9)	$	(230.8)	$	(1,582.9)


	Common Stock		Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Deficiency
Balance, January 1, 2019	$	0.5	$	1,063.8	$	(31.9)	$	(1,855.0)	$	(234.2)	$	(1,056.8)
Treasury stock acquired, at cost (a)	—		—		(1.6)		—		—		(1.6)
Stock-based compensation amortization	—		0.4		—		—		—		0.4
Net loss	—		—		—		(75.1)		—		(75.1)
Other comprehensive (loss) income, net (b)	—		—		—		—		0.9		0.9
Balance, March 31, 2019	0.5		1,064.2		(33.5)		(1,930.1)		(233.3)		(1,132.2)
Treasury stock acquired, at cost (a)	—		—		—		—		—		—
Stock-based compensation amortization	—		3.4		—		—		—		3.4
Net loss	—		—		—		(63.7)		—		(63.7)
Other comprehensive (loss) income, net (b)	—		—		—		—		5.3		5.3
Balance, June 30, 2019	$	0.5	$	1,067.6	$	(33.5)	$	(1,993.8)	$	(228.0)	$	(1,187.2)





Treasury stock acquired, at cost (a)	—		—		—		—		—		—
Stock-based compensation amortization	—		3.9		—		—		—		3.9
Net loss	—		—		—		(44.7)		—		(44.7)
Other comprehensive (loss) income, net (b)	—		—		—		—		0.5		0.5
Balance, September 30, 2019	$	0.5	$	1,071.5	$	(33.5)	$	(2,038.5)	$	(227.5)	$	(1,227.5)

(a) Pursuant to the share withholding provisions of the Fourth Amended and Restated Revlon, Inc. Stock Plan (as amended, the "Stock Plan"), the Company withheld an aggregate of 756 and nil shares of Revlon Class A Common Stock during the three months ended September 30, 2020 and 2019, and 127,725 and 85,607 shares of Revlon Class A Common Stock during the nine months ended September 30, 2020 and 2019, respectively, to satisfy certain minimum statutory tax withholding requirements related to the vesting of restricted shares and restricted stock units ("RSUs") for certain senior executives and employees. These withheld shares were recorded as treasury stock using the cost method, at a weighted-average price per share of $8.50 and nil during the

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three months ended September 30, 2020 and 2019, and $12.99 and $18.86 during the nine months ended September 30, 2020 and 2019, respectively, based on the closing price of Revlon Class A Common Stock as reported on the New York Stock Exchange (the "NYSE") consolidated tape on each respective vesting date, for a total of approximately $6,400 and nil during the three months ended September 30, 2020 and 2019, $1.6 million and $1.6 million during the nine months ended September 30, 2020 and 2019, See Note 11, "Stock Compensation Plan," for details regarding restricted stock awards and RSUs under the Stock Plan.

(b) See Note 13, "Accumulated Other Comprehensive Loss," regarding the changes in the accumulated balances for each component of other comprehensive loss during the nine months ended September 30, 2020 and 2019, respectively.

See Accompanying Notes to Unaudited Consolidated Financial Statements

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REVLON, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)


	Nine Months Ended September 30,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(385.2)	$	(183.5)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	108.3		124.6
Foreign currency losses from re-measurement	9.1		9.0
Amortization of debt discount	1.3		1.2
Stock-based compensation amortization	8.6		7.7
Impairment charges	144.1		—
Benefit from deferred income taxes	(54.4)		(19.0)

Amortization of debt issuance costs	17.8		10.4

Gain on divested assets	(0.5)		—
Pension and other post-retirement cost	4.2		6.3
Gain on early extinguishment of debt	(43.1)		—
Paid-in-kind interest accrued on the 2020 BrandCo Facilities	6.2		—
Change in assets and liabilities:
Decrease (increase) in trade receivables	78.0		(30.5)
Increase in inventories	(79.4)		(4.9)
Increase in prepaid expenses and other current assets	(1.7)		(5.5)
(Decrease) increase in accounts payable	(27.8)		9.1
Decrease in accrued expenses and other current liabilities	(25.2)		(81.0)
Pension and other post-retirement plan contributions	(7.5)		(7.8)
Purchases of permanent displays	(16.5)		(28.4)
Other, net	6.8		25.5
Net cash used in operating activities	(256.9)		(166.8)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(7.4)		(20.0)



Net cash used in investing activities	(7.4)		(20.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings and overdraft	(0.7)		(22.4)
Borrowings under the 2020 BrandCo Facilities	880.0		—