Revlon Reports Fourth Quarter and Full Year 2020 Results
Quarterly Results Reflect Sequential Improvement in Top-Line with Strong E-Commerce Channel Growth, Now Representing Approximately 20% of Net Sales
Continued Cost Reductions from the Company’s Restructuring Program Drove Improved Gross Margin Performance
NEW YORK–(BUSINESS WIRE)–Revlon, Inc. (NYSE: REV) (“Revlon” and together with its subsidiaries, the “Company”) today announced its results for the quarter ended and year ended December 31, 2020.
Quarter ended December 31, 2020 summary developments:1
- As Reported net sales were $626.6 million in the fourth quarter of 2020, compared to $699.4 million during the prior-year period, a decline of $72.8 million, or 10.4%. E-commerce net sales increased approximately 39% versus the prior-year period and represented approximately 20% of fourth quarter 2020 net sales, versus approximately 13% in the prior-year period. The Company experienced strong double-digit growth in most regions across its mass, prestige and professional e-commerce businesses. As Reported net sales include approximately $118 million of estimated negative impacts associated with the ongoing and prolonged COVID-19 pandemic. Excluding the COVID-19 impacts, As Reported net sales increased by $45.2 million, or 6.5%, as compared to the prior-year period.
- As Reported operating income was $28.4 million in the fourth quarter of 2020, compared to $76.7 million during the prior-year period. The lower operating income was driven primarily by the adverse impacts of the COVID-19 pandemic impact on net sales, sales mix and higher manufacturing overhead absorption costs along with costs associated with the Company’s various debt refinancing activities. These negative impacts were partially offset by $10.7 million in lower selling, general and administrative expenses (SG&A), driven in part by cost reductions associated with the Company’s restructuring program and additional actions specifically implemented to mitigate the adverse impact of the COVID-19 pandemic on the Company’s operating results. Despite the higher costs associated with the impacts of the COVID-19 pandemic, the Company was able to improve its gross margin by160 basis points, driven by cost reductions associated with the Company’s restructuring program along with favorable foreign currency impacts. Adjusted operating income in the fourth quarter of 2020 increased by $1.8 million to $75.0 million from $73.2 million in the prior-year period.
- As Reported net loss was $233.8 million in the fourth quarter of 2020, versus $25.8 million net income in the prior-year period. The net loss was driven primarily by a $189.5 million non-cash charge related to an increase in the valuation allowance for the Company’s net federal deferred tax assets as well as higher interest expense of $14.4 million. The Adjusted Net Income was $32.7 million in the fourth quarter of 2020, compared to Adjusted Net Income of $23.6 million during the prior-year period.
- Adjusted EBITDA(a) in the fourth quarter of 2020 was $111.8 million, comparable to the prior-year period. Despite the impact of the COVID-19 pandemic to net sales, the Company was able to improve its Adjusted EBITDA margin to 17.8% during the fourth quarter of 2020, versus 15.7% in the prior-year period. The Company achieved this expansion of Adjusted EBITDA margin through prioritization of brand support focused primarily on e-commerce and priority or lead growth areas, indirect spend control, and the ongoing cost reduction initiatives from the previously announced Revlon 2020 Restructuring Program.
- The 2020 Restructuring Program is on track to achieve the previously announced $200 million to $230 million of annualized cost reductions by the end of 2022. The Company achieved $127 million of cost reductions under this program during 2020.
- As of December 31, 2020, the Company had total liquidity of $249.9 million.
- During March 2021, the Company extended or refinanced two of its maturing debt facilities:
- On March 8, 2021, the Company closed an amendment to its 2016 $450 million asset-based revolving credit agreement with Citibank, N.A. as the collateral agent and administrative agent. The amendment, among other things, extends the scheduled maturity of the revolving credit facility thereunder from September 2021 to June 8, 2023.
- On March 2, 2021, the Company closed on a $75 million asset-based term loan facility with Blue Torch Finance LLC as the collateral agent and administrative agent. The new facility, which is scheduled to mature on March 2, 2024, replaces the 2018 Foreign Asset-Based Term Loan that was scheduled to mature in July 2021. The proceeds of the term loan were used to repay the Company’s 2018 foreign asset-based term loan and fund the Company’s ongoing liquidity needs.
- As previously announced, the Company’s Exchange Offer and Consent Solicitation was successfully closed on November 13, 2020, and the 5.75% Senior Notes due 2021 and accrued interest were immediately retired with the closure.
“In the fourth quarter of 2020, we continued to see positive developments tracing back to the transformational initiatives begun in the second half of 2018 to rationalize the business, capture our share of the E-commerce channel, and launch new products in the segments that will add the greatest value to the Company. While these initiatives, including the Revlon 2020 Restructuring Program, were designed with a long-term view of our business, they have also been essential in helping to mitigate the ongoing effects of COVID-19. The impact of our disciplined expense controls and cost cutting measures was reflected in our adjusted EBITDA margin, which improved approximately 200 basis points from last quarter. We also saw yet another sequential improvement in our net sales decline – continuing a trend from the prior two quarters.
“We are seeing signs of broader positive momentum in the business, and with several major 2020 challenges behind us we believe we are well positioned to capture the reemerging opportunities in the beauty industry. We continue to execute against the key pillars of our strategy, including driving growth in our iconic brands of Revlon and Elizabeth Arden, key markets such as China, and accelerating our e-commerce business. This remained our focus throughout 2020 and we are committed to delivering against these plans in 2021,” said Debra Perelman, Revlon’s President and Chief Executive Officer.
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.
Fourth Quarter 2020 Results
Total Company Results
In calculating Adjusted results, adjustments were made for the Non-Operating Items and the EBITDA Exclusions in the case of Adjusted EBITDA, in each case as described in footnote (a).
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| Three Months Ended December 31, | ||||||||||||||||||||
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| 2020 |
| 2019 |
| As |
| Adjusted | ||||||||||||||
| (USD millions, except per share data) |
| As |
| Adjusted |
| As |
| Adjusted |
| % Change |
| % Change | ||||||||||
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| Net Sales |
| $ | 626.6 |
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| $ | 626.6 |
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| $ | 699.4 |
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| $ | 712.6 |
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| (10.4) | % |
| (12.1) | % |
| Gross Profit |
| 366.8 |
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| 375.5 |
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| 397.9 |
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| 411.9 |
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| (7.8) | % |
| (8.8) | % | ||||
| Gross Margin |
| 58.5 | % |
| 59.9 | % |
| 56.9 | % |
| 57.8 | % |
| 160bps |
| 210bps | ||||||
| Operating Income |
| $ | 28.4 |
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| $ | 75.0 |
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| $ | 76.7 |
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| $ | 73.2 |
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| (63.0) | % |
| 2.5 | % |
| Net (Loss) Income |
| (233.8) |
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| 32.7 |
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| 25.8 |
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| 23.6 |
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| N/M |
| 38.6 | % | |||||
| Adjusted EBITDA |
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| 111.8 |
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| 111.9 |
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| (0.1) | % | |||||||
| Diluted (Loss) Income per Common Share |
| $ | (4.37) |
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| $ | 0.61 |
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| $ | 0.49 |
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| $ | 0.44 |
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| N/M |
| 38.6 | % | |
(*) Refer to footnote (a) to this Earnings Release for a discussion and reconciliation of the Company’s non-GAAP measures, including Adjusted Net Sales, Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted Operating Income (Loss), Adjusted Net Income (Loss), Adjusted EBITDA and Adjusted Diluted Loss per Common Share.
Segment Results
The Company operates in four reporting segments: Revlon; Elizabeth Arden; Portfolio; and Fragrances:
- Revlon – The Revlon segment is comprised of the Company’s flagship Revlon brands. Revlon segment products are primarily marketed, distributed and sold in the mass retail channel, large volume retailers, chain drug and food stores, chemist shops, hypermarkets, general merchandise stores, e-commerce sites, television shopping, department stores, professional hair and nail salons, one-stop shopping beauty retailers and specialty cosmetic stores in the U.S. and internationally under brands such as Revlon in color cosmetics; Revlon ColorSilk and Revlon Professional in hair color; and Revlon in beauty tools.
- Elizabeth Arden – The Elizabeth Arden segment is comprised of the Company’s Elizabeth Arden branded products. The Elizabeth Arden segment markets, distributes and sells fragrances, skin care and color cosmetics primarily to prestige retailers, department and specialty stores, perfumeries, boutiques, e-commerce sites, the mass retail channel, travel retailers and distributors, as well as direct sales to consumers via its Elizabeth Arden branded retail stores and elizabetharden.com e-commerce website, in the U.S. and internationally, under brands such as Elizabeth Arden Ceramide, Prevage, Eight Hour, SUPERSTART, Visible Difference and Skin Illuminating in the Elizabeth Arden skin care brands; and Elizabeth Arden White Tea, Elizabeth Arden Red Door, Elizabeth Arden 5th Avenue and Elizabeth Arden Green Tea in Elizabeth Arden fragrances.
- Portfolio – The Company’s Portfolio segment markets, distributes and sells a comprehensive line of premium, specialty and mass products primarily to the mass retail channel, hair and nail salons and professional salon distributors in the U.S. and internationally and large volume retailers, specialty and department stores under brands such as Almay and SinfulColors in color cosmetics; American Crew in men’s grooming products (which are also sold direct-to-consumer on its americancrew.com website); CND in nail polishes, gel nail color and nail enhancements; Cutex in nail care 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 both professional salons and in large volume retailers and other retailers, primarily in the U.S.; and a hair color line under the Llongueras brand (licensed from a third party) that is sold in the mass retail channel, large volume retailers and other retailers, primarily in Spain.
- Fragrances – The Fragrances segment includes the development, marketing and distribution of certain owned and licensed fragrances, as well as the distribution of prestige fragrance brands owned by third parties. These products are typically sold to retailers in the U.S. and internationally, including prestige retailers, specialty stores, e-commerce sites, the mass retail channel, travel retailers and other international retailers. The owned and licensed fragrances include brands such as: (i) Juicy Couture (which are also sold direct-to-consumer on its juicycouturebeauty.com website), John Varvatos and AllSaints in prestige fragrances; (ii) Britney Spears, Elizabeth Taylor, Christina Aguilera, Jennifer Aniston and Mariah Carey in celebrity fragrances; and (iii) Curve, Giorgio Beverly Hills, Ed Hardy, Charlie, Lucky Brand, ‹PS› (logo of former Paul Sebastian brand), Alfred Sung, Halston, Geoffrey Beene, and White Diamonds in mass fragrances.
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| Three Months Ended December 31, | ||||||||||||
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| Net Sales | ||||||||||||
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| As Reported |
| As Reported | ||||||||||
| (USD millions) |
| 2020 |
| 2019 |
| % Change |
| XFX | ||||||
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| Revlon |
| $ | 205.6 |
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| $ | 242.7 |
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| (15.3) | % |
| (16.4) | % |
| Elizabeth Arden |
| 181.1 |
| 168.0 |
| 7.8 | % |
| 3.8 | % | ||||
| Portfolio |
| 103.2 |
| 133.7 |
| (22.8) | % |
| (23.4) | % | ||||
| Fragrances |
| 136.7 |
| 155.0 |
| (11.8) | % |
| (12.4) | % | ||||
| Total |
| $ | 626.6 |
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| $ | 699.4 |
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| (10.4) | % |
| (12.0) | % |
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| Three Months Ended December 31, | ||||||||||||
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| Segment Profit | ||||||||||||
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| As Reported |
| As Reported | ||||||||||
| (USD millions) |
| 2020 |
| 2019 |
| % Change |
| XFX | ||||||
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| Revlon |
| $ | 45.1 |
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| $ | 42.7 |
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| 5.6 | % |
| 4.2 | % |
| Elizabeth Arden |
| 21.2 |
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| 20.5 |
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| 3.4 | % |
| (2.0) | % | ||
| Portfolio |
| 13.5 |
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| 20.0 |
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| (32.5) | % |
| (34.5) | % | ||
| Fragrances |
| 32.0 |
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| 28.7 |
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| 11.5 | % |
| 10.8 | % | ||
| Total |
| $ | 111.8 |
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| $ | 111.9 |
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| (0.1) | % |
| (2.1) | % |
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Revlon Segment
Revlon segment net sales in the fourth quarter of 2020 were $205.6 million, a $37.1 million or 15.3% (or 16.4% XFX) decrease compared to the prior-year period, with the ongoing COVID-19 pandemic contributing an estimated $51 million (or $50 million XFX) to the decrease. The segment’s lower net sales were driven primarily by Revlon color cosmetics, lower international net sales of Revlon-branded professional products, Revlon ColorSilk hair care, as well as other Revlon-branded hair care, due primarily to the ongoing effects of the COVID-19 pandemic on the mass retail channel and on salons. This decrease was partially offset by higher net sales of Revlon-branded beauty tools.
Revlon segment profit in the fourth quarter of 2020 was $45.1 million, compared to $42.7 million in the prior-year period, an increase driven primarily by the segment’s lower brand support, lower customer allowances, and lower SG&A expenses, driven by cost reductions achieved through the Company’s initiatives designed to mitigate the adverse impact of COVID-19 on the Company’s operating results, as well as the Revlon 2020 Restructuring Program. These gains were partially offset by lower net sales and lower gross profit margin.
Elizabeth Arden Segment
Elizabeth Arden segment net sales in the fourth quarter of 2020 were $181.1 million, a $13.1 million or 7.8% (or 3.8% XFX) increase compared to the prior-year period, with the ongoing COVID-19 pandemic impacting net sales by an estimated $25 million (or $24 million XFX). The higher net sales were driven by Ceramide, Prevage, and the Green and White Tea fragrances, as well as our e-commerce channel, particularly the Company’s ElizabethArden.com site, which grew over 70%, as well as in China where net sales grew by approximately 54% in the fourth quarter over the prior-year period. This growth was partially offset by lower net sales of Eight Hour and other Elizabeth Arden-branded color products.
Elizabeth Arden segment profit in the fourth quarter of 2020 was $21.2 million, compared to $20.5 million in the prior-year period, an increase primarily due to the segment’s higher net sales, partially offset by higher returns and allowances, as well as higher brand support costs.
Portfolio Segment
Portfolio segment net sales in the fourth quarter of 2020 were $103.2 million, a $30.5 million, or 22.8% (or 23.4% XFX) decrease compared to the prior-year period, with COVID-19 contributing an estimated $27 million (or $26 million XFX) to the decrease. The decrease in segment net sales was driven primarily by Almay color cosmetics, American Crew men’s grooming products, and CND nail products, primarily in North America and EMEA, due, in part, to the continuing effects of COVID-19 on the mass retail channel and salons.
Portfolio segment profit in the fourth quarter of 2020 was $13.5 million, compared to $20.0 million in the prior-year period, driven by the segment’s lower net sales and lower gross profit margin, partially offset by lower SG&A expenses and brand support expenses, driven by cost reductions achieved through the Company’s initiatives designed to mitigate the adverse impact of COVID-19 on the Company’s operating results, as well as the Revlon 2020 Restructuring Program.
Fragrances Segment
Fragrances segment net sales in the fourth quarter of 2020 were $136.7 million, an $18.3 million, or 11.8% (or 12.4% XFX) decrease compared to the prior-year period, with COVID-19 contributing an estimated $16 million (or $15 million XFX) to the decrease. The segment’s lower net sales were driven primarily by the continuing impacts from COVID-19, especially in the U.S. mass retail channel, and certain licensed fragrances.
Fragrances segment profit in the fourth quarter of 2020 was $32.0 million, compared to $28.7 million in the prior-year period, primarily as a result of lower SG&A expenses and brand support expenses, driven by cost reductions achieved through the Company’s initiatives designed to mitigate the adverse impact of COVID-19 on the Company’s operating results, as well as the Revlon 2020 Restructuring Program, partially offset by the segment’s lower net sales and lower gross profit margin.
Geographic Net Sales
Overall, As Reported total net sales decreased by 10.4% (or 12.0% XFX) in the fourth quarter of 2020, compared to the prior-year period, as detailed below by segment for the Company’s North America and International Regions.
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| Three Months Ended December 31, |
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| (USD millions) |
| 2020 |
| 2019 |
| As Reported |
| As Reported |
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| Net Sales: |
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| Revlon |
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| North America |
| $ | 115.4 |
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| $ | 129.3 |
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| (10.8) | % |
| (10.8) | % |
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| International |
| 90.2 |
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| 113.4 |
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| (20.5) | % |
| (22.8) | % |
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| Elizabeth Arden |
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| North America |
| $ | 37.5 |
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| $ | 36.5 |
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| 2.7 | % |
| 2.7 | % |
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| International |
| 143.6 |
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| 131.5 |
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| 9.2 | % |
| 4.0 | % |
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| Portfolio |
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| North America |
| $ | 65.1 |
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| $ | 84.4 |
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| (22.9) | % |
| (23.0) | % |
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| International |
| 38.1 |
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| 49.3 |
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| (22.7) | % |
| (24.1) | % |
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| Fragrances |
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| North America |
| $ | 102.3 |
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| $ | 110.8 |
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| (7.7) | % |
| (7.7) | % |
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| International |
| 34.4 |
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| 44.2 |
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| (22.2) | % |
| (24.2) | % |
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| Total Net Sales |
| $ | 626.6 |
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| $ | 699.4 |
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| (10.4) | % |
| (12.0) | % |
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| Total Net Sales Summary |
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| North America |
| $ | 320.3 |
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| $ | 361.0 |
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| (11.3) | % |
| (11.3) | % |
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| International |
| 306.3 |
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| 338.4 |
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| (9.5) | % |
| (12.7) | % |
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Revlon Segment
In North America, Revlon segment net sales of $115.4 million in the fourth quarter of 2020 decreased by $13.9 million, or 10.8% (or 10.8% XFX), compared to the prior-year period, with COVID-19 contributing an estimated $21 million (or $21 million XFX) to the decrease. The segment’s lower net sales in North America were primarily driven by lower net sales of Revlon color cosmetics, Revlon ColorSilk hair care products, and other Revlon-branded hair care products, due to the continuing effects of COVID-19 on the mass retail channel, partially offset by higher net sales of Revlon-branded beauty tools.
In International, Revlon segment net sales of $90.2 million in the fourth quarter of 2020 decreased by $23.2 million, or 20.5% (or 22.8% XFX), compared to the prior-year period, with COVID-19 contributing an estimated $30 million (or $29 million XFX) to the decrease. The segment’s lower International net sales were driven primarily by lower net sales of Revlon color cosmetics and Revlon-branded professional hair-care products.
Elizabeth Arden Segment
In North America, Elizabeth Arden segment net sales of $37.5 million in the fourth quarter of 2020 increased by $1.0 million, or 2.7% (or 2.7% XFX), compared to the prior-year period. COVID-19 impacted net sales by an estimated $4 million (or $4 million XFX) versus the prior-year period. The improved North America net sales were driven by the segment’s higher net sales of Prevage skin care products, partially offset by certain other Elizabeth Arden-branded color products, due primarily to the continuing effects of COVID-19 on foot traffic at department stores and in other retail outlets.
In International, Elizabeth Arden segment net sales of $143.6 million in the fourth quarter of 2020 increased by $12.1 million, or 9.2% (or 4.0% XFX), compared to the prior-year period. COVID-19 impacted net sales by an estimated $21 million (or $20 million XFX) versus the prior-year period. The segment’s higher international net sales were driven by higher net sales of Ceramide skin care products and the White and Green Tea fragrances, partially offset by lower net sales of Eight Hour skin care products.
Portfolio Segment
In North America, Portfolio segment net sales of $65.1 million in the fourth quarter of 2020 decreased by $19.3 million, or 22.9% (or 23.0% XFX), compared to the prior-year period, with COVID-19 contributing an estimated $16 million (or $16 million XFX) to the decrease. The segment’s lower North America net sales were driven by Almay color cosmetics, primarily due to the continuing effects of COVID-19 on the mass retail channel.
In International, Portfolio segment net sales of $38.1 million in the fourth quarter of 2020 decreased by $11.2 million, or 22.7% (or 24.1% XFX), compared to the prior-year period, with COVID-19 contributing an estimated $10 million (or $10 million XFX) to the decrease. The segment’s lower International net sales were driven primarily by lower net sales of American Crew men’s grooming products and CND nail products, primarily in the Company’s EMEA region, largely attributable to COVID-19’s continuing adverse effects on consumer foot traffic in the mass retail channel.
Fragrances Segment
In North America, Fragrances segment net sales of $102.3 million in the fourth quarter of 2020 decreased by $8.5 million, or 7.7% (or 7.7% XFX), compared to the prior-year period, with COVID-19 contributing an estimated $8 million (or $8 million XFX) to the decrease. The segment’s lower net sales in North America compared to the prior year period were driven primarily by the continuing impacts from COVID-19, especially in the U.S. mass retail channel, resulting in decreased foot traffic.
In International, Fragrances segment net sales of $34.4 million in the fourth quarter of 2020 decreased by $9.8 million, or 22.2% (or 24.2% XFX), compared to the prior-year period, with COVID-19 contributing an estimated $8 million (or $7 million XFX) to the decrease. The segment’s lower international net sales were due to lower net sales of certain licensed fragrances and in the local retail channel, primarily in the Company’s EMEA region, due to the continuing impacts from COVID-19, resulting in decreased foot traffic.
Cash Flow
Net cash used in operating activities in 2020 was $97.3 million, compared to $68.3 million in the prior-year period. The increase in cash usage was driven primarily by the COVID-related lower net sales. Free cash flow(a) used in 2020 was $107.6 million, compared to $97.3 million used in the prior year. The increase in free cash flow usage was driven by higher operating cash flow usage, due in part to COVID-19’s ongoing adverse impacts on the business.
Liquidity Update
As of December 31, 2020, the Company had approximately $249.9 million of available liquidity, consisting of $97.1 million of unrestricted cash and cash equivalents, as well as $168.0 million in available borrowing capacity under the Product Corporation’s Amended 2016 Revolving Credit Facility (which had $188.9 million drawn as of such date), less float of approximately $15.2 million.
A key driver of the Company’s fourth quarter liquidity was the closure of the previously announced Trademark License Agreement with Helen of Troy on December 22, 2020, which combined and revised the existing licenses that are in place between the two parties. The Trademark License Agreement grants Helen of Troy the exclusive right to use the “Revlon” brand in connection with the manufacture, display, advertising, promotion, labeling, sale, marketing and distribution of certain hair and grooming products until December 31, 2060 (with 3 additional 20-year renewal periods) in exchange for a one-time, upfront cash fee of $72.
Contacts
Investor Relations:
212-527-4040 or [email protected]
