REVLON, INC. Item 2. Combined Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the information contained in the Unaudited Consolidated Financial Statements and related notes included elsewhere in this document, and in the Company's other public filings with theSecurities and Exchange Commission ("SEC"), including our 2020 Form 10-K. As discussed in more detail in the Section entitled "Forward-Looking Statements," this discussion contains forward-looking statements, which involve risks and uncertainties. COVID-19 Pandemic While the Company continues to execute its business strategy, the ongoing COVID-19 pandemic has adversely impacted net sales in all major commercial regions around the globe that are important to the Company's business. The COVID-19 pandemic's adverse impact on the global economy has contributed to significant and extended quarantines, stay-at-home orders and other social distancing measures; closures and bankruptcies of retailers, beauty salons, spas, offices and manufacturing facilities; increased levels of unemployment; travel and transportation restrictions leading to declines in consumer traffic in key shopping and tourist areas around the globe; and import and export restrictions. These adverse conditions have resulted in the general slowdown of the global economy, in turn contributing to declines in net sales within some of the Company's reporting segments and regions. However, as COVID-19 restrictions are lifted, the Company is seeing a resumption in consumer spending and consumption. The Company continues to closely monitor the associated impacts and take appropriate actions in an effort to mitigate the COVID-19 pandemic's negative effects on the Company's operations and financial results.
Overview
Overview of the BusinessRevlon, Inc. ("Revlon" and together with its subsidiaries, the "Company") conducts its business exclusively through its direct wholly-owned operating subsidiary,Revlon Consumer Products Corporation ("Products Corporation "), and its subsidiaries. Revlon is an indirect majority-owned subsidiary ofMacAndrews & Forbes Incorporated (together with certain of its affiliates other than the Company, "MacAndrews & Forbes"), a corporation beneficially owned byRonald O. Perelman . The Company operates in four brand-centric reporting segments that are aligned with its organizational structure based on four global brand teams: Revlon;Elizabeth Arden ; Portfolio; and Fragrances. The Company manufactures, markets and sells an extensive array of beauty and personal care products worldwide, including color cosmetics; fragrances; skin care; hair color, hair care and hair treatments; beauty tools; men's grooming products; anti-perspirant deodorants; and other beauty care products. Business Strategy The Company remains focused on its 3 key strategic pillars to drive its future success and growth. First, strengthening its iconic brands through innovation and relevant product portfolios; second, building its capabilities to better communicate and connect with its consumers through media channels where they spend the most time; and third, ensuring availability of its products where consumers shop, both in-store and increasingly online. The Company has continued to deliver against the objectives of the Revlon Global Growth Accelerator ("RGGA") program, which includes rightsizing our organization with the objectives of driving improved profitability, cash flow and liquidity. The Company is also managing the business to conserve cash and liquidity, as well as focusing on stabilizing the business, growing e-commerce and preparing the foundation for achieving future growth.
Strategic Review
For additional information regarding the Company's business, see Part 1, Item 1 "Business" in the Company's 2020 Form 10-K.
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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
Overview of
Consolidated net sales in the third quarter of 2021 were$521.1 million , a$44.0 million increase, or 9.2%, compared to$477.1 million in the third quarter of 2020. Excluding the$7.9 million favorable FX impact, consolidated net sales increased by$36.1 million , or 7.6%, during the third quarter of 2021.The XFX (as hereinafter defined) net sales increase of$36.1 million in the third quarter of 2021 was due to: a$13.1 million , or 12.3%, increase inElizabeth Arden segment net sales, a$11.8 million or 11.8%, increase in Portfolio segment net sales, a$6.3 million , or 6.0%, increase in Fragrances segment net sales and$4.9 million , or 3.0% increase in Revlon segment net sales, Consolidated net sales in the nine months endedSeptember 30, 2021 were$1,463.5 million , a$185.8 million increase, or 14.5%, compared to$1,277.7 million in the nine months endedSeptember 30, 2020 . Excluding the$44.8 million favorable FX impact, consolidated net sales increased by$141.0 million , or 11.0%, during the nine months endedSeptember 30, 2021 . The XFX net sales increase of$141.0 million in the nine months endedSeptember 30, 2021 was due to: a$60.0 million , or 21.2%, increase inElizabeth Arden segment net sales, a$55.2 million , or 25.7%, increase in Fragrances segment net sales, a$23.1 million , or 4.8%, increase in Revlon segment net sales and a$2.7 million , or 0.9%, increase in Portfolio segment net sales. Consolidated loss from continuing operations, net of taxes, in the third quarter of 2021 was$53.1 million , compared to$44.5 million in the third quarter of 2020. The$8.6 million increase in consolidated loss from continuing operations, net of taxes, in the third quarter of 2021 was primarily due to: •a$31.2 million decrease in net gain on the early extinguishment of debt from the cancellation of approximately$44.4 million in aggregate principal face amount ofProducts Corporation's 5.75% Senior Notes during the third quarter of 2020, compared to having no gain in the third quarter of 2021; •$19.7 million of unfavorable variance in foreign currency, resulting from$9.9 million in foreign currency losses during the third quarter of 2021, compared to$9.8 million in foreign currency gains during the third quarter of 2020; •a$9.7 million increase in restructuring charges, primarily related to higher expenditures under RGGA in the third quarter of 2021, compared to the subsequent true up of restructuring charges previously accrued in 2020 under the Revlon 2020 Restructuring Program during the third quarter of 2020; •a$3.5 million increase in the provision for income taxes in the third quarter of 2021 compared to the third quarter of 2020, primarily due to an increase in losses for which no tax benefit can be recognized; •$2.7 million of higher SG&A expenses in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by the increased level of activity compared to the prior year quarter, as the Company shows signs of rebound from the negative effects of the ongoing COVID-19 pandemic; •a$2.7 million net increase in other miscellaneous expenses, net, in the third quarter of 2021 compared to the third quarter of 2020, primarily due to the subsequent true-up in the third quarter of 2020 of financing fees previously expensed in 2020 in connection with the 2020 BrandCo Refinancing Transactions; •$0.9 million increase in amortization of debt issuance costs in the third quarter of 2021, compared to the third quarter of 2020, primarily due to the additional debt issuance costs recorded and amortized in connection with the 2021 and 2020 Refinancing Transactions; and •a$1.2 million decrease in gain on divested assets, primarily related to the sale of certain assets in the third quarter of 2020; with the foregoing partially offset by: •$57.1 million of higher gross profit, primarily due to higher net sales in the third quarter of 2021, primarily as a result of the effects of COVID-19 on net sales during the third quarter of 2020; and •a$5.6 million decrease in interest expense in the third quarter of 2021, compared to the third quarter of 2020, primarily due to lower average borrowings primarily resulting from the 5.75% Senior Notes Exchange Offer. 46
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AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
Consolidated loss from continuing operations, net of taxes, in the nine months
ended September 30, 2021 was $216.8 million , compared to consolidated loss from
continuing operations, net of taxes, of $385.2 million in the nine months ended
September 30, 2020 . The $168.4 million decrease in consolidated loss from
continuing operations, net of taxes was primarily due to:
•$177.8 million of higher gross profit in the nine months ended September 30,
2021 , primarily due to higher net sales in the nine months ended September 30,
2021 , primarily as a result of the effects of COVID-19 on net sales during the
prior year period;
•a $144.1 million decrease in impairment charges attributable to the non-cash
impairment charges of $111.0 million and of $33.1 million recorded on the
Company's goodwill and on certain of the Company's indefinite-lived intangible
assets, respectively, following the Company's interim impairment assessments
during the nine months ended September 30, 2020 , all of which are primarily
attributable to the effects of COVID-19, compared to having no impairment
charges in 2021;
•a $22.0 million decrease in restructuring charges, primarily related to lower
expenditures under RGGA in the nine months ended September 30, 2021 , compared to
the expenditures incurred primarily under the 2020 Revlon Restructuring Program
in the nine months ended September 30, 2020 ;
•a $11.1 million decrease in other miscellaneous expenses, net, in the nine
months ended September 30, 2021 , compared to the prior year period, primarily
due to financing fees expensed in 2020 in connection with the 2020 BrandCo
Refinancing Transactions;
•a $2.4 million decrease in acquisition, integration and divestiture costs in
the nine months ended September 30, 2021 , compared to the prior year period,
primarily driven by higher amortization of the cash-based awards under Tier 1
and Tier 2 of the Revlon 2019 TIP in the prior year period; and
•a $1.2 million of increase in gain on divested assets primarily related to the
$1.7 million in gains on the sale of certain assets during the nine months ended
September 30, 2021 , consisting of the Company's Gatineau brand, compared to
having $0.5 million in gains recorded during the nine months ended September 30,
2020 on the sale of certain assets;
with the foregoing partially offset by:
•a $69.0 million increase in the provision for income taxes in the nine months
ended September 30, 2021 , compared to the prior year period, primarily due to an
increase in losses for which no tax benefit can be recognized;
•$56.9 million of higher SG&A expenses in the nine months ended September 30,
2021 , compared to the prior year period, primarily driven by the increased level
of activity compared to the prior year period, as the Company starts to show
signs of rebound from the negative effects of the ongoing COVID-19 pandemic;
•a $43.1 million decrease in net gain on the early extinguishment of debt from
the repurchase and cancellation of approximately $157.2 million in aggregate
principal face amount of Products Corporation's 5.75% Senior Notes during the
nine months ended September 30, 2020 , compared to having no gain during the nine
months ended September 30, 2021 ;
•a $12.9 million increase in amortization of debt issuance costs in the nine
months ended September 30, 2021 , compared to the prior year period, primarily
due to the additional debt issuance costs recorded and amortized in connection
with the 2021 and 2020 Refinancing Transactions;
•a $5.9 million increase in interest expense in the nine months ended
September 30, 2021 , compared to the prior year period, primarily due to higher
weighted average interest rates driven primarily by the 2020 BrandCo Term Loan
Facility; and
•$2.4 million of unfavorable variance in foreign currency, resulting from $11.5
million in foreign currency losses during the nine months ended September 30,
2021 , compared to $9.1 million in foreign currency losses during the nine months
ended September 30, 2020 .
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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
Operating Segments
The Company operates in four reporting segments: Revlon,Elizabeth Arden , Portfolio and Fragrances. For additional information regarding the Company's Operating Segments, see Note 14, "Segment Data" to the Company's Unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Results of Operations -
Segment Results:
The Company's management evaluates segment profit for each of the Company's reportable segments. The Company allocates corporate expenses to each reportable segment to arrive at segment profit, as these expenses are included in the internal measure of segment operating performance. The Company defines segment profit as income from continuing operations before interest, taxes, depreciation, amortization, stock-based compensation expense, gains/losses on foreign currency fluctuations, gains/losses on the early extinguishment of debt and miscellaneous expenses. Segment profit also excludes the impact of certain items that are not directly attributable to the segments' underlying operating performance. The Company does not have any material inter-segment sales. For a reconciliation of segment profit to loss from continuing operations before income taxes, see Note 14, "Segment Data and Related Information," to the Company's Unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
The following tables provide a comparative summary of the Company's segment results for the periods presented.
Net Sales Segment Profit
Three Months Ended September Three Months Ended
30, Change XFX Change (a) September 30 , Change XFX Change (a)
2021 2020 $ % $ % 2021 2020 $ % $ %
Revlon $ 173.0 $ 166.0 $ 7.0 4.2 % $ 4.9 3.0 % $ 16.1 $ 13.5 $ 2.6 19.3 % $ 2.0 14.8 %
Elizabeth Arden 122.8 106.3 16.5 15.5 % 13.1 12.3 % 21.3 3.4 17.9 N.M. 17.0 N.M.
Portfolio 112.7 99.6 13.1 13.2 % 11.8 11.8 % 22.1 12.2 9.9 81.1 % 9.6 78.7 %
Fragrances 112.6 105.2 7.4 7.0 % 6.3 6.0 % 22.9 25.4 (2.5) (9.8) % (2.8) (11.0) %
Total $ 521.1 $ 477.1 $ 44.0 9.2 % $ 36.1 7.6 % $ 82.4 $ 54.5 $ 27.9 51.2 % $ 25.8 47.3 %
Net Sales Segment Profit
Nine Months Ended September
Nine Months Ended September 30 , Change XFX Change (a) 30, Change XFX Change (a)
2021 2020 $ % $ % 2021 2020 $ % $ %
Revlon $ 521.8 $ 482.8 $ 39.0 8.1 % $ 23.1 4.8 % $ 45.3 $ 41.4 $ 3.9 9.4 % $ 0.5 1.2 %
Elizabeth Arden 359.7 282.4 77.3 27.4 % 60.0 21.2 % 42.1 18.4 23.7 128.8 % 20.1 109.2 %
Portfolio 307.4 298.1 9.3 3.1 % 2.7 0.9 % 46.3 33.9 12.4 36.6 % 11.0 32.4 %
Fragrances 274.6 214.4 60.2 28.1 % 55.2 25.7 % 50.8 34.6 16.2 46.8 % 15.3 44.2 %
Total $ 1,463.5 $ 1,277.7 $ 185.8 14.5 % $ 141.0 11.0 % $ 184.5 $ 128.3 $ 56.2 43.8 % $ 46.9 36.6 %
(a) XFX excludes the impact of foreign currency fluctuations. (N.M. - Not meaningful)
Revlon Segment Third quarter results: Revlon segment net sales in the three months endedSeptember 30, 2021 were$173.0 million , a$7.0 million , or 4.2%, increase, compared to$166.0 million in the three months endedSeptember 30, 2020 . Excluding the$2.1 million favorable FX 48
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AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
impact, total Revlon segment net sales in the three months ended September 30,
2021 increased by $4.9 million , or 3.0%, compared to the three months ended
September 30, 2020 . The Revlon segment XFX increase in net sales of $4.9 million
in the three months ended September 30, 2021 was driven by higher net sales of
Revlon ColorSilk and Revlon color cosmetics, both in North America and in
International regions, higher net sales of Revlon-branded professional hair care
products in International regions, and, to a lower extent, higher net sales of
Revlon-branded beauty tools both in North America and in the International
regions. This increase was due, primarily, to retail channels continuing to show
signs of improvement from the effects of the ongoing COVID-19 pandemic, as well
as salons' increased activity in connection with progressive and/or temporary
lifting of restrictions related to the ongoing COVID-19 pandemic, partially
offset by decreased net sales in North America of Revlon-branded hair-care
products.
Revlon segment profit in the three months ended September 30, 2021 was $16.1
million , a $2.6 million , or 19.3%, increase, compared to $13.5 million in the
three months ended September 30, 2020 . Excluding the $0.6 million favorable FX
impact, Revlon segment profit in the three months ended September 30, 2021
increased by $2.0 million , or 14.8%, compared to the three months ended
September 30, 2020 . This increase was driven primarily by the Revlon segment's
higher net sales, as described above, partially offset by moderately lower gross
profit margin.
Year-to-date results:
Revlon segment net sales in the nine months ended September 30, 2021 were $521.8
million , a $39.0 million , or 8.1%, increase, compared to $482.8 million in the
nine months ended September 30, 2020 . Excluding the $15.9 million favorable FX
impact, total Revlon segment net sales in the nine months ended September 30,
2021 increased by $23.1 million , or 4.8%, compared to the nine months ended
September 30, 2020 . The Revlon segment's XFX increase in net sales of $23.1
million in the nine months ended September 30, 2021 was driven by higher net
sales of Revlon color cosmetics in North America and higher net sales of
Revlon-branded professional hair care products in International regions. This
increase was due, primarily, to the mass retail channel continuing to show signs
of improvement from the effects of the ongoing COVID-19 pandemic, as well as
salons' increased activity in connection with progressive and/or temporary
lifting of restrictions related to the ongoing COVID-19 pandemic, partially
offset by decreased net sales in North America of Revlon ColorSilk hair color
products and Revlon-branded hair-care products.
Revlon segment profit in the nine months ended September 30, 2021 was $45.3
million , a $3.9 million , or 9.4%, increase, compared to $41.4 million in the
nine months ended September 30, 2020 . Excluding the $3.4 million favorable FX
impact, Revlon segment profit in the nine months ended September 30, 2021
increased by $0.5 million , or 1.2%, compared to the nine months ended
September 30, 2020 . This increase was driven primarily by the Revlon segment's
higher net sales, partially offset by higher brand support expenses to support
the increase in sales' activity.
Elizabeth Arden Segment
Third quarter results:
Elizabeth Arden segment net sales in the three months endedSeptember 30, 2021 were$122.8 million , a$16.5 million , or 15.5%, increase, compared to$106.3 million in the three months endedSeptember 30, 2020 . Excluding the$3.4 million favorable FX impact,Elizabeth Arden segment net sales in the three months endedSeptember 30, 2021 increased by$13.1 million , or 12.3%, compared to the three months endedSeptember 30, 2020 . The Elizabeth Arden segment XFX increase in net sales of$13.1 million in the three months endedSeptember 30, 2021 was driven primarily by higher net sales of Green Tea and White Tea fragrances, as well as certain otherElizabeth Arden -branded fragrances and skin care products, primarily in International regions. This increase was due, primarily, to growth in e-commerce net sales, as well as an increase in the travel retail business, while there are also signs of improvements from the effects of the ongoing COVID-19 pandemic on foot traffic at department stores and other retail outlets, primarily internationally.Elizabeth Arden segment profit in the three months endedSeptember 30, 2021 was$21.3 million , a$17.9 million increase, compared to$3.4 million in the three months endedSeptember 30, 2020 . Excluding the$0.9 million favorable FX impact,Elizabeth Arden segment profit in the three months endedSeptember 30, 2021 increased by$17.0 million , compared to the three months endedSeptember 30, 2020 . This increase was driven primarily by the Elizabeth Arden segment's higher net sales and higher gross profit margin, partially offset by higher brand support and other SG&A expenses to support the increase in sales activity. 49
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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
Year-to-date results:
Elizabeth Arden segment net sales in the nine months endedSeptember 30, 2021 were$359.7 million , a$77.3 million , or 27.4%, increase, compared to$282.4 million in the nine months endedSeptember 30, 2020 . Excluding the$17.3 million favorable FX impact,Elizabeth Arden segment net sales in the nine months endedSeptember 30, 2021 increased by$60.0 million , or 21.2%, compared to the nine months endedSeptember 30, 2020 . The Elizabeth Arden segment XFX increase in net sales of$60.0 million in the nine months endedSeptember 30, 2021 was driven primarily by higher net sales of Ceramide skin care products, both in International regions and inNorth America , and, to a lower extent, higher net sales of Green Tea and White Tea fragrances, as well as otherElizabeth Arden -branded fragrances and skin care products, primarily in International regions. This increase was due, primarily, to growth in e-commerce net sales, as well as an increase in the travel retail business, while there are also signs of improvements from the effects of the ongoing COVID-19 pandemic on foot traffic at department stores and other retail outlets, and it was partially offset by lower net sales of Prevage, primarily in connection with the delayed launches on certain new products.Elizabeth Arden segment profit in the nine months endedSeptember 30, 2021 was$42.1 million , a$23.7 million , or 128.8%, increase, compared to$18.4 million in the nine months endedSeptember 30, 2020 . Excluding the$3.6 million favorable FX impact,Elizabeth Arden segment profit in the nine months endedSeptember 30, 2021 increased by$20.1 million , or 109.2%, compared to the nine months endedSeptember 30, 2020 . This increase was driven primarily by the Elizabeth Arden segment's higher net sales and higher gross profit margin, partially offset by higher brand support and other SG&A expenses to support the increase in sales activity. Portfolio Segment Third quarter results: Portfolio segment net sales in the three months endedSeptember 30, 2021 were$112.7 million , a$13.1 million , or 13.2%, increase, compared to$99.6 million in the three months endedSeptember 30, 2020 . Excluding the$1.3 million favorable FX impact, total Portfolio segment net sales in the three months endedSeptember 30, 2021 increased by$11.8 million , or 11.8%, compared to the three months endedSeptember 30, 2020 . The Portfolio segment XFX increase in net sales of$11.8 million in the three months endedSeptember 30, 2021 was driven primarily by higher net sales of American Crew men's grooming products, Almay color cosmetics and CND nail products inNorth America , and higher net sales of Mitchum anti-perspirant deodorants in International regions, primarily in connection with the mass retail channel continuing to show signs of improvement from the effects of the ongoing COVID-19 pandemic. This increase was partially offset, primarily, by lower net sales of previously sold brands and of certain local and regional skin care products brands. Portfolio segment profit in the three months endedSeptember 30, 2021 was$22.1 million , a$9.9 million , or 81.1%, increase, compared to$12.2 million in the three months endedSeptember 30, 2020 . Excluding the$0.3 million favorable FX impact, Portfolio segment profit in the three months endedSeptember 30, 2021 increased by$9.6 million , or 78.7%, compared to the three months endedSeptember 30, 2020 . This increase was driven primarily by the Portfolio segment's higher net sales and higher gross profit margin, partially offset by higher brand support expenses to support the increase in sales activity. Year-to-date results: Portfolio segment net sales in the nine months endedSeptember 30, 2021 were$307.4 million , a$9.3 million , or 3.1%, increase, compared to$298.1 million in the nine months endedSeptember 30, 2020 . Excluding the$6.6 million favorable FX impact, total Portfolio segment net sales in the nine months endedSeptember 30, 2021 increased by$2.7 million , or 0.9%, compared to the nine months endedSeptember 30, 2020 . The Portfolio segment XFX increase in net sales of$2.7 million in the nine months endedSeptember 30, 2021 was driven primarily by higher net sales of American Crew men's grooming products, and also by higher net sales inNorth America of Almay color cosmetics and CND nail products, partially offset by lower net sales of previously sold brands and of certain local and regional skin care products brands, both in International regions and inNorth America . The increase was primarily in connection with retail channels continuing to show signs of improvement from the effects of the ongoing COVID-19 pandemic. Portfolio segment profit in the nine months endedSeptember 30, 2021 was$46.3 million , a$12.4 million , or 36.6%, increase compared to$33.9 million in the nine months endedSeptember 30, 2020 . Excluding the$1.4 million favorable FX impact, Portfolio segment profit in the nine months endedSeptember 30, 2021 increased by$11.0 million , or 32.4%, compared to the nine months endedSeptember 30, 2020 . This increase was driven primarily by the Portfolio segment's higher net sales 50
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REVLON, INC AND SUBSIDIARIES
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AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
and higher gross profit margin, as well as lower SG&A, achieved primarily through RGGA, partially offset by higher brand support expenses to support the increase in sales activity.
Fragrances Segment
Third quarter results: Fragrances segment net sales in the three months endedSeptember 30, 2021 were$112.6 million , a$7.4 million , or 7.0%, increase, compared to$105.2 million in the three months endedSeptember 30, 2020 . Excluding the$1.1 million favorable FX impact, total Fragrances segment net sales in the three months endedSeptember 30, 2021 increased by$6.3 million , or 6.0%, compared to the three months endedSeptember 30, 2020 . The Fragrances segment XFX increase in net sales of$6.3 million in the three months endedSeptember 30, 2021 was driven primarily by higher net sales of Juicy Couture andJohn Varvatos fragrances, partially offset by lower net sales inNorth America of other branded and distributed fragrances, primarily due to a recovery from the ongoing COVID-19 pandemic, as retailers are restocking their inventory levels. Fragrances segment profit in the three months endedSeptember 30, 2021 was$22.9 million , a$2.5 million , or 9.8%, decrease, compared to$25.4 million in the three months endedSeptember 30, 2020 . Excluding the$0.3 million favorable FX impact, Fragrances segment profit in the three months endedSeptember 30, 2021 decreased by$2.8 million , or 11.0%, compared to the three months endedSeptember 30, 2020 . This decrease was driven primarily by the Fragrances segment's higher brand support and SG&A expenses, partially offset by higher net sales and moderately higher gross profit margin. Year-to-date results: Fragrances segment net sales in the nine months endedSeptember 30, 2021 were$274.6 million , a$60.2 million , or 28.1%, increase, compared to$214.4 million in the nine months endedSeptember 30, 2020 . Excluding the$5.0 million favorable FX impact, total Fragrances segment net sales in the nine months endedSeptember 30, 2021 increased by$55.2 million , or 25.7%, compared to the nine months endedSeptember 30, 2020 . The Fragrances segment XFX increase in net sales of$55.2 million in the nine months endedSeptember 30, 2021 was driven primarily by higher net sales of Juicy Couture,John Varvatos ,Britney Spears and Curve fragrances, partially offset by lower net sales of other distributed fragrances, primarily inNorth America , primarily due to a recovery from the ongoing COVID-19 pandemic, as retailers are restocking their inventory levels. Fragrances segment profit in the nine months endedSeptember 30, 2021 was$50.8 million , a$16.2 million , increase, compared to$34.6 million in the nine months endedSeptember 30, 2020 . Excluding the$0.9 million favorable FX impact, Fragrances segment profit in the nine months endedSeptember 30, 2021 increased by$15.3 million , compared to the nine months endedSeptember 30, 2020 . This increase was driven primarily by the Fragrances segment's higher net sales, as described above, partially offset by the segment's higher other SG&A and brand support expenses primarily due to the increase in sales activity. 51
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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
Geographic Results:
The following tables provide a comparative summary of the Company's
Three Months Ended September 30, Change XFX Change (a)
2021 2020 $ % $ %
Revlon
North America $ 88.4 $ 86.4 $ 2.0 2.3 % $ 1.3 1.5 %
International 84.6 79.6 5.0 6.3 % 3.6 4.5 %
Elizabeth Arden
North America $ 32.3 $ 30.5 $ 1.8 5.9 % $ 1.6 5.2 %
International 90.5 75.8 14.7 19.4 % 11.5 15.2 %
Portfolio
North America$ 75.2 $ 59.9 $ 15.3 25.5 %$ 15.1 25.2 % International 37.5 39.7 (2.2) (5.5) % (3.3) (8.3) %
Fragrance
North America$ 81.5 $ 79.2 $ 2.3 2.9 % $ 2.0 2.5 % International 31.1 26.0 5.1 19.6 % 4.3 16.5 % Total Net Sales$ 521.1 $ 477.1 $ 44.0 9.2 %$ 36.1 7.6 % Nine Months Ended September 30, Change XFX Change (a) 2021 2020 $ % $ % Revlon North America$ 270.9 $ 265.6 $ 5.3 2.0 % $ 3.4 1.3 % International 250.9 217.2 33.7 15.5 % 19.7 9.1 % Elizabeth Arden North America$ 80.9 $ 66.9 $ 14.0 20.9 %$ 12.4 18.5 % International 278.8 215.5 63.3 29.4 % 47.6 22.1 % Portfolio North America$ 201.9 $ 182.8 $ 19.1 10.4 %$ 18.2 10.0 % International 105.5 115.3 (9.8) (8.5) % (15.5) (13.4) % Fragrances North America$ 193.8 $ 151.1 $ 42.7 28.3 %$ 42.1 27.9 % International 80.8 63.3 17.5 27.6 % 13.1 20.7 % Total Net Sales$ 1,463.5 $ 1,277.7 $ 185.8 14.5 %$ 141.0 11.0 %
(a) XFX excludes the impact of foreign currency fluctuations.
Revlon Segment Third quarter results:North America In North America , Revlon segment net sales in the three months endedSeptember 30, 2021 increased by$2.0 million , or 2.3%, to$88.4 million , compared to$86.4 million in the three months endedSeptember 30, 2020 . Excluding the$0.7 million favorable FX impact, Revlon segment net sales inNorth America in the three months endedSeptember 30, 2021 increased by$1.3 million , or 1.5%, compared to the three months endedSeptember 30, 2020 . The Revlon segment's$1.3 million XFX increase inNorth America net sales in the three months endedSeptember 30, 2021 was due to higher net sales of Revlon ColorSilk hair color products and Revlon color cosmetics, and to a lower extent, Revlon-branded beauty tools due, primarily, 52
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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
to retail channels continuing to show signs of improvement from the effects of the ongoing COVID-19 pandemic, partially offset by lower net sales of Revlon-branded hair-care products.
International
Internationally, Revlon segment net sales in the three months endedSeptember 30, 2021 increased by$5.0 million , or 6.3%, to$84.6 million , compared to$79.6 million in the three months endedSeptember 30, 2020 . Excluding the$1.4 million favorable FX impact, Revlon segment International net sales in the three months endedSeptember 30, 2021 increased by$3.6 million , or 4.5%, compared to the three months endedSeptember 30, 2020 . The Revlon segment's$3.6 million XFX increase in International net sales in the three months endedSeptember 30, 2021 was driven primarily by higher net sales of Revlon-branded professional hair care products, and, to a lower extent, Revlon-branded beauty tools, across all of the Company's International regions, due, primarily, to salons' increased activity in connection with progressive and/or temporary lifting of restrictions related to the ongoing COVID-19 pandemic and to retail channels continuing to show signs of improvement from the effects of the ongoing COVID-19 pandemic. Year-to-date results:North America In North America , Revlon segment net sales in the nine months endedSeptember 30, 2021 increased by$5.3 million , or 2.0%, to$270.9 million , compared to$265.6 million in the nine months endedSeptember 30, 2020 . Excluding the$1.9 million favorable FX impact, Revlon segment net sales inNorth America in the nine months endedSeptember 30, 2021 increased by$3.4 million , or 1.3%, compared to the nine months endedSeptember 30, 2020 . The Revlon segment's$3.4 million XFX increase inNorth America net sales in the nine months endedSeptember 30, 2021 was primarily due to higher net sales of Revlon color cosmetics, which year-to-date positive performance was driven by the increase in sales experienced in the nine months endedSeptember 30, 2021 , as disclosed elsewhere above, partially offset by lower net sales of Revlon ColorSilk hair color products and Revlon-branded hair-care products.
International
Internationally, Revlon segment net sales in the nine months endedSeptember 30, 2021 increased by$33.7 million , or 15.5%, to$250.9 million , compared to$217.2 million in the nine months endedSeptember 30, 2020 . Excluding the$14.0 million favorable FX impact, Revlon segment International net sales in the nine months endedSeptember 30, 2021 increased by$19.7 million , or 9.1%, compared to the nine months endedSeptember 30, 2020 . The Revlon segment's$19.7 million XFX increase in International net sales in the nine months endedSeptember 30, 2021 was driven primarily by higher net sales of Revlon-branded professional hair-care products and of Revlon ColorSilk hair color products, primarily in the EMEA region, and, to a lower extent, higher net sales of Revlon-branded beauty tools. This increase was partially offset primarily by lower net sales of Revlon color cosmetics attributable to the negative year-to-date effects of the COVID-19 pandemic on this item in this region. Elizabeth Arden Segment Third quarter results:North America In North America ,Elizabeth Arden segment net sales in the three months endedSeptember 30, 2021 increased by$1.8 million , or 5.9%, to$32.3 million , compared to$30.5 million in the three months endedSeptember 30, 2020 . Excluding the$0.2 million favorable FX impact,Elizabeth Arden net sales inNorth America in the three months endedSeptember 30, 2021 increased by$1.6 million , or 5.2%, compared to the three months endedSeptember 30, 2020 . The Elizabeth Arden segment's$1.6 million XFX increase inNorth America net sales in the three months endedSeptember 30, 2021 was driven primarily by higher net sales of certainElizabeth Arden -branded fragrances and other skin care products due, primarily, to signs of 53
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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
improvements from the effects of the ongoing COVID-19 pandemic on foot traffic
at department stores and other retail outlets. This increase was partially
offset by lower net sales of certain other Elizabeth Arden -branded skin care
products.
International
Internationally, Elizabeth Arden segment net sales in the three months ended
September 30, 2021 increased by $14.7 million , or 19.4%, to $90.5 million ,
compared to $75.8 million in the three months ended September 30, 2020 .
Excluding the $3.2 million favorable FX impact, Elizabeth Arden segment
International net sales in the three months ended September 30, 2021 increased
by $11.5 million , or 15.2%, compared to the three months ended September 30,
2020 . The Elizabeth Arden segment's $11.5 million XFX increase in International
net sales in the three months ended September 30, 2021 was driven primarily by
higher net sales of Green Tea and White Tea fragrances, as well as certain other
Elizabeth Arden -branded fragrances and skin care products. This increase was
due, primarily, to growth in e-commerce net sales, as well as an increase in the
travel retail business, while there are also signs of improvements from the
effects of the ongoing COVID-19 pandemic on foot traffic at department stores
and other retail outlets, and it was partially offset by lower net sales of
Prevage.
Year-to-date results:
North America
In North America , Elizabeth Arden segment net sales in the nine months ended
September 30, 2021 increased by $14.0 million , or 20.9%, to $80.9 million ,
compared to $66.9 million in the nine months ended September 30, 2020 . Excluding
the $1.6 million favorable FX impact, Elizabeth Arden segment net sales in North
America in the nine months ended September 30, 2021 increased by $12.4 million ,
or 18.5%, compared to the nine months ended September 30, 2020 . The Elizabeth
Arden segment's $12.4 million XFX increase in North America net sales in the
nine months ended September 30, 2021 was driven primarily by higher net sales of
Ceramide skin care products, as well as certain other Elizabeth Arden -branded
fragrances and skin care products. This increase was due, primarily, to signs of
improvements from the effects of the ongoing COVID-19 pandemic on foot traffic
at department stores and other retail outlets, and it was partially offset by
lower net sales of Prevage, primarily in connection with the delayed launches on
certain new products.
International
Internationally, Elizabeth Arden segment net sales in the nine months ended
September 30, 2021 increased by $63.3 million , or 29.4%, to $278.8 million ,
compared to $215.5 million in the nine months ended September 30, 2020 .
Excluding the $15.7 million favorable FX impact, Elizabeth Arden segment
International net sales in the nine months ended September 30, 2021 increased by
$47.6 million , or 22.1%, compared to the nine months ended September 30, 2020 .
The Elizabeth Arden segment's $47.6 million XFX increase in International net
sales in the nine months ended September 30, 2021 was driven primarily by higher
net sales of Ceramide skin care products and, to a lower extent, higher net
sales of Green Tea and White Tea fragrances, as well as other Elizabeth
Arden -branded fragrances and skin care products. This increase was due,
primarily, to growth in e-commerce net sales, as well as an increase in the
travel retail business, while there are also signs of improvements from the
effects of the ongoing COVID-19 pandemic on foot traffic at department stores
and other retail outlets, and it was partially offset by lower net sales of
Prevage, primarily in connection with the delayed launches on certain new
products.
Portfolio Segment
Third quarter results:
North America
In North America , Portfolio segment net sales in the three months ended
September 30, 2021 increased by $15.3 million , or 25.5%, to $75.2 million ,
compared to $59.9 million in the three months ended September 30, 2020 .
Excluding the $0.2 million favorable FX impact, Portfolio segment North America
net sales in the three months ended September 30, 2021 increased by $15.1
million , or 25.2%, compared to the three months ended September 30, 2020 . The
Portfolio segment's $15.1 million XFX increase in North America net sales in the
three months ended September 30, 2021 was driven primarily by higher net sales
of American Crew men's grooming products, Almay color cosmetics, CND nail
products, and also, to a lower extent, higher net sales of Cutex nail care
products, partially offset by lower net sales of certain local and regional skin
care products. This
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AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
increase is primarily in connection with retail channels starting to show signs of improvement from the effects of the ongoing COVID-19 pandemic.
International
Internationally, Portfolio segment net sales in the three months endedSeptember 30, 2021 decreased by$2.2 million , or 5.5%, to$37.5 million , compared to$39.7 million in the three months endedSeptember 30, 2020 . Excluding the$1.1 million favorable FX impact, Portfolio segment International net sales decreased by$3.3 million , or 8.3%, in the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 . The Portfolio segment's$3.3 million XFX decrease in International net sales in the three months endedSeptember 30, 2021 was driven primarily by lower net sales of previously sold brands and of certain local and regional skin care products brands. This decrease was partially offset by higher net sales of Mitchum anti-perspirant deodorants, primarily in connection with retail channels starting to show signs of improvement from the effects of the ongoing COVID-19 pandemic. Year-to-date results:North America In North America , Portfolio segment net sales in the nine months endedSeptember 30, 2021 increased by$19.1 million , or 10.4%, to$201.9 million , as compared to$182.8 million in the nine months endedSeptember 30, 2020 . Excluding the$0.9 million favorable FX impact, Portfolio segment net sales inNorth America in the nine months endedSeptember 30, 2021 increased by$18.2 million , or 10.0%, compared to the nine months endedSeptember 30, 2020 . The Portfolio segment's$18.2 million XFX increase inNorth America net sales in the nine months endedSeptember 30, 2021 was driven primarily by higher net sales of American Crew men's grooming products, Almay color cosmetics and CND nail products, primarily in connection with retail channels continuing to show signs of improvement from the effects of the ongoing COVID-19 pandemic. This increase was partially offset by lower net sales of certain local and regional skin care products brands and, to a lower extent, of Mitchum anti-perspirant deodorants.
International
Internationally, Portfolio segment net sales in the nine months endedSeptember 30, 2021 decreased by$9.8 million , or 8.5%, to$105.5 million , compared to$115.3 million in the nine months endedSeptember 30, 2020 . Excluding the$5.7 million favorable FX impact, Portfolio segment International net sales decreased by$15.5 million , or 13.4%, in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 . The Portfolio segment's$15.5 million XFX decrease in International net sales in the nine months endedSeptember 30, 2021 was driven primarily by lower net sales of previously sold brands and of certain local and regional skin care products brands. This decrease was partially offset primarily by higher net sales of Mitchum anti-perspirant deodorants and American Crew men's grooming products, primarily in connection with retail channels starting to show signs of improvement from the effects of the ongoing COVID-19 pandemic. Fragrances Segment Third quarter results:North America In North America , Fragrances segment net sales in the three months endedSeptember 30, 2021 increased by$2.3 million , or 2.9%, to$81.5 million , as compared to$79.2 million in the three months endedSeptember 30, 2020 . The segment's$2.0 million XFX increase inNorth America net sales in the three months endedSeptember 30, 2021 was driven primarily by increases in net sales of Juicy Couture fragrances, partially offset by lower net sales of other distributed fragrances, primarily due to a recovery from the ongoing COVID-19 pandemic, as retailers are restocking their inventory levels.
International
Internationally, Fragrances segment net sales in the three months endedSeptember 30, 2021 increased by$5.1 million , or 19.6%, to$31.1 million , compared to$26.0 million in the three months endedSeptember 30, 2020 . Excluding the$0.8 million favorable FX impact, Fragrances segment International net sales increased by$4.3 million , or 16.5%, in the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 . The Fragrances segment's$4.3 million XFX increase in International net sales during the three months endedSeptember 30, 2021 was driven primarily by higher net sales 55
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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
of certain licensed fragrance brands primarily due to a recovery from the ongoing COVID-19 pandemic, as retailers are restocking their inventory levels.
Year-to-date results:North America In North America , Fragrances segment net sales in the nine months endedSeptember 30, 2021 increased by$42.7 million , or 28.3%, to$193.8 million , as compared to$151.1 million in the nine months endedSeptember 30, 2020 . Excluding the$0.6 million favorable FX impact, Fragrances segment net sales inNorth America increased by$42.1 million , or 27.9%, in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 . The Fragrances segment's$42.1 million XFX increase inNorth America net sales in the nine months endedSeptember 30, 2021 was driven primarily by higher net sales of Juicy Couture,John Varvatos , Curve andBritney Spears fragrances, as well as other certain licensed fragrance brands, partially offset by lower net sales of other distributed fragrances. This increase is primarily due to a recovery from the ongoing COVID-19 pandemic, as retailers are restocking their inventory levels. International Internationally, Fragrances segment net sales in the nine months endedSeptember 30, 2021 increased by$17.5 million , or 27.6%, to$80.8 million , compared to$63.3 million in the nine months endedSeptember 30, 2020 . Excluding the$4.4 million favorable FX impact, Fragrances segment International net sales increased by$13.1 million , or 20.7%, in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 . The Fragrances segment's$13.1 million XFX increase in International net sales in the nine months endedSeptember 30, 2021 was driven primarily by higher net sales ofBritney Spears ,John Varvatos and Juicy Couture fragrances, as well as, to a lower extent, of other certain licensed fragrance brands, primarily due to a recovery from the ongoing COVID-19 pandemic, as retailers are restocking their inventory levels.
Gross profit: The table below shows the Company's gross profit and gross margin for the periods presented:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 Change 2021 2020 Change
Gross profit $ 299.9 $ 242.8 $ 57.1 $ 854.8 $ 677.0 $ 177.8
Percentage of net sales 57.6 % 50.9 % 6.7 % 58.4 % 53.0 % 5.4 %
Third quarter results:
Gross profit increased by $57.1 million in three months ended September 30,
2021 , as compared to three months ended September 30, 2020 . Gross profit as a
percentage of net sales (i.e., gross margin) in the three months ended
September 30, 2021 increased by 6.7% compared to the three months ended
September 30, 2020 . The increase in gross margin in the three months ended
September 30, 2021 , as compared to the prior year quarter, was impacted
primarily by favorable foreign currency impacts, lower manufacturing costs
attributable to the effects of the ongoing COVID-19 pandemic compared to the
prior year's quarter and favorable product mix.
Year-to-date results:
Gross profit increased by$177.8 million in the nine months endedSeptember 30, 2021 , as compared to the nine months endedSeptember 30, 2020 . Gross profit as a percentage of net sales (i.e., gross margin) in the nine months endedSeptember 30, 2021 increased by 5.4% percentage points, as compared to the nine months endedSeptember 30, 2020 . The increase in gross margin in the nine months endedSeptember 30, 2021 , as compared to the prior year period, was impacted primarily by favorable foreign currency impacts, lower sales returns and lower manufacturing costs attributable to the effects of the ongoing COVID-19 pandemic compared to the prior year period, partially offset by lower favorable inventory adjustment in the nine months endedSeptember 30, 2021 . 56
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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
SG&A expenses: The table below shows the Company's SG&A expenses for the periods presented:
Three Months Ended September
30, Nine Months Ended September 30,
2021 2020 Change 2021 2020 Change
SG&A expenses $ 256.1 $ 253.4 $ 2.7 $ 796.0 $ 739.1 $ 56.9
Third quarter results:
SG&A expenses increased by $2.7 million in the three months ended September 30,
2021 , compared to the three months ended September 30, 2020 , driven primarily
by:
•higher brand support expenses of approximately $11.8 million , resulting from
the resumption of activities to sustain the higher level of net sales across all
segments, compared to the three months ended September 30, 2020 , when brand
support expense had been reduced in response to the early periods of the
COVID-19 pandemic;
•unfavorable FX impact of approximately $3.5 million ; and
•higher distribution expenses of approximately $1.8 million , driven primarily by
the increase in net sales
with the foregoing partially offset by:
•lower general and administrative expenses of approximately $13.1 million ,
primarily driven by higher expenses in connection with the 2020 Refinancing
Transactions during the three months ended September 30, 2020 and cost
reductions achieved through the 2020 Restructuring Program (subsequently renamed
during 2021 the Revlon Global Growth Accelerator, "RGGA", as further defined
below) during the three months ended September 30, 2021 .
Year-to-date results:
SG&A expenses increased by$56.9 million in the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 , driven primarily by: •higher brand support expenses of approximately$47.3 million , resulting from the resumption of activities to sustain the higher level of net sales across all segments, compared to the nine months endedSeptember 30, 2020 , when brand support expense had been reduced in response to the early periods of the COVID-19 pandemic; and •unfavorable FX impact of approximately$21.7 million ; and •higher distribution expenses of approximately$5.0 million , driven primarily by the increase in net sales with the foregoing partially offset by: •lower general and administrative expenses of approximately$16.6 million , primarily driven by cost reductions achieved during the nine months endedSeptember 30, 2021 through the Revlon 2020 Restructuring Program (subsequently renamed RGGA during 2021). Restructuring charges and other, net: The table below shows the Company's restructuring charges and other, net for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 Change 2021 2020 Change Restructuring charges and $ 9.0$ (0.7) $ 9.7 $ 44.8 $ (22.0) other, net$ 22.8 Third quarter results: Restructuring charges and other, net, increased$9.7 million during the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 , primarily related to higher expenditures under RGGA (as further defined below) in the three months endedSeptember 30, 2021 , compared to the subsequent true up of restructuring charges previously accrued in 2020 under the Revlon 2020 Restructuring Program in the three months endedSeptember 30, 2020 . 57
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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
Year-to-date results:
Restructuring charges and other, net, decreased$22.0 million during the nine months endedSeptember 30, 2021 , compared to the nine months endedSeptember 30, 2020 , primarily related to lower expenditures under RGGA in the nine months endedSeptember 30, 2021 , compared to the expenditures incurred primarily under the 2020 Revlon Restructuring Program in the nine months endedSeptember 30, 2020 . Revlon Global Growth Accelerator Program OnMay 10, 2021 , the Company announced that it is expanding the existing Revlon 2020 Restructuring Program through 2023. The Company renamed the revised program the Revlon Global Growth Accelerator ("RGGA"). RGGA includes a reinvestment strategy to strengthen our brands and drive long-term profitable margin and revenue growth through realized incremental productivity initiatives and enhanced capabilities. The major initiatives underlying the RGGA program include: •Strategic Growth: Boost organic sales growth behind our strategic pillars - brands, markets, and channels -- to deliver an approximate mid-single digit compound average annual growth rate through 2023; •Operating Efficiencies: Drive additional operational efficiencies and cost savings to fuel investments in revenue growth; and •Build Capabilities: Enhance capabilities and up-skill employees in order to evolve our culture to promote agility and deliver transformational change. Under RGGA, the Company expects to deliver an updated range of annualized cost reductions of approximately$275 million to$325 million from 2020 through the end of 2023. Approximately 50% of these annualized cost reductions were realized from the headcount reductions that occurred in 2020. The remaining cost reductions will be realized through reductions in SG&A expenses and cost of goods sold. The Company achieved$9 million and$44 million of cost reductions during the three and nine months endedSeptember 30, 2021 , bringing the total cost reductions realized since the inception of the program to approximately$171 million and expects to achieve approximately$50 million to$70 million for the full year 2021 (inclusive of the cost reductions during the first nine months of 2021), with the balance to be realized during 2022 and 2023. In connection with implementing RGGA, the Company expects to recognize an updated cost range of approximately$185 million and$205 million of total pre-tax restructuring and related charges, consisting of employee-related costs, such as severance, pension and other termination costs, as well as related third party expenses. The Company also expects to incur approximately$15 million of additional capital expenditures. Under the RGGA program, the Company expects to incur pre-tax restructuring and related charges of approximately$65 million to$75 million during 2021 (inclusive of the charges during the first nine months of 2021) and the remainder during 2022 and 2023. The Company expects that substantially all of these restructuring and related charges will be paid in cash, with$32.8 million of the total charges paid as ofSeptember 30, 2021 , approximately$20 million to$25 million of the total charges expected to be paid during the second half of 2021, with the remainder to be paid during 2022 and 2023. In connection with RGGA, during the three months endedSeptember 30, 2021 , the Company recorded$10.8 million of total pre-tax restructuring and related charges consisting primarily of i)$9.0 million of employee severance, other personnel benefits and other costs; and (ii)$1.8 million of lease and other restructuring-related charges that were recorded within SG&A and cost of sales. During the nine months endedSeptember 30, 2021 , the Company recorded$28.0 million of total pre-tax restructuring and related charges consisting primarily of i)$22.8 million of employee severance, other personnel benefits and other costs; and (ii)$5.2 million of lease and other restructuring-related charges that were recorded within SG&A and cost of sales. Since its inception and throughSeptember 30, 2021 , the Company recorded$96.8 million of total pre-tax restructuring and related charges consisting primarily of i)$73.3 million of employee severance, other personnel benefits and other costs; and (ii)$23.5 million of lease and other restructuring-related charges that were recorded within SG&A and cost of sales.
Since its inception in
For further information on RGGA, see Note 2, "Restructuring Charges," to the
Company's Unaudited Consolidated Financial Statements in this Quarterly Report
on Form 10-Q.
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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
Impairment Charges:
The table below shows the Company's impairment charges for the periods
presented:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 Change 2021 2020 Change
Impairment charges $ - $ - $ - $ - $ 144.1 $ (144.1)
Third quarter results:
In the third quarter of 2021, the Company assessed whether indicators of
impairment existed that might result in additional impairment charges. Based
upon such assessment, no additional impairment changes were recognized for the
three months ended September 30, 2021 .
During the third quarter of 2020, due to the COVID-19 pandemic, the Company
re-assessed whether further indicators of impairment arose during the third
quarter of 2020 that might result in additional goodwill impairment charges.
Based upon such assessment, the Company determined that it was more likely than
not that the fair value of each of its reporting units exceeded their respective
carrying amounts as of September 30, 2020 . Consequently, no impairment changes
were recognized during the third quarter of 2020.
Year-to-date results:
During the nine months ended
During the nine months endedSeptember 30, 2020 , as a result of the COVID-19 pandemic's impact on the Company's operations, the Company determined that indicators of potential impairment existed requiring the performance of interim impairment analyses during the first and second quarters of 2020. Based on interim impairment analyses performed during the nine months endedSeptember 30, 2020 , the Company recorded$111.0 million and$33.1 million of total non-cash impairment charges on its goodwill and indefinite-lived intangible assets, respectively.
Interest expense: The table below shows the Company's interest expense for the periods presented:
Three Months Ended September
30, Nine Months Ended September 30,
2021 2020 Change 2021 2020 Change
Interest expense $ 63.1 $ 68.7 $ (5.6) $ 183.9 $ 178.0 $ 5.9
Third quarter results:
The $5.6 million decrease in interest expense in the three months ended
September 30, 2021 , as compared to the three months ended September 30, 2020 ,
was primarily due to lower average borrowings primarily resulting from the 5.75%
Senior Notes Exchange Offer.
Year-to-date results:
The $5.9 million increase in interest expense during the nine months ended
September 30, 2021 , as compared to the nine months ended September 30, 2020 , was
primarily due to higher weighted average interest rates driven primarily by the
2020 BrandCo Term Loan Facility.
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COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
Gain on early extinguishment of debt:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 Change 2021 2020 Change
Gain on early extinguishment
of debt - $ (31.2) $ 31.2 $ - $ (43.1) $ 43.1
Gain on early extinguishment of debt for the three and nine months ended
September 30, 2020 includes net debt extinguishment gains of $31.2 million
recorded during the third quarter of 2020 and $11.9 million recorded during the
second quarter of 2020 upon the repurchase and subsequent cancellation of
approximately $157.2 million in aggregate principal face amount of Products
Corporation's 5.75% Senior Notes occurring in the second and third quarters of
2020.
For information on the terms and conditions of these debt instruments, see Note
8, "Debt," in the Audited Consolidated Financial Statements in the Company's
2020 Form 10-K.
Provision for (benefit from) income taxes:
The table below shows the Company's provision for income taxes for the periods presented:
Three Months Ended September Nine Months Ended September
30, 30,
2021 2020 Change 2021 2020 Change
Provision for (benefit
$ 23.8 $ (45.2) $ 69.0 from) income taxes Third quarter results: The Company recorded a provision for income taxes of$5.4 million for the three months endedSeptember 30, 2021 , compared to a provision for income taxes of$1.9 million for the three months endedSeptember 30, 2020 . The$3.5 million increase in the provision for income taxes for the three months endedSeptember 30, 2021 , compared to the three months endedSeptember 30, 2020 , was primarily due to an increase in losses for which no tax benefit can be recognized.
Year-to-date results:
The Company recorded a provision for income taxes of$23.8 million for the nine months endedSeptember 30, 2021 , compared to a benefit for income taxes of$45.2 million for the nine months endedSeptember 30, 2020 . The$69.0 million increase in the provision for income taxes for the nine months endedSeptember 30, 2021 , compared to same period in 2020, was primarily due to an increase in losses for which no tax benefit can be recognized.
For the three and nine months ended
For the three and nine month periods endedSeptember 30, 2020 , the Company concluded that the use of the cut-off tax rate method was more appropriate than the annual effective tax rate method, because the annual effective tax rate method would have not been reliable due to its sensitivity to minimal changes in forecasted annual pre-tax earnings. The Company's effective tax rate for the three and nine month periods endedSeptember 30, 2021 was lower than the federal statutory rate of 21% primarily due to losses for which no tax benefit can be recognized. OnMarch 11, 2021 ,President Biden signed into law the "American Rescue Plan Act of 2021" (the "ARPA") which expands the Employee Retention Credit and the roster of 'covered employees' under §162(m) deduction limits. The ARPA did not have a significant impact on the Company's financial results. The Company's effective tax rate for the three months endedSeptember 30, 2020 was lower than the federal statutory rate of 21% primarily due to the mix and level of earnings and the change in valuation allowance related to the limitation on the deductibility of interest. The Company's effective tax rate for the nine months endedSeptember 30, 2020 was lower than the federal statutory rate of 21% primarily due to the impact of non-deductible impairment charges and the valuation allowance related to the limitation on the deductibility of interest, partially offset by the impact of the "Coronavirus Aid, Relief and Economic Security Act" (the "CARES Act"), signed into law onMarch 27, 2020 byPresident Trump , which resulted in a 60
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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
partial release of a valuation allowance on the Company's 2019 federal tax
attributes associated with the limitation on the deductibility of interest.
The CARES Act, among other things, includes provisions providing for refundable
payroll tax credits, the deferral of employer social security tax payments,
acceleration of alternative minimum tax credit refunds and the increase of the
net interest deduction limitation from 30% to 50%. The Company adopted the net
interest deduction limitation of 50% for the taxable period ending December 31,
2020 as outlined in the CARES Act.
In assessing the recoverability of its deferred tax assets, the Company
continually evaluates all available positive and negative evidence to assess the
amount of deferred tax assets which are more likely than not to be realized.
Deferred tax assets are reduced by a valuation allowance if some portion or all
of the deferred tax assets will not be realized. A valuation allowance is a
non-cash charge, and it in no way limits the Company's ability to utilize its
deferred tax assets, including its ability to utilize tax loss and credit
carryforward amounts.
For further information, see Note 12, "Income Taxes," to the Company's Unaudited
Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
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