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 Condensed 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 2021 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.
Recent Developments
Public Equity Offering
OnApril 25, 2022 , we entered into an equity distribution agreement withJefferies LLC , as sales agent ("Jefferies"), pursuant to which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to$25 million through Jefferies (the "ATM Program"). We filed a prospectus supplement with theSecurities and Exchange Commission in connection with the ATM Program onApril 25, 2022 . As ofJune 30, 2022 , we have not made any sales under the ATM Program.
Voluntary Reorganization under Chapter 11
OnJune 15, 2022 (the "Petition Date"), the Company and certain of its subsidiaries, includingRevlon Consumer Products Corporation ("Products Corporation ") (collectively, the "Filing Subsidiaries" and, together with the Company, the "Debtors"), filed voluntary petitions (the "Bankruptcy Petitions") for reorganization under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in theUnited States Bankruptcy Court for the Southern District of New York (such court, the "Bankruptcy Court " and such cases, the "Chapter 11 Cases"). OnJune 16, 2022 , theBankruptcy Court entered an order authorizing the joint administration of the Chapter 11 Cases under the caption In reRevlon Inc , Case No. 22-10760. The Debtors will continue to operate their businesses as "debtors-in-possession" under the jurisdiction of theBankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of theBankruptcy Court . To ensure their ability to continue operating in the ordinary course of business, the Debtors sought from theBankruptcy Court a variety of "first-day" relief and "second-day" relief, including authority to obtain debtor-in-possession financing, pay employee wages and benefits, pay vendors and suppliers in the ordinary course for all goods and services provided after the Petition Date and pay fees of professionals involved in the Chapter 11 Cases. As ofAugust 2, 2022 , all "first-day" and "second-day" relief has been granted by theBankruptcy Court on a final basis. The Chapter 11 process can be unpredictable and involves significant risks and uncertainties. As a result of these risks and uncertainties, the amount and composition of the Company's assets and liabilities could be significantly different following the outcome of the Chapter 11 cases, and the description of the Company's operations, properties and liquidity and capital resources included in this Quarterly Report may not accurately reflect its operations, properties and liquidity and capital resources following the Chapter 11 process. For additional information regarding such risks, see Part II-Item 1A-Risk Factors of this Quarterly Report on Form 10-Q. The Debtors have received final approval from theBankruptcy Court to maintain business-as-usual operations and uphold their respective commitments to their stakeholders, including employees, customers, and vendors, during the restructuring process, subject to the jurisdiction of theBankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. While the Chapter 11 Cases are pending, the Debtors do not anticipate making interest payments due under the majority of their debt instruments; however, the Debtors expect to pay interest payments in full as they come due under the DIP Facilities and certain other senior secured debt instruments. In addition, prior to the commencement of the Chapter 11 Cases, the Company secured commitments to enter into (i) a superpriority senior secured debtor-in-possession asset-based loan facility (the "DIP ABL Facility"), in the maximum aggregate principal amount of$400 million , with certain financial institutions party thereto as lenders andMidCap Funding IV Trust , as administrative agent and collateral agent, (ii) a superpriority senior secured debtor-in-possession term loan facility (the "DIP Term Loan Facility"), in the aggregate principal amount of$575 million , with certain financial institutions party thereto as lenders andJefferies Finance, LLC , as administrative agent and collateral agent, and (iii) a superpriority junior secured debtor-in-possession intercompany credit facility (the "Intercompany DIP Facility" and, together with the DIP ABL Facility and the DIP Term Loan Facility, the "DIP Facilities") with the Debtors that are BrandCos (as defined in the BrandCo Credit Agreement referred to herein) (the "BrandCos"). 58
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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) NYSE Delisting Proceedings
As previously disclosed, onJune 16, 2022 , the Company received a letter from the staff ofNYSE Regulation, Inc. ("NYSE Regulation") that it had determined to commence proceedings to delist the Class A Common Stock of the Company from theNew York Stock Exchange ("NYSE"). NYSE Regulation reached its decision that the Company is no longer suitable for listing pursuant to NYSE Listed Company Manual Section 802.01D after the Company's disclosure onJune 16, 2022 that it commenced the Chapter 11 Cases, onJune 15, 2022 . The Company appealed the NYSE's delisting decision in a timely manner and requested a hearing before the NYSE. The date of the hearing has been set forOctober 13, 2022 . At this time, and provided the Company continues to comply with the NYSE's ongoing listing requirements, the Company currently expects that its Class A Common Stock will continue to be listed and trade on the NYSE pending resolution of the appeal. There can be no assurance that the NYSE will grant the Company's request for continued listing at the hearing and whether there will be equity value in the Company's Class A Common Stock. The Company does not know the timing of any delisting event if the outcome of the appeal is adverse.
COVID-19 Pandemic
The COVID-19 pandemic had a significant and adverse impact on the beauty industry and the Company's business in 2020 and 2021, and the COVID-19 pandemic continues to impact the Company's business in 2022. The COVID-19 pandemic has contributed to the imposition of face mask mandates, lockdowns and other significant restrictions inthe United States and abroad from time to time? global supply chain disruptions, including manufacturing and transportation delays, due to closures, employee absences, port congestion, labor and container shortages, and shipment delays, increased transportation costs, and shortages in raw materials, tight labor markets and inflationary pressures for a number of industries, including consumer retail, and related consumer products shortages and price increases? closures, bankruptcies and/ or reduced operations of retailers, beauty salons, spas, offices and manufacturing facilities? labor shortages with employers in many industries, including consumer retail, experiencing increased competition to recruit, hire and retain employees? travel and transportation restrictions leading to declines in consumer traffic in key shopping and tourist areas around the globe? and import and export restrictions. With the roll out of COVID-19 vaccinations in 2021 and the easing of COVID-19 restrictions inthe United States and in many of the Company's key markets around the globe, the Company saw a gradual rebound in consumer spending and consumption in 2021, which has continued into 2022. The Company continues to closely monitor the associated impacts of COVID-19, including the impacts of any new variants of COVID-19 and subsequent "waves" of the pandemic, and will 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 Business
Revlon, 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. 59
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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) 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.
For additional information regarding the Company's business, see Part 1, Item 1 "Business" in the Company's 2021 Form 10-K.
Overview ofNet Sales and Earnings Results Consolidated net sales in the second quarter of 2022 were$442.6 million , a$54.8 million decrease, or 11.0%, compared to$497.4 million in the second quarter of 2021. Excluding the$19.0 million unfavorable FX impact, consolidated net sales decreased by$35.8 million , or 7.2%, during the second quarter of 2022.The XFX net sales decrease of$35.8 million in the second quarter of 2022 was due to: a$26.8 million , or 30.7%, decrease in Fragrances segment net sales;$9.4 million or 9.5%, decrease in Portfolio segment net sales;$7.2 million , or 5.8%, decrease inElizabeth Arden segment net sales, partially offset by a$7.6 million , or 4.1% increase in Revlon segment net sales. Consolidated net sales in the six months endedJune 30, 2022 were$922.2 million , a$20.2 million decrease, or 2.1%, compared to$942.4 million in the six months endedJune 30, 2021 . Excluding the$28.4 million unfavorable FX impact, consolidated net sales increased by$8.2 million , or 0.9%, during the six months endedJune 30 , 2022.The XFX net sales increase of$8.2 million in the six months endedJune 30, 2022 was due to: a$32.6 million , or 9.3%, increase in Revlon segment net sales, partially offset by a$17.2 million , or 10.6%, decrease in Fragrances segment net sales;$4.2 million or 2.2%, decrease in Portfolio segment net sales and a$3.0 million or 1.3%, decrease inElizabeth Arden segment net sales.
Consolidated loss from continuing operations, net of taxes, in the second
quarter of 2022 was
•$158.3 million increase in reorganization items, net related to the Company's voluntary Chapter 11 filing onJune 15, 2022 . The costs are primarily related due to the write-off of original issue discount and deferred long-term debt fees on debt subject to compromise, legal and professional fees during the second quarter of 2022, compared to nil during the second quarter of 2021;
•$49.9 million of lower gross profit, primarily due to lower net sales, higher sales incentives, allowances and returns and unfavorable foreign currency impacts during second quarter of 2022, as compared to the second quarter of 2021;
•a$24.3 million increase in non-cash impairment charges for finite-lived and indefinite-lived intangibles of$18.7 million and$5.6 million , respectively, recorded during the second quarter of 2022, primarily attributable to the supply chain disruptions as a result of the COVID-19 pandemic, compared to no impairment charges recorded during the second quarter of 2021; •$15.9 million of unfavorable variance in foreign currency, resulting from$14.2 million in foreign currency losses during the second quarter of 2022, compared to$1.7 million in foreign currency gains during the second quarter of 2021, primarily driven by the net unfavorable impact of foreign currency fluctuations on certainU.S. Dollar denominated intercompany payables, particularly, the strengthening of theU.S. Dollar against the South African Rand, Australian Dollar and British Pound; and
•a
•a
with the foregoing partially offset by:
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AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
•$26.4 million of lower SG&A expenses in the second quarter of 2022 compared to
the second quarter of 2021, primarily driven by lower brand support expenses,
favorable foreign currency impacts, partially offset by higher general and
administrative expenses;
•a $7.7 million decrease in the provision for income taxes in the second quarter
of 2022 compared to the second quarter of 2021, primarily due to the
geographical level and mix of earnings and net change of valuation allowance on
its net federal and certain deferred tax assets;
•a $5.3 million decrease in restructuring charges, primarily related to lower
expenditures under RGGA in the second quarter of 2022, compared to the second
quarter of 2021;
•a $4.4 million decrease in interest expense in the second quarter of 2022,
compared to the second quarter of 2021, primarily driven by contractual interest
stayed on pre-petition debt reclassified to LSTC, partially offset by higher
interest rates under the floating rate debt;
•a $1.5 million decrease in amortization of debt issuance costs in the second
quarter of 2022, compared to the second quarter of 2021, primarily due to the
write off of debt issuance costs on debt subject to compromise to reorganization
items, net subsequent to the Chapter 11 filing, in accordance with ASC 852.
Consolidated loss from continuing operations, net of taxes, in the six months
ended June 30, 2022 was $342.6 million , compared to consolidated loss from
continuing operations, net of taxes, of $163.7 million in the six months ended
June 30, 2021 . The $178.9 million increase in consolidated loss from continuing
operations, net of taxes, in the six months ended June 30, 2022 , compared to six
months ended June 30, 2021 , was primarily due to:
•$158.3 million increase in reorganization items, net related to the Company's
voluntary Chapter 11 filing on June 15, 2022 . The costs are primarily related to
the write-off of original issue discount and deferred long-term debt fees on
debt subject to compromise, legal and professional fees during the six months
ended June 30, 2021 , compared to nil during the six months ended June 30, 2021 ;
•a $24.3 million increase in non-cash impairment charges for finite-lived and
indefinite-lived intangibles of $18.7 million and $5.6 million , respectively,
recorded for the six months ended June 30, 2022 , primarily attributable to the
supply chain disruptions as a result of the COVID-19 pandemic, compared to no
impairment charges for the six months ended June 30, 2021 ;
•$21.0 million of lower gross profit, primarily due to higher sales incentives,
allowances and returns and unfavorable foreign currency impacts, partially
offset by favorable product mix, in the six months ended
•$20.4 million of unfavorable variance in foreign currency, resulting from$22.0 million in foreign currency losses during the second quarter of 2022, compared to$1.6 million in foreign currency losses during the second quarter of 2021, primarily driven by the net unfavorable impact of foreign currency fluctuations on certainU.S. Dollar denominated intercompany payables, particularly, the strengthening of theU.S. Dollar against the British Pound and Euro; •a$4.0 million net increase in other miscellaneous expenses, net, in the six months endedJune 30, 2022 , compared to the prior year period, primarily due to commitment fees in connection with the recent refinancing transactions; and •a$1.8 million decrease in gain on divested assets, primarily related to the sale of the Gatineau brand in the prior year period, compared to nil in the six months endedJune 30, 2022 ;
with the foregoing partially offset by:
•$30.0 million of lower SG&A expenses in the six months endedJune 30, 2022 , compared to the prior year period, primarily driven by lower brand support expenses, favorable foreign currency impacts, partially offset by higher general and administrative expenses; •a$8.8 million decrease in restructuring charges, primarily related to lower expenditures under RGGA in the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 ; •a$9.1 million decrease in the provision for income taxes in the six months endedJune 30, 2022 , compared to the prior year period, primarily due to: the geographical mix of earnings and net change of valuation allowance on its net deferred tax assets for certain jurisdictions; 61
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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)
•a $1.2 million decrease in interest expense in the six months ended June 30,
2022 , compared to the prior year period, driven by contractual interest stayed
on pre-petition debt reclassified to LSTC, partially offset by higher interest
rates under the floating rate debt;
•a $1.1 million decrease in amortization of debt issuance costs in the six
months ended June 30, 2022 , compared to the prior year period, primarily due to
the write off of debt issuance costs on debt subject to compromise to
reorganization items, net subsequent to the Chapter 11 filing, in accordance
with ASC 852; and
•$0.7 million of lower acquisition, integration and divestiture costs in the six
months ended June 30, 2022 , compared to the prior year period, primarily driven
by higher amortization of the cash-based awards under the Revlon 2019 TIP in the
prior year period.
Operating Segments
The Company operates in four reporting segments: Revlon,
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.
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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)
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 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 June 30 , Change XFX Change (a) Three Months Ended June 30 , Change XFX Change (a)
2022 2021 $ % $ % 2022 2021 $ % $ %
Revlon $ 186.2 $ 186.8 $ (0.6) (0.3) % $ 7.6 4.1 % $ 24.7 $ 21.2 $ 3.5 16.5 % $ 4.6 21.7 %
Elizabeth Arden 112.1 124.7 (12.6) (10.1) % (7.2) (5.8) % 18.0 11.6 6.4 55.2 % 7.7 66.4 %
Portfolio 86.2 98.7 (12.5) (12.7) % (9.4) (9.5) % 4.9 11.1 (6.2) (55.9) % (5.9) (53.2) %
Fragrances 58.1 87.2 (29.1) (33.4) % (26.8) (30.7) % 4.2 20.0 (15.8) (79.0) % (15.4) (77.0) %
Total $ 442.6 $ 497.4 $ (54.8) (11.0) % $ (35.8) (7.2) % $ 51.8 $ 63.9 $ (12.1) (18.9) % $ (9.0) (14.1) %
Net Sales Segment Profit
Six Months Ended June 30 , Change XFX Change (a) Six Months Ended June 30 , Change XFX Change (a)
2022 2021 $ % $ % 2022 2021 $ % $ %
Revlon $ 368.3 $ 348.8 $ 19.5 5.6 % $ 32.6 9.3 % $ 48.3 $ 29.2 $ 19.1 65.4 % $ 21.2 72.6 %
Elizabeth Arden 227.0 236.9 (9.9) (4.2) % (3.0) (1.3) % 23.9 20.8 3.1 14.9 % 4.7 22.6 %
Portfolio 185.4 194.7 (9.3) (4.8) % (4.2) (2.2) % 22.2 24.2 (2.0) (8.3) % (1.3) (5.4) %
Fragrances 141.5 162.0 (20.5) (12.7) % (17.2) (10.6) % 15.8 27.9 (12.1) (43.4) % (11.5) (41.2) %
Total $ 922.2 $ 942.4 $ (20.2) (2.1) % $ 8.2 0.9 % $ 110.2 $ 102.1 $ 8.1 7.9 % $ 13.1 12.8 %
(a) XFX excludes the impact of foreign currency fluctuations.
Revlon Segment Second quarter results: Revlon segment net sales in the three months endedJune 30, 2022 were$186.2 million , a$0.6 million , or 0.3%, decrease, compared to$186.8 million in the three months endedJune 30, 2021 . Excluding the$8.2 million unfavorable FX impact, total Revlon segment net sales in the three months endedJune 30, 2022 increased by$7.6 million , or 4.1%, compared to the three months endedJune 30, 2021 . The Revlon segment XFX increase in net sales of$7.6 million in the three months endedJune 30, 2022 was driven by higher net sales of Revlon color cosmetics, both inNorth America and in International regions, and higher net sales of Revlon-branded professional hair care products in International regions, partially offset by lower net sales inNorth America of Revlon-branded beauty tools. This increase was due, primarily, to salons' increased activity in connection with progressive and/or temporary lifting of restrictions related to the ongoing COVID-19 pandemic in International regions compared to the prior period, as well as pricing adjustments in the mass retail channel inNorth America . 63
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AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)
Revlon segment profit in the three months ended June 30, 2022 was $24.7 million ,
a $3.5 million , or 16.5%, increase, compared to $21.2 million in the three
months ended June 30, 2021 . Excluding the $1.1 million unfavorable FX impact,
Revlon segment profit in the three months ended June 30, 2022 increased by $4.6
million , or 21.7%, compared to the three months ended June 30, 2021 . This
increase was driven primarily by the Revlon segment's lower brand support and
higher XFX net sales, as described above, partially offset by moderately lower
gross profit margin and higher other SG&A expenses.
Year-to-date results:
Revlon segment net sales in the six months endedJune 30, 2022 were$368.3 million , a$19.5 million , or 5.6%, increase, compared to$348.8 million in the six months endedJune 30, 2021 . Excluding the$13.1 million unfavorable FX impact, total Revlon segment net sales in the six months endedJune 30, 2022 increased by$32.6 million , or 9.3%, compared to the six months endedJune 30, 2021 . The Revlon segment's XFX increase in net sales of$32.6 million in the six months endedJune 30, 2022 was driven primarily by higher net sales of Revlon color cosmetics inNorth America and higher net sales of Revlon-branded professional hair care products in International regions and, to a lesser extent, and higher net sales of Revlon ColorSilk inNorth America . 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. Revlon segment profit in the six months endedJune 30, 2022 was$48.3 million , a$19.1 million , or 65.4%, increase, compared to$29.2 million in the six months endedJune 30, 2021 . Excluding the$2.1 million unfavorable FX impact, Revlon segment profit in the six months endedJune 30, 2022 increased by$21.2 million , or 72.6%, compared to the six months endedJune 30, 2021 . This increase was driven primarily by the Revlon segment's higher net sales and lower brand support expenses, partially offset by higher other SG&A expenses and lower gross profit margin. Elizabeth Arden Segment Second quarter results:Elizabeth Arden segment net sales in the second quarter of 2022 were$112.1 million , a$12.6 million , or 10.1%, decrease, compared to$124.7 million in the second quarter of 2021. Excluding the$5.4 million unfavorable FX impact,Elizabeth Arden segment net sales in the second quarter of 2022 decreased by$7.2 million , or 5.8%, compared to the second quarter of 2021. The Elizabeth Arden segment XFX decrease in net sales of$7.2 million in the second quarter of 2021 was driven primarily by lower net sales of Prevage in the International regions and, to a lesser extent, lower net sales of Ceramide inNorth America . This decrease was due, primarily, to the return of COVID-19 restrictions in International regions, particularly inAsia , and the effects on foot traffic at department stores and other retail outlets.Elizabeth Arden segment profit in the second quarter of 2022 was$18.0 million , a$6.4 million , or 55.2% increase, compared to$11.6 million in the second quarter of 2021. Excluding the$1.3 million unfavorable FX impact,Elizabeth Arden segment profit in the second quarter of 2022 increased by$7.7 million , or 66.4%, compared to the second quarter of 2021. This increase was driven primarily by the Elizabeth Arden segment's lower brand support expenses, partially offset by lower net sales, primarily due to COVID-19 as described above, as well as moderately lower gross profit margin.
Year-to-date results:
Elizabeth Arden segment net sales in the six months endedJune 30, 2022 were$227.0 million , a$9.9 million , or 4.2%, decrease, compared to$236.9 million in the six months endedJune 30, 2021 . Excluding the$6.9 million unfavorable FX impact,Elizabeth Arden segment net sales in the six months endedJune 30, 2022 decreased by$3.0 million , or 1.3%, compared to the six months endedJune 30, 2021 . The Elizabeth Arden segment XFX decrease in net sales of$3.0 million in the six months endedJune 30, 2022 was driven primarily by lower net sales of Prevage in the International regions and lower net sales of Ceramide inNorth America , partially offset by higher net sales of Ceramide in the International regions and, to a lesser extent, higher net sales of White Tea and Green Tea fragrances in the International regions. This decrease was due, primarily, to the return of COVID-19 restrictions in International regions, particularly inAsia , and the effects on foot traffic at department stores and other retail outlets.Elizabeth Arden segment profit in the six months endedJune 30, 2022 was$23.9 million , a$3.1 million , or 14.9%, increase, compared to$20.8 million in the six months endedJune 30, 2021 . Excluding the$1.6 million unfavorable FX impact, 64
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(all tabular amounts in millions, except share and per share amounts)
Elizabeth Arden segment profit in the six months ended June 30, 2022 increased
by $4.7 million , or 22.6%, compared to the six months ended June 30, 2021 . This
increase was driven primarily by the Elizabeth Arden segment's lower brand
support expenses, partially offset by lower net sales, primarily due to COVID-19
as described above, as well as moderately lower gross profit margin.
Portfolio Segment
Second quarter results:
Portfolio segment net sales in the second quarter of 2022 were$86.2 million , a$12.5 million , or 12.7%, decrease, compared to$98.7 million in the second quarter of 2021. Excluding the$3.1 million unfavorable FX impact, total Portfolio segment net sales in the second quarter of 2022 decreased by$9.4 million , or 9.5%, compared to the second quarter of 2021. The Portfolio segment XFX decrease in net sales of$9.4 million in the second quarter of 2022 was driven primarily by lower net sales of CND nail products, Creme of Nature products and Mitchum anti-perspirant deodorants, primarily inNorth America , partially offset by higher net sales of Mitchum anti-perspirant deodorants in the International regions. The decrease was primarily due to the global supply chain disruptions as a result of the COVID-19 pandemic. Portfolio segment profit in the second quarter of 2022 was$4.9 million , a$6.2 million , or 55.9%, decrease, compared to$11.1 million in the second quarter of 2021. Excluding the$0.3 million unfavorable FX impact, Portfolio segment profit in the three months endedJune 30, 2022 decreased by$5.9 million , or 53.2%, compared to the second quarter of 2021. This decrease was driven primarily by the Portfolio segment's lower net sales, partially offset by lower brand support, other SG&A expenses and marginal improvement in gross profit margin.
Year-to-date results:
Portfolio segment net sales in the six months endedJune 30, 2022 were$185.4 million , a$9.3 million , or 4.8%, decrease, compared to$194.7 million in the six months endedJune 30, 2021 . Excluding the$5.1 million unfavorable FX impact, total Portfolio segment net sales in the six months endedJune 30, 2022 decreased by$4.2 million , or 2.2%, compared to the six months endedJune 30, 2021 . The Portfolio segment XFX decrease in net sales of$4.2 million in the six months endedJune 30, 2022 was driven primarily by lower net sales of Creme of Nature products, CND nail products, Sinful Colors color cosmetics and Mitchum anti-perspirant deodorants, primarily inNorth America . This decrease was partially offset by higher net sales of Mitchum anti-perspirant deodorants in the International regions, higher net sales of Cutex nail care products both inNorth America and the International regions, and higher net sales of Creme of Nature products in the International regions. The decrease was primarily due to the global supply chain disruptions as a result of the COVID-19 pandemic. Portfolio segment profit in the six months endedJune 30, 2022 was$22.2 million , a$2.0 million , or 8.3%, decrease compared to$24.2 million in the six months endedJune 30, 2021 . Excluding the$0.7 million unfavorable FX impact, Portfolio segment profit in the six months endedJune 30, 2022 decreased by$1.3 million , or 5.4%, compared to the six months endedJune 30, 2021 . This decrease was driven primarily by the Portfolio segment's lower net sales and gross profit margin, partially offset by lower brand support and other SG&A expenses.
Fragrances Segment
Second quarter results:
Fragrances segment net sales in the second quarter of 2022 were$58.1 million , a$29.1 million , or 33.4%, decrease, compared to$87.2 million in the second quarter of 2021. Excluding the$2.3 million unfavorable FX impact, total Fragrances segment net sales in the second quarter of 2022 decreased by$26.8 million , or 30.7%, compared to the second quarter of 2021. The Fragrances segment XFX decrease in net sales of$26.8 million in the second quarter of 2022 was driven primarily by lower net sales of other distributed fragrances and, to a lesser extent, lower net sales of Juicy Couture, Curve andJohn Varvatos fragrances inNorth America , primarily due to global supply chain disruptions as a result of the COVID-19 pandemic. Fragrances segment profit in the second quarter of 2022 was$4.2 million , a$15.8 million , or 79.0%, decrease, compared to$20.0 million in the second quarter of 2021. Excluding the$0.3 million unfavorable FX impact, Fragrances segment profit in the second quarter of 2022 decreased by$15.4 million , or 77.0%, compared to the second quarter of 2021. This decrease was driven primarily by the Fragrances segment's lower net sales, as described above, and lower gross profit margin. 65
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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:
Fragrances segment net sales in the six months endedJune 30, 2022 were$141.5 million , a$20.5 million , or 12.7%, decrease, compared to$162.0 million in the six months endedJune 30, 2021 . Excluding the$3.3 million unfavorable FX impact, total Fragrances segment net sales in the six months endedJune 30, 2022 decreased by$17.2 million , or 10.6%, compared to the six months endedJune 30, 2021 . The Fragrances segment XFX decrease in net sales of$17.2 million in the six months endedJune 30, 2022 was driven primarily by lower net sales of other distributed fragrances and, to a lesser extent, lower net sales of Juicy Couture, Curve andJohn Varvatos fragrances inNorth America , primarily due to global supply chain disruptions as a result of the COVID-19 pandemic. This decrease was partially offset by higher net sales of Juicy Couture,Britney Spears andJohn Varvatos fragrances in the International regions. Fragrances segment profit in the six months endedJune 30, 2022 was$15.8 million , a$12.1 million , or 43.4%, decrease, compared to$27.9 million in the six months endedJune 30, 2021 . Excluding the$0.5 million unfavorable FX impact, Fragrances segment profit in the six months endedJune 30, 2022 decreased by$11.5 million , or 41.2%, compared to the six months endedJune 30, 2021 . This decrease was driven primarily by the Fragrances segment's lower net sales, as described above, and lower gross profit margin. 66
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Table of Contents
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 June 30, Change XFX Change (a)
2022 2021 $ % $ %
Revlon
North America $ 101.0 $ 99.5 $ 1.5 1.5 % $ 1.8 1.8 %
International 85.2 87.3 (2.1) (2.4) % 5.8 6.6 %
Elizabeth Arden
North America $ 14.4 $ 20.2 $ (5.8) (28.7) % $ (5.7) (28.2) %
International 97.7 104.5 (6.8) (6.5) % (1.5) (1.4) %
Portfolio
North America $ 54.0 $ 63.2 $ (9.2) (14.6) % $ (9.3) (14.7) %
International 32.2 35.5 (3.3) (9.3) % (0.1) (0.3) %
Fragrance
North America $ 30.9 $ 61.0 $ (30.1) (49.3) % $ (29.7) (48.7) %
International 27.2 26.2 1.0 3.8 % 2.9 11.1 %
Total Net Sales $ 442.6 $ 497.4 $(54.8) (11.0) %$ (35.8) (7.2) % Six Months Ended June 30, Change XFX Change (a) 2022 2021 $ % $ % Revlon North America$ 202.6 $ 182.5 $ 20.1 11.0 %$ 20.2 11.1 % International 165.7 166.3 (0.6) (0.4) % 12.4 7.5 % Elizabeth Arden North America $ 40.4$ 48.6 $ (8.2) (16.9) %$ (8.1) (16.7) % International 186.6 188.3 (1.7) (0.9) % 5.1 2.7 % Portfolio North America$ 118.7 $ 126.7 $ (8.0) (6.3) %$ (7.9) (6.2) % International 66.7 68.0 (1.3) (1.9) % 3.7 5.4 % Fragrances North America $ 83.6$ 112.3 $ (28.7) (25.6) %$ (28.6) (25.5) % International 57.9 49.7 8.2 16.5 % 11.4 22.9 %
Total Net Sales $ 922.2 $ 942.4 $ (20.2) (2.1) % $ 8.2 0.9 %
(a) XFX excludes the impact of foreign currency fluctuations.
Revlon Segment Second quarter results:North America In North America , Revlon segment net sales in the second quarter of 2022 increased by$1.5 million , or 1.5%, to$101.0 million , compared to$99.5 million in the second quarter of 2021. Excluding the$0.3 million unfavorable FX impact, Revlon segment net sales inNorth America in the second quarter of 2022 increased by$1.8 million , or 1.8%, compared to the second quarter of 2021. The Revlon segment's$1.8 million XFX increase inNorth America net sales in the second quarter of 2022 was driven by higher net sales of Revlon color cosmetics and, to a lesser extent, higher net sales of Revlon ColorSilk, partially offset by lower net sales of Revlon-branded beauty tools. 67
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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) International
Internationally, Revlon segment net sales in the second quarter of 2022 decreased by$2.1 million , or 2.4%, to$85.2 million , compared to$87.3 million in the second quarter of 2021. Excluding the$7.9 million unfavorable FX impact, Revlon segment International net sales in the second quarter of 2022 increased by$5.8 million , or 6.6%, compared to the second quarter of 2021. The Revlon segment's$5.8 million XFX increase in International net sales in the second quarter of 2022 was driven primarily by the Revlon segment's higher net sales of Revlon-branded professional hair care products, primarily in the EMEA region, and, to a lesser extent, higher net sales of Revlon color cosmetics.
Year-to-date results:
InNorth America , Revlon segment net sales in the six months endedJune 30, 2022 increased by$20.1 million , or 11.0%, to$202.6 million , compared to$182.5 million in the six months endedJune 30, 2021 . Excluding the$0.1 million unfavorable FX impact, Revlon segment net sales inNorth America in the six months endedJune 30, 2022 increased by$20.2 million , or 11.1%, compared to the six months endedJune 30, 2021 . The Revlon segment's$20.2 million XFX increase inNorth America net sales in the six months endedJune 30, 2022 was primarily due to the Revlon segment's higher net sales of Revlon color cosmetics and, to a lesser extent, higher net sales of Revlon ColorSilk.
International
Internationally, Revlon segment net sales in the six months endedJune 30, 2022 decreased by$0.6 million , or 0.4%, to$165.7 million , compared to$166.3 million in the six months endedJune 30, 2021 . Excluding the$13.0 million unfavorable FX impact, Revlon segment International net sales in the six months endedJune 30, 2022 increased by$12.4 million , or 7.5%, compared to the six months endedJune 30, 2021 . The Revlon segment's$12.4 million XFX increase in International net sales in the six months endedJune 30, 2022 was driven primarily by the Revlon segment's higher net sales of Revlon-branded professional hair care products, primarily in the EMEA region, and, to a lesser extent, and higher net sales of Revlon color cosmetics. Elizabeth Arden Segment Second quarter results:North America In North America ,Elizabeth Arden segment net sales in the second quarter of 2022 decreased by$5.8 million , or 28.7%, to$14.4 million , compared to$20.2 million in the second quarter of 2021. Excluding the$0.1 million unfavorable FX impact,Elizabeth Arden net sales inNorth America in the second quarter of 2022 decreased by$5.7 million , or 28.2%, compared to the second quarter of 2021. The Elizabeth Arden segment's$5.7 million XFX decrease inNorth America net sales in the second quarter of 2022 was driven primarily by the Elizabeth Arden segment's lower net sales of Ceramide and, to a lesser extent, lower net sales of Prevage and certainElizabeth Arden -branded fragrances.
International
Internationally,Elizabeth Arden segment net sales in the second quarter of 2022 decreased by$6.8 million , or 6.5%, to$97.7 million , compared to$104.5 million in the second quarter of 2021. Excluding the$5.3 million unfavorable FX impact,Elizabeth Arden segment International net sales in the second quarter of 2022 decreased by$1.5 million , or 1.4%, compared to the second quarter of 2021. The Elizabeth Arden segment's$1.5 million XFX decrease in International net sales in the second quarter 2022 was driven primarily by lower net sales of Prevage and, to a lesser extent, lower net sales of certainElizabeth Arden -branded skin care products, partially offset by higher net sales of Ceramide and certainElizabeth Arden -branded fragrances. 68
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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:
InNorth America ,Elizabeth Arden segment net sales in the six months endedJune 30, 2022 decreased by$8.2 million , or 16.9%, to$40.4 million , compared to$48.6 million in the six months endedJune 30, 2021 . Excluding the$0.1 million unfavorable FX impact,Elizabeth Arden segment net sales inNorth America in the six months endedJune 30, 2022 decreased by$8.1 million , or 16.7%, compared to the six months endedJune 30, 2021 . The Elizabeth Arden segment's$8.1 million XFX decrease inNorth America net sales in the six months endedJune 30, 2022 was driven primarily by the Elizabeth Arden segment's lower net sales of Ceramide and, to a lesser extent, lower net sales of Prevage and certainElizabeth Arden -branded fragrances, partially offset by higher net sales of certainElizabeth Arden -branded skin care products.
International
Internationally,Elizabeth Arden segment net sales in the six months endedJune 30, 2022 decreased by$1.7 million , or 0.9%, to$186.6 million , compared to$188.3 million in the six months endedJune 30, 2021 . Excluding the$6.8 million unfavorable FX impact,Elizabeth Arden segment International net sales in the six months endedJune 30, 2022 increased by$5.1 million , or 2.7%, compared to the six months endedJune 30, 2021 . The Elizabeth Arden segment's$5.1 million XFX increase in International net sales in the six months endedJune 30, 2022 was driven primarily by higher net sales of Ceramide and, to a lesser extent, higher net sales of White Tea and Green Tea fragrances as well as otherElizabeth Arden -branded fragrances, partially offset by lower net sales of Prevage and certainElizabeth Arden -branded skin care products. Portfolio Segment Second quarter results:North America In North America , Portfolio segment net sales in the second quarter of 2022 decreased by$9.2 million , or 14.6%, to$54.0 million , compared to$63.2 million in the second quarter of 2021. Excluding the$0.1 million unfavorable FX impact, Portfolio segmentNorth America net sales in the second quarter of 2022 decreased by$9.3 million , or 14.7%, compared to the second quarter second quarter of 2021. The Portfolio segment's$9.3 million XFX decrease inNorth America net sales in the second quarter of 2022 was driven primarily by the Portfolio segment's lower net sales of Creme of Nature products, CND nail products and Mitchum anti-perspirant deodorants, primarily due to the global supply chain disruptions as a result of the COVID-19 pandemic.
International
Internationally, Portfolio segment net sales in the second quarter of 2022 decreased by$3.3 million , or 9.3%, to$32.2 million , compared to$35.5 million in the second quarter of 2021. Excluding the$3.2 million unfavorable FX impact, Portfolio segment International net sales decreased by$0.1 million , or 0.3%, in the second quarter of 2022, compared to the second quarter of 2021. The Portfolio segment's$0.1 million XFX decrease in International net sales in the second quarter of 2022 was driven primarily by lower net sales of CND nail products and certain local and regional skin care products brands, partially offset by higher net sales of Mitchum anti-perspirant deodorants, primarily in the EMEA region. Year-to-date results:North America In North America , Portfolio segment net sales in the six months endedJune 30, 2022 decreased by$8.0 million , or 6.3%, to$118.7 million , as compared to$126.7 million in the six months endedJune 30, 2021 . Excluding the$0.1 million unfavorable FX impact, Portfolio segment net sales inNorth America in the six months endedJune 30, 2022 decreased by$7.9 million , or 6.2%, compared to the six months endedJune 30, 2021 . The Portfolio segment's$7.9 million XFX decrease inNorth America net sales in the six months endedJune 30, 2022 was driven primarily by the Portfolio segment's lower net sales of Creme of Nature products and, to a lesser extent, lower net sales of CND nail products, Sinful Colors color cosmetics and Mitchum anti-perspirant deodorants. This decrease was partially offset by higher net sales of Cutex nail care products. 69
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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) International
Internationally, Portfolio segment net sales in the six months endedJune 30, 2022 decreased by$1.3 million , or 1.9%, to$66.7 million , compared to$68.0 million in the six months endedJune 30, 2021 . Excluding the$5.0 million unfavorable FX impact, Portfolio segment International net sales increased by$3.7 million , or 5.4%, in the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 . The Portfolio segment's$3.7 million XFX increase in International net sales in the six months endedJune 30, 2022 was driven primarily by the Portfolio segment's higher net sales of Mitchum anti-perspirant deodorants and, to a lesser extent, higher net sales of Cutex nail care products and Creme of Nature products. This increase was partially offset by lower net sales of certain local and regional skin care products brands. Fragrances Segment Second quarter results:North America In North America , Fragrances segment net sales in the second quarter of 2022 decreased by$30.1 million , or 49.3%, to$30.9 million , as compared to$61.0 million in the second quarter of 2021. Excluding the$0.4 million unfavorable FX impact, Fragrances segment net sales inNorth America decreased by$29.7 million , or 48.7%, in the second quarter of 2022, compared to the second quarter of 2021. The Fragrances segment's$29.7 million XFX decrease inNorth America net sales in the second quarter of 2022 was driven primarily by lower net sales of other distributed fragrances and Juicy Couture and, to a lesser extent, lower net sales ofJohn Varvatos , Curve and other licensed fragrance brands, primarily due to the global supply chain disruptions as a result of the COVID-19 pandemic.
International
Internationally, Fragrances segment net sales in the second quarter of 2022 increased by$1.0 million , or 3.8%, to$27.2 million , compared to$26.2 million in the second quarter of 2021. Excluding the$1.9 million unfavorable FX impact, Fragrances segment International net sales increased by$2.9 million , or 11.1%, in the second quarter of 2022, compared to the second quarter of 2021. The Fragrances segment's$2.9 million XFX increase in International net sales during the second quarter of 2022 was due to higher net sales of Juicy Couture andBritney Spears fragrances, primarily in the EMEA region.
Year-to-date results:
InNorth America , Fragrances segment net sales in the six months endedJune 30, 2022 decreased by$28.7 million , or 25.6%, to$83.6 million , as compared to$112.3 million in the six months endedJune 30, 2021 . Excluding the$0.1 million unfavorable FX impact, Fragrances segment net sales inNorth America decreased by$28.6 million , or 25.5%, in the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 . The Fragrances segment's$28.6 million XFX decrease inNorth America net sales in the six months endedJune 30, 2022 was driven primarily by lower net sales of other distributed fragrances and Juicy Couture and, to a lesser extent, lower net sales ofJohn Varvatos , Curve andBritney Spears fragrances, primarily due to the global supply chain disruptions as a result of the COVID-19 pandemic.
International
Internationally, Fragrances segment net sales in the six months endedJune 30, 2022 increased by$8.2 million , or 16.5%, to$57.9 million , compared to$49.7 million in the six months endedJune 30, 2021 . Excluding the$3.2 million unfavorable FX impact, Fragrances segment International net sales increased by$11.4 million , or 22.9%, in the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 . The Fragrances segment's$11.4 million XFX increase in International net sales in the six months endedJune 30, 2022 was driven primarily by higher net sales of Juicy Couture,Britney Spears andJohn Varvatos as well as other licensed fragrance brands, primarily in the EMEA region andAsia . 70
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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) Gross profit:
The table below shows the Company's gross profit and gross margin for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
Gross profit $ 251.2 $ 301.1 $ (49.9) $ 533.9 $ 554.9 $ (21.0)
Percentage of net sales 56.8 % 60.5 % (3.7) % 57.9 % 58.9 % (1.0) %
Second quarter results:
Gross profit decreased by
Year-to-date results:
Gross profit decreased by$21.0 million in the six months endedJune 30, 2022 , as compared to the second quarter of 2021. Gross profit as a percentage of net sales (i.e., gross margin) in the six months endedJune 30, 2022 decreased by 1.0% percentage points, as compared to the six months endedJune 30, 2021 . The decrease in gross margin in the six months endedJune 30, 2022 , as compared to the six months endedJune 30, 2021 , was impacted primarily by higher sales incentives, allowances and returns and unfavorable foreign currency impacts, partially offset by favorable product mix.
SG&A expenses:
The table below shows the Company's SG&A expenses for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
SG&A expenses $ 253.0 $ 279.4 $ (26.4) $ 509.9 $ 539.9 $ (30.0)
Second quarter results:
SG&A expenses decreased by $26.4 million in the second quarter of 2022, compared
to the second quarter of 2021, driven primarily by:
•lower brand support expenses of approximately $32 million , as investment is
being prioritized to key brands;
•favorable FX impact of approximately $9 million ; and
•lower product display costs of approximately $4 million ;
with the foregoing partially offset by:
•higher general and administrative expenses of approximately $18 million ,
primarily driven by higher professional and legal fees in preparation of the
Chapter 11 filing and higher litigation fees.
Year-to-date results:
SG&A expenses decreased by$30.0 million in the six months endedJune 30, 2022 , compared to the six months endedJune 30, 2021 , driven primarily by: •lower brand support expenses of approximately$35 million , as investment is being prioritized to key brands; •favorable FX impact of approximately$13 million ; and •lower product display costs of approximately$9 million ; with the foregoing partially offset by: •higher general and administrative expenses of approximately$23 million , primarily driven by higher professional and legal fees in preparation of the Chapter 11 filing and higher litigation fees; and •higher distribution expenses of approximately$6 million , driven primarily by higher costs. 71
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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)
Restructuring charges and other, net:
The table below shows the Company's restructuring charges and other, net for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
Restructuring charges and $ 3.1 $ 8.4 $ (5.3) $ 13.8 $ (8.8)
other, net $ 5.0
Second quarter results:
Restructuring charges and other, net, decreased $5.3 million during the second
quarter of 2022, compared to the second quarter of 2021, primarily related to
lower expenditures under RGGA in the second quarter of 2022.
.
Year-to-date results:
Restructuring charges and other, net, decreased
Revlon Global Growth Accelerator Program
OnMarch 2, 2022 , the Company announced that it is extending and expanding its existing Revlon Global Growth Accelerator ("RGGA") program through 2024. The extension and expansion will allow the Company to continue to focus on identifying and implementing new opportunities programmatically. The extension and expansion will provide an additional year to implement larger projects and help make up for supply chain headwinds and the extended COVID restrictions throughout the globe. The major initiatives underlying the RGGA Program will remain and include: • Strategic Growth: Boost organic sales growth behind our strategic pillars - brands, markets, and channels -- to deliver mid-single digit Compound Average Annual Growth Rate through 2024. • Operating Efficiencies: Drive additional operational efficiencies and cost savings for margin improvement and to fuel investments in growth. • Build Capabilities: Build capabilities and embed the Revlon culture of one vision, one team. Under this extension and expansion, the Company expects to deliver an updated range of annualized cost reductions of approximately$325 million to$390 million from 2020 through the end of 2024. 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$32 million of cost reductions during the six months endedJune 30, 2022 , bringing the total cost reductions realized since the inception of the program to approximately$216 million and expects to achieve approximately$40 million to$55 million for the full year 2022, with the balance to be realized during 2023 and 2024. In connection with implementing RGGA, the Company expects to recognize an updated cost range of approximately$193 million and$215 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$20 million of additional capital expenditures. Under the RGGA program, the Company expects to incur pre-tax restructuring and related charges of approximately$30 million to$40 million during 2022 and the remainder during 2023 and 2024. The Company expects that substantially all of these restructuring and related charges will be paid in cash, with$100.4 million of the total charges paid as ofJune 30, 2022 and$5.1 million paid during the first six months of 2022. Approximately$25 million to$30 million of the total charges are expected to be paid during the remainder of 2022, with the residual balance to be paid during 2023 and 2024. In connection with RGGA, during the three months endedJune 30, 2022 , the Company recorded$4.1 million of total pre-tax restructuring and related charges consisting primarily of i)$3.1 million of employee severance, other personnel benefits and other costs; and (ii)$1.0 million of lease and other restructuring-related charges that were recorded within SG&A and cost of sales. During the six months endedJune 30, 2022 , the Company recorded$8.1 million of total pre-tax restructuring and related charges consisting primarily of i)$5.0 million of employee severance, other personnel benefits and other costs; and (ii)$3.1 72
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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)
million of lease and other restructuring-related charges that were recorded
within SG&A and cost of sales. Since its inception and through June 30, 2022 ,
the Company recorded $110.0 million of total pre-tax restructuring and related
charges consisting primarily of i) $81.6 million of employee severance, other
personnel benefits and other costs; and (ii) $28.4 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 Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Interest expense:
The table below shows the Company's interest expense for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
Interest expense $ 57.5 $ 61.9 $ (4.4) $ 119.6 $ 120.8 $ (1.2)
Second quarter results:
The $4.4 million decrease in interest expense in the second quarter of 2022, as
compared to the second quarter of 2021, was primarily driven by contractual
interest stayed on pre-petition debt reclassified to LSTC, partially offset by
higher interest rates under the floating rate debt.
Year-to-date results:
The$1.2 million decrease in interest expense during the six months endedJune 30, 2022 , as compared to the six months endedJune 30, 2021 , was primarily driven by contractual interest stayed on pre-petition debt reclassified to LSTC, partially offset by higher interest rates under the floating rate debt.
Provision for (benefit from) income taxes:
The table below shows the Company's provision for (benefit from) income taxes for the periods presented:
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 Change 2022 2021 Change
(Benefit from) provision for income
Second quarter results: The Company recorded a benefit from income taxes of$0.5 million for the second quarter of 2022, compared to a provision for income taxes of$7.2 million for the second quarter of 2021. The$7.7 million decrease in the provision for income taxes for the second quarter of 2022, compared to the same quarter in 2021, was primarily due to the geographical level and mix of earnings and net change of valuation allowance on its net federal and certain deferred tax assets.
Year-to-date results:
The Company recorded a provision for income taxes of$9.3 million for the six months endedJune 30, 2022 , compared to a provision for income taxes of$18.4 million for the six months endedJune 30, 2021 . The$9.1 million decrease in the provision for income taxes for the six months endedJune 30, 2022 , compared to same period in 2021, was primarily due to the geographical mix of earnings and net change of valuation allowance on its net deferred tax assets for certain jurisdictions. 73
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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)
The Company's effective tax rate for the three and six months ended June 30,
2022 and June 30, 2021 was lower than the federal statutory rate of 21%
primarily due to losses for which no tax benefit can be recognized, as well as
state taxes for certain U.S. entities.
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
Condensed Consolidated Financial Statements in this Quarterly Report on Form
10-Q.
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