Revlon Announces Transformative 2020 Business Optimization Program and Refinancing Agreement

Revlon, Inc. (NYSE: REV) (“Revlon” and together with its subsidiaries, the “Company”) today announced two important steps forward in strengthening the Company’s business, capital structure and foundation for future growth. First, the Company executed an agreement with Jefferies Finance LLC that will significantly enhance the Company’s capital structure by refinancing the Company’s Senior Notes due February 2021 and 2019 Term Loan, extend the Company’s near-term maturities and deliver new funding for the business.

Second, the Company announced a new Revlon 2020 Restructuring Program that is expected to generate significant annualized cost reductions of between $200 and $230 million by the end of 2022. The goal of the 2020 Program is to build a stronger global business operation, enhance the Company’s cost efficiency, and improve operating margin to continue accelerating the growth in operating income and profitability that the Company saw in 2019.

The Company also released preliminary and unaudited1 fourth quarter and full-year 2019 financial results and will host a conference call to discuss these significant milestones on March 10, 2020 at 8:30 a.m. EDT.

Revlon 2020 Restructuring Program and Cost Reductions

Building upon the successful 2018 Optimization Program by which the Company delivered $95 million of in-year cost reductions in 2019 ($125 million on an annualized basis), the Company is implementing a new worldwide organizational restructuring designed to reduce the Company’s selling, general and administrative expenses, improve the Company’s gross profit and Adjusted EBITDA and maximize productivity, cash flow and liquidity.

The new Revlon 2020 Restructuring Program is expected to deliver in the range of approximately $200 million to $230 million of annualized cost reductions by the end of 2022, with approximately 60% of these cost reductions to be realized from headcount reductions occurring in 2020.

The Revlon 2020 Restructuring Program includes rightsizing the organization and operating with more efficient workflows and processes that the Company implemented during the 2018 Optimization Program, such as streamlining support functions and distribution activities. The leaner organizational structure is also expected to improve communication flow and cross-functional collaboration, leveraging more efficient business processes.

In 2020, the Company expects to realize approximately $105 million to $115 million of in-year cost reductions and recognize approximately $55 million to $65 million of total pre-tax restructuring and related charges, consisting of employee-related costs, such as severance, retention and other contractual termination costs. In addition the Company expects restructuring charges in the range of $65 million to $75 million to be charged and paid in the period of 2021 to 2022. The Company expects that substantially all of these restructuring charges will be paid in cash generated by the business, with approximately $55 million to $65 million of the total charges expected to be paid in 2020, approximately $40 million to $45 million expected to be paid in 2021, with the balance expected to be paid in 2022.

Refinancing Agreement

The agreement reached with Jefferies to provide up to $850 million in new financing will be used to repay the 5.75% Senior Notes maturing in 2021 ($500 million outstanding), repay the 2019 Term Loan ($200 million outstanding) and provide additional funding for the Company. The Company plans to close the refinancing transaction in the second quarter.

Strategic Alternatives Review

The company also continues to work with Goldman Sachs on the strategic alternatives process which remains focused on exploring potential options for our portfolio and regional brands.

1See "Notices to Investors" below in the footnotes to this release.

Preliminary 2019 Fourth Quarter and Full Year Financial Results

The Company also released preliminary and unaudited financial results for the fourth quarter and full-year 2019 described below:2

As Reported net sales were $699.4 million in the fourth quarter of 2019, compared to $741.6 million during the prior-year period, a decline of 5.7%. On a constant currency basis, net sales decreased 4.8% driven primarily by net sales declines in the Fragrances and Revlon segments, partially offset by net sales growth in the Elizabeth Arden segment. As Reported net sales includes the negative impact of $13.2 million of excessive coupon redemptions that remain in dispute with a single U.S. mass retailer. Excluding this impact, net sales on a constant currency basis declined 3.0%.

As Reported operating income improved to $76.7 million in the fourth quarter of 2019, compared to $32.2 million during the prior-year period. The higher operating income was driven by $30.0 million in lower selling, general and administrative expenses due primarily to cost reductions related to the Company's 2018 Optimization Program and a benefit from the prior-year non-recurring accelerated amortization related to Pure Ice brand intangible assets, a $26.6 million gain on the divestiture of certain regional brands and a $18.0 million benefit from prior-year non-recurring goodwill impairment charge, partially offset by lower gross profit margin. Adjusted operating income improved 13.7% to $73.2 million from $64.4 million in the prior-year period.

As Reported net income improved to $25.8 million in the fourth quarter of 2019 versus a $70.3 million net loss in the prior-year period. The higher net income was driven primarily by the $44.5 million improvement in operating income described above, a $41.9 million improvement in the benefit from income taxes driven primarily by a non-cash release of a foreign valuation allowance and a $16.0 million favorable foreign currency impact versus the prior-year period, partially offset by higher interest expense.

Adjusted EBITDA(a) in the fourth quarter of 2019 was $111.9 million which included the impact of $9.8 million of tariffs and $1.3 million of negative foreign exchange. Excluding these items, Adjusted EBITDA decreased $6.0 million, or approximately 5%, versus prior-year.

"The refinancing commitment and the launch of the new restructuring program are significant steps forward in the transformation of our business for the future and create a structure that is designed for success in today’s beauty industry. The Revlon 2020 Restructuring Program is expected to create a stronger global business operations model, enhance cost efficiency, and improve operating and profit margins to continue accelerating the growth in operating income and Adjusted EBITDA that we generated in 2019. With an improved capital structure, increased liquidity, and more efficient and streamlined business, I am more confident than ever in our ability to take on the opportunities within our industry and continue to deliver for our key stakeholders, global customers and most importantly our deeply dedicated consumers," said Debra Perelman, President and CEO of Revlon.

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

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