Revlon Reports 2015 Results and Changes in Senior Management

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NEW YORK–(BUSINESS WIRE)–Revlon, Inc. (NYSE:REV) today announced results for the year ended
December 31, 2015.

This release presents the Company’s results using the following
measures: U.S. GAAP (“As Reported”); and non-GAAP (“Adjusted”),
which excludes certain non-operating items from As Reported results, as
well as certain other unusual items identified by management that impact
the comparability of the Company’s period-over-period results. As a
result of the exclusion of these unusual items, the definition of
Adjusted EBITDA has changed from that used in prior periods, and
Adjusted EBITDA for prior periods presented in this release will be
different from amounts reported in prior periods. See footnote (a) for
further discussion of the Company’s non-GAAP and Adjusted measures. In
addition, the Company analyzes and presents its results excluding the
impact of foreign currency adjustments (“XFX”). Reconciliations of As
Reported results to Adjusted results are provided as an attachment to
this release.

Highlights for the fourth quarter and year ended December 31, 2015
include:

  • Total Company net sales were $521.9 million in the fourth quarter of
    2015, a growth of 4.2%, or 9.8% on an XFX basis, over the quarter
    ended December 31, 2014 (the “prior year quarter”). On a full year
    basis, total Company net sales were $1,914.3 million in 2015, a
    decline of 1.4%, or a growth of 4.9% on an XFX basis.
  • Total Company Adjusted EBITDA1 was $125.6 million in the
    fourth quarter of 2015, a growth of 16.4%, or 21.8% on an XFX basis,
    over the prior year quarter. On a full year basis, total Company
    Adjusted EBITDA was $377.5 million in 2015, a growth of 3.4%, or 7.0%
    on an XFX basis;
  • Total Company As Reported net income was $24.8 million in the fourth
    quarter of 2015, including the impact of $36.5 million of
    non-operating items, net of taxes. On a full year basis, As Reported
    net income was $56.1 million in 2015, including the impact of $47.3
    million of non-operating items, net of taxes. The non-operating items
    for both periods included a pension lump-sum settlement charge of
    $20.7 million and a non-cash goodwill impairment charge of $9.7
    million ($6.0 million after-tax). Excluding the non-operating items,
    Adjusted1 net income was $61.3 million in the fourth
    quarter of 2015, an increase of $56.3 million, and was $103.4 million
    in 2015, an increase of $43.1 million, or 71.5%.

Commenting on today’s announcement, Revlon President and Chief Executive
Officer, Lorenzo Delpani, said “2015 ended with a very successful fourth
quarter for both our Consumer and Professional segments. The Company has
reinvigorated our key brands and increased our profitability. At the
same time, we successfully integrated the Colomer business into the
combined company and reduced our cost base. The Company has built strong
momentum, we are in a more competitive position, and we have more
resources to invest in our brands.”

In addition, Mr. Delpani informed the Board of Directors that he intends
to step down as President and CEO effective March 1st for personal
reasons. Mr. Delpani will continue to serve on the Company’s Board of
Directors and as a paid advisor.

“It has been a pleasure and privilege to lead this extraordinary company
during a period of transformation and growth. It has been my mission to
continue Revlon’s industry leading commitment to quality and innovation
and it is the Revlon team’s relentless drive towards those goals that
has paved the way for our current and future success. I want to thank
all my good friends and colleagues at Revlon and MacAndrews & Forbes for
their hard work and support, and I look forward to continuing our
partnership to grow the company we love,” Mr. Delpani said.

“On behalf of all of us at Revlon and MacAndrews & Forbes, I want to
express our gratitude to Lorenzo for his hard work and dedication to our
company. Through creativity and a commitment to innovation, Lorenzo
helped guide Revlon through a successful period of integration and
transformation that has led to the strong business growth we are now
seeing. We are pleased that he is staying on with the Board and as an
advisor,” said Revlon Chairman Ronald O. Perelman.

The Board of Directors also approved appointing current Executive Vice
President and Global President, Revlon Consumer Division, Gianni
Pieraccioni as the Company’s new Chief Operating Officer.

Mr. Pieraccioni has served as the Company’s Executive Vice President and
Global President – Revlon Consumer Division since February 2014. Prior
to joining the Company, Mr. Pieraccioni served as Executive Vice
President and Chief Commercial Officer for Alitalia and as Global
General Manager at Averna Group. During his long career, Mr. Pieraccioni
held several general management, marketing and commercial positions of
increasing scope and seniority within the CPG industry, including at
U.S.-based companies such as The Procter & Gamble Company, PepsiCo,
Johnson & Johnson, and at European firms such as Sector Group and Binda
Group.

1 See footnote (a) for further discussion of the Company’s
non-GAAP measures. Reconciliations of As Reported results to Adjusted
results are provided as an attachment to this release.

Full Year 2015 Results

On an XFX basis, Adjusted1 net sales in 2015 increased $102.8
million, or 5.3%, compared to 2014. The Company’s April 2015 acquisition
of CBBeauty Group (“CBB” and the “CBB Acquisition,” respectively)
contributed $28.4 million to total Company Adjusted net sales in 2015,
with no comparable sales in 2014. On an As Reported basis, total Company
net sales were $1,914.3 million in 2015, and $1,941.0 million in 2014.
Venezuela had reported net sales of $1.0 million in 2015, compared to
net sales of $16.3 million in 2014 as a result of the Company’s exit
from Venezuela in the second quarter of 2015. Excluding Venezuela, total
Company Adjusted1 net sales were $1,913.3 million in 2015,
compared to $1,924.7 million in 2014. Foreign currency negatively
impacted 2015 net sales by $114.2 million (adjusted to exclude the XFX
impact in Venezuela).

As Reported earnings per diluted share was $1.07 in 2015 and $0.78 in
2014. On an Adjusted1 basis, earnings per diluted share was
$1.97 in 2015, compared to $1.15 in 2014.

Further details discussing the drivers of the variances in these Adjusted
measures are provided below.

Segment Results

   
(USD millions)   Twelve Months Ended December 31,
Net Sales     Segment Profit (b)
As Reported   As Reported  
2015   2014   % Change XFX

% Change

2015   2014   % Change

XFX

% Change

 
Consumer $   1,414.8 $   1,438.3 -1.6% 3.7% $   360.2 $   339.4 6.1% 8.8%
Professional 471.1 502.7 -6.3% 2.4% 103.9 104.8 -0.9% 2.7%
Other     28.4     N.M. N.M.     1.4     N.M. N.M.
Total $ 1,914.3 $ 1,941.0 -1.4% 4.9% $ 465.5 $ 444.2 4.8% 7.7%
 

The above table provides information on an As Reported basis and,
where indicated, on an XFX basis, and has not been adjusted for the
unusual items discussed in footnote (a). Segment profit is
defined in footnote (b) below.
Effective in the second quarter of
2015, the Company identified a third reporting segment, Other, as a
result of the CBB Acquisition. The results included within the Other
segment include CBB’s operating results, which are not material to the
Company’s consolidated results of operations.

Consumer Segment

On an XFX basis, Consumer segment net sales increased 3.7%, primarily
driven by higher net sales of Revlon color cosmetics, Mitchum
anti-persipirant deodorants, Revlon ColorSilk hair color and Cutex nail
products, partially offset by lower net sales of Almay color cosmetics.
The Company’s exit from Venezuela in the second quarter of 2015
negatively impacted Consumer segment net sales. Excluding Venezuela, on
an XFX basis, Consumer net sales would have increased by 4.4% in 2015
compared to 2014.

On an XFX basis, Consumer segment profit increased 8.8%, primarily
driven by higher gross profit as a result of the XFX increases in net
sales as discussed above, partially offset by $8.7 million of higher
brand support expenses for the Company’s Consumer brands in 2015. The
Company’s exit from Venezuela negatively impacted Consumer segment
profit, which resulted in no Venezuela EBITDA in 2015, compared to $6.6
million in 2014. Excluding Venezuela, on an XFX basis, Consumer segment
profit would have increased by 11.1% in 2015 compared to 2014.

Professional Segment

On an XFX basis, Professional segment net sales increased 2.4%,
primarily due to higher net sales of American Crew men’s grooming
products, Revlon Professional hair products and Creme of Nature hair
products, partially offset by lower net sales of CND nail products in
the U.S.

On an XFX basis, Professional segment profit increased 2.7%, primarily
driven by higher gross profit as a result of the XFX increases in net
sales as discussed above, partially offset by $5.1 million of higher
brand support expenses for the Company’s Professional brands in 2015. In
addition, Professional segment profit in 2014 included a favorable
adjustment of $3.4 million related to a decrease in the inventory
obsolescence reserve, with no similar adjustment in 2015. Excluding this
unusual adjustment, on an XFX basis, Professional segment profit would
have increased by 6.1% in 2015 compared to 2014.

Geographic Net Sales – Total Company

 
  (USD millions)       Twelve Months Ended December 31,
  As Reported  
Net Sales: 2015     2014     % Change

XFX %
Change

 
United States $   1,043.7 $   1,021.9 2.1% 2.1%
International     870.6     919.1 -5.3% 7.9%
  Total Net Sales       $   1,914.3     $   1,941.0     -1.4%   4.9%
 

The above table provides information on an As Reported basis and,
where indicated, on an XFX basis, and has not been adjusted for the
unusual items discussed in footnote (a).

United States

Total Company U.S. net sales during 2015 increased $21.8 million, or
2.1%. Net sales in the U.S. increased $33.4 million in the Consumer
segment, primarily driven by higher net sales of Revlon color cosmetics,
Mitchum anti-persipirant deodorants and Revlon ColorSilk hair color,
partially offset by lower net sales of Almay color cosmetics. Net sales
in the U.S. decreased $11.6 million in the Professional segment
primarily due to lower net sales of CND nail products.

International

On an XFX basis, International net sales in 2015 increased $72.7
million, or 7.9%, as a result of higher net sales in both the Consumer
and Professional segments. International net sales increased $20.6
million on an XFX basis in the Consumer segment primarily due to higher
net sales of Revlon color cosmetics and Mitchum anti-persipirant
deodorants. International net sales increased $23.7 million on an XFX
basis in the Professional segment primarily due to higher net sales of
American Crew men’s grooming products and Revlon Professional hair
products. From a geographic perspective, the increase in international
net sales on an XFX basis was throughout most of the Company’s
International region. The Other segment had net sales of $28.4 million
in 2015, with no comparable net sales in 2014. Excluding Venezuela, on
an XFX basis, International net sales would have increased by 9.0% in
2015.

Total Company Results

     
(USD millions) Twelve Months Ended December 31,
2015     2014     % Change    

XFX

% Change

 
Operating Income $   215.8 $   235.5 -8.4% -7.1%
EBITDA 319.0 338.1 -5.6% -3.3%
Adjusted EBITDA 377.5 365.2 3.4% 7.0%
Net Income 56.1 40.9 37.2%
Adjusted Net Income 103.4 60.3 71.5%
 

On an XFX basis, Adjusted EBITDA increased $25.4 million, or 7.0%. This
increase was primarily due to higher gross profit in both the Consumer
and Professional segments, partially offset by $16.2 million of higher
brand support expenses, as well as higher general and administrative
expenses. Driving the increase in general and administrative expenses
was $14.7 million of severance costs.

In calculating Adjusted EBITDA, adjustments were made to the calculation
of EBITDA for the following non-operating items:

  • Pension settlement accounting charge of $20.7 million in 2015 as a
    result of offering a one-time lump sum pension payout option to
    certain U.S. plan participants (see below for further discussion);
  • Non-cash impairment charge of $9.7 million in 2015, consisting of a
    portion of the Global Color Brands reporting unit’s goodwill (see
    below for further discussion);
  • Restructuring and related charges of $11.6 million in 2015 and $22.6
    million in 2014;
  • Acquisition and integration costs of $8.0 million in 2015 and $6.4
    million in 2014;
  • Non-cash stock compensation of $5.1 million in 2015 and $5.5 million
    in 2014;
  • Deferred consideration of $2.5 million for the CBB Acquisition
    recognized in 2015; and
  • An unfavorable inventory purchase accounting adjustment of $0.9
    million in 2015 related to the CBB Acquisition and other business
    acquisitions, and $2.6 million in 2014 related to the Colomer
    Acquisition.

As further reflected in the footnotes to this release, to enhance the
comparability of the period-over-period results, in calculating Adjusted
EBITDA, the Company further adjusted its EBITDA results for the
following items:

  • A favorable adjustment of $3.4 million in 2014 related to a decrease
    in the Company’s inventory obsolescence reserve; and
  • Venezuela EBITDA of nil in 2015, compared to $6.6 million in 2014.

The As Reported net income includes certain non-operating items that are
reconciled in the tables to this release. Excluding these items, Adjusted1
net income was $103.4 million in 2015, compared to Adjusted net income
of $60.3 million in 2014, an increase of $43.1 million, or 71.5%. The
increase in Adjusted net income was primarily driven by the growth in
Adjusted EBITDA, as well as a $24.2 million decrease in the provision
for income taxes in 2015 (adjusted for the tax effect of the
non-operating excluded from Adjusted net income) primarily due to the
net reduction of a valuation allowance in certain foreign jurisdictions
in 2015, compared to the establishment of a valuation allowance in 2014.

Pension Lump Sum Offering

In the fourth quarter of 2015, the Company offered certain former
employees who had vested benefits in the Company’s U.S. qualified
defined benefit pension plan (the Revlon Employees’ Retirement Plan) the
option of receiving the present value of the participant’s pension
benefit in a one-time cash lump sum payment. Based on the participants’
acceptance of that offer, $53.4 million was paid from the plan’s assets
to settle $66.9 million of pension liabilities, resulting in a $13.5
million net reduction of the Company’s pension plan liabilities in 2015.
In addition, the Company recorded a charge of $20.7 million as a result
of the pension lump sum settlement accounting within costs of sales
($10.5 million) and SG&A expense ($10.2 million) in 2015. This charge
was the result of accelerating a portion of the losses that were
deferred in accumulated other comprehensive loss, which are required to
be recognized in the period in which the related pension plan
liabilities were settled.

Non-Cash Impairment Charge

For purposes of the annual goodwill impairment test, the Company’s Pure
Ice nail enamel brand, which was acquired in July 2012, is included
within the Company’s Global Color Brands reporting unit. Despite
improvements in the net sales of Pure Ice nail enamel in 2015 and the
realization of margin improvements by integrating the production of Pure
Ice nail enamel within the Company’s existing manufacturing processes,
the Company continued to experience declines in the promotional activity
for the Pure Ice brand at retailers. As a result, in conjunction with
the Company’s annual goodwill impairment test, the Company recorded a
$9.7 million non-cash goodwill impairment charge during the fourth
quarter of 2015 due to the Company’s expectations regarding the future
performance of the Global Color Brands reporting unit in relation to its
carrying amount.

Cash Flow for the Full Year Period

Net cash provided by operating activities in 2015 was $155.3 million,
compared to net cash provided by operating activities of $174.0 million
in the same period last year, representing a decrease of $18.7 million.
Free cash flow1 in 2015 was $113.2 million, compared to
$121.9 million in 2014, representing a decrease of $8.7 million. The
decreases in cash from operating activities and free cash flow were
primarily driven by higher inventory, partially offset by less cash used
in discontinued operations, as well as lower payments for restructuring
in 2015 compared to 2014.

1 See footnote (a) for further discussion of the Company’s
non-GAAP measures. Reconciliations of As Reported results to Adjusted
results are provided as an attachment to this release.

Fourth Quarter 2015 Results

On an XFX basis, Adjusted net sales increased $51.1 million, or 10.2%.
The Company’s April 2015 CBB Acquisition contributed $15.2 million to
total Company Adjusted net sales in the fourth quarter of 2015, with no
comparable net sales in the fourth quarter of 2014. On an As Reported
basis, total Company net sales were $521.9 million in the fourth quarter
of 2015 and $501.0 million in the fourth quarter of 2014. Adjusted net
sales in the fourth quarter of 2015 were $521.8 million, compared to
$498.8 million in the fourth quarter of 2014. Adjusted net sales
excludes from As Reported net sales the impact of the results of the
Company’s Venezuela business operations, with net sales of $0.1 million
and $2.2 million in the fourth quarter of 2015 and 2014, respectively.

Segment Results

 
     
(USD millions) Three Months Ended December 31,
Net Sales   Segment Profit (b)
As Reported   As Reported  
2015   2014   % Change

XFX

% Change

2015   2014   % Change

XFX

% Change

 
Consumer $   387.7 $   383.3 1.1% 6.2% $   128.2 $   113.6 12.9% 16.5%
Professional 119.0 117.7 1.1% 8.8% 27.0 16.3 65.6% 74.8%
Other     15.2     N.M. N.M.     2.6     N.M. N.M.
Total $ 521.9 $ 501.0 4.2% 9.8% $ 157.8 $ 129.9 21.5% 25.9%
 

The above table provides information on an As Reported basis and,
where indicated, on an XFX basis, and has not been adjusted for the
unusual items discussed in footnote (a). Segment profit is
defined in footnote (b) below.

Consumer Segment

On an XFX basis, Consumer segment net sales in the fourth quarter of
2015 increased 6.2%, primarily driven by higher net sales of Revlon
color cosmetics, Mitchum anti-persipirant deodorants and SinfulColors
color cosmetics, partially offset by lower net sales of Revlon ColorSilk
hair color.

On an XFX basis, Consumer segment profit increased 16.5%, primarily
driven by $12.7 million of lower brand support expenses for the
Company’s Consumer brands, as well as higher gross profit as a result of
the XFX increases in net sales discussed above.

Professional Segment

On an XFX basis, Professional segment net sales in the fourth quarter of
2015 increased 8.8%, primarily due to higher net sales of American Crew
men’s grooming products and Revlon Professional hair products.

On an XFX basis, Professional segment profit increased 74.8%, primarily
driven by higher gross profit as a result of the XFX increases in net
sales as discussed above, as well as $7.8 million of lower brand support
expenses for the Company’s Professional brands.

Geographic Net Sales – Total Company

     
(USD millions) Three Months Ended December 31,
  As Reported    
Net Sales: 2015     2014     % Change

XFX %
Change

 
United States $   277.3 $   272.7 1.7% 1.7%
International     244.6     228.3 7.1% 19.5%
Total Net Sales $ 521.9 $ 501.0 4.2% 9.8%
 

The above table provides information on an As Reported basis, and
where indicated, on an XFX basis, and has not been adjusted for the
unusual items discussed in footnote (a).

United States

Total Company U.S. net sales during the fourth quarter of 2015 increased
$4.6 million, or 1.7%. Net sales in the U.S. increased $4.2 million in
the Consumer segment, primarily driven by higher net sales of Revlon and
SinfulColors color cosmetics and Mitchum anti-persipirant deodorants,
partially offset by lower net sales of Revlon ColorSilk hair color. Net
sales in the U.S. in the Professional segment were essentially flat.

International

On an XFX basis, International net sales during the fourth quarter of
2015 increased $44.5 million, or 19.5%, with higher net sales in both
the Consumer and Professional segments. International net sales
increased $19.4 million on an XFX basis in the Consumer segment
primarily due to higher net sales of Revlon color cosmetics and Revlon
ColorSilk hair color. International net sales increased $9.9 million on
an XFX basis in the Professional segment primarily due to higher net
sales of American Crew men’s grooming products and Revlon Professional
hair products. From a geographic perspective, the increase in
International net sales on an XFX basis was throughout most of the
Company’s International region. The Other segment had net sales of $15.2
million in the fourth quarter of 2015, with no comparable net sales in
the fourth quarter of 2014.

Total Company Results

     
(USD millions) Three Months Ended December 31,
2015     2014     % Change    

XFX

% Change

 
Operating Income $   54.9 $   75.9 -27.7% -23.2%
EBITDA 81.3 102.1 -20.4% -16.1%
Adjusted EBITDA 125.6 107.9 16.4% 21.8%
Net Income 24.8 2.7 N.M.
Adjusted Net Income 61.3 5.0 N.M.
 

On an XFX basis, Adjusted EBITDA in the fourth quarter of 2015 increased
by $23.5 million, or 21.8%. This increase was primarily due to $19.6
million of lower brand support expenses and higher gross profit in both
the Consumer and Professional segments in the fourth quarter of 2015,
compared to the fourth quarter of 2014, as discussed above, partially
offset by higher general and administrative costs. Driving the increase
in general and administrative expenses was $7.7 million of severance
costs, as well as higher incentive compensation expenses, mostly due to
the phasing of the Company’s incentive compensation accrual in 2015
compared to the prior year period.

In calculating Adjusted EBITDA, adjustments were made for the following
non-operating items:

  • Pension settlement accounting charge of $20.7 million in the fourth
    quarter of 2015 as a result of offering a one-time lump sum pension
    payout option to certain U.S. plan participants;
  • Non-cash impairment charge of $9.7 million in the fourth quarter of
    2015 consisting of a portion of the Global Color Brands reporting
    unit’s goodwill;
  • Restructuring and related charges of $9.7 million in the fourth
    quarter of 2015, primarily related to the 2015 Efficiency Program(d),
    and $3.8 million in the fourth quarter of 2014, primarily related to
    the Integration Program;
  • Acquisition and integration costs of $1.5 million in the fourth
    quarter of 2015 and $1.0 million in the fourth quarter of 2014;
  • Non-cash stock compensation of $1.3 million in the fourth quarter of
    2015 and $1.8 million in the fourth quarter of 2014;
  • Deferred consideration of $0.9 million for the CBB Acquisition
    recognized in the fourth quarter of 2015; and
  • An unfavorable inventory purchase accounting adjustment of $0.4
    million in the fourth quarter of 2015 related to other business
    acquisitions.

As further reflected in the footnotes to this release, to enhance the
comparability of the period-over-period results, in calculating Adjusted
EBITDA, the Company further adjusted its EBITDA results to exclude
Venezuela EBITDA of $(0.1) million in the fourth quarter of 2015,
compared to $0.8 million in the fourth quarter of 2014, due to the
Company’s exit of its Venezuela business operations in the second
quarter of 2015.

The As Reported net income includes certain non-operating items that are
reconciled in the tables to this release. Excluding these items, Adjusted1
net income was $61.3 million in the fourth quarter of 2015, compared to
Adjusted net income of $5.0 million in the fourth quarter of 2014, an
increase of $56.

Contacts

Revlon, Inc.
Investor Relations:
212-527-5230

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