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Edited Transcript of REV earnings conference call or presentation 8-Nov-19 1:30pm GMT

Q3 2019 Revlon Inc Earnings Call

NEW YORK Nov 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Revlon Inc earnings conference call or presentation Friday, November 8, 2019 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Debra G. Perelman

Revlon, Inc. - President, CEO & Director

* Eric Warren

Revlon, Inc. - VP, Treasurer & Head-IR

* Victoria L. Dolan

Revlon, Inc. - CFO

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Conference Call Participants

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* Ashley Elizabeth Helgans

Jefferies LLC, Research Division - Equity Associate

* Colin R. Ducharme

Sterling Capital Management LLC - Executive Director & Portfolio Manager

* Edward Arthur Brucker

Barclays Bank PLC, Research Division - Research Analyst

* Jenna Loren Giannelli

Goldman Sachs Group Inc., Research Division - Fixed Income Analyst

* Karru Martinson

Jefferies LLC, Research Division - Analyst

* Mary Ross Gilbert

Imperial Capital, LLC, Research Division - MD of Institutional Research Group

* William Michael Reuter

BofA Merrill Lynch, Research Division - MD

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Presentation

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Operator [1]

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Hello, and welcome to the Third Quarter of 2019 Revlon Earnings Call. My name is Lydia, and I will be your coordinator for today's event. Please note, this conference is being recorded. (Operator Instructions)

I will now hand you over to your host, Eric Warren, to begin today's conference. Thank you.

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Eric Warren, Revlon, Inc. - VP, Treasurer & Head-IR [2]

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Thank you, Lydia. Good morning, everyone, and thank you for joining the call. Earlier today, the company released its financial results for the quarter ended September 30, 2019. If you've not already received a copy of the earnings release, a copy can be obtained on the company's website at revloninc.com. On the call this morning are Debbie Perelman, our President and Chief Executive Officer; and Victoria Dolan, our Chief Financial Officer.

The discussion today might include forward-looking statements that are based on current expectations and are provided pursuant to the Private Securities Litigation Reform Act of 1995. Information on factors that could affect actual results and cause them to differ materially from such forward-looking statements is set forth in the company's SEC filings, including its Q3 2019 Form 10-Q. The company undertakes no obligation to publicly update any forward-looking statements, except for the company's obligations under the U.S. federal securities laws.

Remarks today will include a discussion of certain GAAP and non-GAAP results. Consistent with past reporting practices, non-GAAP results excludes certain nonoperating items that are not directly attributable to the company's underlying operating performance. These adjusted measures are defined in the earnings release and are also reconciled in the financial tables at the end of the release. Please also note that certain amounts provided throughout this call have been rounded. The call today should not be copied or recorded.

And with that, we'll turn the call over to Debbie.

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [3]

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Thank you, Eric. Good morning, everyone, and thank you for joining us. Despite the continued headwinds facing our North America business, in the third quarter, we continue to see momentum in our key strategic areas that we have previously discussed with you. Growth in our international markets and e-commerce channel was offset by declines in our North America business, predominantly in our Revlon and Portfolio segments.

We remain focused on driving improved profitability, which we achieved in 3 of our 4 segments as well as generating strong adjusted EBITDA. For the quarter, we also saw improved, as reported, gross profit margin relative to the prior year quarter.

Speaking first to our multiple areas of growth and investment. Our international business continues to be driven by Elizabeth Arden skin care, which grew 29% on a constant currency basis compared to prior year quarter.

We saw growth in our key franchises: Ceramide, which grew 33%; Prevage, which increased 41%; and Eight Hour, which grew 8%, all on a constant currency basis. Our core products continue to perform well in each of these franchises. And in the third quarter, we launched exciting new innovation.

Within Ceramide, we continue to build on our success of capsules with our newest launch Vitamin C Ceramide Capsules. Within our premium franchise of Prevage, we launched the Progressive Renewal Treatment into China in the third quarter. And within our Eight Hour franchise, we entered the daily moisturizer segment with Great 8 Daily Defense Moisturizer, which has been performing extremely well, especially through e-commerce channels.

Our Elizabeth Arden fragrances continue to drive growth, particularly our key pillars of Green Tea and White Tea with the launch of flankers. Globally, our Elizabeth Arden consumption in the third quarter has accelerated versus the first half, outpacing our net sales growth. Additional drivers for international net sales are Mitchum and Cutex, where we saw double-digit growth, primarily in EMEA, where these brands have strong market share in their respective category.

Turning to e-commerce. We continue to expand this part of the business. In the third quarter, e-commerce net sales grew approximately 66%, now representing approximately 9% of net sale versus 5% in the prior year quarter with growth in all geographic regions, and Asia representing the largest component.

Part of the Asia growth was fueled by the e-commerce launch of Revlon color cosmetics into China, which went live in July 2019 with a curated assortment of key products. We are excited about the initial results and anticipate building on this foundation over the coming months.

Additionally, we continue to invest behind all of our owned e-commerce platforms, especially elizabetharden.com, which grew double digits over the prior year quarter.

Despite the continued growth in our key investment areas, our total company performance was heavily impacted by challenging North America results.

Both Revlon and Almay brands were negatively impacted by customer inventory management, the continued decline of the color cosmetics category as well as our increased promotionality.

We estimate that these 3 factors drove the majority of the net sales decline in both the Revlon and Almay brands in North America.

Touching on other mass channel Portfolio brands, Pure Ice and SinfulColors also declined over the prior year quarter, primarily driven by space loss that occurred early in 2019.

Despite our overall challenging North American net sales results, Nielsen data shows both Revlon and Almay consumption continued to strengthen throughout the quarter and into the month of October, where we outpaced the market.

Our Revlon lip innovations have performed well and enabled us to regain our #1 positioning in the lip and Lip Gloss categories in the U.S. mass markets.

In Almay, our latest innovations in the makeup remover category continue to perform exceedingly well, outperforming the market.

Turning to Elizabeth Arden brand in North America. Our net sales declined within large part due to our planned SKU rationalization efforts in our color cosmetics business as we prioritize more productive SKUs in order to increase profitability. We were also impacted by the timing of shipments, particularly of our holiday blockbuster program.

Though our e-commerce business continues to remain very strong, in the third quarter, it was unable to offset the decline within our traditional channels.

Finally, the Fragrance business in North America has stabilized as the third quarter marks the beginning of our important holiday season.

While our Fragrance business in the prestige channel declined, primarily driven by timing of innovation versus the prior year quarter. We experienced net sales growth of 12% in the mass channel. This was driven by our Elizabeth Taylor and Curve brands, which grew 32% and 54%, respectively, on a constant currency basis.

In summary, despite the top line softness driven by North America, we are encouraged by the momentum in our key strategic investment areas, namely in: Elizabeth Arden, the expansion of our businesses in China, which grew over 100%; Travel Retail, which grew 11%; and in e-commerce, which grew 66%.

In the third quarter, we drove strong growth and profitability as well as improved cash flow usage resulting from our cost optimization program, which is on track to deliver the previously disclosed cost reduction.

Although a number of external factors, including category declines and customer inventory management impacted our third quarter results in North America, we remain encouraged by our global consumption trends in Revlon, Elizabeth Arden and Almay.

Before I turn the call over to Victoria, as you know, we are working with Goldman Sachs to explore strategic alternatives for our business and our brands. This process is progressing and we will update you at the appropriate time.

I'll now hand the call over to Victoria to walk you through the details of our third quarter financials before we begin Q&A.

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Victoria L. Dolan, Revlon, Inc. - CFO [4]

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Thank you, Debbie, and good morning to everyone on the call. Let me start by highlighting our third quarter 2019 results. On an as-reported basis, net sales for the third quarter of 2019 were $597 million, a decline of 9% versus the prior year quarter. On a constant currency basis, net sales decreased 7%, driven primarily by declines in our Portfolio and Revlon segments, partially offset by growth within our Elizabeth Arden segment.

As reported, operating profit for the quarter was $17 million, a $14 million improvement compared to the prior year quarter. The improvement in operating profit was driven by lower SG&A expenses as well as a 140 basis point improvement in gross profit margin. The lower SG&A is mainly attributable to lower overhead costs, driven by our cost reduction initiatives, including our 2018 Optimization Program. We also benefited from lower integration expenses due to the substantially completed Elizabeth Arden integration program that impacted the prior year period.

You should also note that we continue to support our brand. In the quarter, brand support dollars are essentially flat on a constant currency basis, while the percentage to net sales increased relative to prior year. As reported, net loss for the quarter was $45 million versus $11 million in the prior year period.

The higher net loss was driven by a $37 million decline in the benefit from income taxes due to a onetime noncash true-up associated with the U.S. 2017 Tax Act in the prior year period and higher interest expense, partially offset by the higher operating income in the quarter. Finally, adjusted EBITDA was $68 million in the third quarter of 2019 compared to $72 million during the prior year period. Excluding the impact of the recently imposed tariffs and foreign exchange, adjusted EBITDA would have increased approximately 2% versus prior year period.

Next, I would like to turn to our segment results. Revlon segment net sales in the third quarter of 2019 were $217 million, representing an 11% decrease on a constant currency basis. The decrease in net sales was driven primarily by lower net sales of Revlon color cosmetics in North America, due in part to the continued weakness in the U.S. mass retail channel and our increased promotionality as well as lower net sales of Revlon ColorSilk hair products due to planned company actions to manage trade inventory levels.

Revlon segment profit decreased to $7 million, driven by the segment's lower net sales and lower gross profit margins as well as higher brand support, both absolutely and as a percentage of net sales, as we continue to invest in the Revlon brand.

Elizabeth Arden net sales were $123 million, representing a 3% increase on a constant currency basis. This improvement was mainly driven by higher net sales of Elizabeth Arden skin care products, including Ceramide and Prevage as well as Fragrances, principally in our international territories. Brand support increased versus prior year, both in absolute dollars and as a percentage of net sales.

Elizabeth Arden segment profit was $13 million, an increase of $6 million versus the prior year period, primarily due to the segment's higher net sales and higher gross profit margin.

Net sales for our Portfolio segment were $118 million in the third quarter of 2019, a decrease of 12% on a constant currency basis. This decrease was primarily driven by lower net sales of (inaudible) color cosmetics due to customer inventory management and our increased promotionality, CND nail products, where we are cycling against the launch of SHELLAC LUXE during the prior year period as well as Pure Ice nail polishes, which lost its primary source of distribution, as discussed with you previously.

Portfolio segment profit was $14 million, an increase of $12 million versus the prior year period as a result of lower brand support and distribution expenses, partially offset by the segment's lower net sales.

Finally, net sales of our Fragrances segment were $138 million in the third quarter of 2019, representing a 4% decrease on a constant currency basis. This decline was driven primarily by lower net sales of Juicy Couture and Britney Spears branded fragrances in our international regions due to timing of innovation.

Fragrances segment profit in the third quarter of 2019 was $34 million, a $7 million increase compared to the prior year period, primarily as a result of improved gross profit margin, decreased overhead expenses and lower brand support, partially offset by the segment's lower net sales.

Turning to liquidity. Cash used in operating activities during the first 9 months of 2019 was $167 million or an improvement of $130 million versus the prior year period, primarily attributed to the lower net loss and favorable working capital changes as well as onetime costs incurred in the 2018 period related to the remediation of the ERP implementation.

Free cash flow used in the first 9 months of 2019 was $187 million compared to $338 million used in the prior year period. The improvement in free cash flow usage was primarily driven by decreased use of cash and operating activities and lower capital expenditures. During the first 3 quarters of 2019, we spent $20 million in capital expenditures and $28 million on permanent displays.

As of September 30, the company had approximately $167 million of available liquidity, consisting of $61 million of unrestricted cash and cash equivalents; $81 million in available borrowing capacity under the revolving credit facility; $30 million in available borrowing capacity under the 2019 senior line of credit, less float of $5 million.

And finally, with regard to our overall financial strategy and 2018 Optimization Program, we are continuously working to optimize all lines of our P&L, with particular focus on improving gross margin and reducing our overhead cost structure.

We remain on track to deliver the previously announced annualized cost reduction of between $125 million and $150 million, and now expect to realize between $90 million and $95 million of in-year cost reductions during 2019, of which approximately $65 million had been realized as of September 30. Approximately, 50% of the annualized cost reductions are expected to be realized within cost of sales and the remainder in selling, general and administrative expenses.

As a reminder, the 2018 Optimization Program has 3 major focus areas: First, optimizing our global supply chain to drive manufacturing efficiencies and rationalizing our global warehouse network and office locations to drive greater efficiency and lower our cost base; second, enhancing our in-market execution by optimizing our commercial and organizational structures to create more effective, global and regional capability; and third, reducing overhead costs and streamlining functions by leveraging technology and shared services and standardizing and simplifying our business processes. I'll now hand the call over to Debbie for closing comments.

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [5]

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Thank you, Victoria. In closing, despite the headwinds in North America, we remain focused on investing in our brands and core strategies, and continuing our ongoing efforts to transform our company.

With that, we will now open up the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of William Reuter of Bank of America.

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William Michael Reuter, BofA Merrill Lynch, Research Division - MD [2]

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With regard to the 2018 Optimization Program, was the previous expectation that you would have achieved the $125 million and $150 million of savings this year? And was it -- is it a pushback in terms of the timing? Or was this always the expectation?

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Victoria L. Dolan, Revlon, Inc. - CFO [3]

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So thank you for the question. When we designed.

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[$50 million], it was always our expectation that all of the projects and plans would be in place and in motion by the end of 2019 but that the full year annualized savings would not be able to be released -- achieved until 2020.

So this is very much in line with our expectations and how we budgeted.

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William Michael Reuter, BofA Merrill Lynch, Research Division - MD [4]

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Okay. And then you mentioned that the Nielsen data has improved a lot recently for Almay and Revlon, was that due to certain product launches that have performed particularly well within those segments? Or is it, kind of, across the board with regard to the brand?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [5]

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So Bill, thank you for the question. We are very excited about the strength of our consumption and the continued strength that we were showing throughout the quarter on both Almay and Revlon brand. We did have some -- a lot of success actually with our new product launches on Revlon in both lip and Lip Gloss.

And as I mentioned, that has enabled us to regain the #1 position in Lip, which is very important for Revlon. With regards to Almay, we have a new foundation that's currently in the market, which is performing very well as well as the biodegradable makeup removers, which continue to perform very well in market.

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William Michael Reuter, BofA Merrill Lynch, Research Division - MD [6]

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Okay. And then just lastly for me. A lot of retailers are obviously reducing their inventory levels. You also mentioned category declines. Is it that retailers are reducing the space that they're allocating to the category? Or is it that they're just keeping less inventory on hand? I guess I was surprised that the category overall of cosmetics [served] that you participate in was in decline.

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [7]

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Yes. So thank you. For the quarter, the category continues to decline. So it's declined about 4% in the quarter. We do see that the retailers are holding less inventory than they held in the past.

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Operator [8]

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Our next question comes from the line of Hale Holden of Barclays.

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Edward Arthur Brucker, Barclays Bank PLC, Research Division - Research Analyst [9]

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This is Ed Brucker on for Hale. I had a question about the Hong Kong protest. I was wondering if there's any disruption -- we've heard some -- from some other consumer product and retail companies that, that's been an issue.

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [10]

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Thanks for the question. We have -- obviously, we're keeping close tabs in terms of our business in Hong Kong given the current political situation.

But with regards to our third quarter results, this really had a minimal impact. But we are continuing to watch that very closely.

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Edward Arthur Brucker, Barclays Bank PLC, Research Division - Research Analyst [11]

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Great. And then you noted that the -- some of the decrease in sales from U.S. mass, or I guess, the Revlon segment was due to increased promotionality. I was wondering why you had to do this. And kind of, will it continue?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [12]

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So thank you for the question. We did have increased promotionality for Revlon in the quarter. And when you look back at 2018 in the third quarter, we had worked to reduce our promotionality at that time based on what we're seeing in the market.

And this year, we made the decision based on what we are seeing in the market to remain competitive that we would increase it. And that's what we're seeing today.

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Edward Arthur Brucker, Barclays Bank PLC, Research Division - Research Analyst [13]

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Great. And then last one for me. Is there any update on the 2021 maturity and your capital structure? And how you plan on addressing as it starts to -- this maturity starts to come up?

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Victoria L. Dolan, Revlon, Inc. - CFO [14]

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So that's a good question. Thank you for that question. So just let me reiterate where we are from a liquidity standpoint. So at quarter end, the company had approximately $167 million of available liquidity, $61 million of cash, $81 million in available borrowing under the revolving credit facility and $30 million in available borrowing under the M&F line of credit, less float of about $5 million.

And with regard to the 2021, nothing has really changed since last quarter. We continue to work with our lenders to refinance the 2021 maturities and our plans remain to refinance that and to communicate as appropriate when we are ready.

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Operator [15]

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Our next question comes from the line of Jenna Giannelli of Goldman Sachs.

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Jenna Loren Giannelli, Goldman Sachs Group Inc., Research Division - Fixed Income Analyst [16]

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I wanted to ask -- just a little about Elizabeth Arden. I'm curious if you could talk to us about how some of the other products and lines are spending outside of Prevage and Ceramide given they're seeing such meaningful strength?

And then also, just kind of a follow on, seems like there's a little bit of deceleration sequentially. Obviously, as the business continues to grow where that's expected. But is there anything going on there? Maybe timing related, et cetera. Just some more color?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [17]

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Thank you for the question. So with regards to Elizabeth Arden, as you stated and as we stated in our comments, we are being -- the growth is really driven by 2 segments, skin care with our 3 franchises. So it is driven by Prevage and Ceramide, but also the franchise of Eight Hour.

And Eight Hour is really being driven by our launch into the daily moisturizer segments with our launch of Great 8 Daily Moisturizer, which is performing very well. When you look to the other segments, Fragrance is also experiencing growth. Our key pillars in Fragrance today are Green Tea and White Tea, and we've launched flankers in the quarter, which is contributing to that growth.

With regards to the consumption, right, so when you look at the total net sales of 3%, right, I think, that is also worth highlighting, which were in the remarks that our consumption continues to grow. So our consumption in the third quarter is outpacing the first half. We continue to have a lot of momentum on Arden.

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Jenna Loren Giannelli, Goldman Sachs Group Inc., Research Division - Fixed Income Analyst [18]

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I have actually one more, if I may. On Revlon International, I'm curious if you're seeing similar -- starting to see some of the similar trends there as you are in the U.S., just really on category challenges and retailer destocking of inventories.

It seems like Revlon International has been performing relatively better, is performing relatively better.

So are you seeing some of those trends that we're seeing in the U.S. start to accelerate internationally as well?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [19]

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So thank you for the question. With regards to Revlon International, first, I would like to highlight the success that we've had with regards to the launch of Revlon into China through e-commerce, where we're seeing good early success, and we continue to look to build on that.

With regards to other markets, particularly with our consumption, we continue to see -- strengthen our consumption. So we look at key markets like Australia, and South Africa and Spain.

We continue to see the consumption on Revlon strengthen in the quarter. With regards to seeing any additional or similar trends to the U.S. mass market, I would say that the U.K. for mass color cosmetics is starting to see some similar trends in terms of the slowdown in the category.

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Operator [20]

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Our next question comes from the line of Karru Martinson of Jefferies.

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Karru Martinson, Jefferies LLC, Research Division - Analyst [21]

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In terms of the tariff's exposure for the fourth quarter, in what way should we be thinking about the drag there?

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Victoria L. Dolan, Revlon, Inc. - CFO [22]

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So we don't give forward guidance in terms of fourth quarter. You certainly saw the incremental impact in Q3. We highlighted that relative to the impact that it had on our adjusted EBITDA. And that provides an order of magnitude.

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Karru Martinson, Jefferies LLC, Research Division - Analyst [23]

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An order of magnitude, okay. And then in terms of Revlon just being down the 19% in North America with the industry down 4%, what is going on there? Is it the competitive response from others relaunching their products? Is the increased promotion, was that in response to that competitive pressure?

What has changed also to make that improve here in October according to the Nielsen data?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [24]

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So as we start with the impact on the net sales, right? We look at 3 key factors that impacted the net sales for Revlon. The first with regards to retailer inventory management. The second is with regards to category decline in the third quarter.

As I mentioned, it continues to decline at approximately 4%. And then the increase in our promotionality. So all 3 of those really impacted the third quarter. When we look at the consumption, right, which is -- has been strengthened throughout the third quarter, we see the impact of the launches that we put into market really hitting towards the end of the second quarter for Revlon, particularly in lip, and that's proving to be very strong.

And as we head into October, we're seeing that the tactics that we put in place with regards to brand support with, which Victoria touched on, that we continued to support the brand, really having a positive impact on the consumption of the brand as we headed into October.

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Karru Martinson, Jefferies LLC, Research Division - Analyst [25]

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Okay. And just lastly, with the 5-3/4% senior notes going current. Does that change anything in terms of your availability or any covenants?

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Victoria L. Dolan, Revlon, Inc. - CFO [26]

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No. It does not.

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Operator [27]

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Our next question comes from the line of Mary Gilbert of Imperial Capital.

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Mary Ross Gilbert, Imperial Capital, LLC, Research Division - MD of Institutional Research Group [28]

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With retailers holding less inventory, and as we go forward, because it, sort of, really impacted you in this quarter, is this something we have to cycle over the next year? And how do we weigh that impact with the improvement in consumption and the brand support? And if you could also talk about the areas in which the brand support is being deployed and how you're getting that traction there?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [29]

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Okay. Thank you, Mary. So with regards -- let me -- I'll take the answer into the very segments for the question that you had. So with regards to retailers and holding less inventory, I'm not going to comment on anything forward-looking. But it is something that did impact the third quarter with regards to Revlon and Almay.

When you look at where our brand support has been and it's focused on Revlon, it's been very focused on our core product line, ColorStay safe and Super Lustrous Lip. And we continue to drive core as well as within Super Lustrous, which is a core franchise of ours, the innovation that we had within that segment with the launch of our matte lipstick.

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Mary Ross Gilbert, Imperial Capital, LLC, Research Division - MD of Institutional Research Group [30]

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Okay. That's helpful. And then, with regard to what's going on [en masse], with CVS and Walgreens sort of transforming and remerchandising the category, including more indie brands, have you experienced -- because it sounds like we have 2 factors. One is the overall reduction in inventory given the weakness of the category. But then number 2, are you seeing a loss of shelf space as the -- some of these mass channel players bring in more indie brands and are transforming the stores to become a little bit more experiential with services? And I also wonder if there is any opportunities given that? And if you could also talk about some of the innovation that we can expect across the portfolio?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [31]

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Okay. So with regards to CVS and Walgreens, and their own reinventions, I think it's great for the industry. I think it's great for the categories that they are investing in beauty, and we are very excited to continue to partner with them and continue our long-standing relationship that we have with them.

With regards to space changes for us, we have normal fluctuations that happened throughout the year. The third quarter was no exception. But really nothing material in terms of these fluctuations with regards to Revlon or Almay.

We did have some contraction in our space on beauty tools and some on Mitchum. And as you know, we did have a contraction in Pure Ice as well as Sinful. With regards to the innovation that you can expect going into 2020, I would love to be able to talk about that right now, but I'm not going to give any forward-looking guidance, but we are very excited about it.

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Mary Ross Gilbert, Imperial Capital, LLC, Research Division - MD of Institutional Research Group [32]

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Okay. And then finally, can you give us an update on Flesh Beauty?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [33]

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Yes. So with regards to Flesh, we continue to be very focused on driving the brand with Gen Z and millennials. Those continue to be the consumers who are very attracted to the brand, particularly buying through e-commerce, both in our direct fleshbeauty.com as well as on ulta.com.

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Operator [34]

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(Operator Instructions) Our next question comes from the line of Elie Radinsky of Cantor Fitzgerald.

(Operator Instructions) We will now move on to our next question from Colin Ducharme of Sterling Capital.

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Colin R. Ducharme, Sterling Capital Management LLC - Executive Director & Portfolio Manager [35]

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I had a quick one for Victoria and then a follow-up for Debbie, if I may cheat the Q&A. Victoria, can you remind us, are you still in market trying to refinance the existing notes? Or is that process on hold given the potential 3 strategic transactions with the repayment of Goldman? And then relatedly, can you also touch on, which assets, if any, are currently unencumbered or not collateralized by existing borrowings? I'm just curious about the borrowing base and potential incremental capacity?

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Victoria L. Dolan, Revlon, Inc. - CFO [36]

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Okay. Thank you for the question. I think I'm going to stick to the -- what I said before, which is that we are constantly working with our lenders to refinance the 2021 note maturities, nothing really has changed in that answer since Q2 as well. And that we will communicate when appropriate about the timing of that execution. But we continue to work actively to manage the capital structure and the refinancing.

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Colin R. Ducharme, Sterling Capital Management LLC - Executive Director & Portfolio Manager [37]

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Okay. And then just on any unencumbered assets, whether tangible or intangible?

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Victoria L. Dolan, Revlon, Inc. - CFO [38]

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We're not going to comment on that.

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Colin R. Ducharme, Sterling Capital Management LLC - Executive Director & Portfolio Manager [39]

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Okay. Follow up for Debbie then. Now that we've lapped the ERP implementation, can you just talk about some of the operational benefits that you're now seeing given that you've had several quarters now under your belt with that in place?

And in particular, if you could link any of those benefits to the ability to make cash flow CapEx more efficient over time and more visible?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [40]

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Sure. So I'll touch on it and then Victoria will also add to it. With regards to the benefits that we've been seeing on the -- in the ERP -- with regards to ERP system that we implemented, we did eliminate several legacy systems within the business. We've had -- we've been able to really streamline our processes in various functional areas such as finance as well as within supply chain. So we have seen the benefit.

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Victoria L. Dolan, Revlon, Inc. - CFO [41]

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And I think just to build on that, if we go back to the tenet behind the Optimization Program, I think putting the ERP system in helped us be able to drive the savings that we've seen in the Optimization Program because -- there were 3 parts to it, but 2 of them specifically relate to starting to standardize global processes, streamlining how we work and being able to become more efficient, which rightfully can take out spans and layers and operate in a more efficient manner.

So I think we're seeing the benefits of that ERP system enabled through the Optimization Program.

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Operator [42]

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Our next question comes from the line of Stephanie Wissink of Jefferies.

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Ashley Elizabeth Helgans, Jefferies LLC, Research Division - Equity Associate [43]

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This is Ashley Helgans on for Steph Wissink. We just wanted to unpack trends you're seeing in the professional channel. And then are you seeing any emerging trends in color cosmetics?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [44]

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So with regards to the professional channel, I'm just trying to get a little bit more clarity on the question.

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Ashley Elizabeth Helgans, Jefferies LLC, Research Division - Equity Associate [45]

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For your professional stylist products?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [46]

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Okay. So with regard to Revlon Professional business, we are -- the performance for the quarter has been basically flat since -- for prior year quarter, and we continue to be focused on the strategy of leading with our hair color business within Revlon Professional.

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Ashley Elizabeth Helgans, Jefferies LLC, Research Division - Equity Associate [47]

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Okay. Great. And then anything you're seeing emerging in color cosmetics?

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [48]

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With regards to product trends?

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Ashley Elizabeth Helgans, Jefferies LLC, Research Division - Equity Associate [49]

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Yes. Just industry trends.

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [50]

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I mean look, we continue to see color cosmetics with regards to trends specifically. It's really where we are launching, right? So we continue to be focused on the areas with Revlon and with Almay that are core to that business, particularly with Revlon very focused on lip in the quarter and with Almay very focused on our safe launch as well as the makeup removers.

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Operator [51]

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Our next question comes from Madeline Villanueva of Citizens Bank.

(Operator Instructions)

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Debra G. Perelman, Revlon, Inc. - President, CEO & Director [52]

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Okay. Seeing no additional questions, let me say thank you to all of you who have joined our call today. And a special note to our team members around the Revlon world, who are listening. Thank you for all the efforts that you make every single day. I'm proud of all that we have accomplished together striving to build a stronger global business. Thank you.

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Operator [53]

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Thank you for joining today's conference. You may now disconnect your lines.