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Revlon Consumer Products (RCPC)

Filed: 12 Nov 20, 7:00pm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________________ to _______________

Commission File NumberRegistrant; State of Incorporation; Address and Telephone NumberIRS Employer Identification No.
1-11178Revlon, Inc.13-3662955
Delaware
One New York Plaza
New York, New York 10004
212-527-4000
33-59650Revlon Consumer Products Corporation13-3662953
Delaware
One New York Plaza
New York, New York 10004
212-527-4000
Securities registered pursuant to Section 12(b) or 12(g) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Revlon, Inc.Class A Common StockREVNew York Stock Exchange
Revlon Consumer Products CorporationNoneN/AN/A

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Revlon, Inc.
Yes
No
Revlon Consumer Products Corporation
Yes
No

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller Reporting CompanyEmerging Growth Company
Revlon, Inc.
Yes No
Yes No
Yes No
Yes
No
Yes
No
Revlon Consumer Products Corporation
Yes No
Yes No
Yes No
Yes
No
Yes
No
1


If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨


Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Act).
Revlon, Inc.Yes
No
Revlon Consumer Products CorporationYes
No

Number of shares of common stock outstanding as of September 30, 2020:
Revlon, Inc. Class A Common Stock:53,330,303
Revlon Consumer Products Corporation Common Stock:5,260

At such date, (i) 46,223,321 shares of Revlon, Inc. Class A Common Stock were beneficially owned by MacAndrews & Forbes Incorporated and certain of its affiliates; and (ii) all shares of Revlon Consumer Products Corporation ("Products Corporation") Common Stock were held by Revlon, Inc.

Products Corporation meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q as, among other things, all of Products Corporation's equity securities are owned directly by Revlon, Inc., which is a reporting company under the Securities Exchange Act of 1934, as amended, and which filed with the SEC on November 13, 2020 all of the material required to be filed pursuant to Section 13, 14 or 15(d) thereof. Products Corporation is therefore filing this Form 10-Q with a reduced disclosure format applicable to Products Corporation.

2



REVLON, INC. AND SUBSIDIARIES
INDEX



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REVLON, INC. AND SUBSIDIARIES

PART I - FINANCIAL INFORMATION


REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share and per share amounts)
September 30, 2020December 31, 2019
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$268.3 $104.3 
Trade receivables, less allowance for doubtful accounts of $12.4 and $11.4 as of September 30, 2020 and December 31, 2019, respectively340.8 423.4 
Inventories, net525.5 448.4 
Prepaid expenses and other assets140.8 135.3 
Total current assets1,275.4 1,111.4 
Property, plant and equipment, net of accumulated depreciation of $530.3 and $488.1 as of September 30, 2020 and December 31, 2019, respectively355.8 408.6 
Deferred income taxes230.5 175.1 
Goodwill563.2 673.7 
Intangible assets, net of accumulated amortization and impairment of $286.7 and $226.4 as of September 30, 2020 and December 31, 2019, respectively435.9 490.7 
Other assets112.5 121.1 
Total assets$2,973.3 $2,980.6 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities:
Short-term borrowings$2.0 $2.2 
Current portion of long-term debt704.5 288.0 
Accounts payable219.9 251.8 
Accrued expenses and other current liabilities387.9 414.9 
Total current liabilities1,314.3 956.9 
Long-term debt2,926.5 2,906.2 
Long-term pension and other post-retirement plan liabilities166.7 181.2 
Other long-term liabilities148.7 157.5 
Stockholders’ deficiency:
Class A Common Stock, par value $0.01 per share: 900,000,000 shares authorized; 57,674,817 and 56,470,490 shares issued as of September 30, 2020 and December 31, 2019, respectively0.5 0.5 
Additional paid-in capital1,080.5 1,071.9 
Treasury stock, at cost: 1,771,032 and 1,625,580 shares of Class A Common Stock as of September 30, 2020 and December 31, 2019, respectively(35.2)(33.5)
Accumulated deficit(2,397.9)(2,012.7)
Accumulated other comprehensive loss(230.8)(247.4)
Total stockholders’ deficiency(1,582.9)(1,221.2)
Total liabilities and stockholders’ deficiency$2,973.3 $2,980.6 






See Accompanying Notes to Unaudited Consolidated Financial Statements
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REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(dollars in millions, except share and per share amounts)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net sales$477.1 $596.8 $1,277.7 $1,720.2 
Cost of sales234.3 269.0 600.7 750.7 
      Gross profit242.8 327.8 677.0 969.5 
Selling, general and administrative expenses253.4 308.1 739.1 973.2 
Acquisition, integration and divestiture costs0.9 0.1 4.2 0.7 
Restructuring charges and other, net(0.7)2.9 44.8 11.6 
Impairment charges144.1 
Gain on divested assets(1.1)(0.5)
      Operating (loss) income(9.7)16.7 (254.7)(16.0)
Other expenses:
   Interest expense, net68.7 50.2 178.0 145.7 
   Amortization of debt issuance costs7.8 3.7 17.8 10.4 
   Gain on early extinguishment of debt(31.2)(43.1)
   Foreign currency (gains) losses, net(9.8)7.6 9.1 9.0 
   Miscellaneous, net(2.6)1.7 13.9 7.6 
      Other expenses32.9 63.2 175.7 172.7 
Loss from continuing operations before income taxes(42.6)(46.5)(430.4)(188.7)
Provision for (benefit from) income taxes1.9 (2.1)(45.2)(3.2)
Loss from continuing operations, net of taxes(44.5)(44.4)(385.2)(185.5)
(Loss) income from discontinued operations, net of taxes(0.3)2.0 
Net loss$(44.5)$(44.7)$(385.2)$(183.5)
Other comprehensive income (loss):
   Foreign currency translation adjustments2.2 (1.8)7.3 (0.5)
   Amortization of pension related costs, net of tax(a)(b)
2.8 2.3 9.3 7.2 
Other comprehensive income, net5.0 0.5 16.6 6.7 
Total comprehensive loss$(39.5)$(44.2)$(368.6)$(176.8)
Basic and Diluted (loss) earnings per common share:
Continuing operations$(0.83)$(0.84)$(7.22)$(3.50)
Discontinued operations0.04 
Net loss$(0.83)$(0.84)$(7.22)$(3.46)
Weighted average number of common shares outstanding:
      Basic53,476,354 53,129,004 53,371,986 53,057,154 
      Diluted53,476,354 53,129,004 53,371,986 53,057,154 

(a) Net of a $0.5 million tax expense and $0.3 million of tax expense for the three months ended September 30, 2020 and 2019, respectively, and net of a $0.7 million tax benefit and $0.9 million of tax expense for the nine months ended September 30, 2020 and 2019, respectively.
(b) This amount is included in the computation of net periodic benefit costs (income). See Note 10, "Pension and Post-Retirement Benefits," for additional information regarding net periodic benefit costs (income).





See Accompanying Notes to Unaudited Consolidated Financial Statements


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REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY
(dollars in millions, except share and per share amounts)

Common StockAdditional Paid-In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive (Loss) IncomeTotal Stockholders’ Deficiency
Balance, January 1, 2020$0.5 $1,071.9 $(33.5)$(2,012.7)$(247.4)$(1,221.2)
Treasury stock acquired, at cost (a)
— — (0.4)— — (0.4)
Stock-based compensation amortization— 2.4 — — — 2.4 
Net loss   (213.9)— (213.9)
Other comprehensive (loss) income, net (b)
— — — — (2.7)(2.7)
Balance, March 31, 20200.5 1,074.3 (33.9)(2,226.6)(250.1)(1,435.8)
Treasury stock acquired, at cost (a)
— — (1.3)— — (1.3)
Stock-based compensation amortization— 1.1 — — — 1.1 
Net loss   (126.8) (126.8)
Other comprehensive (loss) income, net (b)
— — — — 14.3 14.3 
Balance, June 30, 20200.5 1,075.4 (35.2)(2,353.4)(235.8)(1,548.5)
Treasury stock acquired, at cost (a)
— — — — — — 
Stock-based compensation amortization 5.1   — 5.1 
Net loss   (44.5)— (44.5)
Other comprehensive (loss) income, net (b)
    5.0 5.0 
Balance, September 30, 2020$0.5 $1,080.5 $(35.2)$(2,397.9)$(230.8)$(1,582.9)

Common StockAdditional Paid-In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive (Loss) IncomeTotal Stockholders’ Deficiency
Balance, January 1, 2019$0.5 $1,063.8 $(31.9)$(1,855.0)$(234.2)$(1,056.8)
Treasury stock acquired, at cost (a)
— — (1.6)— — (1.6)
Stock-based compensation amortization— 0.4 — — — 0.4 
Net loss— — — (75.1)— (75.1)
Other comprehensive (loss) income, net (b)
    0.9 0.9 
Balance, March 31, 20190.5 1,064.2 (33.5)(1,930.1)(233.3)(1,132.2)
Treasury stock acquired, at cost (a)
— — — — 
Stock-based compensation amortization— 3.4 — — — 3.4 
Net loss— — — (63.7)— (63.7)
Other comprehensive (loss) income, net (b)
    5.3 5.3 
Balance, June 30, 2019$0.5 $1,067.6 $(33.5)$(1,993.8)$(228.0)$(1,187.2)
Treasury stock acquired, at cost (a)
— — — — — — 
Stock-based compensation amortization— 3.9 — — — 3.9 
Net loss— — — (44.7)— (44.7)
Other comprehensive (loss) income, net (b)
    0.5 0.5 
Balance, September 30, 2019$0.5 $1,071.5 $(33.5)$(2,038.5)$(227.5)$(1,227.5)

(a) Pursuant to the share withholding provisions of the Fourth Amended and Restated Revlon, Inc. Stock Plan (as amended, the "Stock Plan"), the Company withheld an aggregate of 756 and NaN shares of Revlon Class A Common Stock during the three months ended September 30, 2020 and 2019, and 127,725 and 85,607 shares of Revlon Class A Common Stock during the nine months ended September 30, 2020 and 2019, respectively, to satisfy certain minimum statutory tax withholding requirements related to the vesting of restricted shares and restricted stock units ("RSUs") for certain senior executives and employees. These withheld shares were recorded as treasury stock using the cost method, at a weighted-average price per share of $8.50 and NaN during the


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three months ended September 30, 2020 and 2019, and $12.99 and $18.86 during the nine months ended September 30, 2020 and 2019, respectively, based on the closing price of Revlon Class A Common Stock as reported on the New York Stock Exchange (the "NYSE") consolidated tape on each respective vesting date, for a total of approximately $6,400 and NaN during the three months ended September 30, 2020 and 2019, $1.6 million and $1.6 million during the nine months ended September 30, 2020 and 2019, See Note 11, "Stock Compensation Plan," for details regarding restricted stock awards and RSUs under the Stock Plan.

(b) See Note 13, "Accumulated Other Comprehensive Loss," regarding the changes in the accumulated balances for each component of other comprehensive loss during the nine months ended September 30, 2020 and 2019, respectively.






See Accompanying Notes to Unaudited Consolidated Financial Statements


Table of Contents
REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
Nine Months Ended September 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(385.2)$(183.5)
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization108.3 124.6 
   Foreign currency losses from re-measurement9.1 9.0 
   Amortization of debt discount1.3 1.2 
   Stock-based compensation amortization8.6 7.7 
Impairment charges144.1 
Benefit from deferred income taxes(54.4)(19.0)
   Amortization of debt issuance costs17.8 10.4 
   Gain on divested assets(0.5)
   Pension and other post-retirement cost4.2 6.3 
Gain on early extinguishment of debt(43.1)
Paid-in-kind interest accrued on the 2020 BrandCo Facilities6.2 
   Change in assets and liabilities:
Decrease (increase) in trade receivables78.0 (30.5)
Increase in inventories(79.4)(4.9)
Increase in prepaid expenses and other current assets(1.7)(5.5)
(Decrease) increase in accounts payable(27.8)9.1 
Decrease in accrued expenses and other current liabilities(25.2)(81.0)
Pension and other post-retirement plan contributions(7.5)(7.8)
Purchases of permanent displays(16.5)(28.4)
Other, net6.8 25.5 
Net cash used in operating activities(256.9)(166.8)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(7.4)(20.0)
Net cash used in investing activities(7.4)(20.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings and overdraft(0.7)(22.4)
Borrowings under the 2020 BrandCo Facilities880.0 
Repurchases of the 5.75% Senior Notes(114.1)
Net borrowings under the Amended 2016 Revolving Credit Facility19.5 13.4 
Net borrowings under the 2019 Term Loan Facility (a)
(200.0)200.0 
Repayments under the 2018 Foreign Asset-Based Term Loan(31.4)
Repayments under the 2016 Term Loan Facility(9.2)(13.5)
Payment of financing costs(108.3)(13.4)
Tax withholdings related to net share settlements of restricted stock and RSUs(1.6)(1.6)
Other financing activities(0.3)(0.9)
Net cash provided by financing activities433.9 161.6 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(0.4)(1.4)
   Net increase (decrease) in cash, cash equivalents and restricted cash
169.2 (26.6)
   Cash, cash equivalents and restricted cash at beginning of period (b)
104.5 87.5 
   Cash, cash equivalents and restricted cash at end of period (b)
$273.7 $60.9 
Supplemental schedule of cash flow information:
   Cash paid during the period for:
Interest$182.2 $157.9 
Income taxes, net of refunds12.6 6.9 
Supplemental schedule of non-cash investing and financing activities:
Non-cash roll-up of participating lenders from the 2016 Term Loan Facility to the 2020 BrandCo Facilities$846.0 $
Paid-in-kind debt issuance costs capitalized to the 2020 BrandCo Facilities29.1 
(a) The Company fully repaid the 2019 Term Loan Facility in May 2020.
(b)These amounts include restricted cash of $5.4 million and $0.2 million as of September 30, 2020 and 2019, respectively. The balance as of September 30, 2020 represents: (i) cash on deposit in lieu of a mandatory prepayment under the 2018 Foreign Asset-Based Term Facility; and (ii) cash on deposit to support


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outstanding undrawn letters of credit. The balance as of September 30, 2019 represents: (i) cash on deposit in lieu of a mandatory prepayment under the 2018 Foreign Asset-Based Term Facility; and (ii) cash on deposit to support outstanding undrawn letters of credit. These balances were included within prepaid expenses and other current assets and other assets in the Company's Unaudited Consolidated Balance Sheets as of September 30, 2020 and September 30, 2019, respectively.




See Accompanying Notes to Unaudited Consolidated Financial Statements


Table of Contents

REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions, except share and per share amounts)
September 30, 2020December 31, 2019
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$268.3 $104.3 
Trade receivables, less allowance for doubtful accounts of $12.4 and $11.4 as of September 30, 2020 and December 31, 2019, respectively340.8 423.4 
Inventories, net525.5 448.4 
Prepaid expenses and other assets136.9 131.4 
Receivable from Revlon, Inc.168.7 161.2 
Total current assets1,440.2 1,268.7 
Property, plant and equipment, net of accumulated depreciation of $530.3 and $488.1 as of September 30, 2020 and December 31, 2019, respectively355.8 408.6 
Deferred income taxes211.9 158.1 
Goodwill563.2 673.7 
Intangible assets, net of accumulated amortization and impairment of $286.7 and $226.4 as of September 30, 2020 and December 31, 2019, respectively435.9 490.7 
Other assets112.5 121.1 
Total assets$3,119.5 $3,120.9 
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
Current liabilities:
Short-term borrowings$2.0 $2.2 
Current portion of long-term debt704.5 288.0 
Accounts payable219.9 251.8 
Accrued expenses and other current liabilities390.8 418.2 
Total current liabilities1,317.2 960.2 
Long-term debt2,926.5 2,906.2 
Long-term pension and other post-retirement plan liabilities166.7 181.2 
Other long-term liabilities153.6 162.7 
Stockholder's deficiency:
Products Corporation Preferred stock, par value $1.00 per share; 1,000 shares authorized; 546 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively54.6 54.6 
Products Corporation Common Stock, par value $1.00 per share; 10,000 shares authorized; 5,260 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively
Additional paid-in capital1,005.1 996.5 
Accumulated deficit(2,273.4)(1,893.1)
Accumulated other comprehensive loss(230.8)(247.4)
Total stockholder's deficiency(1,444.5)(1,089.4)
Total liabilities and stockholder's deficiency$3,119.5 $3,120.9 












See Accompanying Notes to Unaudited Consolidated Financial Statements


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REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(dollars in millions)
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net sales$477.1 $596.8 $1,277.7 $1,720.2 
Cost of sales234.3 269.0 600.7 750.7 
      Gross profit242.8 327.8 677.0 969.5 
Selling, general and administrative expenses251.4 306.3 733.2 968.1 
Acquisition, integration and divestiture costs0.9 0.1 4.2 0.7 
Restructuring charges and other, net(0.7)2.9 44.8 11.6 
Impairment charges144.1 
Gain on divested assets(1.1)(0.5)
      Operating (loss) income(7.7)18.5 (248.8)(10.9)
Other expenses:
   Interest expense, net68.7 50.2 178.0 145.7 
   Amortization of debt issuance costs7.8 3.7 17.8 10.4 
   Gain on early extinguishment of debt(31.2)(43.1)
   Foreign currency (gains) losses, net(9.8)7.6 9.1 9.0 
   Miscellaneous, net(2.6)1.7 13.9 7.6 
      Other expenses32.9 63.2 175.7 172.7 
Loss from continuing operations before income taxes(40.6)(44.7)(424.5)(183.6)
Provision for (benefit from) income taxes2.3 (1.8)(44.2)(2.4)
Loss from continuing operations, net of taxes(42.9)(42.9)(380.3)(181.2)
(Loss) income from discontinued operations, net of taxes(0.3)2.0 
Net loss$(42.9)$(43.2)$(380.3)$(179.2)
Other comprehensive income (loss):
   Foreign currency translation adjustments2.2 (1.8)7.3 (0.5)
   Amortization of pension related costs, net of tax(a)(b)
2.8 2.3 9.3 7.2 
Other comprehensive income, net5.0 0.5 16.6 6.7 
Total comprehensive loss$(37.9)$(42.7)$(363.7)$(172.5)

(a) Net of a $0.5 million tax expense and $0.3 million of tax expense for the three months ended September 30, 2020 and 2019, respectively, and net of a $0.7 million tax benefit and $0.9 million of tax expense for the nine months ended September 30, 2020 and 2019, respectively.
(b)This amount is included in the computation of net periodic benefit costs (income). See Note 10, "Pension and Post-Retirement Benefits," for additional information regarding net periodic benefit costs (income).












See Accompanying Notes to Unaudited Consolidated Financial Statements


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REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIENCY
(dollars in millions)

Preferred StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive (Loss) IncomeTotal Stockholder's Deficiency
Balance, January 1, 2020$54.6 $996.5 $(1,893.1)$(247.4)$(1,089.4)
Stock-based compensation amortization— 2.4 — — 2.4 
Net loss— — (212.2)— (212.2)
Other comprehensive (loss) income, net (a)
   (2.7)(2.7)
Balance, March 31, 202054.6 998.9 (2,105.3)(250.1)(1,301.9)
Stock-based compensation amortization— 1.1 — — 1.1 
Net loss— — (125.2)— (125.2)
Other comprehensive (loss) income, net (a)
— — — 14.3 14.3 
Balance, June 30, 202054.6 1,000.0 (2,230.5)(235.8)(1,411.7)
Stock-based compensation amortization 5.1   5.1 
Net loss  (42.9) (42.9)
Other comprehensive (loss) income, net (a)
   5.0 5.0 
Balance, September 30, 2020$54.6 $1,005.1 $(2,273.4)$(230.8)$(1,444.5)

Preferred StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive (Loss) IncomeTotal Stockholder's Deficiency
Balance, January 1, 2019$54.6 $988.4 $(1,741.9)$(234.2)$(933.1)
Stock-based compensation amortization— 0.4 — — 0.4 
Net loss— — (73.5)— (73.5)
Other comprehensive (loss) income, net (a)
   0.9 0.9 
Balance, March 31, 201954.6 988.8 (1,815.4)(233.3)(1,005.3)
Stock-based compensation amortization— 3.4 — — 3.4 
Net loss— — (62.5)— (62.5)
Other comprehensive (loss) income, net (a)
— — — 5.3 5.3 
Balance, June 30, 2019$54.6 $992.2 $(1,877.9)$(228.0)$(1,059.1)
Stock-based compensation amortization— 3.8 — — 3.8 
Net loss— — (43.2)— (43.2)
Other comprehensive (loss) income, net (a)
— — — 0.5 0.5 
Balance, September 30, 2019$54.6 $996.0 $(1,921.1)$(227.5)$(1,098.0)

(a)See Note 13, "Accumulated Other Comprehensive Loss," regarding the changes in the accumulated balances for each component of other comprehensive loss during the three months ended September 30, 2020 and 2019, respectively.







See Accompanying Notes to Unaudited Consolidated Financial Statements


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REVLON CONSUMER PRODUCTS CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
Nine Months Ended September 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(380.3)$(179.2)
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization108.3 124.6 
   Foreign currency losses from re-measurement9.1 9.0 
   Amortization of debt discount1.3 1.2 
   Stock-based compensation amortization8.6 7.7 
Impairment charges144.1 
  Benefit from deferred income taxes(53.1)(17.8)
   Amortization of debt issuance costs17.8 10.4 
   Gain on divested assets(0.5)
   Pension and other post-retirement cost4.2 6.3 
Gain on early extinguishment of debt(43.1)
Paid-in-kind interest accrued on the 2020 BrandCo Facilities6.2 
   Change in assets and liabilities:
Decrease (increase) in trade receivables78.0 (30.5)
Increase in inventories(79.4)(4.9)
Increase in prepaid expenses and other current assets(9.3)(12.2)
(Decrease) increase in accounts payable(27.8)9.1 
Decrease in accrued expenses and other current liabilities(24.3)(79.8)
Pension and other post-retirement plan contributions(7.5)(7.8)
Purchases of permanent displays(16.5)(28.4)
Other, net7.3 25.5 
Net cash used in operating activities(256.9)(166.8)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(7.4)(20.0)
Net cash used in investing activities(7.4)(20.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings and overdraft(0.7)(22.4)
Borrowings under the 2020 BrandCo Facilities880.0 
Repurchases of the 5.75% Senior Notes(114.1)
Net borrowings under the Amended 2016 Revolving Credit Facility19.5 13.4 
Net borrowings under the 2019 Term Loan Facility (a)
(200.0)200.0 
Repayments under the 2018 Foreign Asset-Based Term Loan(31.4)
Repayments under the 2016 Term Loan Facility(9.2)(13.5)
Payment of financing costs(108.3)(13.4)
Tax withholdings related to net share settlements of restricted stock and RSUs(1.6)(1.6)
Other financing activities(0.3)(0.9)
Net cash provided by financing activities433.9 161.6 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(0.4)(1.4)
   Net increase (decrease) in cash, cash equivalents and restricted cash169.2 (26.6)
   Cash, cash equivalents and restricted cash at beginning of period (b)
104.5 87.5 
   Cash, cash equivalents and restricted cash at end of period (b)
$273.7 $60.9 
Supplemental schedule of cash flow information:
   Cash paid during the period for:
Interest$182.2 $157.9 
Income taxes, net of refunds12.6 6.9 
Supplemental schedule of non-cash investing and financing activities:
Non-cash roll-up of participating lenders from the 2016 Term Loan Facility to the 2020 BrandCo Facilities$846.0 $
Paid-in-kind debt issuance costs capitalized to the 2020 BrandCo Facilities29.1 
(a) The Company fully repaid the 2019 Term Loan Facility in May 2020.


Table of Contents
(b)These amounts include restricted cash of $5.4 million and $0.2 million as of September 30, 2020 and 2019, respectively, The balance as of September 30, 2020 represents: (i) cash on deposit in lieu of a mandatory prepayment under the 2018 Foreign Asset-Based Term Facility; and (ii) cash on deposit to support outstanding undrawn letters of credit. The balance as of September 30, 2019 represents: (i) cash on deposit in lieu of a mandatory prepayment under the 2018 Foreign Asset-Based Term Facility; and (ii) cash on deposit to support outstanding undrawn letters of credit. These balances were included within prepaid expenses and other current assets and other assets in the Company's Unaudited Consolidated Balance Sheets as of September 30, 2020 and September 30, 2019, respectively.

See Accompanying Notes to Unaudited Consolidated Financial Statements


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 of MacAndrews & Forbes Incorporated (together with certain of its affiliates other than the Company, "MacAndrews & Forbes"), a corporation beneficially owned by Ronald O. Perelman. Mr. Perelman is Chairman of Revlon's and Products Corporation's Board of Directors.
The Company is a leading global beauty company with an iconic portfolio of brands that develops, manufactures, markets, distributes and sells an extensive array of color cosmetics; hair color, hair care and hair treatments; fragrances; skin care; beauty tools; men’s grooming products; anti-perspirant deodorants; and other beauty care products across a variety of distribution channels.
The Company operates in 4 brand-centric reporting units that are aligned with its organizational structure based on 4 global brand teams: Revlon; Elizabeth Arden; Portfolio; and Fragrances, which represent the Company's 4 reporting segments. For further information, refer to Note 14, "Segment Data and Related Information."
The accompanying Consolidated Financial Statements are unaudited. In management's opinion, all adjustments necessary for a fair presentation of the Company's financial information have been made. The Unaudited Consolidated Financial Statements include the Company's accounts after the elimination of all material intercompany balances and transactions.
Certain prior year amounts have been reclassified to conform to the current year presentation.
The preparation of the Company's Unaudited Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affect amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the Unaudited Consolidated Financial Statements in the period they are determined to be necessary. Significant estimates made in the accompanying Unaudited Consolidated Financial Statements include, but are not limited to: expected sales returns; certain assumptions related to the valuation of acquired intangible and long-lived assets and the recoverability of goodwill, intangible and long-lived assets; income taxes, including deferred tax valuation allowances and reserves for estimated tax liabilities; and certain estimates and assumptions used in the calculation of the net periodic benefit (income) costs and the projected benefit obligations for the Company’s pension and other post-retirement plans, including the expected long-term return on pension plan assets and the discount rate used to value the Company’s pension benefit obligations. The Unaudited Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and related notes contained in Revlon's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the "2019 Form 10-K").
The Company's results of operations and financial position for interim periods are not necessarily indicative of those to be expected for the full year.
Liquidity and Ability to Continue as a Going Concern

The ongoing and prolonged COVID-19 pandemic has continued to adversely impact the Company’s business in the third quarter of 2020 and beyond, as social-distancing restrictions and related actions designed to curb the spread of the virus have remained in place or have been reinstated as the COVID-19 pandemic spikes across the globe. These adverse economic conditions have resulted in the general slowdown of the global economy, in turn contributing to a significant decline in net sales within each of the Company’s reporting segments and regions.

As previously disclosed, on October 23, 2020, Products Corporation commenced an amended exchange offer (as amended, the “Exchange Offer”) to exchange any and all of its outstanding 5.75% Senior Notes due 2021 (the “5.75% Senior Notes”), which closed on November 13, 2020. In the Exchange Offer, for each $1,000 principal amount of 5.75% Senior Notes validly tendered, holders received either, at their option, (i) $275 in cash (plus a $50 early tender/consent fee payable if such 5.75% Senior Notes were tendered at or before 11:59 p.m. New York City time on November 10, 2020 (the “Expiration Time”)), for an aggregate of $325 in cash (the “Cash Consideration”), or (ii) a combination of (1) $200 in cash (plus a $50 early tender/consent fee payable if such 5.75% Senior Notes were tendered at or before the Expiration Time), for an aggregate of $250 in cash, plus, (2) (A) the Per $1,000 Pro Rata Share (as hereinafter defined) of $50 million aggregate principal amount of new 2020 ABL FILO Term Loans (as hereinafter defined) and (B) the Per $1,000 Pro Rata Share of $75 million aggregate principal amount of the New BrandCo Second-Lien Term Loans (the “Mixed Consideration” and such loans, together with the


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

2020 ABL FILO Term Loans, the “New Loans”), if the holder is: (a)(i) a qualified institutional buyer as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); (ii) an institutional accredited investor within the meaning of Rule 501(a)(1), (a)(2), (a)(3) or (a)(7) of the Securities Act; or (iii) a person that is not a “U.S. person” within the meaning of Regulation S under the Securities Act, (b) not a natural person and (c) not a “Disqualified Institution” (as defined under the Amended 2016 Revolving Credit Facility and related security documents and intercreditor agreements or the 2020 BrandCo Term Loan Facility and related security documents and intercreditor agreements) (an “Eligible Holder”). The “Per $1,000 Pro Rata Share” is (1) $1,000, divided by (2) the aggregate principal amount of 5.75% Senior Notes tendered for Mixed Consideration by all Eligible Holders and accepted for payment by Products Corporation.

On November 13, 2020, the Company announced that the Exchange Offer was successfully consummated and that Products Corporation had accepted $236 million in aggregate principal amount of 5.75% Senior Notes tendered in the Exchange Offer. Products Corporation used cash on hand to redeem, effective as of November 13, 2020, the remaining $106.8 million in aggregate principal amount of 5.75% Senior Notes pursuant to the terms of the indenture governing the 5.75% Senior Notes. Following the consummation of the Exchange Offer and the satisfaction and discharge of the remaining 5.75% Senior Notes, 0 5.75% Senior Notes remained outstanding.

In addition, the Company’s Amended 2016 Revolving Credit Facility matures on September 7, 2021, and the Company is currently in discussions with various lenders to extend such maturity or refinance such facility.

The uncertainty as to Products Corporation’s ability to extend or refinance the Amended 2016 Revolving Credit Facility raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties, nor do they include adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

For more information, please see the risk factors discussed in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q.
Recently Evaluated and/or Adopted Accounting Pronouncements
In August 2018, the FASB issued Accounting Standard Update ("ASU") No. 2018-15, "Internal Use Software (Subtopic 350-40) - Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract," which requires a customer in a cloud computing hosting arrangement that is a service contract to follow the existing guidance in ASC 350-40 on internal-use software to determine which implementation costs are to be deferred and recognized as an asset and which costs are to be expensed as incurred. This guidance is effective for annual periods beginning after December 15, 2019, with early adoption permitted, and may be applied either retrospectively or prospectively to all software implementation costs incurred after adoption. The Company adopted ASU No. 2018-15 prospectively, beginning as of January 1, 2020. The Company completed its assessment and determined that this new guidance does not have a material impact on the Company’s results of operations, financial condition and/or financial statement disclosures.
Recently Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The new guidance under ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is in the process of assessing the impact, if any, that ASU No. 2020-04 is expected to have on the Company’s results of operations, financial condition and/or financial statement disclosures.


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes," which removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocations, calculating income taxes in interim periods and how a company accounts for future events. This ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. This guidance is effective for annual periods beginning after December 15, 2020, with early adoption permitted, including adoption in any interim period. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. After reviewing this ASU, the Company decided that it will adopt this guidance beginning as of January 1, 2021. The Company completed its assessment of the possible effects of this ASU upon its implementation and determined that it is not expected to have significant impacts on the Company’s results of operations, financial condition and/or financial statement disclosures.
In August 2018, the FASB issued ASU No. 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.” This new guidance removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and requires certain additional disclosures. This guidance is effective for annual periods beginning after December 15, 2020, with early adoption permitted. The Company will adopt this guidance (on a retrospective basis for certain new additional disclosures), beginning as of January 1, 2021. This new pronouncement only affects disclosure items and it is not expected to have a material impact on the Company’s results of operations, financial condition and/or financial statement disclosures.
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which was subsequently amended in November 2018 through ASU No. 2018-19, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses." ASU No. 2016-13 will require entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financing receivables, debt securities and other instruments, which will result in earlier recognition of credit losses. Further, the new credit loss model will affect how entities in all industries estimate their allowance for losses for receivables that are current with respect to their payment terms. In November 2019, the FASB issued ASU No. 2019-10, which, among other things, deferred the application of the new guidance on credit losses for smaller reporting companies ("SRC") to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This guidance will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., a modified-retrospective approach). Under the above-mentioned deferral, the Company expects to adopt ASU No. 2016-03, and the related ASU No. 2018-19 amendments, beginning as of January 1, 2023 and is in the process of assessing the impact, if any, that this new guidance is expected to have on the Company’s results of operations, financial condition and/or financial statement disclosures.

2. RESTRUCTURING CHARGES

Revlon 2020 Restructuring Program

Building upon its previously-announced 2018 Optimization Program, in March 2020 the Company announced that it is implementing a worldwide organizational restructuring (the “Revlon 2020 Restructuring Program”) designed to reduce the Company’s selling, general and administrative expenses, as well as cost of goods sold, improve the Company’s gross profit and Adjusted EBITDA and maximize productivity, cash flow and liquidity. The Revlon 2020 Restructuring Program includes rightsizing the organization and operating with more efficient workflows and processes. The leaner organizational structure is also expected to improve communication flow and cross-functional collaboration, leveraging the more efficient business processes.

As a result of the Revlon 2020 Restructuring Program, the Company expects to eliminate approximately 1,000 positions worldwide, including approximately 650 current employees and approximately 350 open positions of which approximately 785 were eliminated by September 30, 2020. In March 2020, the Company began informing certain employees that were affected by the Revlon 2020 Restructuring Program. While certain aspects of the Revlon 2020 Restructuring Program may be subject to consultations with employees, works councils, unions and/or governmental authorities, the Company currently expects to substantially complete the employee-related actions by the end of 2020 and the other consolidation and outsourcing actions during 2021 and 2022.

In connection with implementing the Revlon 2020 Restructuring Program, the Company expects to recognize during 2020 approximately $60 million to $70 million of total pre-tax restructuring and related charges (the “2020 Restructuring Charges”), consisting primarily of employee-related costs, such as severance, retention and other contractual termination benefits. In


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

addition, the Company expects restructuring charges in the range of $75 million to $85 million to be charged and paid during 2021 and 2022. The Company expects that substantially all of these restructuring charges will be paid in cash, 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.

A summary of the 2020 Restructuring Charges incurred since its inception in March 2020 and through September 30, 2020 is presented in the following table:
Restructuring Charges and Other, Net
Employee Severance and Other Personnel BenefitsOther CostsTotal Restructuring ChargesLeases (a)Other Related Charges (b)Total Restructuring and Related Charges
Cumulative charges incurred through September 30, 2020$44.4 $1.2 $45.6 $11.3 $4.3 $61.2 
(a) Lease-related charges are recorded within SG&A in the Company’s Unaudited Consolidated Statement of Operations and Comprehensive Loss. These lease-related charges include: (i) $3.5 million for accelerated recognition of rent expense related to certain abandoned leases; (ii) $3.0 million for the disposal of leasehold improvements and other equipment in connection with certain leases; (iii) $3.9 million of rent expense related to the Revlon 2020 Restructuring Program; and (iv) $0.9 million of disposal of leasehold improvements and other equipment in connection with the abandoned leases identified in clause (i) of this footnote (a).
(b) Other related charges are recorded within SG&A and cost of sales in the Company’s Unaudited Consolidated Statement of Operations and Comprehensive Loss.

A summary of the 2020 Restructuring Charges incurred since its inception in March 2020 and through September 30, 2020 by reportable segment is presented in the following table:
Cumulative charges incurred through September 30, 2020
Revlon$17.9 
Elizabeth Arden10.0 
Portfolio10.6 
Fragrances7.1 
Total$45.6 

2018 Optimization Restructuring Program

In November 2018, the Company announced that it was implementing the 2018 Optimization Restructuring Program (the "2018 Optimization Program") designed to streamline the Company’s operations, reporting structures and business processes, with the objective of maximizing productivity and improving profitability, cash flows and liquidity. The 2018 Optimization Program was substantially completed by December 31, 2019.

As of September 30, 2020, restructuring and related charges under the 2018 Optimization Program expected to be paid in cash are approximately $32 million of the total $39.6 million of recorded charges, of which $30.3 million were already paid through September 30, 2020, with any residual balance expected to be paid during the remainder of 2020.



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

A summary of the 2018 Optimization Restructuring Charges incurred since its inception in November 2018 and through September 30, 2020 is presented in the following table:
Restructuring Charges and Other, Net
Employee Severance and Other Personnel Benefits(a)
Other CostsTotal Restructuring Charges
Inventory Adjustments(b)
Other Related Charges(c)
Total Restructuring and Related Charges
Charges incurred through December 31, 2019$20.3 $0.3 $20.6 $4.9 $14.0 $39.5 
Charges incurred during the nine months ended September 30, 2020
(0.6)(0.6)0.7 0.1 
Cumulative charges incurred through September 30, 2020$19.7 $0.3 $20.0 $4.9 $14.7 $39.6 
(a) Includes reversal due to true-up of previously-accrued restructuring charges.
(b) Inventory adjustments are recorded within cost of sales in the Company’s Unaudited Consolidated Statement of Operations and Comprehensive Loss.
(c) Other related charges are recorded within SG&A in the Company’s Unaudited Consolidated Statement of Operations and Comprehensive Loss.

A summary of the 2018 Optimization Restructuring Charges incurred since its inception in November 2018 and through September 30, 2020 by reportable segment is presented in the following table:
Charges incurred during the nine months ended September 30, 2020Cumulative charges incurred through September 30, 2020
Revlon$(0.3)$8.5 
Elizabeth Arden(0.1)4.2 
Portfolio(0.1)3.9 
Fragrances(0.1)3.4 
     Total$(0.6)$20.0 

Restructuring Reserve
The liability balance and related activity for each of the Company's restructuring programs are presented in the following table:
Utilized, Net
Liability
Balance at January 1, 2020
Expense, NetForeign Currency Translation

Cash

Non-cash
Liability Balance at September 30, 2020
Revlon 2020 Restructuring Program:
Employee severance and other personnel benefits$$44.4 $$(20.3)$$24.1 
Other1.2 (1.2)
Total Revlon 2020 Restructuring Program45.6 (21.5)24.1 
2018 Optimization Program:
Employee severance and other personnel benefits5.7 (0.6)(3.7)1.4 
Other immaterial actions:(a)
Employee severance and other personnel benefits4.3 (0.2)0.2 (0.4)3.9 
Total restructuring reserve$10.0 $44.8 $0.2 $(25.6)$$29.4 
(a) The balance of other immaterial restructuring initiatives primarily consists of balances outstanding under the EA Integration Restructuring Program implemented by the Company in December 2016, which was completed by December 2018. The reversal of charges and payments made during the nine months ended September 30, 2020 primarily related to other individually and collectively immaterial restructuring initiatives.

As of September 30, 2020 and 2019, all of the restructuring reserve balances were included within accrued expenses and other current liabilities in the Company's Consolidated Balance Sheets.




COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

3. INVENTORIES

As of September 30, 2020 and December 31, 2019, the Company's net inventory balances consisted of the following:

September 30,December 31,
20202019
Finished goods$402.2 $326.5 
Raw materials and supplies106.8 110.4 
Work-in-process16.5 11.5 
$525.5 $448.4 


4. PROPERTY, PLANT AND EQUIPMENT
As of September 30, 2020 and December 31, 2019, the Company's property, plant and equipment balances consisted of the following:
September 30,December 31,
20202019
Land and improvements$11.2 $11.0 
Building and improvements112.6 113.0 
Machinery and equipment295.9 296.0 
Office furniture, fixtures and capitalized software240.2 241.5 
Counters and trade fixtures51.9 52.9 
Leasehold improvements43.8 50.1 
Construction-in-progress7.0 14.0 
Right-of-Use assets123.5 118.2 
Property, plant and equipment and Right-of-Use assets, gross886.1 896.7 
Accumulated depreciation and amortization(530.3)(488.1)
Property, plant and equipment and Right-of-Use assets, net$355.8 $408.6 

Depreciation and amortization expense on property, plant and equipment and right-of-use assets was $18.3 million and $59.3 million during the three and nine months ended September 30, 2020, respectively, and $19.2 million and $65.2 million during the three and nine months ended September 30, 2019, respectively.



5. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

In accordance with ASC Topic 350, “Intangibles – Goodwill and Other,” the Company performs its annual impairment test during the fourth quarter of each year. The Company also reviews goodwill for impairment whenever events or changes in circumstances indicate that the carrying value of its goodwill may not be recoverable. After the close of each interim quarter, management assesses whether there exists any indicators of impairment requiring the Company to perform an interim goodwill impairment analysis.

In performing its goodwill impairment assessments the Company uses the simplified approach allowed under ASU No. 2017-04, "Simplifying the Test for Goodwill Impairment." Following the results of such assessments, the Company records non-cash impairment charges in the amount by which the carrying value of each reporting unit exceeded its respective fair value, limited to the amount of each reporting unit's goodwill. Impairment charges are included as a separate component of operating income within the "Impairment charges" caption on the face of the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss for the applicable quarter-to-date and year-to-date periods.


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


First and Second Quarter of 2020 Interim Goodwill Assessments

As of March 31, 2020 and June 30, 2020, as a result of COVID-19’s impact on the Company’s operations, the Company determined that indicators of potential impairment existed requiring the Company to perform interim goodwill impairment analyses. These indicators included a deterioration in the general economic conditions, adverse developments in equity and credit markets, deterioration in some of the economic channels in which the Company's operates (especially in the mass retail channel), the recent trading values of the Company's capital stock and the corresponding decline in the Company’s market capitalization and the revision of the Company's internal forecasts as a result of the ongoing and prolonged COVID-19 pandemic. For its first and second quarter of 2020 interim assessments, the Company examined and performed quantitative interim goodwill impairment assessments for all its reporting units, namely: (i) Revlon; (ii) Elizabeth Arden Skin and Color; (iii) Elizabeth Arden Fragrances; (iv) Fragrances; (v) Mass Portfolio; and (vi) Professional Portfolio.

For the first quarter of 2020, as of March 31, 2020:

The Company determined that it was more likely than not that the fair values of each of its: (i) Revlon; (ii) Elizabeth Arden Skin; and (iii) Color and Fragrances reporting units exceeded their respective carrying amounts for the first quarter of 2020. As of March 31, 2020, prior to the recording of any impairment charges, the Revlon, Elizabeth Arden Skin and Color and Fragrances reporting units had goodwill balances of $264.7 million, $67.4 million and $120.8 million, respectively; and
The Company also determined that indicators of impairment existed for each of its: (i) Elizabeth Arden Fragrances; (ii) Mass Portfolio; and (iii) Professional Portfolio reporting units. Accordingly, for the three months ended March 31, 2020, the Company recognized a total of $99.8 million of non-cash goodwill impairment charges consisting of: $54.3 million and $19.6 million for the Mass Portfolio and Professional Portfolio reporting units, respectively, within the Company's Portfolio segment and $25.9 million for the Elizabeth Arden Fragrances reporting unit within the Company's Elizabeth Arden segment. Following the recognition of these non-cash goodwill impairment charges, as of March 31, 2020, the Elizabeth Arden Fragrances, Mass Portfolio and Professional Portfolio reporting units had approximately $23.5 million, NaN and $97.2 million, respectively, in remaining goodwill.

For the second quarter of 2020, as of June 30, 2020:

The Company determined that it was more likely than not that the fair values of each of its: (i) Revlon; (ii) Elizabeth Arden Skin and Color; and (iii) Fragrances reporting units exceeded their respective carrying amounts for the second quarter of 2020. As of June 30, 2020, prior to the recording of any impairment charges, the Revlon, Elizabeth Arden Skin and Color and Fragrances reporting units had goodwill balances of $264.9 million, $67.4 million and $120.8 million, respectively; and
Primarily due to the continued worldwide effects of the ongoing and prolonged COVID-19 pandemic, the Company also determined that indicators of impairment existed for each of its: (i) Elizabeth Arden Fragrances; and (ii) Professional Portfolio reporting units. Accordingly, for the three months ended June 30, 2020, the Company recognized a total of $11.2 million of non-cash goodwill impairment charges consisting of: $9.6 million for the Professional Portfolio reporting unit within the Company's Portfolio segment and $1.6 million for the Elizabeth Arden Fragrances reporting unit within the Company's Elizabeth Arden segment. Following the recognition of these non-cash goodwill impairment charges, as of June 30, 2020, the Elizabeth Arden Fragrances and Professional Portfolio reporting units had approximately $22.0 million and $87.6 million, respectively, in remaining goodwill.

Third Quarter 2020 Interim Goodwill Assessment

As of September 30, 2020, primarily due to the continued worldwide effects of the ongoing and prolonged COVID-19 pandemic, the Company re-assessed whether further indicators of impairment arose during the third quarter of 2020 that might result in additional goodwill impairment charges. For the third quarter of 2020 interim assessment, the Company, in accordance with ASC 350, performed qualitative analyses for its (i) Revlon; (ii) Elizabeth Arden Skin and Color; (iii) Elizabeth Arden Fragrances; (iv) Professional Portfolio; and (v) Fragrances reporting units. As discussed above, the Mass Portfolio reporting unit's goodwill was written down to NaN during the first quarter of 2020. In performing its third quarter of 2020 qualitative interim goodwill assessment, the Company considered, among other factors, the financial performance of each of its reporting


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

units, the Company's revised expected future cash flows as affected by the ongoing and prolonged COVID-19 pandemic, as well as the results of the second quarter of 2020 quantitative interim analysis.

For the third quarter of 2020, as of September 30, 2020:

The Company, in accordance with ASC 350, performed qualitative analyses for its: (i) Revlon; (ii) Elizabeth Arden Skin and Color; (iii) Elizabeth Arden Fragrances; (iv) Professional Portfolio; and (v) Fragrances reporting units; and
Based upon such assessment, the Company determined that it was more likely than not that the fair value of each of its previously mentioned reporting units exceeded their respective carrying amounts as of September 30, 2020. Consequently, 0 impairment changes were recognized during the three months ended September 30, 2020.

Total non-cash impairment charges recorded on the Company's goodwill were NaN and $111.0 million for the three and nine months ended September 30, 2020. NaN impairment charges were recognized during the nine months ended September 30, 2019.

Inputs and Assumptions Considerations

The above-mentioned fair values for the first and second quarter of 2020 quantitative interim assessments were primarily determined using a weighted average market and income approach. The income approach requires several assumptions including those regarding future sales growth, EBITDA (earnings before interest, taxes, depreciation and amortization) margins, and capital expenditures, which are the basis for the information used in the discounted cash flow model. The weighted-average cost of capital used in the income approach for the first and second quarter of 2020 quantitative interim assessments ranged from 10.5% to 12.0%, with a perpetual growth rate of 2%. For the market approach, for the first and second quarter of 2020 quantitative interim assessments, the Company considered the market comparable method based upon total enterprise value multiples of other comparable publicly-traded companies.

The key assumptions used to determine the estimated fair value of the reporting units for the first and second quarter of 2020 quantitative interim assessments, as well as for the third quarter of 2020 qualitative interim assessment, included the expected success of the Company's future new product launches, the Company's achievement of its expansion plans, the Company's realization of its cost reduction initiatives and other efficiency efforts, as well as certain assumptions regarding COVID-19's expected impact on the Company. If such plans and assumptions do not materialize as anticipated, or if there are further challenges in the business environment in which the Company's reporting units operate, a resulting change in actual results from the Company's key assumptions could have a negative impact on the estimated fair values of the reporting units, which could require the Company to recognize additional impairment charges in future reporting periods.

The inputs and assumptions utilized in the quarterly interim impairment analyses are classified as Level 3 inputs in the fair value hierarchy as defined in ASC Topic 820, “Fair Value Measurements.”

The following table presents the changes in goodwill by segment for the nine months ended September 30, 2020:
RevlonPortfolioElizabeth ArdenFragrancesTotal
Balance at January 1, 2020$264.9 $171.1 $116.9 $120.8 $673.7 
Foreign currency translation adjustment0.3 0.2 0.5 
Goodwill impairment charge(83.5)(27.5)(111.0)
Balance at September 30, 2020$265.2 $87.8 $89.4 $120.8 $563.2 
Cumulative goodwill impairment charges(a)
$(166.2)
(a) Amount refers to cumulative goodwill impairment charges related to impairments recognized in 2015, 2017, 2018 and 2020; NaN and $111.0 million of such impairment charges were recognized during the three and nine months ended September 30, 2020, respectively.



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

In connection with recognizing these goodwill impairment charges for the three and nine months ended September 30, 2020, the Company recognized a tax benefit of approximately NaN and $8.3 million, respectively, during such periods.
Intangible Assets, Net
Finite-Lived Intangibles
In accordance with ASC Topic 360, and in conjunction with the Company's performance of its interim impairment testing of goodwill for the first, second and third quarters of 2020, the Company reviewed its finite-lived intangible assets for impairment. In performing such review, the Company makes judgments about the recoverability of its purchased finite-lived intangible assets whenever events or changes in circumstances indicate that an impairment to its finite-lived intangible assets may exist. The Company also considers several indicators of impairment, including, among other factors, the following: (i) whether there exists any significant adverse change in the extent or manner in which a long-lived asset and/or asset group is being used; (ii) whether there exists any projection or forecast demonstrating losses associated with the use of a long-lived asset and/or asset group; and (iii) whether there exists a current expectation that, more likely than not, a long-lived asset and/or asset group will be sold or otherwise disposed of significantly before the end of its previously-estimated useful life. The carrying amount of a finite-lived intangible asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the finite-lived intangible asset and/or asset group and the impairment loss is measured as the amount by which the carrying amount of the finite-lived intangible asset exceeds its fair value. NaN impairment charges were recognized related to the carrying value of any of the Company's finite-lived intangible assets as a result of the first, second and third quarters of 2020 impairment assessments.
Indefinite-Lived Intangibles
In connection with the interim impairment assessment for the first and second quarters of 2020, the Company also quantitatively reviewed indefinite-lived intangible assets, consisting of certain trade names, using March 31, 2020 and June 30, 2020 carrying values, respectively, similar to goodwill, in accordance with ASC Topic 350.

As a result of COVID-19’s impact on the Company’s operations and on the expected future cash flows of certain asset groups, in connection with the Company's quantitative interim assessment of goodwill in the first and second quarters of 2020, the Company performed quantitative interim assessments for its indefinite-lived intangible assets for the same periods, which resulted in the recognition of:
$24.5 million of total non-cash impairment charges related to certain indefinite-lived intangible assets within the Company's Mass Portfolio, Elizabeth Arden Fragrances and Elizabeth Arden Skin and Color reporting units in the first quarter of 2020; and
$8.6 million of total non-cash impairment charges related to certain indefinite-lived intangible assets within the Company's Elizabeth Arden Fragrances and Elizabeth Arden Skin and Color reporting units in the second quarter of 2020.

As of September 30, 2020, in accordance with the approach followed for the third quarter interim assessment of goodwill, the Company performed a qualitative assessment of its indefinite-lived intangible assets considering, among other factors, the financial performance of certain asset groups within its reporting units, the Company's revised, expected future cash flows (also as affected by COVID-19), as well as the results of the second quarter of 2020 quantitative interim analysis of indefinite-lived intangibles. NaN impairment charges were recognized related to the carrying value of any of the Company's indefinite-lived intangible assets as a result of the third quarter of 2020 qualitative interim impairment assessment. Consequently, total non-cash impairment charges recorded on the Company's indefinite-lived intangible assets were NaN and $33.1 million for the three and nine months ended September 30, 2020.

Inputs and Assumptions Considerations

The fair values of the Company's intangible assets were determined based on the undiscounted cash flows method for its finite-lived intangibles and based on the relief from royalty method for its indefinite-lived intangibles, respectively. The inputs and assumptions utilized in the impairment analyses are classified as Level 3 inputs in the fair value hierarchy as defined in ASC Topic 820, “Fair Value Measurements.” These impairment charges were included as a separate component of operating income within the "Impairment charges" caption on the face of the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020. A summary of such impairment charges by segments is included in the following table:



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Three Months Ended
September 30, 2020
RevlonPortfolioElizabeth ArdenFragrancesTotal
Indefinite-lived intangible assets$$$$$
Total Intangibles Impairment$$$$$
Nine Months Ended
September 30, 2020
RevlonPortfolioElizabeth ArdenFragrancesTotal
Indefinite-lived intangible assets$$(2.5)$(30.6)$$(33.1)
Total Intangibles Impairment$$(2.5)$(30.6)$$(33.1)

In connection with recognizing these intangible assets impairment charges for the three and nine months ended September 30, 2020, the Company recognized a tax benefit of approximately NaN and $6.9 million, respectively, during such periods.
The following tables present details of the Company's total intangible assets as of September 30, 2020 and December 31, 2019:
September 30, 2020
Gross Carrying AmountAccumulated AmortizationImpairmentNet Carrying AmountWeighted-Average Useful Life (in Years)
Finite-lived intangible assets:
Trademarks and licenses$271.3 $(122.7)$$148.6 12
Customer relationships248.8 (107.4)141.4 11
Patents and internally-developed intellectual property23.7 (15.2)8.5 5
Distribution rights31.0 (7.0)24.0 14
Other1.3 (1.3)0
Total finite-lived intangible assets$576.1 $(253.6)$$322.5 
Indefinite-lived intangible assets:
Trade names$146.5 N/A$(33.1)$113.4 
Total indefinite-lived intangible assets$146.5 N/A$(33.1)$113.4 
Total intangible assets$722.6 $(253.6)$(33.1)$435.9 
December 31, 2019
Gross Carrying AmountAccumulated AmortizationImpairmentNet Carrying AmountWeighted-Average Useful Life (in Years)
Finite-lived intangible assets:
Trademarks and licenses$271.2 $(110.9)$$160.3 13
Customer relationships248.3 (96.5)151.8 11
Patents and internally-developed intellectual property21.5 (12.1)9.4 5
Distribution rights31.0 (5.6)25.4 15
Other1.3 (1.3)0
Total finite-lived intangible assets$573.3 $(226.4)$$346.9 
Indefinite-lived intangible assets:
Trade names$143.8 N/A$$143.8 
Total indefinite-lived intangible assets$143.8 N/A$$143.8 
Total intangible assets$717.1 $(226.4)$$490.7 


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


Amortization expense for finite-lived intangible assets was $8.3 million in each of the three months ended September 30, 2020 and 2019, and $25.0 million and $31.9 million for the nine months ended September 30, 2020 and 2019, respectively. The variance with the previous comparable nine-month period was attributable primarily to the accelerated amortization of the Pure Ice intangible assets during the quarter ended March 31, 2019 as a result of the revision of the brand’s intangible assets useful lives following the termination of a business relationship with the brand's principal customer.

The following table reflects the estimated future amortization expense for each period presented, a portion of which is subject to exchange rate fluctuations, for the Company's finite-lived intangible assets as of September 30, 2020:
Estimated Amortization Expense
2020$8.7 
202133.4 
202232.4 
202330.9 
202427.6 
Thereafter189.5 
Total$322.5 

6. ACCRUED EXPENSES AND OTHER

As of September 30, 2020 and December 31, 2019, the Company's accrued expenses and other current liabilities consisted of the following:
September 30,December 31,
20202019
Sales returns and allowances$73.9 $89.7 
Advertising, marketing and promotional costs72.9 82.8 
Taxes (a)
48.1 54.3 
Compensation and related benefits40.1 42.1 
Interest22.0 34.0 
Professional services and insurance15.0 16.3 
Short-term lease liability19.0 14.5 
Freight and distribution costs3.1 13.2 
Restructuring reserve29.4 10.0 
Software3.1 4.0 
Other (b)
61.3 54.0 
Total$387.9 $414.9 
(a) Accrued Taxes for Products Corporation as of September 30, 2020 and December 31, 2019 were $51.1 million and $57.6 million, respectively.
(b) Accrued Other as of December 31, 2019 includes approximately $2.3 million of severance to Mr. Fabian Garcia, the Company's former President and Chief Executive Officer, which was paid in 2020.



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

7. DEBT

The table below details the Company's debt balances as of September 30, 2020 and December 31, 2019. See also Note 19, "Subsequent Events," for recent debt activity updates.
September 30,December 31,
20202019
2020 BrandCo Term Loan Facility due 2025, net of debt issuance costs (see (a) below)$1,625.2 $
2019 Term Loan Facility due 2023, net of discounts and debt issuance costs (see (b) below)187.1 
2018 Foreign Asset-Based Term Facility due 2021, net of discounts and debt issuance costs (see (c) below)54.6 82.3 
Amended 2016 Revolving Credit Facility due 2021, net of debt issuance costs (see (d) below)290.2 269.9 
2016 Term Loan Facility: 2016 Term Loan due 2023 and 2025, net of discounts and debt issuance costs (see (e) below)875.2 1,713.6 
5.75% Senior Notes due 2021, net of debt issuance costs (see (f) below)341.7 498.1 
6.25% Senior Notes due 2024, net of debt issuance costs (see (g) below)
443.8 442.8 
Spanish Government Loan due 20250.3 0.4 
Debt$3,631.0 $3,194.2 
Less current portion(*)
(704.5)(288.0)
Long-term debt$2,926.5 $2,906.2 
Short-term borrowings (see (h) below)
$2.0 $2.2 
(*) At September 30, 2020, the Company classified $704.5 million as its current portion of long-term debt, comprised primarily of $341.7 million of Products Corporation's 5.75% Senior Notes due February 15, 2021 (the "5.75% Senior Notes"), net of debt issuance costs, $290.2 million of net borrowings under the Amended 2016 Revolving Credit Facility, net of debt issuance costs, $54.6 million of the 2018 Foreign Asset-Based Term Facility due July 9, 2021, net of debt issuance costs and debt discount, $9.2 million of amortization payments on the 2016 Term Loan Facility scheduled to be paid over the next four calendar quarters, and $8.6 million of amortization payments under the 2020 BrandCo Term Loan Facility due within one year. At December 31, 2019, the Company classified $288.0 million as its current portion of long-term debt, comprised primarily of $269.9 million of net borrowings under the Amended 2016 Revolving Credit Facility, net of debt issuance costs, and $18.0 million of amortization payments on the 2016 Term Loan Facility. See below in this Note 7, "Debt," and Note 19, "Subsequent Events," for details regarding the Company's recent debt-related transactions.
(a) The aggregate principal amount outstanding under the 2020 BrandCo Term Loan Facility at September 30, 2020 was $1,761.3 million, including $846.0 million of principal rolled-up from the 2016 Term Loan Facility to the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility. See further details below, within this Note 7, "Debt," and Note 19, “Subsequent Events.”
(b) On May 7, 2020, in connection with closing the 2020 BrandCo Facilities, Products Corporation fully repaid the 2019 Term Loan Facility pursuant to that Term Credit Agreement, dated as of August 6, 2019 (the “2019 Term Loan Facility”). See Note 9, "Long-Term Debt," to the Consolidated Financial Statements in the Company's 2019 Form 10-K for certain details regarding the 2019 Term Loan Facility, which prior to its repayment was scheduled to mature on the earliest of: (x) August 6, 2023 and (y) the 180th day prior to the stated maturity of Products Corporation’s existing 2016 Term Loan Facility, if any loans under the 2016 Term Loan Facility remained outstanding and had not been replaced or refinanced by such date. The lenders under the 2019 Term Loan Facility participated in the 2020 BrandCo Term Loan Facility and, as a result, the Company determined that the full repayment of the 2019 Term Loan Facility represented a debt modification under U.S. GAAP. Accordingly, the Company recorded approximately $33.5 million in connection with fees paid to the lenders for the prepayment of the 2019 Term Loan Facility, as well as approximately $10.3 million in other lenders' fees, which were capitalized as part of the total debt issuance costs for the 2020 BrandCo Term Loan Facility. See further details below, within this Note 7, "Debt," and Note 19, “Subsequent Events.”
(c) The aggregate principal amount outstanding under the 2018 Foreign Asset-Based Term Facility at September 30, 2020 was the Euro equivalent of $56.8 million. In connection with the amendment described below, the Company repaid €5 million of the original aggregate principal amount of €77 million. See Note 9, "Long-Term Debt," to the Consolidated Financial Statements in the Company's 2019 Form 10-K for certain details regarding the euro-denominated senior secured asset-based term loan facility that various foreign subsidiaries of Products Corporation entered into on July 9, 2018 and which is scheduled to mature on July 9, 2021 (the “2018 Foreign Asset-Based Term Facility”). In May, 2020 the Company entered into an amendment to the 2018 Foreign Asset Based Term Facility to, among other things, increase the margin applicable to the interest rate from EURIBOR (with a floor of 0.50%) plus a margin of 6.50% to EURIBOR (with a floor 0.50%) plus a margin of 7.00%. See further details below, within this Note 7, "Debt."
(d) Total borrowings at face amount under Tranche A of the Amended 2016 Revolving Credit Facility at September 30, 2020 were $291.9 million (excluding $1.4 million of outstanding undrawn letters of credit). See Note 9, "Long-Term Debt," to the Consolidated Financial Statements in the Company's 2019 Form 10-K for certain details regarding Products Corporation's Amended 2016 Revolving Credit Facility. In April 2018, Products Corporation amended the Amended 2016 Revolving Credit Facility Agreement, as detailed below, to, among other things, add a $41.5 million senior secured first in, last out "Tranche B," while the original $400 million tranche under such facility became a senior secured last in, first out "Tranche A." Tranche A matures on the earlier of: (x) September 7, 2021; and (y) the 91st day prior to the maturity of Products Corporation’s 5.75% Senior Notes, if, on that date (and solely for so long as), (i) any of Products Corporation’s 5.75% Senior Notes remain outstanding and (ii) Products Corporation’s available liquidity does not exceed the aggregate principal amount of the then outstanding 5.75% Senior Notes by at least $200 million. On April 17, 2020, the maturity date of the 2018 Tranche B was extended from April 17, 2020 to May 17, 2020 and was fully repaid on such extended maturity date.
(e) The aggregate principal amount outstanding under the 2016 Term Loan Facility at September 30, 2020 was $886.3 million. See Note 9, "Long-Term Debt," to the Consolidated Financial Statements in the Company's 2019 Form 10-K for certain details regarding Products Corporation's 2016 Term Loan Facility that was originally scheduled to mature on the earlier of: (x) September 7, 2023; and (y) the 91st day prior to the maturity of Products Corporation’s


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

5.75% Senior Notes if, on that date (and solely for so long as), (i) any of Products Corporation's 5.75% Senior Notes remain outstanding and (ii) Products Corporation’s available liquidity does not exceed the aggregate principal amount of the then outstanding 5.75% Senior Notes by at least $200 million (the “Original Maturity Date”). On May 7, 2020, in connection with closing the 2020 BrandCo Facilities, Products Corporation amended the 2016 Term Loan Facility to, among other things, extend the maturity of a portion of the 2016 Term Loan Facility to June 30, 2025, subject to certain springing maturities (the “Extended Maturity Date”). See further details below within this Note 7, "Debt," and Note 19, “Subsequent Events.” As a result of such transaction, as of September 30, 2020, $855.6 million of the 2016 Term Loan Facility is scheduled to mature on the Original Maturity Date and $30.7 million is scheduled to mature on the Extended Maturity Date.
(f) The aggregate principal amount outstanding under the 5.75% Senior Notes at September 30, 2020 was $342.8 million. See Note 9, "Long-Term Debt," to the Consolidated Financial Statements in the Company's 2019 Form 10-K for certain details regarding Products Corporation's 5.75% Senior Notes that are scheduled to mature on February 15, 2021. During the nine months ended September 30, 2020, Products Corporation repurchased $157.2 million in aggregate principal face amount of the 5.75% Senior Notes, recording a gain on extinguishment of debt of approximately $43.1 million, which is included in "Gain on early extinguishment of debt" on the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020. See further details below within this Note 7, "Debt," and Note 19, “Subsequent Events.”
(g) The aggregate principal amount outstanding under the 6.25% Senior Notes at September 30, 2020 was $450 million. See Note 9, "Long-Term Debt," to the Consolidated Financial Statements in the Company's 2019 Form 10-K for certain details regarding Products Corporation's 6.25% Senior Notes that are scheduled to mature on August 1, 2024 (the "6.25% Senior Notes").
(h) There were 0 borrowings at September 30, 2020 under the Second Amended and Restated Unsecured 2019 Senior Line of Credit Facility between Products Corporation and MacAndrews & Forbes Group, LLC (“M&F”), dated as of September 28, 2020 (the “2020 Restated Line of Credit Facility”), which was amended and restated in anticipation of a Future Refinanced European ABL Facility (as hereinafter defined) and will provide Products Corporation with up to a $30 million tranche of a new facility of the 2018 Foreign Asset-Based Term Facility (the “New European ABL FILO Facility”) that would be secured on a “last-out” basis by the same collateral as the 2018 Foreign Asset-Based Term Facility or, if no Future Refinanced European ABL Facility is obtained, a stand-alone $30.0 million credit facility secured by the same collateral as the 2018 Foreign Asset-Based Term Facility when that facility is terminated, in each case, subject to a borrowing base.

Current Year Debt Transactions
5.75% Senior Notes Exchange Offer

See Note 19, “Subsequent Events” for important information regarding the Company’s debt-related transactions occurring after September 30, 2020. On September 29, 2020, Products Corporation commenced the “Exchange Offer” to exchange any and all of the then-outstanding 5.75% Senior Notes (the “Existing 5.75% Senior Notes”). As described in Note 19, the Exchange Offer was amended on October 23, 2020 and on November 13, 2020, the Company announced that the Exchange Offer was successfully consummated and that Products Corporation had accepted $236 million in aggregate principal amount of 5.75% Senior Notes tendered in the Exchange Offer. Products Corporation used cash on hand to redeem, effective as of November 13, 2020, the remaining $106.8 million in aggregate principal amount of 5.75% Senior Notes pursuant to the terms of the 5.75% Senior Notes Indenture. Following the consummation of the Exchange Offer and the satisfaction and discharge of the remaining 5.75% Senior Notes, 0 5.75% Senior Notes remained outstanding as of the closing on November 13, 2020.


Amendments to the 2020 BrandCo Term Loan Facility
Prior to consummating the Exchange Offer, on September 28, 2020, Products Corporation and certain lenders under the 2020 BrandCo Term Loan Facility, representing more than a majority in aggregate principal amount of loans thereunder (the “Supporting BrandCo Lenders”), entered into a Transaction Support Agreement (the “BrandCo TSA”) under which the Supporting BrandCo Lenders agreed to take certain actions to facilitate the Exchange Offer and Consent Solicitation, including, among other things:
Relinquishing certain rights of such Supporting BrandCo Lenders to “roll-up” loans held by such Supporting BrandCo Lenders under the 2016 Term Loan Facility into New BrandCo Second-Lien Term Loans under the 2020 BrandCo Term Loan Facility (the “Roll-up Rights”);
Tendering any Existing 5.75% Senior Notes held by such Supporting BrandCo Lenders into the Exchange Offer and Consent Solicitation;
Consenting to amendments to the 2020 BrandCo Term Loan Facility to permit the exchange of Existing 5.75% Senior Notes for the New BrandCo Second-Lien Term Loans under the 2020 BrandCo Term Loan Facility as contemplated by the Offering Memorandum and the payment of the BrandCo Support and Consent Consideration;
Consenting to other amendments to the 2020 BrandCo Term Loan Facility and the Amended 2016 Revolving Credit Facility to permit the Exchange Offer and Consent Solicitation to be completed as contemplated by the Offering Memorandum; and
Supporting and cooperating with Products Corporation to consummate the transactions contemplated by the BrandCo TSA and the Offering Memorandum, including the Exchange Offer and Consent Solicitation.
In connection with such amendments, Products Corporation agreed to provide the following consideration (collectively, the “BrandCo Support and Consent Consideration”) upon the successful consummation of the Exchange Offer:



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

$12.5 million aggregate principal amount of New BrandCo Second-Lien Term Loans as a fee to the Supporting BrandCo Lenders under the BrandCo TSA in connection with such Supporting BrandCo Lenders’ relinquishment of their Roll-up Rights;
$10.0 million aggregate principal amount of New BrandCo Second-Lien Term Loans to one of the Supporting BrandCo Lenders in exchange for $18.7 million aggregate principal amount of Products Corporation’s 6.25% Senior Notes due 2024 held by such Supporting BrandCo Lender; and
to all lenders under the 2020 BrandCo Term Loan Facility (including the Supporting BrandCo Lenders), an amendment fee that was payable pro rata based on principal amount of loans consenting, consisting of, at Products Corporation's option, either (x) an aggregate of $2.5 million of cash or (y) $5.0 million aggregate principal amount of New BrandCo Second-Lien Term Loans. Pursuant to the BrandCo Amendment, Products Corporation elected to pay this fee in-kind in the form of $5.0 million aggregate principal amount of New BrandCo Second-Lien Term Loans.

On November 13, 2020, Products Corporation entered into that certain Amendment No. 1 (the “BrandCo Amendment”) to the 2020 BrandCo Credit Agreement in connection with the Exchange Offer in order to, among other things, provide for the incurrence of $75 million in aggregate principal amount of New BrandCo Second-Lien Term Loans. The New BrandCo Second Lien Term Loans are a separate tranche of “Term B-2 Loans” (ranking junior to the Term B-1 Loans and senior to the Term B-3 Loans with respect to liens on certain specified collateral) under the BrandCo Credit Agreement. Except as to the use of proceeds, the terms of the New BrandCo Second-Lien Term Loans are substantially consistent with the other Term B-2 Loans. In connection with the BrandCo Amendment, Products Corporation paid certain fees to the lenders in-kind in the form of New BrandCo Second-Lien Term Loans in accordance with the BrandCo TSA.

MacAndrews & Forbes 2020 Restated Line of Credit Facility
In light of the upcoming maturity on July 9, 2021 of the 2018 Foreign Asset-Based Term Facility and the upcoming expiration on December 31, 2020 of the Amended 2019 Senior Line of Credit Facility, the Company sought to refinance or extend both the 2018 Foreign Asset-Based Term Facility and the Amended 2019 Senior Line of Credit Facility. Products Corporation sought to do so in order to reinforce its liquidity position to be better able to address the current business and economic environment and prepare for any further potential disruptions to its business and operations as may be brought on by the ongoing COVID-19 pandemic or other events.
As a result, and anticipating a future refinancing of the 2018 Foreign Asset-Based Term Facility (a “Future Refinanced European ABL Facility”), on September 28, 2020, Products Corporation and M&F entered into the Second Amended and Restated 2019 Senior Unsecured Line of Credit Facility (the “2020 Restated Line of Credit Facility”), which amended and restated the Amended 2019 Senior Line of Credit Facility and will provide Products Corporation with up to a $30 million tranche of a new facility of the 2018 Foreign Asset-Based Term Facility (the “New European ABL FILO Facility”) that would be secured on a “last-out” basis by the same collateral as the 2018 Foreign Asset-Based Term Facility or, if no Future Refinanced European ABL Facility is obtained, a stand-alone $30 million credit facility secured by the same collateral as the 2018 Foreign Asset-Based Term Facility when that facility is terminated, in each case, subject to a borrowing base. Upon the earlier of (x) the incurrence of a New European ABL FILO Facility and (y) December 31, 2020, the 2020 Restated Line of Credit Facility will terminate, such that M&F’s maximum committed amount under the 2020 Restated Line of Credit Facility will never exceed $30.0 million. As of September 30, 2020, there were 0 borrowings outstanding under the 2020 Restated Line of Credit Facility.
The New European ABL FILO Facility would mature on (x) the maturity date of any such Future Refinanced European ABL Facility or (y) if there is no Future Refinanced European ABL Facility, July 9, 2022. To the extent the Future Refinanced European ABL Facility exceeds $35.0 million in principal amount, the amount available under the New European ABL FILO Facility would decrease on a dollar-for-dollar basis, such that, if Products Corporation were able to obtain a Future Refinanced ABL Facility of $65.0 million from third parties, there would be no amounts available under the New European ABL FILO Facility. The interest rate for the New European ABL FILO Facility will be LIBOR + 10.00%. The covenants for the New European ABL FILO Facility would be substantially the same as those applicable to the 2018 European ABL Facility.

Consummation of 2020 BrandCo Refinancing Transactions

On May 7, 2020 (the “BrandCo 2020 Facilities Closing Date”), Products Corporation entered into a term credit agreement (the “2020 BrandCo Credit Agreement”) with Jefferies Finance LLC, as administrative agent and collateral agent, and certain financial institutions (the “2020 Facilities Lenders”) that are lenders or the affiliates of lenders under Products Corporation’s Term Loan Credit Agreement, dated as of September 7, 2016 and amended on April 30, 2020 and as amended on the BrandCo 2020 Facilities Closing Date, as further described below (as amended to date, the “2016 Term Loan Facility”). Pursuant to the 2020 BrandCo Credit Agreement, the 2020 Facilities Lenders provided Products Corporation with new and roll-up senior


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

secured term loan facilities (the “2020 BrandCo Facilities” and, collectively, the "2020 BrandCo Term Loan Facility" and, together with the use of proceeds thereof and the Extension Amendment, the “2020 BrandCo Refinancing Transactions”).

Principal and Maturity: The 2020 BrandCo Facilities consist of: (i) a senior secured term loan facility in an aggregate principal amount outstanding on the BrandCo 2020 Facilities Closing Date of $815 million, plus the amount of certain fees and accrued interest that have been capitalized (the “2020 BrandCo Facility”); (ii) commitments in respect of a senior secured term loan facility in an aggregate principal amount of $950 million (the “Roll-up BrandCo Facility”); and (iii) a senior secured term loan facility in an aggregate principal amount outstanding on the BrandCo 2020 Facilities Closing Date of $3 million (the “Junior Roll-up BrandCo Facility”). Additionally, on May 28, 2020, Products Corporation borrowed from the 2020 Facilities Lenders an additional $65 million of term loans under the 2020 BrandCo Facility to repay in full the 2020 Incremental Facility under the 2016 Term Loan Facility, as a result of which the 2020 BrandCo Facility at June 30, 2020 had an aggregate principal amount outstanding of $910.6 million (including paid-in-kind closing fees of $29.1 million and paid-in-kind interest of $1.5 million that were capitalized). Additionally, during the three months ended June 30, 2020 and the three months ended September 30, 2020, certain lenders under the 2016 Term Loan Facility due June 2023, representing $846.0 million in aggregate principal outstanding, rolled-up to the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility due June 2025, as a result of which the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility at September 30, 2020 had an aggregate principal amount outstanding of $846.0 million. The Company determined that the roll-up of such 2016 Term Loan Facility lenders into the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility represented a debt modification under U.S. GAAP, as the cash flow effect between the amount that Products Corporation owed to the participating lenders under the old debt instrument (i.e., the 2016 Term Loan Facility) and the amount that Products Corporation owed to such lenders after the consummation of the roll-up into the new debt instrument (i.e., the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility) on a present value basis was less than 10% and, thus, the debt instruments were not considered to be substantially different within the meaning of ASC 470, Debt, under U.S. GAAP.

The proceeds of the 2020 BrandCo Facility were used: (i) to repay in full approximately $200 million of indebtedness outstanding under Products Corporation’s 2019 Term Loan Facility; (ii) to repay in full and terminate commitments under the 2020 Incremental Facility; and (iii) to pay fees and expenses in connection with the 2020 BrandCo Facilities and the 2020 BrandCo Refinancing Transactions. The Company will use the remaining net proceeds for general corporate purposes, including repurchasing, repaying or refinancing Products Corporation’s outstanding 5.75% Senior Notes. The proceeds of the Roll-up BrandCo Facility are available prior to the third anniversary of the BrandCo 2020 Facilities Closing Date to purchase at par an equivalent amount of any remaining term loans under the 2016 Term Loan Facility held by the lenders participating in the 2020 BrandCo Facility or their transferees. During the three months ended June 30, 2020 and the three months ended September 30, 2020, certain lenders under the 2016 Term Loan Facility due June 2023, representing $846.0 million in aggregate principal outstanding, rolled-up to the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility due June 2025, as a result of which the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility at September 30, 2020 have an aggregate principal amount outstanding of $846.0 million, with a remaining capacity for the roll-up of loans under the 2016 Term Loan Facility of $107.0 million. See “Amendments to the 2020 BrandCo Term Loan Facility” regarding the Supporting BrandCo Lenders relinquishing certain Roll-up Rights and Products Corporation’s issuance of the BrandCo Support and Consent Consideration.

The 2020 BrandCo Facilities will mature on June 30, 2025, subject to a springing maturity 91 days prior to the August 1, 2024 maturity date of Products Corporation’s 6.25% Senior Notes if, on such date, $100 million or more in aggregate principal amount of the 6.25% Senior Notes remain outstanding.

The Company incurred approximately $119.3 million of new debt issuance costs in connection with closing the 2020 BrandCo Facility, which include paid-in kind amounts that are recorded as an adjustment to the carrying amount of the related liability and amortized to interest expense in accordance with the effective interest method over the term of the 2020 BrandCo Facilities.

Borrower, Guarantees and Security: Products Corporation is the borrower under the 2020 BrandCo Facilities and the 2020 BrandCo Facilities are guaranteed by certain of Products Corporation's indirect subsidiaries (the “BrandCos”) that hold certain intellectual property assets related to the Elizabeth Arden and American Crew brands, certain other Portfolio segment brands and certain owned Fragrance segment brands (the “Specified Brand Assets”). While the BrandCos do not guarantee the 2016 Term Loan Facility, all guarantors of the 2016 Term Loan Facility guarantee the 2020 BrandCo Facilities. All of the assets of the BrandCos (including all capital stock issued by the BrandCos) have been pledged to secure the 2020 BrandCo Facility on a first-priority basis, the Roll-up BrandCo Facility on a second-priority basis and the Junior Roll-up BrandCo Facility on a third-priority basis and while such assets do not secure the 2016 Term Loan Facility, the 2020 BrandCo Facilities are secured on a pari passu basis by the assets securing the 2016 Term Loan Facility.


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


Contribution and License Agreements: In connection with the pledge of the Specified Brand Assets, Products Corporation and certain of its subsidiaries contributed the Specified Brand Assets to the BrandCos. Products Corporation entered into license and royalty arrangements on arm’s length terms with the relevant BrandCos to provide for the continued use of the Specified Brand Assets by Products Corporation and its subsidiaries during the term of the 2020 BrandCo Facilities.

Interest and Fees: Loans under the 2020 BrandCo Facility bear interest at a rate equal to LIBOR (with a LIBOR floor of 1.50%) plus (x) 10.50% per annum, payable not less than quarterly in arrears in cash and (y) 2.00% per annum payable not less than quarterly in-kind by adding such amount to the principal amount of outstanding loans under the 2020 BrandCo Facility. Loans under the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility bear interest at a rate equal to LIBOR (with a LIBOR floor of 0.75%) plus 3.50% per annum, payable not less than quarterly in arrears in cash.

Affirmative and Negative Covenants: The 2020 BrandCo Facilities contain certain affirmative and negative covenants that, among other things, limit Products Corporation’s and its restricted subsidiaries’ ability to: (i) incur additional debt; (ii) incur liens; (iii) sell, transfer or dispose of assets; (iv) make investments; (v) make dividends and distributions on, or repurchases of, equity; (vi) make prepayments of contractually subordinated, unsecured or junior lien debt; (vii) enter into certain transactions with their affiliates; (viii) enter into sale-leaseback transactions; (ix) change their lines of business; (x) restrict dividends from their subsidiaries or restrict liens; (xi) change their fiscal year; and (xii) modify the terms of certain debt. The 2020 BrandCo Facilities also restrict distributions and other payments from the BrandCos based on certain minimum thresholds of net sales with respect to the Specified Brand Assets. The 2020 BrandCo Facilities also contain certain customary representations, warranties and events of default, including a cross default provision making it an event of default under the 2020 BrandCo Credit Agreement if there is an event of default under Products Corporation’s existing 2016 Credit Agreements, the 2018 Foreign Asset-Based Term Agreement or the indentures governing each of Products Corporation’s 5.75% Senior Notes due 2021 and its 6.25% Senior Notes due 2024 (the “Senior Notes Indentures”). The lenders under the 2020 BrandCo Credit Agreement may declare all outstanding loans under the 2020 BrandCo Facilities to be due and payable immediately upon an event of default. Under such circumstances, the lenders under the 2016 Credit Agreements, the 2018 Foreign Asset-Based Term Agreement, and the holders under the Senior Notes Indentures may also declare all outstanding amounts under such instruments to be due and payable immediately as a result of similar cross default or cross acceleration provisions, subject to certain exceptions and limitations described in the relevant instruments.

Prepayments: The 2020 BrandCo Facilities are subject to certain mandatory prepayments, including from the net proceeds from the issuance of certain additional debt and asset sale proceeds of certain non-ordinary course asset sales or other dispositions of property, subject to certain exceptions. The 2020 BrandCo Facilities may be repaid at any time, subject to customary prepayment premiums.

2016 Term Loan Facility Extension Amendment: Term loan lenders under the 2016 Term Loan Facility were offered the opportunity to participate at par in the 2020 BrandCo Facilities based on their holdings of term loans under the 2016 Term Loan Facility. Lenders participating in the 2020 BrandCo Facilities, as well as other consenting lenders representing, in the aggregate, a majority of the loans and commitments under the 2016 Term Loan Facility, consented to an amendment to the 2016 Term Loan Facility (the “Extension Amendment”) that, among other things, made certain modifications to the covenants thereof and extended the maturity date of their term loans (“Extended Term Loans”) to June 30, 2025, subject to (i) the same September 7, 2023 springing maturity date of the non-extended term loans under the 2016 Term Loan Facility if, on such date, $75 million or more in aggregate principal amount of the non-extended term loans under the 2016 Term Loan Facility remains outstanding, and (ii) a springing maturity of 91 days prior to the August 1, 2024 maturity date of the 6.25% Senior Notes if, on such date, $100 million or more in aggregate principal amount of the 6.25% Senior Notes remains outstanding. The Extension Amendment became effective on the BrandCo 2020 Facilities Closing Date. As of September 30, 2020, approximately $30.7 million in aggregate principal amount of Extended Term Loans were outstanding after giving effect to the 2020 BrandCo Refinancing Transactions. The Extended Term Loans bear interest at a rate of LIBOR (with a LIBOR floor of 0.75%) plus 3.50% per annum, payable not less than quarterly in arrears in cash, consistent with the interest rate applicable to the non-extended term loans. Approximately $17.0 million of accrued interest outstanding on the 2016 Term Loan Facility was paid on the BrandCo 2020 Facilities Closing Date. The aggregate principal amount of non-extended term loans under the 2016 Term Loan Facility as of September 30, 2020 was approximately $855.6 million.

Repurchases of 5.75% Senior Notes due 2021

On May 7, 2020, Products Corporation used a portion of the proceeds from the 2020 BrandCo Facility to repurchase and subsequently cancel $50 million in aggregate principal face amount of its 5.75% Senior Notes. Products Corporation also paid approximately $0.7 million of accrued interest outstanding on the 5.75% Senior Notes on May 7, 2020. After the BrandCo 2020 Facilities Closing Date, Products Corporation repurchased and subsequently canceled in July 2020 a further $62.8 million in aggregate principal face amount of its 5.75% Senior Notes. Furthermore, during the three months ended September 30, 2020,


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Products Corporation repurchased and subsequently canceled an additional $44.4 million in aggregate principal face amount of its 5.75% Senior Notes. Accordingly, as of September 30, 2020, Products Corporation had repurchased and subsequently cancelled a total of approximately $157.2 million in aggregate principal face amount of its 5.75% Senior Notes, resulting in a gain on extinguishment of debt of approximately $31.2 million and $43.1 million for the three and nine months ended September 30, 2020, respectively, which were recorded within "Gain on early extinguishment of debt" on the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020. See Note 7, "Debt," and Note 19, “Subsequent Events” for more information regarding Products Corporation's 5.75% Senior Notes and the related Exchange Offer.

Prepayment of the 2019 Term Loan Facility due 2023

On the BrandCo 2020 Facilities Closing Date, Products Corporation used a portion of the proceeds from the 2020 BrandCo Facility to fully prepay the entire principal amount outstanding under its 2019 Term Loan Facility, totaling $200 million, plus approximately $1.3 million of accrued interest outstanding thereon, as well as approximately $33.5 million in prepayment premiums, $10.3 million in lenders' fees, $0.3 million in legal fees and approximately $2.0 million in other third party fees. As the lenders under the 2019 Term Loan Facility participated in the 2020 BrandCo Term Loan Facility, the Company determined that the full repayment of the 2019 Term Loan Facility represented a debt modification under U.S. GAAP as the cash flow effect between the old debt instrument (i.e., the 2019 Term Loan Facility) and the new debt instrument (i.e., the 2020 BrandCo Facility) on a present value basis was less than 10% and, thus, the debt instruments were not considered to be substantially different within the meaning of ASC 470, Debt, under U.S. GAAP. Accordingly, the $33.5 million of prepayment premiums, as well as the $10.3 million in other lenders' fees were capitalized as part of the aforementioned $119.3 million of total new debt issuance costs for the 2020 BrandCo Term Loan Facility, while the aforementioned $0.3 million of legal fees and $2.0 million in other third party fees were expensed as incurred in the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss for the nine months ended September 30, 2020.

Amendment to the 2018 Foreign Asset-Based Term Facility

On May 4, 2020, the Company entered into an amendment to the 2018 Foreign Asset Based Term Facility, which had an original outstanding principal amount of €77 million. Such amendment provided for the following:

increasing the interest rate on the loan from EURIBOR (with a floor 0.50%) plus a margin of 6.50% to EURIBOR (with a floor 0.50%) plus a margin of 7.00%;
adding a springing maturity date of 91 days prior to the February 15, 2021 maturity of the 5.75% Senior Notes if any of Products Corporation's 5.75% Senior Notes remain outstanding on such date;
requiring a mandatory prepayment of €5.0 million; and
clarifying certain terms and waiving certain provisions in connection with the 2020 BrandCo Refinancing Transactions.

Approximately $0.4 million of amendment fees paid to the lenders under 2018 Foreign Asset-Based Term Facility were capitalized and are amortized to interest expense, together with any unamortized debt issuance costs outstanding prior to the amendment. As of September 30, 2020, there was the Euro equivalent of $56.8 million outstanding under the 2018 Foreign Asset-Based Term Facility, reflecting a repayment of €28.5 million made during the quarter ended June 30, 2020.

Incremental Revolving Credit Facility under the 2016 Term Loan Agreement

On April 30, 2020, Products Corporation entered into a Joinder Agreement (the “2020 Joinder Agreement”), with Revlon, certain of their subsidiaries and certain existing lenders (the “Incremental Lenders”) under Products Corporation’s 2016 Term Loan Agreement to provide for a $65 million incremental revolving credit facility (the “2020 Incremental Facility”). On the closing of the 2020 Incremental Facility, Products Corporation borrowed $63.5 million of revolving loans for working capital purposes and subsequently on May 11, 2020 Products Corporation also borrowed the additional $1.5 million of delayed funding revolving loans. Prior to its full repayment on May 28, 2020, amounts outstanding under the 2020 Incremental Facility bore interest at a rate of (x) LIBOR plus 16% or (y) an Alternate Base Rate plus 15%, at Products Corporation’s option. Except as to pricing, maturity and differences due to its revolving nature, the terms of the 2020 Incremental Facility were otherwise substantially consistent with the existing term loans under the 2016 Term Loan Facility. The 2020 Incremental Facility was repaid in full, and the commitments thereunder terminated, on May 28, 2020. Upon such repayment, approximately $2.9 million of upfront commitment fees that Products Corporation incurred in connection with consummating the 2020 Incremental Facility were entirely expensed within "Miscellaneous, net" on the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss for the nine months ended September 30, 2020.



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Amendments to the 2016 Revolving Credit Agreement
On May 7, 2020, in connection with consummating the 2020 BrandCo Refinancing Transactions, Products Corporation entered into Amendment No. 4 to its Asset-Based Revolving Credit Agreement, dated as of September 7, 2016, as amended (the “2016 Revolving Credit Facility”). Amendment No. 4, among other things, made certain amendments and provided for certain waivers relating to the 2020 BrandCo Refinancing Transactions under the 2016 Revolving Credit Facility. In exchange for such amendments and waivers, the interest rate margin applicable to loans under Tranche A of the 2016 Revolving Credit Facility increased by 0.75%. In connection with the amendments to the 2018 Tranche B of the 2016 Revolving Credit Facility (which was fully repaid on its May 17, 2020 extended maturity date), Products Corporation incurred approximately $1.1 million in lender's fees that upon its full repayment were entirely expensed within “Miscellaneous, net” on the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss as of September 30, 2020. See “Recent Developments” and Note 19, “Subsequent Events,” regarding, among other things, Amendment No. 5 to the 2016 Revolving Credit Facility.

Previously, on April 17, 2020 (the “FILO Closing Date”), Products Corporation entered into Amendment No. 3 to the 2016 Revolving Credit Facility (“Amendment No. 3”), pursuant to which, the maturity date applicable to $36.3 million of loans under the $41.5 million senior secured first in, last out 2018 Tranche B under the 2016 Revolving Credit Facility (the “2018 FILO Tranche”) was extended from April 17, 2020 to May 17, 2020 (the “Extended Maturity Date”). Products Corporation repaid the remaining approximately $5.2 million of the 2018 FILO Tranche loans as of the FILO Closing Date. In addition, Amendment No. 3 increased the applicable interest margin for the 2018 FILO Tranche by 0.75%, subject to a LIBOR floor of 0.75%. Products Corporation fully repaid the 2018 FILO Tranche on the Extended Maturity Date.

Covenants

Products Corporation was in compliance with all applicable covenants under the 2020 BrandCo Credit Agreement, 2016 Credit Agreements, the 2018 Foreign Asset-Based Term Agreement, the 2020 Restated Line of Credit Facility, as well as with all applicable covenants under its Senior Notes Indentures, in each case as of September 30, 2020. At September 30, 2020, the aggregate principal amounts outstanding and availability under Products Corporation’s various revolving credit facilities were as follows:
CommitmentBorrowing BaseAggregate principal amount outstanding at September 30, 2020
Availability at September 30, 2020 (a)
Amended 2016 Revolving Credit Facility$400.0 $345.9 $291.9 $52.6 
2020 Restated Line of Credit Facility$30.0 N/A$$30.0 
(a) Availability as of September 30, 2020 is based upon the borrowing base then in effect under the Amended 2016 Revolving Credit Facility of $345.9 million, less $1.4 million of outstanding undrawn letters of credit and $291.9 million then drawn. As Products Corporation’s consolidated fixed charge coverage ratio was greater than 1.0 to 1.0 as of September 30, 2020, all of the $52.6 million of availability under the Amended 2016 Revolving Credit Facility was available as of such date. The 2018 Tranche B under the Amended 2016 Revolving Credit Facility was fully repaid in May 2020.

The Company’s foreign subsidiaries held $93.7 million out of the Company's total $268.3 million in cash and cash equivalents as of September 30, 2020. While the cash held by the Company’s foreign subsidiaries is primarily used to fund their operations, the Company regularly assesses its global cash needs and the available sources of cash to fund these needs, which regularly includes repatriating foreign-held cash to settle historical intercompany loans and other intercompany payables. The Company believes that it has and will have sufficient liquidity to meet its cash needs for at least the next 12 months based upon the cash generated by its operations, cash on hand (which as of September 30, 2020 included approximately $175.0 million of proceeds remaining from the 2020 BrandCo Refinancing Transactions), availability under the Amended 2016 Revolving Credit Facility, the 2020 Restated Line of Credit Facility, as well as other permissible borrowings, along with the option to further settle historical intercompany loans and payables with certain foreign subsidiaries. The Company also expects to generate additional liquidity from cost reductions resulting from the implementation of the Revlon 2020 Restructuring Program, which was initiated during the first quarter of 2020, the 2018 Optimization Program and cost reductions generated from other cost control initiatives, including, without limitation, new interim measures to reduce costs in response to COVID-19 (such as: (i) switching to a reduced work week and reducing executive and employee compensation in the range of 20% to 40%; (ii) furloughing approximately 40% of the Company’s U.S.-based employees and those in certain other locations; (iii) suspending the Company’s 2020 merit base salary increases, discretionary profit sharing contributions and matching contributions to the Company’s 401(k) plan; (iv) reducing Board and committee compensation by 50% and eliminating Board and committee meeting fees; and (v) suspending or terminating services and payments under consulting agreements with certain directors), as well as funds provided by selling certain assets (such as the Natural Honey and Floid brands that were sold in December 2019) in connection with the Company's ongoing Strategic Review. For information regarding certain risks related to the Company’s indebtedness, see Item 1A. “Risk Factors” in the Company's 2019 Form 10-K, as supplemented by certain risk factors included


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

in the Company’s Quarterly Reports on Form 10-Q and in certain Current Reports on Form 8-K, in each case as filed with the SEC during 2020.


8. FAIR VALUE MEASUREMENTS

Assets and liabilities are required to be categorized into three levels of fair value based upon the assumptions used to value the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, generally would require significant management judgment. The three levels for categorizing the fair value measurement of assets and liabilities are as follows:
Level 1: Fair valuing the asset or liability using observable inputs, such as quoted prices in active markets for identical assets or liabilities;
Level 2: Fair valuing the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and
Level 3: Fair valuing the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability.
As of both September 30, 2020 and December 31, 2019, the Company did 0t have any financial assets and liabilities that were required to be measured at fair value.

As of September 30, 2020, the fair value and carrying value of the Company’s long-term debt, including the current portion of long-term debt, are categorized in the table below:
September 30, 2020
Fair Value
Level 1Level 2Level 3TotalCarrying Value
Liabilities:
Long-term debt, including current portion(a)
$$2,068.4 $$2,068.4 $3,631.0 

As of December 31, 2019, the fair value and carrying value of the Company’s long-term debt, including the current portion of long-term debt, are categorized in the table below:
December 31, 2019
Fair Value
Level 1Level 2Level 3TotalCarrying Value
Liabilities:
Long-term debt, including current portion(a)
$$2,522.2 $$2,522.2 $3,194.2 
(a) The fair value of the Company's long-term debt, including the current portion of long-term debt, is based on quoted market prices for similar issuances and maturities.
The carrying amounts of the Company's cash and cash equivalents, trade receivables, notes receivable, accounts payable and short-term borrowings approximate their respective fair values.


9. FINANCIAL INSTRUMENTS

Letters of Credit

Products Corporation maintains standby and trade letters of credit for various corporate purposes under which Products Corporation is obligated, of which $1.4 million and $11.4 million (including amounts available under credit agreements in effect at that time) were maintained as of September 30, 2020 and December 31, 2019, respectively. Included in these amounts are approximately $0.1 million and $8.3 million in standby letters of credit that primarily support Products Corporation’s workers compensation, general liability and automobile insurance programs, in each case as outstanding as of September 30, 2020 and December 31, 2019, respectively. The estimated liability under such programs is accrued by Products Corporation.


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


10. PENSION AND POST-RETIREMENT BENEFITS

Net Periodic Benefit Cost
The components of net periodic benefit costs for the Company's pension and the other post-retirement benefit plans for the three months ended September 30, 2020 and 2019, respectively, were as follows:


Pension Plans
Other
Post-Retirement Benefit Plans
Three Months Ended September 30,
2020201920202019
Net periodic benefit costs:
Service cost$0.5 $0.4 $$
Interest cost3.8 5.1 0.1 0.1 
Expected return on plan assets(5.7)(6.0)
Amortization of actuarial loss2.7 2.5 0.1 0.1 
Total net periodic benefit costs prior to allocation$1.3 $2.0 $0.2 $0.2 
Portion allocated to Revlon Holdings
Total net periodic benefit costs$1.3 $2.0 $0.2 $0.2 

In the three months ended September 30, 2020, the Company recognized net periodic benefit cost of $1.5 million, compared to net periodic benefit cost of $2.2 million in the three months ended September 30, 2019, primarily due to lower interest costs partially offset by lower expected return on plan assets and higher amortization of actuarial loss.
The components of net periodic benefit costs for the Company's pension and the other post-retirement benefit plans for the nine months ended September 30, 2020 and 2019, respectively, were as follows:
Pension PlansOther
Post-Retirement Benefit Plans
Nine Months Ended September 30,
2020201920202019
Net periodic benefit costs:
Service cost$1.3 $1.4 $$
Interest cost11.2 15.00.3 0.3
Expected return on plan assets(17.1)(18.0)
Amortization of actuarial loss8.3 7.50.3 0.2
Total net periodic benefit costs prior to allocation$3.7 $5.9 $0.6 $0.5 
Portion allocated to Revlon Holdings(0.1)(0.1)
Total net periodic benefit costs$3.6 $5.8 $0.6 $0.5 
In the nine months ended September 30, 2020, the Company recognized net periodic benefit cost of $4.2 million, compared to net periodic benefit cost of $6.3 million in the nine months ended September 30, 2019, primarily due to lower interest costs partially offset by lower expected return on plan assets and higher amortization of actuarial loss.
Net periodic benefit costs are reflected in the Company's Unaudited Consolidated Financial Statements as follows for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net periodic benefit costs:
Selling, general and administrative expense$0.5 $0.5 $1.3 $1.4 
Miscellaneous, net1.0 1.7 2.9 4.9 
Total net periodic benefit costs$1.5 $2.2 $4.2 $6.3 



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

The Company expects that it will have net periodic benefit cost of approximately $5.6 million for its pension and other post-retirement benefit plans for all of 2020, compared with net periodic benefit cost of $7.2 million in 2019.
Contributions:
The Company’s intent is to fund at least the minimum contributions required to meet applicable federal employee benefit laws and local laws, or to directly pay benefit payments where appropriate. During the three months ended September 30, 2020, $1.8 million and $0.2 million were contributed to the Company’s pension plans and other post-retirement benefit plans, respectively. During the nine months ended September 30, 2020, $7.0 million and $0.5 million were contributed to the Company’s pension plans and other post-retirement benefit plans, respectively. During 2020, the Company expects to contribute approximately $19 million in the aggregate to its pension and other post-retirement benefit plans.
As a result of the CARES Act passed by the U.S. Congress in March 2020 to address the economic environment resulting from COVID-19, and in accordance with the Limited Relief for Pension Funding and Retirement Plan Distributions provision of such act, the Company expects to defer approximately $9.3 million of contributions that were otherwise scheduled to be paid to its 2 qualified pension plans at different earlier dates during 2020. The first quarterly contributions for the 2 qualified plans were originally due by April 15, 2020. The Company had already made $1.6 million in contributions to its qualified pension plans during the first quarter of 2020, prior to adopting the aforementioned provision of the CARES Act. The deferral is in effect only for 2020 and under the CARES relief provisions the Company will be required to pay the contributions by no later than January 1, 2021, including interest at the plans’ 2020 effective interest rate ("EIR") from the original due date to the actual payment date.
Relevant aspects of the qualified defined benefit pension plans, non-qualified pension plans and other post-retirement benefit plans sponsored by Products Corporation are disclosed in Note 12, "Pension and Post-Retirement Benefits," to the Consolidated Financial Statements in the Company's 2019 Form 10-K.


11. STOCK COMPENSATION PLAN
Revlon maintains the Fourth Amended and Restated Revlon, Inc. Stock Plan (as amended, the "Stock Plan"), which provides for awards of stock options, stock appreciation rights, restricted or unrestricted stock and restricted stock units ("RSUs") to eligible employees and directors of Revlon and its affiliates, including Products Corporation. An aggregate of 6,565,000 shares were reserved for issuance as Awards under the Stock Plan, of which there remained approximately 1.2 million shares available for grant as of September 30, 2020. In July 2014, the Stock Plan was amended to renew the Stock Plan for a 7-year renewal term expiring on April 14, 2021. In September 2019 the Stock Plan was amended in connection with the 2019 TIP, described below, to: (1) allow the Compensation Committee to delegate to Revlon’s Chief Executive Officer the authority to grant RSUs to the Company’s employees, other than its officers who are subject to Section 16 of the Securities Exchange Act of 1934, as amended (i.e., the Company’s Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer & Controller); (2) allow for accelerated vesting of equity awards upon a termination without cause; (3) change the minimum vesting period for specified equity awards from 3 years to 2 years; and (4) to increase by 250,000 shares the number of shares of Revlon common stock that are not subject to the Stock Plan’s minimum vesting requirements.

Revlon 2019 Transaction Incentive Program

In August 2019, it was disclosed that MacAndrews & Forbes and Revlon determined to explore strategic transactions involving Revlon and third parties (the "Strategic Review"). In light of this, the Compensation Committee of Revlon’s Board of Directors approved a Revlon 2019 Transaction Incentive Program (the “2019 TIP”) that enables the Company to award cash-based and RSU-based retention grants and transaction bonus awards, as well as providing for the accelerated vesting of time-based RSUs and restricted shares following a termination without cause or due to death or disability.

Each Tier 1 participant’s 2019 TIP award is payable two-thirds in cash and one-third in RSUs vesting in 50% tranches on each of December 31, 2020 and December 31, 2021, while Tier 2 awards are payable 100% in cash in one lump-sum on December 31, 2020, in each case subject to certain earlier vesting for a change of control or termination of employment without cause, as described below. As of September 5, 2019, the Company approved a total of 206,812 time-based RSUs under Tier 1 of the 2019 TIP, which are scheduled to vest in equivalent amounts on each of December 31, 2020 and December 31, 2021, subject to continued employment (the “2019 TIP RSUs”). As of September 30, 2020, a total of 148,168 time-based RSUs under Tier 1 of the 2019 TIP had been granted and are outstanding. The Company’s President and Chief Executive Officer declined an award under the retention program and will receive a transaction bonus only if the Company completes a transaction.



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

The 2019 TIP RSUs vest in full upon an involuntary termination, other than if due to cause; provided that if a change of control occurs or a brand or business segment is sold and (i) the impacted grantee accepts an offer of employment from the buyer, then: (A) if the buyer assumes the 2019 TIP RSUs, the grantee will continue to vest in the assumed awards (with the grantee having the continued right to accelerated vesting upon an involuntary termination, other than if due to cause); and (B) if the buyer does not assume the 2019 TIP RSUs, the grantee’s 2019 TIP RSUs will vest upon closing the change of control; and (ii) the impacted grantee declines an offer of employment from the buyer for substantially comparable total compensation and benefits, the grantee will forfeit their unvested 2019 TIP RSUs (collectively, the “Special Vesting Rules”).

The 2019 TIP also provides for the following cash-based awards payable to certain employees, subject to continued employment through the respective vesting dates: (i) Tier 1 - $6.8 million payable in 2 equal installments as of December 31, 2020 and December 31, 2021; and (ii) Tier 2 - $2.5 million payable in 1 installment as of December 31, 2020. Such cash-based awards follow the Special Vesting Rules following a termination without cause or due to death or disability. During 2019 and through September 30, 2020, the Company granted $4.7 million and $2.3 million cash-based awards, net of forfeitures, under Tier 1 and Tier 2 of the 2019 TIP, respectively, which are being amortized over the period from the grant dates to December 31, 2021 and December 31, 2020, respectively. The total amount amortized for these cash-based awards since the program's inception and through September 30, 2020 is approximately $4.8 million, of which $1.0 million and $3.5 million were recorded during the three and nine months ended September 30, 2020, respectively, within "Acquisition, integration and divestiture costs" in the Company's Unaudited Consolidated Statements of Operations and Comprehensive Loss.

Long-Term Incentive Program
The Company's LTIP RSUs consist of time-based RSUs and performance-based RSUs. Time-based RSUs are generally scheduled to vest ratably over a 3-year service period, while performance-based RSUs are scheduled to vest based on the achievement of certain Company performance metrics and cliff-vest at the completion of a 3-year performance period.
The fair value of the LTIP and TIP RSUs is determined based on the NYSE closing share price on the grant date.
In connection with the announcement of the 2019 TIP, in August 2019 the Company also approved applying the Special Vesting Rules to outstanding, pre-existing LTIP RSUs, except that accelerated vesting in the case of termination of employment without cause will apply only to any tranche of outstanding, pre-existing LTIP RSUs scheduled to vest in the 12-month period following termination, with any future tranches being forfeited. Prior to the approval of these Special Vesting Rules, while the outstanding, pre-existing LTIP RSUs would generally have accelerated vesting upon a change of control, they did not feature accelerated vesting for termination and, in such cases, they were entirely forfeited upon termination.
During the first quarter of 2020, the Company granted approximately 1.3 million time-based and performance-based RSU awards under the Stock Plan (the "2020 LTIP RSUs"). During the second and third quarter of 2020, there were 0 grants under the 2020 LTIP RSUs. See the roll-forward table in the following sections of this Note 11 for activity related to the nine months ended September 30, 2020.

Acceleration of Vesting
Under the aforementioned provisions for acceleration of vesting, as of September 30, 2020 and since the time these provisions became effective in September 2019, 36,452 LTIP RSUs and 27,356 2019 TIP Tier 1 RSUs were vested on an accelerated basis due to involuntary terminations, resulting in accelerated amortization of approximately $1.2 million. In addition, for the three and nine months ended September 30, 2020 and under the same accelerated vesting provisions, the Company also recorded approximately $0.2 million and $1.0 million of accelerated amortization in connection with the cash portion of the 2019 TIP Tier 1 and Tier 2 awards that were vested on an accelerated basis due to involuntary terminations. See the roll-forward table in the following sections of this Note 11 for activity related to the nine months ended September 30, 2020.


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

During the nine months ended September 30, 2020, the activity related to time-based and performance-based RSUs previously granted to eligible employees and the grant date fair value per share related to these RSUs were as follows under the LTIP and 2019 TIP programs, respectively:
Time-Based LTIPPerformance-Based LTIP
RSUs (000's)Weighted-Average Grant Date Fair Value per RSURSUs (000's)Weighted-Average Grant Date Fair Value per RSU
Outstanding as of December 31, 2019
2019 TIP RSUs (b)
200.6 16.44 n/a— 
LTIP RSUs:
2019425.6 22.55 425.6 22.55 
2018241.9 19.00 364.7 19.00 
2017 (a)
54.0 19.70 110.9 19.70 
Total LTIP RSUs721.5 901.2 
Total LTIP and TIP RSUs Outstanding as of December 31, 2019922.1 901.2 
Granted
2019 TIP RSUs Granted (b)
11.7 10.24 n/a— 
LTIP RSUs:
2020626.6 14.96 626.7 14.96 
2019
2018
2017 (a)
Total LTIP RSUs Granted626.6 626.7 
Vested
2019 TIP RSUs Vested (b)(c)
(27.3)16.44 — — 
LTIP RSUs:
2019 (c)
(133.9)22.55 
2018 (c)
(108.5)19.32 
2017 (a)(c)
(53.4)19.70 (14.2)19.70 
Total LTIP RSUs Vested(295.8)(14.2)
Forfeited/Canceled
2019 TIP RSUs Forfeited/Canceled (b)
(36.8)16.44 n/a— 
LTIP RSUs:
2019(83.3)22.55 (112.1)22.55 
2018(49.0)17.56 (110.0)17.97 
2017 (a)
(0.6)19.70 (96.7)19.70 
Total LTIP RSUs Forfeited/Canceled(132.9)(318.8)
Outstanding as of September 30, 2020
2019 TIP RSUs148.2 15.95 n/a— 
LTIP RSUs:
2020626.6 14.96 626.7 14.96 
2019208.4 22.55 313.5 22.55 
201884.4 19.43 254.7 19.45 
2017 (a)
Total LTIP RSUs919.4 1,194.9 
Total LTIP and TIP RSUs Outstanding as of September 30, 20201,067.6 1,194.9 
(a) The 2017 time-based and performance-based LTIP RSUs were recognized over a 2-year service and performance period (i.e., 2018 and 2019).
(b) The 2019 TIP provides for RSU awards that are only time-based.
(c) Includes acceleration of vesting upon involuntary terminations for the nine months ended September 30, 2020 of 30,992 RSUs under the 2019 and 2018 LTIPs and of 27,356 RSUs under the 2019 TIP Tier I awards.


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


Time-Based LTIP and TIP RSUs
The Company recognized $2.1 million and $5.9 million of net compensation expense related to the time-based LTIP and TIP RSUs for the three and nine months ended September 30, 2020, respectively. As of September 30, 2020, the Company had $12.8 million of total deferred compensation expense related to non-vested, time-based LTIP and TIP RSUs. The cost is recognized over the vesting period of the awards, as described above.

Performance-based LTIP RSUs
The Company recognized $2.5 million and $1.3 million of net compensation expense related to the performance-based LTIP RSUs for the three and nine months ended September 30, 2020, respectively. The amount of net compensation expense recognized during the nine months ended September 30, 2020 was affected by adjustments to the awards' expected achievement rates made primarily as a result of the ongoing adverse impact of COVID-19 on the Company's results of operations. As of September 30, 2020, the Company had $18.9 million of total deferred compensation expense related to non-vested, performance-based LTIP RSUs. The cost is recognized over the service period of the awards, as described above.


12. INCOME TAXES
The Company's provision for income taxes represents federal, foreign, state and local income taxes. The Company’s tax provision changes quarterly based on various factors including, but not limited to, the geographical level and mix of earnings; enacted tax legislation; foreign, state and local income taxes; tax audit settlements; and the interaction of various global tax strategies.
For the three and nine months ended September 30, 2020, the Company concluded that the use of the cut-off tax rate method was more appropriate than the annual effective tax rate method, because the annual effective tax rate method would not be reliable due to its sensitivity to minimal changes in forecasted annual pre-tax earnings.
The Company recorded a provision for income taxes of $1.9 million (Products Corporation - provision for income taxes of $2.3 million) for the three months ended September 30, 2020 and a benefit from income taxes of $2.1 million (Products Corporation - benefit from income taxes of $1.8 million) for the three months ended September 30, 2019, respectively. The $4.0 million decrease (Products Corporation - $4.1 million) in the benefit from income taxes in the three months ended September 30, 2020, compared to the three months ended September 30, 2019, was primarily due to: (i) the mix and level of earnings; (ii) an increase in the U.S. tax on the Company's foreign earnings; and (iii) increased tax expense from return to provision adjustments, partially offset primarily by an increase in tax benefit from the net change in valuation allowances related to the recognition of previously unrecognized tax losses in Canada.
The Company recorded a benefit from income taxes of $45.2 million (Products Corporation - benefit from income taxes of $44.2 million) for the nine months ended September 30, 2020 and a benefit from income taxes of $3.2 million (Products Corporation - benefit from income taxes of $2.4 million) for the nine months ended September 30, 2019, respectively. The $42.0 million increase (Products Corporation - $41.8 million) in the benefit from income taxes in the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019, was primarily due to: (i) the increased loss from continuing operations before income taxes on which the tax benefit is recognized; (ii) the mix and level of earnings; and (iii) a reduction in the U.S. tax on the Company's foreign earnings, net of the impact of non-deductible impairment charges, partially offset by the net change in valuation allowances recorded related to the limitation on the deductibility of interest.
The Company's effective tax rate for the three months ended September 30, 2020 was lower than the federal statutory rate of 21% primarily due the mix and level of earnings and the change in valuation allowance related to the limitation on the deductibility of interest. The Company's effective tax rate for the nine months ended September 30, 2020 was lower than the federal statutory rate of 21% primarily due to the impact of non-deductible impairment charges and the valuation allowance related to the limitation on the deductibility of interest, partially offset by the impact of the "Coronavirus Aid, Relief and Economic Security Act" (the "CARES Act"), signed into law on March 27, 2020 by President Trump, which resulted in a partial release of a valuation allowance on the Company's 2019 federal tax attributes associated with the limitation on the deductibility of interest.

The CARES Act, among other things, includes provisions providing for refundable payroll tax credits, the deferral of employer social security tax payments, acceleration of alternative minimum tax credit refunds and the increase of the net interest deduction limitation from 30% to 50%. The Company continues to examine the impact that the CARES Act may have on its results of operations, financial condition and/or financial statement disclosures.


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

The Company's effective tax rate for the three months and nine months ended September 30, 2019 was lower than the federal statutory rate of 21%, primarily due to the valuation allowance related to the limitation on the deductibility of interest and the U.S. tax on the Company's foreign earnings.
The Company expects that its tax provision and effective tax rate in any individual quarter and year-to-date period will vary and may not be indicative of the Company's tax provision and effective tax rate for the full year.

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 for which it is more likely than not to realize a benefit. For any deferred tax asset in excess of the amount for which it is more likely than not that the Company will realize a benefit, the Company establishes a valuation allowance. 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.

As of September 30, 2020, the Company concluded that, based on its evaluation of objectively verifiable evidence, it does not require a valuation allowance on its federal deferred tax assets, other than those associated with the limitation on the deductibility of interest. The Company does have a valuation allowance on deferred tax assets associated with its activity in certain U.S. states and foreign jurisdictions. These conclusions regarding the establishment of valuation allowances on the Company's deferred tax assets as of the end of the third quarter of 2020 are consistent with the Company's conclusions on such matters as compared to prior quarters. The key assumptions used to determine positive and negative evidence included the Company’s cumulative taxable loss for the past three years, future reversals of existing taxable temporary differences, the Company's cost reduction initiatives and other efficiency efforts, as well as certain assumptions regarding COVID-19's expected impact on the Company. Potential negative evidence, including, among other things, any further worsening of the economies in the jurisdictions in which the Company operates and any future reduced profitability in such jurisdictions could result in additional valuation allowances which would reduce the Company's future deferred tax assets. In such event, the Company's tax expense would likely materially increase in the period the valuation allowance is recognized and adversely impact the Company's results of operations and statement of financial condition in such period. The Company will continue to monitor the circumstances that would require it to establish an additional valuation allowance on its deferred tax assets. Accordingly, depending on future evidence that may become available, the Company's assessments regarding its valuation allowance position may change.
For further information, see Note 14, "Income Taxes," to the Consolidated Financial Statements in the Company's 2019 Form 10-K and Item 1A. “Risk Factors-Uncertainties in the interpretation and application of the U.S. income tax provisions could have a material impact on the Company's financial condition, results of operations and/or cash flows” in the Company's 2019 Form 10-K.

13. ACCUMULATED OTHER COMPREHENSIVE LOSS

A roll-forward of the Company's accumulated other comprehensive loss as of September 30, 2020 is as follows:
Foreign Currency TranslationActuarial (Loss) Gain on Post-retirement BenefitsOtherAccumulated Other Comprehensive Loss
Balance at January 1, 2020$(27.3)$(219.8)$(0.3)$(247.4)
Foreign currency translation adjustment7.3 — — 7.3 
Amortization of pension related costs, net of tax of $0.7 million(a)
— 9.3 — 9.3 
Other comprehensive (loss) gain$7.3 $9.3 $$16.6 
Balance at September 30, 2020$(20.0)$(210.5)$(0.3)$(230.8)
(a) Amounts represent the change in accumulated other comprehensive loss as a result of the amortization of actuarial losses (gains) arising during each year related to the Company’s pension and other post-retirement plans. See Note 10, "Pension and Post-retirement Benefits," for further information on the Company’s pension and other post-retirement plans.

For the three and nine months ended September 30, 2020 and 2019, the Company did not have any activity related to financial instruments.



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


14. SEGMENT DATA AND RELATED INFORMATION
Operating Segments
Operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the Company's "Chief Executive Officer") in deciding how to allocate resources and in assessing the Company's performance. As a result of the similarities in the procurement, manufacturing and distribution processes for the Company’s products, much of the information provided in the Unaudited Consolidated Financial Statements and provided in the segment table below is similar to, or the same as, that reviewed on a regular basis by the Company's Chief Executive Officer.
As of September 30, 2020, the Company’s operations are organized into the following reportable segments:
Revlon - The Revlon segment is comprised of the Company's flagship Revlon brands. Revlon segment products are primarily marketed, distributed and sold in the mass retail channel, large volume retailers, chain drug and food stores, chemist shops, hypermarkets, general merchandise stores, e-commerce sites, television shopping, department stores, professional hair and nail salons, one-stop shopping beauty retailers and specialty cosmetic stores in the U.S. and internationally under brands such as Revlon in color cosmetics; Revlon ColorSilk and Revlon Professional in hair color; and Revlon in beauty tools.
Elizabeth Arden - The Elizabeth Arden segment is comprised of the Company's Elizabeth Arden branded products. The Elizabeth Arden segment markets, distributes and sells fragrances, skin care and color cosmetics primarily to prestige retailers, department and specialty stores, perfumeries, boutiques, e-commerce sites, the mass retail channel, travel retailers and distributors, as well as direct sales to consumers via its Elizabeth Arden branded retail stores and elizabetharden.com e-commerce website, in the U.S. and internationally, under brands such as Elizabeth Arden Ceramide, Prevage, Eight Hour, SUPERSTART, Visible Difference and Skin Illuminating in the Elizabeth Arden skin care brands; and Elizabeth Arden White Tea, Elizabeth Arden Red Door, Elizabeth Arden 5th Avenue and Elizabeth Arden Green Tea in Elizabeth Arden fragrances.
Portfolio - The Company’s Portfolio segment markets, distributes and sells a comprehensive line of premium, specialty and mass products primarily to the mass retail channel, hair and nail salons and professional salon distributors in the U.S. and internationally and large volume retailers, specialty and department stores under brands such as Almay and SinfulColors in color cosmetics; American Crew in men's grooming products (which are also sold direct-to-consumer on its americancrew.com website); CND in nail polishes, gel nail color and nail enhancements; Cutex nail care products; and Mitchum in anti-perspirant deodorants. The Portfolio segment also includes a multi-cultural hair care line consisting of Creme of Nature hair care products, which are sold in both professional salons and in large volume retailers and other retailers, primarily in the U.S.; and a hair color line under the Llongueras brand (licensed from a third party) that is sold in the mass retail channel, large volume retailers and other retailers, primarily in Spain.
Fragrances - The Fragrances segment includes the development, marketing and distribution of certain owned and licensed fragrances as well as the distribution of prestige fragrance brands owned by third parties. These products are typically sold to retailers in the U.S. and internationally, including prestige retailers, specialty stores, e-commerce sites, the mass retail channel, travel retailers and other international retailers. The owned and licensed fragrances include brands such as: (i) Juicy Couture (which are also sold direct-to-consumer on its juicycouturebeauty.com website), John Varvatos and AllSaints in prestige fragrances; (ii) Britney Spears, Elizabeth Taylor, Christina Aguilera, Jennifer Aniston and Mariah Carey in celebrity fragrances; and (iii) Curve, Giorgio Beverly Hills, Ed Hardy, Charlie, Lucky Brand, ‹PS› (logo of former Paul Sebastian brand), Alfred Sung, Halston, Geoffrey Beene and White Diamonds in mass fragrances.
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, and 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 reportable segments' underlying operating performance. Such items are shown below in the table reconciling segment profit to consolidated income from continuing operations before income taxes. The Company does not have any material inter-segment sales.
The accounting policies for each of the reportable segments are the same as those described in Note 1, "Description of Business and Summary of Significant Accounting Policies." The Company's assets and liabilities are managed centrally and


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

are reported internally in the same manner as the Unaudited Consolidated Financial Statements; thus, no additional information regarding assets and liabilities of the Company’s reportable segments is produced for the Company's Chief Executive Officer or included in these Unaudited Consolidated Financial Statements.
The following table is a comparative summary of the Company’s net sales and segment profit for Revlon and Products Corporation by reportable segment for the periods presented.

Revlon, Inc.
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Segment Net Sales:
Revlon$166.0 $217.3 $482.8 $716.1 
Elizabeth Arden106.3 123.2 282.4 352.0 
Portfolio99.6 118.2 298.1 354.1 
Fragrances105.2 138.1 214.4 298.0 
Total$477.1 $596.8 $1,277.7 $1,720.2 
Segment Profit:
Revlon$13.5 $7.3 $41.4 $58.5 
Elizabeth Arden3.4 12.5 18.4 17.1 
Portfolio12.2 14.4 33.9 25.0 
Fragrances25.4 34.2 34.6 53.6 
Total$54.5 $68.4 $128.3 $154.2 
Reconciliation:
Total Segment Profit$54.5 $68.4 $128.3 $154.2 
Less:
Depreciation and amortization35.1 38.9 108.3 124.6 
Non-cash stock compensation expense5.1 3.9 8.6 7.7 
Non-Operating items:
Restructuring and related charges4.5 5.4 61.2 27.4 
Acquisition, integration and divestiture costs0.9 0.1 4.2 0.7 
Gain on divested assets(1.1)(0.5)
Financial control remediation and sustainability actions and related charges0.7 3.4 8.5 9.8 
Excessive coupon redemptions4.2 
COVID-19 charges9.7 35.1 
Capital structure and related charges9.3 9.3 
Impairment charges144.1 
      Operating (loss) income(9.7)16.7 (254.7)(16.0)
Less:
Interest Expense68.7 50.2 178.0 145.7 
Amortization of debt issuance costs7.8 3.7 17.8 10.4
   Gain on early extinguishment of debt(31.2)(43.1)
Foreign currency (gains) losses, net(9.8)7.6 9.1 9.0 
Miscellaneous, net(2.6)1.7 13.9 7.6 
Loss from continuing operations before income taxes$(42.6)$(46.5)$(430.4)$(188.7)


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)




Products Corporation
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Segment Net Sales:
Revlon$166.0 $217.3 $482.8 $716.1 
Elizabeth Arden106.3 123.2 282.4 352.0 
Portfolio99.6 118.2 298.1 354.1 
Fragrances105.2 138.1 214.4 298.0 
Total$477.1 $596.8 $1,277.7 $1,720.2 
Segment Profit:
Revlon$14.2 $7.9 $43.6 $60.6 
Elizabeth Arden3.8 13.0 19.7 18.2 
Portfolio12.6 14.7 35.3 26.0 
Fragrances25.9 34.6 35.6 54.5 
Total$56.5 $70.2 $134.2 $159.3 
Reconciliation:
Total Segment Profit$56.5 $70.2 $134.2 $159.3 
Less:
Depreciation and amortization35.1 38.9 108.3 124.6 
Non-cash stock compensation expense5.1 3.9 8.6 7.7 
Non-Operating items:
Restructuring and related charges4.5 5.4 61.2 27.4 
Acquisition, integration and divestiture costs0.9 0.1 4.2 0.7 
Gain on divested assets(1.1)(0.5)
Financial control remediation and sustainability actions and related charges0.7 3.4 8.5 9.8 
Excessive coupon redemptions4.2 
COVID-19 charges9.7 35.1 
Capital structure and related charges9.3 9.3 
Impairment charge144.1 
      Operating (loss) income(7.7)18.5 (248.8)(10.9)
Less:
Interest Expense68.7 50.2 178.0 145.7 
Amortization of debt issuance costs7.8 3.7 17.8 10.4 
   Gain on early extinguishment of debt(31.2)(43.1)0
Foreign currency (gains) losses, net(9.8)7.6 9.1 9.0 
Miscellaneous, net(2.6)1.7 13.9 7.6 
Loss from continuing operations before income taxes$(40.6)$(44.7)$(424.5)$(183.6)

As of September 30, 2020, the Company had operations established in approximately 25 countries outside of the U.S. and its products are sold throughout the world. Generally, net sales by geographic area are presented by attributing revenues from external customers on the basis of where the products are sold.


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)


The following tables present the Company's segment net sales by geography and total net sales by classes of similar products for the periods presented:

Three Months Ended September 30, 2020Nine Months Ended September 30, 2020
RevlonElizabeth ArdenPortfolioFragrancesTotalRevlonElizabeth ArdenPortfolioFragrancesTotal
Geographic Area(1):
 Net Sales
   North America$86.4 $30.5 $59.9 $79.2 $256.0 $265.6 $66.9 $182.8 $151.1 $666.4 
   EMEA*41.4 25.3 32.8 18.8 118.3 105.2 64.9 93.6 44.4 308.1 
   Asia12.1 43.3 0.4 2.7 58.5 33.6 135.5 1.6 8.1 178.8 
   Latin America*11.3 2.5 3.3 1.5 18.6 35.3 3.5 11.6 2.6 53.0 
   Pacific*14.8 4.7 3.2 3.0 25.7 43.1 11.6 8.5 8.2 71.4 
$166.0 $106.3 $99.6 $105.2 $477.1 $482.8 $282.4 $298.1 $214.4 $1,277.7 

Three Months Ended September 30, 2019Nine Months Ended September 30, 2019
RevlonElizabeth ArdenPortfolioFragrancesTotalRevlonElizabeth ArdenPortfolioFragrancesTotal
Geographic Area(1):
 Net Sales
   North America$100.0 $29.5 $71.4 $98.6 $299.5 367.983.9214.5198.4$864.7 
   EMEA*48.1 37.3 38.4 26.8 150.6 153.395.8111.068.9429.0 
   Asia30.1 46.5 1.0 4.0 81.6 78.4148.13.212.8242.5 
   Latin America*18.8 2.2 4.5 3.1 28.6 56.27.216.27.186.7 
   Pacific*20.3 7.7 2.9 5.6 36.5 60.317.09.210.897.3 
$217.3 $123.2 $118.2 $138.1 $596.8 $716.1 $352.0 $354.1 $298.0 $1,720.2 

(1) During the first quarter of 2020, the Company changed the presentation of its Travel Retail business, which previously was included in its EMEA Region, as it is currently presented within each geographic area in accordance with the location of the retail customer. Travel Retail net sales represented approximately 2.0% and 4.6% of the Company's total net sales for the third quarter of 2020 and 2019, respectively, and 2.2% and 4.9% of the Company's total net sales for the nine months ended September 30, 2020 and 2019, respectively. Prior year amounts have been updated to reflect the current year presentation.

* The EMEA region includes Europe, the Middle East and Africa; the Latin America region includes Mexico, Central America and South America; and the Pacific region includes Australia and New Zealand.

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Classes of similar products:
   Net sales:
Color cosmetics$104.7 22%$173.6 29%$305.3 24%$569.9 33%
Fragrance141.6 30%183.7 31%300.5 24%411.124%
Hair care115.9 24%120.5 20%338.0 26%379.0 22%
Beauty care50.4 11%43.6 7%141.9 11%132.78%
Skin care64.5 13%75.4 13%192.0 15%227.5 13%
$477.1 $596.8 $1,277.7 $1,720.2 



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

The following table presents the Company's long-lived assets by geographic area as of September 30, 2020 and December 31, 2019:
September 30, 2020December 31, 2019
Long-lived assets, net:
United States$1,208.1 82%$1,414.0 83%
International259.3 18%280.1 17%
$1,467.4 $1,694.1 


15. REVLON, INC. BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE
Shares used in calculating Revlon's basic loss per share are computed using the weighted-average number of Revlon's shares of Class A Common Stock outstanding during each period. Shares used in diluted loss per share include the dilutive effect of unvested restricted stock, LTIP RSUs and TIP RSUs under the Company’s Stock Plan using the treasury stock method. For the respective periods ended September 30, 2020 and 2019, Revlon's diluted loss per share equals basic loss per share, as the assumed vesting of restricted stock, LTIP RSUs and TIP RSUs would have an anti-dilutive effect. As of September 30, 2020 and 2019, there were 0 outstanding stock options under the Company's Stock Plan. See Note 11, "Stock Compensation Plan," for information on the LTIP and TIP RSUs.

Following are the components of Revlon's basic and diluted loss per common share for the periods presented:
Three months ended September 30,Nine months ended September 30,
2020201920202019
Numerator:
Loss from continuing operations, net of taxes$(44.5)$(44.4)$(385.2)$(185.5)
(Loss) income from discontinued operations, net of taxes(0.3)2.0 
Net loss$(44.5)$(44.7)$(385.2)$(183.5)
Denominator:
Weighted-average common shares outstanding – Basic53,476,354 53,129,004 53,371,986 53,057,154 
Effect of dilutive restricted stock and RSUs
Weighted-average common shares outstanding – Diluted53,476,354 53,129,004 53,371,986 53,057,154 
Basic and Diluted (loss) earnings per common share:
Continuing operations$(0.83)$(0.84)$(7.22)$(3.50)
Discontinued operations0.04 
Net loss per common share$(0.83)$(0.84)$(7.22)$(3.46)
Unvested restricted stock and RSUs under the Stock Plan(a)
314,478 406,854 
(a) These are outstanding common stock equivalents that were not included in the computation of Revlon's diluted earnings per common share because their inclusion would have had an anti-dilutive effect.




COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

16. CONTINGENCIES

On August 12, 2020, UMB Bank, National Association (“UMB”), purporting to act as successor agent under the Term Credit Agreement, dated as of September 7, 2016 (as amended as of May 7, 2020 and as otherwise amended, restated, supplemented or otherwise modified from time to time, the “2016 Credit Agreement”), filed a lawsuit, titled UMB Bank, National Association v. Revlon, Inc. et al., against Revlon, Inc., Products Corporation, several of Products Corporation’s subsidiaries, and several of Products Corporation’s contractual counterparties, including Citibank, Jefferies Finance LLC, Jefferies LLC, and Ares Corporate Opportunities Fund V, in the U.S. District Court for the Southern District of New York (the “Complaint”). The Complaint alleged various claims, stemming from alleged breaches of the 2016 Credit Agreement. The Company believes that this lawsuit was without merit. On November 6, 2020, having failed to serve the lawsuit on any defendant or make any effort to pursue the case, UMB Bank dismissed the case without prejudice to its right to refile it at a later date.
The Company is also involved in various routine legal proceedings incidental to the ordinary course of its business. The Company believes that the outcome of all pending legal proceedings in the aggregate is not reasonably likely to have a material adverse effect on the Company’s business, prospects, results of operations, financial condition and/or cash flows. However, in light of the uncertainties involved in legal proceedings generally, the ultimate outcome of a particular matter could be material to the Company’s operating results for a particular period depending on, among other things, the size of the loss or the nature of the liability imposed and the level of the Company’s income for that particular period.

17. RELATED PARTY TRANSACTIONS
Reimbursement Agreements

Revlon, Products Corporation and MacAndrews & Forbes have entered into reimbursement agreements (the "Reimbursement Agreements") pursuant to which: (i) MacAndrews & Forbes is obligated to provide (directly or through its affiliates) certain professional and administrative services, including, without limitation, employees, to the Company, and to purchase services from third-party providers, such as insurance, legal, accounting and air transportation services, on behalf of the Company, to the extent requested by Products Corporation; and (ii) Products Corporation is obligated to provide certain professional and administrative services, including, without limitation, employees, to MacAndrews & Forbes and to purchase services from third-party providers, such as insurance, legal and accounting services, on behalf of MacAndrews & Forbes, to the extent requested by MacAndrews & Forbes, provided that in each case the performance of such services does not cause an unreasonable burden to MacAndrews & Forbes or Products Corporation, as the case may be.
The Company reimburses MacAndrews & Forbes for the allocable costs of the services that MacAndrews & Forbes purchases for or provides to the Company and for the reasonable out-of-pocket expenses that MacAndrews & Forbes incurs in connection with the provision of such services. MacAndrews & Forbes reimburses Products Corporation for the allocable costs of the services that Products Corporation purchases for or provides to MacAndrews & Forbes and for the reasonable out-of-pocket expenses incurred by Products Corporation in connection with the purchase or provision of such services. Each of the Company, on the one hand, and MacAndrews & Forbes, on the other, has agreed to indemnify the other party for losses arising out of the services provided by it under the Reimbursement Agreements, other than losses resulting from its willful misconduct or gross negligence.
The Reimbursement Agreements may be terminated by either party on 90 days' notice. The Company does not intend to request services under the Reimbursement Agreements unless their costs would be at least as favorable to the Company as could be obtained from unaffiliated third parties.
The Company participates in MacAndrews & Forbes' directors and officers liability insurance program (the "D&O Insurance Program"), as well as its other insurance coverages, such as property damage, business interruption, liability and other coverages, which cover the Company, as well as MacAndrews & Forbes and its subsidiaries. The limits of coverage for certain of the policies are available on an aggregate basis for losses to any or all of the participating companies and their respective directors and officers. The Company reimburses MacAndrews & Forbes from time-to-time for their allocable portion of the premiums for such coverage or the Company pays the insurers directly, which premiums the Company believes are more favorable than the premiums that the Company would pay were it to secure stand-alone coverage. Any amounts paid by the Company directly to MacAndrews & Forbes in respect of premiums are included in the amounts paid under the Reimbursement Agreements. To ensure the availability of directors and officers liability insurance coverage through January 2023, the Company and MacAndrews & Forbes agreed to collectively make payments under MacAndrews & Forbes’ D&O Insurance Program. In furtherance of such arrangement, on July 28, 2020, the Company made a payment of approximately $3.86 million to MacAndrews & Forbes under the Reimbursement Agreements. The Company expects to make a further payment of approximately $1.4 million in July 2021 in respect of its participation in the D&O Insurance Program.


COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

The net activity related to services purchased under the Reimbursement Agreements during the nine months ended September 30, 2020 and 2019 was $0.6 million income and $0.3 million expense, respectively. As of September 30, 2020 and December 31, 2019, a receivable balance of $0.3 million from, and a payable balance of $0.2 million to, MacAndrews & Forbes, respectively, were included in the Company's Unaudited Consolidated Balance Sheet for transactions subject to the Reimbursement Agreements.

2020 Restated Line of Credit Facility

See Note 7, "Debt," in this Form 10-Q regarding the 2020 Restated Line of Credit Facility between Products Corporation and MacAndrews & Forbes Group, LLC.

Other

During the nine months ended September 30, 2020 and 2019, the Company engaged several companies in which MacAndrews & Forbes had a controlling interest to provide the Company with various ordinary course business services. These services included processing approximately $28.2 million and $19.8 million of coupon redemptions for the Company's retail customers for the nine months ended September 30, 2020 and 2019, respectively, for which the Company incurred fees of approximately $0.8 million and $0.5 million for the nine months ended September 30, 2020 and 2019, respectively, and other similar advertising, coupon redemption and raw material supply services, for which the Company had net payables aggregating to approximately $0.4 million and $0.5 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020 and December 31, 2019, a payable balance of approximately $1.7 million and $5.5 million, respectively, were included in the Company's Consolidated Balance Sheet for the aforementioned coupon redemption services. The Company believes that its engagement of each of these affiliates was on arm's length terms, taking into account each firm's expertise in its respective field, and that the fees paid or received were at least as favorable as those available from unaffiliated parties.

In April 2020, in connection with the organizational measures taken by the Company in response to COVID-19, the Company and Ms. Debbie Perelman, the Company’s President and Chief Executive Officer and a member of Revlon’s and Products Corporation’s Boards of Directors, agreed in writing that, effective on or about April 11, 2020, Ms. Perelman’s base salary would be reduced by 40% to $675,000, less all applicable withholdings and deductions, during the span of COVID-19. The Chairman of the Compensation Committee has the authority to reinstate Ms. Perelman’s base salary in effect immediately prior to such amendment at any time he deems appropriate, in his sole discretion, exercised reasonably. In July 2020, the Chairman of the Compensation Committee, acting pursuant to his delegated authority, partially reinstated Ms. Perelman’s base salary to the same 25% reduction applicable to the other members of the Company’s Executive Leadership Team. In late September 2020, the Company's CEO adjusted the initial COVID-driven 25% reduction in the base salary for members of its Executive Leadership Team to a 20% reduction. Also in connection with such COVID-19 measures, in March 2020, the Company agreed in writing with each of Ms. Mitra Hormozi and Mr. E. Scott Beattie that, effective April 1, 2020, their provision of advisory services to the Company was suspended, and payment of their consulting fees was also suspended. In connection with Ms. Hormozi’s resignation from the Board in July 2020, the Company and Ms. Hormozi terminated her Consulting Agreement, dated as of November 7, 2019, as amended, which Consulting Agreement had previously been suspended as part of the organizational cost-reduction measures taken by the Company in response to the ongoing COVID-19 pandemic. The Company’s CEO may reinstate Mr. Beattie’s advisory services and payment of his consulting fees at the appropriate time, in her sole discretion, exercised reasonably. See Note 19, "Subsequent Events."

As previously disclosed in the Company’s 2019 Form 10-K, prior to this suspension of services and payments, in March 2020, the Company and Mr. Beattie entered into an Amended and Restated Consulting Agreement (the “2020 Consulting Agreement”), pursuant to which he was scheduled to serve as Senior Advisor to the Company’s CEO for an additional year, subject to automatic 1-year renewals, unless either party elects not to renew, and subject to certain standard termination rights, in consideration for which, the Company would pay Mr. Beattie a fee of $250,000 per year, supplemental to the Board’s compensation program for non-employee directors. The foregoing description of the 2020 Consulting Agreement is qualified in its entirety by reference to the full text of such agreement, a copy of which was filed with the SEC on March 12, 2020 together with the Company’s 2019 Form 10-K.

MacAndrews & Forbes tendered approximately $15.5 million of 5.75% Senior Notes into the Exchange Offer and, in exchange, received the Mixed Consideration as described herein, in accordance with the terms and conditions of the Exchange Offer.



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

18. PRODUCTS CORPORATION AND SUBSIDIARIES GUARANTOR FINANCIAL INFORMATION

Products Corporation's 5.75% Senior Notes and 6.25% Senior Notes are fully and unconditionally guaranteed on a senior basis by certain of Products Corporation’s direct and indirect wholly-owned domestic subsidiaries (the "5.75% Senior Notes Guarantors" and the "6.25% Senior Notes Guarantors," respectively, and together the "Guarantor Subsidiaries").

The following Condensed Consolidating Financial Statements present the financial information as of September 30, 2020 and December 31, 2019, and for each of the three and nine months September 30, 2020 and 2019 for (i) Products Corporation on a stand-alone basis; (ii) the Guarantor Subsidiaries on a stand-alone basis; (iii) the subsidiaries of Products Corporation that do not guarantee Products Corporation's 5.75% Senior Notes and 6.25% Senior Notes (the "Non-Guarantor Subsidiaries") on a stand-alone basis; and (iv) Products Corporation, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries on a consolidated basis. The Condensed Consolidating Financial Statements are presented on the equity method, under which the investments in subsidiaries are recorded at cost and adjusted to the applicable share of the subsidiary's cumulative results of operations, capital contributions, distributions and other equity changes. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

Products Corporation and Subsidiaries Condensed Consolidating Balance Sheets
As of September 30, 2020
Products CorporationGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
ASSETS
Cash and cash equivalents$167.8 $8.8 $91.7 $$268.3 
Trade receivables, less allowances for doubtful accounts54.6 107.7 178.5 340.8 
Inventories, net141.0 180.9 203.6 525.5 
Prepaid expenses and other215.0 31.2 59.4 305.6 
Intercompany receivables3,375.6 3,296.1 464.4 (7,136.1)
Investment in subsidiaries1,581.4 (0.1)(1,581.3)
Property, plant and equipment, net184.4 70.5 100.9 355.8 
Deferred income taxes243.5 (70.6)39.0 211.9 
Goodwill48.9 264.0 250.3 563.2 
Intangible assets, net10.8 192.1 233.0 435.9 
Other assets69.0 13.4 30.1 112.5 
      Total assets$6,092.0 $4,094.0 $1,650.9 $(8,717.4)$3,119.5 
LIABILITIES AND STOCKHOLDER’S DEFICIENCY
Short-term borrowings$$$2.0 $$2.0 
Current portion of long-term debt649.0 55.5 704.5 
Accounts payable75.1 62.2 82.6 219.9 
Accrued expenses and other243.5 (48.2)195.5 390.8 
Intercompany payables3,496.2 3,013.9 625.9 (7,136.0)
Long-term debt2,926.2 0.3 2,926.5 
Other long-term liabilities172.9 109.3 38.1 320.3 
      Total liabilities7,562.9 3,137.2 999.9 (7,136.0)4,564.0 
Stockholder’s (deficiency) equity(1,470.9)956.8 651.0 (1,581.4)(1,444.5)
Total liabilities and stockholder’s (deficiency) equity$6,092.0 $4,094.0 $1,650.9 $(8,717.4)$3,119.5 




COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Products Corporation and Subsidiaries Condensed Consolidating Balance Sheets
As of December 31, 2019
Products CorporationGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
ASSETS
Cash and cash equivalents$0.8 $6.4 $97.1 $$104.3 
Trade receivables, less allowances for doubtful accounts95.5 92.3 235.6 423.4 
Inventories, net131.0 151.5 165.9 448.4 
Prepaid expenses and other219.7 26.4 46.5 292.6 
Intercompany receivables2,857.7 2,854.6 452.7 (6,165.0)
Investment in subsidiaries1,598.3 30.7 (1,629.0)
Property, plant and equipment, net208.7 89.5 110.4 408.6 
Deferred income taxes165.0 (37.8)30.9 158.1 
Goodwill159.9 264.0 249.8 673.7 
Intangible assets, net13.0 346.9 130.8 490.7 
Other assets67.8 16.2 37.1 121.1 
      Total assets$5,517.4 $3,840.7 $1,556.8 $(7,794.0)$3,120.9 
LIABILITIES AND STOCKHOLDER’S DEFICIENCY
Short-term borrowings$$$2.2 $$2.2 
Current portion of long-term debt287.9 0.1 288.0 
Accounts payable108.4 39.9 103.5 251.8 
Accrued expenses and other124.1 70.0 224.1 418.2 
Intercompany payables3,030.3 2,668.7 466.0 (6,165.0)
Long-term debt2,822.2 84.0 2,906.2 
Other long-term liabilities220.4 118.2 5.3 343.9 
      Total liabilities6,593.3 2,896.8 885.2 (6,165.0)4,210.3 
Stockholder’s (deficiency) equity(1,075.9)943.9 671.6 (1,629.0)(1,089.4)
Total liabilities and stockholder’s (deficiency) equity$5,517.4 $3,840.7 $1,556.8 $(7,794.0)$3,120.9 



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Products Corporation and Subsidiaries Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
Three Months Ended September 30, 2020
Products CorporationGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net Sales$95.7 $148.9 $232.4 $0.1 $477.1 
Cost of sales45.6 92.6 96.0 0.1 234.3 
Gross profit50.1 56.3 136.4 242.8 
Selling, general and administrative expenses84.4 47.7 119.3 251.4 
Acquisition and integration costs0.8 0.1 0.9 
Restructuring charges and other, net(8.4)2.7 5.0 (0.7)
Impairment charges(23.4)22.0 1.4 
Gain on divested assets(1.1)(1.1)
Operating (loss) income(2.2)(16.1)10.6 (7.7)
Other (income) expense:
Intercompany interest, net(0.5)0.7 (0.2)
Interest expense67.3 1.4 68.7 
Amortization of debt issuance costs7.8 7.8 
Gain on early extinguishment of debt(31.2)(31.2)
Foreign currency losses (gains), net1.0 (0.7)(10.1)(9.8)
Miscellaneous, net(1.8)(55.4)54.6 (2.6)
Other expense (income), net42.6 (55.4)45.7 32.9 
(Loss) income from continuing operations before income taxes(44.8)39.3 (35.1)(40.6)
(Benefit from) provision for income taxes(6.3)17.8 (9.2)2.3 
(Loss) income from continuing operations, net of taxes(38.5)21.5 (25.9)(42.9)
Equity in income (loss) of subsidiaries30.0 (10.0)(20.0)
Net (loss) income$(8.5)$11.5 $(25.9)$(20.0)$(42.9)
Other comprehensive income (loss)5.0 (7.1)1.6 5.5 5.0 
Total comprehensive (loss) income$(3.5)$4.4 $(24.3)$(14.5)$(37.9)



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Products Corporation and Subsidiaries Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
Three Months Ended September 30, 2019
Products CorporationGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net Sales$118.4 $174.8 $303.9 $(0.3)$596.8 
Cost of sales64.9 88.1 116.3 (0.3)269.0 
Gross profit53.5 86.7 187.6 327.8 
Selling, general and administrative expenses90.5 82.1 133.7 306.3 
Acquisition and integration costs0.1 0.1 
Restructuring charges and other, net1.0 0.5 1.4 2.9 
Operating (loss) income(38.1)4.1 52.5 18.5 
Other (income) expense:
Intercompany interest, net(1.1)0.6 0.5 
Interest expense48.5 1.7 50.2 
Amortization of debt issuance costs3.7 3.7 
Foreign currency losses (gains), net0.9 (0.1)6.8 7.6 
Miscellaneous, net(8.4)(10.0)20.1 1.7 
Other expense (income), net43.6 (9.5)29.1 63.2 
(Loss) income from continuing operations before income taxes(81.7)13.6 23.4 (44.7)
(Benefit from) provision for income taxes(31.4)18.9 10.7 (1.8)
Loss (income) from continuing operations, net of taxes(50.3)(5.3)12.7 (42.9)
Income from discontinued operations, net of taxes(0.3)(0.3)
Equity in income (loss) of subsidiaries30.8 0.1 (30.9)
Net (loss) income$(19.5)$(5.2)$12.4 $(30.9)$(43.2)
Other comprehensive income (loss)0.5 3.9 (1.9)(2.0)0.5 
Total comprehensive (loss) income$(19.0)$(1.3)$10.5 $(32.9)$(42.7)



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Products Corporation and Subsidiaries Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
Nine Months Ended September 30, 2020
Products CorporationGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net Sales$305.9 $339.6 $632.2 $$1,277.7 
Cost of sales158.5 190.5 251.7 600.7 
Gross profit147.4 149.1 380.5 677.0 
Selling, general and administrative expenses247.6 163.8 321.8 733.2 
Acquisition, integration and divestiture costs4.0 0.2 4.2 
Restructuring charges and other, net32.3 7.0 5.5 44.8 
Impairment charges120.7 22.0 1.4 144.1 
Gain on divested assets(0.5)(0.5)
Operating (loss) income(256.7)(43.7)51.6 (248.8)
Other (income) expense:
Intercompany interest, net(3.5)1.8 1.7 
Interest expense173.0 5.0 178.0 
Amortization of debt issuance costs17.8 17.8 
Gain on early extinguishment of debt(43.1)(43.1)
Foreign currency losses, net1.6 1.7 5.8 9.1 
Miscellaneous, net(0.9)(71.5)86.3 13.9 
Other expense (income), net144.9 (68.0)98.8 175.7 
Loss from continuing operations before income taxes(401.6)24.3 (47.2)(424.5)
Benefit from for income taxes(58.4)19.2 (5.0)(44.2)
Loss from continuing operations, net of taxes(343.2)5.1 (42.2)(380.3)
Equity in (loss) income of subsidiaries0.7 (36.9)36.2 
Net (loss) income$(342.5)$(31.8)$(42.2)$36.2 $(380.3)
Other comprehensive (loss) income16.6 7.3 4.0 (11.3)16.6 
Total comprehensive (loss) income$(325.9)$(24.5)$(38.2)$24.9 $(363.7)



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Products Corporation and Subsidiaries Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income
Nine Months Ended September 30, 2019
Products CorporationGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
Net Sales$429.4 $428.9 $865.4 $(3.5)$1,720.2 
Cost of sales205.1 217.3 331.8 (3.5)750.7 
Gross profit224.3 211.6 533.6 969.5 
Selling, general and administrative expenses329.5 238.7 399.9 968.1 
Acquisition, integration and divestiture costs0.6 0.1 0.7 
Restructuring charges and other, net3.4 3.4 4.8 11.6 
Operating (loss) income(109.2)(30.6)128.9 (10.9)
Other (income) expenses:
Intercompany interest, net(3.5)2.0 1.5 
Interest expense140.5 5.2 145.7 
Amortization of debt issuance costs10.4 10.4 
Foreign currency losses, net1.2 0.2 7.6 9.0 
Miscellaneous, net(26.4)(36.2)70.2 7.6 
Other expense (income), net122.2 (34.0)84.5 172.7 
(Loss) income from continuing operations before income taxes(231.4)3.4 44.4 (183.6)
(Benefit from) provision for income taxes(36.8)19.3 15.1 (2.4)
(Loss) income from continuing operations, net of taxes(194.6)(15.9)29.3 (181.2)
Income from discontinued operations, net of taxes2.0 2.0 
Equity in income (loss) of subsidiaries39.3 11.8 (51.1)
Net (loss) income$(155.3)$(4.1)$31.3 $(51.1)$(179.2)
Other comprehensive income (loss)6.7 2.7 (1.8)(0.9)6.7 
Total comprehensive (loss) income$(148.6)$(1.4)$29.5 $(52.0)$(172.5)



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Products Corporation and Subsidiaries Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2020
Products CorporationGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash (used in) provided by operating activities$(260.0)$6.6 $(3.5)$$(256.9)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities(6.0)(0.5)(0.9)(7.4)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings and overdraft2.5 (3.8)0.6 (0.7)
Borrowings under the 2020 BrandCo Facilities880.0 880.0 
Repurchases of the 5.75% Senior Notes(114.1)(114.1)
Net borrowings under the Amended 2016 Revolving Credit Facility19.5 19.5 
Net borrowings under the 2019 Term Loan Facility (a)(200.0)(200.0)
Repayments under the 2018 Foreign Asset-Based Term Loan(31.4)(31.4)
Repayments under the 2016 Term Loan Facility(9.2)(9.2)
Payment of financing costs(109.4)1.1 (108.3)
Tax withholdings related to net share settlements of restricted stock and RSUs(1.6)(1.6)
Other financing activities(0.1)(0.1)(0.1)(0.3)
Net cash provided by (used in) financing activities436.2 (3.9)1.6 433.9 
Effect of exchange rate changes on cash, cash equivalents and restricted cash0.4 2.0 (2.8)(0.4)
Net increase (decrease) in cash, cash equivalents and restricted cash170.6 4.2 (5.6)169.2 
Cash, cash equivalents and restricted cash at beginning of period$1.0 $6.4 $97.2 $$104.5 
Cash, cash equivalents and restricted cash at end of period$171.6 $10.6 $91.6 $$273.7 



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Products Corporation and Subsidiaries Condensed Consolidating Statements of Cash Flows
Nine Months Ended September 30, 2019
Products CorporationGuarantor SubsidiariesNon-Guarantor SubsidiariesEliminationsConsolidated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash (used in) provided by operating activities$(169.1)$5.6 $(3.3)$$(166.8)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in investing activities(10.9)(2.0)(7.1)(20.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings and overdraft(11.5)(7.2)(3.7)(22.4)
Net borrowings under the Amended 2016 Revolving Credit Facility13.4 13.4 
Net borrowings under the 2019 Term Loan Facility (a)200.0 200.0 
Repayments under the 2016 Term Loan Facility(13.5)(13.5)
Payments of financing costs(12.2)(1.2)(13.4)
Tax withholdings related to net share settlements of restricted stock and RSUs(1.6)(1.6)
Other financing activities(0.6)(0.1)(0.2)(0.9)
Net cash provided by (used in) financing activities174.0 (7.3)(5.1)161.6 
Effect of exchange rate changes on cash, cash equivalents and restricted cash0.4 (1.8)(1.4)
Net decrease in cash, cash equivalents and restricted cash(6.0)(3.3)(17.3)(26.6)
Cash, cash equivalents and restricted cash at beginning of period$7.2 $6.6 $73.7 $87.5 
Cash, cash equivalents and restricted cash at end of period$1.2 $3.3 $56.4 $$60.9 




COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

19. SUBSEQUENT EVENTS

5.75% Senior Notes Exchange Offer

On October 23, 2020, Products Corporation amended its previously-announced Exchange Offer to exchange any and all of the then-outstanding $342,785,000 in aggregate principal amount of its Existing 5.75% Senior Notes, as described in the amended and restated Offering Memorandum and Consent Solicitation Statement (the “Offering Memorandum”), dated October 23, 2020, which Exchange Offer closed on November 13, 2020. Concurrently with the Exchange Offer, Products Corporation solicited consents (the “Consent Solicitation”) to eliminate substantially all of the restrictive covenants and certain events of default provisions from the indenture governing the 5.75% Senior Notes (the “5.75% Senior Notes Indenture”).

For each $1,000 principal amount of 5.75% Senior Notes validly tendered, holders received either, at their option, (i) $275 in cash (plus a $50 early tender/consent fee payable if such 5.75% Senior Notes are tendered at or before 11:59 p.m. New York City time, on November 10, 2020 (the "Expiration Time"), for an aggregate of $325 in cash, or (ii) a combination of (1) $200 in cash (plus a $50 early tender/consent fee payable if such 5.75% Senior Notes are tendered at or before the Expiration Time), for an aggregate of $250 in cash, plus, (2) (A) the Per $1,000 Pro Rata Share of $50 million aggregate principal amount of new 2020 ABL FILO Term Loans and (B) the Per $1,000 Pro Rata Share of $75 million aggregate principal amount of the New BrandCo Second-Lien Term Loans, if the holder is: (a)(i) a qualified institutional buyer as defined in Rule 144A under the Securities Act; (ii) an institutional accredited investor within the meaning of Rule 501(a)(1), (a)(2), (a)(3) or (a)(7) of the Securities Act; or (iii) a person that is not a “U.S. person” within the meaning of Regulation S under the Securities Act, (b) not a natural person and (c) not a “Disqualified Institution” (as defined under the Amended 2016 Revolving Credit Facility and related security documents and intercreditor agreements or the 2020 BrandCo Term Loan Facility and related security documents and intercreditor agreements).

On November 13, 2020, the Company announced that the Exchange Offer was successfully consummated and that Products Corporation had accepted $236 million in aggregate principal amount of 5.75% Senior Notes tendered in the Exchange Offer. Products Corporation used cash on hand to redeem, effective as of November 13, 2020, the remaining $106.8 million in aggregate principal amount of 5.75% Senior Notes pursuant to the terms of the 5.75% Senior Notes Indenture. Following the consummation of the Exchange Offer and the satisfaction and discharge of the remaining 5.75% Senior Notes, 0 5.75% Senior Notes remained outstanding. Accrued and unpaid interest on the 5.75% Senior Notes that were tendered in the Exchange Offer was paid to, but not including, the settlement date of the Exchange Offer.

The 2020 ABL FILO Term Loans are new “Tranche B” term loans in the aggregate principal amount of $50 million, ranking junior in right of payment to the “Tranche A” revolving loans under the Amended 2016 Revolving Credit Agreement and equal in right of payment with all existing and future unsubordinated indebtedness of Products Corporation and the guarantors under the Amended 2016 Revolving Credit Agreement (such new Tranche B term loans, the “2020 ABL FILO Term Loans”). The 2020 ABL FILO Term Loans will mature six months after the maturity date of the Tranche A Loans (and any extension thereof in part or in whole). The 2020 ABL FILO Term Loans bear interest at a rate of LIBOR (subject to a 1.75% floor) plus 8.50% per annum, accruing from the settlement date of the Exchange Offer. The borrowing base for the 2020 ABL FILO Term Loans consists of an advance rate of 100% of eligible collateral with a customary push down reserve, with collateral consisting of: (i) a first-priority lien on accounts receivable, inventory, cash, negotiable instruments, chattel paper, investment property (other than capital stock), equipment and real property of Products Corporation and the subsidiary guarantors, subject to customary exceptions (the “Priority Collateral”); and (ii) a second-priority lien on substantially all tangible and intangible personal property of Products Corporation and the subsidiary guarantors, subject to customary exclusions (other than the Priority Collateral).

The New BrandCo Second Lien Term Loans are “Term B-2 Loans” in the aggregate principal amount of $75 million (ranking junior to the Term B-1 Loans and senior to the Term B-3 Loans with respect to liens on certain specified collateral) under the 2020 BrandCo Term Loan Facility (such Term B-2 Loans, the “New BrandCo Second-Lien Term Loans”). See Note 7, “Debt,” and Note 19, “Subsequent Events,” regarding the 2020 BrandCo Refinancing Transactions for further details and amounts outstanding under the 2020 BrandCo Credit Agreement).

In conjunction with the Exchange Offer, Products Corporation conducted the Consent Solicitation to effectuate amendments to the 5.75% Senior Notes Indenture, which eliminated substantially all of the restrictive covenants and certain events of default provisions from the 5.75% Senior Notes Indenture.



COMBINED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(except where otherwise noted, all tabular amounts in millions, except share and per share amounts)

Amendment No. 1 to BrandCo Credit Agreement

On November 13, 2020, Products Corporation entered into that certain Amendment No. 1 (the “BrandCo Amendment”) to the 2020 BrandCo Credit Agreement in connection with the Exchange Offer in order to, among other things, provide for the incurrence of $75 million in aggregate principal amount of New BrandCo Second-Lien Term Loans. The New BrandCo Second Lien Term Loans are a separate tranche of “Term B-2 Loans” (ranking junior to the Term B-1 Loans and senior to the Term B-3 Loans with respect to liens on certain specified collateral) under the BrandCo Credit Agreement. Except as to the use of proceeds, the terms of the New BrandCo Second-Lien Term Loans are substantially consistent with the other Term B-2 Loans. In connection with the BrandCo Amendment, Products Corporation paid certain fees to the lenders in-kind in the form of New BrandCo Second-Lien Term Loans in accordance with the BrandCo TSA.

Amendment to Credit Facilities; New Tranche B ABL FILO Term Loan Facility

On October 23, 2020 (the “5th Amendment Effective Date”), Products Corporation entered into Amendment No. 5 (the “5th Amendment”) to the Amended 2016 Revolving Credit Agreement.

The 5th Amendment amended and restated the Amended 2016 Revolving Credit Agreement to add a new Tranche B consisting of $50 million aggregate principal amount of “first-in, last-out” Tranche B term loans (such new Tranche B, the “2020 ABL FILO Term Loan Facility” and the loans incurred thereunder, the “2020 ABL FILO Term Loans”). The 5th Amendment also required Products Corporation to maintain "Excess Availability" (as defined in the 5th Amendment) of at least $85 million from the 5th Amendment Effective Date until the transactions contemplated by the Exchange Offer were consummated (such date, the “Exchange Offer Effective Date”). As a result, on October 23, 2020, Products Corporation repaid $35 million of Tranche A loans under the Amended 2016 Revolving Credit Agreement.

On the Exchange Offer Effective Date, Products Corporation’s As-Adjusted Liquidity was required to be at least $175 million (which condition was satisfied) and Products Corporation cannot hold more than $100 million in cash or Cash Equivalents (as defined in the 5th Amendment). Furthermore, the 5th Amendment provides that a $30 million reserve will be automatically and immediately established against the Tranche A Borrowing Base (as defined in the 5th Amendment) if the results of ongoing appraisals and field exams are not delivered to the administrative agent prior to the occurrence of certain specified defaults.

Products Corporation will pay customary fees to Alter Domus (US) LLC as the administrative agent for the 2020 ABL FILO Term Loan Facility. Except as to maturity date, interest, borrowing base and differences due to their nature as term loans, the terms of the 2020 ABL FILO Term Loans are otherwise substantially consistent with the Tranche A Revolving Loans.

COVID-19-Related Compensation Actions

In November 2020, the Compensation Committee of Revlon’s Board of Directors ratified the following changes to the previously-disclosed COVID-19-related compensation arrangements for certain members of management and the Board: (i) the determination by Mr. Alan Bernikow, in his role as Chairman of the Compensation Committee, to reinstate Ms. Perelman’s annual base salary back to its pre-pandemic level of $1,125,000 per annum, pursuant to the Board’s delegation of such authority to Mr. Bernikow at the time such reductions were implemented in April 2020; and (ii) the determinations by Ms. Perelman, in her role as the Company’s President and Chief Executive Officer, to reinstate (A) the annual retainer fees for non-employee Board members, Audit Committee members and the chairmen of the Audit Committee and the Compensation Committee to their pre-pandemic levels (i.e., $115,000 per annum for Revlon Board members, $25,000 per annum for Products Corporation’s Board members, $10,000 per annum for Audit Committee members and $10,000 per annum for the chairman of each of the Audit Committee and Compensation Committee) and (B) the annual base salaries for certain members of the Company’s Executive Leadership Team back to their respective pre-pandemic levels, pursuant to the Board’s delegation of such authority to Ms. Perelman at the time such reductions were implemented in April 2020.




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REVLON, INC AND SUBSIDIARIES
COMBINED MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)



Item 2. Combined Management’s Discussion and Analysis of Financial Condition and Results of Operations

RECENT DEVELOPMENTS
Liquidity and Ability to Continue as a Going Concern

The ongoing and prolonged COVID-19 pandemic has continued to adversely impact the Company’s business in the third quarter of 2020 and beyond, as social-distancing restrictions and related actions designed to curb the spread of the virus have remained in place or have been reinstated as the COVID-19 pandemic spikes across the globe. These adverse economic conditions have resulted in the general slowdown of the global economy, in turn contributing to a significant decline in net sales within each of the Company’s reporting segments and regions.

As previously disclosed, on October 23, 2020, Products Corporation commenced an amended exchange offer (as amended, the “Exchange Offer”) to exchange any and all of its outstanding 5.75% Senior Notes due 2021 (the “5.75% Senior Notes”), which closed on November 13, 2020. In the Exchange Offer, for each $1,000 principal amount of 5.75% Senior Notes validly tendered, holders received either, at their option, (i) $275 in cash (plus a $50 early tender/consent fee payable if such 5.75% Senior Notes were tendered at or before 11:59 p.m. New York City time on November 10, 2020 (the “Expiration Time”)), for an aggregate of $325 in cash (the “Cash Consideration”), or (ii) a combination of (1) $200 in cash (plus a $50 early tender/consent fee payable if such 5.75% Senior Notes were tendered at or before the Expiration Time), for an aggregate of $250 in cash, plus, (2) (A) the Per $1,000 Pro Rata Share (as hereinafter defined) of $50 million aggregate principal amount of new 2020 ABL FILO Term Loans (as hereinafter defined) and (B) the Per $1,000 Pro Rata Share of $75 million aggregate principal amount of the New BrandCo Second-Lien Term Loans (the “Mixed Consideration” and such loans, together with the 2020 ABL FILO Term Loans, the “New Loans”), if the holder is: (a)(i) a qualified institutional buyer as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); (ii) an institutional accredited investor within the meaning of Rule 501(a)(1), (a)(2), (a)(3) or (a)(7) of the Securities Act; or (iii) a person that is not a “U.S. person” within the meaning of Regulation S under the Securities Act, (b) not a natural person and (c) not a “Disqualified Institution” (as defined under the Amended 2016 Revolving Credit Facility and related security documents and intercreditor agreements or the 2020 BrandCo Term Loan Facility and related security documents and intercreditor agreements) (an “Eligible Holder”). The “Per $1,000 Pro Rata Share” is (1) $1,000, divided by (2) the aggregate principal amount of 5.75% Senior Notes tendered for Mixed Consideration by all Eligible Holders and accepted for payment by Products Corporation.

On November 13, 2020, the Company announced that the Exchange Offer was successfully consummated and that Products Corporation had accepted $236 million in aggregate principal amount of 5.75% Senior Notes tendered in the Exchange Offer. Products Corporation used cash on hand to redeem, effective as of November 13, 2020, the remaining $106.8 million in aggregate principal amount of 5.75% Senior Notes pursuant to the terms of the indenture governing the 5.75% Senior Notes. Following the consummation of the Exchange Offer and the satisfaction and discharge of the remaining 5.75% Senior Notes, no 5.75% Senior Notes remained outstanding.

In addition, the Company’s Amended 2016 Revolving Credit Facility matures on September 7, 2021, and the Company is currently in discussions with various lenders to extend such maturity or refinance such facility.

The uncertainty as to Products Corporation’s ability to extend or refinance the Amended 2016 Revolving Credit Facility raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties, nor do they include adjustments to reflect the possible future effects of the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

For more information, please see the risk factors discussed in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q.



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)


5.75% Senior Notes Exchange Offer

On October 23, 2020, Products Corporation amended its previously-announced Exchange Offer to exchange any and all of the then-outstanding $342,785,000 in aggregate principal amount of its Existing 5.75% Senior Notes, as described in the amended and restated Offering Memorandum and Consent Solicitation Statement (the “Offering Memorandum”), dated October 23, 2020, which Exchange Offer closed on November 13, 2020. Concurrently with the Exchange Offer, Products Corporation solicited consents to eliminate substantially all of the restrictive covenants and certain events of default provisions from the indenture governing the 5.75% Senior Notes (the “5.75% Senior Notes Indenture”).

For each $1,000 principal amount of 5.75% Senior Notes validly tendered, holders received either, at their option, (i) $275 in cash (plus a $50 early tender/consent fee payable if such 5.75% Senior Notes are tendered at or before 11:59 p.m. New York City time, on November 10, 2020 (the "Expiration Time"), for an aggregate of $325 in cash, or (ii) a combination of (1) $200 in cash (plus a $50 early tender/consent fee payable if such 5.75% Senior Notes are tendered at or before the Expiration Time), for an aggregate of $250 in cash, plus, (2) (A) the Per $1,000 Pro Rata Share of $50 million aggregate principal amount of new 2020 ABL FILO Term Loans and (B) the Per $1,000 Pro Rata Share of $75 million aggregate principal amount of the New BrandCo Second-Lien Term Loans, if the holder is an Eligible Holder.

On November 13, 2020, the Company announced that the Exchange Offer was successfully consummated and that Products Corporation had accepted $236 million in aggregate principal amount of 5.75% Senior Notes tendered in the Exchange Offer. Products Corporation used cash on hand to redeem, effective as of November 13, 2020, the remaining $106.8 million in aggregate principal amount of 5.75% Senior Notes pursuant to the terms of the 5.75% Senior Notes Indenture. Following the consummation of the Exchange Offer and the satisfaction and discharge of the remaining 5.75% Senior Notes, no 5.75% Senior Notes remained outstanding. Accrued and unpaid interest on the 5.75% Senior Notes that were tendered in the Exchange Offer was paid to, but not including, the settlement date of the Exchange Offer.

The 2020 ABL FILO Term Loans are new “Tranche B” term loans in the aggregate principal amount of $50 million, ranking junior in right of payment to the “Tranche A” revolving loans under the Amended 2016 Revolving Credit Agreement and equal in right of payment with all existing and future unsubordinated indebtedness of Products Corporation and the guarantors under the Amended 2016 Revolving Credit Agreement (such new Tranche B term loans, the “2020 ABL FILO Term Loans”). The 2020 ABL FILO Term Loans will mature six months after the maturity date of the Tranche A Loans (and any extension thereof in part or in whole). The 2020 ABL FILO Term Loans bear interest at a rate of LIBOR (subject to a 1.75% floor) plus 8.50% per annum, accruing from the settlement date of the Exchange Offer. The borrowing base for the 2020 ABL FILO Term Loans consists of an advance rate of 100% of eligible collateral with a customary push down reserve, with collateral consisting of: (i) a first-priority lien on accounts receivable, inventory, cash, negotiable instruments, chattel paper, investment property (other than capital stock), equipment and real property of Products Corporation and the subsidiary guarantors, subject to customary exceptions (the “Priority Collateral”); and (ii) a second-priority lien on substantially all tangible and intangible personal property of Products Corporation and the subsidiary guarantors, subject to customary exclusions (other than the Priority Collateral).

The New BrandCo Second Lien Term Loans are “Term B-2 Loans” in the aggregate principal amount of $75 million (ranking junior to the Term B-1 Loans and senior to the Term B-3 Loans with respect to liens on certain specified collateral) under the 2020 BrandCo Term Loan Facility (such Term B-2 Loans, the “New BrandCo Second-Lien Term Loans”). See Note 7, “Debt,” and Note 19, “Subsequent Events,” regarding the 2020 BrandCo Refinancing Transactions for further details and amounts outstanding under the 2020 BrandCo Credit Agreement).

In conjunction with the Exchange Offer, Products Corporation conducted the Consent Solicitation to effectuate amendments to the 5.75% Senior Notes Indenture, which eliminated substantially all of the restrictive covenants and certain events of default provisions from the 5.75% Senior Notes Indenture.

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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)


Amendment No. 1 to BrandCo Credit Agreement

On November 13, 2020, Products Corporation entered into that certain Amendment No. 1 (the “BrandCo Amendment”) to the 2020 BrandCo Credit Agreement in connection with the Exchange Offer in order to, among other things, provide for the incurrence of $75 million in aggregate principal amount of New BrandCo Second-Lien Term Loans. The New BrandCo Second Lien Term Loans are a separate tranche of “Term B-2 Loans” (ranking junior to the Term B-1 Loans and senior to the Term B-3 Loans with respect to liens on certain specified collateral) under the BrandCo Credit Agreement. Except as to the use of proceeds, the terms of the New BrandCo Second-Lien Term Loans are substantially consistent with the other Term B-2 Loans. In connection with the BrandCo Amendment, Products Corporation paid certain fees to the lenders in-kind in the form of New BrandCo Second-Lien Term Loans in accordance with the BrandCo TSA.

Amendment to Credit Facilities; New Tranche B ABL FILO Term Loan Facility

On October 23, 2020 (the “5th Amendment Effective Date”), Products Corporation entered into Amendment No. 5 (the “5th Amendment”) to the Amended 2016 Revolving Credit Agreement.

The 5th Amendment amended and restated the Amended 2016 Revolving Credit Agreement to add a new Tranche B consisting of $50 million aggregate principal amount of “first-in, last-out” Tranche B term loans (such new Tranche B, the “2020 ABL FILO Term Loan Facility” and the loans incurred thereunder, the “2020 ABL FILO Term Loans”). The 5th Amendment also required Products Corporation to maintain "Excess Availability" (as defined in the 5th Amendment) of at least $85 million from the 5th Amendment Effective Date until the transactions contemplated by the Exchange Offer were consummated (such date, the “Exchange Offer Effective Date”). As a result, on October 23, 2020, Products Corporation repaid $35 million of Tranche A loans under the Amended 2016 Revolving Credit Agreement.

On the Exchange Offer Effective Date, Products Corporation’s As-Adjusted Liquidity was required to be at least $175 million (which condition was satisfied) and Products Corporation cannot hold more than $100 million in cash or Cash Equivalents (as defined in the 5th Amendment). Furthermore, the 5th Amendment provides that a $30 million reserve will be automatically and immediately established against the Tranche A Borrowing Base (as defined in the 5th Amendment) if the results of ongoing appraisals and field exams are not delivered to the administrative agent prior to the occurrence of certain specified defaults.

Products Corporation will pay customary fees to Alter Domus (US) LLC as the administrative agent for the 2020 ABL FILO Term Loan Facility. Except as to maturity date, interest, borrowing base and differences due to their nature as term loans, the terms of the 2020 ABL FILO Term Loans are otherwise substantially consistent with the Tranche A Revolving Loans.

COVID-19-Related Compensation Actions

In November 2020, the Compensation Committee of Revlon’s Board of Directors ratified the following changes to the previously-disclosed COVID-19-related compensation arrangements for certain members of management and the Board: (i) the determination by Mr. Alan Bernikow, in his role as Chairman of the Compensation Committee, to reinstate Ms. Perelman’s annual base salary back to its pre-pandemic level of $1,125,000 per annum, pursuant to the Board’s delegation of such authority to Mr. Bernikow at the time such reductions were implemented in April 2020; and (ii) the determinations by Ms. Perelman, in her role as the Company’s President and Chief Executive Officer, to reinstate (A) the annual retainer fees for non-employee Board members, Audit Committee members and the chairmen of the Audit Committee and the Compensation Committee to their pre-pandemic levels (i.e., $115,000 per annum for Revlon Board members, $25,000 per annum for Products Corporation’s Board members, $10,000 per annum for Audit Committee members and $10,000 per annum for the chairman of each of the Audit Committee and Compensation Committee) and (B) the annual base salaries for certain members of the Company’s Executive Leadership Team back to their respective pre-pandemic levels, pursuant to the Board’s delegation of such authority to Ms. Perelman at the time such reductions were implemented in April 2020.


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COMBINED MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(all tabular amounts in millions, except share and per share amounts)


Overview

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 of MacAndrews & Forbes Incorporated (together with certain of its affiliates other than the Company, "MacAndrews & Forbes"), a corporation beneficially owned by Ronald O. Perelman.
The Company operates in four brand-centric reporting segments that are aligned with its organizational structure based on four global brand teams: Revlon; Elizabeth Arden; Portfolio; and Fragrances. The Company manufactures, markets and sells an extensive array of beauty and personal care products worldwide, including color cosmetics; fragrances; skin care; hair color, hair care and hair treatments; beauty tools; men's grooming products; anti-perspirant deodorants; and other beauty care products.
Business Strategy

The Company remains focused on its 3 key strategic pillars to drive its future success and growth. First, strengthening its iconic brands through innovation and relevant product portfolios; second, building its capabilities to better communicate and connect with its consumers through media channels where they spend the most time; and third, ensuring availability of its products where consumers shop, both in-store and increasingly online. The Company also continues to deliver against the objectives of the Revlon 2020 Restructuring Program, which includes rightsizing our organization with the objectives of driving improved profitability, cash flow and liquidity. The Company is also managing the business to conserve cash and liquidity, as well as focusing on stabilizing the business, growing e-commerce and preparing the foundation for achieving future growth. 

Strategic Review

In August 2019, it was disclosed that MacAndrews & Forbes and the Company determined to explore strategic transactions involving the Company and third parties. This review is ongoing and remains focused on exploring potential options for the Company's portfolio and regional brands (the “Strategic Review”).

COVID-19 Impact on the Company’s Business

While the Company continues to execute its business strategy, the ongoing and prolonged COVID-19 pandemic has adversely impacted net sales in all major commercial regions around the globe that are important to the Company's business. COVID-19’s adverse impact on the global economy has contributed to significant and extended quarantines, stay-at-home orders and other social distancing measures; closures and bankruptcies of retailers, beauty salons, spas, offices and manufacturing facilities; increased levels of unemployment; travel and transportation restrictions leading to declines in consumer traffic in key shopping and tourist areas around the globe; and import and export restrictions. These adverse economic conditions have resulted in the general slowdown of the global economy, in turn contributing to a significant decline in net sales within each of the Company’s reporting segments and regions. As the Company currently expects that the COVID-19 pandemic, including the impact of the pandemic’s “second wave,” will continue to impact its business going forward, the Company will continue to closely monitor the associated impacts and take appropriate actions in an effort to mitigate COVID-19’s negative effects on the Company’s operations and financial results.

The ongoing and prolonged COVID-19 pandemic has continued to adversely impact the Company’s business in Q3 2020, as social-distancing restrictions and related actions designed to curb the spread of the virus have remained in place or have been reinstated as the COVID-19 pandemic spikes across the globe. These restrictions could continue for the foreseeable future, as global economies face a “second-wave” of the pandemic as re-opening plans are implemented.

The ongoing and prolonged COVID-19 pandemic contributed an estimated $119 million ($119 million "XFX," as hereinafter defined), to the Company's $119.7 million decline in net sales for the three months ended September 30, 2020, compared to the prior year quarter, and an estimated $387 million ($392 million XFX) to the Company's $442.5 million decline in net sales for the nine months ended September 30, 2020, compared to the prior year period. During the three months ended September 30, 2020, the Company experienced increased net sales of Revlon-branded beauty tools, Revlon hair color products and certain Elizabeth Arden skincare products in certain markets, as well as growth in the Company's e-commerce net sales.

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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)


For the third quarter of 2020, Revlon segment net sales declined $51.3 million ($51.9 million XFX) versus the prior year quarter, with the ongoing and prolonged COVID-19 pandemic contributing an estimated $50 million ($50 million XFX) to such decline. During the third quarter of 2020, the Revlon segment experienced increased net sales of Revlon-branded beauty tools and hair color products in North America. COVID-19 had a similar negative impact on the Company's other reporting segments over such period, with COVID-19 contributing: (i) an estimated $25 million ($25 million XFX) to a $32.9 million ($33.1 million XFX) decline in the Fragrances segment; (ii) an estimated $24 million ($25 million XFX) to a $16.9 million ($18.4 million XFX) decline in the Elizabeth Arden segment; and (iii) an estimated $19 million ($19 million XFX) to a $18.6 million ($19.1 million XFX) decline in the Portfolio segment. Within the Company's Portfolio segment, during the third quarter of 2020 the Creme of Nature brand continued to deliver net sales growth versus the third quarter of 2019, driven by increased demand due to a shift in consumer buying preferences.

On a regional basis, the ongoing and prolonged COVID-19 pandemic had a similar negative impact on the Company's North America and International regions during the third quarter of 2020. Of a $43.5 million ($43.2 million XFX) decline in the Company's net sales in its North America region during the third quarter of 2020 compared to the third quarter of 2019, COVID-19 contributed an estimated $47 million ($47 million XFX) to such decline. Similarly, of a $76.2 million ($79.3 million XFX) decline in the Company's net sales in its International region over such period, COVID-19 contributed an estimated $72 million ($72 million XFX) to such decline. During the third quarter of 2020, on a regional basis, the Company also experienced increased net sales of Revlon-branded beauty tools, Revlon hair color products and certain Elizabeth Arden skincare products, predominantly in China, as well as growth in certain local and regional brands in various markets.

For the nine months ended September 30, 2020, Revlon segment net sales declined $233.3 million ($227.4 million XFX) versus the prior year period, with the ongoing and prolonged COVID-19 pandemic contributing an estimated $174 million ($176 million XFX) to such decline. During the nine months ended September 30, 2020, the Revlon segment experienced increased net sales of Revlon-branded beauty tools and Revlon hair color products in North America. COVID-19 had a similar negative impact on the Company's other reporting segments over such period, with COVID-19 contributing: (i) an estimated $93 million ($95 million XFX) to a $69.6 million ($66.8 million XFX) decline in the Elizabeth Arden segment, partially offset by higher net sales of Ceramide skin care products; (ii) an estimated $65 million ($65 million XFX) to a $83.6 million ($82.0 million XFX) decline in the Fragrances segment; and (iii) an estimated $56 million ($56 million XFX) to a $56.0 million ($52.2 million XFX) decline in the Portfolio segment.

On a regional basis, the ongoing and prolonged COVID-19 pandemic had a similar negative impact on the Company's North America and International regions during the nine months ended September 30, 2020. Of a $198.3 million ($197.3 million XFX) decline in the Company’s net sales in its North America region during the nine months ended September 30, 2020, compared to the prior year period, COVID-19 contributed an estimated $162 million ($163 million XFX) to such decline. Similarly, of a $244.2 million ($231.1 million XFX) decline in the Company’s net sales in its International region over such period, COVID-19 contributed an estimated $225 million ($229 million XFX) to such decline. During the nine months ended September 30, 2020, on a regional basis, the Company also experienced increased net sales of Revlon-branded beauty tools, Revlon hair color products and certain Elizabeth Arden skincare products, predominantly in China, as well as growth in Cutex nail care products, and certain local and regional brands, in certain markets.

In April 2020, the Company took several cost reduction measures designed to mitigate the adverse impact of the ongoing and prolonged COVID-19 pandemic on its net sales, including, without limitation: (i) reducing brand support, as a result of the abrupt decline in retail store traffic; (ii) continuing to monitor the Company’s sales and order flow and periodically scaling down operations and cancelling promotional programs; and (iii) closely managing cash flow and liquidity and prioritizing cash to minimize COVID-19’s impact on the Company’s production capabilities. In April 2020, the Company also implemented various organizational interim measures designed to reduce costs in response to COVID-19, including, without limitation: (i) switching to a reduced work week in the U.S. and in the Company's international locations and reducing executive and employee compensation in the range of 20% to 40%; (ii) furloughing approximately 40% of the Company’s U.S.-based office-based employees and 30% factory-based employees, as well as employees in a majority of the Company's other locations; (iii) suspending the Company’s 2020 merit base salary increases, discretionary profit sharing contributions and matching contributions to the Company’s 401(k) plan; (iv) reducing Board and committee compensation by 50% and eliminating Board and committee meeting fees; and (v) suspending or terminating services and payments under consulting agreements with certain directors. During the third quarter of 2020, the Company started to gradually roll back some of these measures especially with regards to some of the employees previously furloughed and/or on a reduced work week. With most of these measures still in place, including the Revlon 2020 Restructuring Program, the Company achieved cost reductions of approximately $78 million and $231 million during the three and nine months ended September 30, 2020, respectively, that have substantially offset the impact of the decline in the Company's net sales over such period. However, with the ongoing and prolonged COVID-19
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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)


pandemic, these mitigation actions may not prove to be effective in insulating the Company from any further damaging economic impacts from the pandemic.

For additional information regarding the Company's business, see "Part 1, Item 1 - Business" in the Company's 2019 Form 10-K. Certain capitalized terms used in this Form 10-Q are defined throughout this Item 2.

Overview of Net Sales and Earnings Results
Consolidated net sales in the third quarter of 2020 were $477.1 million, a $119.7 million decrease, or 20.1%, compared to $596.8 million in the third quarter of 2019. Excluding the $2.8 million favorable impact of foreign currency fluctuations (referred to herein as "FX," "XFX" or on an "XFX basis"), consolidated net sales decreased by $122.5 million, or 20.5%, during the third quarter of 2020. The ongoing and prolonged COVID-19 pandemic contributed an estimated $119 million ($119 million XFX) to the Company's $119.7 million decline in net sales in the three months ended September 30, 2020, compared to the three months ended September 30, 2019. The XFX net sales decrease of $122.5 million in the third quarter of 2020 was due to: a $51.9 million, or 23.9%, decrease in Revlon segment net sales; a $33.1 million, or 24.0%, decrease in Fragrances segment net sales; a $19.1 million, or 16.2%, decrease in Portfolio segment net sales; and a $18.4 million, or 14.9%, decrease in Elizabeth Arden segment net sales.

Consolidated net sales in the nine months ended September 30, 2020 were $1,277.7 million, a $442.5 million decrease, or 25.7%, compared to $1,720.2 million in the nine months ended September 30, 2019. Excluding the $14.1 million unfavorable FX impact, consolidated net sales decreased by $428.4 million, or 24.9%, during the nine months ended September 30, 2020. The ongoing and prolonged COVID-19 pandemic contributed an estimated $387 million ($392 million XFX) to the Company's $442.5 million decline in net sales in the nine months ended September 30, 2020, compared to the prior year period. The XFX net sales decrease of $428.4 million in the nine months ended September 30, 2020 was due to: a $227.4 million, or 31.8%, decrease in Revlon segment net sales; a $82.0 million, or 27.5%, decrease in Fragrances segment net sales; a $66.8 million, or 19.0%, decrease in Elizabeth Arden segment net sales; and a $52.2 million, or 14.7%, decrease in Portfolio segment net sales.

Consolidated loss from continuing operations, net of taxes, in the third quarter of 2020 was $44.5 million, compared to $44.4 million in the third quarter of 2019. The $0.1 million increase in consolidated loss from continuing operations, net of taxes, in the second quarter of 2020 was primarily due to:

$85.0 million of lower gross profit, primarily due to the lower net sales in the third quarter of 2020, primarily as a result of the effects of COVID-19, compared the third quarter of 2019;
a $18.5 million increase in interest expense in the third quarter of 2020, compared to the third quarter of 2019, primarily due to higher weighted average interest rates and higher weighted average borrowings driven primarily by the 2020 BrandCo Term Loan Facility;
a $4.1 million increase in amortization of debt issuance costs in the third quarter of 2020, compared to the third quarter of 2019, primarily due to the additional debt issuance costs recorded and amortized in connection with the 2020 BrandCo Refinancing Transactions;
a $4.0 million decrease in the benefit from income taxes in the third quarter of 2020 compared to the third quarter of 2019, primarily due to: (i) the mix and level of earnings; (ii) an increase in the U.S. tax on the Company's foreign earnings; and (iii) increased tax expense from return to provision adjustments, partially offset primarily by an increase in tax benefit from the net change in valuation allowances related to the recognition of previously unrecognized tax losses in Canada;
$0.8 million of higher acquisition, integration and divestiture costs in the third quarter of 2020, compared to the third quarter of 2019, relating to the amortization of the cash-based awards under Tier 1 and Tier 2 of the Revlon 2019 Transaction Incentive Program (the "2019 TIP"; see Note 11, "Stock Compensation Plan," to the Company's Unaudited Consolidated Financial Statements in this Form 10-Q for additional details on the 2019 TIP);
with the foregoing partially offset by:
$54.7 million of lower SG&A expenses in the third quarter of 2020 compared to the third quarter of 2019, primarily driven by cost reductions achieved through the Company's initiatives designed to mitigate the adverse impact of the ongoing and prolonged COVID-19 pandemic on the Company's operations, as well as from the Revlon 2020 Restructuring Program;
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a $31.2 million increase in gain on the early extinguishment of debt in the third quarter of 2020, compared to having had no gain in the third quarter of 2019, recorded upon the repurchase and cancellation of approximately $44.4 million in aggregate principal face amount of Products Corporation's 5.75% Senior Notes during the third quarter of 2020; and
$17.4 million of favorable variance in foreign currency, resulting from $9.8 million in foreign currency gains during the third quarter of 2020, compared to $7.6 million in foreign currency losses during the third quarter of 2019;
a $4.3 million net decrease in other miscellaneous expenses, net, in the third quarter of 2020 compared to the third quarter of 2019, primarily due to the subsequent true-up in the third quarter of 2020 of financing fees previously expensed in 2020 in connection with the 2020 BrandCo Refinancing Transactions; and
a $3.6 million decrease in restructuring charges, primarily due to the subsequent true-up in the third quarter of 2020 of restructuring charges previously accrued in 2020 under the Revlon 2020 Restructuring Program, compared to the expenditures incurred primarily under the 2018 Optimization Program in the third quarter of 2019; and
Consolidated loss from continuing operations, net of taxes, in the nine months ended September 30, 2020 was $385.2 million, compared to consolidated loss from continuing operations, net of taxes, of $185.5 million in the nine months ended September 30, 2019. The $199.7 million increase in consolidated loss from continuing operations, net of taxes, in the nine months ended September 30, 2020, compared to nine months ended September 30, 2019, was primarily due to:
$292.5 million of lower gross profit, primarily due to the COVID-19 related lower net sales in the nine months ended September 30, 2020;
a $144.1 million increase in non-cash impairment charges recorded for the nine months ended September 30, 2020, primarily attributable to the effects of the ongoing and prolonged COVID-19 pandemic, compared to having had no impairment charges for the nine months ended September 30, 2019. This increase is attributable to non-cash impairment charges of $111.0 million recorded on the Company's goodwill and to $33.1 million of non-cash impairment charges recorded on certain of the Company's indefinite-lived intangible assets following the Company's interim impairment assessments during the first and second quarters of 2020;
a $33.2 million increase in restructuring charges, primarily related to higher expenditures under the Revlon 2020 Restructuring Program in the nine months ended September 30, 2020, compared to the expenditures incurred primarily under the 2018 Optimization Program in the nine months ended September 30, 2019;
a $32.3 million increase in interest expense in the nine months ended September 30, 2020, compared to the prior year period, higher weighted average borrowings and higher weighted average interest rates driven primarily by the 2020 BrandCo Term Loan Facility and the 2019 Term Loan Facility (the latter of which was fully repaid in May 2020 using proceeds from the 2020 BrandCo Term Loan Facility);
a $7.4 million increase in amortization of debt issuance costs in the nine months ended September 30, 2020, compared to the prior year period, primarily due to the additional debt issuance costs recorded and amortized in connection with the 2020 BrandCo Refinancing Transactions;
a $6.3 million net increase in other miscellaneous expenses, net, in the nine months ended September 30, 2020, compared to the prior year period, primarily due to financing fees expensed in connection with the 2020 BrandCo Refinancing Transactions; and
$3.5 million of higher acquisition, integration and divestiture costs in the nine months ended September 30, 2020, compared to the prior year period, including $0.7 million in professional fees incurred in connection with the exploration of strategic transactions involving the Company and third parties pursuant to the Strategic Review and approximately $3.5 million relating to the amortization of the cash-based awards under Tier 1 and Tier 2 of the Revlon 2019 TIP (see Note 11, "Stock Compensation Plan," to the Company's Unaudited Consolidated Financial Statements in this Form 10-Q for additional details on the 2019 TIP);
with the foregoing partially offset by:
$234.1 million of lower SG&A expenses in the nine months ended September 30, 2020, compared to the prior year period, primarily driven by cost reductions achieved through the Company's initiatives designed to mitigate the adverse impact of the ongoing and prolonged COVID-19 pandemic on the Company's operations, as well as from the Revlon 2020 Restructuring Program;
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a $43.1 million increase in gain on the early extinguishment of debt in the nine months ended September 30, 2020, compared to having had no gain in the prior year period, primarily due to $31.2 million recorded during the third quarter of 2020 and $11.9 million recorded during the second quarter of 2020 upon the repurchase and subsequent cancellation of approximately $157.2 million in aggregate principal face amount of Products Corporation's 5.75% Senior Notes; and
a $42.0 million increase in the benefit from income taxes in the nine months ended September 30, 2020, compared to the prior year period, primarily due to: (i) the increased loss from continuing operations before income taxes on which the tax benefit is recognized; (ii) the mix and level of earnings; and (iii) a reduction in the U.S. tax on the Company's foreign earnings, net of the impact of non-deductible impairment charges, partially offset by the net change in valuation allowances recorded related to the limitation on the deductibility of interest.

Recent Debt Transactions

5.75% Senior Notes Exchange Offer

See “Recent Developments” for important information regarding the Company’s debt-related transactions occurring after September 30, 2020. On September 29, 2020, Products Corporation commenced the Exchange Offer to exchange any and all of the then-outstanding 5.75% Senior Notes (the “Existing 5.75% Senior Notes”). As described in "Recent Developments," the Exchange Offer was amended on October 23, 2020 and on November 13, 2020, the Company announced that the Exchange Offer was successfully consummated and that Products Corporation had accepted $236 million in aggregate principal amount of 5.75% Senior Notes tendered in the Exchange Offer. Products Corporation used cash on hand to redeem, effective as of November 13, 2020, the remaining $106.8 million in aggregate principal amount of 5.75% Senior Notes pursuant to the terms of the 5.75% Senior Notes Indenture. Following the consummation of the Exchange Offer and the satisfaction and discharge of the remaining 5.75% Senior Notes, no 5.75% Senior Notes remained outstanding as of the closing on November 13, 2020.

Amendments to the 2020 BrandCo Term Loan Facility
Prior to consummating the Exchange Offer, on September 28, 2020, Products Corporation and certain lenders under the 2020 BrandCo Term Loan Facility, representing more than a majority in aggregate principal amount of loans thereunder (the “Supporting BrandCo Lenders”), entered into a Transaction Support Agreement (the “BrandCo TSA”) under which the Supporting BrandCo Lenders agreed to take certain actions to facilitate the Exchange Offer and Consent Solicitation, including, among other things:
Relinquishing certain rights of such Supporting BrandCo Lenders to “roll-up” loans held by such Supporting BrandCo Lenders under the 2016 Term Loan Facility into New BrandCo Second-Lien Term Loans under the 2020 BrandCo Term Loan Facility (the “Roll-up Rights”);
Tendering any Existing 5.75% Senior Notes held by such Supporting BrandCo Lenders into the Exchange Offer and Consent Solicitation;
Consenting to amendments to the 2020 BrandCo Term Loan Facility to permit the exchange of Existing 5.75% Senior Notes for the New BrandCo Second-Lien Term Loans under the 2020 BrandCo Term Loan Facility as contemplated by the Offering Memorandum and the payment of the BrandCo Support and Consent Consideration;
Consenting to other amendments to the 2020 BrandCo Term Loan Facility and the Amended 2016 Revolving Credit Facility to permit the Exchange Offer and Consent Solicitation to be completed as contemplated by the Offering Memorandum; and
Supporting and cooperating with Products Corporation to consummate the transactions contemplated by the BrandCo TSA and the Offering Memorandum, including the Exchange Offer and Consent Solicitation.
In connection with such amendments, Products Corporation agreed to provide the following consideration (collectively, the “BrandCo Support and Consent Consideration”) upon the successful consummation of the Exchange Offer:

$12.5 million aggregate principal amount of New BrandCo Second-Lien Term Loans as a fee to the Supporting BrandCo Lenders under the BrandCo TSA in connection with such Supporting BrandCo Lenders’ relinquishment of their Roll-up Rights;
$10.0 million aggregate principal amount of New BrandCo Second-Lien Term Loans to one of the Supporting BrandCo Lenders in exchange for $18.7 million aggregate principal amount of Products Corporation’s 6.25% Senior Notes due 2024 held by such Supporting BrandCo Lender; and
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to all lenders under the 2020 BrandCo Term Loan Facility (including the Supporting BrandCo Lenders), an amendment fee that was payable pro rata based on principal amount of loans consenting, consisting of, at Products Corporation's option, either (x) an aggregate of $2.5 million of cash or (y) $5.0 million aggregate principal amount of New BrandCo Second-Lien Term Loans. Pursuant to the BrandCo Amendment, Products Corporation elected to pay this fee in-kind in the form of $5.0 million aggregate principal amount of New BrandCo Second-Lien Term Loans.

On November 13, 2020, Products Corporation entered into that certain Amendment No. 1 (the “BrandCo Amendment”) to the 2020 BrandCo Credit Agreement in connection with the Exchange Offer in order to, among other things, provide for the incurrence of $75 million in aggregate principal amount of New BrandCo Second-Lien Term Loans. The New BrandCo Second Lien Term Loans are a separate tranche of “Term B-2 Loans” (ranking junior to the Term B-1 Loans and senior to the Term B-3 Loans with respect to liens on certain specified collateral) under the BrandCo Credit Agreement. Except as to the use of proceeds, the terms of the New BrandCo Second-Lien Term Loans are substantially consistent with the other Term B-2 Loans. In connection with the BrandCo Amendment, Products Corporation paid certain fees to the lenders in-kind in the form of New BrandCo Second-Lien Term Loans in accordance with the BrandCo TSA.

MacAndrews & Forbes 2020 Restated Line of Credit Facility
In light of the upcoming maturity on July 9, 2021 of the 2018 Foreign Asset-Based Term Facility and the upcoming expiration on December 31, 2020 of the Amended 2019 Senior Line of Credit Facility, the Company sought to refinance or extend both the 2018 Foreign Asset-Based Term Facility and the Amended 2019 Senior Line of Credit Facility. Products Corporation sought to do so in order to reinforce its liquidity position to be better able to address the current business and economic environment and prepare for any further potential disruptions to its business and operations as may be brought on by the ongoing COVID-19 pandemic or other events.
As a result, and anticipating a future refinancing of the 2018 Foreign Asset-Based Term Facility (a “Future Refinanced European ABL Facility”), on September 28, 2020, Products Corporation and M&F entered into the Second Amended and Restated 2019 Senior Unsecured Line of Credit Facility (the “2020 Restated Line of Credit Facility”), which amended and restated the Amended 2019 Senior Line of Credit Facility and will provide Products Corporation with up to a $30 million tranche of a new facility of the 2018 Foreign Asset-Based Term Facility (the “New European ABL FILO Facility”) that would be secured on a “last-out” basis by the same collateral as the 2018 Foreign Asset-Based Term Facility or, if no Future Refinanced European ABL Facility is obtained, a stand-alone $30 million credit facility secured by the same collateral as the 2018 Foreign Asset-Based Term Facility when that facility is terminated, in each case, subject to a borrowing base. Upon the earlier of (x) the incurrence of a New European ABL FILO Facility and (y) December 31, 2020, the 2020 Restated Line of Credit Facility will terminate, such that M&F’s maximum committed amount under the 2020 Restated Line of Credit Facility will never exceed $30.0 million. As of September 30, 2020, there were no borrowings outstanding under the 2020 Restated Line of Credit Facility.
The New European ABL FILO Facility would mature on (x) the maturity date of any such Future Refinanced European ABL Facility or (y) if there is no Future Refinanced European ABL Facility, July 9, 2022. To the extent the Future Refinanced European ABL Facility exceeds $35.0 million in principal amount, the amount available under the New European ABL FILO Facility would decrease on a dollar-for-dollar basis, such that, if Products Corporation were able to obtain a Future Refinanced ABL Facility of $65.0 million from third parties, there would be no amounts available under the New European ABL FILO Facility. The interest rate for the New European ABL FILO Facility will be LIBOR + 10.00%. The covenants for the New European ABL FILO Facility would be substantially the same as those applicable to the 2018 European ABL Facility.

Consummation of 2020 BrandCo Refinancing Transactions

On May 7, 2020 (the “BrandCo 2020 Facilities Closing Date”), Products Corporation entered into a term credit agreement (the “2020 BrandCo Credit Agreement”) with Jefferies Finance LLC, as administrative agent and collateral agent, and certain financial institutions (the “2020 Facilities Lenders”) that are lenders or the affiliates of lenders under Products Corporation’s Term Loan Credit Agreement, dated as of September 7, 2016 and amended on April 30, 2020 and as amended on the BrandCo 2020 Facilities Closing Date, as further described below (as amended to date, the “2016 Term Loan Facility”). Pursuant to the 2020 BrandCo Credit Agreement, the 2020 Facilities Lenders provided Products Corporation with new and roll-up senior secured term loan facilities (the “2020 BrandCo Facilities” and, collectively, the "2020 BrandCo Term Loan Facility" and, together with the use of proceeds thereof and the Extension Amendment, the “2020 BrandCo Refinancing Transactions”).

Principal and Maturity: The 2020 BrandCo Facilities consist of: (i) a senior secured term loan facility in an aggregate principal amount outstanding on the BrandCo 2020 Facilities Closing Date of $815 million, plus the amount of certain fees and accrued interest that have been capitalized (the “2020 BrandCo Facility”); (ii) commitments in respect of a senior secured term
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loan facility in an aggregate principal amount of $950 million (the “Roll-up BrandCo Facility”); and (iii) a senior secured term loan facility in an aggregate principal amount outstanding on the BrandCo 2020 Facilities Closing Date of $3 million (the “Junior Roll-up BrandCo Facility”). Additionally, on May 28, 2020, Products Corporation borrowed from the 2020 Facilities Lenders an additional $65 million of term loans under the 2020 BrandCo Facility to repay in full the 2020 Incremental Facility under the 2016 Term Loan Facility, as a result of which the 2020 BrandCo Facility at June 30, 2020 had an aggregate principal amount outstanding of $910.6 million (including paid-in-kind closing fees of $29.1 million and paid-in-kind interest of $1.5 million that were capitalized). Additionally, during the three months ended June 30, 2020 and the three months ended September 30, 2020, certain lenders under the 2016 Term Loan Facility due June 2023, representing $846.0 million in aggregate principal outstanding, rolled-up to the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility due June 2025, as a result of which the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility at September 30, 2020 had an aggregate principal amount outstanding of $846.0 million. The Company determined that the roll-up of such 2016 Term Loan Facility lenders into the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility represented a debt modification under U.S. GAAP, as the cash flow effect between the amount that Products Corporation owed to the participating lenders under the old debt instrument (i.e., the 2016 Term Loan Facility) and the amount that Products Corporation owed to such lenders after the consummation of the roll-up into the new debt instrument (i.e., the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility) on a present value basis was less than 10% and, thus, the debt instruments were not considered to be substantially different within the meaning of ASC 470, Debt, under U.S. GAAP.

The proceeds of the 2020 BrandCo Facility were used: (i) to repay in full approximately $200 million of indebtedness outstanding under Products Corporation’s 2019 Term Loan Facility; (ii) to repay in full and terminate commitments under the 2020 Incremental Facility; and (iii) to pay fees and expenses in connection with the 2020 BrandCo Facilities and the 2020 BrandCo Refinancing Transactions. The Company will use the remaining net proceeds for general corporate purposes, including repurchasing, repaying or refinancing Products Corporation’s outstanding 5.75% Senior Notes. The proceeds of the Roll-up BrandCo Facility are available prior to the third anniversary of the BrandCo 2020 Facilities Closing Date to purchase at par an equivalent amount of any remaining term loans under the 2016 Term Loan Facility held by the lenders participating in the 2020 BrandCo Facility or their transferees. During the three months ended June 30, 2020 and the three months ended September 30, 2020, certain lenders under the 2016 Term Loan Facility due June 2023, representing $846.0 million in aggregate principal outstanding, rolled-up to the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility due June 2025, as a result of which the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility at September 30, 2020 have an aggregate principal amount outstanding of $846.0 million, with a remaining capacity for the roll-up of loans under the 2016 Term Loan Facility of $107.0 million. See “Amendments to the 2020 BrandCo Term Loan Facility” regarding the Supporting BrandCo Lenders relinquishing certain Roll-up Rights and Products Corporation’s issuance of the BrandCo Support and Consent Consideration.

The 2020 BrandCo Facilities will mature on June 30, 2025, subject to a springing maturity 91 days prior to the August 1, 2024 maturity date of Products Corporation’s 6.25% Senior Notes if, on such date, $100 million or more in aggregate principal amount of the 6.25% Senior Notes remain outstanding.

The Company incurred approximately $119.3 million of new debt issuance costs in connection with closing the 2020 BrandCo Facility, which include paid-in kind amounts that are recorded as an adjustment to the carrying amount of the related liability and amortized to interest expense in accordance with the effective interest method over the term of the 2020 BrandCo Facilities.

Borrower, Guarantees and Security: Products Corporation is the borrower under the 2020 BrandCo Facilities and the 2020 BrandCo Facilities are guaranteed by certain of Products Corporation's indirect subsidiaries (the “BrandCos”) that hold certain intellectual property assets related to the Elizabeth Arden and American Crew brands, certain other Portfolio segment brands and certain owned Fragrance segment brands (the “Specified Brand Assets”). While the BrandCos do not guarantee the 2016 Term Loan Facility, all guarantors of the 2016 Term Loan Facility guarantee the 2020 BrandCo Facilities. All of the assets of the BrandCos (including all capital stock issued by the BrandCos) have been pledged to secure the 2020 BrandCo Facility on a first-priority basis, the Roll-up BrandCo Facility on a second-priority basis and the Junior Roll-up BrandCo Facility on a third-priority basis and while such assets do not secure the 2016 Term Loan Facility, the 2020 BrandCo Facilities are secured on a pari passu basis by the assets securing the 2016 Term Loan Facility.

Contribution and License Agreements: In connection with the pledge of the Specified Brand Assets, Products Corporation and certain of its subsidiaries contributed the Specified Brand Assets to the BrandCos. Products Corporation entered into license and royalty arrangements on arm’s length terms with the relevant BrandCos to provide for the continued use of the Specified Brand Assets by Products Corporation and its subsidiaries during the term of the 2020 BrandCo Facilities.
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Interest and Fees: Loans under the 2020 BrandCo Facility bear interest at a rate equal to LIBOR (with a LIBOR floor of 1.50%) plus (x) 10.50% per annum, payable not less than quarterly in arrears in cash and (y) 2.00% per annum payable not less than quarterly in-kind by adding such amount to the principal amount of outstanding loans under the 2020 BrandCo Facility. Loans under the Roll-up BrandCo Facility and the Junior Roll-up BrandCo Facility bear interest at a rate equal to LIBOR (with a LIBOR floor of 0.75%) plus 3.50% per annum, payable not less than quarterly in arrears in cash.

Affirmative and Negative Covenants: The 2020 BrandCo Facilities contain certain affirmative and negative covenants that, among other things, limit Products Corporation’s and its restricted subsidiaries’ ability to: (i) incur additional debt; (ii) incur liens; (iii) sell, transfer or dispose of assets; (iv) make investments; (v) make dividends and distributions on, or repurchases of, equity; (vi) make prepayments of contractually subordinated, unsecured or junior lien debt; (vii) enter into certain transactions with their affiliates; (viii) enter into sale-leaseback transactions; (ix) change their lines of business; (x) restrict dividends from their subsidiaries or restrict liens; (xi) change their fiscal year; and (xii) modify the terms of certain debt. The 2020 BrandCo Facilities also restrict distributions and other payments from the BrandCos based on certain minimum thresholds of net sales with respect to the Specified Brand Assets. The 2020 BrandCo Facilities also contain certain customary representations, warranties and events of default, including a cross default provision making it an event of default under the 2020 BrandCo Credit Agreement if there is an event of default under Products Corporation’s existing 2016 Credit Agreements, the 2018 Foreign Asset-Based Term Agreement or the indentures governing each of Products Corporation’s 5.75% Senior Notes due 2021 and its 6.25% Senior Notes due 2024 (the “Senior Notes Indentures”). The lenders under the 2020 BrandCo Credit Agreement may declare all outstanding loans under the 2020 BrandCo Facilities to be due and payable immediately upon an event of default. Under such circumstances, the lenders under the 2016 Credit Agreements, the 2018 Foreign Asset-Based Term Agreement, and the holders under the Senior Notes Indentures may also declare all outstanding amounts under such instruments to be due and payable immediately as a result of similar cross default or cross acceleration provisions, subject to certain exceptions and limitations described in the relevant instruments.

Prepayments: The 2020 BrandCo Facilities are subject to certain mandatory prepayments, including from the net proceeds from the issuance of certain additional debt and asset sale proceeds of certain non-ordinary course asset sales or other dispositions of property, subject to certain exceptions. The 2020 BrandCo Facilities may be repaid at any time, subject to customary prepayment premiums.

2016 Term Loan Facility Extension Amendment: Term loan lenders under the 2016 Term Loan Facility were offered the opportunity to participate at par in the 2020 BrandCo Facilities based on their holdings of term loans under the 2016 Term Loan Facility. Lenders participating in the 2020 BrandCo Facilities, as well as other consenting lenders representing, in the aggregate, a majority of the loans and commitments under the 2016 Term Loan Facility, consented to an amendment to the 2016 Term Loan Facility (the “Extension Amendment”) that, among other things, made certain modifications to the covenants thereof and extended the maturity date of their term loans (“Extended Term Loans”) to June 30, 2025, subject to (i) the same September 7, 2023 springing maturity date of the non-extended term loans under the 2016 Term Loan Facility if, on such date, $75 million or more in aggregate principal amount of the non-extended term loans under the 2016 Term Loan Facility remains outstanding, and (ii) a springing maturity of 91 days prior to the August 1, 2024 maturity date of the 6.25% Senior Notes if, on such date, $100 million or more in aggregate principal amount of the 6.25% Senior Notes remains outstanding. The Extension Amendment became effective on the BrandCo 2020 Facilities Closing Date. As of September 30, 2020, approximately $30.7 million in aggregate principal amount of Extended Term Loans were outstanding after giving effect to the 2020 BrandCo Refinancing Transactions. The Extended Term Loans bear interest at a rate of LIBOR (with a LIBOR floor of 0.75%) plus 3.50% per annum, payable not less than quarterly in arrears in cash, consistent with the interest rate applicable to the non-extended term loans. Approximately $17.0 million of accrued interest outstanding on the 2016 Term Loan Facility was paid on the BrandCo 2020 Facilities Closing Date. The aggregate principal amount of non-extended term loans under the 2016 Term Loan Facility as of September 30, 2020 was approximately $855.6 million.

Repurchases of 5.75% Senior Notes due 2021

On May 7, 2020, Products Corporation used a portion of the proceeds from the 2020 BrandCo Facility to repurchase and subsequently cancel $50 million in aggregate principal face amount of its 5.75% Senior Notes. Products Corporation also paid approximately $0.7 million of accrued interest outstanding on the 5.75% Senior Notes on May 7, 2020. After the BrandCo 2020 Facilities Closing Date, Products Corporation repurchased and subsequently canceled in July 2020 a further $62.8 million in aggregate principal face amount of its 5.75% Senior Notes. Furthermore, during the three months ended September 30, 2020, Products Corporation repurchased and subsequently canceled an additional $44.4 million in aggregate principal face amount of its 5.75% Senior Notes. Accordingly, as of September 30, 2020, Products Corporation had repurchased and subsequently cancelled a total of approximately $157.2 million in aggregate principal face amount of its 5.75% Senior Notes, resulting in a
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gain on extinguishment of debt of approximately $31.2 million and $43.1 million for the three and nine months ended September 30, 2020, respectively, which were recorded within "Gain on early extinguishment of debt" on the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020. See “Recent Developments” with respect to the 5.75% Senior Notes Exchange Offer.

Prepayment of the 2019 Term Loan Facility due 2023

On the BrandCo 2020 Facilities Closing Date, Products Corporation used a portion of the proceeds from the 2020 BrandCo Facility to fully prepay the entire principal amount outstanding under its 2019 Term Loan Facility, totaling $200 million, plus approximately $1.3 million of accrued interest outstanding thereon, as well as approximately $33.5 million in prepayment premiums, $10.3 million in lenders' fees, $0.3 million in legal fees and approximately $2.0 million in other third party fees. As the lenders under the 2019 Term Loan Facility participated in the 2020 BrandCo Term Loan Facility, the Company determined that the full repayment of the 2019 Term Loan Facility represented a debt modification under U.S. GAAP as the cash flow effect between the old debt instrument (i.e., the 2019 Term Loan Facility) and the new debt instrument (i.e., the 2020 BrandCo Facility) on a present value basis was less than 10% and, thus, the debt instruments were not considered to be substantially different within the meaning of ASC 470, Debt, under U.S. GAAP. Accordingly, the $33.5 million of prepayment premiums, as well as the $10.3 million in other lenders' fees were capitalized as part of the aforementioned $119.3 million of total new debt issuance costs for the 2020 BrandCo Term Loan Facility, while the aforementioned $0.3 million of legal fees and $2.0 million in other third party fees were expensed as incurred in the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss for the nine months ended September 30, 2020.

Amendment to the 2018 Foreign Asset-Based Term Facility

On May 4, 2020, the Company entered into an amendment to the 2018 Foreign Asset Based Term Facility, which had an original outstanding principal amount of €77 million. Such amendment provided for the following:

increasing the interest rate on the loan from EURIBOR (with a floor 0.50%) plus a margin of 6.50% to EURIBOR (with a floor 0.50%) plus a margin of 7.00%;
adding a springing maturity date of 91 days prior to the February 15, 2021 maturity of the 5.75% Senior Notes if any of Products Corporation's 5.75% Senior Notes remain outstanding on such date;
requiring a mandatory prepayment of €5.0 million; and
clarifying certain terms and waiving certain provisions in connection with the 2020 BrandCo Refinancing Transactions.

Approximately $0.4 million of amendment fees paid to the lenders under 2018 Foreign Asset-Based Term Facility were capitalized and are amortized to interest expense, together with any unamortized debt issuance costs outstanding prior to the amendment. As of September 30, 2020, there was the Euro equivalent of $56.8 million outstanding under the 2018 Foreign Asset-Based Term Facility, reflecting a repayment of €28.5 million made during the quarter ended June 30, 2020.

Incremental Revolving Credit Facility under the 2016 Term Loan Agreement

On April 30, 2020, Products Corporation entered into a Joinder Agreement (the “2020 Joinder Agreement”), with Revlon, certain of their subsidiaries and certain existing lenders (the “Incremental Lenders”) under Products Corporation’s 2016 Term Loan Agreement to provide for a $65 million incremental revolving credit facility (the “2020 Incremental Facility”). On the closing of the 2020 Incremental Facility, Products Corporation borrowed $63.5 million of revolving loans for working capital purposes and subsequently on May 11, 2020 Products Corporation also borrowed the additional $1.5 million of delayed funding revolving loans. Prior to its full repayment on May 28, 2020, amounts outstanding under the 2020 Incremental Facility bore interest at a rate of (x) LIBOR plus 16% or (y) an Alternate Base Rate plus 15%, at Products Corporation’s option. Except as to pricing, maturity and differences due to its revolving nature, the terms of the 2020 Incremental Facility were otherwise substantially consistent with the existing term loans under the 2016 Term Loan Facility. The 2020 Incremental Facility was repaid in full, and the commitments thereunder terminated, on May 28, 2020. Upon such repayment, approximately $2.9 million of upfront commitment fees that Products Corporation incurred in connection with consummating the 2020 Incremental Facility were entirely expensed within "Miscellaneous, net" on the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss for the nine months ended September 30, 2020.

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(all tabular amounts in millions, except share and per share amounts)


Amendments to the 2016 Revolving Credit Agreement

See “Recent Developments” regarding the 5th Amendment to the Amended 2016 Revolving Credit Facility. On May 7, 2020, in connection with consummating the 2020 BrandCo Refinancing Transactions, Products Corporation entered into Amendment No. 4 to its Asset-Based Revolving Credit Agreement, dated as of September 7, 2016, as amended (the “2016 Revolving Credit Facility”). Amendment No. 4, among other things, made certain amendments and provided for certain waivers relating to the 2020 BrandCo Refinancing Transactions under the 2016 Revolving Credit Facility. In exchange for such amendments and waivers, the interest rate margin applicable to loans under Tranche A of the 2016 Revolving Credit Facility increased by 0.75%. In connection with the amendments to the 2018 Tranche B of the 2016 Revolving Credit Facility (which was fully repaid on its May 17, 2020 extended maturity date), Products Corporation incurred approximately $1.1 million in lender's fees that upon its full repayment were entirely expensed within “Miscellaneous, net” on the Company's Unaudited Consolidated Statement of Operations and Comprehensive Loss as of September 30, 2020. See “Recent Developments” and Note 19, “Subsequent Events,” regarding, among other things, Amendment No. 5 to the 2016 Revolving Credit Facility.

Previously, on April 17, 2020 (the “FILO Closing Date”), Products Corporation entered into Amendment No. 3 to the 2016 Revolving Credit Facility (“Amendment No. 3”), pursuant to which, the maturity date applicable to $36.3 million of loans under the $41.5 million senior secured first in, last out 2018 Tranche B under the 2016 Revolving Credit Facility (the “2018 FILO Tranche”) was extended from April 17, 2020 to May 17, 2020 (the “Extended Maturity Date”). Products Corporation repaid the remaining approximately $5.2 million of the 2018 FILO Tranche loans as of the FILO Closing Date. In addition, Amendment No. 3 increased the applicable interest margin for the 2018 FILO Tranche by 0.75%, subject to a LIBOR floor of 0.75%. Products Corporation fully repaid the 2018 FILO Tranche on the Extended Maturity Date.


Operating Segments

The Company operates in four reporting segments: Revlon; Elizabeth Arden; Portfolio; and Fragrances:
Revlon - The Revlon segment is comprised of the Company's flagship Revlon brands. Revlon segment products are primarily marketed, distributed and sold in the mass retail channel, large volume retailers, chain drug and food stores, chemist shops, hypermarkets, general merchandise stores, e-commerce sites, television shopping, department stores, professional hair and nail salons, one-stop shopping beauty retailers and specialty cosmetic stores in the U.S. and internationally under brands such as Revlon in color cosmetics; Revlon ColorSilk and Revlon Professional in hair color; and Revlon in beauty tools.
Elizabeth Arden - The Elizabeth Arden segment is comprised of the Company's Elizabeth Arden branded products. The Elizabeth Arden segment markets, distributes and sells fragrances, skin care and color cosmetics primarily to prestige retailers, department and specialty stores, perfumeries, boutiques, e-commerce sites, the mass retail channel, travel retailers and distributors, as well as direct sales to consumers via its Elizabeth Arden branded retail stores and elizabetharden.com e-commerce business under brands such as Elizabeth Arden Ceramide, Prevage, Eight Hour, SUPERSTART, Visible Difference and Skin Illuminating in the Elizabeth Arden skin care brands; and Elizabeth Arden White Tea, Elizabeth Arden Red Door, Elizabeth Arden 5th Avenue and Elizabeth Arden Green Tea in Elizabeth Arden fragrances.
Portfolio - The Company’s Portfolio segment markets, distributes and sells a comprehensive line of premium, specialty and mass products primarily to the mass retail channel, hair and nail salons and professional salon distributors in the U.S. and internationally and large volume retailers, specialty and department stores under brands such as Almay and SinfulColors in color cosmetics; American Crew in men's grooming products (which are also sold direct-to-consumer on its americancrew.com website); CND in nail polishes, gel nail color and nail enhancements; Cutex in nail care products; and Mitchum in anti-perspirant deodorants. The Portfolio segment also includes a multi-cultural hair care line consisting of Creme of Nature hair care products, which are sold in both professional salons and in large volume retailers and other retailers, primarily in the U.S.; and a hair color line under the Llongueras brand (licensed from a third party) that is sold in the mass retail channel, large volume retailers and other retailers, primarily in Spain.
Fragrances - The Fragrances segment includes the development, marketing and distribution of certain owned and licensed fragrances, as well as the distribution of prestige fragrance brands owned by third parties. These products are typically sold to retailers in the U.S. and internationally, including prestige retailers, specialty stores, e-
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commerce sites, the mass retail channel, travel retailers and other international retailers. The owned and licensed fragrances include brands such as: (i) Juicy Couture (which are also sold direct-to-consumer on its juicycouturebeauty.com website), John Varvatos and AllSaints in prestige fragrances; (ii) Britney Spears, Elizabeth Taylor, Christina Aguilera, Jennifer Aniston and Mariah Carey in celebrity fragrances; and (iii) Curve, Giorgio Beverly Hills, Ed Hardy, Charlie, Lucky Brand, ‹PS› (logo of former Paul Sebastian brand), Alfred Sung, Halston, Geoffrey Beene and White Diamonds in mass fragrances.



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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 — Revlon, Inc.

Consolidated Net Sales:

Third quarter results:

Consolidated net sales in the third quarter of 2020 were $477.1 million, a $119.7 million decrease, or 20.1%, compared to $596.8 million in the third quarter of 2019. Excluding the $2.8 million favorable impact of foreign currency fluctuations (referred to herein as "FX," "XFX" or on an "XFX basis"), consolidated net sales decreased by $122.5 million, or 20.5%, during the third quarter of 2020. The ongoing and prolonged COVID-19 pandemic contributed an estimated $119 million ($119 million XFX) to the Company's $119.7 million decline in net sales in the three months ended September 30, 2020, compared to the three months ended September 30, 2019. The XFX net sales decrease of $122.5 million in the third quarter of 2020 was due to: a $51.9 million, or 23.9%, decrease in Revlon segment net sales; a $33.1 million, or 24.0%, decrease in Fragrances segment net sales; a $19.1 million, or 16.2%, decrease in Portfolio segment net sales; and a $18.4 million, or 14.9%, decrease in Elizabeth Arden segment net sales.

Year-to-date results:

Consolidated net sales in the nine months ended September 30, 2020 were $1,277.7 million, a $442.5 million decrease, or 25.7%, compared to $1,720.2 million in the nine months ended September 30, 2019. Excluding the $14.1 million unfavorable FX impact, consolidated net sales decreased by $428.4 million, or 24.9%, during the nine months ended September 30, 2020. The ongoing and prolonged COVID-19 pandemic contributed an estimated $387 million ($392 million XFX) to the Company's $442.5 million decline in net sales in the nine months ended September 30, 2020, compared to the prior year period. The XFX net sales decrease of $428.4 million in the nine months ended September 30, 2020 was due to: a $227.4 million, or 31.8%, decrease in Revlon segment net sales; a $82.0 million, or 27.5%, decrease in Fragrances segment net sales; a $66.8 million, or 19.0%, decrease in Elizabeth Arden segment net sales; and a $52.2 million, or 14.7%, decrease in Portfolio segment net sales.

See "Segment Results" below for further information on net sales by segment.

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.

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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)


The following tables provide a comparative summary of the Company's segment results for the periods presented.
Net SalesSegment Profit
Three Months Ended September 30,Change
XFX Change (a)
Three Months Ended September 30,Change
XFX Change (a)
20202019$%$%20202019$%$%
Revlon$166.0 $217.3 $(51.3)(23.6)%$(51.9)(23.9)%$13.5 $7.3 $6.2 84.9 %$5.9 80.8 %
Elizabeth Arden106.3 123.2 (16.9)(13.7)%(18.4)(14.9)%3.4 12.5