UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
------------
February 18, 2004 (February 18, 2004)
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Date of Report (Date of earliest event reported)
Revlon, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-11178 13-3662955
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(State or Other (Commission File No.) (I.R.S. Employer
Jurisdiction of Identification
Incorporation) No.)
237 Park Avenue
New York, New York 10017
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(Address of Principal (Zip Code)
Executive Offices)
(212) 527-4000
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(Registrant's telephone number, including area code)
None
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 9. REGULATION FD DISCLOSURE
In connection with an Investor Conference held by Revlon, Inc. (the "Company")
on February 18, 2004, the Company disclosed certain material, non-public
information (the "Conference Information") to attendees of such conference. On
February 12, 2004, the Company issued a press release publicly announcing that
such conference would be held on February 18, 2004 from 8:00 A.M. to 11:00 A.M.
E.S.T. and that during the conference the Company's President and Chief
Executive Officer, Jack Stahl, and other members of senior management will be
discussing their views on the current state of the business and the strategic
outlook for the future. This press release also announced that access to the
Investors Conference would be available to the public via a virtual presentation
on the Company's website at www.revloninc.com and in fact the conference was
webcast in accordance with such press release.
The Conference Information provided at the Investor Conference included
management's forecasts, projections, estimates, objectives, vision, plans,
strategies, beliefs, destination, expectations, records and certain historical
information regarding the Company. Portions of the Conference Information were
prepared by the Company based upon, among other things, the anticipated future
results of operation of the Company after giving affect to the implementation of
various aspects of its strategic plan.
The Conference Information is divided into the following major components: (i)
the Company's long-term vision, referred to in the Conference Information as its
"Success Journey"; (ii) a long-term look at what the Company referred to in the
Conference Information as its "Destination Model", being the Company's longer
term target for various components of its income statement, including an
arithmetic application of the "Destination Model" margins to certain aspects of
the Company's 2004 plan profit and loss statement; (iii) a breakout of assumed
growth drivers of the Company's 2004 plan and the Company's estimates of its
financial performance during 2004, including gross sales, net sales, operating
income, and adjusted EBITDA; (iv) the "Basis of Presentation", "Guiding
Principles" and other assumptions regarding the Company's category, market share
and consumption growth; (v) the assumed potential margin improvements over time
from various "transformation initiatives", including improving in-store
merchandising, redesigning the Company's promotional process, reducing the
Company's cost of goods sold, improving the Company's product development
processes, introduction and lifecycle management, improving the Company's
international supply chain and improving market effective innovation which
entails strategic product development, marketing and advertising; (vi) the
Company's estimate of the impact of various key initiatives (value analysis,
packaging rationalization, direct sourcing, indirect sourcing, SKU
rationalization and demand/supply planning) on its 2003 financial performance
and on its plan for 2004 and 2005; (vii) the Company's estimate of the potential
impact of certain growth initiatives on its 2004 plan gross sales and operating
income for its international business and on gross sales for its North America
business; (viii) quantification of growth plan charges and estimated benefits;
and (ix) a reconciliation of adjusted EBITDA to reported adjusted EBITDA for
2000, 2001, 2002 and 2003, in each case with various adjustments.
2
As certain financial information included within the
Conference Information consisted of non-GAAP amounts, such non-GAAP amounts are
reconciled to the Company's most directly comparable GAAP measures in the
accompanying financial tables beginning on page 31 et. seq. (the "Reconciliation
Information"). Such non-GAAP measures include Adjusted EBITDA (See "Basis of
Presentation") as well as ongoing operations. As stated in the "Basis of
Presentation", the Company believes that Adjusted EBITDA is useful in
understanding the financial operating performance and underlying strength of the
Company's business, excluding the effects of certain factors, including
gains/losses on foreign currency transactions, gains/losses on the sale of
assets, miscellaneous expenses and interest, taxes, depreciation, and
amortization, and thus the Company believes that Adjusted EBITDA is a financial
metric that can assist the Company and investors in assessing the Company's
financial operating performance and liquidity. Similarly, the Company believes
that information presented on an "ongoing operations" basis, which excludes the
disposition of brands and businesses, restructuring, additional consolidation
costs (primarily associated with the closing of the Company's Phoenix and Canada
facilities), executive severance and expenses related to the acceleration of
aspects of the implementation of the Company's stabilization and growth phase of
its plan, is useful to the Company and investors in understanding the Company's
financial operating performance and underlying strength of its business without
the impact of such items.
Statements made in the Conference Information which are not
historical are forward looking statements and are based on estimates,
objectives, vision, projections, forecasts, plans, strategies, beliefs,
destinations and expectations of Revlon's management, and thus are subject to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Revlon's actual results may differ materially from such forward looking
statements for a number of reasons, including, without limitation, those set
forth in Revlon's filings with the Securities and Exchange Commission, including
its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K.
A copy of the Conference Information is furnished herewith as
Exhibit 99.1.
Exhibit No. Description
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Exhibit 99.1 Conference Information and Reconciliation Information.
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REVLON, INC.
By: /s/ Robert K. Kretzman
-----------------------
Robert K. Kretzman
Executive Vice President, General
Counsel and Chief Legal Officer
Date: February 18, 2004
EXHIBIT INDEX
Exhibit No. Description
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Exhibit 99.1 Conference Information and Reconciliation Information.
4
BASIS OF PRESENTATION
CERTAIN NON-GAAP FINANCIAL MEASURES
================================================================================
The data contained herein are both audited and unaudited and have been prepared
from the Company's internal and external reporting information. Certain of the
data are presented on an "ongoing" basis, unless otherwise noted, and exclude
(i) the disposition of brands or businesses, (ii) restructuring, (iii)
additional consolidation costs, primarily associated with the closing of the
Phoenix and Canada facilities and (iv) executive severance. In addition, certain
of the data presented, where indicated, also exclude expenses related to the
acceleration of aspects of the implementation of the stabilization and growth
phase of the Company's plan. Ongoing operations is unaudited and a non-GAAP
measure that the Company believes is useful for its management and investors in
understanding the financial operating performance and underlying strength of the
business without the impact of such items. Ongoing operations does not purport
to represent the results of operations or our financial position that actually
would have occurred had the foregoing transactions been consummated at the
beginning of the periods presented.
Adjusted EBITDA is defined as net earnings before interest, taxes, depreciation,
amortization, gains/losses on foreign currency transactions, gains/losses on the
sale of assets, miscellaneous expenses and the items described above. Adjusted
EBITDA is a non-GAAP financial measure. The Company believes that Adjusted
EBITDA is a financial metric that can assist the Company and investors in
assessing its financial operating performance and liquidity. The Company
believes that Adjusted EBITDA is useful in understanding the financial operating
performance and underlying strength of its business, excluding the effects of
certain factors, including gains/losses on foreign currency transactions,
gains/losses on the sale of assets, miscellaneous expenses and the items
described above. Adjusted EBITDA should not be considered in isolation, as a
substitute for net income/(loss) or cash flow from/used for operating activities
prepared in accordance with GAAP. Adjusted EBITDA does not take into account our
debt service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary uses.
EBITDA is defined differently for our credit agreement. Furthermore, other
companies may define EBITDA differently and, as a result, our measure of
Adjusted EBITDA may not be comparable to EBITDA of other companies.
A reconciliation of GAAP to non-GAAP measures is provided either herein or on
the Company's website.
[REVLON LOGO]
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2004 BUSINESS PLAN
================================================================================
GUIDING PRINCIPLES
1. GROUNDED IN REALITY
2. ACHIEVABLE GROWTH PROJECTIONS
3. APPROPRIATE BALANCE BETWEEN CORE AND NEW PRODUCTS
4. FOCUSED BRAND SUPPORT
5. RESPONSIBLE COST CONTROL
6. RETURN ON INVESTMENT APPROACH
- --------------------------------------------------------------------------------
A PLAN THAT CONTINUES TO CREATE TANGIBLE VALUE, DELIVERING
$200MM IN EBITDA IN 2004, WITH SIGNIFICANT UPSIDE IN 2005
AND BEYOND.
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[REVLON LOGO]
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2004 PLAN HIGHLIGHTS
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KEY DATA ($MM)(1)
2002A 2003 2004P CHANGE
----- ---- ----- ------
1,194 NET SALES 1,304 1,407 +8%
14 OPERATING INCOME 60 100 +67%
1.2% % OF NET SALES 4.6% 7.1% +2.5 PTS
121 ADJUSTED EBITDA 157 200 +27%
10.1% % OF NET SALES 12.0% 14.2% +2.2 PTS
(1) Presented on an ongoing basis and adjusted for Growth Plan charges; see
reconciliation to GAAP and As-Reported measures attached.
[REVLON LOGO]
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REVLON SUCCESS JOURNEY
================================================================================
- --------------------------------------------------------------------------------
VALUE CREATION CONTINUUM -------------------------------->
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
| S
| u
COST STABILIZE & BEGIN CONTINUE GROWTH ---> | s ACCELERATED
RATIONALIZATION TO GROW MOMENTUM | t GROWTH
| a
| i
| n
Consolidated Reversed Market Share Declines BALANCE TOP-LINE GROWTH | a Accelerate Top-line
Manufacturing/ WITH MARGIN IMPROVEMENT | b Momentum
Distribution Generated Top-Line Growth | l
Develop Transformation | e Significantly Improve
Reduced Overhead Restored Consumer/Customer Initiatives | Margins
Confidence | B
Continue Share Growth | u Continue Share Growth
Strengthened Management Team | s
Significantly Strengthen | i
Balance Sheet | n
| e
| s
| s
|
| M
| o
| d
| e
| l
2000-2002 2002-2003 2004-2005E 2005-2006E
[REVLON LOGO]
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WHAT'S POSSIBLE
================================================================================
THE DESTINATION MODEL - REVLON, INC.
% OF GROSS SALES
DESTINATION
2003(1) MODEL (EST.)
------- ------------
-----------------------------
^
GROSS SALES 100% 100% | SIGNIFICANT REVENUE
| GROWTH OPPORTUNITY
RETURNS/ALLOWANCES/DISCOUNTS(2) 18% 17% |
-----------------------------
COST OF GOODS 32% 29%
GROSS MARGIN 50% 54%
SG&A 46% 40%
OPERATING INCOME 4% 14%
- --------------------------------------------------------------------------------
SIGNIFICANT MARGIN EXPANSION OPPORTUNITY
- --------------------------------------------------------------------------------
(1) Presented on an ongoing basis and adjusted for Growth Plan charges; see
reconciliation to GAAP and As-Reported measures attached.
(2) Includes Other Revenues
[REVLON LOGO]
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GROUNDED IN REALITY: THE COLOR COSMETICS CATEGORY
================================================================================
WE ARE FORECASTING THE CATEGORY TO IMPROVE IN 2004, BUT NOT TO HISTORICALLY
HIGH LEVELS
[GRAPHIC OMITTED]
6% 6% 0.3% 4%
1997-2001 2002 2003 2004P
CAGR
Source: ACNielsen U.S. All Outlets plus Wal-Mart and Regional MVRs; Company
estimates for 2004
[REVLON LOGO]
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MARGIN TRANSFORMATION INITIATIVES
================================================================================
ESTIMATED SAVINGS
-----------------------------
DESTINATION
2004P MODEL IMPACT
($MM) (MARGIN PTS.(1))
--------- ------------------
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1. PROMOTION REDESIGN $5MM 1-1.5 PTS.
2. PRODUCT LIFE CYCLE MANAGEMENT - 2
3. IN-STORE MERCHANDISING - 2
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4. INTERNATIONAL SUPPLY CHAIN 2 1
5. COGS REDUCTION 6 0.5-1.5
6. INDIRECT SOURCING 4 0.5
1) Margins on gross sales
[REVLON LOGO]
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MARGIN TRANSFORMATION INITIATIVE
================================================================================
PROMOTION REDESIGN
OBJECTIVES:
|_| Develop promotional process that delivers promotions to our customers
and consumers that are on strategy, on time and on budget in order to:
o Increase revenue
o Increase profits
o Ensure customer and consumer satisfaction
STRATEGIES:
|_| Implement promotional guidelines into strategy and execution for 2005
|_| Implement new promotional process into organization
|_| Create customer-specific plan based on new strategy
|_| Identify next generation promotional format
|_| Develop category specific guidelines
PROGRESS TO DATE:
|_| Audited 2004 promotions; identified $5mm in cost savings
|_| Defining strategic approach for 2005; initial implementation underway
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ESTIMATED ANNUALIZED SAVINGS: $20MM
2004P SAVINGS: $5MM
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[REVLON LOGO]
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MARGIN TRANSFORMATION INITIATIVE
================================================================================
PRODUCT LIFE CYCLE MANAGEMENT
OBJECTIVES:
|_| Reduce returns cost
|_| Maximize wall productivity
|_| Maximize effectiveness of spending
STRATEGIES:
|_| Create new business models for product lifecycle management
o BIRTH:
|X| Smarter sell-in of new products
|X| Contingency planning
o LIFE:
|X| Active retailer inventory monitoring and management
|X| Timely monitoring of new product success and adjustment of
plans
|X| Extended product lifecycles & less "new" churn
o RETIREMENT:
|X| Reduced-cost discontinuance
|_| Create principles for extending product lifecycles
o Devise by category (Lip, Nail, Face, Eye)
o Determine optimal timing and sequence of line extensions and
restages/refreshes
PROGRESS TO DATE:
|_| Implemented management routines to actively manage Birth, Life and
Retirement of our products
|_| Establishing metrics and tools to optimize inventory management
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ESTIMATED ANNUALIZED SAVINGS: $30MM
2004P SAVINGS: --
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[REVLON LOGO]
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MARGIN TRANSFORMATION INITIATIVE
================================================================================
IN-STORE MERCHANDISING
OBJECTIVES:
|_| Enhance in-store presence and effectiveness
|_| Reduce overall wall costs
|_| Maximize SKU productivity and minimize damages/returns
STRATEGY:
|_| Energize and improve overall impact and appeal of wall
|_| Stock optimal product assortment
|_| Simplify and standardize wall
|_| Improve ease of implementation and flexibility
PROGRESS TO DATE:
|_| Designed test to go to market with partner retailer in 2004
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ESTIMATED ANNUALIZED SAVINGS: $30MM
2004P SAVINGS: --
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[REVLON LOGO]
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ESTIMATED SALES IMPACT OF GROWTH INITIATIVES IN NORTH AMERICA
================================================================================
2004P GROSS SALES GROWTH DRIVERS ($MM)
[GRAPHIC OMITTED]
1,118 36 20 8 8 23 1,213
- ---------------------------------------------------------------------------------------------------------------------------------
2003 Category Growth Space Gains Space Gains Pricing Marketing, 2004P
(All Businesses) (Color Cosmetics) (Other Businesses) (Color Cosmetics) Advertising,
Promotion
Effectiveness
(All Businesses)
[REVLON LOGO]
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ACHIEVEMENTS TO DATE-INTERNATIONAL
================================================================================
SIGNIFICANT PROGRESS ACHIEVED IN 2003 TO STRENGTHEN INTERNAL CAPABILITIES
TO DRIVE PERFORMANCE IMPROVEMENT
($MM) 2002(1) 2003(1) CHANGE
------- ------- ------
GROSS SALES 420 462 +10%
OPERATING INCOME (9) 25 +$34MM
- --------------------------------------------------------------------------------
KEY PERFORMANCE DRIVERS
- --------------------------------------------------------------------------------
[ ] DEVELOPED AND IMPLEMENTED STRENGTHENED BRAND PLANS
[ ] INSTALLED STRONGER MANAGEMENT IN KEY POSITIONS AND IMPLEMENTED MORE
DISCIPLINED MANAGEMENT PROCESSES
[ ] CONTROLLED COSTS AND IMPROVED WORKING CAPITAL MANAGEMENT
[ ] RESULTS BENEFITED FROM FAVORABLE FOREIGN EXCHANGE MOVEMENTS (TRANSLATION
AND TRANSACTION)
- --------------------------------------------------------------------------------
(1) Financial data presented on an ongoing basis and adjusted for Growth Plan
charges; see reconciliation to GAAP and As-Reported measures attached.
[REVLON LOGO]
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2004 PLAN-INTERNATIONAL
================================================================================
2004 PLAN BUILDS ON ESTABLISHED MOMENTUM, WITH FOCUS ON KEY PROFITABLE
GROWTH MARKETS AND OPTIMIZING OUR COST STRUCTURE
'04P VS
($MM) 2002(1) 2003(1) 2004P '03
------- ------- ----- ---
GROSS SALES 420 462 506 +10%
OPERATING INCOME (9) 25 35 +40%
- --------------------------------------------------------------------------------
KEY 2004P PERFORMANCE DRIVERS
- --------------------------------------------------------------------------------
|_| INCREASED MARKETING BEHIND NY-DRIVEN REVLON BRAND PLANS IN KEY MARKETS
|_| CONTINUE TO BUILD INTERNAL MANAGEMENT CAPABILITIES, FOCUSING ON LATIN
AMERICA AND EUROPE
|_| OPTIMIZE FIXED COST STRUCTURE IN EUROPE AND LATIN AMERICA, INCLUDING
SUPPLY CHAIN
|_| CONTINUED COST CONTROLS
- --------------------------------------------------------------------------------
(1) Financial data presented on an ongoing basis and adjusted for Growth Plan
charges; see reconciliation to GAAP and As-Reported measures attached.
[REVLON LOGO]
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ESTIMATED SALES IMPACT OF INTERNATIONAL GROWTH INITIATIVES
================================================================================
2004P GROSS SALES GROWTH DRIVERS ($MM)
[GRAPHIC OMITTED]
462 15 18 8 3 506
- --------------------------------------------------------------------------------------------------------------------
2003 Revlon Hair Care Beauty Care Other Cosmetics 2004P
Cosmetics
| | |
| | |
v v v
Primarily UK, Primarily Primarily
Australia and Latin America South Africa,
distributor UK and Brazil
markets in
Europe
[REVLON LOGO]
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MARGIN TRANSFORMATION INITIATIVE
================================================================================
INTERNATIONAL SUPPLY CHAIN: EUROPE
OBJECTIVES:
|_| Transform Europe into a strategic and substantial profitable growth
contributor...
o Growth driven by increased spend in support of strong brand
marketing strategy
o Profit margin increased through:
o Lower cost of goods
o More efficient and productive operating structure
STRATEGIES:
|_| Rationalize and harmonize our product range (while still meeting
distinct consumer needs):
o Within Europe
o With the U.S.
|_| Simplify and streamline our business processes and organize our
regional/country/departmental structures in line with this
PROGRESS TO DATE:
|_| 600 out of a total 2,000 SKU's identified to be eliminated
|_| Remaining SKU's standardized across Europe
|_| 30 positions identified for elimination during the 2H 2004
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ESTIMATED ANNUALIZED SAVINGS: $7MM
2004P SAVINGS: $2MM
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[REVLON LOGO]
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ESTIMATED IMPACT FROM KEY INITIATIVES IDENTIFIED TO DATE
================================================================================
ANNUAL INCREMENTAL IMPACT TOTAL
($MM) BASE ------------------------- ESTIMATED
INITIATIVE SPEND 2003 2004P 2005E SAVINGS IMPACT AREA
- ---------- ----- ---- ----- ----- ------- -----------
Value Analysis | 1 2 5 8 COGS
|
Packaging Rationalization |> 230 - 1 5 6 COGS
|
Direct Sourcing | 6 3 1 10 COGS
Indirect Sourcing 280 1 12 5 18 Non COGS P+L and
Balance Sheet; Phase One
Focus is on $178mm of
base spend
SKU Rationalization - 2 4 6 Balance Sheet
Demand/Supply Planning - 5 5 10 Balance Sheet
------- ------- ------- -------
Total Impact 8 25 25 58
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P+L Impact 7 10 16 33
-------------------------------------------------------------------------------
COGS 7 6 11 23
SG&A - 4 5 10
B/S Impact 1 15 9 25
[REVLON LOGO]
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2000-2003 FINANCIAL PERFORMANCE
================================================================================
FOCUS ON OPERATING MARGINS AND REDUCTION IN RETURNS, DISCOUNTS AND ALLOWANCES
($mm) 2000 2001 2002 2003
---- ---- ---- ----
Gross Sales 1,597 1,537 1,536 1,583
% vs. Prior Year (8%) (4%) - 3%
Net Sales 1,265 1,261 1,194 1,304
----------------------
% vs. Prior Year 6% - (5%) 9%
% Gross Sales 79% 82% 78% 82%
----------------------
Gross Profit 762 765 710 804
----------------------
% Gross Sales 48% 50% 46% 51%
----------------------
SG&A 693 665 696 744
% Gross Sales 43% 43% 45% 47%
Depreciation & Amortization 115 100 107 97
ADJUSTED EBITDA 184 200 121 157
----------------------
% Gross Sales 12% 13% 8% 10%
----------------------
Note: All financial data presented on an ongoing basis and adjusted for Growth
Plan charges; see reconciliation to GAAP and As-Reported measures
attached.
[REVLON LOGO]
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2004 PLAN: SALES & ADJUSTED EBITDA
================================================================================
2004 PLAN DELIVERS ATTRACTIVE EARNINGS GROWTH, FURTHER BUILDING ON SOLID
FOUNDATION ESTABLISHED IN 2003
($MM) 2000 2003 2004P
---- ---- -----
Net Sales 1,194 1,304 1,407
% vs. Prior Year (5%) 9% 8%
% Gross Sales 78% 82% 82%
Adjusted EBITDA 121 157 200
% vs. Prior Year (40%) 28% 27%
% Gross Sales 8% 10% 12%
Note: All financial data presented on an ongoing basis and adjusted for Growth
Plan charges; see reconciliation to GAAP and As-Reported measures
attached.
[REVLON LOGO]
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2004 PLAN: OTHER KEY DATA
================================================================================
PRO FORMA
($mm) 2003 2004
-------- ---------
CAPITAL EXPENDITURES 29 20-25
PERMANENT DISPLAYS 73 50-60
DEPRECIATION & AMORTIZATION(1) 97 101
NET INTEREST EXPENSE 170 ~135(2)
CASH INTEREST PAID 161 ~138(2)
CASH RESTRUCTURING SPENDING(3) 15 15
GROWTH PLAN DISBURSEMENTS 80 20-25
(1) Excludes debt issuance cost amortization
(2) Assumes approximately $780mm debt reduction through exchange offer, with
only MacAndrews & Forbes accepting stock for accrued interest
(3) Includes executive severance
[REVLON LOGO]
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EBITDA RECONCILIATION
================================================================================
($mm) 2000 2001 2002 2003 2004P
---- ---- ---- ---- -----
Adjusted Ongoing EBITDA 184 200 121 157 200
Brand and Facilities Sold 9 (1) - - -
Restructuring Costs & Other (56) (74) (24) (6) -
Growth Plan Charges - - (103) (29) -
As Reported Adjusted EBITDA 137 125 (6) 122 200
Note: See reconciliation to GAAP and As-Reported measures attached.
[REVLON LOGO]
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MARGIN TRANSFORMATION INITIATIVES
================================================================================
WHAT'S POSSIBLE?
ESTIMATED SAVINGS
-----------------------------
DESTINATION
2004P MODEL IMPACT
($MM) (MARGIN PTS.(1))
--------- ------------------
1. PROMOTION REDESIGN $ 5MM 1-1.5 PTS.
2. PRODUCT LIFE CYCLE MANAGEMENT - 2
3. IN-STORE MERCHANDISING - 2
4. INTERNATIONAL SUPPLY CHAIN 2 1
5. COGS REDUCTION 6 0.5-1.5
6. INDIRECT SOURCING 4 0.5
--------- ---------------
TOTAL $17MM 7.0-8.5 PTS.
(1) Margins on gross sales
[REVLON LOGO]
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PROJECTED IMPACT OF MARGIN TRANSFORMATION INITIATIVES
================================================================================
WHAT'S POSSIBLE?
-----------------------------------------
MARGIN TRANSFORMATION INITIATIVES
-----------------------------------------
2003(1) INT'L MARKET
% GROSS PROMOTION IN-STORE PRODUCT SUPPLY COGS INDIRECT EFFECTIVE TOTAL
SALES REDESIGN MERCH. LIFE CYCLE CHAIN REDUCTION SOURCING INNOVATION INITIATIVES DESTINATION
----- -------- -------- ---------- ----- --------- -------- ---------- ----------- -----------
Gross Sales 100% X 100%
Returns/Allowances/ 18% X X 1.0-1.5 pts. 17%
Discounts(2)
COGS 32% X X X X 3.0 pts. 29%
Consumer Marketing 16% X X 1.0-1.5 pts. 14.5%
In-Store Merch 6% X X 2.0-2.5 pts. 3.5%
Other Expenses 24% --------------- Cost Control / Top Line Growth --------------- 2.5 pts. 22%
----- ------
Operating Income 4% 14%
----- ------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL
ESTIMATED POTENTIAL 1-1.5 PTS. 2 PTS. 2 PTS. 1 PT. 0.5-1.5 PTS. 0.5 PTS. 7.0 - 8.5 PTS. INITIATIVES
MARGIN OPPORTUNITY + +
2.5 PTS. DEPARTMENTAL
- ------------------------------------------------------------------------------------------------------ EXPENSE
EQUALS CONTROL
(1) Presented on an ongoing basis and adjusted for Growth Plan charges; see APPROXIMATELY =
reconciliation to GAAP and As-Reported measures attached. 10 PTS. TOTAL MARGIN
OPPORTUNITIES
-----------------------------
(2) Includes Other Revenues
Note: Minor differences due to rounding
[REVLON LOGO]
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WHAT'S POSSIBLE?
================================================================================
ACHIEVING DESTINATION MODEL TRANSLATES INTO DRAMATIC EARNINGS UPSIDE AND VALUE
CREATION
@ DESTINATION
2004 PLAN MARGINS(1)
---------------------- ----------------
($MM) % OF GROSS % OF GROSS
---------------------- ---------------- ----------------------------
^
Gross Sales 1,719 100% 100% | SIGNIFICANT REVENUE
| GROWTH OPPORTUNITY
Returns/Allowances/Discounts(2) 312 18% 17% |
----------------------------
Cost of Goods 548 32% 29%
SG&A 759 44% 40%
Operating Income 100 6% 14%
ADJUSTED EBITDA 200 12% 20% EQUALS APPROXIMATELY $340MM
- --------------------------------------------------------------------------------
~$140MM INCREMENTAL MARGIN OPPORTUNITY ON TOP OF SIGNIFICANT REVENUE
GROWTH OPPORTUNITY
- --------------------------------------------------------------------------------
(1) For illustrative purposes only; applies destination margins to 2004P gross
sales. Destination margins represent Company's longer-term objectives; see
reconciliation to GAAP and As-Reported measures attached.
(2) Includes Other Revenues
[REVLON LOGO]
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RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY FINANCIAL DATA (1)
(DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31, 2000:
- -----------------------------
BRAND AND RESTRUCTURING
AS FACILITIES COSTS AND GROWTH
REPORTED % GROSS SOLD OTHER, NET PLAN ADJUSTED % GROSS
-------- ------- ---------- ------------- ------ ------- -------
Gross sales $1,750 100.0% ($ 153) $ -- $ -- $1,598 100.0%
Returns, allowances, discounts and other 341 19.5% (9) 0 -- 331 20.7%
------ ------ ------ ------ ------ ------ ------
Net sales 1,409 80.5% (144) 0 -- 1,266 79.3%
Gross profit 835 47.7% (78) 5 -- 763 47.7%
Selling, general and administrative expenses 765 43.7% (72) 693 43.4%
Restructuring costs and other, net 54 3.1% (54) 0.0%
------ ------ ------ ------ ------ ------ ------
Operating income (loss) $ 16 0.9% ($ 6) $ 59 $ -- $ 69 4.3%
Adjusted EBITDA:
Operating income (loss) $ 16 0.9% ($ 6) $ 59 $ -- $ 69 4.3%
Depreciation and amortization 121 6.9% (3) (3) -- 115 7.2%
------ ------ ------ ------ ------ ------ ------
Adjusted EBITDA $ 137 7.8% ($ 9) $ 56 $ -- $ 185 11.5%
====== ====== ====== ====== ====== ====== ======
YEAR ENDED DECEMBER 31, 2001:
- -----------------------------
BRAND AND RESTRUCTURING
AS FACILITIES COSTS AND GROWTH
REPORTED % GROSS SOLD OTHER, NET PLAN ADJUSTED % GROSS
-------- ------- ---------- ------------- ------ ------- -------
Gross sales $1,554 100.0% ($ 17) $ -- $ -- $1,538 100.0%
Returns, allowances, discounts and other 276 17.8% (0) 0 -- 276 17.9%
------ ------ ------ ------ ------ ------ ------
Net sales 1,278 82.2% (16) 0 -- 1,262 82.1%
Gross profit 733 41.9% (7) 38 -- 766 47.9%
Selling, general and administrative expenses 679 43.7% (9) (5) -- 665 43.2%
Restructuring costs and other, net 38 2.5% 0 (38) -- 0 0.0%
------ ------ ------ ------ ------ ------ ------
Operating income $ 16 1.0% $ 3 $ 82 $ -- $ 100 6.5%
Adjusted EBITDA:
Operating income $ 16 1.0% $ 3 $ 82 $ -- $ 100 6.5%
Depreciation and amortization 109 7.0% (1) (8) -- 100 6.5%
------ ------ ------ ------ ------ ------ ------
Adjusted EBITDA $ 125 8.0% $ 2 $ 74 $ -- $ 200 13.0%
====== ====== ====== ====== ====== ====== ======
(1) Subject to minor rounding differences
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY FINANCIAL DATA (1)
(DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31, 2002
- -----------------------------------------------------------------------
BRAND AND RESTRUCTURING
AS FACILITIES COSTS AND GROWTH
REPORTED % GROSS SOLD OTHER, NET PLAN ADJUSTED % GROSS
-------- ------- ---------- -------------- -------- ---------- --------
Gross sales $ 1,536 100.0% $0 $ -- $ -- $ 1,537 100.0%
Returns, allowances, discounts and other 417 27.1% 0 0 (75) 342 22.2%
------- ----- --- ----- ----- ------- -----
Net sales 1,119 72.9% 0 0 75 1,195 77.8%
Gross profit 616 40.1% 0 2 93 710 46.2%
Selling, general and administrative expenses 717 46.7% 0 (10) (11) 697 45.3%
Restructuring costs and other, net 14 0.9% 0 (14) 0 0.0%
------- ----- --- ----- ----- ------- -----
Operating income (loss) ($115) -7.5% $0 $ 25 $ 104 $ 14 0.9%
Adjusted EBITDA:
Operating income (loss) ($115) -7.5% $0 $ 25 $ 104 $ 14 0.9%
Depreciation and amortization 109 7.1% 0 (1) (1) 107 7.0%
------- ----- --- ----- ----- ------- -----
Adjusted EBITDA ($6) -0.4% $0 $ 24 $ 103 $ 121 7.9%
======= ===== === ===== ===== ======= =====
YEAR ENDED DECEMBER 31, 2003
- -----------------------------------------------------------------------
BRAND AND RESTRUCTURING
AS FACILITIES COSTS AND GROWTH
REPORTED % GROSS SOLD OTHER, NET PLAN ADJUSTED % GROSS
-------- ------- ---------- -------------- -------- ---------- --------
Gross sales $1,580 100.0% $0 $ -- $ 2.5 $1,584 100.0%
Returns, allowances, discounts and other 281 17.8% 0 0 (2) 279 17.6%
------- ----- --- ----- ----- ------- -----
Net sales 1,299 82.2% 0 0 4 1,304 82.4%
Gross profit 798 50.5% 0 1 5 805 50.8%
Selling, general and administrative expenses 771 48.8% 0 0 (26) 745 47.1%
Restructuring costs and other, net 6 0.4% 0 (6) -- 0 0.0%
------- ----- --- ----- ----- ------- -----
Operating income $21 1.3% $0 $7 $31 $59 3.8%
Adjusted EBITDA:
Operating income $21 1.3% $0 $7 $31 $59 3.8%
Depreciation and amortization 101 6.4% 0 (1) (3) 97 6.1%
------- ----- --- ----- ----- ------- -----
Adjusted EBITDA $122 7.7% $0 $6 $29 $157 9.9%
======= ===== === ===== ===== ======= =====
YEAR ENDED DECEMBER 31, 2004P
- -----------------------------------------------------------------------
BRAND AND RESTRUCTURING
AS FACILITIES COSTS AND GROWTH
REPORTED % GROSS SOLD OTHER, NET PLAN ADJUSTED % GROSS
-------- ------- ---------- -------------- -------- ---------- --------
Gross sales $1,719 100.0% $ - $ - $ - $1,720 100.0%
Returns, allowances, discounts and other 313 18.2% - - - 313 18.2%
------- ------- ----- ------- ------- ------- -------
Net sales 1,407 81.8% - - - 1,407 81.8%
Gross profit 858 49.9% - - 859 49.9%
Selling, general and administrative expenses 759 44.1% - - - 759 44.1%
Restructuring costs and other, net 0 0.0% - - - 0 0.0%
------- ------- ----- ------- ------- ------- -------
Operating income $100 5.8% $ - $ - $ - $100 5.8%
Adjusted EBITDA:
Operating income $100 5.8% $ - $ - $ - $100 5.8%
Depreciation and amortization 102 5.9% - - 102 5.9%
------- ------- ----- ------- ------- ------- -------
Adjusted EBITDA $201 11.7% $ - $ - $ - $202 11.7%
======= ======= ===== ======= ======= ======= =======
(1) Subject to minor rounding differences
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY FINANCIAL DATA (1)
(DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31, 2003A (1)
Brand and Restructuring
As Reported Facilities Costs and Growth Adjusted
---------------------- Sold Other, Net Plan --------------------
(% Gross Sales) (% Gross Sales)
----------------------------------------------------------------------------
GROSS SALES 1,580 100% - 3 1,583 100%
RETURN/ALLOWANCES/DISCOUNTS/OTHER REVENUE 281 18% - (2) 279 18%
----------------------------------------------------------------------------
NET SALES 1,299 - 4 1,304
----------------------------------------------------------------------------
COST OF GOODS 501 32% - (0.9) (1) 499 32%
----------------------------------------------------------------------------
GROSS MARGIN 798 51% - 0.9 5 804 51% Round to 50%
----------------------------------------------------------------------------
SG&A (E.G., ADVERTISING, PROMOTION, 771 49% - (26) 745 47% Round to 46%
DISTRIBUTION, PEOPLE & ADMIN,
COSTS)
RESTRUCTURING COSTS AND OTHER, NET 6 - (6.0) 0 0
----------------------------------------------------------------------------
OPERATING INCOME 21 1% - 6.9 31 60 4%
----------------------------------------------------------------------------
(1) Subject to minor rounding differences
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED SUMMARY FINANCIAL DATA (1)
(DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31, 2004P (1), (2)
Brand and Restructuring
As Reported Facilities Costs and Growth Adjusted
--------------------- Sold Other, Net Plan --------------------
(% Gross Sales) (% Gross Sales)
---------------------------------------------------------------------------
GROSS SALES 1,719 100% - - 1,719 100%
RETURN/ALLOWANCES/DISCOUNTS AND OTHER REVENUE 312 18% - - 312 18%
---------------------------------------------------------------------------
NET SALES 1,407 - - 1,407
---------------------------------------------------------------------------
COST OF GOODS 548 32% - - - 548 32%
---------------------------------------------------------------------------
GROSS MARGIN 859 50% - - - 859 50%
---------------------------------------------------------------------------
SG&A (E.G., ADVERTISING, PROMOTION, 759 44% - - 759 44%
DISTRIBUTION, PEOPLE & ADMIN,
COSTS)
RESTRUCTURING COSTS AND OTHER, NET - - - - -
---------------------------------------------------------------------------
OPERATING INCOME 100 6% - - - 100 6%
---------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION 101 - 101
---------------------------------------------------------------------------
EBITDA 201 12% - 201 12%
---------------------------------------------------------------------------
(1) Subject to minor rounding differences
(2) 2004P represents 2004 Plan as of January 14, 2004
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED NORTH AMERICA AND INTERNATIONAL SALES RECONCILIATION (1)
(dollars in millions)
2002 2003 2004
-------------- --------------- --------------
NORTH AMERICA (United States and Canada)
- ----------------------------------------------
Gross sales $1,117 $1,118 $1,213
Growth plan 0 3 0
Gross Sales - Adjusted 1,117 1,121 1,213
Returns, allowances, discounts and other 356 227 261
Net sales - As Reported 760 891 952
Growth plan 69 1 0
---------- ----------- ----------
Net sales - Adjusted $829 $891 $952
========== =========== ==========
INTERNATIONAL
- ----------------------------------------------
Gross sales $420 $462 $506
Returns, allowances, discounts and other 60 53 52
Net sales - As Reported 359 409 455
Growth plan 6 1 0
---------- ----------- ----------
Net sales - Adjusted $366 $410 $455
========== =========== ==========
(1) Subject to minor rounding differences
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATING OPERATING INCOME RECONCILIATION (1)
(dollars in millions)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2000 2001 2002 2003 2004
------------ ------------ -------------- ------------- --------------
North America $121 $129 $71 $94 $115
International (14) 3 (9) 25 35
Corporate (38) (32) (48) (60) (50)
---------- ---------- ----------- ----------- ------------
Consolidated 69 100 14 59 100
---------- ---------- ----------- ----------- ------------
Product line, brands and facilities sold 6 (3)
Restructuring (54) (38) (14) (6)
Consolidation costs and other, net (5) (44) (11) (1)
Growth plan (104) (31)
---------- ---------- ----------- ----------- ------------
Operating income (loss) - As Reported $16 $16 -$115 $21 $100
========== ========== =========== =========== ============
(1) Subject to minor rounding differences
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED NET SALES RECONCILIATION (1)
(DOLLARS IN MILLIONS)
-----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004P
------- ------- ------- ------- ------- ------- -------
Net sales - As Reported $ 2,064 $ 1,630 $ 1,409 $ 1,278 $ 1,119 $ 1,299 $ 1,407
Product line and brands sold (462) (440) (144) (16)
Growth plan 75 4
------- ------- ------- ------- ------- ------- -------
Net sales $ 1,603 $ 1,190 $ 1,265 $ 1,261 $ 1,195 $ 1,304 $ 1,407
======= ======= ======= ======= ======= ======= =======
(1) Subject to minor rounding differences
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED ADJUSTED EBITDA RECONCILIATION (1)
(DOLLARS IN MILLIONS)
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004P
----- ----- ----- ----- ----- ----- -----
RECONCILIATION TO CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------------------------
Net cash used for operating activities ($ 52) ($ 82) ($ 84) ($ 87) ($112) ($166) ($103)
Changes in assets and liabilities, net of
acquisitions and dispositions 128 (161) 68 64 (54) 126 110
Interest expense, net 133 145 142 136 153 167 187
Foreign currency losses (gains), net 5 (1) 2 2 1 (5) 2
Gain on sale of marketable securities 8 2
Loss (gain) on sale of product line, brands and facilities, net 1 2
Miscellaneous, net 5 (2) (2) 3 1 1
Provision for income taxes 5 9 9 4 5 1 6
----- ----- ----- ----- ----- ----- -----
As Reported Adjusted EBITDA $ 231 ($ 90) $ 137 $ 125 ($ 6) $ 122 $ 201
===== ===== ===== ===== ===== ===== =====
RECONCILIATION TO NET LOSS:
- ---------------------------
Net loss from continuing operations ($ 79) ($371) ($130) ($154) ($287) ($154) ($107)
Interest expense, net 133 145 142 137 156 170 190
Amortization of debt issuance costs 5 4 6 6 8 9 9
Foreign currency losses (gains), net 5 (1) 2 2 1 (5) 2
Loss (gain) on sale of product line, brands and facilities, net 1 (11) 14 1
Loss on early extinguishment of debt 52 4
Miscellaneous, net 5 (2) 3 1 1
Provision for income taxes 5 9 9 4 5 1 6
Depreciation and amortization 106 122 121 109 109 101 102
----- ----- ----- ----- ----- ----- -----
As Reported Adjusted EBITDA 231 (90) 137 125 (6) 122 201
----- ----- ----- ----- ----- ----- -----
Product line and brands sold (65) (42) (9) 2
Restructuring 43 36 54 38 10 6
Consolidation costs and other, net 22 2 36 14
Growth plan 103 29
----- ----- ----- ----- ----- ----- -----
Adjusted EBITDA $ 209 ($ 73) $ 184 $ 200 $ 121 $ 157 $ 201
===== ===== ===== ===== ===== ===== =====
(1) Subject to minor rounding differences
