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
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September 8, 2004 (September 8, 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)
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| Delaware | |
1-11178 | |
13-3662955 | ||||||
| (State or Other Jurisdiction of Incorporation) | |
(Commission File No.) | |
(I.R.S. Employer Identification No.) |
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| 237
Park Avenue New York, New York |
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10017 | ||||
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(Zip Code) | ||||
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(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)
Check the appropriate box below if the Form 8-K filing is
intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions (see General
Instruction A.2.
below):
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| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| [ ] | Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b)) |
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| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 7.01 Regulation FD Disclosure
In connection with a presentation by senior management of Revlon, Inc. (the "Company") at an Investor Conference to be held on September 8, 2004, the Company is disclosing certain material, non-public information (the "Conference Information"). On August 31, 2004, the Company issued a press release publicly announcing that such conference would be held on September 8, 2004 at 3:00 P.M. E.D.T and that during such conference the Company's President and Chief Executive Officer, Jack L. Stahl, and Executive Vice President and Chief Marketing Officer, Stephanie Peponis, would provide an update on the Company's business progress and strategies. The Company's Executive Vice President and Chief Financial Officer, Thomas E. McGuire, also presented at the conference. The press release also announced that access to the Investor Conference would simultaneously be available to the public via a live webcast on the Company's website at www.revloninc.com.
The Conference Information includes certain forecasts, projections, estimates, objectives, vision, plans, strategies, beliefs, intent, opportunities, drivers, destination, expectations, records as well as 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 effect to the implementation of various aspects of its strategic plan.
The Conference Information is divided into the following major components: (i) Company Overview; (ii) Business Progress to Date; and (iii) Opportunities Ahead to Create Long-Term Value, including a breakdown of steps the Company is taking that are intended to enhance profit margins.
As certain financial information included within the Conference Information consists of non-GAAP amounts, such non-GAAP amounts are reconciled to the most directly comparable GAAP measures in the accompanying financial tables (the "Reconciliation Information"). Such non-GAAP measures include Adjusted EBITDA (see "Basis of Presentation"), gross sales and 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 its business, excluding the effects of certain factors, including gains/losses on foreign currency transactions, gains/losses on the sale of assets, gains/losses on the extinguishment of debt, 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's management and investors in assessing its 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's management and investors in understanding its 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, intent, opportunities, drivers, destinations and expectations of the Company's management, and thus are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual results may differ materially from such forward-looking statements. The forward-looking statements in the Conference Information include, without limitation, the Company's expectations and estimates (whether qualitative or quantitative) as to:
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| (i) | the Company being positioned for growth, including that it has experienced significant growth and profitability improvements and has future growth and margin opportunities, as well as the Company's plans regarding the continued growth momentum and accelerated growth phases of its plan, including its objectives of accelerating top-line growth and significantly improving margins; |
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| (ii) | the Company's belief that its International business represents an excellent growth opportunity moving forward and that it is optimizing its fixed cost structure in Europe and Latin America, including its supply chain; |
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| (iii) | future U.S. mass color cosmetics category growth and market share trends, including the Company's expectation that the U.S. mass color cosmetics category will grow less than 1% in 2004; |
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| (iv) | the Company's future financial performance, including its forecasted net sales of approximately $1.335 - $1.350 billion, operating income of approximately $90 million and Adjusted EBITDA of approximately $190 million for 2004, and its belief that its plan is proving effective, that it has strengthened its organizational capability and enhanced in-store execution and that the Company has strengthened its relationships with its key retailers in the U.S.; |
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| (v) | the Company's plans to undertake a $110 million equity offering by March 2006 and to use the proceeds to reduce debt, the timing of the transaction and the impact of such transaction on the Company's financial performance; |
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| (vi) | the Company's plans with respect to the implementation of its Margin Transformation Initiatives, such as COGS reduction and indirect sourcing, promotion redesign and product life cycle management, and the Company's forecasted savings from such initiatives, including the Company's objective that it will achieve a 10 point margin improvement over 3 to 5 years beginning in 2004, as well as the Company's belief that it has made systemic business improvements, with 2004 forecasted to build on the momentum established in 2003; |
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| (vii) | the Company's "Destination Model", including the Company's belief that it has a significant revenue growth opportunity and the Company's objective that it will achieve a 10 margin point improvement over 3 to 5 years beginning in 2004, and the detailed components of the "Destination Model;" |
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| (viii) | the effects of certain top-line and bottom-line drivers on the Company's business and financial performance and the detailed components of such top-line and bottom-line drivers, including its expectation that it will grow U.S. color cosmetics category and share; that it will develop other U.S. businesses; that it will leverage licensing opportunities; that it will drive International growth opportunities; that it will implement Margin Transformation Initiatives; that it will continue to implement cost disciplines across the organization; and that it will create fixed-cost leverage via top-line growth; |
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| (ix) | the Company's plans to improve the effectiveness of its advertising, including that it is expected to drive Revlon brand equity and stimulate the category in mass color cosmetics; |
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| (x) | the Company's belief that the new Revlon spokesmodels will improve the Company's reach and brand positioning; |
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| (xi) | the Company's plans to introduce new products and further strengthen its new product development and implementation process, intended to drive innovation and profitability, and the Company's belief that its 2005 new product line-up is expected to be its strongest in years; and |
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| (xii) | the Company's plans to leverage licensing opportunities, including by broadening its licensing business and to drive international growth opportunities, and the details regarding those opportunities. |
A number of important factors could cause the actual results to differ materially from those contained in any forward-looking statement. In addition to factors that may be described in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for 2003, Quarterly Reports on Form 10-Q for 2004 and Current Reports on Form 8-K for 2004, the following factors, among others, could cause the Company's actual results to differ materially from those expressed in any forward-looking statement:
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| (i) | less than expected growth from the Company's continued growth momentum phase and accelerated growth phase of its plan, or the inability of the Company to achieve improvements in sales and/or profit margins; |
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| (ii) | less than expected growth in the International business, or difficulties or delays impacting the ability of, or the inability of, the International business to optimize its fixed cost structure in Europe and Latin America; |
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| (iii) | less than expected U.S. mass color cosmetics category growth and/or unanticipated market share trends; |
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| (iv) | circumstances affecting the Company's future financial performance and the effectiveness of its plan, including decreased consumer spending in response to weak economic conditions or weakness in the category, changes in consumer shopping patterns or preferences, such as reduced consumer demand for the Company's color cosmetics and other current products, and actions by the Company's competitors, including business combinations, technological breakthroughs, new product offerings, promotional spending and marketing and promotional successes, including increases in market share; |
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| (v) | difficulties, delays or the inability of the Company to undertake a $110 million equity offering by March 2006 and to use the proceeds to reduce debt; |
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| (vi) | difficulties, delays or unanticipated costs associated with completing projects associated with the Company's plan to implement Margin Transformation Initiatives, or less than expected savings and/or profit margin improvements from such initiatives; |
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| (vii) | difficulties, delays or unanticipated costs associated with implementing elements of the Company's "Destination Model;" |
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| (viii) | unanticipated circumstances impacting, or other difficulties, delays or unanticipated costs associated with the implementation of, certain top-line and bottom-line drivers of the Company's business and financial performance, including less than expected growth in category and share; difficulties, delays or unanticipated costs associated with developing other U.S. businesses or leveraging licensing opportunities; difficulties or delays impacting the ability of, or the inability of, the Company to drive International growth opportunities; difficulties, delays or unanticipated costs associated with the implementation of Margin Transformation Initiatives; difficulties or delays in continuing to implement cost disciplines across the organization; and difficulties or delays impacting the ability of, or the inability of, the Company to create fixed-cost leverage via top-line growth; |
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| (ix) | the Company's advertising being less effective than planned, or difficulties or delays in, or unanticipated costs associated with, developing and/or presenting the Company's advertising and optimizing its effectiveness; |
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| (x) | unanticipated circumstances affecting the effectiveness of the Company's marketing and promotion strategies incorporating the new Revlon spokesmodels; |
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| (xi) | difficulties or delays in, or unanticipated costs associated with, developing and/or introducing new products and/or in further strengthening the new product development and implementation process or less than expected consumer response to such new products; and |
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| (xii) | difficulties or delays in, or unanticipated costs associated with, the Company's plans to leverage licensing opportunities. |
A copy of the Conference Information and Reconciliation Information is furnished herewith as Exhibit 99.1. In accordance with general instruction B.2 of Form 8-K, the information in this report, including the exhibit, is furnished pursuant to Item 7.01 and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section.
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.
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REVLON, INC. |
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By: /s/
Robert K. Kretzman
Robert K. Kretzman Executive Vice President, General Counsel and Chief Legal Officer |
Date: September 8, 2004
4
EXHIBIT INDEX
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| Exhibit No. | |
Description | ||||
| 99.1 | |
Conference Information and Reconciliation Information | ||||
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5
Prudential Back to School Conference
September 8, 2004
Agenda
1. Company Overview
2. Business Progress to Date
3.
Opportunities Ahead to Create
Long-Term Value
4. Q & A
2
Forward-Looking Statements
This
presentation relates to various aspects of Revlon, Inc.’s
(“Revlon”) strategic, business and financial
plans. Statements made in
this presentation which are not
historical are forward-looking and based on management's estimates, objectives,
vision, projections,
forecasts, plans, strategies, beliefs, intent,
opportunities, drivers, destination and expectations, and thus are subject to
the safe harbor
provisions of the Private Securities Litigation Reform Act
of 1995. The data contained herein are both audited and unaudited
and have
been prepared from Revlon's internal and external reporting
information. "E" and “F” denote estimated and forecasted data.
Accordingly,
Revlon's actual results may differ materially from such forward-looking
statements for a number of reasons, including,
without limitation, those
set forth in the Company's filings with the SEC, including its Annual Report on
Form 10-K for 2003, Quarterly
Reports on Form 10-Q in 2004 and Current
Reports on Form 8-K in 2004. Access to these filings is available on
the SEC's website at
www.sec.gov.
Revlon does
not generally publish or make publicly available its strategic plans or make
external projections of its anticipated financial
position or results of
operations or the type of forward-looking information in this
presentation. Accordingly, except for the Company’s
ongoing
obligations under the U.S. federal securities laws, Revlon undertakes no
commitment to update or otherwise revise this
presentation to reflect
actual results of operations, changes in financial condition, changes in
estimates, changes in expectations,
changes in assumptions, changes in
external sources of information, or other circumstances arising and/or existing
since the
preparation of the information contained herein or to reflect the
occurrence of any future events. Further, Revlon undertakes no
commitment to update or revise any of this presentation to reflect changes
in general economics or industry conditions or changes in
specific industry
categories in which Revlon operates.
3
Basis of Presentation
Revlon, Inc.
is a public holding company with no business operations of its
own. Revlon, Inc.'s only material asset is all of the outstanding
capital stock of Revlon
Consumer Products Corporation (“Products
Corporation”), through which it conducts its business
operations. As such, its net (loss) income has historically
consisted
predominantly of the net (loss) income of Products Corporation
and in 2001, 2002 and 2003 included approximately $1.5 million, $4.7 million
and ($0.2) million,
respectively, in expenses/(credits) primarily related
to being a public holding company. Unless otherwise noted, all
references to data presented herein relate to
Revlon, Inc.
The data
contained herein are both audited and unaudited and have been prepared from
Revlon'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 Revlon's plan. Ongoing operations
is
unaudited and a non-GAAP measure that Revlon 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. Reflected in the Company’s
Form 8-K filed with
the SEC on September 8, 2004 is a reconciliation of all non-GAAP financial
measures contained in this presentation, including Adjusted EBITDA
and
“ongoing” operations, to their respective, most directly comparable
GAAP measures.
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, gains/losses on the extinguishment of debt,
miscellaneous expenses and the items described above. Adjusted
EBITDA is a non-GAAP financial measure.
Revlon believes that
Adjusted EBITDA is a financial metric that can assist Revlon and investors in
assessing its financial operating performance and liquidity. Revlon
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, gains/losses on the
extinguishment of debt, miscellaneous
expenses and the items described
above. Adjusted EBITDA should not be considered in isolation, or 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 currently in
effect. 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.
Except as
otherwise noted, market share and market position data in this presentation are
based upon retail dollar sales, derived from ACNielsen data, which is the
aggregate of the drug channel, Target, Kmart, and Food and Combo stores,
referred to as Total US All Outlets. ACNielsen measures retail sales
volume of products
sold in the U.S. mass-market distribution
channel. Such data represent ACNielsen's estimates based upon data
gathered by ACNielsen from market samples and
are therefore subject to some
degree of variance. Additionally, as of August 4, 2001, ACNielsen
data do not reflect sales volume from Wal-Mart Inc. In some
instances, as noted, Revlon has estimated the total U.S. mass market,
including Wal-Mart and regional MVRs. You should read the notes presented in
conjunction
with the data presented herein.
4
5
The Revlon Story: Positioned For Growth
Significant
Growth and
Profitability Improvements
Improved Customer Relationships
Strengthened Market Share Position
Strong Management Team
Powerful Brand Equities
Large and Attractive Category
Future
Growth and
Margin Opportunity
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The Revlon Story: Positioned For Growth
Significant
Growth and
Profitability Improvements
Improved Customer Relationships
Strengthened Market Share Position
Strong Management Team
Powerful Brand Equities
Large and Attractive Category
Future
Growth and
Margin Opportunity
7
Source: Euromonitor
and Company estimates; includes all color
cosmetics (mass, prestige, and
direct).
Source: ACNielsen
Total U.S. All Outlets plus Wal-Mart and
Regional MVRs based on Company
estimates after 2001,
NPD, Kline and Company, Find SVP and Euromonitor,
including Company estimates. Total U.S. Market includes
the mass
channel, department, specialty and dollar stores,
direct and other
miscellaneous channels.
Large and Attractive Category
Large global category with U.S. market consistently strong
Worldwide Total Category
Total U.S. Market Category
($bn)
($bn)
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Source: ACNielsen
Total U.S. All Outlets plus Wal-Mart and
Regional MVRs based on Company
estimates after 2001.
Large and Attractive Category
U.S. Mass Market Category
($bn)
Source: ACNielsen
Total U.S. All Outlets plus Wal-Mart and
Regional MVRs based on Company
estimates after 2001,
NPD, Kline and Company, Find SVP and Euromonitor,
including Company estimates. Total U.S. Market includes
the mass
channel, department, specialty and dollar stores,
direct and other
miscellaneous channels.
Total U.S. Market Category
($bn)
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10
Powerful Brand Equities
®
Revlon’s Global Business
(1) Includes Australia and South Africa.
Note: See reconciliations of non-GAAP financial measures on our Form 8-K filed September 8, 2004.
2003 Gross Sales: $1.6bn
Sales by Geography
Sales by Category
Europe
Far East1
Latin
America
North
America
9%
13%
7%
71%
Color
Cosmetics
Beauty Tools
71%
Hair
12%
Fragrances
Beauty Care
10%
4%
3%
(1) Includes Australia and South Africa.
Note: See reconciliations of non-GAAP financial measures on our Form 8-K filed September 8, 2004.
(1) Includes Australia and South Africa.
Note: See reconciliations of non-GAAP financial measures on our Form 8-K filed September 8, 2004.
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Strong Position in Color Cosmetics
Revlon holds the #2 position in color cosmetics in the U.S.
Source: Full year 2003 ACNielsen Total U.S. All Outlets (excluding Wal-Mart and Regional MVRs).
2003 U.S. Mass Market $ Share
All Other
22%
CoverGirl /
Max Factor
23%
34%
21%
L’Oreal / Maybelline
Revlon / Almay
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$270mm category
#1 Brand with 23% $ share
$1.0bn category
7% $ Share
Revlon led $
category
growth in 2003
Other North American Businesses
Highly profitable businesses in key related categories
Source: Full Year 2003 ACNielsen Total U.S. All Outlets (excluding Wal-Mart and Regional MVRs).
Hair Color
Beauty Tools
13
$460mm
category in mass; total
category $3.0bn including
Prestige1
Key Brands:
Charlie, Ciara,
Jean Naté
$1.1bn category
6% $ Share
Other North American Businesses
Highly profitable businesses in key related categories
Source: Full Year 2003 ACNielsen Total U.S. All Outlets (excluding Wal-Mart and Regional MVRs).
(1) Mass
includes ACNielsen Perfumes, Colognes, EDT 52 weeks ending 9/03; Total category
includes ACNielsen plus NPD Prestige
estimate of $2.7bn.
Women’s Fragrances
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Anti-Perspirants & Deodorants
International Overview
(1)
Includes Australia and South Africa.
Note: See reconciliations of non-GAAP financial measures on our Form 8-K filed September 8, 2004.
2003 Gross Sales: $462mm
Sales by Geography
Sales by Category
International
represents an excellent growth opportunity moving
forward
Far East1
32%
Europe
Latin America
Color
Cosmetics
Beauty Tools
1%
Hair
Fragrances
Beauty Care
46%
22%
61%
15%
15%
8%
15
What Held Revlon Back?
Inconsistent Execution
Lack of
effective communication/execution
inside and outside of Revlon
Missed key dates with customers
Lost Share & Shelf Space
Lost 7.5 share points from 1998 to 2002
New product
performance trailed
competitors
Little New Product Success
Inconsistent Brand Position
5 tag lines in 6 years for Revlon brand
Inconsistent imagery
Over-Leveraged
Limited operating flexibility
16
The Revlon Success Journey
Value Creation Continuum
S
u
s
t
a
i
n
a
b
l
e
B
u
s
i
n
e
s
s
M
o
d
e
l
Cost
Rationalization
Consolidated
Manufacturing/
Distribution
Reduced Overhead
2000-2001
Stabilize
&
Begin To Grow
2002-2003
Continue
Growth
Momentum
Balance
Top-Line
Growth with Margin
Improvement
Develop and
Implement
Transformation
Initiatives
Significantly
Strengthen Balance
Sheet
2004E
Accelerated
Growth
2005-2006E
Accelerate Growth:
Accelerate
Top-Line
Momentum
Significantly
Improve
Margins
Restored
Consumer/Customer
Confidence
Reversed
Market Share
Declines
Generated
Top-Line
Growth
17
Business Progress to Date
Progress to Date: Market Share
Dramatically
improved market share trends, behind improved
execution, better customer
relationships and enhanced marketing
Source: ACNielsen
Total U.S. All Outlets (excluding Wal-Mart and Regional MVRs). 1H 2004 data
includes Make-Up Removers, Kits and
Remaining Cosmetics, not included in
prior periods.
Revlon + Almay $ Consumption Growth vs. Category Growth
19
20
Dramatically
improved customer relationships, resulting in formal
recognition and
incremental retail space in 2004
Progress to Date: Retail Customers
Carded Eye Initiative
Progress to Date: In-Store Execution
Source: ACNielsen U.S. and Wal-Mart POS.
Notes: Excludes Lash Tint and New Products (Lash Fantasy & Eye Glide); 2H 2003 results based on performance since reset.
$ Consumption % vs. Prior Year (Top 5 Accounts)
Strengthened
in-store execution via increased wall graphics and
carded eye
initiative
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Progress to Date: International
Significant
progress achieved in 2003 and 2004 to-date to
strengthen internal
capabilities to drive performance improvement
Installed
stronger management in key positions and implemented more disciplined
management processes
2003
1H 2004
Controlled costs; improved working capital management; and benefited from FX
Increased marketing behind NY-driven Revlon brand plans in key markets
Optimizing fixed cost structure in Europe and Latin America, including supply chain
$ mm
>+100%
NA
Operating Income
+15%
+12%
Net Sales
% Change vs PY
Note: All data
presented on an ongoing basis and adjusted for Growth Plan charges; see
reconciliations of non-GAAP financial
measures on our Form 8-K filed
September 8, 2004.
Key Performance Drivers
22
Progress to Date: Financial Results
Strengthened
financial performance through systemic business
improvements, with 2004
forecasted to build on momentum
established in 2003
Note: All data
presented on an ongoing basis and adjusted for Growth Plan charges; see
reconciliations of non-GAAP financial
measures on our Form 8-K filed
September 8, 2004.
$90
+$31
7%
$18
-$1
3%
$59
+$45
5%
$14
-$86
1%
Operating Income
Change Vs PY
% of Net Sales
$190
+21%
14%
$68
--
11%
$157
+30%
12%
$121
10%
Adjusted EBITDA
Change Vs PY
% of Net Sales
$1,335 - $1,350
+3%
$625
-1%
$1,304
+9%
$1,195
Net Sales
Change Vs PY
2002
2003
1H 2004
2004F
23
Progress to Date: Capital Structure
MacAndrews
& Forbes
converts $516m of debt and
preferred stock into common
equity
Fidelity
converts $196m of
debt into common equity
Other
bondholders convert
$147m of debt into common
equity
Revlon enters
into new
$960m credit facility with
Citigroup, replacing existing
facility and repurchasing/
redeeming outstanding 12% Sr.
Secured
Notes
Refinancing
reduces interest
expense and extends debt
maturities
Revlon commits
to launch
a $110m equity offering by
3/06 and use proceeds to
further reduce debt
Over $1 Billion of Equity Invested and Committed
Significant
operating flexibility created through debt-for-equity
exchange offers and
subsequent debt refinancing
Equity Offering by 3/06
7/9/04 Debt Refinancing
3/25/04 Exchange Offers
Note: $1 billion of equity invested and committed includes $41 million purchase of shares by MacAndrews & Forbes in 6/03 rights offering.
24
The Destination Model
Significant Revenue
Growth Opportunity
(1) Includes Other Revenues.
Note:
2003
presented
on an ongoing basis and adjusted for Growth Plan charges; see
reconciliations of non-GAAP financial measures on
our Form
8-K filed September 8, 2004.
Significant Margin Expansion Opportunity
14%
4%
Operating Income
20%
10%
Adjusted EBITDA
40%
47%
SG&A
54%
50%
Gross Margin
29%
32%
Cost of Goods
17%
18%
Returns/Allowances/Discounts1
100%
100%
Gross Sales
Destination
Model
(Est.)
2003
25
Opportunities Ahead
Creating Business Momentum
Creating Business Momentum
Grow U.S.
color cosmetics
category and share
Develop other
U.S.
businesses
Leverage
licensing
opportunities
Drive
International growth
opportunities
Implement
margin
transformation initiatives
Continue cost
disciplines
across the organization
Create
fixed-cost leverage
via top-line growth
Top-Line Drivers
Bottom-Line Drivers
27
U.S. Mass Color Cosmetics
Source: ACNielsen Total U.S. All Outlets (including estimates for Wal-Mart and Regional MVRs); 2004F based on Company estimates.
Category % Change Vs. Prior Year
28
Mass Cosmetics Advertising
[GRAPHICS OMITTED]
29
Consistent
lack of differentiation in advertising among the
major players
Advertising and Marketing
The Revlon “Bellissimo” Campaign
30
New
advertising campaign to drive Revlon brand equity and
stimulate the
category in mass…
…increased purchase intent and strengthened key brand
attributes in brand tracking studies.
New Revlon Spokesmodels
Kate Bosworth
Rising Young Actress
Age 23
Appeared in
Blue Crush,
The Horse
Whisperer, Remember The Titans
3 films releasing over next two years
Susan Sarandon
Actress, Activist, Mother
Age 57
5-time Academy Award nominee
Best Actress
Academy Award
Winner for Dead Man
Walking
6 films releasing over next two years
31
[GRAPHICS OMITTED]
Brand
positioning and reach further reinforced with two new
spokesmodels
In-Store Programming
National TV
In-Store
Demo
In-Store
Media
THE WALL
Graphics
National
Print
Merchandising
In-Store
360o
32
New Product Development Process
Dramatically
improved process and strategy to drive innovation
and profitability
Revlon was introducing twice as many new products with half the success rate
1999 - 2001
Average Weekly Sales – 6 Months Post Launch
Rate of Intros
vs. Average
Competitor A Competitor B Competitor C Revlon Competitor D Almay
0.8X 0.6X 1.5X 1.8X 0.5X 1.1X
Average
Weekly
Sales
Note: Average
weekly sales – 6 months post launch based on ACNielsen Total US
All-Outlets (excluding Wal-Mart and Regional
MVRs); excludes one-time-only
products and shade extensions. Based on Company estimates and BCG
analysis.
33
2004 New Products
2004 new
products contributing less to market share than did 2003
new
products
Reflects cost of transition to new strategy
-0.7 pts
21.9
22.6
Total
+1.2 pts
20.9
19.7
Existing
Products
-1.9 pts
1.0
2.9
New Products
Change
2004
2003
Revlon + Almay 1H $ Market Share
Source: ACNielsen Total U.S. All Outlets (excluding Wal-Mart and Regional MVRs).
Note: New products defined as items introduced in given calendar year.
34
Cross-functionally
developed and consumer insight driven, the
2005 line-up is expected to be
the Company's strongest in years.
2005 New Products: Revlon Color Cosmetics
New Fabulash Mascara
Restaged Age Defying
New Packaging/Eye Products
35
2005 New Products: Almay Color Cosmetics
Skin-Smoothing Foundation
Intense i-Color
Truly Lasting Lip Color
36
2005 New Products: Revlon Beauty Tools
Expert Effect
Accessories
37
2005 New Products: Mitchum
38
The Licensing Opportunity
Broadening
Licensing business into large Specialty Bath category
in Q4 2004
Revlon Specialty Bath
Almay Specialty Bath
39
International Growth Opportunity
Build on
organizational capabilities established in
2003 and 2004
Focus on
countries where we have or can
build
a winning
competitive position
Support key
local brands to drive
growth
(e.g., Body
Sprays, Ultima II, Bozzano and Gatineau)
Leverage
progress and enhanced marketing
sophistication of U.S. business across
International
markets
Highlights
40
Creating Business Momentum
Bottom-Line Drivers
Bottom-Line Drivers
Margin
transformation initiatives critical to building long-term,
sustainable
profit model
(1) Reflects annualized savings as a percentage of gross sales; savings forecasted to be achieved over 3 to 5 years, beginning in 2004.
10.0
Total Margin Opportunity
2.5
Fixed-Cost Leverage
7.0 - 8.5
Subtotal Margin
Transformation
Initiatives
2.0
In-Store Merchandising
1.0
International Supply Chain
2.0
Product Life Cycle Management
1.0 - 1.5
Promotion Redesign
1.0 - 2.0
COGS Reduction/Indirect Sourcing
Estimated
Margin Pt Savings1
42
Margin Transformation Initiatives
Annualized Forecasted Savings: 100 – 200 bps of Gross Sales Achieved Over 3 – 5 Years
COGS Reduction and Indirect Sourcing
Value
analysis review complete for majority of worldwide portfolio; implementation
phase
underway
Package rationalization in process
Strategic
sourcing principles in place for direct purchasing and in development for
indirect
purchasing
Objective:
Reduce Both Direct and Indirect Costs
Streamline Componentry
Enhance Branding
Reduce Cost
of Existing
Products
Establish
Expertise and
Process to Minimize Cost of
Direct and Indirect
Purchasing
Value Analysis
Package Rationalization
Strategic Sourcing
Progress to Date
43
Objective:
Develop
Promotional Process and Business Model to
Deliver Promotions on Strategy, on
Time and on Budget
Margin Transformation Initiatives
Promotion Redesign
Optimize Costs
Define and Implement
Efficient Promotional
Development Process
Identify
Next Generation
Promotional Strategy
Progress to Date
Established dedicated promotional strategy and execution team
Reduced use of one-time-only products in promotions
Improved lead-times for internal planning, avoiding unnecessary costs
Annualized Forecasted Savings: 100 – 150 bps of Gross Sales Achieved Over 3 – 5 Years
44
Margin Transformation Initiatives
Product Life Cycle Management
Create New Business Model
Birth – Smarter Sell-In of New Products
Life –
Active Retailer Inventory Monitoring
and Management
Retirement – Reduce Discontinuance Cost
Create Principles
Devise By Segment (Lip, Nail, Face, Eye)
Determine
Optimal Timing and Sequence of
New Products
Objective:
Extend
Productive Life of Products to: Reduce
Returns,
Optimize Wall Productivity, and Maximize Effectiveness of
Spend
Annualized Forecasted Savings: 200 bps of Gross Sales Achieved Over 3 – 5 Years
Progress to Date
Re-Energizing existing franchises
De-Averaging sell-in of 2005 introductions
Partnering with retailers to optimize inventory levels
45
Creating Business Momentum
Grow U.S.
color cosmetics
category and share
Advertising & Marketing
In-Store Excitement
New Products
Re-Energized Existing Franchises
Packaging
Customer Relationships
Develop other
existing
U.S. businesses
Leverage licensing opportunities
Drive
International growth
opportunity
Implement
margin
transformation initiatives
Continue cost
disciplines
across the organization
Create
fixed-cost leverage
via top-line growth
Top-Line Drivers
Bottom-Line Drivers
46
Summary
The Revlon Story: Positioned For Growth
Significant
Growth and
Profitability Improvements
Improved Customer Relationships
Strengthened Market Share Position
Strong Management Team
Powerful Brand Equities
Large and Attractive Category
Future
Growth and
Margin Opportunity
48
Q & A
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON,
INC. AND SUBSIDIARIES
UNAUDITED ADJUSTED SALES
RECONCILIATION(1)
(DOLLARS IN
MILLIONS)
REVLON'S GLOBAL BUSINESS
|
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|
YEAR ENDED DECEMBER 31, 2003 | |||||||||||||||||
|
AS REPORTED |
|
BRAND AND FACILITIES SOLD |
|
GROWTH PLAN |
|
ADJUSTED | |||||||||||
| Net sales | |
$ | 1,299 | |
$ | — | |
$ | 5 | |
$ | 1,304 | ||||||
| Add: Returns, allowances, discounts and other | |
281 | |
— | |
(1 | ) | |
280 | |||||||||
| Gross sales | |
$ | 1,580 | |
$ | — | |
$ | 4 | |
$ | 1,584 | ||||||
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|
|||||||||||||||
|
||||||||||||||||||
|
|
| (1) | Subject to minor rounding differences |
1
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND
SUBSIDIARIES
UNAUDITED ADJUSTED SALES
RECONCILIATION(1)
(DOLLARS IN
MILLIONS)
INTERNATIONAL OVERVIEW
|
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|
YEAR ENDED DECEMBER 31, 2003 | |||||||||||||||||
|
AS REPORTED |
|
BRAND AND FACILITIES SOLD |
|
GROWTH PLAN |
|
ADJUSTED | |||||||||||
| Net sales | |
$ | 409 | |
$ | — | |
$ | 1 | |
$ | 410 | ||||||
| Add: Returns, allowances, discounts and other | |
53 | |
— | |
(1 | ) | |
52 | |||||||||
| Gross sales | |
$ | 462 | |
$ | — | |
$ | 0 | |
$ | 462 | ||||||
|
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|
|||||||||||||||
|
||||||||||||||||||
|
|
| (1) | Subject to minor rounding differences |
2
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED SELECTED FINANCIAL DATA(1)
(DOLLARS IN
MILLIONS)
PROGRESS TO DATE: INTERNATIONAL
|
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YEAR ENDED DECEMBER 31, | |
FIRST HALF | |||||||||||||||||||||||
|
2002 | |
2003 | |
% CHANGE |
|
2003 | |
2004 | |
% CHANGE |
|||||||||||||||
| Net sales - As reported | |
$ | 359 | |
$ | 409 | |
14 | % | |
$ | 184 | |
$ | 212 | |
15 | % | ||||||||
| Growth plan | |
6 | |
1 | |
(2 | ) | |
— | |
— | |
— | |||||||||||||
| Net sales - Adjusted | |
$ | 365 | |
$ | 410 | |
12 | % | |
$ | 184 | |
$ | 212 | |
15 | % | ||||||||
|
||||||||||||||||||||||||||
|
|
| (1) | Subject to minor rounding differences |
3
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED SELECTED FINANCIAL DATA(1)
(DOLLARS IN
MILLIONS)
PROGRESS TO DATE: FINANCIAL RESULTS
|
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|
YEAR ENDED DECEMBER 31, 2001 | |||||||||||||||||||||
|
AS REPORTED |
|
BRAND AND FACILITIES SOLD |
|
RESTRUCTURING COSTS AND OTHER, NET |
|
GROWTH PLAN |
|
ADJUSTED | |||||||||||||
| Net sales | |
$ | 1,278 | |
$ | (17 | ) | |
$ | — | |
$ | — | |
$ | 1,261 | ||||||
| Operating income | |
$ | 16 | |
$ | 2 | |
$ | 82 | |
$ | — | |
$ | 100 | |||||||
|
|
|
|
|
||||||||||||||||||
| Adjusted EBITDA: | |
|
|
|
|
|||||||||||||||||
| Operating income | |
$ | 16 | |
$ | 2 | |
$ | 82 | |
$ | — | |
$ | 100 | |||||||
| Depreciation and amortization | |
109 | |
(1 | ) | |
(8 | ) | |
— | |
100 | ||||||||||
|
$ | 125 | |
$ | 1 | |
$ | 74 | |
$ | — | |
$ | 200 | ||||||||
|
||||||||||||||||||||||
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|
YEAR ENDED DECEMBER 31, 2002 | |||||||||||||||||||||
|
AS REPORTED |
|
BRAND AND FACILITIES SOLD |
|
RESTRUCTURING COSTS AND OTHER, NET |
|
GROWTH PLAN |
|
ADJUSTED | |||||||||||||
| Net sales | |
$ | 1,119 | |
$ | — | |
$ | — | |
$ | 76 | |
$ | 1,195 | |||||||
| Operating (loss) income | |
$ | (115 | ) | |
$ | — | |
$ | 25 | |
$ | 104 | |
$ | 14 | ||||||
|
|
|
|
|
||||||||||||||||||
| Adjusted EBITDA: | |
|
|
|
|
|||||||||||||||||
| Operating (loss) income | |
$ | (115 | ) | |
$ | — | |
$ | 25 | |
$ | 104 | |
$ | 14 | ||||||
| Depreciation and amortization | |
109 | |
— | |
(1 | ) | |
(1 | ) | |
107 | ||||||||||
|
$ | (6 | ) | |
$ | — | |
$ | 24 | |
$ | 103 | |
$ | 121 | |||||||
|
||||||||||||||||||||||
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|
YEAR ENDED DECEMBER 31, 2003 | |||||||||||||||||||||
|
AS REPORTED |
|
BRAND AND FACILITIES SOLD |
|
RESTRUCTURING COSTS AND OTHER, NET |
|
GROWTH PLAN |
|
ADJUSTED | |||||||||||||
| Net sales | |
$ | 1,299 | |
$ | — | |
$ | — | |
$ | 5 | |
$ | 1,304 | |||||||
| Operating income | |
$ | 21 | |
$ | — | |
$ | 7 | |
$ | 31 | |
$ | 59 | |||||||
|
|
|
|
|
||||||||||||||||||
| Adjusted EBITDA: | |
|
|
|
|
|||||||||||||||||
| Operating income | |
$ | 21 | |
$ | — | |
$ | 7 | |
$ | 31 | |
$ | 59 | |||||||
| Depreciation and amortization | |
101 | |
— | |
(1 | ) | |
(2 | ) | |
98 | ||||||||||
|
$ | 122 | |
$ | — | |
$ | 6 | |
$ | 29 | |
$ | 157 | ||||||||
|
||||||||||||||||||||||
|
|
| (1) | Subject to minor rounding differences |
4
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED SELECTED FINANCIAL DATA(1)
(DOLLARS IN
MILLIONS)
PROGRESS TO DATE: FINANCIAL RESULTS
|
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|
FIRST HALF 2004 | |||||||||||||||||||||
|
AS REPORTED |
|
BRAND AND FACILITIES SOLD |
|
RESTRUCTURING COSTS AND OTHER, NET |
|
GROWTH PLAN |
|
ADJUSTED | |||||||||||||
| Net sales | |
$ | 625 | |
$ | — | |
$ | — | |
$ | — | |
$ | 625 | |||||||
| Operating income | |
$ | 18 | |
$ | — | |
$ | — | |
$ | — | |
$ | 18 | |||||||
|
|
|
|
|
||||||||||||||||||
| Adjusted EBITDA: | |
|
|
|
|
|||||||||||||||||
| Operating income | |
$ | 18 | |
$ | — | |
$ | — | |
$ | — | |
$ | 18 | |||||||
| Depreciation and amortization | |
50 | |
— | |
— | |
— | |
50 | ||||||||||||
|
$ | 68 | |
$ | — | |
$ | — | |
$ | — | |
$ | 68 | ||||||||
|
||||||||||||||||||||||
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|
FIRST HALF 2003 | |||||||||||||||||||||
|
AS REPORTED |
|
BRAND AND FACILITIES SOLD |
|
RESTRUCTURING COSTS AND OTHER, NET |
|
GROWTH PLAN |
|
ADJUSTED | |||||||||||||
| Net sales | |
$ | 614 | |
$ | — | |
$ | — | |
$ | 16 | |
$ | 630 | |||||||
| Operating income | |
($7 | ) | |
$ | — | |
$ | — | |
$ | 26 | |
$ | 19 | |||||||
|
|
|
|
|
||||||||||||||||||
| Adjusted EBITDA: | |
|
|
|
|
|||||||||||||||||
| Operating income | |
($7 | ) | |
$ | — | |
$ | — | |
$ | 26 | |
$ | 19 | |||||||
| Depreciation and amortization | |
51 | |
— | |
— | |
(2 | ) | |
49 | |||||||||||
|
$ | 44 | |
$ | — | |
$ | — | |
$ | 24 | |
$ | 68 | ||||||||
|
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YEAR ENDED DECEMBER 31, 2004F | |||||||||||||||||||||
|
AS REPORTED |
|
BRAND AND FACILITIES SOLD |
|
RESTRUCTURING COSTS AND OTHER, NET |
|
GROWTH PLAN |
|
ADJUSTED | |||||||||||||
| Net sales | |
$ 1,335 - $1,350 | |
$ | — | |
$ | — | |
$ | — | |
$ 1,335 - - $1,350 | |||||||||
| Operating income | |
$ | 90 | |
$ | — | |
($2 | ) | |
$ | — | |
$ | 88 | |||||||
|
|
|
|
|
||||||||||||||||||
| Adjusted EBITDA: | |
|
|
|
|
|||||||||||||||||
| Operating income | |
$ | 90 | |
$ | — | |
($2 | ) | |
$ | — | |
$ | 88 | |||||||
| Depreciation and amortization | |
102 | |
— | |
— | |
— | |
102 | ||||||||||||
|
$ | 192 | |
$ | — | |
($2 | ) | |
$ | — | |
$ | 190 | ||||||||
|
||||||||||||||||||||||
|
|
| (1) | Subject to minor rounding differences |
5
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED ADJUSTED EBITDA RECONCILIATION(1)
(DOLLARS IN
MILLIONS)
PROGRESS TO DATE: FINANCIAL RESULTS
|
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|
YEAR
ENDED DECEMBER 31, |
|
FIRST HALF | |
YEAR
ENDED DECEMBER 31, |
|||||||||||||
|
2002 | |
2003 | |
2004 | |
2004F | |||||||||||
| RECONCILIATION TO CASH FLOWS FROM OPERATING ACTIVITIES: | |
|||||||||||||||||
| Net cash used for operating activities | |
($112 | ) | |
($166 | ) | |
($100 | ) | |
($92 | ) | ||||||
| Changes in assets and liabilities, net of acquisitions and dispositions | |
(54 | ) | |
126 | |
79 | |
137 | |||||||||
| Loss on early extinguishment of debt | |
— | |
— | |
13 | |
14 | ||||||||||
| Interest expense, net | |
153 | |
167 | |
70 | |
122 | ||||||||||
| Foreign currency losses (gains), net | |
1 | |
(5 | ) | |
2 | |
1 | |||||||||
| Miscellaneous, net | |
1 | |
1 | |
2 | |
5 | ||||||||||
| Provision for income taxes | |
5 | |
1 | |
2 | |
5 | ||||||||||
| As Reported Adjusted EBITDA | |
($6 | ) | |
$ | 122 | |
$ | 68 | |
$ | 192 | ||||||
| RECONCILIATION TO NET LOSS: | |
|
|
|||||||||||||||
| Net loss from continuing operations | |
($287 | ) | |
($154 | ) | |
($97 | ) | |
($146 | ) | ||||||
| Interest expense, net | |
156 | |
170 | |
71 | |
124 | ||||||||||
| Amortization of debt issuance costs | |
8 | |
9 | |
5 | |
8 | ||||||||||
| Foreign currency losses (gains), net | |
1 | |
(5 | ) | |
2 | |
1 | |||||||||
| Loss on early extinguishment of debt | |
— | |
— | |
33 | |
93 | ||||||||||
| Loss (gain) on sale of product line, brands and facilities, net | |
1 | |
— | |
— | |
— | ||||||||||
| Miscellaneous, net | |
1 | |
1 | |
2 | |
5 | ||||||||||
| Provision for income taxes | |
5 | |
1 | |
2 | |
5 | ||||||||||
| Depreciation and amortization | |
109 | |
101 | |
50 | |
102 | ||||||||||
| As Reported Adjusted EBITDA | |
(6 | ) | |
122 | |
68 | |
192 | |||||||||
| Product line and brands sold | |
— | |
— | |
— | |
— | ||||||||||
| Restructuring | |
10 | |
6 | |
— | |
(2 | ) | |||||||||
| Consolidation costs and other, net | |
14 | |
— | |
— | |
— | ||||||||||
| Growth plan | |
103 | |
29 | |
— | |
— | ||||||||||
| Adjusted EBITDA | |
$ | 121 | |
$ | 157 | |
$ | 68 | |
$ | 190 | ||||||
|
||||||||||||||||||
|
|
| (1) | Subject to minor rounding differences |
6
RECONCILIATION OF CERTAIN NON-GAAP MEASURES TO GAAP
REVLON, INC. AND SUBSIDIARIES
UNAUDITED OPERATING INCOME MARGIN RECONCILIATION(1)
(DOLLARS IN MILLIONS)
THE DESTINATION MODEL
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|
YEAR ENDED DECEMBER 31, 2003 | |||||||||||||||||||||||||
|
AS REPORTED |
|
BRAND AND FACILITIES SOLD |
|
RESTRUCTURING COSTS AND OTHER, NET |
|
GROWTH PLAN |
|
ADJUSTED | |
% GROSS SALES |
|||||||||||||||
| Gross sales | |
$ | 1,580 | |
$ | — | |
$ | — | |
$ | 4 | |
$ | 1,584 | |
100 | % | ||||||||
| Returns, allowances, discounts and other | |
281 | |
— | |
— | |
(1 | ) | |
280 | |
18 | % | ||||||||||||
| Net sales | |
1,299 | |
— | |
— | |
5 | |
1,304 | |
82 | % | |||||||||||||
| Cost of goods sold | |
501 | |
— | |
(1 | ) | |
— | |
500 | |
32 | % | ||||||||||||
| Gross profit | |
798 | |
— | |
1 | |
5 | |
804 | |
51 | % | |||||||||||||
| Selling, general and administrative expenses | |
771 | |
— | |
— | |
(26 | ) | |
745 | |
47 | % | ||||||||||||
| Restructuring costs and other, net | |
6 | |
— | |
(6 | ) | |
— | |
— | |
0 | % | ||||||||||||
| Operating income | |
$ | 21 | |
$ | — | |
$ | 7 | |
$ | 31 | |
$ | 59 | |
4 | % | ||||||||
|
||||||||||||||||||||||||||
| Adjusted EBITDA: | |
|
|
|
|
|
||||||||||||||||||||
| Operating income | |
$ | 21 | |
$ | — | |
$ | 7 | |
$ | 31 | |
$ | 59 | |
4 | % | ||||||||
| Depreciation and amortization | |
101 | |
|
(1 | ) | |
(2 | ) | |
98 | |
6 | % | ||||||||||||
|
$ | 122 | |
$ | — | |
$ | 6 | |
$ | 29 | |
$ | 157 | |
10 | % | |||||||||
|
||||||||||||||||||||||||||
|
|
| (1) | Subject to minor rounding differences |
7