UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 10, 2006 (July 10, 2006)
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 Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
237 Park Avenue
New York, New York 10017
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(Address of Principal Executive Offices) (Zip Code)
(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):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
To the extent applicable, the contents of Item 7.01 below are incorporated into
this Item 2.02 by reference.
Item 7.01. Regulation FD Disclosure.
On July 10, 2006, Revlon, Inc. (the "Company") issued a press release (the
"Press Release") regarding, among other things, the Company's estimate of its
second quarter financial results and full-year outlook for 2006 and beyond.
A copy of the Press Release is attached to this report as Exhibit 99.1 and is
incorporated by reference herein.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
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99.1 Press Release, dated July 10, 2006.
2
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
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Name: Robert K. Kretzman
Title: Executive Vice President and
General Counsel
Date: July 10, 2006
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EXHIBIT INDEX
Exhibit No. Description
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99.1 Press Release, dated July 10, 2006.
4
Exhibit 99.1
FOR IMMEDIATE RELEASE
Revlon Pre-Announces Q2 Results and Provides Outlook For 2006 and Beyond
Revlon To Webcast Conference Call with Investors
New York, July 10, 2006 - Revlon, Inc. (NYSE: REV) today announced its
preliminary results for the second quarter of 2006 and provided its outlook for
2006 and beyond. The Company also provided an update on its recent launch of
Vital Radiance, a new color cosmetics brand designed to serve women over the age
of 50, as well as its restage of the Almay brand.
Consistent with its previous disclosure, the Company indicated that it expects
Adjusted EBITDA(1) in 2006 to be approximately even with or somewhat below the
$167 million achieved in 2005, after taking into account a significant negative
impact to operating income in 2006 related to Vital Radiance, and the $10
million restructuring charge announced earlier in the year. Net sales for the
full year 2006 are expected to be up in the mid-single-digit range. Longer-term,
the Company indicated that its goal is to grow net sales in the mid-single-digit
range, on average, over time and expects this top-line growth, coupled with the
Company's productivity initiatives and aggressive cost reduction actions, to
drive significant margin improvement over the next several years.
Commenting on the Company's performance and outlook, Revlon President and Chief
Executive Officer Jack Stahl stated, "Our long-term strategy is focused on
actions to build all of our great brands, reduce costs and create sustainable
value. While 2006 Adjusted EBITDA will be lower than originally projected,
largely due to a significant shortfall associated with the launch of Vital
Radiance, our overall business continues to make progress. In this environment,
we believe we are taking the right actions for the long-term to grow our sales,
including capitalizing on the Revlon brand across categories, while working
aggressively to reduce our cost structure and improve our margins. We are
confident that our financial results in 2007 and beyond will benefit
meaningfully from these actions."
The Company indicated that it is continuing to assess various alternatives to
strengthen its capital structure and improve its financial flexibility. These
alternatives include, among other things, a possible amendment to the Company's
current bank credit agreement to add $75 million to the term loan. The Company
also plans on issuing $75 million of equity in late 2006 or early 2007, as
previously announced, and intends to use the proceeds of such equity issuance to
reduce indebtedness.
The Company will host a conference call with members of the investment community
on July 10, 2006 at 10:00 A.M. EDT to discuss this release. Access to the call
is available to the public at www.revloninc.com.
Preliminary Q2 Results
----------------------
The Company indicated that net sales in the second quarter of 2006 are expected
to be approximately even with net sales in the second quarter of 2005. This
performance is expected to reflect growth in gross sales(2) of approximately 8%,
primarily driven by the U.S., largely offset by approximately $20 million of
estimated Vital Radiance returns. Approximately half of the Vital Radiance
returns relate to space reductions at certain large format retail customers,
with the balance due to anticipated modifications to the brand offering related
to the introduction of new products in 2007.
Adjusted EBITDA for the second quarter of 2006 is expected to be a loss of
approximately $30 million versus Adjusted EBITDA of $24 million in the second
quarter of 2005. This performance is expected to primarily reflect a negative
impact of approximately $40 million related to Vital Radiance, as well as higher
brand support across the balance of the portfolio. Partially offsetting these
factors was the benefit of the growth in gross sales in the quarter.
Commenting on the performance of Vital Radiance, Mr. Stahl stated,
"Notwithstanding the investment required to launch this new brand, Vital
Radiance has achieved a strong market share(3) presence in several key retailers
and is on a path to becoming about a $50 million brand at retail targeted at an
important and growing demographic segment with a product line that is highly
effective. We have achieved a share of 2% to 3% in a number of important
retailers after only a few months in the market. We believe these market
positions provide us an important platform from which we can build the brand and
achieve broader success across our customer base over time."
Adjusted EBITDA and gross sales are non-GAAP measures that are defined in the
footnotes to this release. Adjusted EBITDA is reconciled to net income/(loss),
the most directly comparable measure, in the accompanying financial table.
Operating loss in the second quarter of 2006 is expected to be approximately $55
million, versus essentially break-even operating results in the second quarter
of 2005. Substantially the same factors impacting the Adjusted EBITDA comparison
are expected to impact the operating loss comparison. Net loss for the second
quarter of 2006 is expected to be approximately $95 million, versus a net loss
of $36 million in the second quarter of 2005.
Full Year 2006 Outlook
----------------------
For the full year 2006, the Company indicated that it expects net sales growth
in the mid-single digit range. Adjusted EBITDA for the year is expected to be
approximately even with or somewhat below the 2005 level of $167 million, with
the second half of 2006 expected to be up considerably versus year-ago,
notwithstanding the benefit the Company achieved in the fourth quarter of 2005
related to the sell-in of its 2006 new products program. The expected
improvement in the second half of 2006 reflects the absence in the current year
of some $55 million in start-up costs, including $44 million of Almay returns
and allowances, that were incurred primarily in the third quarter and, to a
lesser extent, the fourth quarter of 2005, related to the complete restaging of
Almay and the launch of Vital Radiance. Also expected to benefit the
year-over-year comparison in the second half are savings from the Company's cost
reduction actions and various productivity programs.
In terms of the financial impact of Vital Radiance on the Company's 2006
results, Revlon indicated that the new brand is likely to reduce its
consolidated full year operating profitability by approximately $60 million,
reflecting the significant investment the Company made in the early stage of the
launch to build awareness and trial combined with achieving less than expected
sales.
Update on Vital Radiance and Almay Restage
------------------------------------------
The Company indicated that its new Vital Radiance brand, introduced earlier this
year, has achieved good results in key retailers within both the Drug and Food
classes of trade, while performance in large format mass retailers has been well
below expectations.
The Company indicated that, with only a few months of distribution, Vital
Radiance achieved an overall market share of 1.4% in the month of May, with a
1.6% share achieved in that period in the Drug class of trade. Within Drug,
Vital Radiance has achieved shares of 2% to 3% in several retailers, after only
a few months in the marketplace, and the Company plans to leverage the drivers
of this success across the Vital Radiance customer base.
The Company believes that the range of performance achieved to-date across the
various mass trade channels and store formats relates primarily to shopper
demographics and the degree to which the Vital Radiance brand supports the
go-to-market strategy of a given retailer.
Given the underperformance in certain stores, Revlon currently expects a
reduction of some of the retail space it gained for Vital Radiance. However, the
Company expects its 22% space gain achieved across all of its color cosmetics
brands in early 2006 will be largely maintained, even after giving effect to the
anticipated reduction of some Vital Radiance space.
The Company's plan moving forward for Vital Radiance is to focus resources on
its revised retail footprint, its most effective marketing drivers and the most
productive products in the line. The Company believes this approach will result
in a substantially reduced operating loss for the brand in 2007.
The Company indicated that its restage of Almay, while tracking behind its
expectations, is contributing to consumption growth at retail in 2006, following
the strong year the brand achieved in 2005. The Company believes that Almay,
with its restaged position in the marketplace, provides an important platform
for growth.
Long-Term and 2007 Outlook
--------------------------
The Company indicated that its goal for longer-term net sales growth is in the
mid-single-digit range, on average, over time, based on the strength of its
brands and the demonstrated attractive growth of the categories in which it
competes. The Company continues to believe that significant improvement in
operating margins is achievable over time, with key areas of focus being
improving results in the areas of cost of goods sold and returns, as well as
overhead and administrative expenses. The Company indicated that it continues to
expect its margin improvement initiatives and productivity programs to
significantly benefit its financial results over time.
While not providing specific guidance for 2007, Mr. Stahl stated, "We have
every confidence that our financial results in 2007 will benefit from the
significant revenue-generating actions we are planning to take to grow the
Revlon brand across the categories in which we compete; the
substantially-improved financial profile of Vital Radiance we expect in 2007,
given the actions we have taken to focus our brand support and retail
presentation where it is proving most effective; and the margin enhancing
actions we will continue to aggressively pursue to improve cost of goods sold
and returns, as well as overhead and administrative expenses."
About Revlon
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Revlon is a worldwide cosmetics, skin care, fragrance, and personal care
products company. The Company's vision is to deliver the promise of beauty
through creating and developing the most consumer preferred brands. Websites
featuring current product and promotional information can be reached at
www.revlon.com, www.almay.com, www.vitalradiance.com and www.mitchumman.com.
Corporate and investor relations information can be accessed at
www.revloninc.com. The Company's brands include Revlon(R), Almay(R), Vital
Radiance(R), Ultima(R), Charlie(R), Flex(R), and Mitchum(R).
Investor Relations Contact: Media Contact:
Maria A. Sceppaguercio Scott Behles
(212) 527-5230 (212) 527-4718
Footnote to Press Release
-------------------------
(1)Adjusted EBITDA is a non-GAAP financial measure 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
early extinguishment of debt and miscellaneous expenses. In calculating Adjusted
EBITDA, the Company excludes the effects of gains/losses on foreign currency
transactions, gains/losses on the sale of assets, gains/losses on the early
extinguishment of debt and miscellaneous expenses because the Company's
management believes that some of these items may not occur in certain periods,
the amounts recognized can vary significantly from period to period and these
items do not facilitate an understanding of the Company's operating performance.
The Company's management utilizes Adjusted EBITDA as an operating performance
measure in conjunction with GAAP measures, such as net income and gross margin
calculated in accordance with GAAP.
The Company's management uses Adjusted EBITDA as an integral part of its
reporting and planning processes and as one of the primary measures to, among
other things --
(i) monitor and evaluate the performance of the Company's business operations;
(ii) facilitate management's internal comparisons of the Company's historical
operating performance of its business operations;
(iii) facilitate management's external comparisons of the results of its overall
business to the historical operating performance of other companies that may
have different capital structures and debt levels;
(iv) review and assess the operating performance of the Company's management
team and as a measure in evaluating employee compensation and bonuses;
(v) analyze and evaluate financial and strategic planning decisions regarding
future operating investments; and
(vi) plan for and prepare future annual operating budgets and determine
appropriate levels of operating investments.
The Company's management believes that Adjusted EBITDA is useful to investors to
provide them with disclosures of the Company's operating results on the same
basis as that used by the Company's management. Additionally, the Company's
management believes that Adjusted EBITDA provides useful information to
investors about the performance of the Company's overall business because such
measure eliminates the effects of unusual or other infrequent charges that are
not directly attributable to the Company's underlying operating performance.
Additionally, the Company's management believes that because it has historically
provided Adjusted EBITDA in previous press releases, that including such
non-GAAP measure in its earnings releases provides consistency in its financial
reporting and continuity to investors for comparability purposes. Accordingly,
the Company believes that the presentation of Adjusted EBITDA, when used in
conjunction with GAAP financial measures, is a useful financial analysis tool,
used by the Company's management as described above, which can assist investors
in assessing the Company's financial condition, operating performance and
underlying strength. Adjusted EBITDA should not be considered in isolation or as
a substitute for net income/(loss) prepared in accordance with GAAP. Other
companies may define EBITDA differently. Also, while EBITDA is defined
differently than Adjusted EBITDA for the Company's credit agreement, certain
financial covenants in its borrowing arrangements are tied to similar measures.
Adjusted EBITDA, as well as the other information in this press release, should
be read in conjunction with the Company's financial statements and footnotes
contained in the documents that the Company files with the U.S. Securities and
Exchange Commission.
(2) Gross Sales is a non-GAAP financial measure defined as net sales before
returns, allowances, discounts and other revenues, and essentially represents
the dollar value of shipments. In calculating Gross Sales, the Company excludes
the effects of returns, allowances, discounts and other revenues as the
Company's management believes that some of these items can vary significantly
from period to period. This data is presented to depict the Company's shipment
of products before giving effect to returns, allowances, discounts and certain
other revenue. The Company's management utilizes Gross Sales as an operating
performance measure in conjunction with other GAAP measures, such as net sales
and gross margin calculated in accordance with GAAP. Gross Sales should not be
considered in isolation or as a substitute for net sales prepared in accordance
with GAAP.
(3) All market share and consumption data reflect U.S. mass-market dollar volume
according to ACNielsen (an independent research entity). ACNielsen data is an
aggregate of the drug channel, Kmart, Target and Food and Combo stores, and
excludes Wal-Mart and regional mass volume retailers. This data represents
approximately two-thirds of the Company's U.S. mass-market dollar volume.
Forward-Looking Statements
--------------------------
Statements in this press release which are not historical facts, including
statements about the Company's plans, strategies, beliefs and expectations, are
forward-looking and subject to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements speak only
as of the date they are made. Accordingly, except for the Company's ongoing
obligations under the U.S. federal securities laws, the Company does not intend
to update or otherwise revise the forward-looking information to reflect actual
results of operations, changes in financial condition, changes in estimates,
expectations or assumptions, changes in general economic, industry or cosmetic
category conditions or other circumstances arising and/or existing since the
preparation of this press release or to reflect the occurrence of any
unanticipated events. Such forward-looking statements include, without
limitation, the Company's beliefs, expectations and estimates about: (i) its
future growth, profitability and financial performance, including the Company's
expectations that Adjusted EBITDA for 2006 will be approximately even with or
somewhat below the $167 million achieved in 2005; that net sales growth for the
full year 2006 will be in the mid-single digit range; that Adjusted EBITDA for
the second half of 2006 will be up considerably versus year-ago; that Vital
Radiance is likely to reduce the Company's consolidated full year 2006 operating
profitability by approximately $60 million; that longer-term the Company's goal
is to grow net sales in the mid-single digit range, on average, over time; and
that 2007 financial results and beyond will benefit from significant
revenue-generating actions (including actions to grow the Revlon brand), the
substantially-improved financial profile of Vital Radiance and margin enhancing
actions to aggressively reduce the Company's cost structure and improve margins,
including improving cost of goods sold, returns and overhead and administrative
expenses; (ii) its beliefs and plans as to the potential growth, financial
performance and effectiveness of its Vital Radiance and Almay brands, including
that Vital Radiance is on a path to becoming about a $50 million brand at
retail; that Vital Radiance's share performance in a number of key retailers
provide an important platform from which to build the brand and achieve broader
success across the Company's customer base over time; that it will focus
resources on Vital Radiance's revised retail footprint, its most effective
marketing drivers and the most productive products in the line and that this
approach will result in a substantially reduced operating loss for the Vital
Radiance brand in 2007; and that Almay provides an important platform for
growth; (iii) its expectations as to future retail space configurations,
including its expectations as to the reduction of some of the retail space the
Company gained for Vital Radiance; and that the Company's 22% space gain
achieved across all of its color cosmetics brands in early 2006 will be largely
maintained; (iv) its expectations and plans as to assessing various alternatives
to strengthen the Company's capital structure and improve its financial
flexibility, including a possible amendment to the Company's current bank credit
agreement to add $75 million to the term loan and its plans on issuing $75
million of equity in late 2006 or early 2007 and its intent to use the proceeds
of such equity issuance to reduce indebtedness; and (v) its expectations and
plans to significantly improve its operating margins over time through its
ongoing margin improvement initiatives, productivity programs and aggressive
cost reduction actions; that key areas of focus will be improving results in the
areas of cost of goods sold, returns, and overhead and administrative expenses;
that its expected top-line growth coupled with the Company's productivity
initiatives and aggressive cost reduction actions will drive significant margin
improvement over the next several years, and the impact from such improvements
on the Company's future financial results, including that they will
significantly benefit the Company's financial results over time. Actual results
may differ materially from such forward-looking statements for a number of
reasons, including those set forth in the Company's filings with the SEC,
including the Company's 2005 Annual Report on Form 10-K and the Company's Form
10-Qs and Form 8-Ks that it files with the SEC during 2006 (which may be viewed
on the SEC's website at http://www.sec.gov or on the Company's website at
http://www.revloninc.com), as well as reasons including difficulties, delays or
the inability of the Company to: (i) achieve its future growth, profitability
and financial performance objectives, including less than anticipated growth, or
a decrease in, net sales or Adjusted EBITDA, including due to less than
anticipated results from the Company's Revlon, Vital Radiance, Almay and/or
other brands, such as less than expected effectiveness of their marketing
programs, a decrease in sales of the Company's other products or more than
anticipated returns; (ii) grow and improve the profitability of its brands, such
as due to continued increased competitive activity or less than anticipated
retailer or consumer acceptance of the Company's marketing plans and actions;
(iii) largely maintain the retail space gains the Company secured for 2006,
including greater than anticipated retailer space reductions; (iv) consummate
the possible amendment to the bank credit agreement or complete the $75 million
equity issuance, in whole or in part, due to conditions in the capital markets
or other factors; and/or (v) achieve significant improvements to its operating
margins over time, such as due to its productivity initiatives or cost reduction
actions being less effective than planned, including as a result of higher than
expected expenses due to continued increased competitive activity. Factors other
than those listed above could also cause the Company's results to differ
materially from expected results. Additionally, the business and financial
materials and any other statement or disclosure on, or made available through,
the Company's websites or other websites referenced herein shall not be
incorporated by reference into this release.
REVLON, INC. AND SUBSIDIARIES
UNAUDITED NET LOSS TO ADJUSTED EBITDA RECONCILIATION
(dollars in millions)
Three Months Ended Year Ended
June 30, December 31,
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2006E 2005 2005
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(Unaudited) (Unaudited)
Reconciliation to net loss:
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Net loss............................................... $ (95) $ (35.8) $ (83.7)
Interest expense, net.................................. 35 30.0 124.2
Amortization of debt issuance costs.................... 2 1.7 6.9
Foreign currency (gains) losses, net................... 0 (1.2) 0.5
Loss on early extinguishment of debt................... 0 1.5 9.0
Miscellaneous, net..................................... 0 0.2 (0.5)
Provision for income taxes............................. 2 3.3 8.5
Depreciation and amortization.......................... 26 24.5 101.7
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Adjusted EBITDA........................................ $ (30) $ 24.2 $ 166.6
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E - Unaudited Estimate