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
Date of Report: November 7, 2006
(Date of earliest event reported): (November 7, 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 of (Commission (I.R.S. Employer
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.
On November 7, 2006, Revlon, Inc. issued a press release announcing its earnings
for the fiscal quarter ended September 30, 2006. A copy of the press release is
attached to this Form 8-K as Exhibit 99.1 and is incorporated by reference into
this Item 2.02. In accordance with General Instruction B.2 to the Form 8-K, the
information under this Item 2.02 and the press release shall be deemed to be
"furnished" to the Securities and Exchange Commission (the "SEC") and not be
deemed to be "filed" with the SEC for purposes of Section 18 of the Exchange Act
or otherwise subject to the liabilities of that section.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
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99.1 Press release dated November 7, 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
------------------------------
Robert K. Kretzman
Executive Vice President, Chief
Legal Officer, General Counsel and
Secretary
Date: November 7, 2006
3
EXHIBIT INDEX
Exhibit No. Description
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99.1 Press release dated November 7, 2006.
4
Exhibit 99.1
FOR IMMEDIATE RELEASE
Revlon Reports Third Quarter and Nine-Month 2006 Results
Company Reiterates its Outlook for 2006 and 2007
NEW YORK, November 7, 2006 - Revlon, Inc. (NYSE: REV) today announced results
for the third quarter and nine months ended September 30, 2006. Net sales in the
third quarter 2006 advanced 11% to $306 million, compared with net sales of $275
million in the third quarter 2005. Operating loss in third quarter 2006 was
approximately $57 million, after giving effect to significant expenses during
the quarter related to restructuring, discontinuing Vital Radiance and executive
severance.
During the quarter, the Company began the implementation of its
previously-disclosed organizational streamlining, as well as its
previously-disclosed discontinuance of Vital Radiance, which did not maintain an
economically feasible retail platform for future growth. In addition, the
Company incurred executive severance during the quarter related to a change in
leadership at the Company. Revlon reiterated its belief that its restructuring
actions taken in the first and third quarters of 2006, the total impact of Vital
Radiance and executive severance, while negatively impacting its operating
profitability in the third quarter by some $72 million and the full year 2006 by
an estimated $140 million, will accelerate the Company's path to becoming net
income and cash flow positive.
Commenting on the results for the quarter, Revlon President and Chief Executive
Officer David Kennedy stated, "Our results in the quarter reflect the important,
and admittedly costly, decisions we have made to position Revlon for future
success. We are fortunate to have such a strong portfolio of brands, and we
intend to leverage the tremendous equity of these brands--particularly
Revlon--as we move forward. Importantly, our go-forward approach will continue
to focus on bringing innovation and excitement to the market in a way that is
intensely focused on driving our profitability and cash flow."
Page 1
Revlon will host a conference call with members of the investment community on
November 7, 2006 at 9:30 AM EST to discuss the results of the third quarter.
Access to the call is available to the public at www.revloninc.com, in the
Investor Relations section, under Events Calendar. A copy of the press release
and related information will be available in the Investor Relations section of
the Company's website, under Press Releases and Financial Reports, respectively.
Third Quarter Results
---------------------
Net sales in the third quarter of 2006 advanced 11% to $306 million, compared
with net sales of $275 million in the third quarter of 2005. Net sales in the
2006 quarter were reduced by approximately $15 million due to Vital Radiance,
including approximately $31 million for returns and allowances provisions
related to discontinuing the brand, while net sales in the 2005 quarter were
reduced by approximately $32 million for returns and allowances provisions
related to the complete restaging of the Almay brand. Excluding these factors,
the growth in net sales was driven by strength in International.
In the United States, net sales for the quarter advanced 13% to $160 million,
compared with net sales of $142 million in the third quarter of 2005. This
performance largely reflected the aforementioned net sales reduction in the
current quarter due to Vital Radiance and the aforementioned Almay returns and
allowances provisions in the 2005 quarter. Excluding these factors, net sales in
the U.S. were essentially even with the prior year.
In International, net sales for the quarter advanced 9% to $146 million, versus
net sales of $134 million in the third quarter of 2005. Excluding the impact of
foreign currency translation, this performance was driven by strength in each of
the Company's three geographic regions, particularly Europe and Latin America.
Favorable foreign currency translation added less than one percentage point to
the International growth in the quarter.
Page 2
As previously disclosed, during the quarter the Company initiated an
organizational streamlining to eliminate redundancy, reduce layers of management
and overhead costs and improve profit margins. This restructuring will reduce
the Company's U.S. workforce by approximately 250 positions and result in
estimated ongoing annualized savings of approximately $34 million. The Company
expects the total cost of the program to be approximately $29 million, which it
expects to incur over the 2006 and 2007 period. In this regard, the Company
incurred restructuring and related charges during the third quarter totaling
approximately $14 million related to severance and other termination benefits
and expects to incur an additional $7 million in charges related to this program
in the fourth quarter of 2006.
The Company incurred charges totaling approximately $49 million during the third
quarter related to its decision to discontinue the Vital Radiance brand. The
charges include a provision for returns and allowances of approximately $31
million, as well as approximately $15 million for the write-off of inventories
and selling and promotional materials, and approximately $3 million for the
write-off and accelerated amortization of displays. The Company indicated that,
including the cost to discontinue the brand, Vital Radiance is expected to
negatively impact its full year operating profitability by approximately $100
million, including the impact of approximately $92 million incurred through the
first nine months of 2006.
Adjusted EBITDA(1) in the current quarter was a loss of $25.1 million, and
operating loss in the quarter was approximately $57.2 million, both after giving
effect to restructuring costs, the total impact of Vital Radiance, including the
cost to discontinue the brand, and other charges in connection with executive
severance. The total impact of these items on Adjusted EBITDA in the quarter was
approximately $64 million.
The Adjusted EBITDA loss of $25.1 million in the third quarter of 2006 compared
with an Adjusted EBITDA loss of $6.1 million in the third quarter of 2005.
Driving the decline in Adjusted EBITDA were the impacts of the aforementioned
items--namely restructuring, Vital Radiance and executive severance--that
unfavorably impacted 2006, as well as higher cost of sales primarily related to
increased provisions for estimated excess inventory. Partially offsetting these
factors were the Almay returns and allowances provisions that burdened the prior
year by approximately $32 million, and favorable overhead costs in the 2006
quarter stemming from restructuring, productivity initiatives, and reductions in
discretionary spending. Also favorably impacting the comparison were the
benefits of higher sales and lower overall brand support, excluding the spending
behind Vital Radiance.
Page 3
Commenting on the Company's financial performance, Mr. Kennedy stated, "Our
performance in the third quarter was significantly impacted by the costs of the
decisions we announced in September. We continue to expect net sales for the
full year 2006 to be approximately $1,340 million, including the impact of Vital
Radiance returns and allowances provisions taken during the year. In addition,
we continue to expect Adjusted EBITDA for the year to be approximately $75
million to $85 million, after giving effect to the impacts of the restructuring
charges taken during the year, the expected full-year impact of Vital Radiance,
and executive severance, which collectively are expected to negatively impact
Adjusted EBITDA by approximately $125 million. As we look ahead, we are
confident in our ability to achieve Adjusted EBITDA of approximately $210
million in 2007."
Adjusted EBITDA is a non-GAAP measure that is defined in the footnotes of this
release and which is reconciled to net income/(loss), the most directly
comparable GAAP measure, in the accompanying financial tables.
Net loss in the third quarter of 2006 was $100.5 million, or $0.24 per diluted
share, compared with net loss of $65.4 million, or $0.17 per diluted share, in
the third quarter of 2005, largely driven by the same factors that impacted
operating profitability in the quarter, as well as higher interest expense. Cash
flow used for operating activities in the third quarter of 2006 was $29.3
million, compared with cash flow used for operating activities of $69.1 million
in the third quarter of 2005. This performance largely reflected the significant
use of working capital in the 2005 quarter related to Vital Radiance and the
restage of Almay, partially offset by the increase in net loss in the current
quarter.
Page 4
Nine-Month Results
------------------
Net sales in the first nine months of 2006 advanced approximately 6% to $953
million, compared with net sales of $895 million in the first nine months of
2005. In the United States, net sales advanced 7% to $538 million for the first
nine months of 2006, versus net sales of $502 million in the same period last
year. International net sales of $415 million in the first nine months of 2006
advanced approximately 6% versus net sales of $393 million in the year-ago
period. Excluding the favorable impact of foreign currency translation,
International net sales grew approximately 5% in the nine-month period.
Adjusted EBITDA in the first nine months of 2006 was a loss of $30.0 million,
compared with Adjusted EBITDA of $39.8 million in the first nine months of 2005.
Operating loss in the first nine months of 2006 was $120.3 million, versus an
operating loss of $34.7 million in the first nine months of 2005. For the
nine-month period of 2006, charges related to the Company's restructuring
actions in 2006, the total impact of Vital Radiance, including the cost to
discontinue the brand, and executive severance negatively impacted Adjusted
EBITDA by approximately $113 million and operating profitability by
approximately $124 million.
Net loss in the first nine months of 2006, after giving effect to restructuring,
discontinuing Vital Radiance and executive severance, was $245.8 million, or
$0.61 per diluted share, compared with a net loss in the first nine months of
2005 of $148.0 million, or $0.40 per diluted share. Cash flow used for operating
activities in the first nine months of 2006 was $124.8 million, compared with
cash flow used for operating activities of $115.9 million in the first nine
months of 2005.
Market Share Results(2)
-----------------------
According to ACNielsen, the color cosmetics category grew 5.7% versus year-ago
in the third quarter, while the Company grew its consumption in the category by
8.3% in the period, resulting in a 0.5 point share gain to 22.1%. The Revlon
brand registered a share of 14.5%, compared with 15.3% in the year-ago period,
while the Almay brand maintained its share position at 6.3% in the quarter, and
Vital Radiance contributed a quarterly share of 1.3%.
Page 5
In each of the Company's other key categories, the Company gained or maintained
share for the quarter. Specifically, in women's hair color, the Company grew
consumption 13% versus year-ago in a category that advanced 1%, resulting in a
full share point gain to 9.4%. Similarly, in beauty tools, the Company grew
consumption 7% in the quarter in a category that advanced 2%, resulting in a 1.3
point share improvement to 26.6% in the quarter. In anti-perspirants and
deodorants, the Company maintained its share position at 6.1% in the quarter.
About Revlon
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 and www.mitchumman.com. Corporate and investor
relations information can be accessed at www.revloninc.com. The Company's
brands, which are sold worldwide, include Revlon(R), Almay(R), Ultima(R),
Charlie(R), Flex(R), and Mitchum(R).
Investors & Media Contact:
Maria A. Sceppaguercio
(212) 527-6465
Page 6
Footnotes to Press Release
--------------------------
(1)Adjusted EBITDA is a non-GAAP financial measure that is reconciled to net
income/(loss), its most directly comparable GAAP measure, in the accompanying
financial tables. 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 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, that 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)All market share and consumption data is 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.
Page 7
Forward-Looking Statements
--------------------------
Statements made 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, and, except for the Company's ongoing obligations
under the U.S. federal securities laws, the Company undertakes no obligation to
publicly update any forward-looking statement, whether as a result of new
information, future events or otherwise. In particular, the Company does not
generally publish its strategic plans or make external projections of its
anticipated financial position or results of operations or the type of
forward-looking information regarding its strategic plans included in this press
release, including projections or estimates of growth opportunities, Adjusted
EBITDA and net sales. 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 regarding its strategic plans
to reflect actual results of operations, changes in financial condition, changes
in estimates, expectations or assumptions or other circumstances arising and/or
existing since the preparation of this press release or to reflect the
occurrence of any unanticipated events. Further, the Company does not intend to
update or revise the forward-looking information regarding its strategic plans
to reflect changes in general economic, industry or cosmetics category
conditions. Such forward-looking statements include, without limitation, the
Company's expectations, plans and/or beliefs: (i) concerning its future growth,
profitability, cash flow and financial performance, including that the Company's
organizational streamlining and discontinuance of Vital Radiance will accelerate
the Company's path to becoming net income and cash flow positive; the Company's
plans to leverage the tremendous equity of its established brands, particularly
Revlon, and drive the Company's profitability and cash flow by bringing
innovation and excitement to the market; that, including the cost to discontinue
the brand, Vital Radiance will negatively impact full year operating
profitability by approximately $100 million; that 2006 net sales will be
approximately $1,340 million; that 2006 Adjusted EBITDA will be approximately
$75 million to $85 million, after giving effect to restructuring charges taken
during 2006, the Vital Radiance discontinuance and executive severance, which
collectively are expected to negatively impact 2006 Adjusted EBITDA by
approximately $125 million and 2006 operating profitability by an estimated $140
million; and that the Company has the ability to achieve Adjusted EBITDA of
approximately $210 million in 2007; and (ii) that the Company's organizational
streamlining will eliminate redundancy, reduce layers of management and overhead
costs and improve profit margins and the Company's expectations that the total
cost of the September 2006 program to be incurred over the 2006 and 2007 period
will be approximately $29 million, and the timing of such costs, and that such
program will result in estimated ongoing annualized savings of approximately $34
million. 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 Annual Report on Form 10-K for the
year ended December 31, 2005, and the Company's Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K 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, cash flow and financial performance objectives, including less
than anticipated growth, or a decrease in, net sales or Adjusted EBITDA,
including, without limitation, 2006 net sales being less than approximately
$1,340 million, 2006 Adjusted EBITDA being less than approximately $75 million
to $85 million and/or 2007 Adjusted EBITDA being less than approximately $210
million, such as due to less than anticipated results from the Company's brands,
less than expected effectiveness of marketing programs, lower than anticipated
revenues or more than anticipated returns, less than anticipated shipments,
higher than expected expenses, less than anticipated retail customer or consumer
acceptance of the Company's new products, including under the Revlon brand,
decreased sales of the Company's existing products as a result of new products,
actions by the Company's retail customers impacting the Company's financial
performance, including in response to decreased consumer spending in response to
weak economic conditions or weakness in the category or retailer inventory
management, changes in consumer preferences, such as reduced consumer demand for
the Company's color cosmetics and other current products, changes in consumer
purchasing habits, including with respect to shopping channels, changes in the
competitive environment and actions by the Company's competitors, including
business combinations, technological breakthroughs, new products offerings,
promotional spending and marketing and promotional successes; and (ii) fully
implement the Company's September 2006 organizational streamlining or higher
than anticipated restructuring and related costs, changes in the timing of such
costs, less than anticipated benefits or lower than expected savings in
connection with such program. 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.
Page 8
REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------- ------------- ------------- -------------
Net sales $ 305.9 275.3 952.5 894.5
Cost of sales 148.9 117.0 404.2 350.1
------------- ------------- ------------- -------------
Gross profit 157.0 158.3 548.3 544.4
Selling, general and
administrative expenses 200.4 190.6 645.3 577.6
Restructuring costs
(benefit), net 13.8 - 23.3 1.5
------------- ------------- ------------- -------------
Operating loss (57.2) (32.3) (120.3) (34.7)
------------- ------------- ------------- -------------
Other expenses (income):
Interest expense 38.3 33.2 109.4 94.7
Interest income (0.2) (1.4) (1.0) (4.8)
Amortization of debt
issuance costs 2.0 1.8 5.6 5.1
Foreign currency
(gains) losses, net (0.2) (2.7) (1.4) (1.4)
Loss on early
extinguishment of
debt - - 0.4 9.0
Miscellaneous, net 0.1 (0.1) 0.5 1.5
------------- ------------- ------------- -------------
Other expenses,
net 40.0 30.8 113.5 104.1
------------- ------------- ------------- -------------
Loss before income taxes (97.2) (63.1) (233.8) (138.8)
Provision for income
taxes 3.3 2.3 12.0 9.2
------------- ------------- ------------- -------------
Net loss $ (100.5) $ (65.4) $ (245.8) $ (148.0)
============= ============= ============= =============
Basic and diluted net
loss per common share $ (0.24) $ (0.17) $ (0.61) $ (0.40)
============= ============= ============= =============
Weighted average number
of common shares
outstanding:
Basic and diluted 412,642,997 374,396,137 401,260,132 373,876,139
============= ============= ============= =============
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in millions)
September 30, December 31,
ASSETS 2006 2005
------------- ------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 23.9 32.5
Trade receivables, net 166.9 282.2
Inventories 206.9 220.6
Prepaid expenses and other 56.5 56.7
------------- ------------
Total current assets 454.2 592.0
Property, plant and equipment, net 119.1 119.7
Other assets 165.2 146.0
Goodwill, net 186.1 186.0
------------- ------------
Total assets $ 924.6 $ 1,043.7
============= ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings $ 10.2 9.0
Current portion of long-term debt 8.1 -
Accounts payable 99.8 133.1
Accrued expenses and other 343.7 328.4
------------- ------------
Total current liabilities 461.8 470.5
Long-term debt 1,446.8 1,413.4
Other long-term liabilities 241.0 255.7
Total stockholders' deficiency (1,225.0) (1,095.9)
------------- ------------
Total liabilities and stockholders' deficiency $ 924.6 $ 1,043.7
============= ============
REVLON, INC. AND SUBSIDIARIES
UNAUDITED ADJUSTED EBITDA RECONCILIATION
(dollars in millions)
Three Months Ended
September 30,
----------------------
2006 2005
--------- ---------
(Unaudited)
Reconciliation to net loss:
------------------------------------
Net loss $ (100.5) $ (65.4)
Interest expense, net 38.1 31.8
Amortization of debt issuance costs 2.0 1.8
Foreign currency (gains) losses, net (0.2) (2.7)
Loss on early extinguishment of debt - -
Miscellaneous, net 0.1 (0.1)
Provision for income taxes 3.3 2.3
Depreciation and amortization 32.1 26.2
--------- ---------
Adjusted EBITDA $ (25.1) $ (6.1)
========= =========
Nine Months Ended
September 30,
----------------------
2006 2005
--------- ---------
(Unaudited)
Reconciliation to net loss:
------------------------------------
Net loss $ (245.8) $ (148.0)
Interest expense, net 108.4 89.9
Amortization of debt issuance costs 5.6 5.1
Foreign currency (gains) losses, net (1.4) (1.4)
Loss on early extinguishment of debt 0.4 9.0
Miscellaneous, net 0.5 1.5
Provision for income taxes 12.0 9.2
Depreciation and amortization 90.3 74.5
--------- ---------
Adjusted EBITDA $ (30.0) $ 39.8
========= =========