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Revlon Reports 2011 Results

Stocks in this article: REV

b Free cash flow is a non-GAAP measure that is reconciled to net cash provided by operating activities, its most directly comparable GAAP measure, in the accompanying financial tables. Free cash flow is defined as net cash provided by operating activities, less capital expenditures for property, plant and equipment, plus proceeds from the sale of certain assets. Free cash flow excludes proceeds on sale of discontinued operations. Management uses free cash flow (i) to evaluate its business and financial performance and overall liquidity; (ii) in strategic planning; and (iii) to review and assess the operating performance of the Company's management team and, together with Adjusted EBITDA and other operational objectives, as a measure in evaluating employee compensation and bonuses. Management believes that free cash flow is useful for investors because it provides them with an important perspective on the cash available for debt repayment and other strategic measures, after making necessary capital investments in property and equipment to support the Company's ongoing business operations, and provides them with the same measures that management uses as the basis for making resource allocation decisions. Free cash flow does not represent the residual cash flow available for discretionary expenditures, as it excludes certain expenditures such as mandatory debt service requirements, which for the Company are significant. The Company does not intend for free cash flow to be considered in isolation or as a substitute for the related GAAP measures. Other companies may define free cash flow or similarly titled measures differently.

c Included in this earnings release is the Company's provision for income taxes excluding a non-cash tax benefit of $16.9 million in 2011 and $260.6 million in 2010 associated with a reduction in the Company’s deferred tax valuation allowances, which is a non-GAAP financial measure. Management has presented such non-GAAP measure because the Company's management believes that excluding the non-cash tax benefits 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 and provides useful information to investors about the performance of the Company's overall business because such presentation eliminates the effects of these unusual tax benefits that are not directly attributable to the Company's underlying operating performance in the respective periods. Additionally, the Company's management believes that excluding these non-cash tax benefits of $16.9 million in 2011 and $260.6 million in 2010 associated with reductions in the Company’s deferred tax valuation allowances provides consistency in its financial reporting and continuity to investors for comparability purposes. Accordingly, the Company believes that the presentation of its provision for income taxes excluding these non-cash tax benefits, when used in conjunction with GAAP financial measures, is a useful financial analysis tool, used by the Company's management, that can assist investors in assessing the Company's financial condition, operating performance and underlying strength. Such non-GAAP financial measure, 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.

Forward-Looking Statements

Statements made in this press release, which are not historical facts, including statements about the Company's plans, strategies, focus, 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 to reflect actual results of operations; changes in financial condition; changes in general U.S. or international economic, industry or cosmetics category conditions; changes in estimates, expectations or assumptions; or other circumstances, conditions, developments or events arising after the issuance of this press release. Such forward-looking statements include, without limitation, the Company's following beliefs, expectations, focus and/or plans: (i) the Company’s plans to continue to manage our business carefully, with an emphasis on maintaining our operating margins, as we remain focused on continuing to realize our strategic objective of profitably growing our business; (ii) the Company's belief that it maintains comprehensive property and business interruption insurance and that the business interruption losses incurred in 2011 are not indicative of future business interruption losses for insurance purposes, nor future expected profits for Revlon Venezuela; and (iii) the Company’s plans to continue to execute its business strategy: (a) build our strong brands, (b) develop our organizational capability, (c) drive our company to act globally, (d) increase our operating profit and cash flow and (e) improve our capital structure. Actual results may differ materially from such forward-looking statements for a number of reasons, including those set forth in our filings with the SEC, including, without limitation, our 2011 Annual Report on Form 10-K that we will file with the SEC in February 2012 and our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we have filed or will file with the SEC during 2012 (which may be viewed on the SEC's website at http://www.sec.gov or on our website at http://www.revloninc.com), as well as reasons including: (i) difficulties, delays, unanticipated costs or our inability to profitably grow our business, including, without limitation, less than expected profitable net sales growth, such as due to the reasons set forth in clause (iii)(a) below; (ii) unexpected business interruption losses or impacts on future expected profits in Venezuela and/or less than expected insurance coverages and/or insurance proceeds to cover such losses; and (iii) difficulties, delays, unanticipated costs or our inability to continue to execute our business strategy, such as (a) less than expected growth of our strong brands, such as due to difficulties, delays, unanticipated costs or our inability to launch innovative products, such as due to less than effective new product development; less than expected acceptance of our new products by consumers and/or retail customers; less than expected acceptance of our brand communication for such products by consumers and/or retail partners; less than expected levels of advertising and/or promotional activities for our new product launches; less than expected levels of execution with our retail partners; less than anticipated sales of our new products as a result of consumer response to worldwide economic or other conditions; greater than expected volatility in the retail sales environment; more than anticipated returns for such products; actions by our retail customers impacting our sales, including in response to any decreased consumer spending in response to weak economic conditions or weakness in the cosmetics category in the mass retail channel; adverse changes in currency exchange rates and / or currency controls; decreased sales of the Company's products as a result of increased competitive activities by the Company’s competitors; changes in consumer purchasing habits, including with respect to shopping channels; retailer inventory management; greater than expected impact from changes in retailer pricing or promotional strategies; greater than anticipated retailer space reconfigurations or reductions in retailer display space; less than anticipated results from the Company's existing or new products or from its advertising, promotional and/or marketing plans; or if the Company’s expenses, including, without limitation, for advertising, promotions and/or marketing activities or for sales returns related to any reduction of retail space, product discontinuances or otherwise, exceed the anticipated level of expenses, (b) difficulties, delays or the inability to develop our organizational capability, (c) our inability to drive our company to act globally, such as due to higher than anticipated levels of investment required to support and build our brands globally and/or less than anticipated results from our regional and/or multi-national brands, (d) our inability to increase our operating profit and/or cash flow, such as due to less than anticipated sales growth and/or less than anticipated savings from our ongoing cost controls and/or (e) difficulties, delays, unanticipated costs or our inability to improve our capital structure. 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
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except share and per share amounts)
                         
 
Three Months Ended Year Ended
December 31, December 31,
2011 2010 2011 2010
(Unaudited)
 
Net sales $ 359.8 $ 369.2 $ 1,381.4 $ 1,321.4
Cost of sales 134.3   129.2   492.6 455.3  
Gross profit 225.5 240.0 888.8 866.1
Selling, general and administrative expenses 159.5 172.3 685.5 666.6
Restructuring costs and other, net -   (0.1 ) - (0.3 )
 
Operating income 66.0   67.8   203.3 199.8  
 
Other expenses, net:
Interest expense 20.2 23.1 84.9 90.5
Interest expense - preferred stock dividends 1.6 1.6 6.4 6.4
Amortization of debt issuance costs 1.2 1.4 5.3 5.9
Loss on early extinguishment of debt, net (0.1 ) - 11.2 9.7
Foreign currency losses, net 2.0 1.6 4.4 6.3
Miscellaneous, net 0.3   0.3   1.5 1.2  

Other expenses, net

25.2   28.0   113.7 120.0  
 
Income from continuing operations before income taxes 40.8 39.8 89.6 79.8
Provision for (benefit from) income taxes 4.4   (256.4 ) 36.8 (247.2 )
Income from continuing operations, net of taxes 36.4 296.2 52.8 327.0
Income from discontinued operations, net of taxes -   -   0.6 0.3  
 
Net income $ 36.4   $ 296.2   $ 53.4 $ 327.3  
 
Basic income per common share:
Continuing operations 0.70 5.71 1.01 6.30
Discontinued operations -   -   0.01 0.01  
Net income $ 0.70   $ 5.71   $ 1.02 $ 6.31  
 
Diluted income per common share:
Continuing operations 0.70 5.66 1.01 6.25
Discontinued operations -   -   0.01 0.01  
Net income $ 0.70   $ 5.66   $ 1.02 $ 6.26  
 
Weighted average number of common shares outstanding:
Basic 52,183,008   51,901,970   52,173,906 51,892,824  
Diluted 52,367,871   52,297,106   52,331,807 52,302,636  
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in millions)
               
December 31, December 31,
2011 2010
ASSETS
Current assets:
Cash and cash equivalents $ 101.7 $ 76.7
Trade receivables, net 212.0 197.5
Inventories 111.0 115.0
Deferred income taxes - current 49.8 39.6
Prepaid expenses and other 44.2   47.3  
Total current assets 518.7 476.1
Property, plant and equipment, net 98.9 106.2
Deferred income taxes - noncurrent 232.1 229.4
Goodwill, net 194.7 182.7
Other assets 112.7   92.3  
Total assets $ 1,157.1   $ 1,086.7  
 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings $ 5.9 $ 3.7
Current portion of long-term debt 8.0 8.0
Accounts payable 89.8 88.3
Accrued expenses and other 231.7   218.5  
Total current liabilities 335.4 318.5
Long-term debt 1,107.0 1,100.9
Long-term debt - affiliates 58.4 58.4
Redeemable preferred stock 48.4 48.1
Long-term pension and other post-retirement plan liabilities 245.5 201.5
Other long-term liabilities 55.3 55.7
Commitments and contingencies
Total stockholders' deficiency (692.9 ) (696.4 )
Total liabilities and stockholders' deficiency $ 1,157.1   $ 1,086.7  
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
                  Year Ended
December 31,
2011   2010
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 53.4 $ 327.3
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations, net of taxes (0.6 ) (0.3 )
Depreciation and amortization 60.8 57.0
Amortization of debt discount 2.5 2.7
Stock compensation amortization 1.9 3.6
Provision for (benefit from) deferred income taxes 13.4 (259.3 )
Loss on early extinguishment of debt, net 11.2 9.7
Amortization of debt issuance costs 5.3 5.9
Pension and other post-retirement expense 5.2 9.5
Change in assets and liabilities:
Increase in trade receivables (18.3 ) (19.2 )
Decrease in inventories 3.6 7.0
Decrease (increase) in prepaid expenses and other current assets 0.2 (7.4 )
Increase in accounts payable 5.0 20.8
Increase in accrued expenses and other current liabilities 20.1 12.5
Pension and other post-retirement plan contributions (31.5 ) (25.8 )
Purchases of permanent displays (41.3 ) (33.7 )
Other, net (2.9 ) (13.1 )
Net cash provided by operating activities 88.0   97.2  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13.9 ) (15.2 )
Acquisition (39.0 ) -
Proceeds from the sale of certain assets 0.3   0.3  
Net cash used in investing activities (52.6 ) (14.9 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in short-term borrowings and overdraft 0.2 (10.6 )
Repayments under the 2006 Term Loan Facility - (815.0 )
Borrowings under the 2010 Term Loan Facility - 786.0
Repayments under the 2010 Term Loan Facility (794.0 ) (6.0 )
Borrowings under the 2011 Term Loan Facility 796.0 -
Repayments under the 2011 Term Loan Facility (4.0 ) -
Payment of financing costs (4.3 ) (17.5 )
Other financing activities (1.4 ) 0.3  
Net cash used in financing activities (7.5 ) (62.8 )
Effect of exchange rate changes on cash and cash equivalents (2.9 ) 2.7  
Net increase in cash and cash equivalents 25.0 22.2
Cash and cash equivalents at beginning of period 76.7   54.5  
Cash and cash equivalents at end of period $ 101.7   $ 76.7  
 
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest $ 85.0 $ 77.3
Preferred stock dividends $ 6.2 $ 6.2
Income taxes, net of refunds $ 20.5 $ 16.2
 
Supplemental schedule of non-cash investing and financing activities:
Treasury stock received to satisfy minimum tax withholding liabilities $ 1.4 $ 2.5
REVLON, INC. AND SUBSIDIARIES
PROVISION FOR (BENEFIT FROM) INCOME TAXES RECONCILIATION
(dollars in millions)
         
Three Months Ended
December 31,
2011 2010
(Unaudited)
Reconciliation to provision for (benefit from) income taxes:
U.S. GAAP provision for (benefit from) income taxes

 

$

4.4

 

$

(256.4 )
 
Adjustment to provision for income taxes:
Reduction of deferred tax valuation allowances (a) 16.9 260.6
   
Non-U.S. GAAP adjusted provision for income taxes

 

$

21.3

 

$

4.2  
 
 
Year Ended
December 31,
2011 2010
(Unaudited)
Reconciliation to provision for (benefit from) income taxes:
U.S. GAAP provision for (benefit from) income taxes

 

$

36.8

 

$

(247.2 )
 
Adjustment to provision for income taxes:
Reduction of deferred tax valuation allowances (a) 16.9 260.6
   
Non-U.S. GAAP adjusted provision for income taxes

 

$

53.7

 

$

13.4  
 
 

(a) Reduction of the Company's deferred tax valuation allowances in certain markets outside the U.S.in 2011 and the Company's U.S. deferred tax valuation allowance in 2010.

REVLON, INC. AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION
(dollars in millions)
     
 
 
Three Months Ended
December 31,
2011 2010
(Unaudited)
Reconciliation to net income:
 
Net income $ 36.4 $ 296.2
 
Interest expense 21.8 24.7
Amortization of debt issuance costs 1.2 1.4
Loss on early extinguishment of debt, net (0.1 ) -
Foreign currency losses, net 2.0 1.6
Miscellaneous, net 0.3 0.3
Provision for (benefit from) income taxes 4.4 (256.4 )
Depreciation and amortization 15.7   15.5  
 
Adjusted EBITDA $ 81.7   $ 83.3  
 
 
Year Ended
December 31,
2011 2010
(Unaudited)
Reconciliation to net income:
 
Net income $ 53.4 $ 327.3
Income from discontinued operations, net of taxes 0.6   0.3  
Income from continuing operations, net of taxes 52.8 327.0
 
Interest expense 91.3 96.9
Amortization of debt issuance costs 5.3 5.9
Loss on early extinguishment of debt, net 11.2 9.7
Foreign currency losses, net 4.4 6.3
Miscellaneous, net 1.5 1.2
Provision for (benefit from) income taxes 36.8 (247.2 )
Depreciation and amortization 62.7   60.6  
 
Adjusted EBITDA $ 266.0   $ 260.4  
REVLON, INC. AND SUBSIDIARIES
FREE CASH FLOW RECONCILIATION
(dollars in millions)
   
 
 
Three Months Ended
December 31,
2011 2010
(Unaudited)
Reconciliation to net cash provided by operating activities:
 
Net cash provided by operating activities $ 67.8 $ 47.2
 
Less capital expenditures (4.3 ) (3.8 )
Plus proceeds from the sale of certain assets 0.1   0.1  
 
Free cash flow $ 63.6   $ 43.5  
 
 
Year Ended
December 31,
2011 2010
(Unaudited)
Reconciliation to net cash provided by operating activities:
 
Net cash provided by operating activities $ 88.0 $ 97.2
 
Less capital expenditures (13.9 ) (15.2 )
Plus proceeds from the sale of certain assets 0.3   0.3  
 
Free cash flow $ 74.4   $ 82.3  




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