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TheStreet Open House

Revlon Reports Third Quarter 2012 Results

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.

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 and/or plans: (i) the Company’s expectations regarding the charges and payments related to the restructuring actions announced in September 2012 and the amount and timing of the annualized cost reductions, including that (a) the announced actions to drive operating efficiencies, once fully implemented, are to generate annualized cost reductions of approximately $10 million ($9 million of which is expected to benefit 2013) and are further enabling us to invest in the execution of our strategy while maintaining highly competitive margins, and (b) restructuring and related charges are expected to be approximately $25 million, $23 million of which will be cash that is expected to be paid over the next 18 months; and (ii) 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 filed 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) higher than anticipated restructuring and related charges and/or payments and/or changes in the expected timing of such charges and/or payments and/or less than anticipated annualized cost reductions from these actions and/or changes in the timing of our realizing such reductions; and/or difficulties with, delays in or the inability of the Company to implement these actions and/or realize their anticipated benefits, such as difficulties or delays in or our inability to invest in the execution of our strategy which could adversely affect our ability to maintain highly competitive margins; and (ii) 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 or higher than anticipated operating expenses 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 AND COMPREHENSIVE (LOSS) INCOME
(dollars in millions, except share and per share amounts)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012   2011   2012 2011  
(Unaudited) (Unaudited)
 
Net sales $ 347.0 $ 337.2 $ 1,034.8 $ 1,021.6
Cost of sales 127.0   123.1   367.1 358.3  
Gross profit 220.0 214.1 667.7 663.3
Selling, general and administrative expenses 179.9 169.3 540.5 526.0
Restructuring charges 21.0   -   21.0 -  
 
Operating income 19.1   44.8   106.2 137.3  
 
Other expenses, net:
Interest expense 19.9 20.4 59.5 64.7
Interest expense - preferred stock dividends 1.6 1.6 4.8 4.8
Amortization of debt issuance costs 1.3 1.3 3.9 4.1
Loss on early extinguishment of debt, net - - - 11.3
Foreign currency (gains) losses, net (0.1 ) (0.9 ) 2.0 2.4
Miscellaneous, net (0.1 ) 0.2   0.2 1.2  
Other expenses, net 22.6   22.6   70.4 88.5  
 
(Loss) income from continuing operations before income taxes (3.5 ) 22.2 35.8 48.8
Provision for income taxes 11.5   22.1   31.6 32.4  
(Loss) income from continuing operations, net of taxes (15.0 ) 0.1 4.2 16.4
Income from discontinued operations, net of taxes -   -   0.4 0.6  
 
Net (loss) income $ (15.0 ) $ 0.1   $ 4.6 $ 17.0  
 
Other comprehensive (loss) income:
Currency translation adjustment, net of tax (1.9 ) (8.9 ) 0.3 (8.7 )
Amortization of pension related costs, net of tax 1.8   0.9   7.5 2.7  
Other comprehensive (loss) income (0.1 ) (8.0 ) 7.8 (6.0 )
 
Total comprehensive (loss) income $ (15.1 ) $ (7.9 ) $ 12.4 $ 11.0  
 
Basic (loss) income per common share:
Continuing operations (0.29 ) - 0.08 0.31
Discontinued operations -   -   0.01 0.01  
Net (loss) income $ (0.29 ) $ -   $ 0.09 $ 0.32  
 
Diluted (loss) income per common share:
Continuing operations (0.29 ) - 0.08 0.31
Discontinued operations -   -   0.01 0.01  
Net (loss) income $ (0.29 ) $ -   $ 0.09 $ 0.32  
 
Weighted average number of common shares outstanding:
Basic 52,356,641   52,182,848   52,345,895 52,170,839  
Diluted 52,356,641   52,345,857   52,356,911 52,319,654  
 
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in millions)
     
September 30, December 31,
2012 2011
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 45.2 $ 101.7
Trade receivables, net 195.7

 

212.0
Inventories 143.4 111.0
Deferred income taxes - current 49.8 49.8
Prepaid expenses and other 56.1   44.2  
Total current assets 490.2 518.7
Property, plant and equipment, net 99.9 98.9
Deferred income taxes - noncurrent 211.4 232.1
Goodwill 217.7 194.7
Other assets 164.4   112.7  
Total assets $ 1,183.6   $ 1,157.1  
 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings $ 8.3 $ 5.9
Current portion of long-term debt 8.0 8.0
Accounts payable 102.7 89.8
Accrued expenses and other 266.5   231.7  
Total current liabilities 385.5 335.4
Long-term debt 1,160.8 1,107.0
Long-term debt - affiliates - 58.4
Redeemable preferred stock 48.3 48.4
Long-term pension and other post-retirement plan liabilities 216.6 245.5
Other long-term liabilities 53.1 55.3
Commitments and contingencies
Total stockholders' deficiency (680.7 ) (692.9 )
Total liabilities and stockholders' deficiency $ 1,183.6   $ 1,157.1  
   
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
 
Nine Months Ended
September 30,
2012 2011
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4.6 $ 17.0
Adjustments to reconcile net income to net cash provided by
operating activities:
Income from discontinued operations, net of taxes (0.4 ) (0.6 )
Depreciation and amortization 48.4 45.3
Amortization of debt discount 1.6 2.0
Stock compensation amortization 0.3 1.7
Provision for deferred income taxes 22.8 17.1
Loss on early extinguishment of debt, net - 11.3
Amortization of debt issuance costs 3.9 4.1
Loss on sale of certain assets 0.2 -
Pension and other post-retirement expense 4.1 3.9
Change in assets and liabilities:
Decrease in trade receivables 16.5 8.1
Increase in inventories (32.6 ) (29.4 )
Increase in prepaid expenses and other current assets (13.2 ) (4.0 )
Increase in accounts payable 2.3 2.0
Increase in accrued expenses and other current liabilities 35.3 2.4
Pension and other post-retirement plan contributions (26.8 ) (28.7 )
Purchases of permanent displays (31.2 ) (28.2 )
Other, net (17.9 ) (3.8 )
Net cash provided by operating activities 17.9   20.2  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14.8 ) (9.6 )
Business acquisition (66.2 ) (39.0 )
Proceeds from the sale of certain assets 0.6   0.2  
Net cash used in investing activities (80.4 ) (48.4 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term borrowings and overdraft 12.5 10.0
Repayments under the 2010 Term Loan Facility - (794.0 )
Borrowings under the 2011 Term Loan Facility - 796.0
Repayments under the 2011 Term Loan Facility (6.0 ) (2.0 )
Payment of financing costs (0.1 ) (4.2 )
Other financing activities (0.7 ) (1.2 )
Net cash provided by financing activities 5.7   4.6  
Effect of exchange rate changes on cash and cash equivalents 0.3   (3.2 )
Net decrease in cash and cash equivalents (56.5 ) (26.8 )
Cash and cash equivalents at beginning of period 101.7   76.7  
Cash and cash equivalents at end of period $ 45.2   $ 49.9  
 
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest $ 57.5 $ 66.4
Preferred stock dividends $ 4.6 $ 4.6
Income taxes, net of refunds $ 13.8 $ 14.0
 
Supplemental schedule of non-cash investing and financing activities:
Treasury stock received to satisfy minimum tax withholding liabilities $ 1.2 $ 1.4
 
REVLON, INC. AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION
(dollars in millions)
   
Three Months Ended
September 30,
2012 2011
(Unaudited)
Reconciliation to net (loss) income:  
 
Net (loss) income $ (15.0 ) $ 0.1
 
Interest expense 21.5 22.0
Amortization of debt issuance costs 1.3 1.3
Foreign currency gains, net (0.1 ) (0.9 )
Miscellaneous, net (0.1 ) 0.2
Provision for income taxes 11.5 22.1
Depreciation and amortization 17.1   15.5  
 
Adjusted EBITDA $ 36.2   $ 60.3  
 
 
Nine Months Ended
September 30,
2012 2011
(Unaudited)
Reconciliation to net income:  
 
Net income $ 4.6 $ 17.0
Income from discontinued operations, net of taxes 0.4   0.6  
Income from continuing operations, net of taxes 4.2 16.4
 
Interest expense 64.3 69.5
Amortization of debt issuance costs 3.9 4.1
Loss on early extinguishment of debt, net - 11.3
Foreign currency losses, net 2.0 2.4
Miscellaneous, net 0.2 1.2
Provision for income taxes 31.6 32.4
Depreciation and amortization 48.7   47.0  
 
Adjusted EBITDA $ 154.9   $ 184.3  
 
REVLON, INC. AND SUBSIDIARIES
FREE CASH FLOW RECONCILIATION
(dollars in millions)
 
Three Months Ended
September 30,
2012 2011
(Unaudited)
Reconciliation to net cash provided by operating activities:  
 
Net cash provided by operating activities $ 39.6 $ 16.9
 
Less capital expenditures (5.9 ) (3.7 )
Plus proceeds from the sale of certain assets 0.5   0.1  
 
Free cash flow $ 34.2   $ 13.3  
 
 
Nine Months Ended
September 30,
2012 2011
(Unaudited)
Reconciliation to net cash provided by operating activities:  
 
Net cash provided by operating activities $ 17.9 $ 20.2
 
Less capital expenditures (14.8 ) (9.6 )
Plus proceeds from the sale of certain assets 0.6   0.2  
 
Free cash flow $ 3.7   $ 10.8  




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