Revlon, Inc. Q1 2010 Earnings Call Transcript

Revlon, Inc. Q1 2010 Earnings Call Transcript
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Revlon, Inc. (REV)

Q1 2010 Earnings Call

April 29, 2010 9:30 am ET

Executives

Elise Garofalo – Senior Vice President, Treasurer, and Investor Relations

Alan Ennis – President and Chief Executive Officer

Chris Elshaw – Executive Vice President and Chief Operating Officer

Steven Berns – Executive Vice President and Chief Financial Officer

Analysts

Reza Vahabzadeh – Barclays Capital

Carla Casella – JP Morgan

Connie Maneaty – BMO Capital

Presentation

Operator

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Good morning, ladies and gentlemen, and welcome to Revlon's first quarter 2010 earnings conference call. At the request of Revlon, today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Miss Elise Garofalo, Revlon's Senior Vice President, Treasurer, and Investor Relations. You may begin, Miss Garofalo.

Elise Garofalo

Thanks, Stephanie. Good morning, everyone, and thanks for joining today's call. Earlier today we released our results for the first quarter ended March 31, 2010. If you have not already received a copy of the earnings release, you can obtain one on our website at revloninc.com.

On the call with me this morning are Alan Ennis, Revlon's President and Chief Executive Officer; Chris Elshaw, Executive Vice President and Chief Operating Officer; and Steven Berns, Executive Vice President and Chief Financial Officer.

Before I turn the call over to Alan, I would like to remind everyone of a few things. First, our discussion this morning might include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Information and factors that could affect the company's results from time to time and cause them to differ materially from such forward-looking statements is set forth in the company's filings with the SEC including our 2009 Form 10-K and our 2010 first quarter 10-Q, which we filed earlier this morning.

Next, our remarks today will include a discussion of adjusted EBITDA and free cash flow, which are non-GAAP measures that are defined in the footnotes to our release and are reconciled in the case of adjusted EBITDA to net income and in the case of free cash flow to net cash provided by operating activities. These are the most directly comparable GAAP measures in the accompanying financial table.

Regarding market share information, as a reminder, during our 2009 fourth quarter earnings call in February, we indicated that beginning with the first quarter of 2010 we're no longer reporting ACNielsen U.S. market share information. ACNielsen data represents only a portion of our channels in only the U.S. market. We believe that consumption through all of our retail partners in our markets globally is best reflected by observing our net sales performance and trends over time rather than this partial market share information.

In addition, effective for periods beginning January 1, 2010, in order to align our business with our typical geographical reporting, we have made some changes to how we report net sales. Specifically, Canada is being reported as a separate region where in prior periods it was included in the Europe region; and South Africa is now included as part of the Europe, Middle East, and Africa region where in prior periods it was included in the Asia-Pacific region.

As a result, prior year amounts have been reclassified to conform to this presentation. For your convenience, we've included the reclassified numbers for each of the quarters in 2009 at the back of our earnings release.

Also, I want to remind you that from a financial reporting perspective, promotional allowances are recorded as a deduction to arrive at net sales while advertising costs are recorded within SG&A on the income statement.

Finally, as a reminder, our discussion this morning should not be copied or recorded. With that, I'd like to turn the call over to Alan.

Alan Ennis

Thank you, Elise, and good morning everyone. As we have discussed with you in the past, Revlon's vision is glamour, excitement, and innovation through high quality products at affordable prices. This underpins everything we do. We realize this vision by executing the five key elements of our business strategy: Building our strong brands, developing our organizational capability, driving our company to act globally, increasing our operating profit and cash flow, and improving our capital structure.

The execution of this strategy has led to improved profitability, positive free cash flow, opportunistic debt reduction, and a continuous pipeline of innovative, new product introductions. As Steven will review later in today's call, we continued to improve our capital structure in the first quarter of 2010. Combined with our competitive operating margin structure, this gives us the flexibility to further execute our business strategy and to drive profitable growth.

As I mentioned, one of our key business strategies is to build our strong brands. We achieved this through a focus on the key drivers of profitable brand growth, specifically first innovative high quality consumer preferred offerings. Next, effective brand communication, including appropriate levels of advertising and promotion. Finally, superb execution with our retail partners to provide the optimal in-store offering.

In terms of innovation, earlier this year Alan Meyers joined us as our chief science officer and head of our research and development operations globally. In his early days with us at Revlon, Alan is providing key insights into consumer needs and is leading our group with a game-changing mentality. With this R&D capability in addition to our focus on packaging innovation and products development, we feel extremely well positioned in terms of innovation.

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