Revlon, Inc. (REV)
Q2 2010 Earnings Conference Call
July 29, 2010 9:30 AM ET
Elise Garofalo – SVP, Treasurer, and IR
Alan Ennis – President and CEO
Chris Elshaw – EVP and COO
Steven Berns – EVP and CFO
Reza Vahabzadeh – Barclays Capital
Jeff Kobylarz – Stone Harbor Investment Partners
Patrick Trucchio – BMO Capital Markets
David Sowu (ph) – Healthy Eyes Hilly (ph)
Good morning, ladies and gentlemen, and welcome to Revlon’s Second Quarter 2010 Earnings Conference Call. At the request of Revlon, today’s conference call is being recorded. (Operator Instructions) I would know like to turn the call over to Ms. Elise Garofalo, Revlon’s Senior Vice President, Treasurer, and Investor Relations. You may begin Ms. Garofalo.
Thanks, Stephanie. Good morning, everyone, and thanks for joining today’s call. Earlier today we released our results for the second quarter ended June 30, 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’d 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. 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 as set forth in the company’s filings with the SEC, including our 2009 Form 10-K filed in February of this year and our 2010 second quarter 10-Q, which we filed earlier this morning.
Next, our remarks today will include a discussion of adjusted EBITDA and free cash flow, both of 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 which are the most directly comparable GAAP measures and they can be found in the financial table accompanying the release.
Regarding market share information, as a reminder, during our 2009 fourth quarter earnings call this February, we indicated that beginning with the first quarter of 2010, we are 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, as previously disclosed, effective for periods beginning January 1, 2010, we have made some changes to how we report net sales. Specifically, Canada is now reported as a separate region where in prior periods, before 2010, it was included in the Europe region; and South Africa is now included as part of 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 a schedule of the reclassified numbers for each of the quarters in ‘09 and ‘08 at the back of our release.
I’d also like to remind you that some of financial reporting perspective, promotional allowances are recorded as a deduction to arrive at net sales while advertising costs are recorded within SG&A in the P&L.
And finally, as a reminder, our discussion this morning should not be copied or recorded. With that, I’ll turn it over to Alan.
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. And 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.
During the second quarter of 2010, we continued our intense focus on the key drivers of our business to support our business strategies. These drivers are innovative, high quality consumer preferred brand offering, effective brand communication including appropriate levels of advertising and promotion and superb execution with the retail partners to provide the optimal in-store offering.
In meeting the needs of consumers seeking new innovative products, we introduced several new breakthrough and first to market products for the first half of 2010 in Revlon and Almay color cosmetics. These product launches include unique offerings in mass cosmetics, innovations in products and extensions across all segments within the Revlon and Almay franchises.
Our new products include Revlon Grow Luscious Mascara, Revlon Just Bitten Lipstain + Balm and Almay One Coat Dial Up mascara. Chris will provide some more color on this launches later in the call. Additionally during the quarter, we signed one of Hollywood’s hottest stars, Kate Hudson, as the newest global brand ambassador for our Almay brands.
From the strategic and financial perspective, we maintain a sharp focus on driving profitable growth, while at the same time maintaining financial discipline. In the second quarter we delivered improved cash flow and competitive operating margins while significantly increasing our advertising investments to enhance our marketplace competitiveness. We will continue to support our brands in the third quarter as compared to prior year levels.