Revlon, Inc. (REV)

Q3 2011 Earnings Conference Call

October 27, 2011 09:30 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

Carla Casella

David Wu

Grant Jordon

Presentation

Operator

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Good morning ladies and gentlemen, and welcome to Revlon’s Third Quarter 2011 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 Ms. Elise Garofalo, Revlon’s Senior Vice President, Treasurer, and Investor Relations. You may begin.

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

Thank you, (Ryan). Good morning everyone, and thanks for joining today’s call. Earlier today we released our results for the third quarter ended September 30, 2011. If you have not already accessed a copy of our third quarter 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. Information on 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 2010 Form 10-K and our 2011 third quarter 10-Q, which we expect to file over the next couple of days.

Next, our remarks today will include a discussion of adjusted EBITDA and free cash flow, both of which are non-GAAP measures. These non-GAAP measures are defined in the footnotes to our release and are also reconciled to their most directly comparable GAAP measures in the financial tables at the end of our release. And finally, as a remainder, our discussion this morning should not be copied or recorded.

With that, I will turn the call over to Alan.

Alan Ennis – President and Chief Executive Officer

Thank you, Elise and good morning everyone. As you know our strategic objective is to drive profitable growth and in our third quarter we continue to successfully execute the strategy. With regard to building our strong brands, during the third quarter we grew net sales by 3.6% excluding the impact of currency fluctuations. Our U.S. regions drove the increase with positive performance across our Revlon color cosmetics, Revlon ColorSilk, and Sinful Colors brands. Outside the U.S., our net sales declined in the quarter. However, on year-to-date basis most of our regions have grown year-over-year.

In addition our continued emphasis on innovation effective brand communication and in-store execution positively impacted our performance in the quarter. We are also extremely excited this quarter to announce the two of Hollywood’s most sought after actresses, Emma Stone and Olivia Wilde joined us as global brand ambassadors for our Revlon brand. These remarkable talented actresses personify the Revlon woman, glamorous, confident and bold, and will help us build meaningful connections with consumers.

Another key element of our strategy is to develop our organizational capability. To that end we’ve recently strengthened our global leadership team with the addition of Xavier Garijo as our Executive Vice President and Chief Supply Chain Officer. Xavier joins us with broad experience product space having served in key leadership roles at top consumer product companies. We are focused on more effectively globalizing our supply chain and I’m trilled to have someone of Xavier’s capability leading that efforts.

With regard to our strategic objectives of increasing our operating profit in cash flow and improving our capital structure, we continue to make progress as we sustain competitive operating margins reduced interest expense and generated positive free cash flow. While we remain focused on delivering profitable growth, we are extremely aware of the challenging global economic environment and so we continue to manage our resources carefully with the balance perspective on long-term growth and profitability. So taking a look at our performance so far this year, we have grown the top-line with sustained competitive margins and we are generating positive cash flow all of which we believe reflective the effectiveness of our strategy.

So with that, I’ll hand it over to Chris, he will talk about our marketplace performance.

Chris Elshaw – Executive Vice President and Chief Operating Officer

Thank you, Alan, and good morning everyone. Today I will review our net sales performance excluding the impacts of changes in foreign currencies by region and by brand. Total company net sales in the third quarter were $337.2 million, an increase of 3.6% versus a third quarter of last year. The increase was primarily driven by the inclusion of the net sales of simple colors and higher net sales of Revlon color cosmetics and Revlon ColorSilk hair color. Partially offset by lower net sales in Venezuela due to the June 2011 fire at tour facility there.

From the regional standpoints, in the United States net sales increased $18 million or 10.8% primarily due to the inclusion of net sales of Sinful Colors and higher net sales of Revlon color cosmetics and Revlon ColorSilk hair color. It is important to note that net sales in the U.S. region grew in the quarter, excluding the results of Sinful Colors. In Asia-Pacific, net sales decreased $1.3 million, or 2.4%. Lower net sales of Revlon color cosmetics in Japan and Australia and other beauty care products were partially offset by higher net sales of Revlon color cosmetics in China and certain distributor markets.

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