Revlon's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Revlon, Inc. (REV)

Q2 2012 Earnings Call

July 31, 2012 09:30 a.m. ET

Executives

Elise Garofalo – SVP, Treasurer, IR

Alan Ennis – President and CEO

Chris Elshaw – COO

Steven Berns – CFO

Analysts

Grant Jordan – Wells Fargo

Carla Casella – J.P. Morgan

Brian Schinderle – BAM

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to Revlon’s Second Quarter 2012 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. At the conclusion of today’s presentation, we will open the call for questions. [Operator Instructions] I would now like to turn the call over to Ms. Elise Garofalo, Revlon’s Senior Vice President, Treasurer and Investor Relations. You may now begin, Ms. Garofalo.

Elise Garofalo

Thank you, Karenna. Good morning, everyone, and thanks for joining today’s call. Earlier today, we released our results for the second quarter ended June 30, 2012. If you’ve 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, Chief Operating Officer; and Steven Berns, 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 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 2011 Form 10-K and our 2012 second quarter Form 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. These non-GAAP measures are defined in the footnotes to our release and are also reconciled to the most directly comparable GAAP measure in the financial tables at the end of our release. Finally, as a reminder, our discussion this morning should not be copied or recorded. With that, I’ll turn the call over to Alan.

Alan Ennis

Thank you, Elise, and good morning everyone. As we’ve discussed for some time, our strategic goal is to profitably grow our business. Overall, we had a positive quarter and I am pleased with our performance so far this year.

From a net sales perspective we grew 4.2% in the quarter and 2.4% year-to-date. Our Revlon brands performed very well in the market place again this quarter. We are pleased with both new and core product performance during the period and are excited about our recent new product introductions.

From a regional perspective we grew in the US, Canada and Latin America, however we experienced some softness in Europe, Greater China and Australia.

As we move forward, we will continue to manage our resources carefully given the uncertain global economic environments. While we continue to drive growth organically, we are also growing through acquisitions and are excited about the recent addition of Pure Ice to our brand portfolio. Pure Ice is a wide range of value priced nail color products which have been in distribution for over 20 years in the U.S mass retail channel. This acquisition complements our brand portfolio and builds on the successful acquisition of the Sinful Colors brand in 2011.

From a financial perspective we had a positive quarter as we continue to deliver competitive operating income margins and our financial profile remains strong.

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

Chris Elshaw

Thank you Alan and good morning everyone. Today I will review our net sales performance excluding the impact of changes in foreign currencies. Total company net sales in the second quarter of 2012 were $357.1 million, an increase of 4.2 % as compared to the second quarter of last year. The increase was primarily driven by higher net sales of Revlon and Almay color cosmetics and Revlon ColorSilk hair color.

In the United States, net sales increased $9 million, or 4.6% primarily driven by higher net sales of Revlon color cosmetics.

In Asia Pacific, net sales decreased $1.7 million, or 2.9%, primarily driven by lower net sales of Revlon color cosmetics in China and Australia and lower net sales of other beauty care products in Hong Kong. These lower net sales were partially offset by higher net sales of Revlon color cosmetics and Revlon ColorSilk hair color in certain distributor territories.

Moving on to Europe, Middle East and Africa, net sales decreased $1.8 million, or 3.5%. The decrease was primarily due to lower net sales of fragrances in the U.K. and certain distributor territories as well as lower net sales of Revlon color cosmetics in France, Italy and certain distributor territories. This was partially offset by higher net sales of Revlon color cosmetics in the U.K, where we continue to be very pleased with a strong marketplace performance of the Revlon brand.

In Latin America, net sales increased of $7.3 million, or 27.8%, primarily due to higher net sales of Revlon and Almay color cosmetics and Revlon ColorSilk hair color throughout the region. Venezuela’s increase in net sales was primarily due to the absence of sales in June 2011 as a result of the fire that destroyed the Company’s facility there last year. Net sales in the region also benefitted from higher selling prices in Venezuela and Argentina which accounted for approximately one-third of the $7.3 million net sales increase in the region. Finally, with respect to our Canada region net sales increased $2.1 million or 10.8% primarily due to high net sales of Revlon and Almay color cosmetics.

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