<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: June 30, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from__________________ to _______________
Commission file number 333-23451
REV HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3933701
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 MADISON AVENUE, NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-527-4000
REVLON WORLDWIDE (PARENT) CORPORATION
(Former name of registrant)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
The number of shares outstanding of the registrant's common stock was 1,000
shares as of June 30, 1997, all of which were held by affiliates of Mafco
Holdings Inc.
Total Pages - 18
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 39.9 $ 38.6
Trade receivables, less allowances of $24.4
and $24.9, respectively............................. 394.1 426.3
Inventories............................................. 367.1 281.0
Prepaid expenses and other.............................. 81.5 74.5
----------- ------------
Total current assets................................ 882.6 820.4
Property, plant and equipment, net........................ 382.1 381.1
Other assets.............................................. 161.1 144.2
Restricted marketable securities.......................... 324.4 -
Intangible assets, net.................................... 298.3 280.6
----------- ------------
Total assets.................................... $ 2,048.5 $ 1,626.3
=========== ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings - third parties.................. $ 22.6 $ 27.1
Current portion of long-term debt - third parties...... 8.3 8.8
Accounts payable....................................... 172.0 161.9
Accrued expenses and other............................. 321.7 365.2
----------- ------------
Total current liabilities.......................... 524.6 563.0
Long-term debt - third parties ........................... 2,305.7 2,291.4
Long-term debt - affiliates............................... 30.8 30.4
Other long-term liabilities............................... 220.4 202.8
Stockholders' deficiency:
Common Stock, par value $1.00 per share; 1,000 shares
authorized, issued and outstanding................. - -
Capital deficiency..................................... (410.9) (971.0)
Accumulated deficit since June 24, 1992................ (595.2) (472.1)
Adjustment for minimum pension liability............... (12.4) (12.4)
Currency translation adjustment........................ (14.5) (5.8)
----------- ------------
Total stockholders' deficiency..................... (1,033.0) (1,461.3)
----------- ------------
Total liabilities and stockholders' deficiency..... $ 2,048.5 $ 1,626.3
=========== ============
</TABLE>
See Notes to Unaudited Consolidated Conensed Financial Statements.
2
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE, 30
------------------ ----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Sales................................................... $ 572.2 $ 517.9 $ 1,064.7 $ 982.2
Cost of sales............................................... 201.8 170.7 368.0 323.6
------ ------ ------ ------
Gross profit........................................... 370.4 347.2 696.7 658.6
Selling, general and admistrative expenses.................. 322.6 304.6 626.4 599.7
Business consolidation costs and other, net................. 4.0 - 9.4 -
------ ------ ------ ------
Operating income....................................... 43.8 42.6 60.9 58.9
------ ------ ------ ------
Other expenses (income):
Interest expense....................................... 56.3 58.3 119.4 117.8
Interest and net investment income..................... (5.7) (1.0) (8.1) (2.0)
Gain on sale of subsidiary stock....................... (6.1) - (6.2) (187.8)
Amortization of debt issuance costs.................... 3.0 3.0 6.4 6.6
Foreign currency losses, net........................... 1.0 1.7 2.8 3.8
Miscellaneous, net..................................... 1.3 0.8 2.0 1.3
------ ------ ------ ------
Other expenses (income), net....................... 49.8 62.8 116.3 (60.3)
------ ------ ------ ------
(Loss) income before income taxes........................... (6.0) (20.2) (55.4) 119.2
Provision for income taxes.................................. 3.5 5.9 9.0 12.9
------ ------ ------ ------
(Loss) income before extraordinary item..................... (9.5) (26.1) (64.4) 106.3
Extraordinary item - early extinguishment of debt........... (14.9) - (58.7) (6.6)
------ ------ ------ ------
Net (loss) income........................................... $ (24.4) $ (26.1) $ (123.1) $ 99.7
====== ====== ====== ======
</TABLE>
See Notes to Unaudited Consoldated Condensed Financial Statements
3
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARES
UNAUDITED CONSLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
CASH FLOWS FROM OPERATING ACTIVITES: 1997 1996
---------- ----------
<S> <C> <C>
Net (loss) income................................................ $ (123.1) $ 99.7
Adjustments to reconcile net (loss) income to net cash (used for)
provided by operating activities:
Depreciation and amortization.................................. 53.5 46.8
Amortization of debt discount.................................. 52.5 51.8
Gain on sale of subsidiary stock............................... (6.2) (187.8)
Extraordinary item............................................. 58.7 6.6
Change in assets and liabilities:
Decrease (increase) in trade receivables.................... 25.8 (5.4)
Increase in inventories..................................... (37.8) (50.7)
Decrease (increase) in prepaid expenses and other
current assets......................................... 4.1 (8.7)
Increase in accounts payable................................ 2.2 5.6
Decreased in accrued expenses and other current liabilities. (69.6) (48.6)
Other, net.................................................. (42.4) (23.7)
---------- ----------
Net cash used for operating activities........................... (82.3) (114.4)
---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures............................................. (22.5) (26.5)
Acquisition of businesses, net of cash acquired.................. (19.9) (4.1)
Purchase of marketable securities................................ (319.6) -
---------- ----------
Net cash used for investing activites............................ (362.0) (30.6)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in short-term borrowings - third
parties.............................................. (3.8) 0.5
Proceeds from the issuance of long-term debt - third parties.... 1,008.2 186.5
Repayment of long-term debt - third parties..................... (539.8) (230.5)
Net proceeds from the sale of subsidiary common stock........... 0.2 187.8
Proceeds from the issuance of debt - affiliates................. 62.3 66.9
Repayment of debt - affiliates.................................. (61.9) (66.9)
Payment of debt issuance costs.................................. (18.7) (10.9)
---------- ----------
Net cash provided by financing activities....................... 446.5 133.4
---------- ----------
Effect of exchange rate changes on cash and cash equivalents.... (0.9) (1.0)
---------- ----------
Net increase (decrease) in cash and cash equivalents....... 1.3 (12.6)
Cash and cash equivalents at beginning of period........... 38.6 36.3
---------- ----------
Cash and cash equivalents at end of period................. $ 39.9 $ 23.7
========== ==========
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest................................................... $ 68.5 $ 69.8
Income taxes, net of refunds............................... 7.2 10.7
Supplemental schedule of noncash investing and financing activities:
Noncash contribution from parent to cancel Revlon Worldwide
Senior Secured Discount Notes.............................. $ 560.1 $ -
In connection with business acquisitions, liabilities
were assumed as follows:
Fair value of assets acquired.............................. $ 71.5 $ 6.7
Cash paid.................................................. (21.2) (4.2)
---------- ----------
Liabilities assumed........................................ $ 50.3 $ 2.5
========== ==========
</TABLE>
See Notes to Unaudited Consolidated Condensed Financial Statements.
4
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(1) BASIS OF PRESENTATION
Effective August 5, 1997, Revlon Worldwide Corporation ("Revlon
Worldwide") was merged with and into Revlon Worldwide (Parent) Corporation
("Revlon Worldwide (Parent)") (the "Merger"), with Revlon Worldwide (Parent)
surviving the Merger and changing its name to REV Holdings Inc.
REV Holdings Inc. (and together with its subsidiaries, the "Company")
is a holding company formed in 1997, that conducts its business exclusively
through its indirect subsidiary, Revlon Consumer Products Corporation
("Products Corporation") and its subsidiaries. Products Corporation was formed
in April 1992 and, on June 24, 1992, succeeded to assets and liabilities of
the cosmetic and skin care, fragrances and personal care products business of
its then parent company, whose name was changed from Revlon, Inc. to Revlon
Holdings Inc. ("Holdings"). REV Holdings Inc. has had no business operations
of its own and its only material asset is its ownership of 83.1% of the
outstanding shares of capital stock of Revlon, Inc. (which represents
approximately 97.4% of the voting power of those outstanding shares), which,
in turn, owns all of the capital stock of Products Corporation. The Company is
an indirect wholly owned subsidiary of Holdings and an indirect wholly owned
subsidiary of MacAndrews & Forbes Holdings Inc., a corporation wholly owned by
Mafco Holdings Inc.
The accompanying Consolidated Condensed Financial Statements are
unaudited. In management's opinion, all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation have been made.
The Unaudited Consolidated Condensed Financial Statements include the
accounts of the Company after elimination of all material intercompany
balances and transactions. Further, the Company has made a number of estimates
and assumptions relating to the assets and liabilities, the disclosure of
contingent assets and liabilities and the reporting of revenues and expenses
to prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
The Company recognizes gains and losses on sales of subsidiary stock
in its Statements of Operations.
The Company accounts for investments in marketable securities,
consisting of U.S. Treasury Bills, in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."As of June 30, 1997, the fair market value of the Company's
investments in marketable secuities approximates carrying value.
The results of operations and financial position, including working
capital, for interim periods are not necessarily indicative of those to be
expected for a full year, due, in part, to seasonal fluctuations which are
normal for the Company's business.
The Company matches advertising and promotion expenses with sales
revenues for interim reporting purposes. Advertising and promotion expenses
estimated for a full year are charged to earnings for interim reporting
purposes in proportion to the relationship that net sales for such period bear
to estimated full year net sales. As a result, in the first half of 1997 and
1996, disbursements and commitments for advertising and promotion exceeded
advertising and promotion expenses by $44.9 and $33.8, respectively, and such
amounts were deferred.
5
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(2) INVENTORIES
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---------- -------------
<S> <C> <C>
Raw materials and supplies........................ $ 91.9 $ 76.6
Work-in-process................................... 21.6 19.4
Finished goods.................................... 253.6 185.0
---------- -------------
$ 367.1 $ 281.0
========== =============
</TABLE>
(3) GAIN ON SALE OF SUBSIDIARY STOCK
On March 5, 1996, Revlon, Inc. completed an initial public offering
(the "Revlon IPO") in which it issued and sold 8,625,000 shares of its Class A
Common Stock for $24.00 per share. The proceeds, net of underwriter's discount
and related fees and expenses, of $187.8 were contributed to Products
Corporation and were used to repay borrowings outstanding under the credit
agreement in effect at that time (the "1995 Credit Agreement") and to pay fees
and expenses related to the credit agreement which became effective on March
5, 1996 (the "1996 Credit Agreement").
As a result of the Revlon IPO, the Company's ownership in Revlon,
Inc. was reduced to 83.1% of Revlon, Inc.'s outstanding common stock (with the
Company having approximately 97.4% of the voting power of the outstanding
shares of Revlon, Inc. common stock) from 100% prior to the Revlon IPO.
Additionally, the Company recognized a $187.8 gain on this transaction in the
first quarter of 1996.
(4) EXTRAORDINARY ITEM
The extraordinary item in the second quarter of 1997 resulted from
the write-off of deferred financing costs associated with the extinguishment
of borrowings under the 1996 Credit Agreement prior to maturity and costs of
approximately $6.3 in connection with the redemption of Products Corporation's
10 7/8% Sinking Fund Debentures due 2010 (the "Sinking Fund Debentures"). The
extinguishment of borrowings under the 1996 Credit Agreement and the
redemption of the Sinking Fund Debentures were financed by the proceeds from a
Products Corporation new credit agreement which became effective in May 1997
(the "Credit Agreement"). The extraordinary item in the first quarter of 1997
resulted from the cancellation of a portion of Revlon Worldwide's Senior
Secured Discount Notes due 1998 (the "Revlon Worldwide Notes") (See Note 9).
The extraordinary item in the first quarter of 1996 resulted from the
write-off of deferred financing costs associated with the extinguishment of
borrowings under the 1995 Credit Agreement prior to maturity with the net
proceeds from the Revlon IPO and proceeds from the 1996 Credit Agreement.
(5) BUSINESS CONSOLIDATIONS AND OTHER, NET
In the second quarter of 1997, the Company's retail subsidiary
incurred business consolidation costs, including severance and other costs, in
connection with the consolidation of certain warehouse, distribution and
headquarter operations related to the consummation of the merger with the
Cosmetic Center, Inc. (See Note 6). In addition, the Company incurred business
consolidation costs in connection with the implementation of its business
strategy to rationalize factory operations primarily including severance and
other related costs in certain International operations. These business
consolidation costs were partially offset by an approximately $12.7 settlement
of a claim. In the first quarter of 1997, the Company incurred business
consolidation costs of approximately $5.4 in connection with the
implementation of its business strategy to rationalize factory operations
primarily including severance and other related costs in certain International
operations. As of June 30, 1997, the balance of the business consolidations
6
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
liability was approximately $20.9, which amounts are included in accrued
expenses and other and other long-term liabilities.
(6) MERGER OF SUBSIDIARY
On April 25, 1997, Prestige Fragrance & Cosmetics, Inc. ("PFC"), a
wholly owned subsidiary of Products Corporation, and the Cosmetic Center, Inc.
("CCI") completed the merger of PFC with and into CCI (the "Cosmetic Merger")
with the Cosmetic Center, Inc. (subsequent to the Cosmetic Merger, "Cosmetic
Center") surviving the Cosmetic Merger. In the Cosmetic Merger, Products
Corporation received in exchange for all of the capital stock of PFC newly
issued Class C common stock of Cosmetic Center constituting approximately
85.0% of the outstanding common stock. Accordingly, the Cosmetic Merger was
accounted for as a reverse acquisition using the purchase method of
accounting, and PFC is considered the acquiring entity for accounting
purposes, even though Cosmetic Center is the surviving legal entity. The
deemed purchase price paid for the acquisition was approximately $27.9 and the
goodwill associated with the Cosmetic Merger was approximately $10.5. The
Company recognized a gain of $6.0 resulting from the sale of subsidiary stock
pursuant to the Cosmetic Merger. The results for the Company for the period
ended June 30, 1997, include the results of operations of Cosmetic Center since
the effective date of the Cosmetic Merger.
The results of Cosmetic Center as reflected in the accounts of the
Company (which, using the Company's basis of presentation, includes buying,
occupancy and distribution costs in SG&A expenses) are as follows (for periods
prior to April 25, 1997, only PFC's results are reported):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1997 1996 1997 1996
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net sales.................................... $ 36.5 $ 16.3 $ 49.3 $ 29.0
Gross profit................................. 14.5 5.8 21.5 9.6
Business consolidation costs................. 4.0 - 4.0 -
Operating loss............................... (4.2) (0.6) (6.7) (3.6)
</TABLE>
The following represents the summary pro forma information as if the
Cosmetic Merger had occurred at January 1, 1997. The summary pro forma
information below combines the actual results of the Company (including
Cosmetic Center after the Cosmetic Merger) and CCI and PFC (prior to the
Cosmetic Merger) and reflects increased amortization of goodwill, increased
interest expense and certain income tax adjustments related to the Cosmetic
Merger that would have been incurred had the Cosmetic Merger occurred on
January 1, 1997. The summary pro forma information is not necessarily
indicative of the results of operations of the Company had the Cosmetic Merger
occurred at January 1, 1997, nor is it necessarily indicative of future
results.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
----------------
<S> <C>
Net sales......................................... $ 1,100.3
Operating income.................................. 58.8
Loss before extraordinary item.................... (70.6)
</TABLE>
7
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(7) NEW CREDIT AGREEMENT
In May 1997, Products Corporation entered into the Credit Agreement
with a syndicate of lenders, whose individual members change from time to
time. The proceeds of loans made under the Credit Agreement were used to repay
the loans outstanding under the 1996 Credit Agreement and to redeem the
Sinking Fund Debentures and will be used for general corporate purposes or, in
the case of the Acquisition Facility (as defined herein), the financing of
acquisitions.
The Credit Agreement is comprised of five senior secured facilities:
a $115.0 initial term loan facility (the "Term Loan Facility"), an $85.0
deferred draw term loan facility (the "Deferred Draw Term Loan Facility" and,
together with the Term Loan Facility, the "Term Loan Facilities"), a $300.0
multi-currency facility (the "Multi-Currency Facility"), a $200.0 revolving
acquisition facility, which may be increased to $400.0 under certain
circumstances with the consent of a majority of the lenders (the "Acquisition
Facility") and a $50.0 special standby letter of credit facility (the "Special
LC Facility" and together with the Term Loan Facility, the Deferred Draw Term
Loan Facility, the Multi-Currency Facility and the Acquisition Facility, the
"Credit Facilities"). The Multi-Currency Facility is available (i) to Products
Corporation, in revolving credit loans denominated in U.S. dollars (the
"Revolving Credit Loans"), (ii) to Products Corporation, in standby and
commercial letters of credit denominated in U.S. dollars (the "Operating
Letters of Credit") and (iii) to Products Corporation and certain of its
international subsidiaries designated from time to time in revolving credit
loans and bankers' acceptances denominated in U.S. dollars and other
currencies (the "Local Loans"). At June 30, 1997 Products Corporation had
approximately $115.0 outstanding under the Term Loan Facility, zero
outstanding under the Deferred Draw Term Loan Facility, $196.2 outstanding
under the Multi-Currency Facility, zero outstanding under the Acquisition
Facility and $34.4 outstanding under the Special LC Facility.
The Credit Facilities (other than loans in foreign currencies) bear
interest at a rate equal to, at Products Corporation's option, either (A) the
Alternate Base Rate plus 1/2 of 1% (or 1.5% for Local Loans); or (B) the
Eurodollar Rate plus 1.5%. Loans in foreign currencies bear interest at a rate
equal to the Eurocurrency Rate or, in the case of Local Loans, the local
lender rate, in each case plus 1.5%. The applicable margin is reduced (or
increased, but not above 3/4 of 1% for Alternate Base Rate Loans not
constituting Local Loans and 1.75% for other loans) in the event Products
Corporation attains (or fails to attain) certain leverage ratios. Products
Corporation pays the Lender a commitment fee of 3/8 of 1% of the unused
portion of the Credit Facilities, subject to reduction (or increase, but not
above 1/2 of 1%) based on attaining (or failing to attain) certain leverage
ratios. Products Corporation also paid certain facility and other fees to the
lenders and agents upon closing of the Credit Agreement. Prior to its
termination date, the commitments under the Credit Facilities will be reduced
by: (i) the net proceeds in excess of $10.0 each year received during such
year from sales of assets by Holdings (or certain of its subsidiaries),
Products Corporation or any of its subsidiaries (and $25.0 with respect to
certain specified dispositions), subject to certain limited exceptions, (ii)
certain proceeds from the sales of collateral security granted to the lenders,
(iii) the net proceeds from the issuance by Holdings, Products Corporation or
any of its subsidiaries of certain additional debt, (iv) 50% of the excess
cash flow of Products Corporation and its subsidiaries (unless certain
leverage ratios are attained) and (v) certain scheduled reductions in the case
of the Term Loan Facilities, which commence on May 31, 1998 in the aggregate
amount of $1.0 annually over the remaining life of the Credit Agreement, and
in the case of the Acquisition Facility, which will commence on December 31,
1999 in the amount of $25.0, $60.0 during 2000, $90.0 during 2001 and $25.0
during 2002 (which reductions will be proportionately increased if the
Acquisition Facility is increased). The Credit Agreement will terminate on May
30, 2002. The weighted average interest rates on the Term Loan Facility and
the Multi-Currency Facility were 6.5%, and 7.4% per annum, respectively, as of
June 30, 1997. Effective as of July 31, 1997, the interest rates under the
Credit Facilities were reduced by .25%.
The Credit Facilities, subject to certain exceptions and limitations,
are supported by guarantees from Holdings and certain of its subsidiaries,
Revlon, Inc., Products Corporation and the domestic subsidiaries of Products
Corporation. The obligations of Products Corporation under the Credit
Facilities and the obligations under the aforementioned guarantees are
secured, subject to certain limitations, by (i) mortgages on Holdings' Edison,
New Jersey and Products Corporation's Phoenix, Arizona facilities; (ii) the
capital stock of Products Corporation and its domestic subsidiaries and
8
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
66% of the capital stock of its first tier foreign subsidiaries and the
capital stock of certain subsidiaries of Holdings; (iii) domestic intellectual
property and certain other domestic intangibles of (x) Products Corporation
and its domestic subsidiaries (other than Cosmetic Center) and (y) certain
subsidiaries of Holdings; (iv) domestic inventory and accounts receivable of
(x) Products Corporation and its domestic subsidiaries (other than Cosmetic
Center) and (y) certain subsidiaries of Holdings; and (v) the assets of
certain foreign subsidiary borrowers under the Multi-Currency Facility (to
support their borrowings only). The Credit Agreement provides that the liens
on the stock and personal property referred to above may be shared from time
to time with specified types of other obligations incurred or guaranteed by
Products Corporation, such as interest rate hedging obligations, working
capital lines and a subsidiary of Products Corporation's Yen-denominated
credit agreement (the "Yen Credit Agreement").
The Credit Agreement contains various material restrictive covenants
prohibiting Products Corporation from (i) incurring additional indebtedness or
guarantees, with certain exceptions, (ii) making dividend, tax sharing and
other payments or loans to the Company or other affiliates, with certain
exceptions, including among others, permitting Products Corporation to pay
dividends and make distributions to Revlon, Inc., among other things, to
enable Revlon, Inc. to pay expenses incidental to being a public holding
company, including, among other things, professional fees such as legal and
accounting, regulatory fees such as Securities and Exchange Commission
("Commission") filing fees and other miscellaneous expenses related to being a
public holding company, and to pay dividends or make distributions in certain
circumstances to finance the purchase by Revlon, Inc. of its common stock in
connection with the delivery of such common stock to grantees under any stock
option plan, provided that the aggregate amount of such dividends and
distributions taken together with any purchases of Revlon, Inc. common stock
on the market to satisfy matching obligations under an excess savings plan may
not exceed $6.0 per annum, (iii) creating liens or other encumbrances on their
assets or revenues, granting negative pledges or selling or transferring any
of their assets except in the ordinary course of business, all subject to
certain limited exceptions, (iv) with certain exceptions, engaging in merger
or acquisition transactions, (v) prepaying indebtedness, subject to certain
limited exceptions, (vi) making investments, subject to certain limited
exceptions, and (vii) entering into transactions with affiliates of Products
Corporation other than upon terms no less favorable to Products Corporation or
its subsidiaries than it would obtain in an arms' length transaction. In
addition to the foregoing, the Credit Agreement contains financial covenants
requiring Products Corporation to maintain minimum interest coverage, and
covenants which limit the leverage ratio of Products Corporation and the
amount of capital expenditures.
(8) COSMETIC CENTER CREDIT FACILITY
In connection with the Cosmetic Merger, Cosmetic Center entered into
a loan and security agreement (the "Cosmetic Center Facility"). Cosmetic
Center paid the then outstanding balance of $14.0 on CCI's former credit
agreement with borrowings under the Cosmetic Center Facility. On April 28,
1997, Cosmetic Center used approximately $21.2 of borrowings under the
Cosmetic Center Facility to fund the cash election associated with the
Cosmetic Merger. The Cosmetic Center Facility, which expires on April 30,
1999, provides up to $70.0 of revolving credit tied to a borrowing base of 65%
of Cosmetic Center's eligible inventory, as defined in the Cosmetic Center
Facility. Borrowings under the Cosmetic Center Facility are secured by
Cosmetic Center's accounts receivable and inventory (and proceeds therefrom).
Under the Cosmetic Center Facility, Cosmetic Center may borrow at the London
Inter-Bank Offered Rate ("LIBOR") plus 2.25% or at the bank's prime rate plus
0.5%. Cosmetic Center also pays a commitment fee equal to one-quarter of one
percent per annum. Interest is payable on a monthly basis except for interest
on LIBOR rate loans with a maturity of less than three months, which is
payable at the end of the LIBOR rate loan period and interest on LIBOR rate
loans with a maturity of more than three months which is payable every three
months. If Cosmetic Center terminates the Cosmetic Center Facility, Cosmetic
Center is obligated to pay a prepayment penalty of $0.7 if the termination
occurs before the first anniversary date of the Cosmetic Center Facility and
$0.2 if the termination occurs after the first anniversary date. The Cosmetic
Center Facility contains various restrictive covenants and requires Cosmetic
Center to maintain a minimum tangible net worth and an interest coverage
ratio. At June 30, 1997, Cosmetic Center had approximately $33.0 outstanding
under the Cosmetic Center Facility.
9
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(9) PURCHASE OF THE REVLON WORLDWIDE NOTES
During March 1997, $778.4 principal amount at maturity (accreted
value of $694.0) of the Revlon Worldwide Notes was delivered to the Trustee
under the Indenture for cancellation. On April 2, 1997, funds were deposited
in an irrevocable trust to effect the covenant defeasance of the remaining
balance of $337.4 principal amount at maturity of the Revlon Worldwide Notes.
At June 30, 1997, the accreted value of the Revlon Worldwide Notes was $310.7.
In connection with the Revlon Worldwide Notes that were canceled, the Company
recorded a capital contribution of $560.1 and recorded an extraordinary loss
of $43.8, which included the write-off of deferred financing costs, in the
first quarter of 1997.
The covenant defeasance of the Revlon Worldwide Notes was effected on
August 4, 1997, the 124th day following the deposit.
Following the covenant defeasance, on August 5, 1997, Revlon
Worldwide was merged with and into Revlon Worldwide (Parent), with Revlon
Worldwide (Parent) surviving the Merger and changing its name to REV Holdings
Inc. In connection with the Merger, the Company assumed the obligations of
Revlon Worldwide under the Revlon Worldwide Notes and the indenture governing
the Revlon Worldwide Notes. Because of the effectiveness of the covenant
defeasance, however, the Company may omit to comply with substantially all of
its covenants and other obligations, other than payment, under the indenture
governing the Revlon Worldwide Notes. As a result of the Merger, REV Holdings
Inc. directly owns all of the shares of Common Stock of Revlon, Inc. that were
owned by Revlon Worldwide and were pledged to secure the Revlon Worldwide
Notes. Following the Merger, the Company pledged 20 million shares of Revlon,
Inc. Common Stock to secure the indebtedness of the Company and the balance to
secure the obligations of an affiliate (See Note 10).
(10) ISSUANCE OF SENIOR SECURED DISCOUNT NOTES DUE 2001
On March 5, 1997, the Company issued and sold $770.0 aggregate
principal amount at maturity of its Senior Secured Discount Notes due 2001
(the "Old Notes"). The Old Notes were issued at a discount from their
principal amount at maturity representing a yield to maturity of 10 3/4% per
annum calculated from March 5, 1997. The Company filed a registration
statement under the Securities Act of 1933, as amended, relating to an offer
to exchange (the "Exchange Offer") the Old Notes for a like principal amount
of notes with substantially identical terms (such notes, together with the Old
Notes, being the "New Notes") which registration statement became effective on
July 9, 1997. The Exchange Offer will expire on August 13, 1997, unless
extended. The indenture governing the New Notes (the "Indenture") requires the
Company to hold at all times a minimum percentage of Common Stock of Revlon,
Inc. pledged to secure the New Notes. In addition, the Indenture contains
covenants that, among other things, limit (i) the issuance of additional debt
and redeemable stock by the Company or Revlon, Inc. and the issuance of
preferred stock by Revlon, Inc., (ii) the issuance of debt and preferred stock
by Products Corporation and its subsidiaries, (iii) the payments of dividends
on capital stock of the Company and its subsidiaries and the redemption of
capital stock of the Company, (iv) the sale of assets and subsidiary stock,
(v) transactions with affiliates and (vi) consolidations, mergers and
transfers of all or substantially all of the Company's assets. The Indenture
also prohibits certain restrictions on distributions from subsidiaries. All of
these limitations and prohibitions, however, are subject to a number of
important qualifications.
(11) SUBSEQUENT EVENT
Effective July 1, 1997, Revlon Holdings Inc. contributed to Products
Corporation substantially all of the assets and liabilities of the Bill
Blass business not already owned by Products Corporation (the "Blass
Business"). The net assets contributed were $0.0. The contributed assets
and liabilities will be accounted for at historical cost in a manner
similar to that of a pooling of interests and, accordingly, prior period
financial statements will be restated as if the contribution took place
at the beginning of the earliest period. For the three months ended June 30,
1997 and 1996, the Blass Business' net sales were $0.2 and $0.3, respectively,
and loss before income taxes was $0.1 and $0.1, respectively. For the six
months ended June 30, 1997 and 1996, the Blass Business' net sales were
$0.6 and $0.6, respectively, and income (loss) before income taxes was $0.1
and ($0.2), respectively.
10
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
OVERVIEW
The Company operates in a single business segment with many different
products, which include an extensive array of glamorous, exciting and
innovative cosmetics and skin care, fragrance and personal care products, and
professional products, consisting of hair and nail care products principally
for use in and resale by professional salons. In addition, the Company also
operates retail outlet stores and has a licensing group.
The Company presents its business geographically as its United States
operation, which comprises the Company's business in the United States, and
its International operation, which comprises its business outside of the
United States.
RESULTS OF OPERATIONS
The following table sets forth the Company's net sales by operation
for the three months and six months ended June 30, 1997 and 1996,
respectively:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1997 1996 1997 1996
------------------ ----------------
<S> <C> <C> <C> <C>
Net sales:
United States............................... $ 343.7 $ 293.4 $ 626.2 $ 553.0
International............................... 228.5 224.5 438.5 429.2
------- ------- ------- -------
$ 572.2 $ 517.9 $1,064.7 $ 982.2
======= ======= ======= =======
</TABLE>
The following sets forth certain statements of operations data as a
percentage of net sales for the three months and six months ended June 30,
1997 and 1996, respectively:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Cost of sales................... 35.3% 33.0% 34.6% 32.9%
Gross profit.................... 64.7 67.0 65.4 67.1
Selling, general and administrative
expenses..................... 56.4 58.8 58.8 61.1
Business consolidation costs and
other, net.................. 0.7 - 0.9 -
Operating income................ 7.6 8.2 5.7 6.0
</TABLE>
Net sales
Net sales were $572.2 and $517.9 for the second quarter of 1997 and
1996, respectively, an increase of $54.3, or 10.5%, and were $1,064.7 and
$982.2 for the first half of 1997 and 1996, respectively, an increase of
$82.5, or 8.4%, primarily as a result of successful new product introductions
worldwide, increased demand in the United States, the impact of net sales of
Cosmetic Center after April 25, 1997, increased distribution internationally
into the expanding self-select distribution channel and the further
development of new international markets.
United States. The United States operation's net sales increased to
$343.7 for the second quarter of 1997 from $293.4 for the second quarter of
1996, an increase of $50.3, or 17.1%, and increased to $626.2 in the first
half of 1997 from $553.0 for the first half of 1996, an increase of $73.2, or
13.2%. Net sales improved for the second quarter and first half of 1997
primarily as a result of continued consumer acceptance of new product
offerings, general improvement in consumer demand for the Company's color
cosmetics in the United States and the impact of Cosmetic Center's net sales
of approximately $18.6, net of certain intercompany eliminations and
adjustments from and after April 25, 1997, partially offset by overall
softness in the fragrance industry. The Company's dollar share of its Revlon
branded cosmetics in the
11
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
color cosmetics business in the United States self-select distribution channel
was 21.6% for the first half of 1997 and 1996, continuing as the number one
brand in market share. Market share, which is subject to a number of
conditions, can vary from quarter to quarter as a result of such things as
timing of new product introductions and advertising and promotional spending.
New product introductions (including, in 1997, certain products launched
during 1996) generated incremental net sales in the second quarter and first
half of 1997, principally as a result of launches of products in the COLORSTAY
collection, including COLORSTAY foundation, lip makeup, eye makeup, and blush,
launches of products in the ALMAY AMAZING collection, including lip makeup,
eye makeup, face makeup and concealer and launches of REVLON AGE DEFYING line
extensions, STREETWEAR nail enamel, NEW COMPLEXION face makeup, LINE & SHINE
lip makeup and ALMAY TIME-OFF REVITALIZER.
International. The International operation's net sales increased to
$228.5 for the second quarter of 1997 from $224.5 for the second quarter of
1996, an increase of $4.0, or 1.8% on a reported basis or 5.3% on a constant
U.S. dollar basis, and increased to $438.5 for the first half of 1997 from
$429.2 for the first half of 1996, an increase of $9.3, or 2.2% on a reported
basis or 5.8% on a constant U.S. dollar basis. Net sales improved for the
second quarter and first half of 1997 principally as a result of successful
new product introductions, including the continued roll-out of the COLORSTAY
cosmetics collection, increased distribution into the expanding self-select
distribution channel and the further development of new international markets,
partially offset by sales lost in exiting the unprofitable
demonstrator-assisted channel in Japan, by less favorable economic conditions
in several international markets, and, on a reported basis, by the unfavorable
effect on sales of a stronger U.S. dollar against certain foreign currencies,
primarily the Spanish peseta and several other European currencies, the South
African rand and the Japanese yen. The International operation's sales are
divided into the following geographic areas: Europe, which is comprised of
Europe, the Middle East and Africa (in which net sales increased by 4.6% to
$104.2 for the second quarter of 1997 as compared to the second quarter of
1996, and increased by 2.4% to $199.7 for the first half of 1997 as compared
to the first half of 1996); the Western Hemisphere, which is comprised of
Canada, Mexico, Central America, South America and Puerto Rico (in which net
sales increased by 5.6% to $78.8 for the second quarter of 1997 as compared to
the second quarter of 1996, and increased by 8.6% to $153.4 for the first half
of 1997 as compared to the first half of 1996); and the Far East (in which net
sales decreased by 9.6% to $45.5 for the second quarter of 1997 as compared to
the second quarter of 1996, and decreased by 8.2% to $85.4 for the first half
of 1997 as compared to the first half of 1996). Excluding in both periods the
effect of the Company's strategy of exiting the demonstrator-assisted
distribution channel in Japan, Far East net sales for the second quarter and
first half of 1997 would have been at approximately the same level as those in
the second quarter and first half of 1996.
The Company's operations in Brazil are significant and, along with
operations in certain other countries, have been subject to, and may continue
to be subject to, significant political and economic uncertainties. In Brazil,
net sales, operating income and income before taxes were $31.4, $2.3 and $0.5,
respectively, for the second quarter of 1997 compared to $33.3, $6.3, $5.2,
respectively, for the second quarter of 1996 and were $65.7, $9.1, $4.9,
respectively, for the first half of 1997 compared to $64.9, $13.7 and $11.2,
respectively, for the first half of 1996. Results of operations in Brazil for
the 1997 periods were adversely impacted by less favorable economic conditions
and competitive activity affecting the Company's toiletries business. In
Mexico, operating results for the first half of 1997 and 1996 were adversely
affected by the continued weakness of the Mexican economy. Effective January
1997, Mexico is considered a hyperinflationary economy. In Venezuela,
operating results for the first half of 1997 and 1996 were adversely affected
by high inflation and in the 1996 period by a currency devaluation.
Cost of sales
As a percentage of net sales, cost of sales was 35.3% for the second
quarter of 1997 compared to 33.0% for the second quarter of 1996, and 34.6%
for the first half of 1997 compared to 32.9% for the first half of 1996,
respectively. The increase in cost of sales as a percentage of net sales is
due primarily to changes in product mix involving increased sales of the
Company's higher cost enhanced-performance technology-based products, an
increase in export sales, increased sales of lower margin products (such as
those products sold by the Company's retail subsidiary, Cosmetic Center), the
effect of weaker local currencies on the cost of imported purchases and
competitive pressures on the Company's toiletries business in certain
International markets. These factors were
12
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
partially offset by the benefits of improved overhead absorption against
higher production volumes and more efficient global production and purchasing.
The aforementioned increases in sales that negatively impacted cost of sales
as a percentage of net sales were, however, more profitable to the Company's
overall operating results.
Selling, general & administrative ("SG&A") expenses
As a percentage of net sales, SG&A expenses were 56.4% for the second
quarter of 1997, an improvement from 58.8% for the second quarter of 1996, and
58.8% for the first half of 1997, an improvement from 61.1% for the first half
of 1996. SG&A expenses other than advertising expense, as a percentage of net
sales, improved to 40.5% for the second quarter of 1997 compared with 43.2%
for the second quarter of 1996 and improved to 42.7% for the first half of
1997 compared with 45.1% for the first half of 1996, primarily as a result of
reduced general and administrative expenses, improved productivity and lower
distribution costs in the first half of 1997 compared with the first half of
1996. In accordance with its business strategy, the Company increased
advertising and consumer-directed promotions in the second quarter and first
half of 1997 compared with the comparable 1996 periods to support growth in
existing product lines, new product launches and increased distribution in the
self-select distribution channel in many of the Company's markets in the
International operation. Advertising expense increased by 12.3% to $91.1, or
15.9% of net sales, for the second quarter of 1997 from $81.1, or 15.7% of net
sales, for the second quarter of 1996 and increased by 9.3% to $171.4, or
16.1% of net sales, for the first half of 1997 from $156.8, or 16.0% of net
sales, for the first half of 1996.
Business consolidation costs and other, net
In the second quarter of 1997, the Company's retail subsidiary,
Cosmetic Center, incurred business consolidation costs, including severance
and other costs related to the Cosmetic Merger, in connection with the
consolidation of certain warehouse, distribution and headquarter operations
related to the consummation of the Cosmetic Merger. In addition, the Company
incurred business consolidation costs in connection with the implementation of
its business strategy to rationalize factory operations primarily including
severance and other related costs in certain International operations. These
business consolidation costs were partially offset by an approximately $12.7
settlement of a claim. In the first quarter of 1997, the Company incurred
business consolidation costs of approximately $5.4 in connection with the
implementation of its business strategy to rationalize factory operations
primarily including severance and other related costs in certain International
operations. These business consolidations are intended to lower the Company's
operating costs and increase efficiency in the future. Certain facilities
relating to the International operations are held for sale, and the Company
believes it may realize a gain upon any such sale based upon current estimated
market values.
Operating income
As a result of the foregoing, operating income increased by $1.2, or
2.8%, to $43.8 for the second quarter of 1997 from $42.6 for the second
quarter of 1996 and increased by $2.0, or 3.4%, to $60.9 for the first half of
1997 from $58.9 for the first half of 1996.
Other expenses/income
Interest expense was $56.3 for the second quarter of 1997 compared to
$58.3 for the second quarter of 1996 and $119.4 for the first half of 1997
compared to $117.8 for the first half of 1996. The decrease in interest
expense for the second quarter of 1997 compared to the corresponding 1996
period is primarily due to the cancellation of the Revlon Worldwide Notes and
lower interest rates under the Credit Agreement and the New Notes partially
offset by higher average outstanding borrowings on the Credit Agreement. The
increase in interest expense for the first half of 1997 as compared to the
corresponding 1996 period is attributable to the higher accreted value of the
Revlon Worldwide Notes prior to cancellation partially offset by lower average
outstanding borrowings under the Credit Agreement and lower interest rates
under the Credit Agreement.
Interest and net investment income was $5.7 for the second
13
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
quarter of 1997 compared to $1.0 for the second quarter of 1996 and $8.1 for
the first half of 1997 compared to $2.0 for the first half of 1996. The
increase in interest and net investment income was primarily due to the
interest income recognized on marketable securities that were purchased by the
Company and deposited in an irrevocable trust to effect the covenant
defeasance of the remaining Revlon Worldwide Notes not previously delivered to
the Trustee for cancellation.
Gain on sale of subsidiary stock of $6.1 was recognized in the second
quarter of 1997 primarily as a result of the Cosmetic Merger. A gain on sale
of subsidiary stock of $187.8 was recognized in the first quarter of 1996 as a
result of the Revlon IPO.
Foreign currency losses, net, were $1.0 for the second quarter of
1997 compared to $1.7 for the second quarter of 1996 and $2.8 for the first
half of 1997 compared to $3.8 for the first half of 1996. The reduction in the
foreign currency loss in the second quarter of 1997 as compared to 1996
resulted primarily from the strengthening of the Japanese yen versus the U.S.
dollar, and the reduction in the first half of 1997 as compared to the
corresponding 1996 period was due to a stable Venezuelan bolivar versus the
devaluation which occurred during the first half of 1996, partially offset by
the stronger U.S. dollar and U.K. pound against certain foreign currencies.
Provision for income taxes
The provision for income taxes was $3.5 and $5.9 for the second
quarter of 1997 and 1996, respectively, and $9.0 and $12.9 for the first half
of 1997 and 1996, respectively. The decrease was primarily attributable to the
implementation of tax planning involving the utilization of net operating loss
carryforwards in certain International operations, partially offset by higher
taxable income in certain International operations.
Extraordinary item
The extraordinary item in the second quarter of 1997 resulted from
the write-off of deferred financing costs associated with the extinguishment
of borrowings under the 1996 Credit Agreement prior to maturity with proceeds
from the Credit Agreement, and costs of approximately $6.3 in connection with
the redemption of Products Corporation's Sinking Fund Debentures. The
extraordinary item in the first quarter of 1997 resulted from the cancellation
of a portion of the Revlon Worldwide Notes as well as the write-off of the
deferred financing costs associated with the cancellation. The extraordinary
item in the first quarter of 1996 resulted from the write-off of deferred
financing costs associated with the extinguishment of borrowings under the
1995 Credit Agreement prior to maturity with the net proceeds from the Revlon
IPO and proceeds from the 1996 Credit Agreement.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash used for operating activities was $82.3 and $114.4 for the
first half of 1997 and 1996, respectively. The decrease in net cash used for
operating activities for the first half of 1997 compared with the first half
of 1996 resulted primarily from higher operating income and improved working
capital management, partially offset by increased spending on merchandise
display units in connection with the Company's continued expansion into the
self-select distribution channel.
Net cash used for investing activities was $362.0 and $30.6 for the
first half of 1997 and 1996, respectively. Net cash used for investing
activities for the first half of 1997, consisted of the purchase of marketable
securities that were deposited in an irrevocable trust to effect the covenant
defeasance of the remaining Revlon Worldwide Notes not previously delivered to
the Trustee for cancellation, capital expenditures and cash paid in connection
with the Cosmetic Merger and in the first half of 1996 consisted primarily of
capital expenditures.
Net cash provided by financing activities was $446.5 and $133.4 for
the first half of 1997 and 1996, respectively. Net cash provided by financing
activities for the first half of 1997 included cash drawn under the 1996
Credit Agreement, the Credit Agreement and Cosmetic Center's Facility and net
proceeds from the issuance of the New Notes, partially offset by the purchase
of the Revlon Worldwide Notes, repayment of borrowings under the 1996 Credit
14
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
Agreement, the payment of fees and expenses related to the Credit Agreement,
the repayment of borrowings under the Yen Credit Agreement and repayment of
borrowings under CCI's former credit agreement. Net cash provided by financing
activities for the first half of 1996 included the net proceeds from the
Revlon IPO, cash drawn under the 1995 Credit Agreement and under the 1996
Credit Agreement, partially offset by the repayment of borrowings under the
1995 Credit Agreement, the payment of fees and expenses related to the 1996
Credit Agreement and the repayment of borrowings under the Yen Credit
Agreement.
In May 1997, Products Corporation entered into the Credit Agreement
with a syndicate of lenders, whose individual members change from time to
time. The proceeds of loans made under the Credit Agreement were used for the
purpose of repaying the loans outstanding under the 1996 Credit Agreement and
to redeem the Sinking Fund Debentures and will be used for general corporate
purposes or, in the case of the Acquisition Facility, the financing of
acquisitions.
A subsidiary of Products Corporation is the borrower under the Yen
Credit Agreement, which had a principal balance of approximately (Y) 4.3
billion as of June 30, 1997 (approximately $37.6 U.S. dollar equivalent as of
June 30, 1997). In accordance with the terms of the Yen Credit Agreement,
approximately (Y) 539 million (approximately $5.2 U.S. dollar equivalent)
was paid in January 1996 and approximately (Y) 539 million (approximately
$4.6 U.S. dollar equivalent) was paid in January 1997. In June 1997, Products
Corporation amended and restated the Yen Credit Agreement to extend the term
to December 31, 2000 subject to earlier termination under certain
circumstances. In accordance with the terms of the Yen Credit Agreement, as
amended and restated, approximately (Y) 539 million (approximately $4.7 U.S.
dollar equivalent as of June 30, 1997) is due in each of March 1998, 1999 and
2000 and (Y) 2.7 billion (approximately $23.5 U.S. dollar equivalent as of
June 30, 1997) is due on December 31, 2000.
Products Corporation made an optional sinking fund payment of $13.5
and redeemed all of the outstanding Sinking Fund Debentures on July 15, 1997
with the proceeds of borrowings under the Credit Agreement. $9.0 aggregate
principal amount of previously purchased Sinking Fund Debentures were used for
the mandatory sinking fund payment due July 15, 1997.
Products Corporation borrows funds from its affiliates from time to
time to supplement its working capital borrowings at interest rates more
favorable to Products Corporation than interest rates under the Credit
Agreement. No such borrowings were outstanding as of June 30, 1997.
The Company's principal sources of funds are expected to be cash flow
generated from operations and borrowings under the Credit Agreement and other
existing working capital lines. Various debt instruments and agreements
contain certain provisions that by their terms limit the Company's and/or its
subsidiaries' ability to, among other things, incur additional debt. The
Company's principal uses of funds are expected to be the payment of operating
expenses, working capital and capital expenditure requirements and debt
service payments.
The Company estimates that capital expenditures for 1997 will be
approximately $60, including approximately $10 for upgrades to the Company's
management information systems. Pursuant to tax sharing agreements, the
Company and Revlon, Inc. may be required to make tax sharing payments to Mafco
Holdings Inc. as if the Company or Revlon, Inc., as the case may be, were
filing separate income tax returns, except that no payments are required by
Revlon, Inc. if and to the extent that Products Corporation is prohibited
under the Credit Agreement from making tax sharing payments to Revlon, Inc.
The Credit Agreement prohibits Products Corporation from making any cash tax
sharing payments other than in respect of state and local income taxes. The
Company anticipates that, with respect to Revlon, Inc. as a result of net
operating tax losses and prohibitions under the Credit Agreement and with
respect to the Company as a result of the absence of business operations or a
source of income of its own, no federal tax payments or payments in lieu of
taxes pursuant to the tax sharing agreements will be made for 1997.
As of June 30, 1997, Products Corporation was party to a series of
interest rate swap agreements (which expire at various dates through December
2001) totaling a notional amount of $225.0 in which Products Corporation
agreed to pay on such notional amount a variable interest rate equal to the
six month LIBOR (5.81% per annum at
15
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
July 30, 1997) to its counterparties and the counterparties agreed to pay on
such notional amounts fixed interest rates averaging approximately 6.03% per
annum. Products Corporation entered into these agreements in 1993 and 1994
(and in the first quarter of 1996 extended a portion equal to a notional
amount of $125.0 through December 2001) to convert the interest rate on $225.0
of fixed-rate indebtedness to a variable rate. If Products Corporation had
terminated these agreements, which Products Corporation considers to be held
for other than trading purposes, on June 30, 1997, a loss of approximately
$3.6 would have been realized. Certain other swap agreements were terminated
in 1993 for a gain of $14.0. The amortization of the realized gain on these
agreements for the first half of 1997 was approximately $1.6. The remaining
unamortized gain, which is being amortized over the original lives of the
agreements, is $1.5 as of June 30, 1997. Although cash flow from the presently
outstanding agreements was slightly positive for the first half of 1997,
future positive or negative cash flows from these agreements will depend upon
the trend of short-term interest rates during the remaining lives of such
agreements. Based on current interest rate levels, Products Corporation
expects to have break even cash flow from these agreements in 1997, although
no assurances can be given that short-term interest rates will not rise above
current levels. In the event of nonperformance by the counterparties at any
time during the remaining lives of the agreements, Products Corporation could
lose some or all of any possible future positive cash flows from these
agreements. However, Products Corporation does not anticipate nonperformance
by such counterparties, although no assurances can be given.
Products Corporation enters into forward foreign exchange contracts
from time to time to hedge certain cash flows denominated in foreign
currencies. At June 30, 1997, Products Corporation had forward foreign
exchange contracts denominated in various currencies of approximately $16.6
(U.S. dollar equivalent). If Products Corporation had terminated these
contracts on June 30, 1997, no material gain or loss would have been realized.
Based upon the Company's current level of operations and anticipated
growth in net sales and earnings as a result of its business strategy, the
Company expects that cash flows from operations and funds from currently
available subsidiary credit facilities and refinancings of existing subsidiary
indebtedness will be sufficient to enable the Company to meet its anticipated
cash requirements for the foreseeable future, including debt service of its
subsidiaries. However, there can be no assurance that cash flow will be
sufficient to meet the Company's cash requirements on a consolidated basis. If
the Company is unable to satisfy such cash requirements from these sources,
the Company could be required to adopt one or more alternatives, such as
reducing or delaying capital expenditures, restructuring subsidiary
indebtedness, selling assets or operations, selling its equity securities,
seeking capital contributions or loans from affiliates of the Company or
selling additional shares of capital stock of Revlon, Inc. There can be no
assurance that any of such actions could be effected, that they would enable
the Company's subsidiaries to continue to satisfy their capital requirements
or that they would be permitted under the terms of the Company's various debt
instruments then in effect. The Credit Agreement requires, subject to certain
exceptions, that the proceeds of any public offering of capital stock of
Revlon, Inc. be contributed to Products Corporation. The Company, as a holding
company, will be dependent on distributions with respect to its approximately
83.1% indirect ownership interest in Revlon, Inc. from the net earnings
generated by Products Corporation to pay its expenses and to pay the principal
amount at maturity of the New Notes. The terms of the Credit Agreement, the
Senior Subordinated Notes, the 1999 Senior Notes and the Senior Notes
generally restrict Products Corporation from paying dividends or making
distributions, except that Products Corporation is permitted to pay dividends
and make distributions to Revlon, Inc., among other things, to enable Revlon,
Inc. to pay expenses incidental to being a public holding company, including,
among other things, professional fees such as legal and accounting, regulatory
fees such as SEC filing fees and other miscellaneous expenses related to being
a public holding company, and to pay dividends or make distributions in
certain circumstances to finance the purchase by Revlon, Inc. of its Class A
Common Stock in connection with the delivery of such Class A Common Stock to
grantees under the Revlon, Inc. 1996 Stock Plan provided that the aggregate
amount of such dividends and distributions taken together with any purchases
of Revlon, Inc. common stock on the open market to satisfy matching
obligations under the excess savings plan may not exceed $6.0 per annum.
The Revlon Worldwide Notes mature March 1998 and funds were deposited
in an irrevocable trust to effect the covenant defeasance of the remaining
$337.4 principal amount at maturity of the Revlon Worldwide Notes not
16
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
previously delivered to the Trustee for cancellation. The covenant defeasance
of the Revlon Worldwide Notes was effected on August 4, 1997, the 124th day
following the deposit.
The Company currently anticipates that cash flow generated from
operations will be insufficient to pay the principal amount at maturity of the
New Notes. Accordingly, the Company currently anticipates that it will be
required to adopt one or more alternatives to pay the principal amount at
maturity of the New Notes, such as refinancing its indebtedness, selling its
equity securities or the equity securities or assets of Revlon, Inc. or
seeking capital contributions or loans from its affiliates. There can be no
assurance that any of the foregoing actions could be effected on satisfactory
terms, that any of the foregoing actions would enable the Company to pay the
principal amount at maturity of the New Notes or that any of such actions
would be permitted by the terms of the Indenture or any other debt instruments
of the Company and the Company's subsidiaries then in effect.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q for the quarter ended June 30,
1997 as well as other public documents of the Company contain forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from those discussed in such forward-looking statements.
Such statements include, without limitation, the Company's expectation and
estimates as to introduction of new products, future financial performance,
including growth in net sales and earnings, cash flows from operations,
improved results from business consolidations, the possibility of gains from
dispositions of facilities held for sale, capital expenditures and the
availability of funds from refinancings of indebtedness, capital contributions
or loans from affiliates, the sale of assets or additional shares of Revlon,
Inc. and the sale of equity securities of the Company. Readers are urged to
consider statements which use the terms "believes," "no reason to believe,"
"expects," "plans," "intends," "estimates," "anticipated" or "anticipates" and
similar expressions to be uncertain and forward-looking. Such statements
reflect the current views of the Company with respect to future events and are
subject to certain risks, uncertainties and assumptions. In addition to
factors that may be described in the Company's Commission filings, including
this filing, the following factors, among others, could cause the Company's
actual results to differ materially from those expressed in any
forward-looking statements made by the Company: (i) difficulties or delays in
developing and introducing new products or failure of customers to accept new
product offerings; (ii) changes in consumer preferences, including reduced
consumer demand for the Company's color cosmetics and other current products;
(iii) difficulties or delays in the Company's continued expansion into the
self-select distribution channel and development of new markets; (iv)
unanticipated costs or difficulties or delays in completing projects
associated with the Company's strategy to improve operating efficiencies,
including information system upgrades; (v) the inability to refinance
indebtedness, secure capital contributions or loans from affiliates or sell
assets or additional shares of Revlon, Inc. or equity securities of REV
Holdings Inc.; (vi) effects of and changes in economic conditions, including
inflation and monetary conditions, and in trade, monetary, fiscal and tax
policies in countries outside of the U.S. in which the Company operates,
including Brazil; (vii) actions by competitors, including business
combinations, technological breakthroughs, new product offerings and marketing
and promotional successes; (viii) difficulties or delays in realizing improved
results from business consolidations and in realizing gains from the sale of
certain facilities held for sale; and (ix) combinations among significant
customers or the loss, insolvency or failure to pay its debts by a significant
customer or customers.
17
<PAGE>
REV HOLDINGS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
(a) EXHIBITS
Exhibit No.
*3.1 Certificate of Incorporation and Certificate of Ownership and Merger
dated as of August 5, 1997 merging Revlon Worldwide Corporation into the
Company and changing the Company's name to "REV Holdings Inc.".
4.12 Third Amended and Restated Credit Agreement dated as of June 30, 1997
between Pacific Finance & Development Corporation and the Long-Term Credit
Bank, Ltd. (Incorporated by reference to Exhibit 4.11 to the Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1997 of Revlon, Inc. (the
"Revlon, Inc. June 30, 1997 Form 10-Q")).
*4.24 First Supplemental Indenture dated as of August 5, 1997 among Revlon
Worldwide (Parent) Corporation, Revlon Worldwide Corporation and State Street
Bank and Trust Company, as Successor Trustee supplementing the Indenture dated
as of March 15, 1993 between Revlon Worldwide Corporation and State Street
Bank and Trust Company, as Successor Trustee.
10.27 The Revlon Excess Savings Plan for Key Employees. (Incorporated by
reference to Exhibit 10.24 to the Revlon, Inc. June 30, 1997 Form 10-Q).
- -----------------
* Filed herewith.
(b) REPORTS ON FORM 8-K - None
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REV HOLDINGS INC.
Registrant
By:/s/Irwin Engelman By:/s/Lawrence E. Kreider
- ---------------------------------- ---------------------------------------
Irwin Engelman Lawrence E. Kreider
Executive Vice President Senior Vice President, Controller
and Chief Financial Officer and Chief Accounting Officer
Dated: August 13, 1997
18
<PAGE>
CERTIFICATE OF INCORPORATION
OF
REVLON WORLDWIDE (PARENT) CORPORATION
FIRST: The name of the Corporation is Revlon
Worldwide (Parent) Corporation (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1013 Centre Road, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of
the Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock,
each having a par value of one dollar ($1.00).
FIFTH: The name and mailing address of the
Sole Incorporator is as follows:
Name Address
---- -------
Catherine D. Ledyard P.O. Box 636
Wilmington, DE 19899
SIXTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
<PAGE>
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written
ballot unless the By-Laws so provide.
(4) No director shall be personally liable to the
Corporation or any of its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Corporation or
its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the GCL or (iv) for any transaction
from which the director derived an improper personal benefit. If the
GCL is amended hereafter to authorize the further elimination or
limitation of liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the
fullest extent authorized by the GCL, as so amended. Any repeal or
modification of this Article SIXTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to
such repeal or modification.
(5) In addition to the powers and authority hereinbefore or
by statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of the GCL, this Certificate of
Incorporation, and any By-Laws adopted by the stockholders; provided,
however, that no By-Laws hereafter adopted by the stockholders
2
<PAGE>
shall invalidate any prior act of the directors which would have been
valid if such By-Laws had not been adopted.
SEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL)
outside the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the By-Laws of the
Corporation.
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the GCL, do make
this Certificate, hereby declaring and certifying that this is my act and deed
and the facts herein stated are true, and accordingly have hereunto set my
hand this 24th day of February, 1997.
/s/ Catherine D. Ledyard
----------------------------
Catherine D. Ledyard
Sole Incorporator
3
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
REVLON WORLDWIDE CORPORATION
INTO
REVLON WORLDWIDE (PARENT) CORPORATION
(Pursuant to Sections 103 and 253 of the General
Corporation Law of the State of Delaware)
REVLON WORLDWIDE (PARENT) CORPORATION, a Delaware
corporation (the "Corporation"), does hereby certify:
FIRST: The Corporation is incorporated pursuant to the General Corporation Law
of the State of Delaware.
SECOND: The Corporation owns 100% of the outstanding shares of capital stock
of Revlon Worldwide Corporation, a Delaware corporation (the "Subsidiary").
THIRD: The Board of Directors of the Corporation by resolutions (a true copy
of the pertinent resolutions is attached hereto as Exhibit A) duly adopted by
unanimous written consent on February 24, 1997, has authorized the merger of
the Subsidiary with and into the Corporation (the "Merger") upon the terms and
subject to the conditions set forth in such resolutions, including the terms
and conditions set forth in the Merger Agreement referred to in such
resolutions (a true copy of the Merger Agreement is attached hereto as Exhibit
B). Such resolutions have not been modified or rescinded and are in full force
and effect on the date hereof.
FOURTH: The Corporation shall be the surviving corporation of the Merger (the
"Surviving Corporation").
FIFTH: At the effective time of the Merger the name of the Surviving
Corporation shall be changed to REV Holdings Inc. To reflect such change, the
First Article of the Certificate of Incorporation of the Corporation is
amended to read in its entirety as follows: "The name of the Corporation is
REV Holdings Inc. (hereinafter the "Corporation")."
SIXTH: The Merger shall be effective upon the filing of this Certificate of
Ownership and Merger with the Secretary of State of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, Revlon Worldwide (Parent) Corporation has caused
this Certificate of Ownership and Merger to be executed in its corporate name
on this 5th day of August, 1997.
REVLON WORLDWIDE (PARENT)
CORPORATION
By: /s/ Glenn P. Dickes
----------------------------
Name: Glenn P. Dickes
Title: Vice President
<PAGE>
Exhibit A
REVLON WORLDWIDE (PARENT) CORPORATION
ACTIONS BY THE BOARD OF DIRECTORS
BY UNANIMOUS WRITTEN CONSENT
February 24, 1997
WHEREAS, the Board of Directors of Revlon Worldwide (Parent)
Corporation (the "Corporation") deems it advisable and in the best interests
of the Corporation that, following the defeasance of $1,115,760,000 aggregate
principal amount at maturity of the Senior Secured Discount Notes Due 1998 of
Revlon Worldwide Corporation (the "Revlon Worldwide Notes Defeasance"), Revlon
Worldwide Corporation ("Revlon Worldwide") be merged with and into the
Corporation.
NOW, THEREFORE BE IT:
RESOLVED, that it is advisable and in the best interests of
the Corporation and its stockholders that the Corporation enter into the
Agreement and Plan of Merger (the "Merger Agreement") by and between the
Corporation and Revlon Worldwide, substantially in the form presented to the
Board of Directors; and further
RESOLVED, that the Merger Agreement, which provides, among
other things, that following the Revlon Worldwide Notes Defeasance Revlon
Worldwide will be merged with and into the Corporation (the "Merger"), hereby
is approved and adopted, and the appropriate officers of the Corporation be,
and each of them individually hereby is, authorized in the name and on behalf
of the Corporation, to execute and deliver the Merger Agreement, with such
changes therein as the officer executing the same shall approve, the signature
of such officer of the Corporation to be conclusive evidence of such changes;
that such officers be, and each of them individually hereby is, authorized to
perform all of the agreements and obligations of the Corporation under such
Merger Agreement and to consummate the Merger and the other transactions
contemplated thereby; and that such officers be, and each of them individually
hereby is, authorized to execute and deliver such other agreements and
documents and to take such other actions in connection with the execution and
delivery of the Merger Agreement as such officers deem necessary or
appropriate; and further
3
<PAGE>
RESOLVED, that the Board of Directors hereby approves the
Merger and the other transactions contemplated in the Merger Agreement and
determines that the Merger and such other transactions are in the best
interests of the Corporation's stockholders.
4
<PAGE>
Exhibit B
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of August 5,
1997, is by and between Revlon Worldwide (Parent) Corporation, a Delaware
corporation ("Parent" or the "Surviving Corporation"), and Revlon Worldwide
Corporation, a Delaware corporation ("Revlon Worldwide").
RECITALS
A. Revlon Worldwide has 1,000 shares of common stock, par value $1.00
per share, authorized, issued and outstanding (the "Revlon Worldwide Common
Stock"). Revlon Worldwide has no other shares of capital stock authorized,
issued or outstanding.
B. Parent owns all of the 1,000 shares of Revlon Worldwide Common
Stock.
C. Each of the Boards of Directors of Parent and Revlon Worldwide
deems it advisable and in the best interest of its respective corporation and
stockholders that Revlon Worldwide be merged with and into Parent in
accordance with this Agreement and Plan of Merger (this "Plan") and the laws
of the State of Delaware (the "Merger") on terms whereby all of the issued and
outstanding shares of Revlon Worldwide Common Stock shall be surrendered and
canceled as described below.
D. The parties hereto desire to enter into this Plan for the reasons
set forth above, and Revlon Worldwide and Parent have, by action of their
respective Boards of Directors, approved this Plan in accordance with the laws
of State of Delaware.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties hereto agree as
follows:
<PAGE>
AGREEMENT
1. The Merger. Upon the terms and subject to the conditions
set forth in this Plan, and in accordance with the laws of the State of
Delaware, Revlon Worldwide shall be merged with and into Parent on the
Effective Date of the Merger (as defined herein). As a result of the Merger,
the separate corporate existence of Revlon Worldwide shall cease and Parent
shall continue as the Surviving Corporation of the Merger.
2. Effective Date of Merger.
(a) Parent shall execute, acknowledge and file a
Certificate of Ownership and Merger with the Secretary of State of the State
of Delaware. Subject to paragraph 2(b) hereof, the effective date of the
Merger (the "Effective Date") shall be the later of (i) August 5, 1997 or (ii)
the date the Certificate of Ownership and Merger is filed with the Secretary
of State of the State of Delaware.
(b) The obligation of each party hereto to effect
the Merger shall be subject to the satisfaction of the condition that on the
Effective Date, the consummation of the Merger shall not constitute an "Event
of Default" as such term is defined under the Indenture, dated as of March 1,
1997, between Parent and The Bank of New York, as trustee.
3. Shares of Common Stock.
(a) Revlon Worldwide Common Stock. Upon the
Effective Date, each share of Revlon Worldwide Common Stock issued and
outstanding immediately prior to the Merger shall be surrendered and canceled.
All shares of Revlon Worldwide Common Stock held in treasury shall be
canceled.
(b) Capital Stock of the Surviving Corporation.
The issued and outstanding capital stock of the Surviving Corporation shall
not be converted as a result of the Merger and shall remain unchanged.
2
<PAGE>
4. Certificate of Incorporation; Bylaws.
(a) The Certificate of Incorporation and the
By-Laws of Parent as they exist on the Effective Date (as amended to reflect
the name change authorized in paragraph 4(b)) shall continue to be the
Certificate of Incorporation and the By-Laws of Parent, as the Surviving
Corporation, until the same shall thereafter be altered, amended or repealed
in accordance with the laws of the State of Delaware and in accordance with
said Certificate of Incorporation and By-Laws.
(b) At the effective time of the Merger, the name
of the Surviving Corporation shall be changed to REV Holdings Inc. To reflect
such change, the First Article of the Certificate of Incorporation of the Sur-
viving Corporation shall be amended to read in its entirety as follows: "The
name of the Corporation is REV Holdings Inc. (hereinafter the "Corporation")."
5. Stock Certificates. Upon the Effective Date, Parent,
being the sole holder of outstanding certificates representing all of the
shares of Revlon Worldwide Common Stock, shall surrender the same for
cancellation in accordance with paragraph 3(a).
6. Management of Surviving Corporation.
(a) Directors. The directors of the Surviving
Corporation on the Effective Date immediately prior to the Merger shall
continue to be the directors of the Surviving Corporation after the Merger and
shall hold office until their respective successors are duly elected and
qualified.
(b) Officers. The officers of the Surviving
Corporation on the Effective Date immediately prior to the Merger shall
continue to be the officers of the Surviving Corporation after the Merger and
shall hold their respective offices until their respective successors are duly
appointed and qualified.
7. Supplemental Indenture. On or before the Effective Date,
Parent and Revlon Worldwide shall execute and deliver to the Trustee (as
defined below) a supplemental indenture to evidence the assumption by
Parent, as the Surviving Corporation, of the obligations of Revlon
3
<PAGE>
Worldwide under the Indenture, dated as of March 15, 1993 (the "Indenture"),
between Revlon Worldwide and State Street Bank and Trust Company, as successor
trustee (the "Trustee"), and the obligations of Revlon Worldwide relating to
its Senior Secured Discount Notes Due 1998
issued pursuant to the Indenture.
8. Transfer of Assets. Revlon Worldwide agrees, from time to
time and as and when requested by Parent, or by its successors or assigns, to
execute and deliver, or cause to be executed and delivered, all such
instruments, assignments and other documents, and other assurances in law, and
to take such other action, as Parent may deem necessary or desirable to carry
out the purposes of the Merger.
9. Abandonment of Plan. This Plan may be abandoned (a) at
any time prior to the filing of the Certificate of Ownership and Merger with
the Secretary of State of the State of Delaware by agreement of all of the
parties, or (b) after the filing of the Certificate of Ownership and Merger
with the Secretary of State of the State of Delaware, but prior to the
Effective Date by agreement of all of the parties and the filing of a
certificate of termination with the Secretary of State of the State of
Delaware.
4
<PAGE>
IN WITNESS WHEREOF, this Plan has been executed by the
parties to this Plan as of the date first written above.
REVLON WORLDWIDE (PARENT) CORPORATION
By: /s/ Glenn Dickes
---------------------------------------
Name: Glenn Dickes
Title: Vice President and
Secretary
REVLON WORLDWIDE CORPORATION
By: /s/ Glenn Dickes
---------------------------------------
Name: Glenn Dickes
Title: Vice President and
Secretary
<PAGE>
- -------------------------------------------------------------------------------
REVLON WORLDWIDE (PARENT) CORPORATION
REVLON WORLDWIDE CORPORATION
Senior Secured Discount Notes Due 1998
and
Series B Senior Secured Discount Notes Due 1998
--------------------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of August 5, 1997
Supplementing the Indenture, Dated
as of March 15, 1993, Between
Revlon Worldwide Corporation and
State Street Bank and Trust Company,
as Successor Trustee
--------------------------------------------------------------
STATE STREET BANK AND TRUST COMPANY
TRUSTEE
- -------------------------------------------------------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of August 5, 1997
(the "First Supplemental Indenture"), among REVLON WORLDWIDE (PARENT)
CORPORATION, a Delaware corporation ("Parent"), REVLON WORLDWIDE CORPORATION,
a Delaware corporation ("Worldwide"), and STATE STREET BANK AND TRUST COMPANY
(the "Trustee"), as Successor Trustee under the Indenture referred to herein;
WHEREAS, Worldwide and The First National Bank of Boston
(the "Original Trustee") heretofore executed and delivered an Indenture, dated
as of March 15, 1993 (the "Indenture"); and
WHEREAS, pursuant to the Indenture Worldwide issued and the
Original Trustee authenticated and delivered $1,115,760,000 aggregate
principal amount at maturity of Worldwide's Senior Secured Discount Notes Due
1998 and Series B Senior Secured Discount Notes Due 1998 (collectively, the
"Securities"); and
WHEREAS, pursuant to Section 8.01(b) of the Indenture,
Worldwide has exercised its covenant defeasance option (as defined in the
Indenture) (the "Defeasance"), effective August 4, 1997; and
WHEREAS, Parent and Worldwide have entered into the
Agreement and Plan of Merger, dated as of August 5, 1997, pursuant to which
Worldwide will merge with and into Parent on the date hereof; and
WHEREAS, Section 5.01(i) of the Indenture provides that
Worldwide shall not merge with or into any entity unless the surviving entity
shall expressly assume by supplemental indenture all the obligations of
Worldwide under the Securities and the Indenture; and
WHEREAS, Section 9.01 of the Indenture provides that
Worldwide and the Trustee may amend the Indenture and the Securities without
notice to or consent of any Holders of the Securities in order to comply with
Article V of the Indenture; and
WHEREAS, this First Supplemental Indenture has been duly
authorized by all necessary corporate action on the part of each of Parent and
Worldwide.
NOW, THEREFORE, Parent, Worldwide and the Trustee agree as
follows for the equal and ratable benefit of the Holders of the Securities:
<PAGE>
2
ARTICLE I
ASSUMPTION BY SUCCESSOR CORPORATION
SECTION 1.1 Assumption of the Securities. Parent hereby
expressly assumes the due and punctual payment of the principal of and
interest on the Securities and all obligations of Worldwide under the
Securities and the Indenture and shall be the successor to Worldwide under the
Indenture.
SECTION 1.2 Trustee's Acceptance. The Trustee hereby accepts
this First Supplemental Indenture and agrees to perform the same under the
terms and conditions set forth in the Indenture.
ARTICLE II
MISCELLANEOUS
SECTION 2.1 Effect of Supplemental Indenture. Upon the later
to occur of (i) the execution and delivery of this First Supplemental
Indenture by Parent, Worldwide and the Trustee and (ii) the consummation of
the merger of Worldwide with and into Parent, the Indenture shall be
supplemented in accordance herewith, and this First Supplemental Indenture
shall form a part of the Indenture for all purposes, and every Holder of
Securities heretofore or hereafter authenticated and delivered under the
Indenture shall be bound thereby.
SECTION 2.2 Indenture Remains in Full Force and Effect.
Except as supplemented hereby, all provisions in the Indenture shall remain in
full force and effect, other than those the operation of which has been
terminated as a result of the Defeasance.
SECTION 2.3 Indenture and Supplemental Indenture Construed
Together. This First Supplemental Indenture is an indenture supplemental to
and in implementation of the Indenture, and the Indenture and this First
Supplemental Indenture shall henceforth be read and construed together.
SECTION 2.4 Confirmation and Preservation of Indenture. The
Indenture as supplemented by this First Supplemental Indenture is in all
respects confirmed and preserved, except to the extent of those provisions in
the Indenture the operation of which has been terminated as a result of the
Defeasance.
SECTION 2.5 Conflict with Trust Indenture Act. If any
provision of this First Supplemental Indenture limits, qualifies or conflicts
with any provision of the TIA that is required under the TIA to be part of and
govern any provision of this First Supplemental Indenture, the provision of
the TIA shall control. If any provision of this First Supplemental Indenture
modifies or excludes any provision of the TIA that may be so modified or
excluded, the provision of the TIA shall be deemed to
<PAGE>
3
apply to the Indenture as so modified or to be excluded by this First
Supplemental Indenture, as the case may be.
SECTION 2.6 Severability. In case any provision in this
First Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 2.7 Terms Defined in the Indenture. All capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Indenture.
SECTION 2.8 Headings. The Article and Section headings of
this First Supplemental Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Supplemental Indenture
and shall in no way modify or restrict any of the terms or provisions hereof.
SECTION 2.9 Benefits of First Supplemental Indenture, etc.
Nothing in this First Supplemental Indenture or the Securities, express or
implied, shall give to any Person, other than the parties hereto and thereto
and their successors hereunder and thereunder and the Holders of the
Securities, any benefit of any legal or equitable right, remedy or claim under
the Indenture, this First Supplemental Indenture or the Securities.
SECTION 2.10 Successors. All agreements of Parent in this
First Supplemental Indenture shall bind its successors. All agreements of the
Trustee in this First Supplemental Indenture shall bind its successors.
SECTION 2.11 Trustee Not Responsible for Recitals. The
recitals contained herein shall be taken as the statements of Worldwide and
Parent, and the Trustee assumes no responsibility for their correctness.
SECTION 2.12 Certain Duties and Responsibilities of the
Trustee. In entering into this First Supplemental Indenture, the Trustee shall
be entitled to the benefit of every provision of the Indenture relating to the
conduct or affecting the liability or affording protection to the Trustee,
whether or not elsewhere herein so provided.
SECTION 2.13 Governing Law. This First Supplemental
Indenture shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
<PAGE>
4
SECTION 2.14 Counterpart Originals. The parties may sign any
number of copies of this First Supplemental Indenture. Each signed copy shall
be an original, but all of them together represent the same agreement.
IN WITNESS WHEREOF, the parties have caused this First
Supplemental Indenture to be duly executed as of the date first written above.
REVLON WORLDWIDE (PARENT) CORPORATION
By: /s/ Glenn P. Dickes
-----------------------------------------------
Name: Glenn P. Dickes
Title: Vice President and Assistant Secretary
REVLON WORLDWIDE CORPORATION
By: /s/ Glenn P. Dickes
-----------------------------------------------
Name: Glenn P. Dickes
Title: Vice President and Assistant Secretary
STATE STREET BANK AND TRUST COMPANY, as Trustee
By: /s/ Mark Nelson
-----------------------------------------------
Name: Mark Nelson
Title: Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 39,900
<SECURITIES> 0
<RECEIVABLES> 418,500
<ALLOWANCES> 24,400
<INVENTORY> 367,100
<CURRENT-ASSETS> 882,600
<PP&E> 595,800
<DEPRECIATION> 213,700
<TOTAL-ASSETS> 2,048,500
<CURRENT-LIABILITIES> 524,600
<BONDS> 2,305,700
0
0
<COMMON> 1
<OTHER-SE> (1,033,000)
<TOTAL-LIABILITY-AND-EQUITY> 2,048,500
<SALES> 1,064,700
<TOTAL-REVENUES> 1,064,700
<CGS> 368,000
<TOTAL-COSTS> 368,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,300
<INTEREST-EXPENSE> 119,400
<INCOME-PRETAX> (55,400)
<INCOME-TAX> 9,000
<INCOME-CONTINUING> (64,400)
<DISCONTINUED> 0
<EXTRAORDINARY> (58,700)
<CHANGES> 0
<NET-INCOME> (123,100)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
