<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, 2000
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 1-11178
REVLON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3662955
(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
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 X No
--- ---
As of June 30, 2000, 20,115,935 shares of Class A Common Stock and 31,250,000
shares of Class B Common Stock were outstanding. 11,250,000 shares of Class A
Common Stock and all the shares of Class B Common Stock were held by REV
Holdings Inc., an indirect wholly owned subsidiary of Mafco Holdings Inc.
Total Pages - 20
<PAGE>
REVLON, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 2000 1999
----------- ----------
Current assets: (Unaudited)
<S> <C> <C>
Cash and cash equivalents ............................................................ $ 38.1 $ 25.4
Trade receivables, less allowances of $19.7
and $27.2, respectively ........................................................ 227.6 332.6
Inventories .......................................................................... 213.5 278.3
Prepaid expenses and other ........................................................... 42.5 51.3
----------- ----------
Total current assets ........................................................... 521.7 687.6
Property, plant and equipment, net ......................................................... 267.5 336.4
Other assets ............................................................................... 168.7 177.5
Intangible assets, net ..................................................................... 210.7 356.8
----------- ----------
Total assets ................................................................... $ 1,168.6 $ 1,558.3
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Short-term borrowings - third parties................................................ $ 36.5 $ 37.6
Current portion of long-term debt - third parties .................................... - 10.2
Accounts payable ..................................................................... 90.1 139.8
Accrued expenses and other ........................................................... 304.7 409.7
----------- ----------
Total current liabilities ...................................................... 431.3 597.3
Long-term debt - third parties ............................................................. 1,523.6 1,737.8
Long-term debt - affiliates ................................................................ 24.1 24.1
Other long-term liabilities ................................................................ 217.5 214.0
Stockholders' deficiency:
Preferred stock, par value $.01 per share; 20,000,000 shares authorized,
546 shares of Series A Preferred Stock
issued and outstanding ......................................................... 54.6 54.6
Class B Common Stock, par value $.01 per share; 200,000,000
shares authorized, 31,250,000 issued and outstanding ........................... 0.3 0.3
Class A Common Stock, par value $.01 per share; 350,000,000 shares
authorized, 20,115,935 and 19,992,837 issued and outstanding, respectively ..... 0.2 0.2
Capital deficiency ................................................................... (227.3) (228.4)
Accumulated deficit since June 24, 1992 .............................................. (826.0) (773.5)
Accumulated other comprehensive loss ................................................. (29.7) (68.1)
----------- ----------
Total stockholders' deficiency ................................................. (1,027.9) (1,014.9)
----------- ----------
Total liabilities and stockholders' deficiency ................................. $ 1,168.6 $ 1,558.3
========== ==========
</TABLE>
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
2
<PAGE>
REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales ............................................. $ 350.6 $ 553.4 $ 818.6 $ 994.5
Cost of sales ......................................... 124.3 184.9 292.8 340.6
---------------- ---------------- ---------------- ----------------
Gross profit ..................................... 226.3 368.5 525.8 653.9
Selling, general and administrative expenses .......... 204.0 324.6 482.9 597.5
Business consolidation costs, net ..................... 5.1 9.5 14.6 17.7
---------------- ---------------- ---------------- ----------------
Operating income ................................. 17.2 34.4 28.3 38.7
---------------- ---------------- ---------------- ----------------
Other expenses (income):
Interest expense ................................. 33.9 35.9 73.3 71.8
Interest income .................................. (0.4) (0.4) (0.8) (1.5)
Amortization of debt issuance costs .............. 1.0 1.2 3.5 2.5
Foreign currency losses, net ..................... 2.6 - 2.1 -
Miscellaneous, net ............................... 0.4 (0.2) 0.9 0.3
Loss (gain) on sale of product line and brand, net 3.2 - (3.0) -
---------------- ---------------- ---------------- ----------------
Other expenses, net ......................... 40.7 36.5 76.0 73.1
---------------- ---------------- ---------------- ----------------
Loss before income taxes .............................. (23.5) (2.1) (47.7) (34.4)
Provision for income taxes ............................ 1.1 1.8 4.8 3.7
---------------- ---------------- ---------------- ----------------
Net loss .............................................. $ (24.6) $ (3.9) $ (52.5) $ (38.1)
================ ================ ================ ================
Basic loss per common share ........................... $ (0.48) $ (0.08) $ (1.02) $ (0.74)
================ ================ ================ ================
Diluted loss per common share ......................... $ (0.48) $ (0.08) $ (1.02) $ (0.74)
================ ================ ================ ================
Weighted average number of common shares outstanding:
Basic and diluted ............................... 51,359,171 51,237,829 51,301,004 51,237,303
================ ================ ================ ================
</TABLE>
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
3
<PAGE>
REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
AND COMPREHENSIVE LOSS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
PREFERRED COMMON CAPITAL ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCK STOCK DEFICIENCY DEFICIT LOSS (a) DEFICIENCY
--------- ------- ---------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 ....................... $ 54.6 $ 0.5 $ (228.5) $ (402.0) $ (72.6) $ (648.0)
Issuance of common stock .................. 0.1 0.1
Comprehensive loss:
Net loss .......................... (38.1) (38.1)
Revaluation of marketable
securities .................... (0.6) (0.6)
Currency translation adjustment ... (29.2) (29.2)
-------------
Total comprehensive loss .................. (67.9)
--------- ------- ---------- ----------- -------------- -------------
Balance, June 30, 1999 ......................... $ 54.6 $ 0.5 $ (228.4) $ (440.1) $ (102.4) $ (715.8)
========= ======= ========== =========== ============== =============
Balance, January 1, 2000 ....................... $ 54.6 $ 0.5 $ (228.4) $ (773.5) $ (68.1) $ (1,014.9)
Issuance of common stock .................. 1.1 1.1
Comprehensive loss:
Net loss .......................... (52.5) (52.5)
Currency translation adjustment ... 38.4 (b) 38.4
-------------
Total comprehensive loss .................. (14.1)
--------- ------- ---------- ----------- -------------- -------------
Balance, June 30, 2000 ......................... $ 54.6 $ 0.5 $ (227.3) $ (826.0) $ (29.7) $ (1,027.9)
========= ======= ========== =========== ============== =============
</TABLE>
--------------------
(a) Accumulated other comprehensive loss includes a revaluation of
marketable securities of $3.8 and $3.6 as of June 30, 2000 and 1999,
respectively, currency translation adjustments of $21.0 and $66.3 as of
June 30, 2000 and 1999, respectively, and adjustments for the minimum
pension liability of $4.9 and $32.5 as of June 30, 2000 and 1999,
respectively.
(b) Accumulated other comprehensive loss and comprehensive income each
include a reclassification adjustment of $48.3 for realized losses
associated with the sale of the Company's worldwide professional
products line.
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
4
<PAGE>
REVLON, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 2000 1999
---------------- ----------------
<S> <C> <C>
Net loss ...................................................................... $ (52.5) $ (38.1)
Adjustments to reconcile net loss to net cash
(used for) provided by operating activities:
Depreciation and amortization ............................................ 61.8 60.8
Net gain on sale of product line and brand ............................... (3.0) -
Change in assets and liabilities, net of effects of dispositions:
Decrease in trade receivables ....................................... 25.0 55.8
Decrease (increase) in inventories .................................. 7.6 (20.5)
Decrease (increase) in prepaid expenses and
other current assets ................................... 9.5 (0.1)
(Decrease) increase in accounts payable ............................. (18.3) 18.2
Decrease in accrued expenses and other
current liabilities .................................... (103.4) (95.3)
Other, net .......................................................... (26.9) (37.0)
---------------- ----------------
Net cash used for operating activities ........................................ (100.2) (56.2)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .......................................................... (6.1) (20.0)
Net proceeds from the sale of product line, brand and certain assets .......... 339.6 -
Acquisition of technology rights .............................................. (3.0) -
---------------- ----------------
Net cash provided by (used for) investing activities .......................... 330.5 (20.0)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short-term borrowings - third parties ......................... 2.7 9.1
Proceeds from the issuance of long-term debt - third parties .................. 231.2 393.7
Repayment of long-term debt - third parties ................................... (449.8) (331.4)
Net proceeds from issuance of common stock .................................... - 0.1
Proceeds from the issuance of debt - affiliates ............................... - 62.1
Repayment of debt - affiliates ................................................ - (62.1)
---------------- ----------------
Net cash (used for) provided by financing activities .......................... (215.9) 71.5
---------------- ----------------
Effect of exchange rate changes on cash and cash equivalents .................. (1.7) (3.2)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents ..................... 12.7 (7.9)
Cash and cash equivalents at beginning of period ......................... 25.4 34.7
---------------- ----------------
Cash and cash equivalents at end of period ............................... $ 38.1 $ 26.8
=============== ===============
Supplemental schedule of cash flow information:
Cash paid during the period for:
Interest ............................................................ $ 73.0 $ 69.1
Income taxes, net of refunds ........................................ 2.4 5.6
Supplemental schedule of noncash financing activities:
Issuance of common stock ............................................ $ 1.1 $ -
</TABLE>
See Accompanying Notes to Unaudited Consolidated Condensed Financial Statements.
5
<PAGE>
REVLON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS)
(1)BASIS OF PRESENTATION
Revlon, Inc. (the "Company") is a holding company, formed in April 1992,
that conducts its business exclusively through its direct subsidiary, Revlon
Consumer Products Corporation and its subsidiaries ("Products Corporation"). The
Company is an indirect majority owned subsidiary of MacAndrews & Forbes Holdings
Inc. ("MacAndrews Holdings"), a corporation wholly owned through Mafco Holdings
Inc. ("Mafco Holdings" and, together with MacAndrews Holdings, "MacAndrews &
Forbes") by Ronald O. Perelman.
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. 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 Unaudited
Consolidated Condensed Financial Statements should be read in conjunction with
the consolidated financial statements and related notes contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
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.
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, for the first half of 2000 and 1999, disbursements and
commitments for advertising and promotion exceeded advertising and promotion
expenses by $31.2 and $71.1 respectively, and such amounts were deferred.
On March 30, 2000 and May 8, 2000, the Company completed the dispositions
of its worldwide professional products line and Plusbelle brand in Argentina,
respectively. Accordingly, the Unaudited Consolidated Condensed Financial
Statements include the results of operations of the professional products line
and Plusbelle brand through the dates of their respective dispositions.
6
<PAGE>
REVLON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
(DOLLARS IN MILLIONS)
(2) INVENTORIES
JUNE 30, DECEMBER 31,
2000 1999
--------- ---------
Raw materials and supplies ............. $ 61.5 $ 74.1
Work-in-process ........................ 14.2 19.7
Finished goods ......................... 137.8 184.5
--------- ---------
$ 213.5 $ 278.3
========= =========
(3) BASIC AND DILUTED (LOSS) INCOME PER COMMON SHARE
The basic (loss) income per common share has been computed based upon the
weighted average number of shares of common stock outstanding during each of the
periods presented. Diluted (loss) income per common share has been computed
based upon the weighted average number of shares of common stock outstanding.
The Company's outstanding stock options represent the only potential dilutive
common stock outstanding. The number of shares used in the calculation of
diluted loss per common share was the same in each period presented, as it does
not include any incremental shares that would have been outstanding assuming the
exercise of stock options because the effect of those incremental shares would
have been antidilutive. For each period presented, the amount of loss used in
the calculation of diluted loss per common share was the same as the amount of
loss used in the calculation of basic loss per common share.
(4) BUSINESS CONSOLIDATION COSTS, NET
During the fourth quarter of 1999, the Company continued to re-evaluate its
organizational structure and implemented a new restructuring plan, principally
at its New York headquarters and New Jersey locations. As part of this new
restructuring plan, the Company reduced personnel and consolidated excess real
estate. In the first quarter of 2000, the Company recorded a charge of $9.5
relating to such restructuring plan, principally for additional employee
severance and other personnel benefits and to restructure certain operations
outside the United States. The Company continued to implement such restructuring
plan during the second quarter of 2000 during which it recorded a charge of $5.1
relating to exiting certain operations in Japan and employee severance and other
personnel benefits.
In the fourth quarter of 1998, the Company committed to a restructuring
plan to realign and reduce personnel, exit excess leased real estate, realign
and consolidate regional activities, reconfigure certain manufacturing
operations and exit certain product lines. In the first half of 1999, the
Company recorded a net charge of $16.7, $8.5 of which was recorded in the second
quarter of 1999, relating to such restructuring plan, principally for additional
employee severance and other personnel benefits as well as other costs. Also in
the second quarter of 1999, the Company adopted a plan to exit a non-core
business for which it recorded a charge of $1.0.
Of the 208 employees and the 181 employees for whom severance and other
personnel benefits were included in the charges for the fourth quarter 1999 and
during the first half of 2000, respectively, the Company had terminated 344
employees by June 30, 2000. As of June 30, 2000, the unpaid balance of the
business consolidation costs is included in accrued expenses and other in the
Company's Unaudited Consolidated Condensed Balance Sheet.
7
<PAGE>
REVLON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
(DOLLARS IN MILLIONS)
Details of the activity described above during the six-month period
ended June 30, 2000 are as follows:
<TABLE>
<CAPTION>
BALANCE UTILIZED, NET BALANCE
AS OF -------------------------- AS OF
1/1/00 EXPENSES, NET CASH NONCASH 6/30/00
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Employee severance and other
personnel benefits ................... $ 24.6 $ 11.4 $ (18.0) $ (1.1) $ 16.9
Factory, warehouse, office
and other costs ....................... 9.4 3.2 (2.6) (2.1) 7.9
------------ ------------ ------------ ------------ ------------
$ 34.0 $ 14.6 $ (20.6) $ (3.2) $ 24.8
============ ============ ============ ============ ============
</TABLE>
(5) DISPOSITION OF PRODUCT LINE AND BRAND
On March 30, 2000, the Company completed the disposition of its worldwide
professional products line, including professional hair care for use in and
resale by professional salons, ethnic hair and personal care products, Natural
Honey skin care and certain regional toiletries brands, for $315 in cash, before
adjustments, plus $10 in purchase price payable in the future, contingent upon
the purchasers' achievement of certain rates of return on their investment. The
disposition involved the sale of certain of the Company's subsidiaries
throughout the world devoted to the professional products line, as well as
assets dedicated exclusively or primarily to the lines being disposed. The
worldwide professional products line was purchased by a company formed by CVC
Capital Partners, the Colomer family and other investors, led by Carlos Colomer,
a former manager of the line that was sold, following arms'-length negotiation
of the terms of the purchase agreement therefor, including the determination of
the amount of the consideration. In connection with the disposition, the Company
recognized a pre-tax and after-tax gain of $6.2. Approximately $150.3 of the Net
Proceeds (as defined in the Credit Agreement) was used to reduce the aggregate
commitment under the Credit Agreement (as hereinafter defined).
On May 8, 2000, Products Corporation completed the disposition of its
Plusbelle brand in Argentina for $46.2 in cash. Approximately $20.7 of the Net
Proceeds was used to reduce the aggregate commitment under the Credit Agreement.
In connection with the disposition, the Company recognized a pre-tax and
after-tax loss of $3.2.
8
<PAGE>
REVLON, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
(DOLLARS IN MILLIONS)
(6) GEOGRAPHIC INFORMATION
The Company manages its business on the basis of one reportable operating
segment. The Company is exposed to the risk of changes in social, political and
economic conditions inherent in foreign operations and the Company's results of
operations and the value of its foreign assets and liabilities are affected by
fluctuations in foreign currency exchange rates. The Company's operations in
Brazil have accounted for approximately 4.7% and 3.8% of the Company's net sales
for the second quarter of 2000 and 1999, respectively, and 4.4% and 4.0% of the
Company's net sales for the first half of 2000 and 1999, respectively. Net sales
by geographic area are presented by attributing revenues from external customers
on the basis of where the products are sold.
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS: THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------------- ----------------------------------
Net sales: 2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
United States .......................... $ 207.6 $ 347.3 $ 481.9 $ 597.1
International............................ 143.0 206.1 336.7 397.4
-------------- -------------- -------------- --------------
$ 350.6 $ 553.4 $ 818.6 $ 994.5
============== ============== ============== ==============
JUNE 30, DECEMBER 31,
Long-lived assets: 2000 1999
-------------- --------------
United States .......................... $ 424.1 $ 611.3
International .......................... 222.8 259.4
-------------- --------------
$ 646.9 $ 870.7
============== ==============
CLASSES OF SIMILAR PRODUCTS: THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------------- ----------------------------------
Net sales: 2000 1999 2000 1999
-------------- -------------- -------------- --------------
Cosmetics, skin care and fragrances .... $ 232.2 $ 310.4 $ 501.5 $ 534.6
Personal care and professional ......... 118.4 243.0 317.1 459.9
-------------- -------------- -------------- --------------
$ 350.6 $ 553.4 $ 818.6 $ 994.5
============== ============== ============== ==============
</TABLE>
9
<PAGE>
REVLON, 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 segment and manufactures, markets and
sells an extensive array of cosmetics and skin care, fragrances and personal
care products. In addition, the Company has a licensing group.
On March 30, 2000 and May 8, 2000, the Company completed the dispositions
of its worldwide professional products line and Plusbelle brand in Argentina,
respectively. Accordingly, the Unaudited Consolidated Condensed Financial
Statements include the results of operations of the professional products line
and Plusbelle brand through the dates of their respective dispositions.
RESULTS OF OPERATIONS
The following table sets forth the Company's net sales for the
three-month and six-month periods ended June 30, 2000 and 1999, respectively:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ -------------------------------
2000 1999 2000 1999
Net sales: ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
United States ................................. $ 207.6 $ 347.3 $ 481.9 $ 597.1
International ................................. 143.0 206.1 336.7 397.4
------------ ------------ ------------- -------------
$ 350.6 $ 553.4 $ 818.6 $ 994.5
============ ============ ============= =============
</TABLE>
The following table sets forth certain statements of operations data
as a percentage of net sales for the three-month and six-month periods ended
June 30, 2000 and 1999, respectively:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------ -------------------------------
2000 1999 2000 1999
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Cost of sales ........................... 35.5 % 33.4 % 35.8 % 34.2%
Gross profit ............................ 64.5 66.6 64.2 65.8
Selling, general and administrative
expenses ("SG&A") .............. 58.2 58.7 59.0 60.1
Business consolidation costs, net ....... 1.5 1.7 1.8 1.8
Operating income ........................ 4.9 6.2 3.5 3.9
</TABLE>
NET SALES
Net sales were $350.6 and $553.4 for the second quarters of 2000 and 1999,
respectively, a decrease of $202.8, or 36.6% on a reported basis (a decrease of
36.1% on a constant U.S. dollar basis), and were $818.6 and $994.5 for the first
half of 2000 and 1999, respectively, a decrease of $175.9, or 17.7% on a
reported basis (a decrease of 16.8% on a constant U.S. dollar basis). The
decline in consolidated net sales for the second quarter and first half of 2000
as compared with the comparable 1999 periods is primarily due to the sale of the
worldwide professional products line and Plusbelle brand in Argentina, a
reduction of overall U.S. customer inventories, and reduced consumer demand for
the Company's hair care products.
New products in the first half of 2000 included REVLON COLORSTAY
LIPSHINE, REVLON COLORSTAY STICK makeup, REVLON AGE DEFYING LIFTING makeup,
ALMAY ONE COAT LIP CREAM, ALMAY LIGHT & EASY makeup and ALMAY 3-IN-1 STICK
makeup.
10
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
Net sales, excluding the worldwide professional products line and the
Plusbelle brand in Argentina, were $346.6 and $447.0 for the second quarters of
2000 and 1999, respectively, a decrease of $100.4, or 22.5% on a reported basis
(a decrease of 21.4% on a constant U.S. dollar basis), and were $722.3 and
$793.7 for the first half of 2000 and 1999, respectively, a decrease of $71.4,
or 9.0% on a reported basis (a decrease of 8.2% on a constant U.S. dollar
basis).
United States. Net sales in the United States were $207.6 for the second
quarter of 2000 compared with $347.3 for the second quarter of 1999, a decrease
of $139.7, or 40.2%, and were $481.9 for the first half of 2000 compared with
$597.1 for the first half of 1999, a decrease of $115.2, or 19.3%.
Net sales, excluding the domestic portion of the worldwide professional
products line, were $207.6 for the second quarter of 2000 compared with $299.6
for the second quarter of 1999, a decrease of $92.0, or 30.7%, and were $446.8
for the first half of 2000 compared with $512.8 for the first half of 1999, a
decrease of $66.0, or 12.9%. The decline in sales in the second quarter and
first half of 2000 is primarily due to a reduction of overall U.S. customer
inventories, which the Company anticipates will continue to affect sales, and
reduced consumer demand for the Company's hair care products. Despite
significantly decreased sales to retailers in the U.S., consumer take away in
dollar volume of REVLON cosmetics in the first half of 2000 (as measured by
ACNielsen) in the U.S. mass cosmetic market remained approximately the same
compared with the first half of 1999.
International. Net sales outside the United States were $143.0 for the
second quarter of 2000 compared with $206.1 for the second quarter of 1999, a
decrease of $63.1, or 30.6%, and were $336.7 for the first half of 2000 compared
with $397.4 for the first half of 1999, a decrease of $60.7, or 15.3%.
Net sales, excluding the worldwide professional products line outside the
United States and the Plusbelle brand in Argentina, were $139.0 for the second
quarter of 2000 compared with $147.4 for the comparable 1999 period, a decrease
of $8.4, or 5.7%, on a reported basis (a decrease of 2.0% on a constant U.S.
dollar basis), and were $275.5 for the first half of 2000 compared with $280.9
for the first half of 1999, a decrease of $5.4, or 1.9%, on a reported basis (an
increase of 0.5% on a constant U.S. dollar basis). The decrease in net sales for
the second quarter of 2000 on a constant dollar basis is primarily due to
increased competitive activity in certain markets outside the U.S., partially
offset by the introduction of new products in certain markets. The decrease in
net sales for the second quarter and first half of 2000 on a reported basis also
reflects the unfavorable effect on sales of a stronger U.S. dollar against
certain foreign currencies. Sales outside the United States are divided into
three geographic regions. In Europe, which comprises Europe, the Middle East and
Africa, net sales decreased by 4.4% on a reported basis to $46.0 for the second
quarter of 2000 as compared with the second quarter of 1999 (an increase of 3.4%
on a constant U.S. dollar basis), and decreased by 3.6% on a reported basis to
$90.6 for the first half of 2000 as compared with the first half of 1999 (an
increase of 2.9% on a constant U.S. dollar basis). In the Western Hemisphere,
which comprises Canada, Mexico, Central America, South America and Puerto Rico,
net sales decreased by 1.6% on a reported basis to $62.6 for the second quarter
of 2000 as compared with the second quarter of 1999 (and sales were at the same
level on a constant U.S. dollar basis), and increased by 2.6% on a reported
basis to $121.2 for the first half of 2000 as compared with the first half of
1999 (an increase of 3.0% on a constant U.S. dollar basis). The Company's
operations in Brazil are significant. In Brazil, net sales were $16.5 on a
reported basis for the second quarter of 2000 compared with $20.8 for the second
quarter of 1999, a decrease of $4.3, or 20.7% (a decrease of 16.8% on a constant
U.S. dollar basis), and were $36.4 on a reported basis for the first half of
2000 compared with $39.4 for the first half of 1999, a decrease of $3.0, or 7.6%
(a decrease of 5.1% on a constant U.S. dollar basis). On a reported basis, net
sales in Brazil were adversely affected by the stronger U.S. dollar against the
Brazilian real, increased competitive activities and disruptions resulting from
the Company's consideration of the possible sale of certain of its Brazilian
brands. In the Far East, net sales decreased by 14.8% on a reported basis to
$30.4 for the second quarter of 2000 as compared with the second quarter of 1999
(a decrease of 12.3% on a constant U.S. dollar basis), and decreased by 7.4% on
a reported basis to $63.7 for the first half of 2000 as compared with the first
half of 1999 (a decrease of 6.6% on a constant U.S. dollar basis). Net sales
outside
11
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
the United States, including, without limitation, in Brazil, may be adversely
affected by weak economic conditions, political and economic uncertainties,
including, without limitation, currency fluctuations, and competitive activities
in certain markets.
Cost of sales
As a percentage of net sales, cost of sales was 35.5% for the second
quarter of 2000 compared with 33.4% for the second quarter of 1999, and 35.8%
for the first half of 2000 compared with 34.2% for the first half of
1999. Excluding the worldwide professional products line and the Plusbelle brand
in Argentina, cost of sales as a percentage of net sales was 35.2% for the
second quarter of 2000 compared with 32.3% for the second quarter of 1999, and
35.1% for the first half of 2000 compared with 33.2% for the first half of 1999.
The increase in cost of sales as a percentage of net sales for the second
quarter and first half of 2000 compared with the second quarter and first half
of 1999 is due to the mix of new products with higher product packaging and
material costs and the effect of fixed costs on lower net sales.
SG&A expenses
As a percentage of net sales, SG&A expenses were 58.2% for the second
quarter of 2000 compared with 58.7% for the second quarter of 1999, and 59.0%
for the first half of 2000 compared with 60.1% for the first half of 1999.
Excluding the worldwide professional products line and the Plusbelle brand in
Argentina, SG&A expenses as a percentage of net sales were 58.3% for the second
quarter of 2000 compared with 60.0% for the second quarter of 1999, and 59.6%
for the first half of 2000 compared with 61.9% for the first half of 1999. The
decrease of SG&A expenses as a percentage of net sales is primarily due to
reduced trade promotion and couponing activity and the favorable impact of the
Company's restructuring efforts, partially offset by the effect of fixed costs
on lower net sales.
Business consolidation costs, net
During the fourth quarter of 1999, the Company continued to re-evaluate its
organizational structure and implemented a new restructuring plan, principally
at its New York headquarters and New Jersey locations. As part of this new
restructuring plan, the Company reduced personnel and consolidated excess real
estate. In the first quarter of 2000, the Company recorded a charge of $9.5
relating to such restructuring plan, principally for additional employee
severance and other personnel benefits and to restructure certain operations
outside the United States. The Company continued to implement such restructuring
plan during the second quarter of 2000 during which it recorded a charge of $5.1
relating to exiting certain operations in Japan and employee severance and other
personnel benefits. The Company anticipates annual savings of between $6 and $8
relating to the restructuring charges taken in the first half of 2000.
In the fourth quarter of 1998, the Company committed to a restructuring
plan to realign and reduce personnel, exit excess leased real estate, realign
and consolidate regional activities, reconfigure certain manufacturing
operations and exit certain product lines. In the first half of 1999, the
Company recorded a net charge of $16.7, $8.5 of which was recorded in the second
quarter of 1999, relating to such restructuring plan, principally for additional
employee severance and other personnel benefits as well as other costs. Also in
the second quarter of 1999, the Company adopted a plan to exit a non-core
business as to which a charge of $1.0 is included in business consolidation
costs and other, net.
12
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
Operating income
As a result of the foregoing, operating income decreased to $17.2 for the
second quarter of 2000 from $34.4 for the second quarter of 1999 and decreased
to $28.3 for the first half of 2000 from $38.7 for the first half of 1999.
Operating income, excluding the worldwide professional products line and
the Plusbelle brand in Argentina, decreased to $17.4 for the second quarter of
2000 from $27.0 for the second quarter of 1999 and increased to $23.7 for the
first half of 2000 from $23.3 for the first half of 1999.
Other expenses (income)
Interest expense was $33.9 for the second quarter of 2000 compared with
$35.9 for the second quarter of 1999 and $73.3 for the first half of 2000
compared with $71.8 for the first half of 1999. The decrease in interest expense
for the second quarter of 2000 as compared with the second quarter of 1999 is
primarily due to the repayment in June 1999 of Products Corporation's 9 1/2%
Senior Notes due 1999 (the "1999 Notes") and the repayment of borrowings under
the Credit Agreement with the net proceeds from the disposition of the worldwide
professional product line and the Plusbelle brand in Argentina, partially offset
by higher interest rates under the Credit Agreement. The increase in interest
expense for the first half of 2000 as compared with the first half of 1999 is
primarily due to higher average outstanding debt during the first quarter of
2000 and higher interest rates under the Credit Agreement during the first half
of 2000, partially offset by the repayment of the 1999 Notes and the repayment
of borrowings under the Credit Agreement with the net proceeds from the
disposition of the professional product line and the Plusbelle brand.
Foreign currency losses, net, were $2.6 for the second quarter of 2000
compared with nil in the second quarter of 1999, and $2.1 in the first half of
2000 compared with nil in the first half of 1999. Foreign currency losses, net
for the second quarter and first half of 2000, consisted primarily of losses in
certain markets in Latin America.
Sale of product line and brand
On May 8, 2000, Products Corporation completed the disposition of its
Plusbelle brand in Argentina for $46.2 in cash. Approximately $20.7 of the Net
Proceeds was used to reduce the aggregate commitment under the Credit Agreement.
In connection with the disposition, the Company recognized a pre-tax and
after-tax loss of $3.2 (See Note 5 to the Unaudited Consolidated Condensed
Financial Statements).
On March 30, 2000, the Company completed the disposition of its worldwide
professional products line, including professional hair care for use in and
resale by professional salons, ethnic hair and personal care products, Natural
Honey skin care and certain regional toiletries brands. In connection with the
disposition, the Company recognized a pre-tax and after-tax gain of $6.2 (See
Note 5 to the Unaudited Consolidated Condensed Financial Statements).
Provision for income taxes
The provision for income taxes was $1.1 for the second quarter of 2000
compared with $1.8 for the second quarter of 1999 and $4.8 for the first half of
2000 compared with $3.7 for the first half of 1999. The decrease in the second
quarter of 2000 as compared with the second quarter of 1999 was primarily
attributable to lower taxable income in certain markets outside the United
States. The increase in the first half of 2000 compared with the first half of
1999 was primarily due to the reduction of certain deferred tax assets and
increased taxes associated with the worldwide professional products line.
13
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash used for operating activities was $100.2 and $56.2 for the first
half of 2000 and 1999, respectively. The increase in net cash used for
operating activities in the first half of 2000 compared with net cash used for
operating activities in the first half of 1999 resulted primarily from an
increased net loss and changes in working capital.
Net cash provided by (used for) investing activities was $330.5 and
$(20.0) for the first half of 2000 and 1999, respectively. Net cash provided by
investing activities in the first half of 2000 consisted of proceeds from the
sale of the Company's worldwide professional products line and Plusbelle brand
in Argentina, partially offset by cash used for capital expenditures. Net cash
used for investing activities for the first half of 1999 consisted of capital
expenditures which primarily included upgrades to the Company's management
information systems the majority of which are non-recurring in 2000.
Net cash (used for) provided by financing activities was $(215.9) and
$71.5 for the first half of 2000 and 1999, respectively. Net cash used for
financing activities for the first half of 2000 included repayments of
borrowings under the Credit Agreement and the repayment of Products
Corporation's Japanese yen-denominated credit agreement (the "Yen Credit
Agreement"), partially offset by cash drawn under the Credit Agreement. Net
cash provided by financing activities for the first half of 1999 included cash
drawn under the Credit Agreement, partially offset by repayments of borrowings
under the Credit Agreement, redemption of the 1999 Notes and repayments under
the Yen Credit Agreement.
In May 1997, Products Corporation entered into a credit agreement (as
subsequently amended, the "Credit Agreement") with a syndicate of lenders,
whose individual members change from time to time. In March 2000 and May 2000,
60% of the Net Proceeds from the sale of its worldwide professional products
line and its Plusbelle brand in Argentina, respectively was applied to reduce
the aggregate commitment under the Credit Agreement. As of June 30, 2000, the
Credit Agreement provides up to $534.8 and is comprised of five senior secured
facilities: $106.2 in two term loan facilities (the "Term Loan Facilities"), a
$300.0 multi-currency facility (the "Multi-Currency Facility"), a $78.6
revolving acquisition facility, which may also be used for general corporate
purposes and which may be increased to $278.6 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"). At
June 30, 2000, the Company had $106.2 outstanding under the Term Loan
Facilities, $189.6 outstanding under the Multi-Currency Facility, $78.5
outstanding under the Acquisition Facility and $28.7 of issued but undrawn
letters of credit under the Special LC Facility. In May 2000, approximately
$20.7 of Net Proceeds from the sale of the Plusbelle brand in Argentina was used
to permanently reduce the aggregate commitment under the Credit Agreement. As a
result of such commitment reductions and scheduled reductions, as of June 30,
2000, the aggregate amount outstanding under the Term Loan Facilities was
reduced by $12.0 to $106.2, and the aggregate commitment under the Acquisition
Facility was reduced by $25.9 to $78.6. The scheduled reductions of the
Acquisition Facility will also be reduced such that the total amount of such
reductions is equal to the reduced aggregate Acquisition Facility commitment.
The scheduled reductions of the Acquisition Facility changed from $17.9 to $16.2
for the remainder of 2000, from $53.8 to $48.8 during 2001 and from $14.9 to
13.6 during 2002.
A subsidiary of Products Corporation was the borrower under the Yen Credit
Agreement. In March 2000, the outstanding balance under the Yen Credit
Agreement was repaid in full in accordance with its terms.
The Company's principal sources of funds are expected to be cash flow
generated from operations (before interest), borrowings under the Credit
Agreement and other existing working capital lines and renewals thereof. The
Credit Agreement, Products Corporation's 8 5/8% Senior Subordinated Notes due
2008 (the "8 5/8% Notes"), Products Corporation's 8 1/8% Senior Notes due 2006
(the "8 1/8% Notes") and Products Corporation's 9% Senior Notes due 2006 (the
"9% Notes") contain certain provisions that by their terms limit Products
Corporation'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, expenses in connection with the Company's restructuring referred
to above and debt service payments.
14
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
The Company estimates that capital expenditures for 2000 will be
approximately $25. The Company estimates that cash payments related to the
restructuring plans referred to in Note 4 to the Unaudited Consolidated
Condensed Financial Statements and executive separation costs will be
approximately $48 in 2000. Pursuant to a tax sharing agreement, Revlon, Inc. may
be required to make tax sharing payments to Mafco Holdings Inc. as if Revlon,
Inc. 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
tax sharing payments other than in respect of state and local income taxes.
Revlon, Inc. currently anticipates that, as a result of net operating tax losses
and prohibitions under the Credit Agreement, no cash federal tax payments or
cash payments in lieu of federal taxes pursuant to the tax sharing agreement
will be required for 2000.
Products Corporation enters into forward foreign exchange contracts and
option contracts from time to time to hedge certain cash flows denominated in
foreign currencies. There were no forward foreign exchange or option contracts
outstanding at June 30, 2000.
The Company expects that cash flows from operations and funds from
currently available credit facilities and renewals of short-term borrowings will
be sufficient to enable the Company to meet its anticipated cash requirements
during 2000 on a consolidated basis, including for debt service. However, there
can be no assurance that the combination of cash flow from operations, funds
from existing credit facilities and renewals of short-term borrowings will be
sufficient to meet the Company's cash requirements on a consolidated basis. If
the Company is unable to satisfy such cash requirements, the Company could be
required to adopt one or more alternatives, such as reducing or delaying capital
expenditures, restructuring indebtedness, selling other assets or operations, or
seeking capital contributions or loans from affiliates of the Company or issuing
additional shares of capital stock of Revlon, Inc. Products Corporation has had
discussions with an affiliate that is prepared to provide financial support to
Products Corporation of up to $40 on appropriate terms through December 31,
2000. There can be no assurance that any of such actions could be effected, that
they would enable the Company to continue to satisfy its capital requirements or
that they would be permitted under the terms of the Company's various debt
instruments then in effect. Revlon, Inc., as a holding company, will be
dependent on the earnings and cash flow of, and dividends and distributions
from, Products Corporation to pay its expenses and to pay any cash dividend or
distribution on the Class A Common Stock that may be authorized by the Board of
Directors of Revlon, Inc. The terms of the Credit Agreement, the 8 5/8% Notes,
the 8 1/8% Notes and the 9% 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 Securities and Exchange Commission (the
"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 Class A Common
Stock in connection with the delivery of such Class A Common Stock to grantees
under the Revlon, Inc. Amended and Restated 1996 Stock Plan, provided that the
aggregate amount of such dividends and distributions taken together with any
purchases of Revlon, Inc. Class A Common Stock on the open market to satisfy
matching obligations under the excess savings plan may not exceed $6.0 per
annum.
EURO CONVERSION
As part of the European Economic and Monetary Union, a single currency (the
"Euro") will replace the national currencies of the principal European countries
(other than the United Kingdom) in which the Company conducts business and
manufacturing. The conversion rates between the Euro and the
15
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
participating nations' currencies were fixed as of January 1, 1999, with the
participating national currencies to be removed from circulation between January
1, 2002 and June 30, 2002 and replaced by Euro notes and coinage. During the
transition period from January 1, 1999 through December 31, 2001, public and
private entities as well as individuals may pay for goods and services using
checks, drafts, or wire transfers denominated either in the Euro or the
participating country's national currency. Under the regulations governing the
transition to a single currency, there is a "no compulsion, no prohibition"
rule, which states that no one can be prevented from using the Euro after
January 1, 2002 and no one is obliged to use the Euro before July 2002. In
keeping with this rule, the Company expects to either continue using the
national currencies or the Euro for invoicing or payments. Based upon the
information currently available, the Company does not expect that the transition
to the Euro will have a material adverse effect on the business or consolidated
financial condition of the Company.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has exposure to market risk both as a result of changing
interest rates and movements in foreign currency exchange rates. The Company's
policy is to manage market risk through a combination of fixed and floating rate
debt, the use of derivative financial instruments and foreign exchange forward
and option contracts. The Company does not hold or issue financial instruments
for trading purposes. The qualitative and quantitative information presented in
Item 7A of the Company's Annual Report on Form 10-K for the year ended December
31, 1999 describes significant aspects of the Company's financial instrument
programs that have material market risk as of December 31, 1999. As referred to
above, in March 2000 and May 2000, Products Corporation reduced the aggregate
commitment under its Credit Agreement and repaid its Yen Credit Agreement. The
following table presents the information required by Item 7A as of June 30,
2000.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE FOR YEAR ENDED JUNE 30, FAIR VALUE
--------------------------------------------------------------------- JUNE 30,
2001 2002 2003 2004 2005 THEREAFTER TOTAL 2000
------- -------- ------- ------- ------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt (US dollar equivalent in millions)
Short-term variable rate (various currencies)... $36.5 $ 36.5 $ 36.5
Average interest rate (a)................. 7.7%
Long-term fixed rate ($US)...................... $ 1,149.3 1,149.3 683.9
Average interest rate..................... 8.6%
Long-term variable rate ($US)................... $300.6 300.6 300.6
Average interest rate (a)................. 10.1%
Long-term variable rate (various currencies).... 73.7 73.7 73.7
Average interest rate (a)................. 7.6%
--------- -----------
Total debt...................................... $ 1,560.1 $ 1,094.7
========= ===========
</TABLE>
(a) Weighted average variable rates are based upon implied forward rates from
the yield curves at June 30, 2000.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q for the quarter ended June 30, 2000 as
well as other public documents of the Company contains forward-looking
statements that 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 expectations and
estimates as to: the introduction of new products; future financial performance;
the effect on sales of the reduction of overall U.S. customer inventories
including the timing thereof; the effect on sales of political and/or economic
conditions and competitive activities in certain markets; the Company's estimate
of restructuring activities,
16
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
restructuring costs and benefits; cash flow from operations; capital
expenditures; the Company's qualitative and quantitative estimates as to market
risk sensitive instruments; the Company's expectations about the effects of the
transition to the Euro; the availability of funds from currently available
credit facilities, renewals of short-term borrowings, capital contributions or
loans from affiliates, the sale of assets or operations or additional shares of
Revlon, Inc.; and the effect of the adoption of certain accounting standards.
Statements that are not historical facts, including statements about the
Company's beliefs and expectations, are forward-looking statements.
Forward-looking statements can be identified by, among other things, the use of
forward-looking language, such as "believes," "expects," "estimates," "may,"
"will," "should," "seeks," "plans," "scheduled to," "anticipates" or "intends"
or the negative of those terms, or other variations of those terms or comparable
language, or by discussions of strategy or intentions. Forward-looking
statements speak only as of the date they are made, and the Company undertakes
no obligation to update them. A number of important factors could cause actual
results to differ materially from those contained in any forward-looking
statement. In addition to factors that may be described in the Company's filings
with the Commission, 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) unanticipated costs or difficulties or delays in
completing projects associated with the Company's strategy to improve operating
efficiencies; (iv) the inability to renew short-term borrowings, secure capital
contributions or loans from affiliates or sell assets or operations or
additional shares of Revlon, Inc.; (v) effects of and changes in political
and/or economic conditions, including inflation and monetary conditions, and in
trade, monetary, fiscal and tax policies in international markets, including but
not limited to Brazil; (vi) actions by competitors, including business
combinations, technological breakthroughs, new products offerings and marketing
and promotional successes; (vii) combinations among significant customers or the
loss, insolvency or failure to pay debts by a significant customer or customers;
(viii) lower than expected sales as a result of the reduction of the overall
U.S. customer inventories; (ix) difficulties, delays or unanticipated costs or
less than expected savings and other benefits resulting from the Company's
restructuring activities; (x) interest rate or foreign exchange rate changes
affecting the Company and its market sensitive financial instruments; (xi)
difficulties, delays or unanticipated costs associated with the transition to
the Euro; and (xii) the effects of the Company's adoption of certain new
accounting standards.
EFFECT OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Certain Derivative Instruments and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Certain Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of SFAS No.
133, an Amendment of SFAS No. 133," which has delayed the required
implementation of SFAS No. 133 such that the Company must adopt this standard no
later than January 1, 2001. In June 2000, the FASB issued SFAS No. 138,
"Accounting for Certain Derivative Instruments and Hedging Activities, an
Amendment of SFAS No. 133," to amend SFAS No. 133 and provide guidance on the
implementation of SFAS No. 133. The Company is in the process of determining the
impact the adoption of this Statement will have on its financial position and
results of operations. The Company plans to adopt the new standard on January 1,
2001.
In May 2000, the FASB Emerging Issues Task Force (the "EITF") issued new
guidelines entitled, "Accounting for Certain Sales Incentives" (the
"Guidelines"), which address the recognition, measurement, and income statement
classification for sales incentives, such as coupons. The Guidelines are
effective for the Company
17
<PAGE>
REVLON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN MILLIONS)
beginning October 1, 2000. The implementation of the Guidelines will require
the Company to make reclassifications between SG&A and sales.
In March 2000, the FASB issued SFAS Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation: An Interpretation of APB
Opinion No. 25" (the "Interpretation"). The Interpretation provides guidance for
issues that have arisen in the application of APB Opinion No. 25, "Accounting
for Stock Issued to Employees" ("Opinion No. 25"). The Interpretation, which is
effective July 1, 2000, applies prospectively to new awards, exchanges of
awards, modifications to outstanding awards and changes in grantee status that
occur on or after July 1, 2000, except for the provisions related to repricings
and the definition of an employee, which apply to awards issued after December
15, 1998. The implementation of the Interpretation by the Company on July 1,
2000 had no material impact on the Company's consolidated financial statements.
In December 1999, the staff of the United States Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements," as amended by SAB 101A and SAB 101B ("SAB 101"). SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidelines for disclosure related to revenue recognition policies. SAB 101 is
required to be implemented in the fourth quarter of 2000. The Company is
currently reviewing SAB 101 to determine the impact of its provisions, if any,
on the Company's consolidated financial statements.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 17, 2000 the plaintiffs in the six purported class actions filed
by each of Thomas Comport, Boaz Spitz, Felix Ezeir and Amy Hoffman, Ted Parris,
Jerry Krim and Dan Gavish individually and on behalf of others similarly
situated to them against Revlon, Inc. and certain of its present and former
officers and directors, alleging among other things, violations of Rule 10b-5
under the Securities and Exchange Act of 1934 in October and November of 1999
in the United States District Court for the Southern District of New York, filed
an Amended Complaint, which consolidated all of the actions and limited the
alleged class period to the period from October 29, 1997 through October 1,
1998. On June 2, 2000, the Company moved to dismiss the Amended Complaint. The
Company believes the allegations contained in the Amended Complaint are without
merit and intends to vigorously defend against them.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 2000 Annual Meeting of Stockholders was held on May 4, 2000. Directors
elected at the meeting were Ronald O. Perelman, Donald G. Drapkin, Meyer
Feldberg, Howard Gittis, Vernon E. Jordan, Edward J. Landau, Jerry W. Levin,
Jeffrey M. Nugent, Linda Gosden Robinson, Terry Semel and Martha Stewart,
consisting of all the Board of Directors standing for election. All of the
directors were elected without opposition. The only other matters voted upon
were the consideration and approval of the Revlon, Inc. Amended and Restated
Executive Bonus Plan (the "Amended Bonus Plan"), which plan was approved, and
the ratification of the appointment by the Board of Directors of KPMG LLP as the
Company's independent certified public accountants for 2000, which appointment
was ratified. There were no broker nonvotes with respect to the election of
directors or the ratification of the appointment of KPMG LLP.
18
<PAGE>
REVLON, INC. AND SUBSIDIARIES
The tabulation of votes for each matter is as follows:
1) ELECTION OF DIRECTORS:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
NOMINEES FOR DIRECTOR FOR AGAINST OR WITHHELD ABSTAINED
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
Ronald O. Perelman 331,760,436 138,025 ---
----------------------------------------------------------------------------------------------------------
Donald G. Drapkin 331,764,575 133,886 ---
----------------------------------------------------------------------------------------------------------
Meyer Feldberg 331,764,577 133,884 ---
----------------------------------------------------------------------------------------------------------
Howard Gittis 331,764,775 133,686 ---
----------------------------------------------------------------------------------------------------------
Vernon E. Jordan 331,757,656 140,805 ---
----------------------------------------------------------------------------------------------------------
Edward J. Landau 331,764,652 133,809 ---
----------------------------------------------------------------------------------------------------------
Jerry W. Levin 331,764,793 133,668 ---
----------------------------------------------------------------------------------------------------------
Jeffrey M. Nugent 331,764,953 133,508 ---
----------------------------------------------------------------------------------------------------------
Linda Gosden Robinson 331,765,052 133,409 ---
----------------------------------------------------------------------------------------------------------
Terry Semel 331,765,752 132,709 ---
----------------------------------------------------------------------------------------------------------
Martha Stewart 331,760,537 137,924 ---
----------------------------------------------------------------------------------------------------------
</TABLE>
2) APPROVAL OF AMENDED BONUS PLAN:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAINED UNVOTED
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
325,311,165 385,967 60,019 6,141,310
-----------------------------------------------------------------------------------------------------------
</TABLE>
3) RATIFICATION OF KPMG LLP:
--------------------------------------------------------------------------------
FOR AGAINST ABSTAINED
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331,784,710 91,844 21,907
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19
<PAGE>
REVLON, INC. AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS -
10.22 Employment Agreement amended and restated as of May 9, 2000
between Revlon Consumer Products Corporation and Douglas Greeff.
10.23 Revlon Executive Bonus Plan (Amended and Restated as of March 1,
2000).
(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, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
REVLON, INC.
------------
Registrant
By:/s/ Douglas H. Greeff By:/s/ Laurence Winoker
--------------------------- -----------------------------------
Douglas H. Greeff Laurence Winoker
Executive Vice President Senior Vice President, Corporate
and Chief Financial Officer Controller and Treasurer
Dated: August 14, 2000
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