Revlon Reports Third Quarter and Nine-Month 2004 Results; Company Confirms Guidance for Full Year 2004 EBITDA

Business Wire, Nov 10, 2004

NEW YORK -- Revlon, Inc. (NYSE: REV) today announced results for the third quarter and nine months ended September 30, 2004. The Company indicated that Adjusted EBITDA(1) for the third quarter of 2004 advanced to $26 million, compared with Adjusted EBITDA of $15 million in the third quarter of 2003. In making the announcement, the Company reconfirmed its previous guidance of achieving Adjusted EBITDA of approximately $190 million in 2004 and reiterated its goal to deliver its destination model profit margins over the next several years.

Adjusted EBITDA is a non-GAAP measure that is defined in the footnotes of this release and which is reconciled to its most directly comparable GAAP measures, net loss and cash flow used for operating activities, in the accompanying financial tables.

During the quarter, the Company made further progress to strengthen its balance sheet, with the successful consummation of a debt refinancing that included entering into new credit facilities and redeeming all of its 12% Senior Secured Notes. As a result of the refinancing, the Company extended to 2010 at the earliest the maturities on much of its debt that would have otherwise matured in 2005. The refinancing also further reduced the Company's annual interest expense.

Commenting on the Company's performance, Revlon President and Chief Executive Officer Jack Stahl stated, "We are pleased with the progress we made in the third quarter to strengthen both our business and our balance sheet. Our year-to-date results have positioned us to deliver our Adjusted EBITDA target of approximately $190 million in 2004, up significantly versus the Adjusted EBITDA we generated in 2003. Clearly, our productivity initiatives are proving to be an important driver of our financial progress this year, particularly given the softness of the color cosmetics category in the U.S. mass market. As we move forward, we will continue to take what we believe are the appropriate actions to create long-term value, by capitalizing on the underlying strengthening of our brands, customer partnerships, and organization. In 2005, to further accelerate our progress and the creation of long-term value, we plan to reinvest much, if not all, of the expected margin benefits from our productivity initiatives back into our brands to drive long-term growth. We believe that doing so at this stage of our turnaround is the right course of action and one that will result in long-term value creation."

Revlon will host a conference call with members of the investment community on November 10, 2004 at 9:30 AM EST to discuss the results of the third quarter. Access to the call is available to the public at www.revloninc.com, in the Investor Relations section, under Events Calendar. A copy of the press release and related information will be available in the Investor Relations section of the Company's website, under Press Releases and Financial Reports, respectively.

Third Quarter Results

Net sales in the third quarter of 2004 declined approximately 7% to $294 million, compared with net sales of $317 million in the third quarter of 2003, while gross sales in the third quarter of 2004 were modestly higher. The net sales performance in the current quarter primarily reflected higher provisions for returns, allowances and discounts combined, partially offset by favorable foreign currency translation in International. Excluding the favorable impact of foreign currency translation, net sales declined approximately 9%.

Regarding the Company's previous guidance on sales growth for 2004, Mr. Stahl stated, "Our expectation for gross sales growth of approximately 3% for 2004 remains intact, while net sales will likely be even with year-ago."

In North America(2), net sales for the quarter declined approximately 10% to $192 million, versus $212 million in the third quarter of 2003, largely reflecting higher provisions for returns, allowances and discounts combined, while gross sales were essentially even with year-ago.

In International, net sales declined approximately 2% to $102 million, versus $105 million in the third quarter of 2003. The performance primarily reflected higher provisions for returns, allowances and discounts combined, offset by favorable foreign currency translation and higher gross sales, stemming from strength in the Far East region. Excluding the favorable impact of foreign currency translation, International net sales were down 8% versus year-ago, largely reflecting the increase in returns, allowances and discounts that more than offset the gross sales growth in the quarter.

Operating loss in the quarter was $2.0 million, versus an operating loss of $7.9 million in the third quarter of 2003. This performance reflected, in part, the absence in the current quarter of approximately $6 million of growth plan charges taken in the third quarter of 2003. The performance also reflected the benefit of manufacturing efficiencies in the current quarter and lower discretionary spending, stemming from a reduction of brand support to more appropriately reflect current top-line trends. Partially offsetting these positive factors were the lower net sales and higher depreciation and amortization.