Revlon first-quarter net sales drop 2.5%; focused on profitable sales growth, positive free cash flow

By Jennifer Lanning Drey

Portland, Ore., May 1 - Revlon Inc.'s first-quarter net sales dropped to $320.4 million from $328.6 million in the first quarter of 2007; however, the company believes it will be able to generate sustainable profitable sales growth and positive free cash flow through new product development, Revlon's management said Thursday during the company's first-quarter earnings conference call.

"Although net sales in the first quarter declined, it's important to note that we remain focused on profitable sales growth. We have, and will continue to make, careful return-on-investment decisions regarding how we generate net sales growth," Alan Ennis, Revlon's chief financial officer, said during the call.

Revlon's first-quarter results also included a $2.5 million net loss, compared to a net loss of $35.2 million in the 2007 first quarter, and adjusted EBITDA of $58.1 million, compared to $32.3 million in the prior-year quarter.

The improvements were mainly due to lower selling, general and administrative expenses as the first quarter of 2007 included significant brand support expenses related to the launch of Revlon Colorist hair color.

"We know that we need to further improve our performance. We will continue to execute our strategy and we're moving through 2008 with a continued focus on increasing the value of our company by building the Revlon brand and our key brands around the world and driving toward both profitable sales growth and positive free cash flow," David Kennedy, chief executive officer of Revlon, said during the call.

Cash flow drops to $11.6 million

Revlon's operating cash flow in the first quarter was $11.6 million, compared to $24.7 million in the first quarter of 2007. Ennis said the decrease was primarily due to changes in net working capital related to the timing of payments, partially offset by the lower net loss and lower permanent display spending.

The company had cash and unused borrowing capacity of $139.5 million at March 31. The number consisted of $92.8 million available under its revolving multi-currency facility and $46.7 million of cash and cash equivalents.

Revlon ended the quarter with total debt of $1.4 billion.

In April, Revlon entered into a $150 million two-year floating-to-fixed interest rate swap transaction related to the company's term loan, which was intended to reduce exposure to volatility.

Revlon's debt is now 60% fixed rate and 40% floating rate.

Revlon is a New York-based cosmetics, skincare, fragrances, beauty tools, hair color, anti-perspirants/deodorants and personal care products company.

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