ON THE COVER,
Cindy Crawford is wearing:
ColorStay Compact in Sand
Beige, EveryLash Mascara in
Black, SoftStroke PowderLiner
in Brown Suede, Wet/Dry
Shadow in Taupe Star, Super
Lustrous Lipstick in Hot Cocoa,
Nail Enamel in Iced Cocoa.
Cybill Shepherd is wearing:
Ultima II Glowtion Skin
Brightening Moisturizer in
Light, Ultima II Glowtion Lip
Brightener, Ultima II Full
Moisture Lipcolor in Maple
Sugar, Ultima II Full Moisture
Anti-Feathering Lipliner in
Sandalwood, Ultima II Brighten
Up, Tighten Up Eye Brightening
Cream, Ultima II Beautiful
Nutrient Nourishing Mascara in
Blackest Brown, Ultima II
Beautiful Nutrient Nourishing
Cream Eyecolor in Biscuit,
Ultima II Wonderwear Eyesexxxy
Eyeliner in Brown, Ultima II
Beautiful Nutrient Nourishing
Blush Stick in Tawny.
This annual report contains forward-looking statements under the caption “Dear Fellow Shareholders” and “Financial Information - Management’s Discussion and Analysis of
Financial Condition and Results of Operations” which reflect Revlon’s expectations and estimates as to future events and financial performance including expectations regarding,
the impact of competitive activity on share growth, the impact of retailer consolidations, expansion of Ultima II distribution in 1999, introduction of new products, growth in net
sales and earnings, the effect of political and/or economic conditions in international markets, restructuring activities, costs and benefits including cost savings, cash flows from
operations, our plans to address the Year 2000 issue, the costs associated therewith and the results of non-compliance the availabilites of funds from currently available credit
facilities and refinancings and future capital expenditures. Additionally, statements which use the terms “believes,” “expects,” “may,” “will,”“should,” “seeks,” “plans,” “sched-
uled to,” “anticipates,” or “intends” are forward-looking. Forward-looking statements involve risks and uncertainties and a number of factors could cause actual results to dif-
fer materially from those expressed in any forward-looking statements. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations -
Forward-Looking Statements” for a full description of these risks, uncertainties and factors. We assume no responsibility to update forward-looking information.
Profileevlon is a worldwide leader in cosmetics, skin care,
R
fragrance, personal care and professional products. Our
vision is to provide glamour, excitement and innovation to
consumers through high-quality products at aff o rd a b l e
prices. Revlon’s products are sold in a p p roximately 175
countries and t e rr i t o r i e s a round the world under such well-
known brand names as Revlon, C o l o r S t a y, Revlon Age
Defying, A l m a y, Ultima II, Charlie, Flex and Creme of Nature .
than otherwise would
have been possible.
Also in 1998, we
announced a new
p a rtnership with the
National Council of
N e g ro Women to de-
velop programs
to
s u p p o rt the wellness
of African-American women. One pro-
gram already scheduled is a study of the
a w a reness and understanding of bre a s t
and ovarian cancer issues. We also
continue to support a wide range of
other eff o rts, including the well-known
Revlon Run/Walk for Wo m e n.
Challenge, change and future gro w t h
The past year was one of significant
challenge and change in our markets.
But it was also a year of rapid and effec-
tive response. We were able to adjust
because we are an agile organization, a
confident organization, always willing
to question assumptions and rethink
the way we approach our business.
firmly
We head into 1999
with all the stre n g t h s
that have made us the
leader in mass market
cosmetics
in
place: brands that no
competitor can match,
i n d u s t ry-leading tech-
nologies, leadership at
retail, and the strongest team in the
i n d u s t ry. With those strengths and a
l e a n e r, more responsive organization,
we believe the stage is set for
significant gro w t h.
Sincerely,
G e o rge Fellows
PRESIDENT AND CHIEF EXECUTIVE OFFICER
REVLON R E S U LTS AT A GLANCE
RE V LON R E S U LTS AT A GLANCE
YEAR ENDED DEC EMB ER 31,
DOLLAR S IN MILLIONS, EXCEPT PER SHARE DATA
NET SALES
1 9 9 8
1 9 9 7
$2,252.2
$2,238.6
1 9 9 6
$2,092.1
1 9 9 5
$1,867.3
EBITDA( a)
O P E R ATING INCOME BEFORE NON-RECURRING CHARGES, N ET( b)
O P E R ATING INCOME
INCOME (LOSS) FROM CONTINUING OPERAT I O NS( c )
INCOME (LOSS) FROM CONTINUING OPERATIONS PER SHARE( c)
266.6
160.4
124.6
(27.3)
$(.53)
311.6
218.5
214.9
57.8
$1.13
279.6
199.2
199.2
24.4
$.49
222.9
147.5
147.5
(37.2)
$(.88)
(a) Defined as operating income before non-recurring charges, net of $35.8 million and $3.6 millon in 1998 and 1997, respectively, plus depreciation and amortization
other than that relating to debt issuance costs.
(b) Excludes non-re c u rring charges, net of $35.8 million and $3.6 million in 1998 and 1997, re s p e c t i v e l y.
(c) Includes the effects of non-recurring charges, net.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REVLON, INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS)
OVERVIEW
Revlon, Inc. (and together with its subsidiaries, the “Company”) operates in a single 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 profes-
sional products, consisting of hair and nail care products principally for use in and resale by professional salons. In addition, the
Company has a licensing group. The Company’s business is conducted exclusively through its wholly owned subsidiary, Revlon
Consumer Products Corporation (together with its subsidiaries, “Products Corporation”).
RESULTS OF OPERATIONS
The following table sets forth the Company’s net sales for each of the last three years:
NET SALES:
UNITED STATES
INTERNATIONAL
YEAR ENDED DECEMBER 31,
1998
1997
1996
$ 1,338.5
$ 1,300.2
$ 1,182.3
913.7
938.4
909.8
$ 2,252.2
$ 2,238.6
$ 2,092.1
The following table sets forth certain statements of operations data as a percentage of net sales for each of the last three years:
COST OF SALES*
GROSS PROFIT
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (“SG&A”)
BUSINESS CONSOLIDATION COSTS AND OTHER, NET
OPERATING INCOME
*1998 includes $2.7 (0.1% of net sales) for charges related to restructuring.
YEAR ENDED DECEMBER 31,
1998
1997
1996
34.0%
33.2%
32.9%
66.0
59.0
1.5
5.5
66.8
57.1
0.1
9.6
67.1
57.6
–
9.5
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
Year ended December 31, 1998 compared with year ended December 31, 1997
NET SALES
Net sales were $2,252.2 and $2,238.6 for 1998 and 1997, re s p e c t i v e l y, an increase of $13.6, or 0.6% (or 2.7% on a constant
U.S. dollar basis).
UNITED STATES. Net sales in the United States were $1,338.5 for 1998 compared to $1,300.2 for 1997, an increase of $38.3,
or 2.9%. The increase in net sales in 1998 reflects improvements in net sales of products in the Company’s Almay and Ultima fran-
chises and expansion of certain of the Company’s professional product lines including an acquisition. For the first half of 1998, net
sales for the Company’s Revlon franchise increased as compared to the first half of 1997 as a result of continued consumer acceptance
of new product offerings and general improvement in consumer demand for the Company’s color cosmetics. Beginning in the third quar-
ter of 1998, such sales were adversely affected by a slowdown in the rate of growth in the mass market color cosmetics category and
a leveling of market share. Additionally, net sales for 1998 were impacted by reduced purchases by some retailers, particularly chain
drugstores, resulting from improved inventory management through systems upgrades and inventory reductions following several recent
business combinations. The Company expects retail inventory balancing and reductions to continue to affect sales in 1999.
R e v l o n brand color cosmetics continued as the number one brand in dollar market share in the U.S. self-select distribution channel.
New product introductions (including, in 1998, certain products launched during 1997) generated incremental net sales in 1998, prin-
cipally as a result of launches of Top Speed nail enamel, M o i s t u re S t a y lip makeup, products in the New Complexion line, C o l o r S t a y
shampoo, Almay Stay Smooth lip makeup, products in the Almay Amazing collection, products in the Almay One Coat collection, pro d-
ucts in the Ultima II Beautiful Nutrient and Ultima II Full Moisture lipcolor lines and Ultima II Glowtion skin brighteners.
INTERNATIONAL. Net sales outside the United States were $913.7 for 1998 compared to $938.4 for 1997, a decrease of $24.7,
or 2.6%, on a reported basis (an increase of 2.4% on a constant U.S. dollar basis). The increase in net sales for 1998 on a constant
dollar basis reflects the benefits of increased distribution, including acquisitions, and successful new product introductions in several mar-
kets including MoistureStay lip makeup and Top Speed nail enamel. The decrease in net sales for 1998 on a reported basis reflects
the unfavorable effect on sales of a stronger U.S. dollar against most foreign currencies and unfavorable economic conditions in sev-
eral international markets. These unfavorable economic conditions restrained consumer and trade demand outside the U.S., particular-
ly in South America and the Far East, as well as Russia and other developing economies. Sales outside the United States are divided
into three geographic regions. In Europe, which is comprised of Europe, the Middle East and Africa, net sales decreased by 2.6% on
a reported basis to $406.9 for 1998 as compared to 1997 (an increase of 0.5% on a constant U.S. dollar basis). In the Western
Hemisphere, which is comprised of Canada, Mexico, Central America, South America and Puerto Rico, net sales increased by 4.8%
on a reported basis to $363.3 for 1998 as compared to 1997 (an increase of 9.5% on a constant U.S. dollar basis). The Company’s
operations in Brazil are significant. In Brazil, net sales were $122.5 on a reported basis for 1998 compared to $130.9 for 1997, a
decrease of $8.4, or 6.4% (an increase of 0.5% on a constant U.S. dollar basis). On a reported basis, net sales in Brazil were adverse-
ly affected by the stronger U.S. dollar against the Brazilian real. In the Far East, net sales decreased by 17.5% on a reported basis to
$143.5 for 1998 as compared to 1997 (a decrease of 7.4% on a constant U.S. dollar basis). Net sales outside the United States,
including without limitation in Brazil, were, and may continue to be, adversely impacted by generally weak economic conditions, polit-
ical 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 34.0% for 1998 compared to 33.2% for 1997. The increase in cost of sales as a
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
p e rcentage of net sales for 1998 compared to 1997 is due to changes in product mix, the effect of weaker local currencies on the cost
of imported purchases, the effect of lower net sales in the second half of 1998 and the inclusion of $2.7 of other costs incurred to exit
c e rtain product lines outside the United States in connection with the re s t ructuring charge in the fourth quarter of 1998. These factors were
p a rtially offset by the benefits of more efficient global production and purc h a s i n g .
SG&A EXPENSES
As a percentage of net sales, SG&A expenses were 59.0% for 1998 compared to 57.1% for 1997. SG&A expenses other than adver-
tising and consumer- d i rected promotion expenses, as a percentage of net sales, were 40.2% for 1998 compared to 39.3% for 1997.
The increase in SG&A expenses other than advertising and consumer- d i rected promotion expenses as a percentage of net sales was due
primarily to the effects of lower than expected sales. The Company’s advertising and consumer- d i rected promotion expenditures were
i n c u rred to support existing product lines, new product launches and increased distribution. Advertising and consumer- d i rected pro m o t i o n
expenses as a percentage of net sales were 18.8%, or $422.9, for 1998 compared to 17.8%, or $397.4, for 1997.
BUSINESS CONSOLIDATION COSTS AND OTHER, NET
In the fourth quarter of 1998 the Company committed to a re s t ructuring plan to realign and reduce personnel, exit excess leased real estate,
realign and consolidate regional activities, re c o n f i g u re certain manufacturing operations and exit certain product lines. As a result, the
Company recognized a net charge of $42.9 comprised of $26.6 of employee severance and termination benefits for 720 sales, market-
ing, administrative, factory and distribution employees worldwide, $14.9 of costs to exit excess leased real estate primarily in the United States
and $2.7 of other costs described above in cost of sales, partially offset by a gain of $1.3 for the sale of a factory outside the United States.
In the third quarter of 1998 the Company recognized a gain of approximately $7.1 for the sale of the wigs and hairpieces port i o n
of its business in the United States.
In 1997 the Company incurred business consolidation costs of $20.6 in connection with the implementation of its business strategy
to rationalize factory operations. These costs primarily included severance for 415 factory and administrative employees and other costs
related to the rationalization of certain factory and warehouse operations worldwide. Such costs were partially offset by an appro x i m a t e l y
$12.7 settlement of a claim and related gains of approximately $4.3 for the sales of certain factory operations outside the United States.
O P E R ATING INCOME
As a result of the foregoing, operating income decreased by $90.3, or 42.0%, to $124.6 for 1998 from $214.9 for 1997.
OTHER EXPENSES/INCOME
I n t e rest expense was $137.9 for 1998 compared to $133.7 for 1997. The increase in interest expense for 1998 as compared to 1997
is due to higher average outstanding borrowings partially offset by lower interest rates.
Foreign currency losses, net, were $4.6 for 1998 compared to $6.4 for 1997. The foreign currency losses for 1998 were com-
prised primarily of losses in several markets in Latin America. The losses in 1997 were comprised primarily of losses in several markets
in Europe and the Far East.
PROVISION FOR INCOME TA X E S
The provision for income taxes was $5.0 and $9.3 for 1998 and 1997, re s p e c t i v e l y. The decrease was primarily attributable to lower
taxable income outside the United States in 1998.
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
DISCONTINUED OPERAT I O N S
During 1998, the Company completed the disposition of its approximately 85% equity interest in The Cosmetic Center, Inc. (the “Cosmetic
Center”). In connection with such transaction, the Company re c o rded a loss on disposal of $47.7 during 1998. (Loss) income from discon-
tinued operations was $(16.5) (excluding the $47.7 loss on disposal) and $0.7 for 1998 and 1997, re s p e c t i v e l y. The 1997 period includes
a $6.0 non-re c u rring gain resulting from the merger of Prestige Fragrance & Cosmetics, Inc., then a wholly owned subsidiary of the Company,
with and into Cosmetic Center on April 25, 1997, partially offset by related business consolidation costs of $4.0. The 1998 period includes
the Company’s share of a non-re c u rring charge of $10.5 taken by Cosmetic Center primarily related to inventory and severance.
E X T R A O R D I N A RY ITEMS
The extraord i n a ry item of $51.7 in 1998 resulted primarily from the write-off of deferred financing costs and payment of call premiums asso-
ciated with the redemption of the 9 3/8% Senior Notes and the 10 1/2% Senior Subordinated Notes. The extraord i n a ry item in 1997
resulted from the write-o ff of deferred financing costs associated with the extinguishment of borrowings under the 1996 Credit Agre e m e n t
(as hereinafter defined) prior to maturity with proceeds from the Credit Agreement (as hereinafter defined), 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 Debenture s ” ) .
Year ended December 31, 1997 compared with year ended December 31, 1996
NET SALES
Net sales were $2,238.6 and $2,092.1 for 1997 and 1996, re s p e c t i v e l y, an increase of $146.5, or 7.0% or 9.5% on a constant U.S.
dollar basis, primarily as a result of successful new product introductions worldwide, increased demand in the United States, increased dis-
tribution internationally into the expanding self-select distribution channel and the further development of new international markets.
UNITED STATES. Net sales in the United States increased to $1,300.2 for 1997 from $1,182.3 for 1996, an increase of $117.9, or
10.0%. Net sales improved for 1997, primarily as a result of continued consumer acceptance of new product offerings and general
i m p rovement in consumer demand for the Company’s color cosmetics. These results were partially offset by a decline in the Company’s
fragrance business caused by downward trends in the mass fragrance industry and the Company’s strategy to de-emphasize new fra-
grance products. Even though consumer sell-through for the R e v l o n and A l m a y brands, as described below in more detail, has incre a s e d
s i g n i f i c a n t l y, the Company’s sales to its customers have been during 1997 and may continue to be impacted by retail inventory balanc-
ing and reductions resulting from consolidation in the chain dru g s t o re industry in the U.S.
R e v l o n brand color cosmetics continued as the number one brand in dollar market share in the self-select distribution channel with
a share of 21.6% for 1997 versus 21.4% for 1996. Market share, which is subject to a number of conditions, can vary from quar-
ter to quarter as a result of such things as timing of new product introductions and advertising and promotional spending. New pro d-
uct introductions (including, in 1997, certain products launched during 1996) generated incremental net sales in 1997, principally
as a result of launches of products in the C o l o r S t a y collection, including C o l o r S t a y eye makeup and face products such as powder
and blush, C o l o r S t a y h a i rc o l o r, launched in the third quarter of 1997, Top Speed nail enamel, launched in the third quarter of 1997,
and launches of Revlon Age Defying line extensions, the S t re e t We a r collection, New Complexion face makeup, Line & Shine l i p
makeup and launches of products in the Almay Amazing collection, including lip makeup, eye makeup, face makeup and conceal-
e r, Almay One Coat, and Almay Ti m e - O ff Revitalizer.
I N T E R N AT I O N A L . Net sales outside the United States increased to $938.4 for 1997 from $909.8 for 1996, an increase of $28.6,
or 3.1% on a re p o rted basis or 8.8% on a constant U.S. dollar basis. Net sales improved for 1997, principally as a result of
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
i n c reased distribution into the expanding self-select distribution channel, successful new product introductions, including the continued
roll-out of the C o l o r S t a y cosmetics collection and the further development of new international markets. This was partially offset by the
C o m p a n y ’s decision to exit the unprofitable demonstrator-assisted channel in Japan in the second half of 1996, unfavorable economic
conditions in several international markets, and, on a re p o rted basis, the unfavorable effect on sales of a stronger U.S. dollar against
c e rtain foreign currencies, primarily the Spanish peseta, the Italian lira and several other European currencies, the Australian dollar,
the South African rand and the Japanese yen. New products such as C o l o r S t a y h a i rcolor and S t re e t We a r w e re introduced in select
i n t e rnational markets in the second half of 1997. Sales outside the United States were divided into the following geographic are a s :
E u rope, which is comprised of Europe, the Middle East and Africa (in which net sales increased by 3.4% on a re p o rted basis to
$417.9 for 1997 as compared to 1996 or an increase of 11.3% on a constant U.S. dollar basis); the We s t e rn Hemisphere, which
is comprised of Canada, Mexico, Central America, South America and Puerto Rico (in which net sales increased by 11.1% on a
re p o rted basis to $346.6 for 1997 as compared to 1996 or an increase of 14.5% on a constant U.S. dollar basis); and the Far
East (in which net sales decreased by 10.3% on a re p o rted basis to $173.9 for 1997 as compared to 1996 or a decrease of 5.5%
on a constant U.S. dollar basis). Excluding in both periods the effect of the Company’s strategy of exiting the demonstrator- a s s i s t e d
distribution channel in Japan, Far East net sales on a constant U.S. dollar basis for 1997 would have been at approximately the same
level as those in1 9 9 6 .
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 $130.9, $16.0 and $7.7, re s p e c t i v e l y, for 1997 compared to $132.7, $25.1 and $20.0, re s p e c t i v e l y, for 1996. Results
of operations in Brazil for 1997 were adversely impacted by competitive activity affecting the Company’s toiletries business.
COST OF SALES
As a percentage of net sales, cost of sales was 33.2% for 1997 compared to 32.9% for 1996. The increase in cost of sales as a per-
centage of net sales included factors which enhanced overall operating income, including increased sales of the Company’s higher
cost, enhanced-performance, technology-based products and increased export sales and other factors including 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 partially offset by the benefits of improved overhead absorption against higher production volumes and
more efficient global production and purchasing.
SG&A EXPENSES
As a percentage of net sales, SG&A expenses were 57.1% for 1997, an improvement from 57.6% for 1996. SG&A expenses other than
a d v e rtising and consumer- d i rected promotion expenses, as a percentage of net sales, improved to 39.3% for 1997 compared with 40.6%
for 1996, primarily as a result of reduced general and administrative expenses, improved productivity and lower distribution costs in 1997
c o m p a red with those in 1996. In accordance with its business strategy, the Company increased advertising and consumer- d i rected pro-
motion expenditures in 1997 compared with 1996 to support growth in existing product lines, new product launches and increased dis-
tribution in the self-select distribution channel in many of the Company’s markets outside the United States. Advertising and consumer- d i re c t-
ed promotion expenses increased by 11.8% to $397.4, or 17.8% of net sales, for 1997 from $355.5, or 17.0% of net sales, for 1996.
BUSINESS CONSOLIDATION COSTS AND OTHER, NET
Business consolidation costs and other, net, in 1997 include severance, writedowns of certain assets to their estimated net realizable v a l u e
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
and other related costs to rationalize factory operations in certain operations in accordance with the Company’s business strategy, part i a l-
ly offset by related gains for the sales of certain factory operations and an approximately $12.7 settlement of a claim in the second quar-
ter of 1997. These business consolidations are intended to lower the Company’s operating costs and increase efficiency in the future .
O P E R ATING INCOME
As a result of the foregoing, operating income increased by $15.7, or 7.9%, to $214.9 for 1997 from $199.2 for 1996.
OTHER EXPENSES/INCOME
I n t e rest expense was $133.7 for 1997 compared to $133.4 for 1996. The slight increase in interest expense in 1997 is due to high-
er average outstanding borrowings, partially offset by lower interest rates.
F o reign currency losses, net, were $6.4 for 1997 compared to $5.7 for 1996. The increase in foreign currency losses for 1997 as
c o m p a red to 1996 resulted primarily from a non-re c u rring gain recognized in 1996 in connection with the Company’s simplification of its
i n t e rnational corporate stru c t u re and from the strengthening of the U.S. dollar versus currencies in the Far East and most European curre n-
cies, partially offset by the stabilization of the Venezuelan bolivar and Mexican peso versus the devaluations which occurred during 1996.
PROVISION FOR INCOME TA X E S
The provision for income taxes was $9.3 and $25.5 for 1997 and 1996, re s p e c t i v e l y. The decrease was primarily attributable to lower
taxable income with respect to operations outside the United States, partially as a result of the implementation of tax planning, including
the utilization of net operating loss carryforwards with respect to operations outside the United States, and benefits from net operating loss
carryforwards d o m e s t i c a l l y.
DISCONTINUED OPERAT I O N S
Income from discontinued operations was $0.7 and $0.4 for 1997 and 1996, re s p e c t i v e l y. The 1997 period includes a $6.0 non-
re c u rring gain resulting from the merger of Prestige Fragrance & Cosmetics, Inc., then a wholly owned subsidiary of Products Corporation,
with and into Cosmetic Center on April 25, 1997, partially offset by related business consolidation costs of $4.0 and operating losses
of Cosmetic Center.
E X T R A O R D I N A RY ITEMS
The extraord i n a ry item in 1997 resulted from the write-o ff in the second quarter of 1997 of deferred financing costs associated with the
early 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 extraord i n a ry item
in 1996 resulted from the write-o ff in the first quarter of 1996 of deferred financing costs associated with the early extinguishment of bor-
rowings under the credit agreement in effect at that time (the “1995 Credit Agreement”) prior to maturity with the net proceeds from the
C o m p a n y ’s initial public equity offering (the “Revlon IPO”) and proceeds from the 1996 Credit Agre e m e n t .
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash (used for) provided by operating activities was $(51.5), $8.7 and $(10.3) for 1998, 1997 and 1996, re s p e c t i v e l y. The
i n c rease in net cash used for operating activities for 1998 compared with cash provided in 1997 resulted primarily from lower operat-
ing income and increased cash used for business consolidation costs and other, net in 1998. The increase in net cash provided by
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
operating activities for 1997 compared with net cash used in 1996 resulted primarily from higher operating income and improved work-
ing capital management in 1997, partially offset by increased spending on merchandise display units in connection with the Company’s
expansion into the self-select distribution channel.
Net cash used for investing activities was $91.0, $84.3 and $61.8 for 1998, 1997 and 1996, re s p e c t i v e l y. Net cash used for
investing activities for 1998 and 1997 includes cash paid in connection with acquisitions of businesses and capital expenditures, par-
tially offset by the proceeds from the sale of the wigs and hairpieces portion of the Company’s business in the United States in 1998 and
f rom the sale of certain assets in 1998 and 1997. Net cash used for investing activities for 1998, 1997 and 1996 included capital
e x p e n d i t u res of $60.8, $52.3 and $54.7, re s p e c t i v e l y, and $57.6, $40.5 and $7.1, re s p e c t i v e l y, used for acquisitions.
Net cash provided by financing activities was $159.1, $84.9 and $77.9 for 1998, 1997 and 1996, re s p e c t i v e l y. Net cash pro-
vided by financing activities for 1998 included proceeds from the issuance of the 9% Senior Notes due 2006 (the “9% Notes”), the
8 1/8% Notes (as hereinafter defined) and the 8 5/8% Notes (as hereinafter defined) and cash drawn under the Credit Agreement, par-
tially offset by the payment of fees and expenses related to the issuance of the 9% Notes, the 8 1/8% Notes and the 8 5/8% Notes, the
redemption of the Senior Subordinated Notes (as hereinafter defined), the Senior Notes (as hereinafter defined), and the repayment of bor-
rowings under the Company’s Japanese yen-denominated credit agreement (the “Yen Credit Agreement”). During 1998, 1997 and 1996,
net cash used by discontinued operations was $17.3, $3.4 and $2.7, re s p e c t i v e l y. Net cash provided by financing activities for 1997
included cash drawn under the 1996 Credit Agreement and the Credit Agreement, partially offset by the repayment of borrowings under
the 1996 Credit Agreement, the payment of fees and expenses related to entering into the Credit Agreement, the repayment of borro w i n g s
under the Yen Credit Agreement and the redemption of the Sinking Fund Debentures. Net cash provided by financing activities for 1996
included the net proceeds from the Revlon IPO, cash drawn under the 1995 Credit Agreement and under the 1996 Credit Agre e m e n t ,
p a rtially offset by the repayment of borrowings under the 1995 Credit Agreement, the payment of fees and expenses related to the 1996
C redit Agreement and the repayment of borrowings under the Yen Credit Agre e m e n t .
On November 6, 1998, Products Corporation issued and sold $250.0 aggregate principal amount of the 9% Notes in a pri-
vate placement, receiving net proceeds of $247.2. Products Corporation intends to use $200.0 of the net proceeds from the sale
of the 9% Notes to refinance Products Corporation’s 9 1/2% Senior Notes due 1999 (the “1999 Notes”), including through open
market purchases. Products Corporation intends to use the balance of the net proceeds for general corporate purposes, including
to temporarily reduce indebtedness under the working capital lines under the Credit Agreement. Pending the refinancing of the 1999
Notes, such net proceeds will be retained by Products Corporation and a portion of such proceeds will be used to temporarily
reduce indebtedness under the working capital lines under the Credit Agreement and under other short - t e rm facilities. On Febru a ry
24, 1999, substantially all of the 9% Notes were exchanged for re g i s t e red notes with substantially identical terms (the 9% Notes
and the re g i s t e red exchange notes shall each be re f e rred to as the “9% Notes”).
On Febru a ry 2, 1998, Revlon Escrow Corp., an affiliate of Products Corporation, issued and sold in a private placement
$650.0 aggregate principal amount of 8 5/8% Senior Subordinated Notes due 2008 (the “8 5/8% Notes”)
and $250.0 aggregate principal amount of 8 1/8% Senior Notes due 2006 (the “8 1/8% Notes” and, together with
the 8 5/8% Notes, the “Notes”), with the net proceeds of approximately $886 deposited into escro w. The proceeds from
the sale of the Notes were used to finance the redemption by Products Corporation of $555.0 aggregate principal
amount of its 10 1/2% Senior Subordinated Notes due 2003 (the “Senior Subordinated Notes”) and $260.0 aggregate
principal amount of its 9 3/8% Senior Notes due 2001 (the “Senior Notes”). Products Corporation delivered a redemption
notice to the holders of the Senior Subordinated Notes for the redemption of the Senior Subordinated Notes on
M a rch 4, 1998, at which time Products Corporation assumed the obligations under the 8 5/8% Notes and the related
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
i n d e n t u re (the “8 5/8% Notes Assumption”), and to the holders of the Senior Notes for the redemption of the Senior Notes on
April 1, 1998, at which time Products Corporation assumed the obligations under the 8 1/8% Notes and the related indenture (the “8
1/8% Notes Assumption” and, together with the 8 5/8% Notes Assumption, the “Assumption”). In connection with the redemptions of
the Senior Subordinated Notes and the Senior Notes, the Company re c o rded an extraord i n a ry loss of $51.7 during 1998 resulting pri-
marily from the write-off of deferred financing costs and payment of call premiums on the Senior Subordinated Notes and the Senior Notes.
On May 7, 1998, substantially all of the Notes were exchanged for re g i s t e red notes with substantially identical terms (the Notes and the
re g i s t e red exchange notes shall each be re f e rred to as the “Notes”).
In May 1997, Products Corporation entered into a credit agreement (the “Credit Agreement”) with a syndicate of lenders, whose indi-
vidual members change from time to time. The proceeds of loans made under the Credit Agreement were used for the purpose of re p a y-
ing the loans outstanding under the credit agreement in effect at that time (the “1996 Credit Agreement”) and to redeem Pro d u c t s
C o r p o r a t i o n ’s Sinking Fund Debentures and were and will be used for general corporate purposes and, in the case of the Acquisition Facility
(as hereinafter defined), the financing of acquisitions. The Credit Agreement provides up to $749.0 and is comprised of five senior secure d
facilities: $199.0 in two term loan facilities (the “Te rm 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”). At December 31, 1998,
the Company had approximately $199.0 outstanding under the Te rm Loan Facilities, $9.7 outstanding under the Multi-Currency Facility,
$63.5 outstanding under the Acquisition Facility and $29.0 of issued but undrawn letters of credit under the Special LC Facility. In con-
nection with the issuance of the 9% Notes, Products Corporation amended the Credit Agreement to provide that it can retain the net pro-
ceeds of such issuance which exceed the amount of the 1999 Notes refinanced plus related costs and expenses. Additionally, Pro d u c t s
Corporation agreed that until the 1999 Notes are refinanced, $200.0 of the Multi-Currency Facility available under the Credit Agre e m e n t
( reduced by the amount of 1999 Notes actually re p u rchased or refinanced), which would otherwise be available for working capital pur-
poses, will be used solely to refinance the 1999 Notes. In December 1998, Products Corporation amended the Credit Agreement to mod-
ify the terms of certain of the financial ratios and tests to account for, among other things, the expected charges in connection with the
C o m p a n y ’s re s t ructuring eff o rt. In addition, the amendment increased the applicable margin and provides that Products Corporation may
use the proceeds of the Acquisition Facility for general corporate purposes as well as for acquisitions.
A subsidiary of Products Corporation is the borrower under the Yen Credit Agreement, which had a principal balance of appro x i m a t e l y
¥1.5 billion as of December 31, 1998 (approximately $13.6 U.S. dollar equivalent as of December 31, 1998) (after giving effect to the
repayment described below). Approximately ¥539 million (approximately $4.2 U.S. dollar equivalent) was paid in March 1998, appro x i-
mately ¥539 million (approximately $4.7 U.S. dollar equivalent as of December 31, 1998) is due in each of March 1999 and 2000 and
a p p roximately ¥474 million (approximately $4.2 U.S. dollar equivalent as of December 31, 1998) is due on December 31, 2000. On
December 10, 1998, in connection with the disposition of the stock of Cosmetic Center, which had served as collateral under the Yen Cre d i t
A g reement, Products Corporation repaid ¥2.22 billion (approximately $19.0 U.S. dollar equivalent as of December 10, 1998) principal amount.
P roducts Corporation made an optional sinking fund payment of $13.5 and redeemed all of the outstanding $85.0 principal amount
Sinking Fund Debentures during 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.
P roducts Corporation borrows funds from its affiliates from time to time to supplement its working capital borrowings at interest rates
m o re favorable to Products Corporation than interest rates under the Credit Agreement. No such borrowings were outstanding as of
December 31, 1998.
The Company’s principal sources of funds are expected to be cash flow generated from operations and borrowings under the Credit
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
Agreement, refinancings and other existing working capital lines. The Credit Agreement, the 1999 Notes, the Notes and 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
(including purchase and repayment of the 1999 Notes).
The Company estimates that capital expenditures for 1999 will be approximately $60, including upgrades to the Company’s man-
agement information systems. The Company estimates that cash payments related to the 1998 re s t ructuring charge will be appro x i-
mately $35, of which approximately $22 will be paid in 1999. Pursuant to a tax sharing agreement, Revlon, Inc. may be re q u i re d
to make tax sharing payments to Mafco Holdings Inc. as if Revlon, Inc. were filing separate income tax re t u rns, except that no pay-
ments are re q u i red by Revlon, Inc. if and to the extent that Products Corporation is prohibited under the Credit Agreement from mak-
ing 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
p rohibitions under the Credit Agreement, no cash federal tax payments or cash payments in lieu of taxes pursuant to the tax sharing
a g reement will be re q u i red for 1999 (See Note 16 to the Consolidated Financial Statements).
As of December 31, 1997, Products Corporation was party to a series of interest rate swap agreements 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
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 por-
tion 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. Products Corporation terminated these agreements in January 1998 and realized a gain of approximately $1.6,
which was recognized upon repayment of the hedged indebtedness and is included in the 1998 extraordinary item for the early
extinguishment of debt.
P roducts Corporation enters into forw a rd foreign exchange contracts and option contracts from time to time to hedge certain cash
flows denominated in foreign currencies. Products Corporation had forw a rd foreign exchange contracts denominated in various cur-
rencies of approximately $197.5 and $90.1 (U.S. dollar equivalent) outstanding at December 31, 1998 and 1997, re s p e c t i v e-
l y, and option contracts of approximately $51.0 and $94.9 outstanding at December 31, 1998 and 1997, re s p e c t i v e l y. Such
contracts are entered into to hedge transactions predominantly occurring within twelve months. If Products Corporation had term i-
nated these contracts on December 31, 1998 and 1997 or the contracts then outstanding on December 31, 1996, no material
gain or loss would have been re a l i z e d .
Based upon the Company’s current level of operations and anticipated growth in net sales and earnings as a result of its business strat-
e g y, the Company expects that cash flows from operations and funds from currently available credit facilities and refinancings of existing
indebtedness will be sufficient to enable the Company to meet its anticipated cash re q u i rements for the foreseeable future on a consoli-
dated basis, including for debt service (including refinancing the 1999 Notes). However, there can be no assurance that cash flow fro m
operations and funds from existing credit facilities and refinancing of existing indebtedness will be sufficient to meet the Company’s cash
re q u i rements on a consolidated basis. If the Company is unable to satisfy such cash re q u i rements, the Company could be re q u i red to
adopt one or more alternatives, such as reducing or delaying capital expenditures, re s t ructuring indebtedness, selling assets or operations,
or seeking capital contributions or loans from affiliates of the Company or issuing additional shares of capital stock of Revlon, Inc. Revlon,
Inc., as a holding company, will be dependent on the earnings and cash flow of, and dividends and distributions from, Pro d u c t s
Corporation to pay its expenses and to pay any cash dividend or distribution of the Class A Common Stock that may be authorized by
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
the Board of Directors of Revlon, Inc. 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 re q u i rements or that they would be permitted under the terms of the Company’s various debt
i n s t ruments then in effect. The terms of the Credit Agreement, the 1999 Notes, the Notes and the 9% Notes generally restrict Pro d u c t s
Corporation from paying dividends or making distributions, except that Products Corporation is permitted to pay dividends and make dis-
tributions to Revlon, Inc., among other things, to enable Revlon, Inc. to pay expenses incidental to being a public holding company, includ-
ing, among other things, professional fees such as legal and accounting, re g u l a t o ry 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 aggre g a t e
amount of such dividends and distributions taken together with any purchases of Revlon, Inc. common stock on the open market to satis-
fy matching obligations under the excess savings plan may not exceed $6.0 per annum.
YEAR 2000
Commencing in 1997, the Company undertook a business process enhancement program to substantially upgrade management infor-
mation technology systems in order to provide comprehensive order processing, production and accounting support for the Company’s
business. The Company also developed a comprehensive plan to address Year 2000 issues. The Year 2000 plan addresses three main
a reas: (a) information technology systems; (b) non-information technology systems (including factory equipment, building systems and other
embedded systems); and (c) business partner readiness (including without limitation customers, inventory and non-inventory suppliers, ser-
vice suppliers, banks, insurance companies and tax and other governmental agencies). To oversee the process, the Company has estab-
lished a Steering Committee comprised of senior executives of the Company.
In connection with and as part of the Company’s business process enhancement program, certain information technology systems have
been and will continue to be upgraded to be Year 2000 compliant. In addition, as part of its Year 2000 plan, the Company has iden-
tified potential deficiencies related to Year 2000 in certain of its information technology systems, both hard w a re and software, and is in
the process of addressing them through upgrades and other remediation. The Company currently expects to complete upgrade and re m e-
diation and testing of its information systems by the third quarter of 1999. In respect of non-information technology systems with date sen-
sitive operating controls, the Company is in the process of identifying those items which may re q u i re remediation or replacement, and has
commenced an upgrade and remediation program for systems identified as Year 2000 non-compliant. The Company expects to com-
plete remediation or replacement and testing of these by the third quarter of 1999. The Company has identified and contacted and con-
tinues to identify and contact key suppliers, both inventory and non-inventory, key customers and other strategic business partners, such as
banks, pension trust managers and marketing data suppliers, either by soliciting written responses to questionnaires and/or by meeting
with certain of such third parties. The parties from whom the Company has received responses to date generally have indicated that their
systems are or will be Year 2000 compliant. The Company currently expects to gain a better understanding of the Year 2000 re a d i n e s s
of third party business partners by early 1999.
The Company does not expect that incremental out-of-pocket costs of its Year 2000 program (which do not include costs incurred in
connection with the Company’s comprehensive business process enhancement program) will be material. These costs are expected to con-
tinue to be incurred through fiscal 1999 and include the cost of third party consultants, remediation of existing computer software and
replacement and remediation of embedded systems.
The Company believes that at the current time it is difficult to identify specifically the most reasonably likely worst case Year 2000 sce-
nario. As with all manufacturers and distributors of products such as those sold by the Company, a reasonable worst case scenario would
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
be the result of failures of third parties (including, without limitation, governmental entities and entities with which the Company has no
d i rect involvement, as well as the Company’s suppliers of goods and services and customers) that continue for more than a brief period
in various geographic areas where the Company’s products are produced or sold at retail or in areas from which the Company’s raw
materials and components are sourced. In connection with functions that represent a particular Year 2000 risk, including the produc-
tion, warehousing and distribution of products and the supply of raw materials and components, the Company is considering various
contingency plans. Continuing failures in key geographic areas in the United States and in certain European, South American and Asian
countries that limit the Company’s ability to produce products, its customers’ ability to purchase and pay for the Company’s products
and/or consumers’ ability to shop, would be likely to have a material adverse effect on the Company’s results of operations, although
it would be expected that at least part of any lost sales eventually would be recouped. The extent of such deferred or lost revenue can-
not be estimated at this time.
The Company’s Year 2000 efforts are ongoing and its overall plan, as well as the consideration of contingency plans, will contin-
ue to evolve as new information becomes available. While the Company currently anticipates continuity of its business activities, that
continuity will be dependent upon its ability, and the ability of third parties upon which the Company relies directly, or indirectly, to be
Year 2000 compliant. There can be no assurance that the Company and such third parties will eliminate potential Year 2000 issues
in a timely manner or as to the ultimate cost to the Company of doing so.
EURO CONVERSION
As part of the European Economic and Monetary Union, a single currency (the “Euro”) will replace the national currencies of the prin-
cipal European countries (other than the United Kingdom) in which the Company conducts business and manufacturing. The conversion
rates between the Euro and the participating nations’ currencies were fixed as of January 1, 1999, with the participating national cur-
rencies being 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 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.
FORWARD-LOOKING STATEMENTS
This annual report for the year ended December 31, 1998 as well as other public documents of the Company contain forward-look-
ing 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 expectations and estimates as to introduction of
new products and expansion into markets, future financial performance, including growth in net sales and earnings, the effect on sales
of retail inventory balancing and reductions, the effect on sales of political and/or economic conditions in international markets, the
Company’s estimate of restructuring activities, costs and benefits, cash flow from operations, information systems upgrades, the
Company’s plan to address the Year 2000 issue, the costs associated with the Year 2000 issue and the results of Year 2000 non-com-
pliance by the Company or by one or more of the Company’s customers, suppliers or other strategic business partners, capital expen-
ditures, the Company’s qualitative and quantitative estimates as to market risk, the Company’s expectations about the transition to the
Euro, the availability of funds from currently available credit facilities and refinancings of indebtedness, and capital contributions or loans
MANAGEMENT’S DISCUSSION AND ANALYSIS
REVLON, INC. AND SUBSIDIARIES
f rom affiliates or the sale of assets or operations or additional shares of Revlon, Inc. Statements that are not historical facts, including state-
ments about the Company’s beliefs and expectations, are forw a rd-looking statements. Forw a rd-looking statements can be identified by,
among other things, the use of forw a rd-looking language, such as “believe,” “expects,” “may,” “will,” “should,” “seeks,” “plans,” “sched-
uled to,” “anticipates” or “intends” or the negative of those terms, or other variations of those terms or comparable language, or by discus-
sions of strategy or intentions. Forw a rd-looking statements speak only as of the date they are made, and the Company undertakes no obli-
gation to update them. A number of important factors could cause actual results to differ materially from those contained in any forw a rd -
looking statement. In addition to factors that may be described in the Company’s filings with the Commission, the following factors, among
others, could cause the Company’s actual results to differ materially from those expressed in any forw a rd-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 pre f e rences, including reduced consumer demand for the Company’s color cosmetics and other current products; (iii)
d i fficulties or delays in the Company’s continued expansion into the self-select distribution channel and into certain markets and development
of new markets; (iv) unanticipated costs or difficulties or delays in completing projects associated with the Company’s strategy to impro v e
operating efficiencies, including information system upgrades; (v) the inability to refinance indebtedness, secure capital contributions or loans
f rom affiliates or sell assets or operations or additional shares of Revlon, Inc.; (vi) effects of and changes in political and/or economic con-
ditions, including inflation and monetary conditions, and in trade, monetary, fiscal and tax policies in international markets, including
but not limited to Brazil; (vii) actions by competitors, including business combinations, technological breakthroughs, new products offer-
ings and marketing and promotional successes; (viii) combinations among significant customers or the loss, insolvency or failure to pay
debts by a significant customer or customers; (ix) lower than expected sales as a result of a longer than expected duration of retail
inventory balancing and reductions; (x) difficulties, delays or unanticipated costs or less than expected benefits resulting from the
Company’s restructuring activities; (xi) interest rate or foreign exchange rate changes affecting the Company’s market sensitive financial
instruments; (xii) difficulties, delays or unanticipated costs associated with the transition to the Euro; and (xiii) difficulties, delays or unan-
ticipated costs in achieving Year 2000 compliance or unanticipated consequences from non-compliance by the Company or one or
more of the Company’s customers, suppliers or other strategic business partners.
EFFECT OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, “Accounting
for 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. The effect of adopting the statement
and the date of such adoption by the Company have not yet been determined.
INFLATION
In general, costs are affected by inflation and the effects of inflation may be experienced by the Company in future periods.
Management believes, however, that such effects have not been material to the Company during the past three years in the United
States or foreign non-hyperinflationary countries. The Company operates in certain countries around the world, such as Brazil, Venezuela
and Mexico, that have experienced hyperinflation in the past three years. The Company’s operations in Brazil were accounted for as
operating in a hyperinflationary economy until June 30, 1997. Effective July 1, 1997, Brazil was considered a non-hyperinflationary
economy. The impact of accounting for Brazil as a non-hyperinflationary economy was not material to the Company’s operating results.
Effective January 1997, Mexico was considered a hyperinflationary economy for accounting purposes. Effective January 1, 1999, it
will no longer be considered a hyperinflationary economy. In hyperinflationary foreign countries, the Company attempts to mitigate the
effects of inflation by increasing prices in line with inflation, where possible, and efficiently managing its working capital levels.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
REVLON, INC. AND SUBSIDIARIES
INTEREST RATE SENSITIVITY
The Company has exposure to changing interest rates, primarily in the United States. The Company’s policy is to manage interest rate
risk through the use of a combination of fixed and floating rate debt. The Company from time to time makes use of derivative financial
instruments to adjust its fixed and floating rate ratio. The table below provides information about the Company’s indebtedness that is
sensitive to changes in interest rates. The table presents cash flows with respect to principal on indebtedness and related weighted aver-
age interest rates by expected maturity dates. Weighted average variable rates are based on implied forward rates in the yield curve
at December 31, 1998. The information is presented in U.S. dollar equivalents, which is the Company’s reporting currency.
EXCHANGE RATE SENSITIVITY
The Company manufactures and sells its products in a number of countries throughout the world and, as a result, is exposed to move-
ments in foreign currency exchange rates. In addition, a portion of the Company’s borrowings are denominated in foreign currencies,
which are also subject to market risk associated with exchange rate movement (See “Financial Condition, Liquidity and Capital
Resources”). The Company’s policy is to hedge major net foreign currency cash exposures generally through foreign exchange forward
and option contracts. The contracts are entered into with major financial institutions to minimize counterparty risk. These contracts gen-
erally have a duration of less than twelve months and are primarily against the U.S. dollar. In addition, the Company enters into for-
eign currency swaps to hedge intercompany financing transactions. The table below provides information about the Company’s for-
eign exchange financial instruments by functional currency and presents such information in U.S. dollar equivalents. For foreign cur-
rency forward exchange agreements and option contracts, the table presents the gross notional amounts and weighted average
exchange rates by contractual maturity dates. The fair value of foreign currency options and forward exchange contracts is the esti-
mated amount the Company would receive (pay) to terminate the agreements.
The Company does not hold or issue financial instruments for trading purposes.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
REVLON, INC. AND SUBSIDIARIES
(US DOLLAR EQUIVALENT IN MILLIONS)
DEBT
SHORT-TERM VARIABLE RATE (VARIOUS CURRENCIES)
AVERAGE INTEREST RATE
LONG-TERM FIXED RATE ($US)
AVERAGE INTEREST RATE
LONG-TERM VARIABLE RATE ($US)
AVERAGE INTEREST RATE
LONG-TERM VARIABLE RATE (VARIOUS CURRENCIES)
AVERAGE INTEREST RATE
FORWARD AND OPTION CONTRACTS (b)
BRISTISH POUND
FORWARD CONTRACTS
CANADIAN DOLLAR
FORWARD CONTRACTS
OPTION CONTRACTS
JAPANESE YEN
FORWARD CONTRACTS
OPTION CONTRACTS
OPTION CONTRACTS
FRENCH FRANC
FORWARD CONTRACTS
SOUTH AFRICAN RAND
FORWARD CONTRACTS
NETHERLAND GUILDER
FORWARD CONTRACTS
HONG KONG DOLLAR
FORWARD CONTRACTS
AUSTRALIAN DOLLAR
FORWARD CONTRACTS
OPTION CONTRACTS
GERMAN DEUTSCHEMARK FORWARD CONTRACTS
OPTION CONTRACTS
NEW ZEALAND DOLLAR
FORWARD CONTRACTS
SWITZERLAND FRANC
FORWARD CONTRACTS
AVERAGE
CONTRACTUAL
RATE (a)
EXPECTED MATURITY DATE FOR YEAR ENDED DECEMBER 31,
FAIR VALUE
DEC. 31,
1999
2000
2001
2002
2003
THEREAFTER
TOTAL
1998
$
27.8
6.7%
200.0
9.5%
1.0 $
1.0 $
39.5 $ 227.6
7.9%
9.3
3.9%
7.9%
0.3
7.3%
8.0%
3.1
7.7%
7.9%
5.0
3.8%
55.0
8.5
41.2
17.5
36.4
4.8
17.7
11.2
9.5
6.1
9.9
10.9
4.8
9.3
4.6
1.1
0.60
0.60
1.53
1.56
118.39
116.28
5.60
6.40
1.88
7.82
1.61
1.64
1.65
1.67
1.92
1.34
$
27.8 $
27.8
$ 1,149.1
1,349.1 1,286.0
8.6%
0.1
7.3%
269.1
269.1
17.8
17.8
55.0
8.5
41.2
17.5
36.4
4.8
17.7
11.2
9.5
6.1
9.9
10.9
4.8
9.3
4.6
1.1
–
–
0.1
(0.2)
(1.5)
0.1
–
(0.2)
–
–
0.1
–
–
–
(0.1)
–
(a) Stated in units of local currency per U.S. dollar.
(b) Maturity amounts for forward and option contracts are stated in contract notional amounts.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
REVLON, INC. AND SUBSIDIARIES
(US DOLLAR EQUIVALENT IN MILLIONS)
DEBT
SHORT-TERM VARIABLE RATE (VARIOUS CURRENCIES)
AVERAGE INTEREST RATE
LONG-TERM FIXED RATE ($US)
AVERAGE INTEREST RATE
LONG-TERM VARIABLE RATE ($US)
AVERAGE INTEREST RATE
LONG-TERM VARIABLE RATE (VARIOUS CURRENCIES)
AVERAGE INTEREST RATE
FORWARD AND OPTION CONTRACTS (b)
BRISTISH POUND
FORWARD CONTRACTS
CANADIAN DOLLAR
FORWARD CONTRACTS
OPTION CONTRACTS
OPTION CONTRACTS
JAPANESE YEN
FORWARD CONTRACTS
OPTION CONTRACTS
FRENCH FRANC
FORWARD CONTRACTS
SOUTH AFRICAN RAND
FORWARD CONTRACTS
NETHERLAND GUILDER
FORWARD CONTRACTS
HONG KONG DOLLAR
FORWARD CONTRACTS
AUSTRALIAN DOLLAR
FORWARD CONTRACTS
OPTION CONTRACTS
GERMAN DEUTSCHEMARK FORWARD CONTRACTS
OPTION CONTRACTS
NEW ZEALAND DOLLAR
FORWARD CONTRACTS
SWITZERLAND FRANC
FORWARD CONTRACTS
AVERAGE
CONTRACTUAL
RATE (a)
EXPECTED MATURITY DATE FOR YEAR ENDED DECEMBER 31,
FAIR VALUE
DEC. 31,
1999
2000
2001
2002
2003
THEREAFTER
TOTAL
1998
$
27.8
6.7%
200.0
9.5%
1.0 $
1.0 $
39.5 $ 227.6
7.9%
9.3
3.9%
7.9%
0.3
7.3%
8.0%
3.1
7.7%
7.9%
5.0
3.8%
55.0
8.5
41.2
17.5
36.4
4.8
17.7
11.2
9.5
6.1
9.9
10.9
4.8
9.3
4.6
1.1
0.60
0.60
1.53
1.56
118.39
116.28
5.60
6.40
1.88
7.82
1.61
1.64
1.65
1.67
1.92
1.34
$
27.8 $
27.8
$ 1,149.1
1,349.1 1,286.0
8.6%
0.1
7.3%
269.1
269.1
17.8
17.8
55.0
8.5
41.2
17.5
36.4
4.8
17.7
11.2
9.5
6.1
9.9
10.9
4.8
9.3
4.6
1.1
–
–
0.1
(0.2)
(1.5)
0.1
–
(0.2)
–
–
0.1
–
–
–
(0.1)
–
(a) Stated in units of local currency per U.S. dollar.
(b) Maturity amounts for forward and option contracts are stated in contract notional amounts.
CONSOLIDATED BALANCE SHEETS
REVLON, INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
A S S E T S
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS
TRADE RECEIVABLES, LESS ALLOWANCES OF $28.5
AND $25.9, RESPECTIVELY
INVENTORIES
PREPAID EXPENSES AND OTHER
TOTAL CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT, NET
OTHER ASSETS
INTANGIBLE ASSETS, NET
NET ASSETS OF DISCONTINUED OPERATIONS
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES:
SHORT-TERM BORROWINGS - THIRD PARTIES
CURRENT PORTION OF LONG -TERM DEBT - THIRD PARTIES
ACCOUNTS PAYABLE
ACCRUED EXPENSES AND OTHER
TOTAL CURRENT LIABILITIES
LONG -TERM DEBT - THIRD PARTIES
LONG-TERM DEBT - AFFILIATES
OTHER LONG -TERM LIABILITIES
STOCKHOLDERS’ DEFICIENCY:
PREFERRED STOCK, PAR VALUE $.01 PER SHARE; 20,000,000
SHARES AUTHORIZED, 546 SHARES OF SERIES A PREFERRED STOCK
ISSUED AND OUTSTANDING
CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE; 200,000,000
SHARES AUTHORIZED, 31,250,000 ISSUED AND OUTSTANDING
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE; 350,000,000
SHARES AUTHORIZED, 19,986,771 AND 19,886,575 ISSUED AND
OUTSTANDING, RESPECTIVELY
CAPITAL DEFICIENCY
ACCUMULATED DEFICIT SINCE JUNE 24, 1992
ACCUMULATED OTHER COMPREHENSIVE LOSS
TOTAL STOCKHOLDERS’ DEFICIENCY
DECEMBER 31,
1998
1997
$
34.7
$
37.4
536.0
264.1
69.9
904.7
378.9
173.5
372.9
–
492.5
260.7
94.4
885.0
364.0
142.7
319.2
45.1
$ 1,830.0
$ 1,756.0
$
27.9
$
42.7
6.0
134.8
389.7
558.4
1,629.9
24.1
265.6
54.6
0.3
0.2
(228.5)
(402.0)
(72.6)
(648.0)
5.5
178.8
356.0
583.0
1,388.8
30.9
211.8
54.6
0.3
0.2
(231.1)
(258.8)
(23.7)
(458.5)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
$ 1,830.0
$1,756.0
See Accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
REVLON, INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
NET SALES
COST OF SALES
GROSS PROFIT
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
BUSINESS CONSOLIDATION COSTS AND OTHER, NET
OPERATING INCOME
OTHER EXPENSES (INCOME):
INTEREST EXPENSE
INTEREST INCOME
AMORTIZATION OF DEBT ISSUANCE COSTS
FOREIGN CURRENCY LOSSES, NET
MISCELLANEOUS, NET
OTHER EXPENSES, NET
YEAR ENDED DECEMBER 31,
1998
1997
1996
$
2,252.2
$
2,238.6
$
2,092.1
765.7
1,486.5
1,328.8
33.1
743.1
1,495.5
1,277.0
3.6
688.9
1,403.2
1,204.0
–
124.6
214.9
199.2
137.9
(5.2)
5.1
4.6
4.5
133.7
(4.2)
6.6
6.4
5.3
133.4
(4.4)
8.3
5.7
6.3
146.9
147.8
149.3
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
PROVISION FOR INCOME TAXES
(LOSS) INCOME FROM CONTINUING OPERATIONS
(LOSS) INCOME FROM DISCONTINUED OPERATIONS
LOSS FROM DISPOSAL OF DISCONTINUED OPERATIONS
EXTRAORDINARY ITEMS - EARLY EXTINGUISHMENTS OF DEBT
(22.3)
5.0
(27.3)
(16.5)
(47.7)
(51.7)
NET (LOSS) INCOME
$
(143.2)
67.1
9.3
57.8
0.7
–
(14.9)
43.6
1.13
0.01
(0.29)
0.85
1.13
0.01
(0.29)
0.85
$
$
$
$
$
$
$
$
$
$
49.9
25.5
24.4
0.4
–
(6.6)
18.2
0.49
0.01
(0.13)
0.37
0.49
0.01
(0.13)
0.37
$
$
$
$
(0.53)
(1.26)
(1.01)
(2.80)
(0.53)
(1.26)
(1.01)
(2.80)
51,217,997
51,131,440
49,687,500
51,217,997
51,544,318
49,818,792
BASIC (LOSS) INCOME PER COMMON SHARE:
(LOSS) INCOME FROM CONTINUING OPERATIONS
(LOSS) INCOME FROM DISCONTINUED OPERATIONS
EXTRAORDINARY ITEMS
NET (LOSS) INCOME PER COMMON SHARE
DILUTED (LOSS) INCOME PER COMMON SHARE:
(LOSS) INCOME FROM CONTINUING OPERATIONS
(LOSS) INCOME FROM DISCONTINUED OPERATIONS
EXTRAORDINARY ITEMS
NET (LOSS) INCOME PER COMMON SHARE
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
BASIC
DILUTIVE
See Accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY AND COMPREHENSIVE LOSS
REVLON, INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS)
PREFERRED
COMMON
STOCK
STOCK
CAPITAL
DEFICIENCY
ACCUMULATED
DEFICIT (a)
COMPREHENSIVE
LOSS (b)
STOCKHOLDERS’
DEFICIENCY
BALANCE, JANUARY 1, 1996
$
54.6
$
0.4
$
(414.7)
$
(320.6)
$
(22.0)
$
(702.3)
ACCUMULATED
OTHER
TOTAL
NET PROCEEDS FROM
INITIAL PUBLIC OFFERING
NET CAPITAL DISTRIBUTION
ACQUISITION OF BUSINESS
COMPREHENSIVE INCOME:
NET INCOME
ADJUSTMENT FOR MINIMUM
PENSION LIABILITY
CURRENCY TRANSLATION ADJUSTMENT
TOTAL COMPREHENSIVE INCOME
0.1
187.7
(0.5) (c)
(4.1) (d)
18.2
4.6
(0.8) (e)
187.8
(0.5)
(4.1)
18.2
4.6
(0.8)
22.0
BALANCE, DECEMBER 31, 1996
54.6
0.5
(231.6)
(302.4)
(18.2)
(497.1)
ISSUANCE OF COMMON STOCK
NET CAPITAL CONTRIBUTION
COMPREHENSIVE INCOME:
NET INCOME
ADJUSTMENT FOR MINIMUM
PENSION LIABILITY
CURRENCY TRANSLATION ADJUSTMENT
TOTAL COMPREHENSIVE INCOME
BALANCE, DECEMBER 31, 1997
54.6
0.5
ISSUANCE OF COMMON STOCK
COMPREHENSIVE LOSS:
NET LOSS
ADJUSTMENT FOR MINIMUM
PENSION LIABILITY
REVALUATION OF MARKETABLE SECURITIES
CURRENCY TRANSLATION ADJUSTMENT
TOTAL COMPREHENSIVE LOSS
0.2
0.3 (c)
43.6
7.9
(13.4)
(231.1)
2.6
(258.8)
(23.7)
(143.2)
(28.0)
(3.0)
(17.9) (f)
0.2
0.3
43.6
7.9
(13.4)
38.1
(458.5)
2.6
(143.2)
(28.0)
(3.0)
(17.9)
(192.1)
BALANCE, DECEMBER 31, 1998
$
54.6
$
0.5
$
(228.5)
$
(402.0)
$
(72.6)
$
(648.0)
(a) Represents net loss since June 24, 1992, the effective date of the transfer agreements referred to in Note 16.
(b) Accumulated other comprehensive loss includes a revaluation of marketable securities of $3.0 for 1998, currency translation adjustments of $37.1, $19.2 and $5.8 for 1998, 1997 and 1996, respec-
tively, and adjustments for the minimum pension liability of $32.5, $4.5 and $12.4 for 1998, 1997 and 1996, respectively.
(c) Represents changes in capital from the acquisition of the Bill Blass business (See Note 16).
(d) Represents amounts paid to Revlon Holdings Inc. for the Tarlow Advertising Division (“Tarlow”) (See Note 16).
(e) Includes $2.1 of gains related to the Company’s simplification of its corporate structure outside the United States.
(f) Accumulated other comprehensive loss and comprehensive loss each include a reclassification adjustment of $2.2 for realized gains associated with the sale of certain assets outside the United States.
See Accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
REVLON, INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS)
CASH FLOWS FROM OPERATING ACTIVITIES:
NET (LOSS) INCOME
ADJUSTMENTS TO RECONCILE NET (LOSS) INCOME TO NET CASH
(USED FOR) PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION
LOSS (INCOME) FROM DISCONTINUED OPERATIONS
EXTRAORDINARY ITEMS
GAIN ON SALE OF CERTAIN ASSETS, NET
CHANGE IN ASSETS AND LIABILITIES:
INCREASE IN TRADE RECEIVABLES
INCREASE IN INVENTORIES
(INCREASE) DECREASE IN PREPAID EXPENSES AND
OTHER CURRENT ASSETS
(DECREASE) INCREASE IN ACCOUNTS PAYABLE
INCREASE (DECREASE) IN ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES
OTHER, NET
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES
ACQUISITION OF BUSINESSES, NET OF CASH ACQUIRED
PROCEEDS FROM THE SALE OF CERTAIN ASSETS
NET CASH USED FOR INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
NET (DECREASE) INCREASE IN SHORT-TERM BORROWINGS - THIRD PARTIES
PROCEEDS FROM THE ISSUANCE OF LONG -TERM DEBT - THIRD PARTIES
REPAYMENT OF LONG -TERM DEBT - THIRD PARTIES
NET PROCEEDS FROM ISSUANCE OF COMMON STOCK
NET CONTRIBUTION FROM (DISTRIBUTION TO) PARENT
PROCEEDS FROM THE ISSUANCE OF DEBT - AFFILIATES
REPAYMENT OF DEBT - AFFILIATES
ACQUISITION OF BUSINESS FROM AFFILIATE
PAYMENT OF DEBT ISSUANCE COSTS
NET CASH PROVIDED BY FINANCING ACTIVITIES
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
NET CASH USED BY DISCONTINUED OPERATIONS
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
INTEREST
INCOME TAXES, NET OF REFUNDS
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
IN CONNECTION WITH BUSINESS ACQUISITIONS, LIABILITIES
WERE ASSUMED (INCLUDING MINORITY INTEREST AND
DISCONTINUED OPERATIONS) AS FOLLOWS:
FAIR VALUE OF ASSETS ACQUIRED
CASH PAID
LIABILITIES ASSUMED
See Accompanying Notes to Consolidated Financial Statements.
YEAR ENDED DECEMBER 31,
1998
1997
1996
$ (143.2)
$
43.6
$
18.2
111.3
64.2
51.7
(8.4)
(43.0)
(4.6)
(11.4)
(49.2)
52.5
(71.4)
(51.5)
(60.8)
(57.6)
27.4
(91.0)
(16.3)
1,469.1
(1,270.9)
1.1
–
105.9
(105.9)
–
(23.9)
159.1
(2.0)
(17.3)
(2.7)
37.4
34.7
$
99.7
(0.7)
14.9
(4.4)
(70.0)
(16.9)
0.4
17.9
(2.8)
(73.0)
8.7
(52.3)
(40.5)
8.5
(84.3)
18.0
760.2
(690.2)
0.2
0.3
120.7
(120.2)
–
(4.1)
84.9
(3.6)
(3.4)
2.3
35.1
37.4
$
88.7
(0.4)
6.6
–
(67.7)
(2.7)
(7.2)
9.4
(10.0)
(45.2)
(10.3)
(54.7)
(7.1)
–
(61.8)
5.8
266.4
(366.6)
187.8
(0.5)
115.0
(115.0)
(4.1)
(10.9)
77.9
(0.9)
(2.7)
2.2
32.9
35.1
$
$ 133.4
10.9
$ 139.6
10.5
$ 139.0
15.4
$
$
74.5
(57.6)
16.9
$ 132.7
(64.5)
68.2
$
$
$
9.7
(7.2)
2.5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND 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 operates in a single segment with many
d i ff e rent products, which include an extensive array of glamorous, exciting and innovative cosmetic and skin care, fragrance and personal
c a re products, and professional products (products for use in and resale by professional salons). In the United States and increasingly in
i n t e rnational markets, the Company’s products are sold principally in the self-select distribution channel. The Company also sells certain pro d-
ucts in the demonstrator-assisted distribution channel, sells consumer and professional products to United States military exchanges and com-
missaries and has a licensing group. Outside the United States, the Company also sells such consumer products through department store s
and specialty stores, such as perf u m e r i e s .
P roducts Corporation was formed in April 1992 and, on June 24, 1992, succeeded to assets and liabilities of the cosmetic and skin
c a re, fragrance and personal care products business of its then parent company whose name was changed from Revlon, Inc. to Revlon
Holdings Inc. (“Holdings”). Certain consumer products lines sold in demonstrator-assisted distribution channels considered not integral to the
C o m p a n y ’s business and which historically had not been profitable (the “Retained Brands”) and certain other assets and liabilities were
retained by Holdings. Unless the context otherwise re q u i res, all re f e rences to the Company mean Revlon, Inc. and its subsidiaries. Thro u g h
December 31, 1998, the Company has essentially had no business operations of its own and its only material asset has been all of the
outstanding capital stock of Products Corporation. As such, its net (loss) income has historically consisted predominantly of its equity in the
net (loss) income of Products Corporation and in 1998, 1997 and 1996 included approximately $1.5, $1.2 and $0.8, re s p e c t i v e l y, in
expenses incidental to being a public holding company.
The Consolidated Financial Statements of the Company presented herein relate to the business to which the Company succeeded and
include the assets, liabilities and results of operations of such business. Assets, liabilities, revenues, other income, costs and expenses which
w e re identifiable specifically to the Company are included herein and those identifiable specifically to the retained and divested business-
es of Holdings have been excluded. Amounts which were not identifiable specifically to either the Company or Holdings are included here-
in to the extent applicable to the Company pursuant to a method of allocation generally based on the respective pro p o rtion of the business
of the Company to the applicable total of the businesses of the Company and Holdings. The operating results of the Retained Brands and
divested businesses of Holdings have not been reflected in the Consolidated Financial Statements of the Company. Management of the
Company believes that the basis of allocation and presentation is re a s o n a b l e .
Although the Retained Brands were not transferred to the Company when the cosmetic and skin care, fragrance and personal care
products business of Holdings was transferred to Products Corporation, Products Corporation’s bank lenders required that all assets and
liabilities relating to such Retained Brands existing on the date of transfer (June 24, 1992), other than the brand names themselves and
certain other intangible assets, be transferred to Products Corporation. Any assets and liabilities that had not been disposed of or sat-
isfied by December 31 of the applicable year have been reflected in the Company’s consolidated financial position as of such dates.
However, any new assets or liabilities generated by such Retained Brands since the transfer date and any income or loss associated
with inventory that has been transferred to Products Corporation relating to such Retained Brands have been and will be for the account
of Holdings. In addition, certain assets and liabilities relating to divested businesses were transferred to Products Corporation on the
transfer date and any remaining balances as of December 31 of the applicable year have been reflected in the Company’s
Consolidated Balance Sheets as of such dates. At December 31, 1998 and 1997, the amounts reflected in the Company’s
Consolidated Balance Sheets aggregated a net liability of $25.9, of which $7.5 is included in accrued expenses and other and $18.4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
is included in other long-term liabilities as of both dates.
The Consolidated Financial Statements include the accounts of the Company and its subsidiaries after elimination of all material inter-
company balances and transactions. Further, the Company has made a number of estimates and assumptions relating to the reporting
of assets and liabilities, the disclosure of 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 is an indirect majority owned subsidiary of MacAndrews & Forbes Holdings Inc. (“MacAndrews Holdings”), a cor-
poration wholly owned indirectly through Mafco Holdings Inc. (“Mafco Holdings” and, together with MacAndrews Holdings,
“MacAndrews & Forbes”) by Ronald O. Perelman.
CASH AND CASH EQUIVALENTS:
Cash equivalents (primarily investments in time deposits which have original maturities of three months or less) are carried at cost, which
approximates fair value.
INVENTORIES:
Inventories are stated at the lower of cost or market value. Cost is principally determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS:
Property, plant and equipment is recorded at cost and is depreciated on a straight-line basis over the estimated useful lives of such assets
as follows: land improvements, 20 to 40 years; buildings and improvements, 5 to 50 years; machinery and equipment, 3 to 17 years;
and office furniture and fixtures and capitalized software, 2 to 12 years. Leasehold improvements are amortized over their estimated
useful lives or the terms of the leases, whichever is shorter. Repairs and maintenance are charged to operations as incurred, and expen-
ditures for additions and improvements are capitalized.
During 1998, the Company adopted Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use,” which requires capitalization of certain development costs of software to be used internally. The adoption
of this statement did not have a material effect on the Company’s financial condition or results of operations.
Included in other assets are permanent displays amounting to approximately $129.0 and $107.7 (net of amortization) as of
December 31, 1998 and 1997, respectively, which are amortized over 3 to 5 years. In addition, the Company has included in other
assets charges related to the issuance of its debt instruments amounting to approximately $23.6 and $20.5 (net of amortization) as of
December 31, 1998 and 1997, respectively, which are amortized over the term of the debt instruments.
INTANGIBLE ASSETS RELATED TO BUSINESSES ACQUIRED:
Intangible assets related to businesses acquired principally re p resent goodwill, the majority of which is being amortized on a straight-line basis
over 40 years. The Company evaluates, when circumstances warrant, the recoverability of its intangible assets on the basis of undiscounted
cash flow projections and through the use of various other measures, which include, among other things, a review of its image, market share
and business plans. Accumulated amortization aggregated $115.6 and $104.2 at December 31, 1998 and 1997, re s p e c t i v e l y.
REVENUE RECOGNITION:
The Company recognizes net sales upon shipment of merchandise. Net sales comprise gross revenues less expected returns, trade dis-
counts and customer allowances. Cost of sales is reduced for the estimated net realizable value of expected returns.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
INCOME TAXES:
Income taxes are calculated using the liability method in accordance with the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 109, “Accounting for Income Taxes.”
The Company is included in the affiliated group of which Mafco Holdings is the common parent, and the Company’s federal tax-
able income and loss will be included in such group’s consolidated tax return filed by Mafco Holdings. The Company also may be
included in certain state and local tax returns of Mafco Holdings or its subsidiaries. For all periods presented, federal, state and local
income taxes are provided as if the Company filed its own income tax returns. On June 24, 1992, Holdings, the Company and cer-
tain of its subsidiaries and Mafco Holdings entered into a tax sharing agreement, which is described in Notes 13 and 16.
PENSION AND OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS:
The Company sponsors pension and other retirement plans in various forms covering substantially all employees who meet eligibility
requirements. For plans in the United States, the minimum amount required pursuant to the Employee Retirement Income Security Act, as
amended, is contributed annually. Various subsidiaries outside the United States have retirement plans under which funds are deposited
with trustees or reserves are provided.
The Company accounts for benefits such as severance, disability and health insurance provided to former employees prior to their
retirement, if estimable, on a terminal basis in accordance with the provisions of SFAS No. 5, “Accounting for Contingencies,” as
amended by SFAS No. 112, “Employers’ Accounting for Postemployment Benefits,” which requires companies to accrue for postem-
ployment benefits when it is probable that a liability has been incurred and the amount of such liability can be reasonably estimated.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are expensed as incurred. The amounts charged against earnings in 1998, 1997 and 1996
were $31.9, $29.7 and $26.3, respectively.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of foreign operations are generally translated into United States dollars at the rates of exchange in effect at the bal-
ance sheet date. Income and expense items are generally translated at the weighted average exchange rates prevailing during each peri-
od presented. Gains and losses resulting from foreign currency transactions are included in the results of operations. Gains and losses
resulting from translation of financial statements of foreign subsidiaries and branches operating in non-hyperinflationary economies are
re c o rded as a component of stockholders’ deficiency. Foreign subsidiaries and branches operating in hyperinflationary economies trans-
late nonmonetary assets and liabilities at historical rates and include translation adjustments in the results of operations.
E ffective January 1997, the Company’s operations in Mexico have been accounted for as operating in a hyperinflationary economy.
E ffective January 1, 1999, Mexico will no longer be considered a hyperinflationary economy. Effective July 1997, the Company’s oper-
ations in Brazil have been accounted for as is re q u i red for a non-hyperinflationary economy. The impact of the changes in accounting
for Brazil and Mexico were not material to the Company’s operating results in 1997.
SALE OF SUBSIDIARY STOCK:
The Company recognizes gains and losses on sales of subsidiary stock in its Consolidated Statements of Operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
BASIC AND DILUTED (LOSS) INCOME PER COMMON SHARE AND CLASSES OF STOCK:
The basic (loss) income per common share has been computed based upon the weighted average number of shares of common stock out-
standing. Diluted (loss) income per common share has been computed based upon the weighted average number of shares of common
stock outstanding and shares that would have been outstanding assuming the issuance of common stock for all dilutive potential common
stock outstanding. The Company’s outstanding stock options re p resent the only potential dilutive common stock outstanding. The amounts
of (loss) income used in the calculations of diluted and basic (loss) income per common share were the same for all years presented. The
number of shares used in the calculation of diluted (loss) income per common share for 1998 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 antidi-
lutive. The number of shares used in the calculation of diluted (loss) income per common share for 1997 and 1996 increased by 412,878
and 131,292 shares, re s p e c t i v e l y, to give effect to outstanding stock options.
Basic and diluted (loss) income per common share calculations assume that 42,500,000 shares of Common Stock (as defined
below) had been outstanding for all periods presented prior to the consummation of the Company’s initial public equity offering on
March 5, 1996 (the “Revlon IPO”), in which each of the outstanding shares of the Company’s common stock in existence at that time
was converted into approximately .1215 of a share of its newly created Class A Common Stock, par value $.01 per share (the “Class
A Common Stock”) (totaling 11,250,000 shares of Class A Common Stock), and approximately .3376 of a share of its newly creat-
ed Class B Common Stock, par value $.01 per share (totaling 31,250,000 shares of Class B Common Stock) (collectively with the
Class A Common Stock, the “Common Stock”), upon consummation of the Revlon IPO. In connection with the Revlon IPO, the Company
issued and sold 8,625,000 shares of its Class A Common Stock. Such shares were included in the Company’s basic weighted aver-
age number of shares outstanding from March 5, 1996.
The Class A Common Stock and Class B Common Stock vote as a single class on all matters, except as otherwise re q u i red by law,
with each share of Class A Common Stock entitling its holder to one vote and each share of the Class B Common Stock entitling its hold-
er to ten votes. All of the shares of the Class B Common Stock are owned by REV Holdings Inc. (“REV Holdings”), an indirect wholly owned
s u b s i d i a ry of Mafco Holdings. Mafco Holdings beneficially owns shares of Common Stock having approximately 97.4% of the combined
voting power of the outstanding shares of Common Stock. The holders of the Company’s two classes of common stock are entitled to share
equally in the earnings of the Company from dividends, when and if declared by the Board .
The Company designated 1,000 shares of Pre f e rred Stock as the Series A Pre f e rred Stock, of which 546 shares are outstanding and
held by REV Holdings. The holder of Series A Pre f e rred Stock is not entitled to receive any dividends. The Series A Pre f e rred Stock is enti-
tled to a liquidation pre f e rence of $100,000 per share before any distribution is made to the holders of Common Stock. The holder of the
Series A Pre f e rred Stock does not have any voting rights, except as re q u i red by law. The Series A Pre f e rred Stock may be redeemed at
any time by the Company, at its option, for $100,000 per share. However, the terms of Products Corporation’s various debt agreements
currently restrict Revlon, Inc.’s ability to effect such redemption by generally restricting the amount of dividends or distributions Products
Corporation can pay to Revlon, Inc.
STOCK-BASED COMPENSATION:
S FAS No. 123, “Accounting for Stock-Based Compensation,” encourages, but does not re q u i re companies to re c o rd compensation cost
for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation plans using
the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,”
and related interpretation. Accord i n g l y, compensation cost for stock options is measured as the excess, if any, of the quoted market price
of the Company’s stock at the date of the grant over the amount an employee must pay to acquire the stock (See Note 15).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
DERIVATIVE FINANCIAL INSTRUMENTS:
Derivative financial instruments are utilized by the Company to reduce interest rate and foreign exchange risks. The Company main-
tains a control environment which includes policies and procedures for risk assessment and the approval, reporting and monitoring of
derivative financial instrument activities. The Company does not hold or issue derivative financial instruments for trading purposes.
The differentials to be received or paid under interest rate contracts designated as hedges are recognized in income over the life of
the contracts as adjustments to interest expense. Gains and losses on terminations of interest rate contracts designated as hedges are
deferred and amortized into interest expense over the remaining life of the original contracts or until repayment of the hedged indebt-
edness. Unrealized gains and losses on outstanding contracts designated as hedges are not recognized.
Gains and losses on contracts designated to hedge identifiable foreign currency commitments are deferred and accounted for as
part of the related foreign currency transaction. Gains and losses on all other foreign currency contracts are included in income cur-
rently. Transaction gains and losses have not been material.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, “Accounting for 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. The effect of adopting the statement and the date of such adoption by the
Company have not yet been determined.
2. DISCONTINUED OPERATIONS
During 1998, the Company completed the disposition of its approximately 85% equity interest in The Cosmetic Center, Inc. (the
“Cosmetic Center”), along with certain amounts due from Cosmetic Center to the Company for working capital and inventory, to a
newly formed limited partnership controlled by an unrelated third party. The Company received a minority limited partnership interest in
the limited partnership as consideration for the disposition. Based upon the Company’s expectation that it will receive no future cash
flows from the limited partnership, as well as other factors, the Company has assigned no value to such interest. As a result, the
Company recorded a loss on disposal of $47.7 during 1998. All prior periods have been restated to reflect the results of operations
of Cosmetic Center as discontinued operations. As of December 31, 1997, the net assets of the discontinued operations consisted pri-
marily of inventory and intangible assets, offset by liabilities, including third party debt and minority interest.
3. EXTRAORDINARY ITEMS
The extraordinary item of $51.7 in 1998 resulted primarily from the write-off of deferred financing costs and payment of call premiums
associated with the redemption of the Senior Notes (as hereinafter defined) and the Senior Subordinated Notes (as hereinafter defined).
The extraordinary item in 1997 resulted from the write-off in the second quarter of 1997 of deferred financing costs associated with
the early extinguishment of borrowings under a prior credit agreement and costs of approximately $6.3 in connection with the redemp-
tion of Products Corporation’s 10 7/8% Sinking Fund Debentures due 2010 (the “Sinking Fund Debentures”). The early extinguishment
of borrowings under a prior credit agreement and the redemption of the Sinking Fund Debentures were financed by the proceeds from a
new credit agreement which became effective in May 1997 (the “Credit Agreement”). The extraord i n a ry item in 1996 resulted from the
w r i t e - o ff of deferred financing costs associated with the early extinguishment of borrowings with the net proceeds from the Revlon IPO and
p roceeds from a prior credit agre e m e n t .
4. BUSINESS CONSOLIDATION COSTS AND OTHER, NET
In the fourth quarter of 1998 the Company committed to a re s t ructuring plan to realign and reduce personnel, exit excess leased re a l
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
estate, realign and consolidate regional activities, re c o n f i g u re certain manufacturing operations and exit certain product lines. The restruc-
turing also included the sale of a factory outside the United States. As a result, the Company recognized a net charge of $42.9, which
includes $2.7 charged to cost of sales. The restructuring included the termination of 720 sales, marketing, administrative, factory and
distribution employees worldwide. By December 31, 1998 the Company had terminated 215 employees.
In the third quarter of 1998 the Company recognized a gain of approximately $7.1 for the sale of the wigs and hairpieces por-
tion of its business in the United States.
The cash and noncash elements of the re s t ructuring charge and gains re c o rded in 1998 approximate $30.1 and $5.7, re s p e c t i v e l y.
In 1997 the Company incurred business consolidation costs of $20.6 in connection with the implementation of its business strategy
to rationalize factory operations. These costs primarily included severance for 415 factory and administrative employees and other costs
related to the rationalization of certain factory and warehouse operations worldwide. Such costs were partially offset by an appro x i m a t e l y
$12.7 settlement of a claim and related gains of approximately $4.3 on the sales of certain factory operations outside the United States.
As of December 31, 1998 and 1997 the Company had terminated 415 and 200 employees, re s p e c t i v e l y, relating to the 1997 charg e .
Details of the charges are as follows:
EMPLOYEE SEVERANCE AND
TERMINATION BENEFITS
FACTORY, WAREHOUSE AND
OFFICE COSTS
SALE OF ASSETS
OTHER (EXPENSE INCLUDED IN COST OF SALES)
EMPLOYEE SEVERANCE AND
TERMINATION BENEFITS
FACTORY, WAREHOUSE AND
OFFICE COSTS
SALE OF ASSETS
SETTLEMENT OF CLAIM
YEAR ENDED DECEMBER 31,1998
BALANCE
BEGINNING
OF YEAR
EXPENSE
(INCOME)
(UTILIZED) RECEIVED
CASH
NONCASH
BALANCE
END
OF YEAR
$
7.8
$
26.6
$
(9.5)
$
–
$
24.9
3.2
–
–
14.9
(8.4)
2.7
(2.4)
8.4
–
$
11.0
$
35.8
$
(3.5)
$
(3.6)
–
(2.7)
(6.3)
12.1
–
–
$
37.0
BALANCE
BEGINNING
OF YEAR
$
$
–
–
–
–
–
YEAR ENDED DECEMBER 31,1997
EXPENSE
(INCOME)
(UTILIZED) RECEIVED
CASH
NONCASH
BALANCE
END
OF YEAR
$
14.2
$
(6.4)
$
–
$
7.8
6.4
(4.3)
(12.7)
3.6
$
(1.2)
4.3
12.7
9.4
$
(2.0)
–
–
3.2
–
–
$
(2.0)
$
11.0
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
5. ACQUISITIONS
In 1998 and 1997 the Company consummated acquisitions for a combined purchase price of $62.6 and $51.6 (excluding the acquisi-
tion of Cosmetic Center), re s p e c t i v e l y, with resulting goodwill of $63.7 and $35.8, re s p e c t i v e l y. These acquisitions were not significant to
the Company’s results of operations. Acquisitions consummated in 1996 were also not significant to the Company’s results of operations.
6. INVENTORIES
RAW MATERIALS AND SUPPLIES
WORK-IN-PROCESS
FINISHED GOODS
7. PREPAID EXPENSES AND OTHER
PREPAID EXPENSES
OTHER
8. PROPERTY, PLANT AND EQUIPMENT, NET
LAND AND IMPROVEMENTS
BUILDINGS AND IMPROVEMENTS
MACHINERY AND EQUIPMENT
OFFICE FURNITURE AND FIXTURES AND CAPITALIZED SOFTWARE
LEASEHOLD IMPROVEMENTS
CONSTRUCTION-IN-PROGRESS
ACCUMULATED DEPRECIATION
DECEMBER 31,
1998
1997
$
78.2
14.4
171.5
$
82.6
14.9
163.2
$
264.1
$ 260.7
DECEMBER 31,
1998
1997
$
$
42.4
27.5
69.9
$
$
40.7
53.7
94.4
DECEMBER 31,
1998
1997
$
33.8
$
32.5
197.3
216.8
88.5
37.2
36.9
610.5
(231.6)
193.2
203.5
73.9
37.5
30.6
571.2
(207.2)
$
378.9
$ 364.0
Depreciation expense for the years ended December 31, 1998, 1997 and 1996 was $40.5, $38.4 and $37.0, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
9. ACCRUED EXPENSES AND OTHER
ADVERTISING AND PROMOTIONAL COSTS AND ACCRUAL FOR SALES RETURNS
$ 158.3
$ 147.1
DECEMBER 31,
1998
1997
COMPENSATION AND RELATED BENEFITS
INTEREST
TAXES, OTHER THAN FEDERAL INCOME TAXES
RESTRUCTURING AND BUSINESS CONSOLIDATION COSTS
OTHER
68.6
39.4
27.5
27.1
68.8
73.5
32.1
30.2
18.2
54.9
$ 389.7
$ 356.0
10. SHORT-TERM BORROWINGS
Products Corporation maintained short-term bank lines of credit at December 31, 1998 and 1997 aggregating approximately $88.3
and $82.3, respectively, of which approximately $27.9 and $42.7 were outstanding at December 31, 1998 and 1997, respec-
tively. Interest rates on amounts borrowed under such short-term lines at December 31, 1998 and 1997 varied from 2.9% to 8.6% and
from 2.5% to 12.0%, respectively, excluding Latin American countries in which the Company had outstanding borrowings of approxi-
mately $3.5 and $7.5 at December 31, 1998 and 1997, respectively. Compensating balances at December 31, 1998 and 1997
were approximately $5.1 and $6.2, respectively. Interest rates on compensating balances at December 31, 1998 and 1997 varied
from 3.3% to 5.0% and 0.4% to 8.1%, respectively.
11. LONG-TERM DEBT
WORKING CAPITAL LINES(a)
BANK MORTGAGE LOAN AGREEMENT DUE 2000 (b)
9 1/2% SENIOR NOTES DUE 1999(c)
9 3/8% SENIOR NOTES DUE 2001(d)
8 1/8% SENIOR NOTES DUE 2006 (e)
9% SENIOR NOTES DUE 2006(f)
10 1/2% SENIOR SUBORDINATED NOTES DUE 2003(g)
8 5/8% SENIOR SUBORDINATED NOTES DUE 2008 (h)
ADVANCES FROM HOLDINGS (i)
NOTES PAYABLE DUE THROUGH 2004 (7.2%)
LESS CURRENT PORTION
DECEMBER 31,
1998
1997
$ 272.2
$ 344.6
13.6
200.0
–
249.3
250.0
–
649.8
24.1
1.0
33.3
200.0
260.0
–
–
555.0
–
30.9
1.4
1,660.0
(6.0)
1,425.2
(5.5)
$ 1,654.0
$1,419.7
(a) 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
credit agreement in effect at that time and to redeem the Sinking Fund Debentures.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
The Credit Agreement provides up to $749.0 and is comprised of five senior secured facilities: $199.0 in two term loan facilities
(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 Facilities, the Multi-Currency
Facility and the Acquisition Facility, the “Credit Facilities”). The Multi-Currency Facility is available (i) to Products Corporation in revolv-
ing credit loans denominated in U.S. dollars (the “Revolving Credit Loans”), (ii) to Products Corporation in standby and commercial let-
ters of credit denominated in U.S. dollars (the “Operating Letters of Credit”) and (iii) to Products Corporation and certain of its interna-
tional 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 December 31, 1998, Products Corporation had approximately $199.0 outstanding under the
Term Loan Facilities, $9.7 outstanding under the Multi-Currency Facility, $63.5 outstanding under the Acquisition Facility and $29.0 of
issued but undrawn letters of credit under the Special LC Facility.
The Credit Facilities (other than loans in foreign currencies) bear interest as of December 31, 1998 at a rate equal to, at Products
Corporation’s option, either (A) the Alternate Base Rate plus 1.75% (or 2.75% for Local Loans); or (B) the Eurodollar Rate plus 2.75%.
Loans in foreign currencies bear interest as of December 31, 1998 at a rate equal to the Eurocurrency Rate or, in the case of Local
Loans, the local lender rate, in each case plus 2.75%. The applicable margin is reduced in the event Products Corporation attains cer-
tain leverage ratios. Products Corporation pays the lender a commitment fee as of December 31, 1998 of 1/2 of 1% of the unused
portion of the Credit Facilities. Under the Multi-Currency Facility, the Company pays the lenders an administrative fee of 1/4% per
annum on the aggregate principal amount of specified Local Loans. 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 cer-
tain of its subsidiaries), Products Corporation or any of its subsidiaries (and $25.0 in the aggregate during the term with respect to cer-
tain 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 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 sched-
uled reductions in the case of the Term Loan Facilities, which commenced on May 31, 1998 in the aggregate amount of $1.0 annu-
ally 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 and in the amounts of $60.0 during 2000, $90.0 during 2001 and $25.0 during 2002 (which reduc-
tions 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 Facilities, the Multi-Currency Facility and the Acquisition Facility were 8.1%, 9.2%
and 8.7% per annum for 1998, respectively, and 7.1%, 5.4% and 5.7% for 1997, respectively.
The Credit Facilities, subject to certain exceptions and limitations, are supported by guarantees from Holdings and certain of its sub-
sidiaries, 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 limita-
tions, by (i) mortgages on Holdings’ Edison, New Jersey (until its disposition in August 1998) and Products Corporation’s Phoenix,
Arizona facility; (ii) the capital stock of Products Corporation and its domestic subsidiaries, 66% of the capital stock of its first tier for-
eign 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 and (y) certain subsidiaries of Holdings; (iv) domestic inventory and
accounts receivable of (x) Products Corporation and its domestic subsidiaries 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
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 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 Revlon, Inc. or
other affiliates, with certain exceptions, including among others, permitting Products Corporation to pay dividends and make distribu-
tions to Revlon, Inc., among other things, to enable Revlon, Inc. to pay expenses incidental to being a public holding company, includ-
ing, 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 cer-
tain 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 addi-
tion 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.
The events of default under the Credit Agreement include a Change of Control (as defined in the Credit Agreement) of Products
Corporation, the acceleration of, or certain payment defaults under, indebtedness of REV Holdings in excess of $0.5, and other cus-
tomary events of default for such types of agreements.
In December 1998, Products Corporation amended the Credit Agreement to modify the terms of certain of the financial ratios and
tests to account for, among other things, the expected charges in connection with the Company’s restructuring effort. In addition, the
amendment increased the applicable margin to the levels set forth in the description above and provides that Products Corporation may
use the proceeds of the Acquisition Facility for general corporate purposes as well as for acquisitions.
(b) The Pacific Finance & Development Corp., a subsidiary of Products Corporation, is the borrower under a yen-denominated cred-
it agreement (the “Yen Credit Agreement”), which had a principal balance of approximately ¥1.5 billion as of December 31, 1998
(approximately $13.6 U.S. dollar equivalent as of December 31, 1998) (after giving effect to the repayment described below).
Approximately ¥539 million (approximately $4.2 U.S. dollar equivalent) was paid in March 1998, approximately ¥539 million
( a p p roximately $4.7 U.S. dollar equivalent as of December 31, 1998) is due in each of March 1999 and 2000 and appro x i m a t e l y
¥474 million (approximately $4.2 U.S. dollar equivalent as of December 31, 1998) is due on December 31, 2000. On December 10,
1998, in connection with the disposition of the stock of Cosmetic Center, which had served as collateral under the Yen Credit Agreement,
Products Corporation repaid ¥2.22 billion (approximately $19.0 U.S. dollar equivalent as of December 10, 1998) principal amount.
The applicable interest rate at December 31, 1998 under the Yen Credit Agreement was the Euro-Yen rate plus 2.75%, which approx-
imated 3.5%. The interest rate at December 31, 1997 was the Euro-Yen rate plus 1.25%, which approximated 1.9%.
(c) The 9 1/2% Senior Notes due 1999 (the “1999 Notes”) are senior unsecured obligations of Products Corporation and rank pari
passu in right of payment to all existing and future Senior Debt (as defined in the indenture relating to the 1999 Notes (the “1999 Notes
I n d e n t u re”)). The 1999 Notes bear interest at 9 1/2% per annum. Interest is payable on June 1 and December 1.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
The 1999 Notes may not be redeemed prior to maturity. Upon a Change of Control (as defined in the 1999 Notes Indenture) and
subject to certain conditions, each holder of 1999 Notes will have the right to require Products Corporation to repurchase all or a por-
tion of such holder’s 1999 Notes at 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repur-
chase. In addition, under certain circumstances in the event of an Asset Disposition (as defined in the 1999 Notes Indenture), Products
Corporation will be obligated to make offers to purchase the 1999 Notes.
The 1999 Notes Indenture contains various restrictive covenants that, among other things, limit (i) the issuance of additional debt and
redeemable stock by Products Corporation, (ii) the issuance of debt and pre f e rred stock by Products Corporation’s subsidiaries, (iii) the
i n c u rrence of liens on the assets of Products Corporation and its subsidiaries which do not equally and ratably secure the 1999 Notes,
(iv) the payment of dividends on and redemption of capital stock of Products Corporation and its subsidiaries and the redemption of cer-
tain subordinated obligations of Products Corporation, except that the 1999 Notes Indenture permits Products Corporation to pay divi-
dends 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, re g u l a t o ry fees such as Commission fil-
ing fees and other miscellaneous expenses related to being a public holding company, and to pay dividends or make distributions up to
$5.0 per annum (subject to allowable increases) 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 any stock option plan, (v) the sale of assets and
s u b s i d i a ry stock, (vi) transactions with affiliates and (vii) consolidations, mergers and transfers of all or substantially all of Pro d u c t s
C o r p o r a t i o n ’s assets. The 1999 Notes Indenture also prohibits certain restrictions on distributions from subsidiaries. All of these limitations
and prohibitions, however, are subject to a number of important qualificat i o n s .
On November 6, 1998, Products Corporation issued and sold in a private placement $250.0 aggregate principal amount of 9% Senior
Notes due 2006 (the “9% Notes”), receiving net proceeds of $247.2. Products Corporation intends to use $200.0 of the net proceeds from the
sale of the 9% Notes to refinance the 1999 Notes, including through open market purchases. Such proceeds have temporarily been used to
reduce borrowings under the Credit Agreement. As a result of the refinancing, the Company has classified the 1999 Notes as “Long -t e rm debt-
t h i rd parties” in its consolidated balance sheet as of December 31, 1998. On January 22, 1999, Products Corporation filed a registration state-
ment with the Commission with respect to an offer to exchange the 9% Notes for re g i s t e red notes with substantially identical terms (the “Exchange
O ffer”). The Exchange Offer will expire on Febru a ry 24, 1999, unless extended.
(d) During 1998 Products Corporation redeemed the 9 3/8% Senior Notes due 2001 with proceeds from the sale of the 8 1/8%
Notes due 2006 (the “8 1/8% Notes”) and 8 5/8% Notes due 2008 (the “8 5/8% Notes”).
(e) The 8 1/8% Notes are senior unsecured obligations of Products Corporation and rank pari passu in right of payment with all
existing and future Senior Debt (as defined in the indenture relating to the 8 1/8% Notes (the “8 1/8% Notes Indenture”)) of Products
Corporation, including the 1999 Notes until the maturity or earlier retirement thereof, the 9% Notes and the indebtedness under the
Credit Agreement, and are senior to the 8 5/8% Notes and to all future subordinated indebtedness of Products Corporation. The
8 1/8% Notes are effectively subordinated to the outstanding indebtedness and other liabilities of Products Corporation’s subsidiaries.
Interest is payable on February 1 and August 1.
The 8 1/8% Notes may be redeemed at the option of Products Corporation in whole or from time to time in part at any time on or
after February 1, 2002 at the redemption prices set forth in the 8 1/8% Notes Indenture plus accrued and unpaid interest, if any, to
the date of redemption. In addition, at any time prior to February 1, 2001, Products Corporation may redeem up to 35% of the aggre-
gate principal amount of the 8 1/8% Notes originally issued at a redemption price of 108 1/8% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the date fixed for redemption, with, and to the extent Products Corporation receives, the
net cash proceeds of one or more Public Equity Offerings (as defined in the 8 1/8% Notes Indenture), provided that at least $162.5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
aggregate principal amount of the 8 1/8% Notes remains outstanding immediately after the occurrence of each such redemption.
Upon a Change of Control (as defined in the 8 1/8% Notes Indenture), Products Corporation will have the option to redeem the
8 1/8% Notes in whole at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest, if any, thereon to
the date of redemption plus the Applicable Premium (as defined in the 8 1/8% Notes Indenture) and, subject to certain conditions, each
holder of the 8 1/8% Notes will have the right to re q u i re Products Corporation to re p u rchase all or a portion of such holder’s 8 1/8%
Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of re p u rc h a s e .
The 8 1/8% Notes Indenture contains covenants that, among other things, limit (i) the issuance of additional debt and redeemable
stock by Products Corporation, (ii) the incurrence of liens, (iii) the issuance of debt and preferred stock by Products Corporation’s sub-
sidiaries, (iv) the payment of dividends on capital stock of Products Corporation and its subsidiaries and the redemption of capital stock
of Products Corporation and certain subordinated obligations, (v) the sale of assets and subsidiary stock, (vi) transactions with affiliates
and (vii) consolidations, mergers and transfers of all or substantially all Products Corporation’s assets. The 8 1/8% Notes Indenture also
prohibits certain restrictions on distributions from subsidiaries. All of these limitations and prohibitions, however, are subject to a number
of important qualifications.
(f) The 9% Notes are senior unsecured obligations of Products Corporation and rank pari passu in right of payment with all existing and
f u t u re Senior Debt (as defined in the indenture relating to the 9% Notes (the “9% Notes Indenture”)) of Products Corporation, including the
1999 Notes until the maturity or earlier re t i rement thereof, the 8 1/8% Notes and the indebtedness under the Credit Agreement, and are
senior to the 8 5/8% Notes and to all future subordinated indebtedness of Products Corporation. The 9% Notes are effectively subord i n a t e d
to outstanding indebtedness and other liabilities of Products Corporation’s subsidiaries. Interest is payable on May 1 and November 1.
The 9% Notes may be redeemed at the option of Products Corporation in whole or from time to time in part at any time on or after
November 1, 2002 at the redemption prices set forth in the 9% Notes Indenture plus accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time prior to November 1, 2001, Products Corporation may redeem up to 35% of the aggregate princi-
pal amount of the 9% Notes originally issued at a redemption price of 109% of the principal amount thereof, plus accrued and unpaid inter-
est, if any, thereon to the date fixed for redemption, with, and to the extent Products Corporation receives, the net cash proceeds of one or
more Public Equity Offerings (as defined in the 9% Notes Indenture), provided that at least $162.5 aggregate principal amount of the
9% Notes remains outstanding immediately after the occurrence of each such redemption.
Upon a Change in Control (as defined in the 9% Notes Indenture), Products Corporation will have the option to redeem the 9%
Notes in whole at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the
date of redemption plus the Applicable Premium (as defined in the 9% Notes Indenture) and, subject to certain conditions, each hold-
er of the 9% Notes will have the right to require Products Corporation to repurchase all or a portion of such holder’s 9% Notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of repurchase.
The 9% Notes Indenture contains covenants that, among other things, limit (i) the issuance of additional debt and redeemable stock by
P roducts Corporation, (ii) the incurrence of liens, (iii) the issuance of debt and pre f e rred stock by Products Corporation’s subsidiaries, (iv) the
payment of dividends on capital stock of Products Corporation and its subsidiaries and the redemption of capital stock of Products Corporation
and certain subordinated obligations, (v) the sale of assets and subsidiary stock, (vi) transactions with affiliates and (vii) consolidations, merg-
ers and transfers of all or substantially all Products Corporation’s assets. The 9% Notes Indenture also prohibits certain restrictions on distribu-
tions from subsidiaries. All of these limitations and prohibitions, however, are subject to a number of important qualifications.
(g) During 1998 Products Corporation redeemed the 10 1/2% Senior Subordinated Notes due 2003 with proceeds from the sale
of the 8 1/8% Notes and 8 5/8% Notes.
(h) The 8 5/8% Notes are general unsecured obligations of Products Corporation and are (i) subordinate in right of payment to all exist-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
ing and future Senior Debt (as defined in the indenture relating to the 8 5/8% Notes (the “8 5/8% Notes Indenture”)) of Products Corporation,
including the 1999 Notes until the maturity or earlier re t i rement thereof, the 9% Notes, the 8 1/8% Notes and the indebtedness under the
C redit Agreement, (ii) pari passu in right of payment with all future senior subordinated debt, if any, of Products Corporation and (iii) senior in
right of payment to all future subordinated debt, if any, of Products Corporation. The 8 5/8% Notes are effectively subordinated to the out-
standing indebtedness and other liabilities of Products Corporation’s subsidiaries. Interest is payable on Febru a ry 1 and August 1.
The 8 5/8% Notes may be redeemed at the option of Products Corporation in whole or from time to time in part at any time on or
after February 1, 2003 at the redemption prices set forth in the 8 5/8% Notes Indenture plus accrued and unpaid interest, if any, to
the date of redemption. In addition, at any time prior to February 1, 2001, Products Corporation may redeem up to 35% of the aggre-
gate principal amount of the 8 5/8% Notes originally issued at a redemption price of 108 5/8% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the date fixed for redemption, with, and to the extent Products Corporation receives, the
net cash proceeds of one or more Public Equity Offerings (as defined in the 8 5/8% Notes Indenture), provided that at least $422.5
aggregate principal amount of the 8 5/8% Notes remains outstanding immediately after the occurrence of each such redemption.
Upon a Change of Control (as defined in the 8 5/8% Notes Indenture), Products Corporation will have the option to redeem the
8 5/8% Notes in whole at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest, if any, thereon to
the date of redemption plus the Applicable Premium (as defined in the 8 5/8% Notes Indenture) and, subject to certain conditions, each
holder of the 8 5/8% Notes will have the right to re q u i re Products Corporation to re p u rchase all or a portion of such holder’s 8 5/8%
Notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, thereon to the date of re p u rc h a s e .
The 8 5/8% Notes Indenture contains covenants that, among other things, limit (i) the issuance of additional debt and redeemable
stock by Products Corporation, (ii) the incurrence of liens, (iii) the issuance of debt and preferred stock by Products Corporation’s sub-
sidiaries, (iv) the payment of dividends on capital stock of Products Corporation and its subsidiaries and the redemption of capital stock
of Products Corporation, (v) the sale of assets and subsidiary stock, (vi) transactions with affiliates, (vii) consolidations, mergers and trans-
fers of all or substantially all Products Corporation’s assets and (viii) the issuance of additional subordinated debt that is senior in right
of payment to the 8 5/8% Notes. The 8 5/8% Notes Indenture also prohibits certain restrictions on distributions from subsidiaries. All
of these limitations and prohibitions, however, are subject to a number of important qualifications.
The 1999 Notes Indenture, the 8 1/8% Notes Indenture, the 8 5/8% Notes Indenture and the 9% Notes Indenture contain cus-
tomary events of default for debt instruments of such type.
(i) During 1992, Holdings made an advance of $25.0 to Products Corporation, evidenced by subordinated nonintere st -bearing demand
notes. The notes were subsequently adjusted by offsets of amounts due from Holdings to Products Corporation, and additional amounts loaned
by Holdings to Products Corporation, such that the amount outstanding under the notes was $41.3 as of December 31, 1995. In June 1996,
$10.9 in notes due to Products Corporation from Holdings under the Financing Reimbursement Agreement was offset against the notes. In
June 1997, Products Corporation borrowed from Holdings approximately $0.5, re p resenting certain amounts received by Holdings from the
sale of a brand and the inventory relating thereto. In 1998, approximately $6.8 due to Products Corporation from Holdings was offset against
the notes payable to Holdings. At December 31, 1998 the balance of $24.1 is evidenced by noninterest-bearing pro m i s s o ry notes payable
to Holdings that are subordinated to Products Corporation’s obligations under the Credit Agre e m e n t .
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 the rate under the Credit Agreement. No such borrowings were outstanding at
December 31, 1998 or 1997.
The aggregate amounts of long-term debt maturities (at December 31, 1998), in the years 1999 through 2003 are $206.0,
$10.2, $39.8, $254.8 and $0, respectively, and $1,149.2 thereafter.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
12. FINANCIAL INSTRUMENTS
As of December 31, 1997, Products Corporation was party to a series of interest rate swap agreements 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 to its
c o u n t e r p a rties 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. Products Corporation terminated these agreements in January 1998 and realized a gain of approximately $1.6, which was re c o g-
nized upon repayment of the hedged indebtedness and is included in the extraord i n a ry item for the early extinguishment of debt. Cert a i n
other swap agreements were terminated in 1993 for a gain of $14.0 that was amortized over the original lives of the agreements thro u g h
1997. The amortization of the 1993 realized gain in 1997 and 1996 was approximately $3.1 and $3.2, re s p e c t i v e l y.
Products Corporation enters into forward foreign exchange contracts and option contracts from time to time to hedge certain cash
flows denominated in foreign currencies. At December 31, 1998 and 1997, Products Corporation had outstanding forward foreign
exchange contracts denominated in various currencies of approximately $197.5 and $90.1, respectively, and outstanding option con-
tracts of approximately $51.0 and $94.9, respectively. Such contracts are entered into to hedge transactions predominantly occurring
within twelve months. If Products Corporation had terminated these contracts on December 31, 1998 and 1997 or the contracts then
outstanding on December 31, 1996, no material gain or loss would have been realized.
The fair value of the Company’s long-term debt is estimated based on the quoted market prices for the same issues or on the current
rates offered to the Company for debt of the same remaining maturities. The estimated fair value of long-term debt at December 31,
1998 and 1997 was approximately $(63.1) and $39.0 (less) more than the carrying value of $1,660.0 and $1,425.2, respectively.
Because considerable judgment is required in interpreting market data to develop estimates of fair value, the estimates are not neces-
sarily indicative of the amounts that could be realized or would be paid in a current market exchange. The effect of using different mar-
ket assumptions or estimation methodologies may be material to the estimated fair value amounts.
Products Corporation also maintains standby and trade letters of credit with certain banks for various corporate purposes under which
Products Corporation is obligated, of which approximately $30.7 and $40.6 (including amounts available under credit agreements in
effect at that time) were maintained at December 31, 1998 and 1997, respectively. Included in these amounts are $26.9 and $27.7,
respectively, in standby letters of credit, which support Products Corporation’s self-insurance programs. The estimated liability under such
programs is accrued by Products Corporation.
The carrying amounts of cash and cash equivalents, marketable securities, trade receivables, accounts payable and short-term bor-
rowings approximate their fair values.
13. INCOME TAXES
In June 1992, Holdings, Revlon, Inc. and certain of its subsidiaries, and Mafco Holdings entered into a tax sharing agreement (as sub-
sequently amended, the “Tax Sharing Agreement”), pursuant to which Mafco Holdings has agreed to indemnify Revlon, Inc. against fed-
eral, state or local income tax liabilities of the consolidated or combined group of which Mafco Holdings (or a subsidiary of Mafco
Holdings other than Revlon, Inc. or its subsidiaries) is the common parent for taxable periods beginning on or after January 1, 1992
during which Revlon, Inc. or a subsidiary of Revlon, Inc. is a member of such group. Pursuant to the Tax Sharing Agreement, for all tax-
able periods beginning on or after January 1, 1992, Revlon, Inc. will pay to Holdings amounts equal to the taxes that Revlon, Inc.
would otherwise have to pay if it were to file separate federal, state or local income tax returns (including any amounts determined to
be due as a result of a redetermination arising from an audit or otherwise of the consolidated or combined tax liability relating to any
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
such period which is attributable to Revlon, Inc.), except that Revlon, Inc. will not be entitled to carry back any losses to taxable peri-
ods ending prior to January 1, 1992. No payments are required by Revlon, Inc. if and to the extent that Products Corporation is pro-
hibited 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. Since the payments to be
made by Revlon, Inc. under the Tax Sharing Agreement will be determined by the amount of taxes that Revlon, Inc. would otherwise
have to pay if it were to file separate federal, state or local income tax returns, the Tax Sharing Agreement will benefit Mafco Holdings
to the extent Mafco Holdings can offset the taxable income generated by Revlon, Inc. against losses and tax credits generated by Mafco
Holdings and its other subsidiaries. As a result of net operating tax losses and prohibitions under the Credit Agreement there were no
federal tax payments or payments in lieu of taxes pursuant to the Tax Sharing Agreement for 1998, 1997 or 1996. The Company has
a liability of $0.9 to Holdings in respect of federal taxes for 1997 under the Tax Sharing Agreement.
Pursuant to the asset transfer agreement referred to in Note 16, Products Corporation assumed all tax liabilities of Holdings other
than (i) certain income tax liabilities arising prior to January 1, 1992 to the extent such liabilities exceeded reserves on Holdings’ books
as of January 1, 1992 or were not of the nature reserved for and (ii) other tax liabilities to the extent such liabilities are related to the
business and assets retained by Holdings.
The Company’s (loss) income from continuing operations before income taxes and the applicable provision (benefit) for income taxes
are as follows:
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:
DOMESTIC
FOREIGN
PROVISION (BENEFIT) FOR INCOME TAXES:
FEDERAL
STATE AND LOCAL
FOREIGN
CURRENT
DEFERRED
BENEFITS OF OPERATING LOSS CARRYFORWARDS
CARRYFORWARD UTILIZATION APPLIED TO GOODWILL
EFFECT OF ENACTED CHANGE OF TAX RATES
YEAR ENDED DECEMBER 31,
1998
1997
1996
$
15.3
(37.6)
$
(22.3)
$
$
$
$
–
0.6
4.4
5.0
12.1
(0.3)
(7.7)
0.5
0.4
5.0
$
$
$
$
$
$
82.6
(15.5)
67.1
0.9
1.1
7.3
9.3
31.9
10.4
(34.1)
1.1
–
9.3
$
$
$
$
$
9.4
40.5
49.9
–
1.2
24.3
25.5
22.7
6.6
(4.7)
1.0
(0.1)
$
25.5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
The effective tax rate on (loss) income from continuing operations before income taxes is reconciled to the applicable statutory fed-
eral income tax rate as follows:
STATUTORY FEDERAL INCOME TAX RATE
STATE AND LOCAL TAXES, NET OF FEDERAL INCOME TAX BENEFIT
FOREIGN AND U.S. TAX EFFECTS ATTRIBUTABLE TO
OPERATIONS OUTSIDE THE U.S.
TAX WRITE- OFF OF U.S. INVESTMENT IN FOREIGN SUBSIDIARY
NONDEDUCTIBLE AMORTIZATION EXPENSE
CHANGE IN DOMESTIC VALUATION ALLOWANCE
OTHER
EFFECTIVE RATE
YEAR ENDED DECEMBER 31,
1998
1997
1996
(35.0)%
1.7
75.1
(232.9)
13.5
200.3
(0.3)
22.4%
35.0%
1.1
13.4
–
4.5
(43.5)
3.4
13.9%
35.0%
1.6
36.2
–
5.9
(29.7)
2.1
51.1%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at
December 31, 1998 and 1997 are presented below:
DEFERRED TAX ASSETS:
ACCOUNTS RECEIVABLE, PRINCIPALLY DUE TO DOUBTFUL ACCOUNTS
$
INVENTORIES
NET OPERATING LOSS CARRYFORWARDS – DOMESTIC
NET OPERATING LOSS CARRYFORWARDS – FOREIGN
ACCRUALS AND RELATED RESERVES
EMPLOYEE BENEFITS
STATE AND LOCAL TAXES
SELF -INSURANCE
ADVERTISING, SALES DISCOUNTS AND RETURNS AND COUPON REDEMPTIONS
OTHER
TOTAL GROSS DEFERRED TAX ASSETS
LESS VALUATION ALLOWANCE
NET DEFERRED TAX ASSETS
DEFERRED TAX LIABILITIES:
PLANT, EQUIPMENT AND OTHER ASSETS
OTHER
TOTAL GROSS DEFERRED TAX LIABILITIES
NET DEFERRED TAX LIABILITY
DECEMBER 31,
1998
1997
4.2
12.1
190.3
111.0
22.6
32.5
13.1
2.2
30.5
27.5
446.0
(383.0)
63.0
(58.4)
(8.2)
(66.6)
$
3.3
10.5
107.6
100.1
9.4
28.7
13.1
3.8
26.0
25.3
327.8
(280.1)
47.7
(50.8)
(5.5)
(56.3)
$
(3.6)
$
(8.6)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
The valuation allowance for deferred tax assets at January 1, 1998 was $280.1. The valuation allowance increased by $102.9
during 1998 and decreased by $54.0 and $9.9 during 1997 and 1996, respectively.
During 1998, 1997 and 1996, certain of the Company’s foreign subsidiaries used operating loss carryf o rw a rds to credit the curre n t
p rovision for income taxes by $2.4, $4.0, and $4.7, re s p e c t i v e l y. Certain other foreign operations generated losses during 1998, 1997
and 1996 for which the potential tax benefit was reduced by a valuation allowance. During 1998 and 1997, the Company used domes-
tic operating loss carry f o rw a rds to credit the deferred provision for income taxes by $5.3 and $12.0, re s p e c t i v e l y. During 1997, the
Company applied domestic operating loss carry f o rw a rds to credit the current provision for income taxes by $18.1. At December 31, 1998,
the Company had tax loss carry f o rw a rds of approximately $830.4 as compared with $581.3 at December 31, 1997. The increase in
1998 is primarily related to a substantial increase in the domestic net operating loss carry f o rw a rds as a result of the write-off of the U.S.
tax basis of the investment in certain foreign operations. The net operating losses at December 31, 1998 expire in future years as follows:
1 9 99 - $29.9; 2000 - $14.2; 2001- $17.1; 2002 - $32.5; 2003 and beyond - $593.8; unlimited - $142.9. The Company could re c e i v e
the benefit of such tax loss carry f o rw a rds only to the extent it has taxable income during the carryf o rw a rds periods in the applicable juris-
dictions. In addition, based upon certain factors, including the amount and nature of gains or losses recognized by Mafco Holdings and
its other subsidiaries included in the consolidated federal income tax re t u rn, the amount of net operating loss carryf o rw a rds attributable to
Mafco Holdings and such other subsidiaries and the amounts of alternative minimum tax liability of Mafco Holdings and such other sub-
sidiaries, pursuant to the terms of the Tax Sharing Agreement, all or a portion of the domestic operating loss carryf o rw a rds may not be avail-
able to the Company should the Company cease being a member of the Mafco Holdings consolidated federal income tax re t u rn .
Appropriate United States and foreign income taxes have been accrued on foreign earnings that have been or are expected to be
remitted in the near future. Unremitted earnings of foreign subsidiaries which have been, or are currently intended to be, permanently
reinvested in the future growth of the business aggregated approximately $14.3 at December 31, 1998, excluding those amounts
which, if remitted in the near future, would not result in significant additional taxes under tax statutes currently in effect.
14. POSTRETIREMENT BENEFITS
PENSION:
A substantial portion of the Company’s employees in the United States are covered by defined benefit pension plans. The Company uses
September 30 as its measurement date for plan obligations and assets.
OTHER POSTRETIREMENT BENEFITS:
The Company also has sponsored an unfunded retiree benefit plan, which provides death benefits payable to beneficiaries of certain
key employees and former employees. Participation in this plan is limited to participants enrolled as of December 31, 1993. The
Company also administers a medical insurance plan on behalf of Holdings, the cost of which has been apportioned to Holdings. The
Company uses September 30 as its measurement date for plan obligations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
Information regarding the Company’s significant pension and other postretirement plans at the dates indicated is as follows:
PENSION PLANS
DECEMBER 31,
OTHER POSTRETIREMENT
BENEFITS
1998
1997
1998
1997
CHANGE IN BENEFIT OBLIGATION:
BENEFIT OBLIGATION - SEPTEMBER 30 OF PRIOR YEAR
$
(364.8)
$
(339.5)
$
SERVICE COST
INTEREST COST
PLAN AMENDMENTS
ACTUARIAL LOSS
CURTAILMENTS
BENEFITS PAID
FOREIGN EXCHANGE
PLAN PARTICIPANT CONTRIBUTIONS
(12.8)
(27.0)
0.2
(51.6)
0.6
17.6
(0.1)
(0.7)
(11.7)
(26.0)
(2.5)
(5.9)
(0.1)
20.5
1.1
(0.7)
BENEFIT OBLIGATION - SEPTEMBER 30 OF CURRENT YEAR
(438.6)
(364.8)
CHANGE IN PLAN ASSETS:
FAIR VALUE OF PLAN ASSETS - SEPTEMBER 30 OF PRIOR YEAR
ACTUAL (LOSS) RETURN ON PLAN ASSETS
EMPLOYER CONTRIBUTIONS
PLAN PARTICIPANT CONTRIBUTIONS
BENEFITS PAID
FOREIGN EXCHANGE
FAIR VALUE OF PLAN ASSETS - SEPTEMBER 30 OF CURRENT YEAR
FUNDED STATUS OF PLANS
AMOUNTS CONTRIBUTED TO PLANS DURING FOURTH QUARTER
UNRECOGNIZED NET LOSS (GAIN)
UNRECOGNIZED PRIOR SERVICE COST
UNRECOGNIZED NET (ASSET) OBLIGATION
ACCRUED BENEFIT COST
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS CONSIST OF:
PREPAID EXPENSES
OTHER LONG -TERM LIABILITIES
INTANGIBLE ASSET
ACCUMULATED OTHER COMPREHENSIVE LOSS
DUE FROM AFFILIATE
306.9
(6.5)
3.5
0.7
(17.6)
(1.0)
286.0
(152.6)
1.0
96.6
7.3
(0.9)
254.9
58.0
14.4
0.7
(20.5)
(0.6)
306.9
(57.9)
0.9
12.9
9.7
(1.1)
$
(48.6)
$
(35.5)
$
8.7
$
(98.6)
7.8
32.5
1.0
9.6
(51.6)
1.0
4.5
1.0
$
(8.7)
(0.1)
(0.7)
–
(0.3)
–
0.5
–
–
(9.3)
–
–
0.5
–
(0.5)
–
–
(9.3)
0.1
(1.4)
–
–
(8.2)
(0.1)
(0.7)
0.3
(0.3)
–
0.3
–
–
(8.7)
–
–
0.3
–
(0.3)
–
–
(8.7)
0.1
(2.0)
–
–
$
$
(10.6)
$
(10.6)
–
$
–
(10.6)
(10.6)
–
–
1.7
–
–
1.9
(8.7)
$
(48.6)
$
(35.5)
$
(8.9)
$
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
The following weighted-average assumptions were used in accounting for the plans:
DISCOUNT RATE
EXPECTED RETURN ON PLAN ASSETS
RATE OF FUTURE COMPENSATION INCREASES
U.S. PLANS
INTERNATIONAL PLANS
1998
1997
1996
1998
1997
1996
6.75%
7.75%
7.75%
9.0
5.3
9.0
5.3
9.0
5.3
6.2%
9.6
4.9
7.1%
10.1
5.3
7.9%
10.4
5.1
The components of net periodic benefit cost for the plans are as follows:
PENSION PLANS
OTHER POSTRETIREMENT BENEFITS
YEAR ENDED DECEMBER 31,
1998
1997
1996
1998
1997
1996
SERVICE COST
INTEREST COST
EXPECTED RETURN ON PLAN ASSETS
AMORTIZATION OF PRIOR SERVICE COST
AMORTIZATION OF NET TRANSITION ASSET
AMORTIZATION OF ACTUARIAL LOSS (GAIN)
SETTLEMENT LOSS
CURTAILMENT LOSS
PORTION ALLOCATED TO HOLDINGS
$ 12.8
$ 11.7
$ 10.6
27.0
(27.4)
1.8
(0.2)
1.0
–
0.3
15.3
(0.3)
26.0
(23.0)
1.8
(0.2)
1.2
0.2
0.1
17.8
(0.3)
24.3
(19.3)
1.7
0.3
2.0
0.3
1.0
20.9
(0.3)
$ 15.0
$ 17.5
$ 20.6
$
$
0.1
0.7
–
–
–
$ 0.1
$
0.7
–
–
–
0.1
0.7
–
–
–
(0.3)
(0.2)
(0.2)
–
–
0.5
0.1
0.6
–
–
0.6
0.1
0.7
$
–
–
0.6
0.1
0.7
$
Where the accumulated benefit obligation exceeded the related fair value of plan assets, the projected benefit obligation, accu-
mulated benefit obligation, and fair value of plan assets for the Company’s pension plans are as follows:
PROJECTED BENEFIT OBLIGATION
ACCUMULATED BENEFIT OBLIGATION
FAIR VALUE OF PLAN ASSETS
DECEMBER 31,
1998
1997
1996
$ 428.2
$
370.5
276.3
55.5
45.2
1.9
$ 141.4
131.4
81.6
15. STOCK COMPENSATION PLAN
Since March 5, 1996, Revlon, Inc. has had a stock-based compensation plan (the “Plan”), which is described below. Revlon, Inc.
applies APB Opinion No. 25 and its related interpretation in accounting for the Plan. Under APB Opinion No. 25, because the exer-
cise price of Revlon, Inc.’s employee stock options equals the market price of the underlying stock on the date of grant, no compensa-
tion cost has been recognized. Had compensation cost for the Plan been determined consistent with SFAS No. 123, Revlon, Inc.’s net
(loss) income and net (loss) income per diluted share of $(143.2) and $(2.80), respectively, for 1998, $43.6 and $0.85, respectively,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
for 1997 and $18.2 and $0.37, respectively, for 1996 would have been changed to the pro forma amounts of $(166.8) and $(3.25)
for 1998, respectively, $31.3 and $0.61, respectively, for 1997 and $15.0 and $0.30, respectively, for 1996. The fair value of
each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model assuming no dividend yield, expect-
ed volatility of approximately 56% in 1998, 39% in 1997 and 31% in 1996; weighted average risk-free interest rate of 5.37% in
1998, 6.54% in 1997 and 5.99% in 1996; and a seven year expected average life for the Plan’s options issued in 1998, 1997
and 1996. The effects of applying SFAS No. 123 in this pro forma disclosure are not necessarily indicative of future amounts.
Under the Plan, Revlon, Inc. may grant options to its employees for up to an aggregate of 5.0 million shares of Class A Common Stock.
Non-qualified options granted under the Plan have a term of 10 years during which the holder can purchase shares of Class A Common
Stock at an exercise price which must be not less than the market price on the date of the grant. Options granted in 1996 to certain exec-
utive officers will not vest as to any portion until the third anniversary of the grant date and will thereupon become 100% vested, except that
upon termination of employment by Revlon, Inc. between the second and third anniversary of the grant other than for “cause,” death or “dis-
ability” under the applicable employment agreement, such options will vest with respect to 50% of the shares subject thereto. Primarily all
other option grants, including options granted to certain executive officers in 1998 and 1997, will vest 25% each year beginning on the
first anniversary of the date of grant and will become 100% vested on the fourth anniversary of the date of grant. During each of 1997
and 1998, the Company granted to Mr. Perelman, Chairman of the Board, options to purchase 300,000 shares of Class A Common
Stock, which grants will vest in full on the fifth anniversary of the grant dates. At December 31, 1998 and 1997 there were 403,950 and
98,450 options exercisable under the Plan, re s p e c t i v e l y. At December 31, 1996 there were no options exercisable under the Plan.
A summary of the status of the Plan as of December 31, 1998, 1997 and 1996 and changes during the years then ended is pre-
sented below:
OUTSTANDING AT FEBRUARY 28, 1996
GRANTED
EXERCISED
FORFEITED
OUTSTANDING AT DECEMBER 31, 1996
GRANTED
EXERCISED
FORFEITED
OUTSTANDING AT DECEMBER 31,1997
GRANTED
EXERCISED
FORFEITED
OUTSTANDING AT DECEMBER 31, 1998
SHARES
(000)
–
1,010.2
–
(119.1)
891.1
1,485.5
(12.1)
(85.1)
2,279.4
1,707.8
(55.9)
(166.8)
3,764.5
WEIGHTED AVERAGE
EXERCISE PRICE
–
$
24.37
–
24.00
24.37
32.64
24.00
29.33
29.57
36.65
26.83
32.14
32.71
The weighted average fair value of each option granted during 1998, 1997 and 1996 approximated $22.26, $16.42 and
$11.00, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
The following table summarizes information about the Plan’s options outstanding at December 31, 1998:
DECEMBER 31, 1998
RANGE
OF
NUMBER
OUTSTANDING
WEIGHTED
AVERAGE
YEARS
WEIGHTED
AVERAGE
EXERCISE PRICES
(000)
REMAINING
EXERCISE PRICE
$17.13 TO $29.88
31.38 TO 33.88
34.00 TO 53.56
17.13 TO 53.56
833.2
1,012.7
1,918.6
3,764.5
7.43
8.05
8.95
8.37
$ 23.41
31.41
37.44
32.71
16. RELATED PARTY TRANSACTIONS
TRANSFER AGREEMENTS
In June 1992, Revlon, Inc. and Products Corporation entered into an asset transfer agreement with Holdings and certain of its wholly
owned subsidiaries (the “Asset Transfer Agreement”), and Revlon, Inc. and Products Corporation entered into a real property asset trans-
fer agreement with Holdings (the “Real Property Transfer Agreement” and, together with the Asset Transfer Agreement, the “Transfer
Agreements”), and pursuant to such agreements, on June 24, 1992 Holdings transferred assets to Products Corporation and Products
Corporation assumed all the liabilities of Holdings, other than certain specifically excluded assets and liabilities (the liabilities excluded
are referred to as the “Excluded Liabilities”). Holdings retained the Retained Brands. Holdings agreed to indemnify Revlon, Inc. and
Products Corporation against losses arising from the Excluded Liabilities, and Revlon, Inc. and Products Corporation agreed to indem-
nify Holdings against losses arising from the liabilities assumed by Products Corporation. The amounts reimbursed by Holdings to
Products Corporation for the Excluded Liabilities for 1998, 1997 and 1996 were $0.6, $0.4 and $1.4, respectively.
OPERATING SERVICES AGREEMENT
In June 1992, Revlon, Inc., Products Corporation and Holdings entered into an operating services agreement (as amended and restat-
ed, and as subsequently amended, the “Operating Services Agreement”) pursuant to which Products Corporation has manufactured,
marketed, distributed, warehoused and administered, including the collection of accounts receivable, the Retained Brands for Holdings.
Pursuant to the Operating Services Agreement, Products Corporation was reimbursed an amount equal to all of its and Revlon, Inc.’s
direct and indirect costs incurred in connection with furnishing such services, net of the amounts collected by Products Corporation with
respect to the Retained Brands, payable quarterly. The net amounts due from Holdings to Products Corporation for such direct and indi-
rect costs plus a fee equal to 5% of the net sales of the Retained Brands for 1998, 1997 and 1996 were $0.9 (which amount was
offset against certain notes payable to Holdings), $1.7 and $5.7, respectively.
REIMBURSEMENT AGREEMENTS
Revlon, Inc., Products Corporation and MacAndrews Holdings have entered into reimbursement agreements (the “Reimbursement
Agreements”) pursuant to which (i) MacAndrews Holdings is obligated to provide (directly or through affiliates) certain professional and
administrative services, including employees, to Revlon, Inc. and its subsidiaries, including Products Corporation, and purchase services
from third party providers, such as insurance and legal and accounting services, on behalf of Revlon, Inc. and its subsidiaries,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
including Products Corporation, to the extent requested by Products Corporation, and (ii) Products Corporation is obligated to provide
certain professional and administrative services, including employees, to MacAndrews Holdings (and its affiliates) and purchase ser-
vices from third party providers, such as insurance and legal and accounting services, on behalf of MacAndrews Holdings (and its affil-
iates) to the extent requested by MacAndrews Holdings, provided that in each case the performance of such services does not cause
an unreasonable burden to MacAndrews Holdings or Products Corporation, as the case may be. The Company reimburses
MacAndrews Holdings for the allocable costs of the services purchased for or provided to the Company and its subsidiaries and for
reasonable out-of-pocket expenses incurred in connection with the provision of such services. MacAndrews Holdings (or such affiliates)
reimburses the Company for the allocable costs of the services purchased for or provided to MacAndrews Holdings (or such affiliates)
and for the reasonable out-of-pocket expenses incurred in connection with the purchase or provision of such services. The net amounts
reimbursed by MacAndrews Holdings to the Company for the services provided under the Reimbursement Agreements for 1998, 1997
and 1996 were $3.1 ($0.2 of which was offset against certain notes payable to Holdings), $4.0 and $2.2, respectively. Each of
Revlon, Inc. and Products Corporation, on the one hand, and MacAndrews Holdings, on the other, has agreed to indemnify the other
party for losses arising out of the provision of services by it under the Reimbursement Agreements other than losses resulting from its will-
ful misconduct or gross negligence. The Reimbursement Agreements may be terminated by either party on 90 days’ notice. The
Company does not intend to request services under the Reimbursement Agreements unless their costs would be at least as favorable to
the Company as could be obtained from unaffiliated third parties.
TAX SHARING AGREEMENT
Holdings, Revlon, Inc., Products Corporation and certain of its subsidiaries and Mafco Holdings are parties to the Tax Sharing
Agreement, which is described in Note 13. Since payments to be made under the Tax Sharing Agreement will be determined by the
amount of taxes that Revlon, Inc. would otherwise have to pay if it were to file separate federal, state or local income tax returns, the
Tax Sharing Agreement will benefit Mafco Holdings to the extent Mafco Holdings can offset the taxable income generated by Revlon,
Inc. against losses and tax credits generated by Mafco Holdings and its other subsidiaries.
FINANCING REIMBURSEMENT AGREEMENT
Holdings and Products Corporation entered into a financing reimbursement agreement (the “Financing Reimbursement Agreement”) in
1992, which expired on June 30, 1996, pursuant to which Holdings agreed to reimburse Products Corporation for Holdings’ allocable
p o rtion of (i) the debt issuance cost and advisory fees related to the capital re s t ructuring of Holdings, and (ii) interest expense attributable
to the higher cost of funds paid by Products Corporation under the credit agreement in effect at that time as a result of additional bor-
rowings for the benefit of Holdings in connection with the assumption of certain liabilities by Products Corporation under the Asset Tr a n s f e r
A g reement and the re p u rchase of certain subordinated notes from affiliates. In Febru a ry 1995, the Financing Reimbursement Agre e m e n t
was amended and extended to provide that Holdings would reimburse Products Corporation for a portion of the debt issuance costs and
a d v i s o ry fees related to the credit agreement then in effect (which portion was approximately $4.7 and was evidenced by a nonintere s t -
bearing pro m i s s o ry note payable on June 30, 1996) and 1 1/2% per annum of the average balance outstanding under the credit agre e-
ment then in effect and the average balance outstanding under working capital borrowings from affiliates through June 30, 1996 and
such amounts were evidenced by a noninterest-bearing pro m i s s o ry note payable on June 30, 1996. As of December 31, 1995, the
a g g regate amount of notes payable by Holdings under the Financing Reimbursement Agreement was $8.9. In June 1996, $10.9 in
notes due to Products Corporation, which included $2.0 of interest reimbursement from Holdings in 1996, under the Financing
Reimbursement Agreement was offset against an $11.7 demand note payable by Products Corporation to Holdings.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
REGISTRATION RIGHTS AGREEMENT
Prior to the consummation of the Revlon IPO, Revlon, Inc. and Revlon Worldwide Corporation (subsequently merged into REV Holdings),
the then direct parent of Revlon, Inc., entered into the Registration Rights Agreement pursuant to which REV Holdings and certain trans-
ferees of Revlon, Inc.’s Common Stock held by REV Holdings (the “Holders”) have the right to require Revlon, Inc. to register all or part
of the Class A Common Stock owned by such Holders and the Class A Common Stock issuable upon conversion of Revlon, Inc.’s Class
B Common Stock owned by such Holders under the Securities Act of 1933, as amended (a “Demand Registration”); provided that
Revlon, Inc. may postpone giving effect to a Demand Registration up to a period of 30 days if Revlon, Inc. believes such registration
might have a material adverse effect on any plan or proposal by Revlon, Inc. with respect to any financing, acquisition, recapitaliza-
tion, reorganization or other material transaction, or if Revlon, Inc. is in possession of material non-public information that, if publicly dis-
closed, could result in a material disruption of a major corporate development or transaction then pending or in progress or in other
material adverse consequences to Revlon, Inc. In addition, the Holders have the right to participate in registrations by Revlon, Inc. of its
Class A Common Stock (a “Piggyback Registration”). The Holders will pay all out-of-pocket expenses incurred in connection with any
Demand Registration. Revlon, Inc. will pay any expenses incurred in connection with a Piggyback Registration, except for underwriting
discounts, commissions and expenses attributable to the shares of Class A Common Stock sold by such Holders.
OTHER
Pursuant to a lease dated April 2, 1993 (the “Edison Lease”), Holdings leased to Products Corporation the Edison research and devel-
opment facility for a term of up to 10 years with an annual rent of $1.4 and certain shared operating expenses payable by Products
Corporation which, together with the annual rent, were not to exceed $2.0 per year. Pursuant to an assumption agreement dated
February 18, 1993, Holdings agreed to assume all costs and expenses of the ownership and operation of the Edison facility as of
January 1, 1993, other than (i) the operating expenses for which Products Corporation was responsible under the Edison Lease and (ii)
environmental claims and compliance costs relating to matters which occurred prior to January 1, 1993 up to an amount not to exceed
$8.0 (the amount of such claims and costs for which Products Corporation is responsible, the “Environmental Limit”). In addition, pur-
suant to such assumption agreement, Products Corporation agreed to indemnify Holdings for environmental claims and compliance costs
relating to matters which occurred prior to January 1, 1993 up to an amount not to exceed the Environmental Limit and Holdings agreed
to indemnify Products Corporation for environmental claims and compliance costs relating to matters which occurred prior to January 1,
1993 in excess of the Environmental Limit and all such claims and costs relating to matters occurring on or after January 1, 1993.
Pursuant to an occupancy agreement, during 1998, 1997 and 1996 Products Corporation rented from Holdings a portion of the
administration building located at the Edison facility and space for a retail store of Products Corporation’s now discontinued retail oper-
ation. Products Corporation provided certain administrative services, including accounting, for Holdings with respect to the Edison facil-
ity pursuant to which Products Corporation paid on behalf of Holdings costs associated with the Edison facility and was reimbursed by
Holdings for such costs, less the amount owed by Products Corporation to Holdings pursuant to the Edison Lease and the occupancy
agreement. In August 1998, Holdings sold the Edison facility to an unrelated third party, which assumed substantially all liability for
environmental claims and compliance costs relating to the Edison facility, and in connection with the sale, Products Corporation termi-
nated the Edison Lease and entered into a new lease with the new owner. Holdings agreed to indemnify Products Corporation to the
extent rent under the new lease exceeds rent that would have been payable under the terminated Edison Lease had it not been termi-
nated. The net amount reimbursed by Holdings to Products Corporation with respect to the Edison facility for 1998, 1997 and 1996
was $0.5, $0.7 and $1.1, respectively.
During 1997, a subsidiary of Products Corporation sold an inactive subsidiary to a company that was an affiliate of the Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
during 1997 and part of 1998 for approximately $1.0.
Effective July 1, 1997, Holdings contributed to Products Corporation substantially all of the assets and liabilities of the Bill Blass busi-
ness not already owned by Products Corporation. The contributed assets approximated the contributed liabilities and were accounted
for at historical cost in a manner similar to that of a pooling of interests and, accordingly, prior period financial statements were restat-
ed as if the contribution took place prior to the beginning of the earliest period presented.
In the fourth quarter of 1996, a subsidiary of Products Corporation purchased an inactive subsidiary from an affiliate for net cash con-
sideration of approximately $3.0 in a series of transactions in which the Company expects to realize foreign tax benefits in future years.
E ffective January 1, 1996, Products Corporation acquired from Holdings substantially all of the assets of Tarlow in considera-
tion for the assumption of substantially all of the liabilities and obligations of Ta r l o w. Net liabilities assumed were appro x i m a t e l y
$3.4. The assets acquired and liabilities assumed were accounted for at historical cost in a manner similar to that of a pooling of
i n t e rests and, accord i n g l y, prior period financial statements have been restated as if the acquisition took place at the beginning of
the earliest period. Products Corporation paid $4.1 to Holdings which was accounted for as an increase in capital deficiency. A
nationally recognized investment banking firm re n d e red its written opinion that the terms of the purchase are fair from a financial
standpoint to Products Corporation.
On February 2, 1998, Revlon Escrow Corp., an affiliate of Products Corporation, issued and sold in a private placement $650.0
aggregate principal amount of 8 5/8% Notes and $250.0 aggregate principal amount of 8 1/8% Notes, with the net proceeds
deposited into escrow. The proceeds from the sale of the 8 5/8% and 8 1/8% Notes were used to finance the redemption of Products
Corporation’s $555.0 aggregate principal amount of 10 1/2% Senior Subordinated Notes due 2003 (the “Senior Subordinated
Notes”) and $260.0 aggregate principal amount of 9 3/8% Senior Notes due 2001 (the “Senior Notes” and, together with the Senior
Subordinated Notes, the “Old Notes”). Products Corporation delivered a redemption notice to the holders of the Senior Subordinated
Notes for the redemption of the Senior Subordinated Notes on March 4, 1998, at which time Products Corporation assumed the obli-
gations under the 8 5/8% Notes and the related indenture (the “8 5/8% Notes Assumption”), and to the holders of the Senior Notes
for the redemption of the Senior Notes on April 1, 1998, at which time Products Corporation assumed the obligations under the
8 1/8% Notes and the related indenture (the “8 1/8% Notes Assumption” and, together with the 8 5/8% Notes Assumption, the
“Assumption”). A nationally recognized investment banking firm rendered its written opinion that the Assumption, upon consummation of
the redemptions of the Old Notes, and the subsequent release from escrow to Products Corporation of any remaining net proceeds from
the sale of the 8 5/8% and 8 1/8% Notes are fair from a financial standpoint to Products Corporation under the 1999 Notes Indenture.
P roducts Corporation leases certain facilities to MacAndrews & Forbes or its affiliates pursuant to occupancy agreements and leases.
These included space at Products Corporation’s New York headquarters and at Products Corporation’s offices in London during 1998,
1997 and 1996; in Tokyo during 1996 and in Hong Kong during 1997 and the first half of 1998. The rent paid to Products Corporation
for 1998, 1997 and 1996 was $2.9, $3.8 and $4.6, re s p e c t i v e l y.
In June 1997, Products Corporation borrowed from Holdings approximately $0.5, re p resenting certain amounts received by Holdings
f rom the sale of a brand and inventory relating thereto. Such amounts are evidenced by noninterest-bearing pro m i s s o ry notes. Holdings
a g reed not to demand payment under such notes so long as any indebtedness remains outstanding under the Credit Agre e m e n t .
During 1998, approximately $5.7 due to Products Corporation from Holdings was offset against certain notes payable to Holdings.
Products Corporation’s Credit Agreement is supported by, among other things, guarantees from Holdings and certain of its sub-
sidiaries. The obligations under such guarantees are secured by, among other things, (i) the capital stock and certain assets of certain
subsidiaries of Holdings and (ii) until the disposition of the Edison facility in August 1998, a mortgage on the Edison facility.
Products Corporation borrows funds from its affiliates from time to time to supplement its working capital borrowings. No such
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
borrowings were outstanding as of December 31, 1998, 1997 or 1996. The interest rates for such borrowings are more favorable to
Products Corporation than interest rates under the Credit Agreement and, for borrowings occurring prior to the execution of the Credit
Agreement, the credit facilities in effect at the time of such borrowing. The amount of interest paid by Products Corporation for such bor-
rowings for 1998, 1997 and 1996 was $0.8, $0.6 and $0.5, respectively.
During 1998, the Company made advances of $0.25 and $0.3 to Mr. Fellows and Ms. Dwyer, respectively. During 1998, the
Company made an advance of $0.4 to Mr. Levin, which advance was repaid in January 1999.
In November 1993, Products Corporation assigned to Holdings a lease for warehouse space in New Jersey (the “N.J. Wa re h o u s e ” )
between Products Corporation and a trust established for the benefit of certain family members of the Chairman of the Board. The N.J.
Wa rehouse had become vacant as a result of divestitures and re s t ructuring of Products Corporation. The lease has annual lease payments
of approximately $2.3 and terminates on June 30, 2005. In consideration for Holdings assuming all liabilities and obligations under the
lease, Products Corporation paid Holdings $7.5 (for which a liability was previously re c o rded) in three installments of $2.5 each in January
1994, January 1995 and January 1996. A nationally recognized investment banking firm re n d e red its written opinion that the terms of the
lease transfer were fair from a financial standpoint to Products Corporation. During 1996 Products Corporation paid certain costs associ-
ated with the N.J. Wa rehouse on behalf of Holdings and was reimbursed by Holdings for such amounts. The amounts reimbursed by
Holdings to the Company for such costs were $0.2 for 1996.
During 1997 and 1996, Products Corporation used an airplane owned by a corporation of which Messrs. Gittis, Drapkin and,
during 1996, Levin, were the sole stockholders, for which Products Corporation paid approximately $0.2 and $0.2 for 1997 and
1996, respectively.
During 1998 and 1997, Products Corporation purchased products from a company that was an affiliate of the Company during part
of 1998, for which it paid approximately $0.4 and $0.9, re s p e c t i v e l y.
During 1997, Products Corporation provided licensing services to a company that was an affiliate of the Company during 1997 and
p a rt of 1998, for which Products Corporation was paid approximately $0.7 in 1997. In connection with the termination of the licens-
ing arrangement and its agreement to provide consulting services during 1998, Products Corporation received payments of $2.0 in 1998
and is entitled to receive an additional $1.0 in 1999.
A company that was an affiliate of the Company during 1996, 1997 and 1998 assembled lipstick cases for Products Corporation.
Products Corporation paid approximately $1.1, $0.9 and $1.0 for such services for 1998, 1997 and 1996, respectively.
17. COMMITMENTS AND CONTINGENCIES
The Company currently leases manufacturing, executive, including re s e a rch and development, and sales facilities and various types of equip-
ment under operating lease agreements. Rental expense was $43.7, $46.1 and $46.7 for the years ended December 31, 1998, 1997
and 1996, re s p e c t i v e l y. Minimum rental commitments under all noncancelable leases, including those pertaining to idled facilities, with
remaining lease terms in excess of one year from December 31, 1998 aggregated $164.0; such commitments for each of the five years
subsequent to December 31, 1998 are $37.4, $33.4, $27.4, $24.6 and $12.8, re s p e c t i v e l y. Such amounts exclude the minimum
rentals to be received by the Company in the future under noncancelable subleases of $5.1.
The Company and its subsidiaries are defendants in litigation and proceedings involving various matters. In the opinion of the
Company’s management, based upon advice of its counsel handling such litigation and proceedings, adverse outcomes, if any, will
not result in a material effect on the Company’s consolidated financial condition or results of operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations:
1ST
QUARTER
YEAR ENDED DECEMBER 31, 1998
2ND
QUARTER
3RD
QUARTER
NET SALES
GROSS PROFIT
(LOSS) INCOME FROM CONTINUING OPERATIONS
LOSS FROM DISCONTINUED OPERATIONS
EXTRAORDINARY ITEMS- EARLY EXTINGUISHMENTS OF DEBT
NET (LOSS) INCOME
BASIC (LOSS) INCOME PER COMMON SHARE:
(LOSS) INCOME FROM CONTINUING OPERATIONS
LOSS FROM DISCONTINUED OPERATIONS
EXTRAORDINARY ITEMS
NET (LOSS) INCOME PER COMMON SHARE
DILUTED (LOSS) INCOME PER COMMON SHARE:
(LOSS) INCOME FROM CONTINUING OPERATIONS
LOSS FROM DISCONTINUED OPERATIONS
EXTRAORDINARY ITEMS
NET (LOSS) INCOME PER COMMON SHARE
NET SALES
GROSS PROFIT
(LOSS) INCOME FROM CONTINUING OPERATIONS
(LOSS) INCOME FROM DISCONTINUED OPERATIONS
EXTRAORDINARY ITEMS -EARLY EXTINGUISHMENTS OF DEBT
NET (LOSS) INCOME
BASIC (LOSS) INCOME PER COMMON SHARE:
(LOSS) INCOME FROM CONTINUING OPERATIONS
(LOSS) INCOME FROM DISCONTINUED OPERATIONS
EXTRAORDINARY ITEMS
NET (LOSS) INCOME PER COMMON SHARE
DILUTED (LOSS) INCOME PER COMMON SHARE:
(LOSS) INCOME FROM CONTINUING OPERATIONS
(LOSS) INCOME FROM DISCONTINUED OPERATIONS
EXTRAORDINARY ITEMS
NET (LOSS) INCOME PER COMMON SHARE
$
$
$
$
$
$
$
$
$
$
497.8
334.5
(15.3)
(4.6)
(38.2)
(58.1)
(0.30)
(0.09)
(0.75)
(1.14)
(0.30)
(0.09)
(0.75)
(1.14)
$
$
$
$
$
$
575.3
381.3
11.7
(26.9)
(13.5)
(28.7)
548.6
362.5
12.7 (a)
–
–
12.7
0.23
$
0.25
(0.53)
(0.26)
–
–
(0.56)
$
0.25
0.22
$
0.24
$
$
$
(0.51)
(0.26)
(0.55)
–
–
$
0.24
$
(1.35)
1ST
QUARTER
YEAR ENDED DECEMBER 31, 1997
2ND
QUARTER
3RD
QUARTER
$
$
480.0
319.6
(22.6)
(2.8)
–
(25.4)
(0.44)
(0.06)
–
(0.50)
$
$
(0.44)
(0.06)
–
(0.50)
$
537.7
356.5
8.4
1.0
(14.9)
(5.5)
0.16
0.02
(0.29)
(0.11)
0.16
0.02
(0.29)
(0.11)
$
$
$
$
581.0
389.3
34.6
(1.5)
–
33.1
0.68
(0.03)
–
0.65
0.67
(0.03)
–
4TH
QUARTER
$
630.5
408.2
(36.4) ( a )
(32.7)
–
(69.1)
(0.71)
(0.64)
–
(1.35)
(0.71)
(0.64)
–
4TH
QUARTER
$
639.9
430.1
37.4
4.0
–
41.4
0.73
0.08
–
0.81
0.72
0.08
–
$
$
$
(a) Includes a non-re c u rring gain of $7.1 in the third quarter and non-re c u rring charges, net, of $42.9 in the fourth quarter (See Note 4).
$
0.64
$
0.80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REVLON, INC. AND SUBSIDIARIES
19. GEOGRAPHIC INFORMATION
The Company manages its business on the basis of one reportable operating segment. See Note 1 for a brief description of the
Company’s business. As of December 31, 1998, the Company had operations established in 26 countries outside of the United States
and its products are sold throughout the world. The Company is exposed to the risk of changes in social, political and economic con-
ditions inherent in foreign operations and the Company’s results of operations and the value of its foreign assets are affected by fluctu-
ations in foreign currency exchange rates. The Company’s operations in Brazil have accounted for approximately 5.4%, 5.8% and 6.3%
of the Company’s net sales for 1998, 1997 and 1996, respectively. Net sales by geographic area are presented by attributing rev-
enues from external customers on the basis of where the products are sold. During 1998, 1997 and 1996, one customer and its affil-
iates accounted for approximately 10.1%, 10.3% and 10.5% of the Company’s consolidated net sales, respectively.
GEOGRAPHIC AREAS:
NET SALES:
UNITED STATES
INTERNATIONAL
LONG -LIVED ASSETS:
UNITED STATES
INTERNATIONAL
CLASSES OF SIMILAR PRODUCTS:
NET SALES:
COSMETICS, SKIN CARE AND FRAGRANCES
PERSONAL CARE AND PROFESSIONAL
YEAR ENDED DECEMBER 31,
1998
1997
1996
$ 1,338.5
$ 1,300.2
$1,182.3
913.7
938.4
909.8
$ 2,252.2
$ 2,238.6
$2,092.1
DECEMBER 31,
1998
1997
$ 637.9
287.4
$ 925.3
$ 545.4
280.5
$ 825.9
YEAR ENDED DECEMBER 31,
1998
1997
1996
$ 1,309.7
$ 1,319.6
$1,216.3
942.5
919.0
875.8
$ 2,252.2
$ 2,238.6
$2,092.1
INDEPENDENT AUDITORS’ REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS
REVLON, INC.:
We have audited the accompanying consolidated balance sheets of Revlon, Inc. and its subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of operations, stockholders’ deficiency and comprehensive loss and cash flows for each
of the years in the three-year period ended December 31, 1998. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and per-
form the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assess-
ing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Revlon, Inc. and its subsidiaries as of December 31, 1998 and 1997 and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1998, in conformity with generally accepted accounting principles.
New York, New York
January 25, 1999
FIVE-YEAR FINANCIAL HIGHLIGHTS
REVLON, INC. AND SUBSIDIARIES
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
1998
1997
1996
1995
1994
YEAR ENDED DECEMBER 31,
S TATEMENTS OF OPERATIONS DATA :
NET SALES
OPERATING INCOME
(LOSS) INCOME FROM CONTINUING OPERATIONS
BASIC (LOSS) INCOME FROM CONTINUING
OPERATIONS PER COMMON SHARE
DILUTED (LOSS) INCOME FROM CONTINUING
OPERATIONS PER COMMON SHARE
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING: (c)
BASIC
DILUTIVE
EBITDA (d)
$
2,252.2
$
2,238.6
$
2,092.1
$ 1,867.3
$
1,674.0
124.6 (a)
(27.3)
214.9 (b)
57.8
$
$
(0.53)
(0.53)
$
$
1.13
1.13
$
$
199.2
24.4
0.49
0.49
147.5
(37.2)
(0.88)
(0.88)
$
$
108.1
(73.0)
(1.72)
(1.72)
$
$
51,217,997
51,131,440
49,687,500
42,500,000
42,500,000
51,217,997
51,544,318
49,818,792
42,500,000
42,500,000
$
266.6
$
311.6
$
279.6
$
222.9
$
177.0
(DOLLARS IN MILLIONS)
BALANCE SHEET DATA :
TOTAL ASSETS
1998
1997
1996
1995
1994
DECEMBER 31,
$
1,830.0
$
1,756.0
$
1,617.3
$ 1,532.6
$
1,414.3
LONG -TERM DEBT, INCLUDING CURRENT PORTION
TOTAL STOCKHOLDERS’ DEFICIENCY
1,660.0
(648.0)
1,425.2
(458.5)
1,361.0
(497.1)
1,476.7
(702.3)
1,330.4
(656.2)
(a) Includes non-recurring charges, net, of $35.8. See Note 4 to the Consolidated Financial Statements.
(b) Includes non-recurring charges, net, of $3.6. See Note 4 to the Consolidated Financial Statements.
(c) Represents the weighted average number of common shares outstanding for the period. See Note 1 to the Consolidated Financial Statements.
(d) Defined as operating income before non-recurring charges, net plus depreciation and amortization other than that
relating to debt issuance costs.
R E V L O N DIRECTORS AND OFFICERS
B o a rd of Dire c t o r s
O ff i c e r s
Tarlow Advert i s i n g
Ronald O. Pere l m a n 1
CH AIRMAN OF THE BOARD
CH AIRMAN AND CHIEF EXE CUTIVE OFFICER OF
MACANDREWS & FORBES HOLDINGS INC.
G e o rge Fellows 1
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Donald G. Drapkin 2
VICE CHAI RMAN,
MACANDREWS & F ORBES HOLDINGS INC.
Ronald O. Pere l m a n
C H A I R M A N
G e o rge Fellows
PRESIDENT AN D CHIEF EXECUTIV E OFFICER
I r win Engelman
VICE CH AIRMAN AND CHIEF ADMINISTRATIVE OFFICER
Frank J. Gehrm a n n
EXECUTIV E VICE PRESIDENT AND CHIEF FIN ANCIAL OFFICER
I rwin Engelman
VICE CHA IRMAN AND CHIEF ADMINISTRATIV E OFFICER
Wade H. Nichols III
EXECUTIV E VICE PRESIDENT AND GENERAL COUNSEL
Stanley B. Dessen
SENIOR VICE PRESIDENT AND GENERAL TAX COUN SEL
M. Katherine Dwyer
SENIOR VICE PRESIDENT
Deena S. Fishman
SENIOR VICE PRESIDENT,
C O R P O R ATE FINANCE A ND INVESTO R R ELAT I O N S
L a w rence E. Kre i d e r, Jr.
SENIOR VICE PRESIDENT,
CONTROLLER AND CHIEF ACCOUNTING OFFICER
R o b e rt K. Kre t z m a n
SENIOR VICE PRESIDENT,
DEPUTY GENERAL COUN SEL AND SECRETA RY
D. Eric Pogue
SENIOR VICE PRESIDENT, HUMAN RESOURCES
Steven D. Bern s
VIC E PRESIDENT AND TREASURER
R evlon Wo r l d w i d e
G e o rge Fioto
P R E S I D E N T, RESEARCH AND DEVELOPMEN T
Elias K. Hebeka
EXECUTIVE VICE PRESIDENT, OPERAT I O N S
Meyer Feldberg 3
DEAN, COLUMBIA BUSIN ESS SCHOOL
William J. Fox
CH AIRMAN OF THE BOARD
AND CHI EF EXECUTIVE OFFICER, AKI, INC.
H o w a rd Gittis 1 , 2
VICE CHAI RMAN,
MACANDREWS & FORBES HOLDINGS INC.
M o rton L. Janklow 2
SEN IOR PA RTNER, JANKLOW & NESBIT ASSOCIAT E S
Ve rnon E. Jordan, Jr.
SENIOR PA RTNER, AKIN, GUMP, STRAUSS, HAUER & FEL D, L LP
H e n ry A. Kissinger
C HAIRMAN AND CHIEF EXECUTIVE OFFICER,
KISSINGER ASSOCIATES , INC.
E d w a rd J. Landau 3
SENIOR PA RTNER, WOLF, BLOCK,
SC HORR AND SO LIS-COHEN LLP
J e rr y W. Levin
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SUNBEAM CORPORAT I O N
Linda Gosden Robinson 3
CH AIRMAN AND C HIEF EXECUTIVE OFFICER,
ROBINSON LERER & MONTGOMERY, LLC
Te rry Semel 2
CH AIRMAN AND CO-CHIEF EXECUTIVE OFFICER,
WARNE R BROS. A ND WARNER MUSIC GROUP
M a rtha Stewart
CH AIRMAN AND CHIEF EXE CUTIVE OFFICER,
M A RTHA STEWA RT LIVING OMNIMEDIA LLC
1
2
3
EXECUTIVE COMMITTEE
C O M P E N S ATION AND STOCK PLAN COMMITTEE
AUDIT COMMITTE E
John W. Lombard i
EXECUTIVE VICE PRESIDEN T, CR EATIVE SERV I C E S
A u s t r a l i a
Allyn Seidman
SENIOR VICE PRESIDENT, CO RPORATE COMMUNICAT I O N S
Graeme Howard
GENERAL MANAGER
A n d rew J. Schlossman
SENIOR VICE PRESIDENT, C ORPORATE DEVELOPMENT
C h i n a
Patrick Lee
GENERAL MANAGER
R i c h a rd J. Ta r l o w
P R E S I D E N T
Consumer Products USA
M. Katherine Dwyer
P R E S I D E N T
Victor Gaudet
EXECUTIVE VICE PRESIDENT, SALES
Tanya M. Mandor
EXECUTIVE VICE PRESIDENT, MARKETING,
REVLON BRAN D EQUITY DEVELO PMENT GROUP
C h e r yl Vi t a l i
EXECUTIVE VICE PRESIDENT, MARKETING ,
P O RTFOLIO BRAND DEVELOPMENT GROUP
Vincent A. Colonna
SENIOR V ICE PRESIDENT, SALES
Consumer Intern a t i o n a l
Joseph E. Heid
P R E S I D E N T
R o b e rt Graff
EXECUTIVE VICE PRESIDENT A ND CHIEF FI NANCIAL OFFI CER
Gloria Garre t t
SENIOR V ICE PRESIDENT, MARKETIN G
A SI A PACIFIC REGION
Alvan Lewis
P R E S I D E N T
J a p a n
Thomas Seymour
P R E S I D E N T
Northern Europe
J e rome Lefebvre
VICE PRESIDENT AND REGIONAL MANAGER,
PROFESSIONAL DIVISION
Spain, Italy, Portugal, Germany,
Eastern Europe, Middle East
Benito Lena
VICE PRESIDENT AND REGIONAL MANAGER,
PROFESSIONAL DIVISION
Pacific Far East, Canada,
Caribbean, Central A m e r i c a
Antonio Nemer
VICE PRESIDENT AND REGIONAL MANAGE R,
PROFESSIONAL DIVISION
L i c e n s i n g
Emily Stone
P R E S I D E N T
Revlon Te c h n o l o g i e s
A n d rew J. Schlossman
P R E S I D E N T
Melvin E. Kamen
EXECUTIVE VICE PRESIDEN T A ND
CHIEF OF TECH NOLOGY
New Zealand
Wayne Ta rr a n t
GENERAL MA NAGER
T R AV E L R E TAIL,
P U E RTO RICO, HAWA I I
Chris Ta y l o r
VICE PRESIDENT AND GEN ERAL MANAGER
EUROPE, MIDDLE EAST AND A F R I C A
R E G I O N
C A N A D A
Clive Schre u d e r
P R E S I D E N T
F r a n c e
Philippe Perr i n
GENERAL MANAGER
I t a l y
Maria Rosaria Montiro l i
GENERAL MANAGER
South A f r i c a
Vanessa Solomon
GENERAL MANAGER
United Kingdom, Benelux
David Wi n d e a t t
GENERAL MANAGER
I s r a e l
Moshe Vi d m a n
GENERAL MA NAGER
Cynthia Passmore - M c L a u g h l i n
GENERAL MANAGER
P rofessional USA
Charles Busta
EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER
James A. Nord s t ro m
CHAIRMAN, CREATIVE NAIL DESIGN
Brian Marks
P R E S I D E N T, ETHNIC PRODUCTS
Jan Nord s t ro m - A rn o l d
P R E S D I E N T, CREATIVE N AIL DESIGN
David A. Raccuglia
P R E S I D E N T, AMERICAN CREW
Michael L. Powell
EXEC UTIV E VICE PRESIDENT AND
GENERAL MANA GER OPEN L INE
Gia Clinkscales
SENIOR VICE PRESIDENT, ETHNIC PRODUCTS
L ATIN A M E R I C A R E G I O N
P rofessional Inter n a t i o n a l
Argentina, Chile
A l f red M. Roman
GENERAL MANAGER
B r a z i l
Gioji Okuhara
GENERAL MANAGER
M e x i c o
Rogelio Ve l e z
GENERAL MANAGER
Venezuela, Colombia
Francisco Camacho
GENERAL MANAGER
Carlos Colomer
C H A I R M A N
E d w a rd F. Skeffington, Jr.
EXECUTIV E VICE PRESIDENT AND CHIEF FIN ANCIAL OFFIC ER
Santiago Vi l a
P R E S I D E N T, INTERNAT I O N A L
Spain, Portugal, Italy
Julio Furn e
VICE PRESIDENT AND GENERAL MANAGER,
BEAUTY CARE AND COSMETICS
Latin A m e r i c a
M a rtin Garc i a
VICE PR ESIDENT AN D REGIO NAL MAN AGER,
PROFESSIONAL DIVISION
SHAREHOLDER INFORMATION
REVLON, INC. AND SUBSIDIARIES
COMMON STOCK AND RELATED STOCKHOLDER MAT T E R S
The Company’s Class A Common Stock, par value $.01 per share, is listed and
traded on the New York Stock Exchange under the symbol “REV.” The following
table sets forth the range of high and low closing sales prices as reported by the
New York Stock Exchange for the Company’s Class A Common Stock for each quar-
ter in 1998 and 1997.
QUARTER
First
Second
Third
Fourth
1998
1997
HIGH
LOW
HIGH
LOW
$51 13/16 $33 5/8
$42 3/8
47 9/16
56 1/16
54 1/2
30 7/8
27 13/16 12 1/2
51 13/16
54 1/8
49
$29 5/8
33 1/4
45 3/8
33 1/8
As of the close of business on February 18, 1999 there were 643 holders of
record of the Company’s Common Stock. As of the close of business on February
18, 1999, the closing sale price as reported by the New York Stock Exchange for
the Company’s Class A Common Stock was $15 3/16.
The Company has not declared a cash dividend on the Class A Common
Stock subsequent to the Company’s Initial Public Offering and does not anticipate
that any dividends will be declared on the Class A Common Stock in the fore-
seeable future. The declaration and payment of dividends are subject to the dis-
c retion of the Company’s Board of Directors and subject to certain limitations
under Delaware law, and are also limited by the terms of the Company’s Cre d i t
A g reement and indentures. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and Note 11 of “Notes to
Consolidated Financial Statements”. The timing, amount and form of dividends, if
a n y, will depend, among other things, on the Company’s results of operations,
financial condition, cash re q u i rements and other factors deemed relevant by the
B o a rd of Directors of the Company.
TRANSFER AGENT & REGISTRAR
American Stock Transfer & Trust
40 Wall Street
New York, New York 10005
718-921-8200
INDEPENDENT AUDITORS
KPMG LLP
New York, New York
NOTICE OF ANNUAL MEETING
The annual meeting of
s h a reholders will be held
April 7,1999 at 9:00 a.m.
at the Revlon Research Center,
2121 Route 27,
Edison, New Jersey 08818
C O R P O R ATE ADDRESS
Revlon, Inc.
625 Madison Av e n u e
New York, New York 10 0 2 2
21 2 - 5 2 7 - 4 0 0 0
C O R P O R ATE AND INVESTOR
I N F O R M AT I O N
The Company’s annual re p o rt
on Form 10-K filed with the
Securities and Exchange
Commission is available without
c h a rge upon written request to:
Investor Relations
Revlon, Inc.
625 Madison Av e n u e
New York, New York 10022
C O N TA C T S
Investor Relations
2 1 2 - 5 2 7 - 5 2 3 0
M e d i a
21 2 - 5 2 7 - 5 7 9 1
Consumer Information Center
1- 8 00-4 -R E V L O N
Visit our Web site at
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re p o rt are re g i s t e red or unre g i s t e red trademarks of
Revlon Consumer Products Corporation.
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©1999 Revlon, Inc.