Revlon secures credit life line
credit agreement as a means of securing its short-term stability
after the company chose to withdraw its much maligned Vital
Radiance cosmetic line for old women.
Although the exact terms of the agreement were not revealed, Revlon said that the new credit line would cover up to $75m in charges, write-offs and costs mainly relating the discontinued line.
"This amendment provides us with flexibility we need to reduce our cost structure and improve our margins, while simultaneously continuing to invest in our established brands to drive profitable growth," said Revlon CEO David Kennedy.
The announcement came as a tough week drew to an end for the company last Friday. On Monday of that week, it announced the end of its Vital Radiance line, a line the company had invested spent million on in the hope that it would tap into the fast-growing graying baby boomer market.
However, critics say that the line was not well conceived, lacked the technological advancement of many other similar lines and also suffered from distribution problems. This resulted in slow sales and the decision that axing the line just eight months after its launch would save money in the longer term.
Only the week prior to the most recent announcement, the company announced the departure of CEO Jack, Stahl, who has been replaced by the company's chief financial officer David Kennedy.
At the same time the company also announced job cuts as part of a cost reduction and margin improvement program, which it says will mean the loss of 250 jobs, or 8 per cent of its workforce.
The job cuts carry related charges of approximately $29m, of which the company says it is hoping to save $34m a year. The cuts will involve consolidating existing job functions and reducing the number of layers in management positions.
It will also mean streamlining support functions, eliminating certain senior executive positions and consolidating a number of facilities, the company said.
But despite these moves, the company's share price continued to slide last week, forcing it to take more radical action in an effort to restore investor confidence and to try and put the company back on track.
Last week shares were trading at around $1 each, compared to a year high of just over $4, with shares falling 60 per cent since the beginning of this year. Share prices picked up towards the end of last week, after the refinancing announcement was made and are now trading at around $1.1 per share.
Revlon is currently saddled with approximately $1.4bn in debts, and with the latest set back it looks like refinancing will be the only solution to get it through a difficult period.
The company says that net sales are expected to be in the range of $280m to $290m for the up and coming third quarter, leading to a net loss of approximately $135m. That should translate into full year sales of approximately $1.34bn with adjusted EBITDA of $75m - 85m.
