Revlon (NYSE:REV) is scheduled to announce complete fiscal 2013 results on Wednesday, March 05. The mass market cosmetics manufacturer serves a well defined segment of the $290 billion beauty and personal care market, and has a market capitalization of approximately $1.24 billion. We have presented our key areas of focus from the forthcoming Q4 earnings for Revlon in our previous article. (See: Revlon Fiscal 2013 Pre-Earnings: Holiday Season Sales, Balance Sheet Condition In Focus)
In the current note, we provide a few quantitative metrics that we are watching from its full fiscal 2013 results. We have a $24 Trefis Price Estimate for Revlon which would be revised after the company files its results with the SEC.
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– FY13 Revenue: We expect Revlon’s organic revenues to cross FY12 revenues of $1,426 million and reach $1,477 million. These revenues should further be augmented by the company’s acquisition of The Colomer Group, which was completed early in the quarter. In its press release, Revlon stated that TCG had an annual revenue turonver of approximately $500 million last fiscal. With a strong focus in the hair care market, the consolidated Revlon – TCG entity should ensure strong growth in revenues from hair care products this fiscal year.
– GAAP EBIT Margins: We expect GAAP EBIT margins of approximately 15.1% for FY13, up from 13.2% Revlon posted a year ago. However, we haven’t accounted for any significant restructuring expenses arising from the consolidation of Revlon and TCG, which should depress these margins on an unadjusted basis. The acquisition was completed in October 2013 and hence, all revenue and cost synergies fall into the fourth quarter. In the nine months reported so far, Revlon’s GAAP EBIT margins stood at 14.5% and total restructuring expenses of $1.8 million. If full FY13 restructuring expenses reach $18 million, fiscal GAAP EBIT margins decline to 13.9% against our estimate of 15.1%.
– Interest Expense: We forecast an Interest Coverage ratio (GAAP EBIT/Interest Expense) of 2.35x for FY13 compared to 2.20x last fiscal, boosted by a higher GAAP profit. Revlon prepaid its outstanding principal of approximately $330 million on its 9.75% senior secured notes due 2015 and announced the fresh issue of $500 million 5.75% senior unsecured notes. On an absolute basis, we do not expect meaningful reduction in interest payment for Revlon due to its early extinguishment of existing debt. On the flipside, Revlon upsized its term loan facility by $700 million which should increase interest expense modestly and suppress net income levels for the company.