Revlon Inc (REV) 2008 Q4 法說會逐字稿

Good morning, ladies and gentlemen and welcome to Revlon's fourth quarter 2008 earnings conference call. At the request of Revlon, today's conference is being recorded. If you have any objections, you may disconnect at this time.

I would now like to turn the call over to Ms. Abbe Goldstein, Revlon's Senior Vice President of Investor Relations and Corporate Communications. You may begin, Ms. Goldstein.

Thank you and good morning, everyone and thanks for joining our call. Earlier this morning, we released our results for the fourth quarter and year ended December 31, 2008. If you have not already received a copy of the earnings release, you can obtain one at our Website, www.revloninc.com.

Here with me today, are David Kennedy, President and Chief Executive Officer; and Alan Ennis, Executive Vice President and Chief Financial Officer. On today's call, David will briefly highlight the results for the year and provide a strategic update on the business. Alan will then review our financial results for the quarter and the year in detail.

Before we get started, I would like to remind everyone that our discussion this morning might include forward-looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The information on factors that could affect the Company's results from time to time, and cause them to differ materially from such forward-looking statements, is set forth in the Company's filings with the SEC, including our 2008 Form 10-K, which we will file in about two weeks.

Our remarks today will include a discussion of adjusted EBITDA and free cash flow, which are non-GAAP measures that are defined in the footnotes to the release we issued this morning and are reconciled; in the case of adjusted EBITDA to net income or net loss; and in the case of free cash to net cash provided by or used in operating activities; the most directly comparable GAAP measures, in the accompanying financial tables.

In relation to the US share results, unless otherwise noted, our discussion this morning of mass retail share is that of the US mass retail dollar volume according to ACNielsen, which excludes Walmart, as well as regional mass volume retailers, prestige, department stores, Internet, door-to-door, television shopping, perfumeries and specialty stores, all of which are outlets for cosmetics sales. The ACNielsen data is an aggregate of the drug channel, Target, KMart and food and combo stores and represents approximately 2/3 of the Company's US mass retail dollar volume. And finally, as a reminder, our discussion this morning should not be copied or recorded. With that, I would now like to hand it over to David.

Thank you, Abbe, and good morning, everyone. First, I would like to make a few brief comments on our financial results for the year, followed by an update on the progress we made in 2008 in executing our strategy. Then I will turn it over to Alan to review our 2008 financial results.

Overall, during the year, we improved our operating margins; generated positive free cash flow and net income from continuing operations; and improved our capital structure by reducing debt by $110 million. While our net sales for the year were down 1.5%, we were very pleased with the strong growth of Revlon color cosmetics in the US and in key countries around the world.

Gross profit margins expanded to 63.5% in 2008, from 63% in 2007. Operating profit improved to $155 million in 2008, compared to $118 million in 2007. And operating profit margins significantly increased to 11.5% in 2008, from 8.7% in 2007. We had net income from continuing operations of $13.1 million in 2008, compared to a net loss from continuing operations of $19 million in 2007. And we generated positive free cash flow of $26 million, compared to negative free cash flow of $17.1 million in 2007.

During 2008, we continued to make progress executing our strategy. We continued to build and leverage our strong brands, focusing on the key drivers of profitable growth: innovative, high-quality consumer-preferred products, effective brand communication, appropriate levels of advertising and promotion, and superb execution with our retail partners.

We further strengthened our product offering in the color cosmetics category with the introduction of a comprehensive lineup of Revlon and Almay new products for 2008 and for the first half of 2009. The product launches included unique offerings for the mass channel, innovations in products and packaging and line extensions within the Revlon and Almay franchises.

It is important to note that we continue to concentrate on ensuring that we have a strong pipeline of new products each and every year in all segments of the mass color cosmetics category.

We supported our new product launches, as well as our existing product lines, with effective creative advertising, coupled with integrated promotional activities. In line with our plan for a more focused allocation of advertising and promotional spending, we supported our brands throughout the year, including increased spending in the fourth quarter of 2008, compared to 2007. This resulted in consumption growth in the product lines and segments in which we focused.

For example, in the US, the Revlon brand in the face segment grew 12.6% in the fourth quarter and 12.2% in the year, significantly faster than the category segment growth of 5% in the fourth quarter and 3.3% in the year. The Revlon brand growth in the face segment was driven by three important 2008 new product launches. Namely, Revlon ColorStay Mineral foundation, Revlon Custom Creations foundation and Revlon Beyond Natural makeup; which were supported by TV and print advertising featuring Halle Berry and Jessica Alba, as well as promotions in each quarter of 2008.

We signed Jennifer Connelly and Elle Macpherson to represent the Revlon brand, along with Halle Berry, Jessica Alba and Beau Garrett. We engaged Gucci Westman, world renowned makeup artist to serve as Revlon's Global Artistic Director; and Leslie Bibb to represent the Almay brand, along with Elaine Mellencamp and Marina Theiss.

In our Revlon beauty tools business, we launched several new products during the year and recently introduced the superior quality, Revlon Pedi-EXPERT, our entry into the fast expanding, foot smoothing, pedicure tool segment. We continue to realize positive results from our focused marketing activities in support of Revlon ColorSilk hair color, and for the Mitchum brand, we continued the successful Mitchum Man advertising campaign, and in the fourth quarter, we launched a significant package upgrade.

Our international business continued to grow, driven by strong growth of Revlon color cosmetics, primarily in the Asia Pacific region and Canada, while operating margins continued to expand.

We completed the $107 million sale of our noncore Bozzano brand, a leading men's hair care and shaving line of products in Brazil. Revlon brand color cosmetics continue to be marketed in Brazil through Revlon's current third party distributor.

We reduced debt by $110 million in 2008. We used $63 million of the net proceeds from the Bozzano sale to reduce the $170 million MacAndrews & Forbes senior subordinated term loan, leaving $107 million of the loan outstanding. We're saving $7 million in annualized interest expense as a result of this repayment. In addition, the maturity date of the MacAndrews & Forbes loan was extended to August, 2010. We used the balance of the Bozzano sale proceeds of $32 million, in addition to our free cash flow from operations, to reduce revolver borrowings.

We continued to see the benefits of our day-to-day intense focus on rigorous cost control and initiatives to continuously improve efficiency. Favorable manufacturing efficiencies contributed to the improvement in gross profit margins. In the US, we completed a restructuring of our sales force, reducing staffing while better aligning our resources to serve our customers and efficiently implement our strategy.

During 2008, we continued to strengthen our organizational capability, recruiting talented and experienced executives in all functions throughout the Company.

As we look forward to 2009, while we expect economic conditions and the retail sales environment to remain uncertain around the world, we believe that we are better positioned than in many years to maximize our business results in light of these conditions. Specifically, we have: strong global brands; a highly capable organization; a sustainable, reduced cost structure; and an improved capital structure.

We are encouraged by the continued growth throughout 2008 in the mass channel color cosmetic retail sales in the US and in key markets around the world, despite the uncertain economic conditions.

We are also encouraged that in January 2009, according to ACNielsen, the US mass retail color cosmetics category expanded 3.6% and Revlon brand color cosmetics gained 0.7 percentage points, growing faster than the category, resulting in a dollar share of 13.3%.

We are continuing to execute our strategy and manage our business while maintaining flexibility to adapt to changes in business conditions. We're also continuing our intense focus on the key growth drivers of our business, which over time, we believe will generate profitable net sales growth and sustainable positive free cash flow. So, with that, let me hand it over to Alan, who will take you through the financial results in detail.

Thank you, Abbe. Thank you, David. And good morning, everyone. As we normally do, I would like to build upon David's introductory financial comments and take you through a more detailed review of our financial results.

So, starting with the P&L for 2008, net sales in 2008 were $1.347 billion, a decrease of $20.3 million or 1.5%, compared to $1.367 billion in 2007. Foreign currency fluctuations negatively impacted net sales by $8.3 million, which accounted for 0.6% of the net sales percentage decline. Excluding foreign currency fluctuations, net sales of Revlon brand color cosmetics increased 9%, driven by strong new product introductions, specifically higher shipments and favorable product returns, partially offset by higher promotional allowances. Increased net sales of Revlon brand color cosmetics were offset by declines in net sales of Almay, specifically higher shipments, offset by higher product returns and higher promotional allowances, in addition to lower net sales of certain fragrance and beauty care brands.

In the United States, net sales in 2008 were $782.6 million, a decrease of $21.6 million or 2.7%, compared to $804.2 million in 2007. Higher net sales of Revlon brand color cosmetics were offset by lower net sales of Almay, fragrance and beauty care products. In 2008, higher net sales of Revlon ColorSilk and Revlon beauty tools were offset by the cycling of 2007 launches of Revlon Colorist hair color, Revlon Flair fragrance and Mitchum Smart Solid anti-perspirant and deodorant.

In our international operations, net sales in 2008 were $564.2 million, an increase of $1.3 million or 0.2%, compared to $562.9 million in 2007. Excluding the unfavorable impact of foreign currency fluctuations of $8.3 million, net sales increased by 1.7%, as the result of higher sales of Revlon and Almay color cosmetics, Revlon beauty tools and Mitchum anti-perspirant and deodorant, partially offset by lower net sales of fragrance and hair care products. Regionally, higher net sales in the Asia Pacific and Latin America regions were partially offset by lower net sales in the Europe region.

In our Asia Pacific region, which is comprised of Asia Pacific and Africa, net sales increased 3.7%, or 6.7% excluding the impact of foreign currency fluctuations, to $265 million, compared to $255.6 million last year. This growth was primarily due to higher shipments of Revlon color cosmetics throughout the region and higher shipments of beauty care and fragrances in South Africa.

In our Europe region, which is comprised of Europe, Canada and the Middle East, net sales decreased 4.9%, or 4.7% excluding the impact of foreign currency fluctuations, to $200.8 million, compared to $211.1 million last year. Lower shipments of fragrances and color cosmetics in the UK, Italy and certain distributor markets were partially offset by higher shipments of Revlon and Almay color cosmetics in Canada.

In our Latin America region, which is comprised of Mexico, Central America and South America, net sales increased by 2.3%, or 2.4% excluding the impact of foreign currency fluctuations, to $98.4 million, compared to $96.2 million last year. This increase was primarily driven by higher net sales in Venezuela and Argentina, partially offset by lower shipments of beauty care products in Mexico and lower shipments of fragrances and color cosmetics in certain distributor markets.

Moving down the rest of the P&L for Revlon Inc. for 2008. Consistent with our business plan and the increased level of new product introductions, we supported our brands with a more focused allocation of advertising and promotional spending throughout the year. Let me remind you that, from a financial reporting perspective, promotional allowances are recorded as a deduction to arrive at net sales, while advertising costs are recorded within SG&A in the P&L.

In 2008, advertising and promotional spending across all our brands remained largely unchanged. We increased spending on our color cosmetics brands, while we had lower spending on certain beauty care brands as a result of the cycling of prior year spending of the launches of Revlon Colorist hair color, Revlon Flair fragrance and Mitchum Smart Solid anti-perspirant deodorant. These specific actions contributed to our performance in the marketplace in 2008, as reflected in the US mass retail dollar share and dollar volume growth related to the Revlon and Almay brands in the segments in which our new product launches and advertising and promotional spending were focused.

In 2008, our gross profit margin improved by 50 basis points to 63.5% from 63% last year. We saw benefits from favorable changes in sales mix and favorable manufacturing efficiencies.

SG&A expenses of $709.3 million improved by $26.4 million to $735.7 million last year. The improvement in SG&A expenses for 2008, as compared to 2007, was driven primarily by three factors: lower advertising costs of $27.6 million. As I mentioned, we increased spending on our color cosmetics brands, while spending on certain of our beauty care brands was lower as a result of cycling prior year spending on certain beauty care launches; permanent display amortization expenses were lower by $9.5 million; and these two factors were partially offset by a $4.4 million benefit in 2007 related to the reversal of a deferred rental liability upon exiting a portion of our New York City headquarters leased space in that year.

Operating income in 2008 was $155 million, representing an 11.5% operating income margin, compared to $118.4 million; representing an 8.7% operating income margin in 2007. Adjusted EBITDA in 2008 was $248.1 million, compared to $221.4 million in 2007. Operating income and adjusted EBITDA benefited from an improvement in gross profit margins, lower SG&A expenses and lower restructuring charges. Additionally, operating income and adjusted EBITDA in 2008 benefited from a net gain of $4.7 million and $5.2 million respectively, related to the sale of a facility in Mexico, in addition to a net gain of $5.9 million related to the sale of a noncore trademark.

Interest expense for the year was $119.7 million, an improvement of $15.9 million from $135.6 million last year. This significant improvement was due to both lower average borrowing rates and lower average debt levels.

Net income in 2008 was $57.9 million or $1.13 per diluted share, compared to a net loss of $16.1 million, or $0.32 per diluted share, in the prior year. Net income in 2008 includes $45.2 million, or $0.88 per diluted share, gain on the sale of discontinued operations, and a loss from discontinued operations of $400,000 or $0.01 per share. Income from continuing operations in 2008 was $13.1 million and that includes a net gain of $4.3 million related to the sale of a facility in Mexico and a net gain of $5.9 million related to the sale of a noncore trademark, and this compares to a loss from continuing operations of $19 million in 2007.

Looking at the P&L, specifically, for the fourth quarter of 2008. Net sales in the fourth quarter were $334.2 million, a decrease of $39.1 million or 10.5%, compared to $373.3 million in the fourth quarter of last year. Importantly, foreign currency fluctuations negatively impacted net sales by $23.3 million, which accounted for 6.2 points of the net sales percentage decline. Excluding foreign currency fluctuations, increased net sales of Revlon brand color cosmetics were offset by decreased net sales for Almay and certain beauty care brands.

Higher net sales of Revlon were driven by favorable product returns, partially offset by lower shipments and higher promotional allowances; while lower net sales of Almay were driven by higher shipments, offset by higher product returns and higher promotional allowances.

In the United States, net sales in the fourth quarter of 2008 were $199.6 million, a decrease of $16.2 million or 7.5%, compared to $215.8 million in the fourth quarter of 2007. Increased Revlon brand color cosmetics net sales were offset by declines in Almay and declines in certain beauty care brands.

In our international operations, net sales in the fourth quarter of 2008 were $134.6 million, a decrease of $22.9 million or 14.5%. This decline, as I mentioned, was entirely due to unfavorable foreign currency fluctuations. Excluding the unfavorable impact of foreign currency fluctuations, net sales increased by 0.2% as a result of higher net sales for Revlon and Almay color cosmetics, mostly offset by declines in hair care and fragrance products. Regionally, higher net sales in the Asia Pacific and Latin America regions were offset by lower net sales in the Europe region.

As I mentioned in relation to the year, consistent with our business plan and the increased level of new product introductions, we supported our brands with increased levels of advertising and promotional support in the fourth quarter of 2008, compared to the fourth quarter of last year.

In the fourth quarter of 2008, gross profit margin decreased by 40 basis points to 62.1%, from 62.5% in the year-ago period last year, primarily driven by the effect of higher promotional allowances, partially offset by the benefit of favorable manufacturing efficiencies and favorable product returns.

SG&A expenses of $160.8 million increased by $7 million, or 4.5%, from $153.8 million last year, mostly due to increased advertising, partially offset by reduced general and administrative expenses.

Operating income in the fourth quarter was $44 million, compared to $79.3 million in the fourth quarter of last year, and adjusted EBITDA was $66.7 million, compared to $105.1 million in the year-ago period. The decline in operating income and adjusted EBITDA was driven primarily by the increased level of advertising and promotional spending, consistent with our plan.

Interest expense for the period was $27.8 million, again a significant improvement from $34.2 million last year due to both lower average borrowing rates and lower average debt levels.

Net income in the fourth quarter was $11.3 million, or $0.22 per diluted share, compared to net income of $40.8 million, or $0.80 per diluted share, in the same period of 2007. Income from continuing operations in the fourth quarter of 2008 was $11.2 million, compared to $40 million in the year-ago period.

Moving now to mass retail share. For the four-week period ended January 24, 2009, according to ACNielsen, the US mass retail color cosmetics category grew by 3.6% compared to the year-ago period. For this period, the Revlon brand color cosmetics dollar volume grew 9.7%, resulting in a retail dollar share of 13.3%, up 0.7 of a percentage point compared to the year-ago period. Following 14.1% growth in the fourth quarter of 2008, dollar volume for the Almay brand decreased 3% in January 2009, resulting in a retail dollar share of 5.7%, down 0.4 of a percentage point compared to the year-ago period.

I'd now like to discuss the 2008 mass retail share information in more detail. According to ACNielsen, the US mass retail color cosmetics category grew 3.4% in the fourth quarter of 2008 and grew 3.8% in the full-year 2008 versus the comparable period last year.

Revlon color cosmetics achieved a 12.2% dollar share in the fourth quarter and a 12.7% dollar share for 2008. Revlon brand dollar volume grew by 2.5% in the fourth quarter and by 2.1% in 2008, compared to the same period in 2007.

This growth in the Revlon brand was driven by strength in the face segment throughout the year, as David mentioned, with dollar volume up 12.6% in the fourth quarter and up 12.2% in 2008. Our strength in the face segment was driven largely by Revlon ColorStay Mineral foundation, Revlon Custom Creations foundation and Revlon Beyond Natural makeup, all of which were introduced in 2008. Revlon Custom Creations foundation and Revlon ColorStay mineral foundation were in the 2008 Top 10 ACNielsen New Products, by retail dollar sales.

In the lip segment, the Revlon brand benefited from growth in dollar volume by Revlon Super Lustrous lipcolor and the introduction of Revlon ColorStay Mineral lipgloss in the second half of 2008. In fact, the Revlon brand had the Number 1 dollar share position in the lip segment in both the fourth quarter and full-year 2008.

In the nail segment, the Revlon core nail franchise grew quarterly dollar volume by 18.8% and annual dollar volume by 15.2%.

In the eye segment, Revlon brand dollar volume declined 1% for the fourth quarter of 2008 and increased 0.3% in 2008. The primary drivers for Revlon in the eye segment in 2008 were growth in eye liner, mainly from Revlon ColorStay pencil and liquid eye liners, offset by declines in mascara.

Moving on to Almay. Almay achieved a 6% dollar share in the fourth quarter and a 5.9% dollar share for 2008. Almay brand dollar volume grew 14.1% in the fourth quarter of 2008 and 2.2% in 2008, compared to the same periods in 2007. This performance was driven by growth in the eye and face segments of 25.6% and 14% respectively in the fourth quarter of 2008, and 9.4% and 9.2%, respectively, in the full-year 2008.

Almay's positive performance in the eye segment was driven by the Almay Intense i-Color collection and the Almay Bright Eyes collection, which were introduced in the first half of 2008 and second half of 2008, respectively. Almay Intense i-Color eye shadow and mascara were both ranked in the ACNielsen 2008 Top 25 Products, by retail dollars sales.

Almay's positive performance in the face segment was driven by the continued success of Almay Smart Shade foundation.

In the lip segment, Almay dollar volume declined in the fourth quarter and in the full year, largely due to declines in Almay Hydracolor lipstick as it cycled its 2007 launch.

Moving on to women's hair color. In the fourth quarter of 2008, the women's hair color category declined by 1.8%, while ColorSilk dollar volume declined by 1%, compared to the same period in 2007. In 2008, the women's hair color category declined by 0.7%, while Revlon ColorSilk dollar volume grew by 4%, compared to the prior year.

In anti-perspirants and deodorants, the category grew by 0.9% in the fourth quarter and 2.6% in the full year 2008. Throughout 2008, Mitchum maintained an approximate 5% dollar share, in line with its performance in 2007.

And finally, in beauty tools, the category grew 15.6% in the fourth quarter and 24.3% in 2008, significantly higher than the category's historical growth rates, driven by a single pedicure product that was introduced by a nontraditional beauty tools category participant. Excluding that nontraditional single pedicure product, Revlon dollar share would have increased by 0.5% to 23% in the fourth quarter and by 0.2% to 24% in 2008, compared to the same periods in 2007. As a reminder, we recently launched Revlon Pedi-EXPERT, which is an superior quality, ergonomically engineered pedicure tool and we expect to benefit from the recently increased consumer interest in foot smoothing pedicure tools, which has driven growth in the category in 2008.

Moving on with the financial results for the year. Operating cash flow in 2008 was $33.1 million, compared to $300,000 in 2007, representing an improvement of $32.8 million year-over-year.

Free cash flow, which we define as operating cash flow, plus proceeds from the sales of certain assets, less capital expenditures, was $26 million in 2008 compared to negative free cash flow of $17.1 million in 2007, resulting in an improvement of $43.1 million year-over-year.

It is important to note that the net proceeds and gain on sale of the Bozzano brand during 2008 are recorded as discontinued operations and are, therefore, not included in our adjusted EBITDA or free cash flow numbers. The improvement in free cash flow year-over-year was primarily due to improved operating cash flow, which benefited from lower interest payments and the proceeds from the sale of the noncore trademark and the sale of the facility in Mexico.

So therefore, the components of our free cash flow in 2008 of $26 million are as follows. Adjusted EBITDA was $248.1 million. Capital expenditures were $20.7 million. Permanent display expenditures were $47.2 million. Interest paid was $123 million. Taxes paid were $14.4 million and all other cash flows, including changes in working capital, were a cash usage of $16.8 million.

In terms of our borrowing capacity, our unutilized borrowing capacity and cash as of December 31, 2008 was $168.6 million, comprising $126.8 million available under the revolving multicurrency facility and $48.1 million of cash and cash equivalents. It's important to note that we do not have any debt maturing in 2009.

Moving now onto 2009. I would like to take a few minutes to cover some specific factors that are likely to impact our 2009 financial performance, namely pension, foreign exchange and certain other items that may impact cash flows.

Firstly, relating to pension and post-retirement expenses and cash contributions. As you know, declines in the financial markets in the US and around the world in 2008 resulted in a decline in the value of our pension assets. While we are still in the process of finalizing the expected impact on 2009, we currently expect that pension and post-retirement expenses will be approximately $30 to $35 million in 2009, compared to $7.4 million in 2008. Consequently, we currently expect our P&L expense related to pensions to be $23 to $28 million higher in 2009, compared to 2008.

Additionally, we currently expect that cash contributions to the pension and post-retirement plans will be approximately $25 to $30 million, compared to $12.8 million in cash contributions in 2008. Consequently, we currently expect pension cash contributions to be $12 to $17 million higher in 2009 than in 2008.

Secondly, relating to currency, as you know, early in the fourth quarter of 2008, the US dollar strengthened significantly relative to other major currencies. As a result, our reported fourth quarter 2008 net sales were negatively impacted by $23 million. This equates to a 15% decline in net sales in the quarter in our international business or a 6% decline in total Company net sales in the quarter from unfavorable foreign currency translation.

As you know, foreign currency exchange rates have not changed significantly from the levels in the fourth quarter of 2008 and thus, there may be an impact on net sales comparability for the first nine months of 2009. As a consequence, there may also be an impact from foreign currency translation on the comparability of reported operating income in 2009 compared to 2008, broadly in line with our operating margin percentage.

Additionally, in relation to currency, changes in foreign currency rates could have an impact on our 2009 results from the approximately 40% of our international products that are sourced from our manufacturing facility in North Carolina in the US. As we export US-manufactured products to our international business, the impact of the stronger US dollar results in higher input costs for our international business and, therefore, unfavorably impacts gross margins to the extent that we are not immediately able to pass those increased costs on to the consumer.

And finally, in order to assist you in understanding certain other factors that will impact our expected full-year of 2009 cash flows, while we are not providing specific guidance for adjusted EBITDA, I would indicate the following: Capital expenditures are expected to be approximately $20 million. Permanent display expenditures are expected to be approximately $50 million. With respect to interest, as I indicated, interest paid in 2008 was $123 million. You will note that, at the end of 2008, our total debt was $1.329 billion, which was $110 million lower than at the end of 2007. Approximately 60% of our total debt is at fixed interest rates. And approximately 40% is at floating interest rates. We are benefiting, and expect to continue to benefit, from the low interest rate environment on our floating interest rate debt. In addition, we expect to also benefit from the expiration of our higher interest rate $150 million swap, which expires in September, 2009. Taxes in 2009 are expected to be approximately $15 million, and all other cash flows in 2009, including changes in working capital and including the impact of higher pension expense and contributions, as mentioned, are anticipated to result in cash usage of approximately $15 million.

In closing, we believe we are better positioned than in many years to maximize our business results in light of the uncertain economic conditions. Specifically, we have strong global brands, with an extensive multiyear pipeline of new products; we have a highly capable organization; we have a sustainable reduced cost structure; and we have an improved capital structure. Over time, we believe that continuing to execute our strategy will generate profitable net sales growth and sustainable positive free cash flow.

Thank you. Operator, you may begin the question-and-answers.

Thank you. (Operator Instructions) Our first question comes from the line of Karru Martinson of Deutsche Bank. Your line is open.

I'll start with housekeeping. On the other cash flow, did I hear correctly, it's cash usage of $15 million?

In 2009, correct.

Correct. Okay. I just wanted to make sure on that. As we look out at 2009 and kind of the advertising spend, are we looking at kind of a similar level going forward here or are we going to see some pullback? And how would that kind of be weighted through the course of the year?

Well, as we've indicated, we'll, we're going to support our brands. We'll continue to support them appropriately with advertising and promotional expenditures. We'll support all of our new product launches and that's the approach. In addition to that, of course, as we look out, we're going to maintain flexibility in order to adapt to whatever the business conditions are. Let me remind you, that throughout 2008 in the US and in key countries around the world, the mass color cosmetics market continued to grow. We saw that even in January.

Okay. And in terms of the 2010 maturities, obviously, the rights offering seems like it's on hold for now. Kind of what's the mindset here as we go through 2009 in terms of addressing that?

Well, a couple of points, Karru. First of all, as I mentioned, we're in a good position in that we do not have any debt maturing in 2009. The MacAndrews & Forbes loan, as you know, was extended to August 2010. Having said that, we're still committed to doing the equity rights offering. Obviously, we are watching the markets closely to assess timing at this point. So, our strategy has not changed. We just have to wait and see what happens in the marketplace.

Taking a step back and looking at the broader picture, are you seeing any shifts in your customers' behavior in terms of trade downs and kind of reaching perhaps for out of the prestige market into kind of the mass market?

Well, let me answer that. In the cosmetics category, what we have seen is continued growth in mass, as we've indicated. We have also noted that, in the US again, in prestige, cosmetics are down. However, it's very difficult to -- it's extremely difficult to know whether there's actually shifting going on between channels. In addition to that, in mass cosmetics, again in the US with the data that we've had, we've not seen any indication of trade down. In fact, dollar volume is actually somewhat ahead of unit volume increases. So, it doesn't appear that people, at least in mass cosmetics, are trading down.

Thank you very much, guys.

Thank you. Our next question comes from the line Reza Vahabzadeh of Barclays Capital. Your line is open.

So when you look at the fourth quarter EBITDA comparisons year-over-year, Alan, basically, is it just a reflection of somewhat lower shipments in the US and higher returns, offset by lower A&P spending?

Well, there's a couple of things. The primary driver of the lower EBITDA year-over-year, actually is the increased level of advertising and promotional spending.

Okay.

That would be the single biggest driver. There obviously was some negative impact of foreign currency, driven by the impact of foreign currency on the top line. But they're the two biggest drivers. It would be increased advertising and promotional spending, which we had planned to do and indicated during the third quarter call, and the unfavorable impact of currency.

Did the shipments and number match your own internal plan?

Yes, it did.

It did. Okay. And then, as we look ahead to 2009, are there particular quarters where the timing of shipments or A&P and ad spending will change this year versus last year?

Well, as you know, in the US, and it's different outside the US, but in the US, there are typically two major periods of product introductions. And so, the cycle goes something like this. First half 2009 new products start to ship in the fourth quarter of 2008 and continue to ship into the beginning of the first quarter of 2009. Then, when we believe we've reached the appropriate distribution, we will commence the appropriate advertising and promotional campaign. So, there is a lag between when a sale is recorded in our financial statements and when you would actually; (a) see the product at retail, (b) see the commencement of the advertising, and (c), see those retail sales show up in Nielsen.

The second cycle, then in relation to, for example, second half 2009, you would see shipments starting in the back half of the second quarter and trickle into the third quarter. And you would have that same lag effect on the timing of advertising and promotional spending and when you would see the sales of those products show up in Nielsen. It's different outside the US. The US is -- outside the US, they don't have such a regimented cycle. It's more of a continual flow of new product introductions to the wall.

But there's no difference in the timing of those patterns this year versus last year, to your knowledge? Nothing significant --?

You're talking about '09?

Yes, '09 versus '08, there's no significant change in pattern.

Well, it's possible because it really depends on the timing of the new product launches.

Right.

And even though Alan outlined the general launch cycle in the US, that can actually change somewhat.

Right. So, are your new product launches, from a timing standpoint, do you know if they're going to be about the same time as prior year or are they going to be different?

It will be broadly consistent.

Broadly consistent but let me caution you, there could be some differences.

Okay. Got it.

Just one other point on that. As you think about our international operations, as I did mention, if exchange rates stay where they are today, there would be an impact on reported net sales comparability in the first three quarters of next year, driven by currency.

I see. Okay. And then, on the cash flow lines, you mentioned that the other line item would be a use of cash of $15 million, which is less than your pension contribution number. Is there an offsetting working capital or some other item?

Yes, well, let me explain it to you. The -- what you see -- the way I outlined it, is that the cash flows that I talk about, start at EBITDA and bridge their way down to cash flows. So clearly, the pension expense or the accrual to pension expense would be recorded in EBITDA.

I see.

What you would see in your movement in working capital, really is the delta between your expense and your contributions.

Okay. So, you don't need to add any -- the contribution is not more than the actual expense this year. Okay. And then, last question. Are you seeing any signs of inventory destocking in the US or abroad and where are we in that cycle, if you will?

Well, first of all, let me remind you, as we've done on prior calls, that retailers today manage, and we work with them to manage, their level of inventories in trade very closely. Targets have been set and we work with all the retailers in order to make sure that we've got the appropriate level of inventories in trade. We've not seen anything to change that pattern. We've not seen any major changes to what the retailers are doing today in the trade than we've seen over the past year or two or three.

Thank you, much.

Thank you, your next question comes from the line of Carla Casella of J.P. Morgan. Your line is open.

Hi, good morning. My question is related to permanent display spending. It looks like it's ticking up a bit in '09. Is that just because of the number of product introductions or do you need to do some more spending on your -- or displays or is that strategy to potentially gain some more shelf space?

Well, Carla, it's actually, the reported 2008 spending was around $47 million. What I said, is we expect it to be approximately $50 million in '09. So it's broadly in line in '09 where it was in '08.

Okay.

And by the way, that's consistent with where it was in 2007 as well.

Right exactly. And then, it looks -- I just want to clarify, the adjusted EBITDA that you gave does not adjust out the two gains? And then also, doesn't adjust for the restructuring charge that you took in the fourth quarter?

That's correct. The only thing that's excluded from it, in that context, is the Bozzano transaction.

Okay.

But the two one-time gains are in there and the restructuring is in there, too.

Okay. And I know prior questions asked about the destocking but I am wondering, how do you -- would you say your trade inventories -- the inventories at the trade level, are they pretty clean across channels or are there any channels that you're worried about that may be carrying too much inventory of either old products or even some of the new ones?

As we monitor our inventory levels in trade at the key customers, we don't see any significant change year-over-year, even over the past few years.

Okay. That's great, thanks. That's all I had.

Thanks Carla.

Thank you. Our next question comes from the line of Kevin Ziets of Pali Capital. Your line is open.

Hi, good morning. I just wanted to know if you could quantify that currency impact in the fourth quarter? Because it looked like your gross margins held up reasonably well.

Well, we didn't quantify it specifically. The way to think about it Kevin, in the fourth quarter -- a way to think about it would be, the sales declined resulting from currency was $23 million. A way to think about it would be to look at our margin structure, so operating income margin. And if you were to assume that margin applies to international business, then you could work out what the currency impact on OI is.

So there was no additional impact from the 40% sourcing of those international sales from North Carolina?

It was very immaterial. And I'll tell you why. Inventory turns around three times a year. And so, while our international businesses were purchasing inventory from our US manufacturing facility in the fourth quarter, most of that inventory on average, in general, would be on the balance sheet at the end of the year. And that would start to bleed through into the first quarter. So there's a lag because of inventory turns with when that transaction impact would hit the P&L.

So what you're saying is, some of that more expensive inventory, if you will, is going to flush through in maybe the first quarter and first few -- or most of 2009?

Yes, well, certainly in the first quarter. And then if rates stay where they are, today, then that would continue. Correct.

Okay. And then, with regards to the ad spend, I know you're always saying that you're going to spend at competitive levels. I'm just looking at the Mitchum share year-over-year and some of the areas where maybe you brought down spending, it does look to be have impacted market share. One, just want to get a sense of whether you're going to be more -- just as kind of focused on the new launches or if you're going to be more broad-based in terms of the ad spend going forward? And then -- well, maybe just answer that to start.

As far as the Mitchum brand is concerned, remember that we launched a major new product in 2007. So, we spent significantly behind that launch, as is customary when you launch a new product. In that category and in the hair color category and even in the fragrance category, the number of new product introductions is much, much less than in the color cosmetics category. So, you won't see us spending at levels because we're not launching new products every year in those categories. So as we go forward, of course, if we do launch new products, we'll spend at appropriate levels to be competitive, depending upon the product line, whether it's an extension, whether it's a major new product and so forth.

Right. Thinking along those lines, you have the Pedi-EXPERT coming up. That seems like a more major new product line.

Correct.

I want to balance that against maybe what you're seeing in terms of just advertising rates out there. Is there any opportunity there to bring your costs down?

You mean in terms of advertising rates?

Yes.

Well, I'll say this, that we have processes in place and we'll manage to get and to take advantage of whatever favorable rates that we can get in advertising and really across the board in all of our raw materials, for example. So, whatever is favorable out there, we believe that we can be very aggressive and take advantage of it.

And maybe you mentioned this but what were the restructuring costs that were taken during the fourth quarter?

Related to the restructuring of our sales force in the US.

Okay. Well, could you give a little more color on that?

Well, what we did is realign our sales force to our customer base in a more effective and efficient way. And accordingly, we reduced staffing levels but we believe that we've got a more efficient and in fact, a better aligned sales force against our customer base.

The charge we took, Kevin, in the fourth quarter was about $3 million.

And the anticipated annualized savings?

We expect the savings to be more than that on an annualized basis.

And will hit pretty immediately?

Yes, well, we -- the restructuring was done in November/December, so savings are already started.

Okay, great. Last question is on the new product launches and whether in general they've -- you've been able to -- this may be -- well, a reach but whether you've been able to open up any new channels of distribution or expand existing channels with the launches that you've come out with?

Well, we're broadly distributed in the US. We're in every mass channel to a significant degree. Outside the US, we're in all the channels that strategically we think that we can compete. And so, we believe that we've got very good, strong access to the consumer in the US and in all the countries around the world. So, we really think our focus should be on increasing the turnover per store, per door. And that's our focus.

Okay. Just one more on L'Oreal. I think they've said that they're increasing their ad spend and their promotional stance. I'm just wondering whether you're seeing an increased level of competition in general out there?

Well, remember that L'Oreal operates in a number of categories, which we don't compete.

I think they were speaking particularly about the US mass but maybe I'm wrong.

Yes, well, they still have -- they still operate in a number of categories in which we don't compete. So, I would say, broadly speaking at this point, although we haven't seen all the data yet for fourth quarter, but we've seen no significant change, I would say, broadly speaking, in the patterns of advertising and promotional spending in 2008, that we've seen in prior years.

Okay. That's great. Good luck guys.

Thank you. Our next question comes from the line of Walter Branson of Regiment Capital. Your line is open.

Thank you. Just a couple things. Going back to the kind of timing of the numbers. So in 2008, you did have, broadly different timing I think, with strong year-over-year growth and adjusted EBITDA in the first two quarters and then decline in the fourth quarter. Was there a significant change in the calendar in 2008 in terms of new product shipments and A&P spending versus 2007 that explains a lot of that?

Well, in fact that does explain it. We had -- we did have a, I would say a -- I don't know if you call it significant but a moderate change in the calendar. We introduced more products for 2009, earlier, which means later in the year in 2008. And in addition, we supported our products throughout the year. And we had a more even support based on the products that we launched for '08 throughout the year versus '07. Does that make sense?

Yes. And in just maybe looking at the immediate future, in the first quarter of '09, is it broadly comparable in terms of shipments of new products and A&P to the first quarter of '08 or significantly different?

Well, as we've said, we will have and we -- our intent is to have strong new product pipeline in cosmetics each and every year. And that's what we will continue to do.

Okay. And in terms of the large increase in A&P spending in the fourth quarter, can you give us a sense, whether in dollars or percentages, what the magnitude of that was on a year-over-year basis?

What I can tell you, Walter, is that the preponderance of the difference between our EBITDA in the fourth quarter of last year versus the fourth quarter of this year was advertising and promotional spending.

Okay.

As I mentioned earlier, there was a negative impact of currency. So, if you strip that out, the difference really would be increased levels of spending in advertising and promotions.

And that was in accordance with our marketing plan.

Okay. So, that's obviously a pretty significant change. And given that significant change, were you disappointed that the Revlon brand did not increase its share for the quarter?

No, in fact we were very pleased because the advertising in the US was very focused on certain segments and we called that out I think in the script. We got very good performance in all those segments in which we focused the advertising and the promotions. We also saw that in January as well.

Okay. Thank you.

Thank you. Our next question comes from the line of Mary Gilbert of Imperial Capital. Your line is open.

Thank you.

Hello Mary.

Hi Mary, how are you.

Good, how are you doing?

Good, very well.

I wanted to just get a clarification on the reversal and the gains. In the quarter you had, is it $4.3 million gain and then a $5.9 million noncore trademark?

Let me clarify. That was in relation to the full-year.

So, the $5.9 million was full-year. Okay.

Well, the sale of the noncore trademark happened in the first quarter.

Okay.

And the Mexico plant sale happened in the second quarter. So there was no one-time gain in the fourth quarter but in relation to the year, obviously, there were.

Okay. So there were no reversals or anything in the fourth quarter. Correct?

Except the restructuring charge.

Right, yes.

And increased advertising and promotional expense, in accordance with our plan.

Yes, which we got that. So basically -- yes, so, we add back that, we're going to get closer to $69 million for the quarter? Yes, for the quarter. So then therefore, for the full-year, what I need to do is; there was the $4.4 million reversal, the $4.3 million gain, and the $5.9 million gain. Correct? Those were all the adjustments?

You're trying to put these into your model?

Yes.

Yes, that's correct.

Okay. Super. Okay. Got it. So, that's kind of in line with what I'm looking for. And then, I wondered, in looking at the cash requirements for 2009, it looks like it's going to be somewhere around $220 million in total. I know you haven't said that you but you did give us some color on what's going on with the currency and we've gone over that in the past. And I wanted -- and then, we have an idea of the pension expense impact. So on that basis, do you expect to have potentially, if we sort of look at the current demand that we're seeing in the market and the way the category is acting, that you would be slightly cash flow negative to the tune of maybe $20 to $30 million?

Well, that's not something we're going to answer on the call, obviously, Mary. But I think we've given you enough information to be able to model that fairly appropriately.

Okay. And then one other thing on the revolver, how much did you have drawn on the revolver and how much outstanding in LCs?

The revolver was undrawn at the end of the year and we continue to have around $13 million of LCs.

Okay. Perfect.

One important point, I just want to reemphasize as you're thinking of the cash flow. As you think about interest, as I mentioned, interest in 2008 was $123 million.

Right.

Obviously, we reduced debt during 2008 and rates have come down. So as you think about modeling interest in 2009, you have to bear in mind those factors.

Right.

It should be a positive impact to us.

Exactly. Yes. Okay. Yes.

Also I would keep in mind that, as I indicated earlier, that we've got processes in place to take advantage of any cost savings that may arise indirectly from improved prices in commodities, advertising rates, et cetera. And as well, we will continue to day-to-day control our costs, very well. Plus, we will get the benefit of the restructuring of the sales force.

Got it. Yes, so basically with these initiatives, you're targeting it and you've done this in the past. I've seen you do it. You're targeting to be at least cash flow neutral, it sounds like.

Well again, we'll leave to you work it out. But I would take our comments, very carefully, particularly as it concerns our ability to take advantage of whatever cost savings are there in terms of our input costs, rates on advertising, as well as controlling the day-to-day costs around here.

Okay. And then also, with regard to --?

As well as interest rates, as well, as Alan pointed out.

Yes. And then, with regard to the rights offering, that's definitely going to be a 2009 event or could it be pushed out?

What we said, Mary, is that the expiration of that loan was extended to August 2010 to give us some flexibility in terms of timing. We haven't identified or committed to a specific timing to do the rights offering, although we are committed to doing it.

Okay, got it. So, it could be pushed off into early 2010 if necessary.

Correct.

Okay. Great. That's super. Most helpful. Thank you, very much.

Thank you. Our next question comes from the line of Connie Maneaty of BMO Capital Markets. Your line is open.

Good morning. What is the split in pension expense between cost of goods and SG&A?

I will -- the total pension expense in 2009, we expect to be, as I mentioned, $30 to $35 million. I don't have a specific answer for you. I do know that a significant portion is in SG&A. There is a component in cost of goods but it's certainly less than 50% the number.

Okay.

You could model that less than $10 million is in cost of goods and the balance of the $20 to $25 million would be in SG&A.

Okay. Did you -- I don't know if you -- I didn't see it in the release. Did you give the sales growth rates for the international segments?

Yes, we did.

Yes, I called them out specifically.

Okay. I mean for the fourth quarter not the full-year.

Yes, I think we did.

Yes.

Okay. As I look at the US business, sales declined in 2008 in three of the four quarters. And so, the US sales growth rate declined 2.7% this year and it rose 5.1% last year. If we take out -- was the big swing factor here the Colorist launch last year?

That was part of it, for sure. There was also allowances. And then, you've to take into account returns. And I don't remember where we were for the whole year. Was it favorable for the whole year? I can't recall.

Right, yes. But the real big drivers, as you point out, would be cycling the launch of those beauty care products we talked about, Colorist and Flair and Mitchum.

And Mitchum Smart Solid, the pipeline sales, primarily.

And the increase in promotional allowance, which as you know, is a deduction in arriving at net sales.

So, as we look forward, are there one-time events that are going to swing the growth rate in the US business in 2009?

Are there one-time events? You mean like a new product launch or something like that?

It's just very hard to model what a normalized growth rate for the US business should be or could be. Is 2009 a normalized year, would you say?

Is 2009 a normalized year?

Yes.

Well, it's really going to depend on what success we have with new products. New products, in that we may launch in other categories. Pedi-EXPERT, for example, which we're launching, obviously, we don't know what the performance is going to be. We have very high expectations. We're very optimistic about it. And if it works, then it's going to create some growth.

Okay. Would you just describe the impact on the gross margin from foreign exchange with what's coming up in the next couple of quarters? Would you describe it as material or immaterial?

Well, "material" is a subjective.

Well, it also depends on what exchange rates do as well.

Well, assuming they stay where they are.

I would say that, in the first three quarters of 2009, if rates stay where they are, you would see a fairly significant impact to the top line. Within costs of goods, as you know, you also have the transaction impact. So I would say that the impact in gross margin could be significant.

Okay.

One other point just to help you think about it, the four major currencies that you need to think about, from our standpoint, in other words, our bigger markets; would be the Australian dollar, the Canadian dollar, the South African rand and the UK pound. They're the four major currencies that you should track relative to our international business.

I would also call out again that there will be other factors involved, which could be positive. And that is the effect of whatever we see in terms of efficiencies in our manufacturing and supply chain, as well as if we're able to gain better input costs. And to the extent that we can get pricing and pass on whatever the transaction effect might be.

Most companies have already talked about having price increases announced. Have you announced price increases yet?

We have not announced any price increases in the US. However, let me point out that in the color cosmetics category in the US, that dollar volume is ahead of unit volume. So I believe that everyone is taking price as they introduce new product lines at relatively higher prices.

Right. But what about price increases in international markets to offset the FX effect?

We are considering and will evaluate whether we can and should take price increases. We will take those but we will also -- we will take those where we can but we'll balance that out with being competitive.

Okay. I understand that you're pleased with the impact that higher advertising has had on the specific products that you've targeted. But when do you suspect all this effort will translate into sustainably growing market shares for both Almay and Revlon?

Well, it will depend, obviously, on the continued effectiveness of our new products and, as well as, the effectiveness of our overall marketing. We believe that we're in a very good position today. We believe that we are making tremendous progress and that we're very optimistic about our ability to continue to maintain our share and if our new products work well, then we believe that we'll be able to grow share over time. We believe strongly in our strategy. It's very focused. We've got a tremendous capability with all of our people in-house now. We've strengthened that over the past two years. And I think you've seen the progress we've made over the past 2.5 years, approximately. Also, I would go on to say that we want profitable share growth. We want to be able to sustain that share growth. And so, we'll balance share growth out with profitability as we go forward.

And just one final question. I think you said that the sales in the fourth quarter, 7.5% decline in the US and 10% decline overall, as well as adjusted EBITDA; they all met your expectations?

Yes, they were in line with our plan.

Okay great. Thank you.

And by the way, we attempted to call out, in the third quarter, what we expected to do in the fourth quarter in terms of our advertising and promotional expenditures.

Right. I remember that. Okay. Thanks very much.

Thank you, our next question comes from the line of Mark Kaufman of Source Capital. Your line is open.

Hello?

Operator, can you go to the next caller, please?

Thank you, our next question comes from the line of Brandon Austin of Venator. Your line is open.

Hi, guys. Can you guys sort -- did you guys guide to negative cash flow from operations but -- not "guide" but hopefully, negative cash flow from operations but positive -- not positive -- but neutral free cash flow, is that the plan?

Are you -- I don't understand your question.

Sorry, I thought you guys said earlier on the call that you expect 2009 to have negative cash flow from operations but neutral free cash flow.

No, we never said anything like that. We outlined the factors, so that you could calculate your own estimate of cash flow.

Okay. Can you -- the debt relief that you guys got, obviously, that's quite helpful. The debt relief that you guys got until 2010, was that -- which debt is more senior, the stuff that you got relief on or the rest of the debt?

The rest of the debt.

The rest of the debt is more senior.

When you say "relief," we extended the MacAndrews & Forbes term loan, which is a subordinated debt, to August 2010. The other two pieces of debt that we have are our senior term loan, which matures in January 2012; and our 9.5% senior notes, which mature at April 2011.

Okay. And are you guys going to have to -- I missed the part on the pension liability. Are you guys going to have to take some more cash to fund the pension liability or how do you plan on dealing with that situation?

Yes, what I said specifically was in relation to cash contributions for pension, that we expect that cash contributions would be approximately $12 to $17 million higher in 2009 than they were in 2008.

Okay. And could we talk a bit about the competitive environment? Everyone out there seems to be having a tough time. Is there an opportunity or is there a necessary retrenchment in the industry in general, in your opinion?

I haven't seen any retrenchment. As we've indicated, the category in the US and key markets around the world, for cosmetics, continues to grow. We're very pleased with that. And we saw that growth in the US in January. We see no change in the competitive environment. So, it seems, for now anyway, that we're very well positioned.

And the last thing. On the rights offering, is that necessarily going to be equity or could that be done in a form of debt convert? Are you guys hoping --?

It would probably be equity rights offering.

Equity rights offering. Okay, thanks a lot guys.

Thank you.

Our next question comes from the line of Ben Fader-Rattner of Canyon Capital. Your line is open.

Hi, My question was answered. Thank you.

Okay. Good morning. Thank you. Our next question comes from the line of Mark Kaufman of Source Capital. Your line is open.

Good morning, gentlemen. Here's my question. When I look at your numbers for the fourth quarter, you talk about Revlon being a positive and Almay being a negative. And of course, down a couple of paragraphs or maybe it's the next paragraph, talk about the takeaway -- ACNielsen saying that, Almay did quite well. So, is the difference between those two events because you had a lot of returns, which obviously don't show up in the ACNielsen -- returns of old product that reduced your overall revenue on Almay? Or is there something else going on in the channels that ACNielsen doesn't follow?

Well, in terms of our shipments, returns were a major factor. In fact, I think we called out that we actually had higher shipments. I should have said in terms of our sales. So, we had higher accrued returns, primarily based on our marketing plan for '09 and the products we expect to discontinue.

Right.

Okay?

So it would seem to me that -- well, maybe going forward, that if you get some follow-through that there's actually some pretty good interest in the Almay brand right now.

The Almay brand is very strong. We had a very good quarter. We had a very good year with the Almay brand and we did very well in eye and face. That's where we focused. We launched Hydracolor lip in '07 and we were really cycling the launch of that product, as you know, and the pipelines of that. So, we feel very good about the Almay brand.

So, there's a possibility here that we might see shipments higher than returns going forward? Or maybe I am overstating the case, as far as how --?

Well, I think if you look back at our average return experience over the past few years, it's continued to improve as we get much better at managing our offering and our in-store inventory.

Okay. Thanks very much.

Thank you. Our next question comes from the line of Walter Branson of Regiment Capital. Your line is open.

Thanks just a follow-up on the sales. So, looking back on my notes and correct me if I'm wrong. I saw that first quarter '09 new launches were projected to be up 50% in SKU's year-over-year. So, I'd expected a sales gain in Revlon brand for the fourth quarter because of you shipping those launches but actually, your shipments were lower in the fourth quarter of '08 than '07. But you said they met your expectations. So, what am I looking at wrong here?

I'm not sure what you're looking at. First, I've got to get some indication of where you're getting your --?

Yes, one point. The number of SKUs year-over-year isn't necessarily indicative of higher dollar shipments. It depends on the type of SKU, the make up of where that would go on the wall. So it's not necessarily a direct correlation between the number of SKUs and how that would affect shipments.

Also if I understand what you're saying, the shipments in the fourth quarter will come towards the end. And there's shipments into the retailers, there can be a difference as to when the shipments occur and when they actually show up on the counter as well.

Okay. But I'm just looking at --?

If you're trying to match those two statistics that you pointed out, that is sometimes very difficult because of the difference in shipment patterns and retail sales patterns.

Okay. Well, let me ask another way. Do you look at your first quarter '09 launches as being stronger than your first quarter '08 launches? And, whether yes or no, are the shipments of those first quarter '09 launches mostly in fourth quarter or significantly in the first quarter as well?

Well, as far as whether they're stronger or not, the marketplace will be the judge. I believe we've launched, in terms of the number of products and product lines, a similar number, broadly speaking. And I would say that the shipment pattern there is, broadly speaking then, about the same as what you've seen in prior years.

Another way to think about it is in terms of retail space. So, our shelf space on the wall, in 2009 is, we expect, to be largely unchanged from what it was in 2008 and in 2007. So, that there's a fixed amount of linear feet on a wall to put product.

So, what are you attributing the, and you said, it did meet your expectations, the lower shipments of Revlon product in the US in the fourth quarter year-over-year?

I think it was just timing.

Okay. Good, thank you.

This ends the question-and-answer session of today's call. We will now turn things back over to Mr. Kennedy for closing remarks.

Thank you, everyone, for being on the call today. We really appreciate it. Let me just reiterate a couple things. In closing, I believe we are better positioned than in many years to maximize our results, in light of the uncertain economic conditions. We have very strong global brands, with an extensive multiyear pipeline of new products. We have a highly capable organization. We have a sustainable, reduced cost structure and we have an improved capital structure. And we will continue to intensely focus on executing our strategy and believe that over time, that will generate profitable net sales growth and sustainable positive free cash flow. Thank you.

Thank you. And this concludes today's conference all. You may now disconnect.