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Revlon, Inc. announced a worldwide organizational restructuring, "rightsizing" the organization to reflect the more efficient workflows and processes that the company has implemented during the past two years. In addition, given the ongoing uncertain economic environment and the potential effect that it could have on net sales, this action will also provide the company with additional flexibility.
“[The] announcement represents an important, necessary, and logical next step forward for Revlon," said Alan T. Ennis, president and CEO, Revlon. "Over the past two years, we have built improved and more efficient processes and workflows, which now allow us to take this step to reduce annualized costs by approximately $30 million. This action, which we are implementing immediately, will enable us to become a stronger, more financially sound organization while staying true to our vision of providing glamour, excitement and innovation to consumers through high-quality products at affordable prices.”
The primary components of the organizational restructuring involve consolidating certain functions; reducing layers of management, where appropriate, to increase accountability and effectiveness; streamlining support functions to reflect the new organizational structure; and further consolidating the company’s office facilities in New Jersey. The organizational restructuring will result in the elimination of approximately 400 positions worldwide, including approximately 325 current employees and approximately 75 open positions.
Annualized cost reductions from this organizational restructuring are expected to be approximately $30 million, of which approximately $15 million will benefit 2009 results. Restructuring and related charges are expected to be $20 million comprised of $17 million of employee-related costs, including severance and other termination benefits, and $3 million related to the consolidation of the company’s office facilities in New Jersey. Approximately $17 million of the charges are expected to be recognized in the second quarter of 2009 with the remaining $3 million expected to be recognized in the second half of 2009. All of the charges are expected to be paid out throughout the 2009 to 2012 period, including $11 million in 2009, $6 million in 2010, and the balance of $3 million to be paid thereafter.
“While the mass color cosmetics category in the U.S., according to ACNielsen, continues to grow, the rate of growth has started to slow, and retailers are carefully examining and optimizing inventory levels," said Ennis. "Additionally, as communicated in our first quarter earnings release call, first quarter 2009 net sales benefited from higher pipeline shipments of new color cosmetics products, as a result of the timing of shipments and our more extensive new product lineup. As a result of these factors, combined with the unfavorable impact of foreign currency fluctuations and pension expense, not including charges related to our organizational restructuring actions, we anticipate significant negative impact on net sales and profitability in our second quarter 2009 results as compared to the second quarter 2008.”