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Revlon, Inc. (NYSE:REV)

Q1 2011 Earnings Call

April 28, 2011 9:30 am ET

Executives

Elise A. Garofalo – Senior Vice President, Treasurer and Investor Relations

Alan T. Ennis – President and Chief Executive Officer

Chris Elshaw – Executive Vice President and Chief Operating Officer

Steven Berns – Executive Vice President and Chief Financial Officer

Analysts

David Wu – Telsey Advisory Group

Connie M. Maneaty – BMO Capital Markets

Karru Martinson – Deutsche Bank

Jeff Kobylarz – Stone Harbor Investments

Operator

Good morning, ladies and gentlemen, and welcome to Revlon’s First Quarter 2011 Earnings Conference Call. At the request of Revlon, today’s conference call is being recorded. (Operator Instructions)

I would know like to turn the call over to Ms. Elise Garofalo, Revlon’s Senior Vice President, Treasurer and Investor Relations. You may begin Ms. Garofalo.

Elise A. Garofalo

Thanks, Simon. Good morning, everyone, and thanks for joining today’s call. Earlier today we released our results for the first quarter ended March 31, 2011. If you have not already received a copy of the earnings release, you can obtain one on our website at revloninc.com.

On the call with me this morning are Alan Ennis, Revlon’s President and Chief Executive Officer; Chris Elshaw, Executive Vice President and Chief Operating Officer; and Steven Berns, Executive Vice President and Chief Financial Officer.

Before I turn the call over to Alan, I’d like to remind everyone of a few things. First, our discussion this morning might include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act. Information and factors that could affect the company’s results from time to time and cause them to differ materially from such forward-looking statements as set forth in the company’s filings with the SEC, including our 2010 Form 10-K and our 2011 first quarter 10-Q, which we filed earlier this morning.

Next, our remarks today will include a discussion of adjusted EBITDA and free cash flow, both of which are non-GAAP measures. These non-GAAP measures are defined in the footnotes to our release and are also reconciled to the most directly comparable GAAP measures in the financial tables at the end of our release.

And finally, as a reminder, our discussion this morning should not be copied or recorded.

With that, I’ll turn the call over to Alan.

Alan T. Ennis

Thank you, Elise, and good morning everyone. As we have discussed with you in the past, Revlon’s vision is glamour, excitement and innovation through high-quality products at affordable prices. And this underpins everything we do. We realize this vision by executing the five key elements of our business strategy and they are building our strong brands, developing our organizational capability, driving our company to act globally, increasing our operating profit and cash flow, and improving our capital structure.

We are carrying positive momentum into 2011 with respect to our strategy and have a keen focus on delivering on our strategic goals of profitability growing our business. With regard to building our strong brands, during the first quarter of 2011 we made progress in a number of areas. From a topline perspective we are very pleased with our net sales growth of over 9% during the quarter. We delivered improved year-over-year net sales performance in each of our five regions, which demonstrates the focus of our regional teams on delivering global growth.

Our brands performed well in the marketplace with particularly strong performance by some of our new products including Revlon ColorBurst Lipgloss, Revlon Top Speed Nail Enamel and Almay Intense i- Smoky-i kit.

We have discussed for some time that we believe the drivers of profitable growth are first, innovative high-quality consumer preferred brand offering, second, effective brand communication, including appropriate levels of advertising and promotion, and third, superb execution with our retail partners to provide optimal in-store offerings.

Our continued emphasize and key focus on these drivers is of utmost importance to our objective of sustaining topline momentum.

Also with respect to our focus on growth we added the Sinful Colors brand to our portfolio in March of this year. Sinful Colors is a fashion color cosmetics brand, primarily in nail color, which is sold today in mass cosmetics retails in the U.S. and certain markets outside the U.S. We will continue to utilize the successful Sinful Colors business model, namely speed-to-market with on-trend and exciting new product introductions and highly effective in-store promotional programs. Going forward we will evaluate opportunities to drive further growth with this brand.

With regard to our strategic objectives of increasing our operating profit and cash flow and improving our capital structure, we continue to make progress. We sustain competitive operating margins while significantly increasing our advertising investment to enhance our marketplace competitiveness. Also with respect to our capital structure Moody’s announced in April that it upgraded our corporate credit ratings.

And lastly, before I turn the call over to Chris, let me remind you about our Annual EIF Revlon Run/Walk For Women, which will be held in New York City this Saturday, April 30, and Los Angeles on Saturday, May 7. We, at Revlon, are very proud of our longstanding and continued philanthropic support for women’s health initiatives and the fight against women’s cancers.

Over the years Revlon has helped to raise millions of dollars for research, education and efficacy. Every dollar we help raise puts us one step closer to finding more treatment options and a cure for women’s cancers. If you would like to donate to this cause or register to participate, please visit www.revlonrunwalk.org.

And with that, I will hand it over to Chris who will talk about our marketplace performance.

Chris Elshaw

Thank you, Alan, and good morning, everyone. Today I will review our net sales performance excluding the impact of changes in foreign currencies by region and by brand. Our net sales include the acquisition of Sinful Colors, effective March 17 through the end of the first quarter, the results of which were not material in the period.

Net sales in the first quarter were $333.2 million, an increase of 7% versus the first quarter of last year. The increase was primarily due to high net sales of Revlon color cosmetics, as well as Almay color cosmetics, fragrances, and other beauty care products. These increases were partially offset by low net sales of Revlon ColorSilk hair color.

Before moving onto regional sales performance for the quarter, I’d like to take a moment to address the recent disaster in Japan. We are thankful to report that our employees in Japan were not directly affected. We are currently assessing the potential impacts of these events and the aftermath in our global supply-chain and our operations in Japan for the remainder of 2011.

In the first quarter of 2011, these events did not have a material impact on our net sales, operating profit, operating cash flow, or supply-chain. We will continue to monitor the potential impact in our business and evaluate some foreseeable alternatives to mitigate any possible impact.

Now moving on to retail performance starting with the United States; net sales increased $4.1 million or 2.3% primarily due to higher net sales of Revlon and Almay color cosmetics, which were partially offset by low net sales of Revlon ColorSilk hair color. Net sales of Revlon color cosmetics increased in part due to lower promotional allowances as compared to the first quarter of 2010. As we continue to optimize our brand support mix between advertising, promotional activity, and other drivers to be more effective in the marketplace.

In Asia Pacific, net sales increased $4.1 million or 8.9% primarily due to the higher net sales of Revlon color cosmetics in China and certain distributor markets. Moving on to Europe, Middle East, and Africa, net sales increased $4.8 million or 11.2% primarily due to higher net sales of Revlon color cosmetics Mitchum anti-perspirant deodorants and fragrances both in the UK and South Africa.

In Latin America, net sales increased $6.9 million or 34.5% primarily due to higher net sales across our portfolio of brands in the region. The higher net sales in Venezuela including the impact of higher selling prices given market conditions and inflation, accounted for approximately one-half of the $6.9 million net sales increase in the region. Lastly in Canada, net sales increased $1.6 million or 11% primarily due to higher net sales of Revlon color cosmetics.

Now moving on to performance by brand starting with Revlon color cosmetics; net sales increased in each of our five regions during the quarter as compared to the prior-year. Recent new products included in the Face segment, Revlon Colorstay Aqua Mineral makeup, which is the first Mineral foundation that captures the hydrating, benefits of coconut water in a lightweight powder foundation.

Revlon ColorStay’s patented longwearing technology helps keeps skin looking luminous and radiant all day. In the Eye segment, the Revlon customized franchise consists of a mascara as well as an eye shadow with liner.

CustomEyes Mascara provides two different lash looks, length and drama or length and definition with one revolutionary adjustable brush. Revlon CustomEyes Shadow & Liner is offered in a range of expertly coordinated pallets each with four shadows and one liner that enables consumers to create and customize their look with ease.

In the lip segment, Revlon ColorBurst Lipgloss is a luxurious new lip-gloss that contains our revolutionary elastic color technology and micropore crystal formula, which distributes rich color pigments evenly for weightless color and vivid mirror-like shine. Continuing in the lip segment, I am pleased that the Cosmetics Executive Women’s Organization has announced a Just Bitten Lipstain + Balm was named as the finalist for the upcoming Insider’s Choice Beauty Award in the U.S. market. This award recognizes the most innovative beauty products of the year as selected by the CEW’s membership of approximately 4,000 beauty industry professionals from over 1,100 companies.

And lastly, in the nail segment, Revlon Top Speed is an advanced line of nail color that dries in 60 seconds. Top Speed has been introduced in several countries where it is performing very well in the marketplace and we have further global launch funds for the balance of 2011.

Moving on the Almay brand, net sales increased year-over-year. We have seen positive momentum in certain markets on the hills of our recent new product introductions. Notably, Almay wake-up makeup, a light-weight powder foundation that uses encapsulated water to instantly deliver cooling hydration to sooth the skin while providing full coverage and giving a healthy, well rested glow. And Almay Intense i Smoky-i kit, which helps consumers achieve the smoky eye look with ease. Smoky-i is performing extremely well in the marketplace.

In women’s hair color, Revlon ColorSilk net sales declined driven by low net sales in the U.S., partially offset by higher net sales outside the U.S. as compared to the same period last year. And the anti-perspirant deodorants, as we stated in February, we continue to support the Mitchum brand and in 2011 we plan to build a Mitchum’s established efficacy positioning with the introduction of Mitchum Advanced Control containing fresh defense technology. Advanced Control will be supported by new advertising creative that is currently being produced.

And finally, with regard to Revlon beauty tools, we continue to bring innovative new products to the market. And through the first quarter of 2011 we are pleased with the performance of our new designer collection, Slant-Tip Tweezer and Revlon Crazy Shine, a Nail Buffer that gives bare nails 400% more shine instantly. In addition, I’m pleased to announce that Revlon Crazy Shine Nail Buffer has been named the best beauty buy for 2011 by InStyle Magazine. Revlon Crazy Shine was chosen this year by Hollywood’s top beauty pros as a Get Gorgeous Essential.

Now I’ll turn it over to Steven to walk you through the financial results for the quarter.

Steven Berns

Thank you, Chris. As we have already discussed our net sales performance, I will start with gross margin performance in the quarter. In the first quarter of 2011, our gross profit margin improved to 66% versus 64.4% in the first quarter of 2010. Gross margin in the 2011 first quarter was positively impacted by lower material cost, higher sales levels resulting in favorable fixed overhead absorption, lower pension expenses and lower cost related to inventory obsolescence and sales returns. These positive impacts were partially offset by unfavorable changes in sales mix during the quarter.

In addition, there was a negative impact on cost of good sold in the first quarter of 2010 as a result of the devaluation of Venezuela’s local currency. This impact did not recur in the first quarter of 2011 and therefore benefited the comparison of gross profit between the first quarter of 2011 and the first quarter of 2010. SG&A increased $23.8 million or 15.7% to $175.2 million primarily due to higher advertising expenses consistent with our strategy to build our strong brands.

Operating income in the first quarter of 2011 was $44.7 million compared to $45.4 million in the same period last year and adjusted EBITDA was $60.7 million compared to $61.1 million in the same period last year. The benefit of higher net sales and gross profit in the first quarter of 2011 was offset by higher SG&A expenses as noted earlier. Net income in the first quarter of 2011 was $10.4 million or $0.20 per diluted share compared to net income of $2.2 million or $0.04 per diluted share in the same period last year. The 2011 first quarter provision for income taxes was $2.7 million higher than 2010 primarily due to a higher effective tax rate in the United States.

As we discussed in our last earnings call in February, the increase in the provision for income taxes resulting from the higher effective tax rate in the U.S. is not expected to affect cash taxes paid in 2011.

Net income in the first quarter of 2010 included $9.7 million of expenses associated with our March 2010 refinancing and a $2.8 million foreign currency loss related to the re-measurement of Revlon Venezuela's balance sheet as a result of Venezuela's currency devaluation.

Net cash provided by operating activities in the first quarter of 2011 was $24.1 million compared to $31.2 million in the same period last year, and free cash flow was $21.7 million compared to $28.2 million in the same period a year ago. Net cash used in investing activities was $41.4 million compared to $3.0 million in the same period last year. The increase in cash used was primarily due to the Sinful Colors acquisition in the first quarter of '11.

On the liquidity front, our unutilized borrowing capacity and cash on hand as of March 31, 2011 was $162.5 million comprised of $56.1 million of available cash and $106.4 million available under our revolving credit facilities. Our revolver was undrawn as of March 31, 2011.

Now moving on to balance of 2011; consistent with our historical practice I'm going to provide certain 2011 cash flow information none of which has changed from the guidance we provided you during our last earnings call.

Capital expenditures are expected to be approximately $20 million. Permanent display expenditures are expected to be approximately $40 million. Pension plan contributions are expected to be approximately $30 million. Cash interest expense can be estimated by reference to our public filings, which detail the composition of our capital structure and applicable interest rates. And lastly, cash paid for income taxes is expected to be approximately $20 million.

As a remainder, with respect to operating cash flow in general, the timing of these cash flow items just noted as well as other working capital items can vary from quarter-to-quarter based on a number of factors. We continue to closely manage our key working capital accounts including receivables, payables and inventory.

This concludes our prepared remarks and we would now like to open up the call for your questions. Operator, please prompt the participants for questions.

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes from the line of Grant Jordan with Wells Fargo Securities. Your line is open.

Grant Jordan – Wells Fargo Securities

Good morning. Thanks for taking the questions.

Alan T. Ennis

Good morning.

Grant Jordan – Wells Fargo Securities

My first question on the Sinful Colors acquisition, can you give us a little more color in terms of revenue and potentially EBITDA, what they did last year?

Alan T. Ennis

Yes. Grant, good morning. Sinful Colors, as you know, there is a complete disclosure of certain information in our 10-Q, which we filed this morning. We’re not going to disclose as we don’t with our other brands. We’re not going to disclose revenue or EBITDA or EBITDA targets for the business. But what I can tell you is the following. We paid $39 million to buy the business and that included not only the Sinful Colors brand, but also two other smaller brands, Wild and Crazy cosmetics and FreshMinerals cosmetics. As I mentioned, the Sinful Colors brand is a nice complement to our portfolio, sold primarily in the U.S., but also outside the U.S. So we are not going to disclose revenue and EBITDA targets or stock information. We did pay $39 million for it.

Grant Jordan – Wells Fargo Securities

Okay. In terms of other acquisitions, how would you rate your appetite right now?

Alan T. Ennis

Well, our strategy as you know is to profitably grow the business, and so we believe there are opportunities both with our existing brands and to potentially look at other acquisitions. I think we’ve shown that with our organic brands that we can drive profitable growth as we did in 2010 and the first quarter of 2011. So, my view is that if there are opportunities out there, we’d certainly evaluate them. Our focus now is to drive on our organic brands and to transition Sinful Colors into our portfolio.

Grant Jordan – Wells Fargo Securities

Okay. My last question, switching gears a bit, it certainly seems like the increased investments in advertising and brand building are paying off on the topline in terms of year-over-year increase going forward. Do you still expect to see that continue to ramp up at a pretty good rate?

Alan T. Ennis

What we said throughout 2010 is as we shifted the focus of the company’s strategy from managing costs and driving profitable growth, what we said is that we would expect to increase the advertising spending, and we did that throughout the balance of 2010, the first quarter of 2011. That’s a key part of our strategy to build our strong brands. We made an investment that we have from period to period. It’s going to vary depending on timing of new product launches within the marketplace and competitive conditions. What I will tell you is that we are spending at competitive levels, both above the line and below the line and we’ll continue to do that throughout 2011.

Grant Jordan – Wells Fargo Securities

So would you say that the big ramp up, that happened in 2010 and Q1 ‘11 is kind of over from the financial standpoint as we think about how to look at the company going forward?

Alan T. Ennis

Well, what I will tell you is from Q2 last year we call that specifically that we expected increased spending in advertising in the following quarter and that was done through the fourth quarter of 2010. We didn’t make such a statement in the first quarter of this year.

Grant Jordan – Wells Fargo Securities

Great. Thank you.

Alan T. Ennis

Sure.

Operator

Your next question comes from the line of Carla Casella with JPMorgan. Your line is open.

Carla Casella – JPMorgan

Hi. I wanted to ask a question just on the competitive market, what you are seeing in terms of competitive promotions and whether they are picking up or abating at all.

Chris Elshaw

Hi, Carla. Well, as I think we said a number of times before, this is a highly competitive category. I wouldn’t say that we’ve seen an increase or decrease. It continues to be continuously competitive. Everybody is competing very hard on product innovation, on the quality they are advertising, and their in-store promotion. And as we have said in the past, we are very competitive in those regions.

Carla Casella – JPMorgan

Do you give us sense that display spend is similar to competition or there people competing on different levels.

Steven Berns

There is no information available on display spending in the marketplace, but I will say is that in-store as we mentioned in Q4 of last year we are very focused on improving our in-store display presence and also our permanent wall merchandising presence. So that is what we’re focusing on.

Alan T. Ennis

I think what you will see Carla is to build on Chris’s point what you will see in U.S. businesses since the middle of last year we’ve really focused on improving the execution in-store and improving the quality of our in-store displays and making sure that that’s consistent from our 360 degree standpoint with all of the advertising materials that we have on our new product launches.

And so our objective is when a consumer walks in to store, we want them to see the Revlon brands, Revlon Almay, et cetera displayed being the most impact full to attract the consumer to buy our product versus the competitive product, and I think we are making some good progress there.

Carla Casella – JPMorgan

Okay, great. And then I may have missed this in the beginning, did you talk about what you’re shipping versus the sell-through has been and whether it is relatively even at this point.

Alan T. Ennis

We don’t talk about shipping versus sell-through Carla, we talk about net sales. What I can tell you is that is that, we work very closely with the retail partners to ensure that we have got the optimal levels of inventory across those channels. We haven’t seen any significant jumps in inventory in the quarter and jumps in the retail environment.

Carla Casella – JPMorgan

Okay, great thank you.

Operator

The next question comes from the line of David Wu with Telsey Advisory Group. Your line is open.

David Wu – Telsey Advisory Group

Hi. Good morning everyone.

Alan T. Ennis

Good morning, David

David Wu – Telsey Advisory Group

Hi. Just have a couple of questions. First, the EMEA and Latin America were nice surprises in the quarter. Can you talk about whether it’s driven more by expanded distribution, your stronger sell-throughs or through new launches? I mean just secondly on input cost, we’ve heard from some of your peers that they’ve seen a slight, a bit of an increase, I just want to get your thoughts on what you’re seeing with the cost. Thank you.

Chris Elshaw

Okay. Hi, David. So with regards to EMEA and Latin America, a couple of things. One, as we’ve said when we talked about the bands we’re pleased with our new product performance, the innovation that we brought to marketplace in all our markets. As we said, we’ve been focusing on the execution, install and its relation to the 360 degree marketing campaign. So I think what you’re saying is the result of those things happening in EMEA and Latin America. One thing as I mentioned in my remarks in Latin America is approximately one half of the $6.9 million net sales increase in the region is due to the impact of higher selling prices given market conditions and inflation. But overall our performance is based upon our focus on execution and go-to-market plans.

Alan T. Ennis

And just in terms of the other part of your question, David, in terms of input costs, obviously a key element of our strategy is to grow profit and cash flow and we’re continuously looking at all input costs to make sure that we have the best and most competitive pricing. I would say that with respect to our business there is no single commodity that has a material impact on our cost structure. Obviously oil plays a part as it relates to distribution, but it’s not a significant component of our overall cost base.

So like other companies, yes, we are experiencing some input cost pressures, particularly from oil based on commodities as it relates to plastics et cetera, but we are looking for opportunities to offset those costs with other savings. So nothing material to tell at this point.

David Wu – Telsey Advisory Group

Excellent. Thank you very much.

Alan T. Ennis

Thank you, David.

Operator

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

Connie M. Maneaty – BMO Capital Markets

Hi. And I think Pat may also have a couple of questions. The first question I have relates to the second quarter gross margin a year ago. Sorry to bring it up, but there was margin expansion of about 480 basis points. Can you remind us what was of a one-time nature back trends that we can get a better sense of how to think about the quarter that’s coming for gross margins?

Alan T. Ennis

Right. So Connie, we talked about last year when we discussed gross margin and we reported the focus of the company is to deliver competitive operating margins. And so, we have done that consistently over the past three, four years and we continue to do that over rolling 12-month period. We had the benefit last year in the second quarter of restructuring savings and the first really full quarter of procurement savings as a result of a procurement initiative that began in 2009. So that might have had an impact on the gross margin in that quarter. But our focus once again is really on delivering operating margins that are competitive. We’ve done that in the 14.5% range to 15% range over several quarters when you look on a latest 12-month basis.

Connie M. Maneaty – BMO Capital Markets

Okay. And then we had trouble getting into the call, so I hope I’m not asking something you’ve already answered. On the first quarter sales growth in the U.S., can you give us what the contributions were in percent or growth from the acquisition, the volume increase and the reduction of return versus prior year?

Alan T. Ennis

Yeah. Well, so a couple of things just in terms of the acquisition, what we have said is of the acquisition and they owned it for 13 days in the quarter, so clearly it was immaterial impact to the performance in the U.S. business. The results of Sinful Colors are consolidated within the U.S. region for reporting purpose, so that’s the way they will be going forward, but it was immaterial in relation to the results of the first quarter. The second part of your question Connie was around volume?

Connie M. Maneaty – BMO Capital Markets

Yes. Was there an increase in shipments and how do we think of that versus your comment in the press release that, they were better comparisons to last year’s returns and allowances?

Alan T. Ennis

Right, we talk about net sales as you know, we don’t talk about gross sales or shipments as you say. What we did say is that, we saw net sales growth of 2.3% in the U.S– and we said that part of that growth was driven by lower promotional allowances. So part of that was from a lower promotion allowances, obviously the rest of it was either higher shipments or lower returns.

Connie M. Maneaty – BMO Capital Markets

Were there any material price increases?

Alan T. Ennis

No it isn’t. Price in the marketplace is a function of both the quality of the products that we are launching, the competitive landscape, so we launched new products we make sure that they are priced appropriately. There is no price increases on existing products. If there is a price increase, it’s generally as a consequence of launching a new product at a higher price point.

Connie M. Maneaty – BMO Capital Markets

Okay.

Connie M. Maneaty – BMO Capital Markets

Hi, good morning. I actually just have one quick question on the gross margin in the first quarter. First to the Venezuela adjustment, could you remind us what that was last year and why it didn’t repeat, and also if that’s going to continue throughout 2011?

Steven Berns

Yeah so in the first quarter of 2010, the Venezuelan government devalued the currency, and as a result the accounting impact of that was a $2.8 million expense item which hit cost of goods as a result of the revaluation of our inventory at the new exchange rate. So unless there is number devaluation, okay it’s a one-time item and would not repeat.

Connie M. Maneaty – BMO Capital Markets

And so that should continue throughout 2011?

Steven Berns

No. Once again, the question you are asking is, I believe is, what was the impact in the first quarter of 2010? The impact in the first quarter of 2010 that is last year was a $2.8 million expense, okay. So that expense showed up on our P&L, was in inventory only in the first quarter that revalue the inventory. That inventory sells through during the year at a higher cost of goods, okay. It’s now gone, okay and if there is no other devaluation, that impact was only on the P&L in the first quarter of 2010.

Connie M. Maneaty – BMO Capital Markets

Okay. Thank you. I understand now. And then secondly, with regard to material costs, why are they down in the quarter, does that have something to do with your inventory turns? And given what’s going on with the price of oil later in the year, should we (Audio Gap)

Steven Berns

(Audio Gap) continuous process to reduce input cost. There is nothing specific or unique about what happened in the first quarter.

Connie M. Maneaty – BMO Capital Markets

Okay, great. Thank you very much.

Operator

Your next question comes from the line of Karru Martinson with Deutsche Bank. Your line is open.

Karru Martinson – Deutsche Bank

Good morning. Just kind of follow-up on the competitive environment with Wal-Mart talking about bringing SKUs back into the store and others actually kind of continuing to rationalize. What are you seeing in terms of opportunities for shelf space going forward?

Alan T. Ennis

Well, as you refer to, Wal-Mart have been very public about the number of SKUs brought back into their store. Of course we’re very closer with them. I think in the remarks we said a lot of it was in the food area. But in the environment of SKUs and Wal-Mart versus other customers that all comes from the review in that range and that all comes when we’re trying to attain the balance between the best productivity for SKU and the right range for the consumer. So, as far as we are concerned today, we are optimally spaced. We don’t have a space issue and we think we have good productive brands in there and we have very close working relationship with them of course.

Karru Martinson – Deutsche Bank

All right. Thank you very much guys.

Chris Elshaw

Thanks Karru.

Operator

Your next question comes from the line of Jeff Kobylarz with Stone Harbor Investments. Your line is open.

Jeff Kobylarz – Stone Harbor Investments

Just curious a little bit about what’s going on with what you stated in the press release in China you got greater sell in Revlon and that was both in China and distributor markets? I’m sorry. I used the word sell in. Is that, is the increase in China in distributor markets is at sell-in essentially as the new agreements, your distribution agreements there?

Steven Berns

No there is no new distributional agreements. As all our remarks I would spell, our net sales, so we have a net sales distributors. We have a number of distributors across key Southeast Asian market.

Alan T. Ennis

To build on that Jeff, one of our strategy obviously is to grow and so and to do so profitably, and China is an opportunity for us as it is for many companies, and so we’ve talked about investing to grow our key brands in our key markets and clearly China is a market that we’re very, we’re aware of.

Jeff Kobylarz – Stone Harbor Investments

Right. But can you talk about sell-in versus sell-through in Asia-Pacific?

Alan T. Ennis

We don’t talk about sell-in versus sell-through Jeff, it’s something we comment on. But that point, generally we keep a close sign inventory retail to make sure that nothing gets at whacky.

Jeff Kobylarz – Stone Harbor Investments

Right, okay. But do you have any new agreements in the Asian markets that are…

Alan T. Ennis

No, there is no new agreements. No.

Jeff Kobylarz – Stone Harbor Investments

Okay. All right, good. And then Europe, you said that you have better sales of Mitchum and fragrances in the U.K. and South Africa, and anything special driving that?

Alan T. Ennis

No nothing special except the continued focus on our execution. We say we are constantly focused on how can we profitably grow the business. We’re constantly optimizing our promotional and advertising mix. The success of those activities and the innovation that we will bring to the market.

Jeff Kobylarz – Stone Harbor Investments

Okay. Fine and then…

Alan T. Ennis

Brand in South Africa is a very successful brand in the marketplace and the fragrance business both in terms of regular eau de toilettes and in terms of body spray is a very robust business in the South African market. Doing well in that market.

Jeff Kobylarz – Stone Harbor Investments

Okay, all right good. And then do you have any general comments about your market share in the different geographic areas?

Alan T. Ennis

We don’t comment on market share, we haven’t done still since the end of 2009 primarily because it’s very difficult to get a global view of market share. You can talk about market share in a micro level in the specific markets, but it’s not representative of what we are doing as a global company and so we talk about net sales and the performance of net sales over time as being the best indicator of our performance.

Jeff Kobylarz – Stone Harbor Investments

Okay. All right, thank you.

Alan T. Ennis

Thank you, Jeff.

Operator

There are no further questions at this time. I’ll turn the call back over to Mr. Ennis for any closing remarks.

Alan T. Ennis

Thank you Simon and thank all of you for joining our conference call this morning. This ends our conference call. We look forward to speaking with you when we report second quarter results later this year. Thank you.

Operator

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.

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