REVLON RIDES RECOVERY TO WALL ST. SPECULATION ABOUT IPO THIS YEAR

Byline: Thomas J. Ryan

NEW YORK--Buoyed by a turnaround in the second half of 1994 and a recovery in its bond prices, Revlon may attempt an initial public offering later this year, according to Wall Street analysts.
Revlon, however, is not showing its hand.
"We have always disclosed that a public offering is something that we have considered and will consider strategically for the organization," said William J. Fox, executive vice president and chief financial officer.
He would not speculate on when an offering might be made.
Last week, Revlon Consumer Products Corp., the company's operating division, reported that operating profits in 1994 more than doubled to $113.1 million from $51.5 million. As reported, sales increased 9.1 percent to $1.73 billion from $1.59 billion.
After interest costs and taxes, Revlon lost $98.1 million in the year against a loss of $144.7 million in 1993. Interest expense was $136.7 million against $121.5 million.
A successful IPO would permit Revlon to substantially reduce its debt and do away with the huge interest payments.
Analysts said any prospect of an IPO depends on equity market conditions.
The equity market was a problem for Revlon once before. In May 1992, Revlon withdrew a massive $437 million after realizing it would not get the price it wanted for the stock.
Looking ahead, Revlon has to make a move by March 15, 1998, when the $1.1 billion discount note issue of Revlon Worldwide Corp. comes due, according to analysts. The most logical move would be to make an initial public offering, but the company could also refinance its debt, or get additional capital from its parent company.
Whatever the long-term solution, analysts say that Revlon is back on track.
"I think 1994 was really the start of the turnaround period and they have implemented a lot of changes that will help 1995," said Alison Lew, a bond analyst at Credit & Research & Trading, a special-situation and high-yield securities firm in Greenwich, Conn.
David Wells, bond analyst at Bear Stearns, expects Revlon's business to remain strong in 1995, with the help of lower costs and new product launches. He said cash flow increased 52 percent to $183.4 million in 1994 from $120.4 million and predicts cash flow to grow 20 percent to $220 million in 1995.
"The real question is what's going to happen after 1995," Wells said. "If they can keep the advertising going and put the polish back on the Revlon name, they'll have a roll that will last for more than one or two years, and that's what it's going to take to do an IPO."
Sally J. Dessloch, bond analyst at J.P. Morgan, said a Revlon IPO could be possible in 1995 if equity market conditions are right, but she suspects the market would want to see another good quarter.
"Revlon could try to do something during the second quarter, especially since comparisons will become more difficult during the second half of 1995 due to Revlon's robust results for the third and fourth quarters of 1994," Dessloch said in a report.
Credit & Research's Lew said the market may want to see a few more positive quarters before it welcomes a Revlon IPO.
"A few more positive results under their belts will help them sell the IPO at a higher price," Lew said.
Wells concurred.
"My gut is probably they'd want to get some more numbers out there before they tackled an IPO," Wells said. "They've had two very good quarters, but I would think that you'd want to get some quarters out there to show people how you're really doing. I think the earliest they would consider it is late this year, but that's just the earliest."
Meanwhile, Revlon bond prices have increased. Revlon Consumer Product Corp.'s 9.5 percent senior notes maturing in 1999 are now trading at around 95 1/2, up from its summer 1994 trading range in the 80s.
Revlon Worldwide Corp.'s zero-coupon senior secured notes maturing in 1998 are now trading at 61 cents on the dollar, bouncing back from the 40s last summer. Revlon Worldwide is a parent of Revlon's Consumer Products Corp.
Analysts said the company is finally benefiting from its repositioning program, which began in mid-1991. The effort included a heavier emphasis on retailers offering self-service merchandising to consumers, improved customer service, restructuring and centralization of manufacturing operations and a massive cost reduction program.
Analysts said Revlon benefited from improved market conditions in cosmetics and fragrances and healthier conditions in the mass market, which had been hurt in 1993, when many chains substantially cut inventories.
About 88 percent of Revlon's U.S. sales in 1994 for its cosmetics and fragrance division were to the mass market. Domestic sales to mass merchandisers such as Wal-Mart and Kmart increased to 27 percent of color cosmetics in 1994, from 22 percent in 1993. Analysts said Revlon is doing a better job supporting its product launches and was able to increase advertising by 23 percent to $230.4 million last year by lowering costs in other areas.--Fairchild News Service

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