Elizabeth Arden, Inc. Announces Third Quarter Fiscal 2013 Results

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Elizabeth Arden, Inc. Announces Third Quarter Fiscal 2013 Results

~ Net Sales of $264.5 Million; Increase of 10.5% ~

~ Adjusted EPS of $0.02 ~


~ Fiscal Year-to-Date Net Sales Increase of 11%; Adjusted EPS Increase of 14% ~

NEW YORK--(BUSINESS WIRE)-- Elizabeth Arden, Inc. (NAS: RDEN) , a global prestige beauty products company, today announced financial results for its third fiscal quarter ended March 31, 2013.

THIRD QUARTER RESULTS

For the quarter ended March 31, 2013, the Company reported net sales of $264.5 million, an increase of 10.5% as compared to the third quarter of the prior fiscal year. Excluding the unfavorable impact of foreign currency translation, net sales increased by 11.2%.

On a reported basis, net loss per diluted share for the quarter ended March 31, 2013 was $0.04. On an adjusted basis, net income per diluted share for the current year period was $0.02, as compared to net income per diluted share of $0.07 for the prior year period. The adjusted net income per diluted share for the current fiscal quarter was impacted by $0.03 per share as a result of a year-to-date revision of the expected adjusted tax rate to 25%. As such, the adjusted net income per share is based on an effective tax rate of 63.6% for the quarter ended March 31, 2013. This compares to an effective tax rate of 5.6% for the prior year period. Adjusted net income per diluted share excludes acquisition-related expenses and non-recurring charges associated with the Elizabeth Arden brand repositioning. A reconciliation between GAAP and adjusted results can be found in the tables and footnotes at the end of this press release.

In North America, net sales increased 9.4% for the quarter and 12.2% fiscal year-to-date. Sales growth was driven by new launches, including Pink Friday Nicki Minaj, Justin Bieber's Girlfriend and Taylor Swift Wonderstruck Enchanted, and growth in existing fragrance brands, including the Juicy Couture fragrances.

Internationally, net sales grew 14% (at constant rates) for the third fiscal quarter and 11.1% (at constant rates) fiscal year-to-date. Net sales of fragrances in the international segment have increased 22% (at constant rates) for the third fiscal quarter and 16% (at constant rates) for the first nine months of fiscal 2013, behind the Company's Western European fragrance initiative. Fragrance sales in Europe grew 33% (at constant rates) for the quarter and 22% (at constant rates) fiscal year-to-date.

Net sales of Elizabeth Arden branded products increased by approximately 1% (at constant rates) for the quarter and fiscal year-to-date on a global basis. Retail sales at the Company's Elizabeth Arden flagship counters have increased 22% in North America year over year since conversion, and retail sales at the Company's international flagship doors have increased 18% in the aggregate since conversion. These increases are driven by the retail sales performance of skin care and color.

E. Scott Beattie, Chairman, President and Chief Executive Officer of Elizabeth Arden, Inc., commented, "We continue to execute against our key growth initiatives. Sales of fragrances expanded strongly in all of our key fragrance markets this quarter. During the quarter, we opened our affiliate in Brazil and began commercial sales in that market in February. We also continue to be very excited with the traction we are seeing with the Elizabeth Arden brand repositioning and the momentum of retail sales increases in our Elizabeth Arden flagship doors. As we mentioned, the flagship model was established as a way for us to test, learn, and gather feedback on the repositioning of the Elizabeth Arden brand, as well as to build confidence in the growth potential of the brand with our key retail partners. Our focus is on extending key elements of the flagship model to drive the Elizabeth Arden brand on a global basis."

NINE MONTH RESULTS

For the nine months ended March 31, 2013, the Company reported net sales of $1,076.9 million, an increase of 10.7%, as compared to the prior year period. Excluding the unfavorable impact of foreign currency translation, net sales increased by 11.8%. On a reported basis, net income per diluted share for the nine months ended March 31, 2013 was $1.50. On an adjusted basis, net income per diluted share was $2.04, as compared to net income per diluted share of $1.79 for the prior year period. Adjusted net income per diluted share excludes acquisition-related expenses and non-recurring charges associated with the Elizabeth Arden brand repositioning. A reconciliation between GAAP and adjusted results can be found in the tables and footnotes at the end of this press release.

OUTLOOK

The Company is confirming its latest revenue and earnings guidance for fiscal 2013. For the full fiscal year ending June 30, 2013, the Company expects net sales to increase by 9% to 11%, assuming an expected unfavorable impact from foreign currency of approximately 0.6%, as compared to the prior year period, and for adjusted earnings per diluted share to be in the range of $2.30 to $2.50.

The earnings guidance excludes non-recurring charges related to the Elizabeth Arden brand repositioning and expenses related to the acquisitions completed in the fourth quarter of fiscal 2012. The Company has incurred a total of $24.4 million of acquisition-related and non-recurring Elizabeth Arden brand repositioning expenses in the nine months ended March 31, 2013. The remainder of the Elizabeth Arden brand repositioning charges, currently estimated at $1.5 million (pre-tax), is expected to be incurred in the fourth quarter of fiscal 2013. No additional acquisition-related expenses are expected to be incurred in fiscal 2013.

The Company will introduce fiscal 2014 guidance in August 2013 when it reports its fourth quarter and fiscal 2013 financial results.

The guidance is based on current foreign currency rates. The Company also notes that continued global economic uncertainty may have a negative effect on retailer and consumer confidence and demand, and, along with the foreign currency volatility, makes forecasting difficult.

CONFERENCE CALL INFORMATION

The Company will host a conference call today at 11:00 a.m. Eastern Time. All interested parties can listen to a live web cast of the Company's conference call by visiting the Investor Relations section of the Corporate tab on the Company's web site at http://ir.elizabetharden.com. An online archive of the broadcast will be available within one hour of the completion of the call and will be accessible on the Company's web site until June 4, 2013.

Elizabeth Arden is a global prestige beauty products company with an extensive portfolio of prestige beauty brands sold in over 120 countries. The company's brand portfolio includes Elizabeth Arden skincare, color and fragrance products, the celebrity fragrance brands of Britney Spears, Elizabeth Taylor, Justin Bieber, Mariah Carey, Nicki Minaj, Taylor Swift, and Usher; the designer fragrance brands of Juicy Couture, Alfred Sung, BCBGMAXAZRIA, Geoffrey Beene, Halston, Ed Hardy, John Varvatos, Kate Spade, Lucky Brand, True Religion and Rocawear; and the lifestyle fragrance brands Curve, Giorgio Beverly Hills, and PS Fine Cologne.

  
 

ELIZABETH ARDEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(Unaudited)
(In thousands, except percentages and per share data)

 
Three Months EndedNine Months Ended

March 31,
2013

 

March 31,
2012

March 31,
2013

 

March 31,
2012

 
Net Sales$264,484$239,279$1,076,944$972,739
Cost of Goods Sold:
Cost of Sales136,643118,781562,220489,548

Depreciation Related to Cost of Goods
 Sold

 1,656  906  4,674  3,850 
Total Cost of Goods Sold138,299119,687566,894493,398
 
Gross Profit126,185119,592510,050479,341
Gross Profit Percentage47.7%50.0%47.4%49.3%
 

Selling, General and Administrative
Expenses

111,597104,582404,257371,480
Depreciation and Amortization 10,254  7,645  28,755  21,433 
Total Operating Expenses121,851112,227433,012392,913
Interest Expense, Net5,8935,29118,51516,339
(Loss) Income Before Income Taxes(1,559)2,07458,52370,089

(Benefit from) Provision for Income Taxes

 (286) (117) 12,803  16,295 
 
Net (Loss) Income$(1,273)$2,191 $45,720 $53,794 
 
Net (Loss) Income Per Basic Share$(0.04)$0.08$1.54$1.85
Net (Loss) Income Per Diluted Share$(0.04)$0.07$1.50$1.79
 
Basic Shares29,60729,11629,65829,017
Diluted Shares29,60730,06930,49829,997
 
EBITDA (a)$16,244$15,916$110,467$111,711
EBITDA margin (a)6.1%6.7%10.3%11.5%
 

Adjusted to exclude acquisition-related
 and Elizabeth Arden repositioning
 costs, net of taxes (b)(c):

 
Gross Profit$129,561$119,592$533,578$479,341
Gross Profit Percentage49.0%50.0%49.5%49.3%
 
Net Income$716$2,191$62,214$53,794
 
Net Income Per Basic Share$0.02$0.08$2.10$1.85
Net Income Per Diluted Share$0.02$0.07$2.04$1.79
 
EBITDA (a)$19,768$15,916$134,869$111,711
EBITDA margin (a)7.5%6.7%12.5%11.5%

(a) EBITDA is defined as net income plus the provision for income taxes (or net loss less the benefit from income taxes) plus interest expense, plus depreciation and amortization. EBITDA should not be considered as an alternative to income (loss) from operations or net income (loss) (as determined in accordance with generally accepted accounting principles (GAAP)) as a measure of our operating performance or to net cash provided by operating, investing and financing activities (as determined in accordance with GAAP) or as a measure of our ability to meet cash needs. We believe that EBITDA is a measure commonly reported and widely used by investors and other interested parties as a measure of a company's operating performance and debt servicing ability because it assists in comparing performance on a consistent basis without regard to capital structure, depreciation and amortization or non-operating factors (such as historical cost). Accordingly, as a result of our capital structure, we believe EBITDA is a relevant measure. This information has been disclosed here to permit a more complete comparative analysis of our operating performance relative to other companies and of our debt servicing ability. EBITDA may not, however, be comparable in all instances to other similar types of measures. We have also disclosed EBITDA as adjusted without giving effect to acquisition-related and Elizabeth Arden repositioning costs. This disclosure is being provided for comparability purposes because we believe it is meaningful to our investors and other interested parties to understand the EBITDA performance of the Company on a consistent basis without regard to the effect of acquisition-related and Elizabeth Arden repositioning costs.

The table below reconciles net (loss) income, as determined in accordance with GAAP, to EBITDA and to EBITDA as adjusted: (For a reconciliation of net income to EBITDA for prior periods, see the Company's filings with the Securities and Exchange Commission which can be found on the Company's website at www.elizabetharden.com.)

(Amounts in thousands) Three Months Ended Nine Months Ended
March 31,
2013
 March 31,
2012
March 31,
2013
 March 31,
2012
 
Net (loss) income$(1,273)$2,191$45,720$53,794
Plus:
(Benefit from) Provision for income taxes(286)(117)12,80316,295
Interest expense, net5,8935,29118,51516,339
Depreciation related to cost of goods sold1,6569064,6743,850
Depreciation and amortization 10,254  7,645  28,755 21,433
EBITDA16,24415,916110,467111,711

Acquisition-related and Elizabeth Arden
 repositioning costs (c)

 3,524  --  24,402 --
EBITDA, as adjusted$19,768 $15,916 $134,869$111,711

The table below reconciles net cash flow (used in) provided by operating activities, as determined in accordance with GAAP, to EBITDA:

(Amounts in thousands)   Nine Months Ended
March 31,
2013
 March 31,
2012
Net cash (used in) provided by operating activities$(8,848)$50,331
Changes in assets and liabilities, net of acquisitions99,63945,318
Interest expense, net18,51516,339
Amortization of senior note offering and credit facility costs(1,024)(931)
Provision for income taxes12,80316,295
Deferred income taxes(6,371)(11,883)
Amortization of share-based awards (4,247) (3,758)
EBITDA$110,467 $111,711 

(b) The table below reconciles the calculation of (i) net (loss) income and (ii) net (loss) income per share on a basic and diluted basis from the amounts reported in accordance with GAAP to such amounts before giving effect to acquisition-related and Elizabeth Arden repositioning costs. This disclosure is being provided for comparability purposes because we believe it is meaningful to our investors and other interested parties to understand the Company's operating performance on a consistent basis without regard to the effect of acquisition-related and Elizabeth Arden repositioning costs. The presentation in the table below of the non-GAAP information titled "Net income as adjusted" and "Net income per basic and diluted share as adjusted" is not meant to be considered in isolation or as a substitute for net (loss) income or net (loss) income per basic and diluted share prepared in accordance with GAAP.

(In thousands, except per share data)  Three Months Ended Nine Months Ended
March 31,
2013
 March 31,
2012
March 31,
2013
 March 31,
2012

Gross Profit:

Gross Profit as reported$126,185$

119,592

 

$

510,050

 

$

479,341

 

Acquisition-related and Elizabeth Arden repositioning costs (c)

 3,376  --  23,528  -- 
Gross Profit as adjusted$129,561 $119,592 $533,578 $479,341 
 

Net Income:

Net (loss) income as reported$(1,273)$2,191$45,720$53,794

Acquisition-related and Elizabeth Arden repositioning costs (c)

 1,989  --  16,494  -- 
Net income as adjusted$716 $2,191 $62,214 $53,794 
 

Net Income Per Basic Share:

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