Elizabeth Arden, Inc. Announces Fourth Quarter and Fiscal 2013 Results
Elizabeth Arden, Inc. Announces Fourth Quarter and Fiscal 2013 Results
~ Fiscal 2013 Net Sales of $1.345 Billion ~
~ Increase of 8.6%; 9.6% at Constant Rates ~
NEW YORK--(BUSINESS WIRE)-- Elizabeth Arden, Inc. (NAS: RDEN) , a global prestige beauty products company, today announced financial results for its fourth fiscal quarter and fiscal year ended June 30, 2013.
FISCAL 2013 RESULTS
For the fiscal year ended June 30, 2013, the Company reported net sales of $1.345 billion or an increase of 8.6% as compared to the prior fiscal year. At constant rates, net sales increased by 9.6%. On a reported basis, net income per diluted share was $1.33. On an adjusted basis, net income per diluted share was $2.14, as compared to net income per diluted share of $2.07 for the prior year period. Adjusted net income per diluted share excludes non-recurring costs relating to the Elizabeth Arden repositioning and the fiscal 2012 fragrance brand acquisitions. 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 10.2% over the prior fiscal year, and net sales for the Company's international segment increased by 8.4% (at constant rates). Net sales of fragrances in the international segment increased 14% (at constant rates) for fiscal 2013 behind the Company's Western European fragrance initiative and expansion into new markets.
The Company continued to see success with the Elizabeth Arden repositioning. Retail sales at the Company's Elizabeth Arden flagship counters have increased 20% in North America year over year since conversion, and retail sales at the Company's international flagship doors have increased 17% in the aggregate since conversion. These increases are driven by the retail sales performance of skin care and color products.
E. Scott Beattie, Chairman, President and Chief Executive Officer of Elizabeth Arden, Inc., commented, "There were two primary factors that caused our sales and earnings results to be below our expectations in fiscal 2013. The first was due to weakness at one of our largest North American mass retail customers, both in terms of retail sales performance and replenishment rate. The second factor was that are growth projections for the Elizabeth Arden brand proved to be overly optimistic given the complexity and scope of transition underway for the brand repositioning. We remain confident in our repositioning efforts and, in fact, are accelerating the execution of the Elizabeth Arden brand repositioning. We expect to incur the final phase of repositioning expenses, including eliminating pre-repositioned product inventory and exiting unprofitable doors, in fiscal 2014. While resulting in near term charges, this is expected to drive improved performance of the Elizabeth Arden brand going forward. Separately, we are taking steps to improve efficiencies in our sales organizations and in the overall indirect overhead structure."
Mr. Beattie continued, "While this was a transitional year for our company, we did make good progress driving both our Western European fragrance initiative and significantly enhancing the future prospects of the Elizabeth Arden brand through the brand repositioning. We also integrated the fragrance brands acquired late in fiscal 2012, grew our category-leading market share of fragrances at mass retail in North America, opened affiliates in new markets, including Brazil and Germany, and restructured our business in China."
Mr. Beattie concluded, "Our priorities remain to accelerate the global growth of the Elizabeth Arden brand, expand sales of our fragrance portfolio, particularly internationally, and continue to drive operational efficiencies. Many of the initiatives we are undertaking to expand our business, while not accretive in fiscal 2014, are important to drive future growth. I am confident that with the acquisitions and restructuring activities, including those associated with the Elizabeth Arden brand repositioning, behind us and more conservative forward guidance, we will return to systematic improvement in gross margins, EBITDA margins and return on invested capital."
FOURTH QUARTER RESULTS
For the fourth quarter ended June 30, 2013, the Company reported net sales of $267.6 million, or an increase of 0.8%, as compared to the prior year period. At constant rates, net sales increased by 1.2%. On a reported basis, net loss per diluted share was $0.17. On an adjusted basis, net income per diluted share was $0.10, as compared to net income per diluted share of $0.28 for the prior year period. Adjusted net income per diluted share excludes non-recurring costs as noted above.
During the fourth quarter, the Company experienced lower than expected replenishment orders from one of its key North American mass retail customers, effectively reducing their inventory on hand with orders significantly below their pace of their retail sales of the Company's products. The replenishment rate at this account worsened significantly in the month of June. The impact from this customer, coupled with weak performance in Europe, particularly in the UK, caused the fourth quarter and full year earnings results to be below the expectations communicated last May. The remainder of the Company's business largely performed as expected.
The Company's guidance for fiscal 2014 reflects more modest expectations regarding the overall Elizabeth Arden brand repositioning, uncertain economic conditions globally and the quarterly variability of all of the Company's initiatives to drive future revenue growth and market share, which span across the Company's businesses and geographies. In addition, based on current foreign currency rates, foreign currency translation is expected to negatively impact fiscal 2014 results.
For the full fiscal year ending June 30, 2014, the Company expects net sales to increase by 3.0% to 5.0%, including an expected unfavorable impact from foreign currency of approximately 1.0%, as compared to the prior year period, and for earnings per diluted share to be in the range of $2.15 to $2.30. The earnings guidance includes a negative impact of $0.19 per share resulting from foreign currency translation as compared to rates in effect for fiscal 2013.
For the first quarter of fiscal 2014 ending September 30, 2013, the Company expects sales to be flat to down 1% in comparison to the prior year period, including an unfavorable impact from foreign currency translation of approximately 1.0%, and for adjusted earnings per diluted share to be in the range of $0.13 to $0.18.
The gross margin and earnings guidance excludes all non-recurring expenses. In fiscal 2014, the Company expects to incur non-recurring expenses of $11 million to $16 million for the Elizabeth Arden repositioning, approximately $7.5 million of which is expected to be incurred in the first quarter. The Elizabeth Arden repositioning costs primarily relate to product changeover charges and exiting unprofitable doors. Additionally, the Company expects to incur approximately $5 million for restructuring and severance charges, $3.5 million of which is expected to be incurred in the first quarter.
The Company 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 on Thursday, August 8, 2013 at 9:30 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 September 8, 2013.
Elizabeth Arden is a global prestige beauty products company with an extensive portfolio of prestige beauty brands sold in over 100 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, Bob Mackie, Ed Hardy, John Varvatos, Lucky Brand, True Religion and Rocawear; and the lifestyle fragrance brands Curve, Giorgio Beverly Hills, and PS Fine Cologne.
ELIZABETH ARDEN, INC. AND SUBSIDIARIES
|Three Months Ended||Twelve Months Ended|
|Cost of Goods Sold:|
|Cost of Sales||147,124||134,437||709,344||623,985|
Depreciation Related to Cost of Goods Sold
|Total Cost of Goods Sold||148,836||135,844||715,730||629,242|
|Gross Profit Percentage||44.4||%||48.8||%||46.8||%||49.2||%|
Selling, General and Administrative Expenses
|Depreciation and Amortization||10,828||7,364||39,583||28,797|
|Total Operating Expenses||123,821||120,847||556,833||513,760|
|Interest Expense, Net||5,794||5,420||24,309||21,759|
|(Loss) Income Before Income Taxes||(10,872||)||3,423||47,651||73,512|
(Benefit from) Provision for Income Taxes
|Net (Loss) Income||$||(5,009||)||$||3,625||$||40,711||$||57,419|
|Net (Loss) Income Per Basic Share||$||(0.17||)||$||0.12||$||1.37||$||1.97|
|Net (Loss) Income Per Diluted Share||$||(0.17||)||$||0.12||$||1.33||$||1.91|
|EBITDA margin (a)||2.8||%||6.6||%||8.8||%||10.4||%|
Adjusted to exclude non-recurring
|Gross Profit Percentage||49.2||%||50.7||%||49.5||%||49.6||%|
|Net Income Per Basic Share||$||0.11||$||0.29||$||2.20||$||2.14|
|Net Income Per Diluted Share||$||0.10||$||0.28||$||2.14||$||2.07|
|EBITDA margin (a)||8.2||%||9.3||%||11.7||%||11.0||%|
(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 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 our filings with the Securities and Exchange Commission which can be found on our website at www.elizabetharden.com.)
|(Amounts in thousands)||Three Months Ended||Twelve Months Ended|
|Net (loss) income||$||(5,009||)||$||3,625||$||40,711||$||57,419|
|(Benefit from) Provision for income taxes||(5,863||)||(202||)||6,940||16,093|
|Interest expense, net||5,794||5,420||24,309||21,759|
|Depreciation related to cost of goods sold||1,712||1,407||6,386||5,257|
|Depreciation and amortization||10,828||7,364||39,583||28,797|
|Non-recurring costs (c)||14,383||7,108||38,785||7,108|
|EBITDA, as adjusted||$21,845||$24,722||$156,714||$136,433|
The table below reconciles net cash flow provided by operating activities, as determined in accordance with GAAP, to EBITDA:
|(Amounts in thousands)||Twelve Months Ended|
|Net cash provided by operating activities||$||62,091||$||58,524|
|Changes in assets and liabilities, net of acquisitions||30,508||48,016|
|Interest expense, net||24,309||21,759|
|Amortization of senior note offering and credit facility costs||(1,367||)||(1,247||)|
|Provision for income taxes||6,940||16,093|
|Deferred income taxes||1,055||(8,763||)|
|Amortization of share-based awards||(5,607||)||(5,057||)|
(b) The table below reconciles the calculation of (i) gross profit and net (loss) income and (ii) net (loss) income per share on a basic and diluted basis from the amounts reported in accordance with GAAP to such amounts before giving effect to non-recurring costs related to the Elizabeth Arden brand repositioning and our 2012 fragrance license acquisitions. This disclosure is being provided for comparability purposes because we believe it is meaningful to our investors and other interested parties to understand our operating performance on a consistent basis without regard to the effect of such non-recurring costs. The presentation in the table below of the non-GAAP information titled "Gross profit as adjusted", "Net income as adjusted" and "Net income per basic and diluted share as adjusted" is not meant to be considered in isolation or as a substitute for gross profit, net (loss) income or net (loss) income per basic and diluted share prepared in accordance with GAAP.
|(In thousands, except per share data)||Three Months Ended||Twelve Months Ended|
|Gross Profit as reported||$||118,743||$||129,690||$||628,793||$||609,031|
|Non-recurring costs (c)||12,827||4,948||36,355||4,948|
|Gross Profit as adjusted||$||131,570||$||134,638||$||665,148||$||613,979|
Net (Loss) Income:
|Net (loss) income as reported||$||(5,009||)||$||3,625||$||40,711||$||57,419|
|Non-recurring costs (c) (d)|
|Net income as adjusted||$||3,121||$||8,550||$||65,335||$||62,344|
Net Income Per Basic Share:
|Net (loss) income per basic share as reported||$||(0.17||)||$||
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