Net Sales of $211 million; Net Loss per Share of
$0.10 (Excluding Charges)
Year to Date EPS Increase of 7% to $1.09 per Diluted
Share (Excluding Charges)
NEW YORK, May 1, 2008 (PRIME NEWSWIRE) -- Elizabeth Arden, Inc. (Nasdaq:RDEN), a global prestige beauty products company, today announced financial results for the third fiscal quarter and nine months ended March 31, 2008.
THIRD QUARTER RESULTS
Net sales decreased 4.0% to $210.6 million for the three months ended March 31, 2008, from $219.2 million in the comparable period of the prior year. Excluding the favorable impact of foreign currency translation, net sales decreased 5.9%. Net sales results reflect weakness in the consumer and retail environment in North America and in the United Kingdom.
Net loss for the three months ended March 31, 2008, excluding restructuring charges, was $2.9 million, or $0.10 per share. This compares to net income, excluding restructuring charges, in the same period last year of $3.3 million, or $0.11 per diluted share. On a reported basis, the net loss was $3.8 million, or $0.14 per diluted share, compared to net income of $3.2 million, or $0.11 per diluted share, for the prior year period. In addition, the Company's reported results were negatively impacted by currency hedges established in 2007 when the U.S. dollar was stronger.
E. Scott Beattie, Chairman, President and Chief Executive Officer of Elizabeth Arden, Inc., commented, "Despite a weak consumer and retail environment, we were still disappointed with our results this quarter. While we were not expecting any improvement in the retail environment this past quarter in North America, we did not anticipate the extent of the negative retail sales trends. The pace of our international business, particularly in the U.K., slowed this past quarter, after delivering 20% growth in the first half of this fiscal year, and was not able to offset these negative trends. That said, we are pleased to end the quarter with a strengthened balance sheet. Inventory was on plan and well controlled, and we generated better than expected cash flow for the period. Cash flow from operations, after adjusting for the Sovereign Sales acquisition in fiscal 2007, has increased by $52 million through our third fiscal quarter, and we used this cash to reduce our credit line and repurchase shares under our share repurchase program."
Mr. Beattie continued, "For the balance of the year, we remain cautious with respect to our business in North America and the developed markets in Europe. We do expect this softness to be offset somewhat by a solid pipeline of new brands to North American retailers and continued excellent performance in the Asia Pacific region and in our travel retail and developing markets, which now represent over 50% of our international business."
The Company also announced that it has substantially completed the comprehensive review of its global business processes that it announced and commenced in fiscal 2007 to re-engineer its extended supply chain, logistics and transaction processing systems ("Global Efficiency Engineering"). The inventory reduction initiatives and other programs that have been implemented as part of the Company's Global Efficiency Engineering have been well executed and have so far achieved their targets. As a result, the Company has decided to accelerate the re-engineering of its extended supply chain functions as well as the realignment of other parts of the organization to best support its new business processes.
In connection with the Global Efficiency Engineering, the Company is migrating to a new enterprise software application, the Oracle/JD Edwards enterprise software application to improve key transaction processes and accommodate anticipated growth of its business. This infrastructure investment is expected to simplify the Company's transaction processing by utilizing a common platform to centralize all of its global transaction processing functions.
In connection with the acceleration of the re-engineering of its extended supply chain functions and the implementation of the JD Edwards transaction processing system, the Company is announcing a restructuring plan to be implemented over the next 18 to 24 months. The Company currently estimates that these activities will result in savings of approximately $10.0 million to $12.0 million during fiscal 2009 and approximately $13.0 million to $15.0 million during fiscal 2010. The restructuring and one-time expenses associated with these activities include one-time severance related, relocation, recruiting and temporary staffing expenditures, and are expected to be incurred primarily in fiscal years 2009 and 2010. These expenses are currently estimated to be approximately $12.0 million to $14.0 million before taxes, of which $1.1 million is expected to be recorded in the fourth quarter of fiscal 2008.
NINE MONTH RESULTS
For the nine months ended March 31, 2008, net sales rose 2.3% to $904.8 million, from $884.8 million for the nine months ended March 31, 2007. Excluding the favorable impact of foreign currency translation, net sales were essentially flat as compared to the prior year period. Net income, excluding restructuring charges, was $31.9 million, or $1.09 per diluted share, versus net income, excluding restructuring charges, of $29.1 million, or $1.02 per diluted share, for the year-ago period. On a reported basis, net income was $30.3 million, or $1.04 per diluted share, compared to $27.7 million, or $0.97 per diluted share, for the prior year period.
OUTLOOK
For fiscal 2008, excluding the restructuring charges discussed above, the Company now expects earnings per diluted share to be in the range of $1.30 to $1.36, based on an estimated effective tax rate of 25.8%, as compared to the effective tax rate in fiscal 2007 of 16.7%, and its net sales to increase by 1% to 2%. The Company will provide initial guidance for fiscal 2009 when it reports its financial results for fiscal 2008 in August 2008.
The Company notes that it utilizes foreign currency hedges which are reflected in its results and guidance. The Company's guidance is based on a number of assumptions, including those regarding the current retail environment and consumer confidence levels and continued improvement in operating performance, and excludes any restructuring and severance charges and any impact from the licensing or acquisition of additional brands.
CONFERENCE CALL INFORMATION
The Company will host a conference call today at 10:00 a.m. Eastern Time. All interested parties can listen to a live web cast of the Company's conference call by visiting the "Corporate Info" section on the Company's web site at http://www.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 May 30, 2008.
Elizabeth Arden. Skincare. Color. PREVAGE(r) Skincare. Fragrances (Red Door, 5th Avenue, green tea, Mediterranean and Provocative Woman).
Fragrance Portfolio. Elizabeth Taylor. Mariah Carey. Britney Spears. Hilary Duff. Danielle Steele. Alberta Ferretti. Alfred Sung. Badgley Mischka. Bob Mackie. GANT. Geoffrey Beene. Halston. Nanette Lepore. Rocawear. Giorgio of Beverly Hills. Daytona 500(r). HUMMER(r). PS Fine Cologne.
ELIZABETH ARDEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(Unaudited)
(In thousands, except percentages and per share data)
Three Months Ended Nine Months Ended
-------------------- --------------------
March 31, March 31, March 31, March 31,
2008 2007 2008 2007
-------- -------- -------- --------
Net Sales $210,554 $219,223 $904,786 $884,802
Cost of Sales 119,800 120,744 528,792 529,143
-------- -------- -------- --------
Gross Profit 90,754 98,479 375,994 355,659
Gross Profit Percentage 43.1% 44.9% 41.6% 40.2%
Selling, General and
Administrative
Expenses 83,004 82,090 294,837 277,696
Depreciation and
Amortization 6,298 6,042 18,461 18,740
-------- -------- -------- --------
Total Operating Expenses 89,302 88,132 313,298 296,436
Interest Expense, Net 6,067 6,552 21,821 22,441
-------- -------- -------- --------
(Loss) Income Before
Income Taxes (4,615) 3,795 40,875 36,782
(Benefit from) Provision
for Income Taxes (803) 638 10,538 9,083
-------- -------- -------- --------
Net (Loss) Income $ (3,812) $ 3,157 $ 30,337 $ 27,699
======== ======== ======== ========
As reported:
-----------------------
Net (Loss) Income
Per Basic Share $ (0.14) $ 0.11 $ 1.08 $ 1.00
Net (Loss) Income
Per Diluted Share $ (0.14) $ 0.11 $ 1.04 $ 0.97
Basic Shares 27,894 27,455 27,961 27,566
Diluted Shares 27,894 28,754 29,292 28,581
EBITDA (a) $ 7,750 $ 16,389 $ 81,157 $ 77,963
EBITDA margin 3.7% 7.5% 9.0% 8.8%
Adjusted to exclude the
effect of restructuring
charges, net of
taxes (b):
-----------------------
Net (Loss) Income $ (2,881) $ 3,271 $ 31,877 $ 29,058
Net (Loss) Income
Per Basic Share $ (0.10) $ 0.12 $ 1.14 $ 1.05
Net (Loss) Income
Per Diluted Share $ (0.10) $ 0.11 $ 1.09 $ 1.02
EBITDA (a) $ 8,878 $ 16,526 $ 83,231 $ 79,768
EBITDA margin 4.2% 7.5% 9.2% 9.0%
(a) EBITDA is defined as net income plus the provision for income
taxes (or net loss less benefit from income taxes), plus interest
expense, plus depreciation and amortization. EBITDA should not be
considered as an alternative to operating income or net (loss)
income (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. EBITDA margin
represents EBITDA divided by Net Sales.
The following is a reconciliation of net income, as determined in
accordance with GAAP, to EBITDA: (For a reconciliation of net income
(loss) 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).
(In thousands) Three Months Ended Nine Months Ended
-------------------- --------------------
March 31, March 31, March 31, March 31,
2008 2007 2008 2007
-------- -------- -------- --------
Net (loss) income $ (3,812) $ 3,157 $ 30,337 $ 27,699
Plus:
(Benefit from)
provision for
income taxes (803) 638 10,538 9,083
Interest expense, net 6,067 6,552 21,821 22,441
Depreciation and
amortization 6,298 6,042 18,461 18,740
-------- -------- -------- --------
EBITDA 7,750 16,389 81,157 77,963
Restructuring charges 1,128 137 2,074 1,805
-------- -------- -------- --------
EBITDA adjusted to
exclude restructuring
charges $ 8,878 $ 16,526 $ 83,231 $ 79,768
======== ======== ======== ========
(b) The following table reconciles the calculation of 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 the impact of restructuring charges. 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 impact of restructuring charges. The
presentation in the table below of the non-GAAP information
titled "Net (loss) income per share as adjusted" is not meant to
be considered in isolation or as a substitute for net income
(loss) or net income (loss) per share prepared in accordance with
GAAP.
(In thousands,
except per share data) Three Months Ended Nine Months Ended
-------------------- --------------------
March 31, March 31, March 31, March 31,
2008 2007 2008 2007
======== ======== ======== ========
Adjusted to exclude the
effect of restructuring
charges, net of taxes
-----------------------
Net (loss) income
as reported $ (3,812) $ 3,157 $ 30,337 $ 27,699
Restructuring
charges, net of tax 931 114 1,540 1,359
-------- -------- -------- --------
Net (loss) income
as adjusted $ (2,881) $ 3,271 $ 31,877 $ 29,058
======== ======== ======== ========
Net (loss) income
per basic share
as reported $ (0.14) $ 0.11 $ 1.08 $ 1.00
Restructuring charges
per share, net of tax 0.04 0.01 0.06 0.05
-------- -------- -------- --------
Net (loss) income
per basic share
as adjusted $ (0.10) $ 0.12 $ 1.14 $ 1.05
======== ======== ======== ========
Net (loss) income
per diluted share
as reported $ (0.14) $ 0.11 $ 1.04 $ 0.97
Restructuring charges
per share, net of tax 0.04 -- 0.05 0.05
-------- -------- -------- --------
Net (loss) income
per diluted share
as adjusted $ (0.10) $ 0.11 $ 1.09 $ 1.02
======== ======== ======== ========
CONSOLIDATED BALANCE SHEET DATA
(Unaudited)
(In thousands)
March 31, June 30, March 31,
2008 2007 2007
-------- -------- --------
Cash $ 28,392 $ 30,287 $ 33,173
Accounts Receivable, Net 222,634 214,972 213,484
Inventories 340,037 380,232 327,184
Property and Equipment, Net 44,566 42,471 38,662
Exclusive Brand Licenses,
Trademarks and
Intangibles, Net 223,284 224,611 219,084
Total Assets 903,767 939,175 873,978
Short-Term Debt 97,800 97,640 114,840
Current Portion of
Long-Term Debt 1,292 1,125 1,125
Current Liabilities 307,488 367,428 318,690
Long-Term Liabilities 254,775 250,820 248,425
Total Debt 322,752 323,295 340,433
Shareholders' Equity 341,504 320,927 306,863
Working Capital 322,621 298,165 290,732
In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Elizabeth Arden, Inc., is hereby providing cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in forward-looking statements (as defined in such act). Any statements that are not historical facts and that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, indicated through the use of words or phrases such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "intends," "plans," "believes" and "projects") may be forward-looking and may involve estimates and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. These statements include, but are not limited to, our guidance and expectations regarding net sales and earnings, and the costs, savings and benefits we expect in connection with our restructuring plan. In addition, any such statements are qualified in their entirety by reference to, and are accompanied by, the following key factors that have a direct bearing on our results of operations:
* factors affecting our relationships with our customers or our customers' businesses, including the absence of contracts with customers, our customers' financial condition, and changes in the retail, fragrance and cosmetic industries, such as the consolidation of retailers and the associated closing of retail doors as well as retailer inventory control practices, including but not limited to levels of inventory carried at point of sale and practices used to control inventory shrinkage; * our reliance on third-party manufacturers for substantially all of our owned and licensed products and our absence of contracts with suppliers; * delays in shipments, inventory shortages and higher costs of production due to the loss of or disruption in our distribution facilities or at key third party manufacturing or fulfillment facilities that manufacture or provide logistic services for our products; * our ability to respond in a timely manner to changing consumer preferences and purchasing patterns and other international and domestic conditions, and events that impact consumer confidence and demand, such as economic downturns; * our ability to protect our intellectual property rights; * the success, or changes in the timing or scope, of our new product launches, advertising and merchandising programs; * the quality, safety and efficacy of our products; * the impact of competitive products and pricing; * risks of international operations, including foreign currency fluctuations, hedging activities, economic and political consequences of terrorist attacks, and political instability in certain regions of the world; * our ability to implement our growth strategy and acquire or license additional brands or secure additional distribution arrangements, to successfully and cost-effectively integrate acquired businesses or new brands, and to finance our growth strategy and our working capital requirements; * our level of indebtedness, debt service obligations and restrictive covenants in our revolving credit facility and the indenture for our 7 3/4% senior subordinated notes; * changes in product mix to less profitable products; * the retention and availability of key personnel; * changes in the legal, regulatory and political environment that impact, or will impact, our business, including changes to customs or trade regulations or accounting standards or critical accounting estimates; * success of, and costs associated with, our restructuring plan; and * other unanticipated risks and uncertainties.
We caution that the factors described herein could cause actual results to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. This press release is qualified in its entirety by the cautionary statements and risk factor disclosure contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the year ended June 30, 2007.