SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. _)
-------------------
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Section 240.14a-12
Elizabeth Arden, Inc.
(Name of Registrant as specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: _________________________________________
(2) Form, Schedule or Registration No.: _____________________________
(3) Filing Party: ___________________________________________________
(4) Date Filed: _____________________________________________________
ELIZABETH ARDEN, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on June 25, 2003
The annual meeting of shareholders of Elizabeth Arden, Inc. will be
held on Wednesday, June 25, 2003, at 10:00 a.m., local time, at our principal
executive offices located at 14100 N.W. 60th Avenue, Miami Lakes, Florida
33014, for the following purposes, as described in the attached proxy
statement:
1. To elect a board of six directors to serve until the next annual
meeting of shareholders or until their successors are duly
elected and qualified;
2. To approve an amendment to our 2000 Stock Incentive Plan to
increase the number of shares of our common stock, par value $.01
per share, which may be granted under the 2000 Stock Incentive
Plan from 3,000,000 to 4,100,000;
3. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent auditors for the fiscal year ending January 31, 2004;
and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The board of directors has fixed the close of business on April 28,
2003 as the record date for the determination of shareholders entitled to
notice of and to vote at the annual meeting and at any adjournment or
postponement of that meeting. Only shareholders of record at the close of
business on that date will be entitled to vote at the annual meeting. For 10
days prior to the annual meeting, a list of shareholders entitled to vote
will be available for inspection at our offices at 14100 N.W. 60th Avenue,
Miami Lakes, Florida 33014.
It is important that your shares be represented at the annual meeting
regardless of how many shares you own. Whether or not you intend to be
present at the annual meeting in person, we urge you to please complete, date
and sign the enclosed proxy card and return it in the envelope provided for
that purpose. Many shareholders who hold their shares in the street name of
a bank or brokerage firm will also have the option to vote by telephone or
internet. We urge you to vote by telephone or internet, if possible, since
your vote will be recorded quickly and there is no risk that postal delays
will cause your vote to arrive late and therefore not be counted. See your
proxy card for further instructions on voting. If you attend the annual
meeting, you may also submit your vote in person, and if you do so, any
previous votes that you previously submitted will be superceded by the vote
you cast at the annual meeting.
By Order of the Board of Directors
OSCAR E. MARINA
Secretary
Miami Lakes, Florida
May 16, 2003
YOU ARE URGED TO COMPLETE, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY IN
THE ACCOMPANYING POSTAGE-FREE ENVELOPE OR TO VOTE BY TELEPHONE OR INTERNET
WHERE POSSIBLE. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
ELIZABETH ARDEN, INC.
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 25, 2003
GENERAL
This proxy statement is being furnished to holders of common stock, par
value $.01 per share, of Elizabeth Arden, Inc., in connection with the
solicitation of proxies by our board of directors for use at our annual
meeting of shareholders to be held at our principal executive offices located
at 14100 N.W. 60th Avenue, Miami Lakes, Florida 33014, at 10:00 a.m., local
time, on June 25, 2003, and at any adjournment or postponement of this
meeting, for the purposes set forth in the accompanying notice of meeting.
It is anticipated that our annual report for the fiscal year ended
January 31, 2003, this proxy statement and the accompanying form of proxy
card will be first mailed to our shareholders on or about May 21, 2003. The
annual report is not to be regarded as proxy soliciting material.
The company was organized in Florida in 1960. Following our
acquisition of the Elizabeth Arden fragrance, cosmetics and skin care
business in January 2001, we changed our name to "Elizabeth Arden, Inc." Our
primary business is the manufacture and marketing of prestige fragrances,
skin treatment and cosmetic products.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of our common stock at the close of business on
April 28, 2003 are entitled to notice of and to vote at the annual meeting.
On that date, there were 18,905,908 shares of common stock entitled to vote
on each matter to be presented at the annual meeting. Holders of the common
stock have one vote per share on all matters. No other class of stock of the
company has voting rights.
A majority of the shares of our common stock entitled to vote on a
matter, represented in person or by proxy, will constitute a quorum for
action on a matter at the annual meeting. In determining the presence of a
quorum at the annual meeting, abstentions are counted, and broker non-votes
are not. Our By-laws provide that the affirmative vote of a majority of the
shares of the voting stock represented, in person or by proxy, and entitled
to vote on a matter at a meeting in which a quorum is present will be the
act of the shareholders, except as otherwise provided by law. The
affirmative vote of a majority of the shares of common stock represented, in
person or by proxy, and entitled to vote at the meeting is required
to approve the amendment to the 2000 Stock Incentive Plan and the
ratification of the appointment of PricewaterhouseCoopers LLP as our
independent auditors. The Florida Business Corporation Act provides that
directors are elected by a plurality of the votes cast. Abstentions and
broker non-votes have no legal effect on whether a nominee for director is
elected but will have the same effect as votes against the approval of the
amendment to the 2000 Stock Incentive Plan and against the ratification of
the appointment of PricewaterhouseCoopers LLP as our independent auditors for
the fiscal year ending January 31, 2004.
Shares represented by a properly executed proxy received in time to
permit its use at the annual meeting or any adjournment or postponement of
this meeting will be voted in accordance with the instructions indicated
therein. If no instructions are indicated, the shares represented by the
proxy will be voted FOR the election of all of the nominees for director, FOR
the approval of the amendment to the 2000 Stock Incentive Plan, FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as our
independent auditors for the fiscal year ending January 31, 2004 and in the
discretion of the proxy holders as to any other matter which may properly
come before the annual meeting.
You are requested, regardless of the number of shares you hold, to sign
the proxy and return it promptly in the enclosed envelope, or, if permitted
by your bank or brokerage firm, vote by telephone or
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internet. Each shareholder giving a proxy has the power to revoke it at any
time before it is voted, either in person at the annual meeting, by written
notice to our corporate secretary or by delivery of a later-dated proxy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 9, 2003 (except as noted
below), (i) the ownership of common stock by all persons known by us to own
beneficially more than 5% of the outstanding shares of our common stock, and
(ii) the beneficial ownership of common stock by (a) each of our directors
and director-nominees, (b) the chief executive officer and each of the other
named executives as set forth in the "Summary Compensation Table" under
"Executive Compensation" below and (c) all of our directors and executive
officers as a group, without naming them:
Common Stock
Amount and
Nature of
Beneficial Percentage of
Name and Address of Beneficial Owner(1) Ownership(2) the Class(2)
- -----------------------------------------------------------------------------
E. Scott Beattie (3) 1,474,970 7.4
Paul F. West (4) 259,315 1.4
Stephen J. Smith (5) 39,108 *
Ronald L. Rolleston (6) 109,336 *
Joel B. Ronkin (7) 60,870 *
Gretchen Goslin (8) 122,304 *
Richard C.W. Mauran (9) 1,819,698 9.6
Fred Berens (10) 869,753 4.6
J.W. Nevil Thomas (11) 251,062 1.3
George Dooley (12) 83,500 *
William M. Tatham (13) 38,980 *
Conopco, Inc. (14) 2,812,500 13.0
Dynamic Mutual Funds Ltd. (15) 2,024,990 10.8
William Blair & Company, L.L.C. (16) 1,997,800 10.6
All directors and executive officers as a
group (10 persons) (17) 5,006,592 24.5
* Less than one percent of the class.
(1) The address of each of the persons shown in the above table other than
Messrs. Mauran, Thomas and Tatham, Conopco, Inc., Dynamic Mutual Funds
Ltd. and William Blair & Company, L.L.C., is c/o Elizabeth Arden, Inc.,
14100 N.W. 60th Avenue, Miami Lakes, Florida 33014. The address of Mr.
Mauran is 31 Burton Court, Franklins Row, London SW3, England. The
address of Mr. Thomas is Scotia Plaza, 40 King Street W., Suite 3507,
Toronto, Ontario M5H 3Y2 Canada. The address of Mr. Tatham is 4100
Young Street, Suite 612, Toronto, Ontario M2P 2B5 Canada. The address
of Conopco, Inc. is 390 Park Avenue, New York, New York 10022. The
address of Dynamic Mutual Funds Ltd. is 55th Floor, Scotia Plaza, 40
King Street West, Toronto, Ontario M5H 4A9 Canada. The address of
William Blair & Company, L.L.C. is 222 W. Adams, Chicago, Illinois
60606.
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(2) Includes, where applicable, shares of common stock issuable upon the
exercise of options to acquire common stock held by such person that
may be exercised within 60 days after May 9, 2003. Also includes
shares of restricted common stock and performance accelerated
restricted common stock as to which such person has voting power but no
dispositive power. Unless otherwise indicated, we believe that all
persons named in the table above have sole voting power and/or
investment power with respect to all shares of common stock
beneficially owned by them.
(3) Includes (i) 391,021 shares of common stock, (ii) 1,282 shares of
restricted common stock, (iii) 81,000 shares of performance accelerated
restricted common stock, (iv) 876,667 shares of common stock issuable
upon the exercise of stock options and (v) 125,000 shares of common
stock for which Mr. Beattie has an option to purchase from an
unaffiliated third party.
(4) Includes (i) 7,576 shares of common stock, (ii) 1,072 shares of
restricted common stock, (iii) 39,000 shares of performance accelerated
restricted common stock and (iv) 211,667 shares of common stock
issuable upon the exercise of stock options.
(5) Includes (i) 599 shares of common stock, (ii) 1,175 shares of
restricted common stock, (iii) 24,000 of shares of performance
accelerated restricted common stock and (iv) 13,334 shares of common
stock issuable upon the exercise of stock options.
(6) Includes (i) 957 shares of common stock, (ii) 1,045 shares of
restricted common stock, (iii) 24,000 shares of performance accelerated
restricted common stock and (iv) 83,334 shares of common stock issuable
upon the exercise of stock options.
(7) Includes (i) 768 shares of common stock, (ii) an additional 1,000
shares of common stock owned by Mr. Ronkin together with his spouse as
joint tenants with right of survivorship, (iii) 768 shares of
restricted common stock, (iv) 15,000 shares of performance accelerated
restricted common stock and (v) 43,334 shares of common stock issuable
upon the exercise of stock options.
(8) Includes (i) 991 shares of common stock, (ii) 979 shares of restricted
common stock, (iii) 12,000 shares of performance accelerated restricted
common stock and (iv) 108,334 shares of common stock issuable upon the
exercise of stock options. Ms. Goslin is a named executive as set
forth under "Executive Compensation," but is not an executive officer of
the company.
(9) Includes (i) 1,752,198 shares of common stock owned by Euro Credit
Investments Limited, a company controlled by Mr. Mauran and (ii)
67,500 shares of common stock issuable upon the exercise of stock
options.
(10) Includes (i) 802,253 shares of common stock and (ii) 67,500 shares of
common stock issuable upon the exercise of stock options.
(11) Includes (i) 15,184 shares of common stock owned individually by Mr.
Thomas, (ii) 137,425 shares of common stock owned by Nevcorp, Inc., a
corporation controlled by Mr. Thomas, (iii) 4,772 shares of
common stock held in four trusts for the benefit of Mr. Thomas'
children and for which he serves as a trustee, (iv) 26,181 shares of
common stock owned by Mr. Thomas' spouse and (v) 67,500 shares of
common stock issuable upon the exercise of stock options. Mr. Thomas
disclaims beneficial ownership as to the shares of common stock owned
by his spouse and the four trusts.
(12) Includes (i) 9,000 shares of common stock owned by Mr. Dooley together
with his spouse as joint tenants with right of survivorship and (ii)
74,500 shares of common stock issuable upon the exercise of stock
options.
(13) Includes (i) 930 shares of common stock owned individually by Mr.
Tatham, (ii) 1,050 shares of common stock owned by Mr. Tatham's spouse
and (iii) 37,000 shares of common stock issuable upon the exercise of
stock options. Mr. Tatham disclaims beneficial ownership as to the
shares of common stock owned by his spouse.
(14) Based on a Schedule 13G/A reporting ownership as of March 17, 2003
filed by Conopco, Inc. Represents shares of common stock issuable upon
the conversion of Series D convertible preferred stock that were
convertible as of March 17, 2003.
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(15) Based on a Schedule 13G/A reporting ownership as of February 10, 2003
filed by Dynamic Mutual Funds Ltd. Shares are held in mutual funds
managed by Dynamic Mutual Funds Ltd. acting as investment counsel
and portfolio manager.
(16) Based on a Schedule 13G reporting ownership as of December 31, 2002
filed by William Blair & Company, L.L.C.
(17) Includes 1,542,336 shares of common stock issuable upon exercise of
stock options.
PROPOSAL 1 - ELECTION OF DIRECTORS
INFORMATION ABOUT THE NOMINEES
Six directors are to be elected at the annual meeting. The six nominees
named below are currently serving as the directors of the company and have
been designated by the board of directors as nominees for election as
directors, to serve until the next annual meeting of shareholders and until
their successors are duly elected and qualified. In the event that any
nominee is unable or unwilling to serve, discretionary authority is reserved
to the persons named in the accompanying form of proxy to vote for substitute
nominees. The board of directors does not anticipate that such an event will
occur. Each director must be elected by a plurality of the votes cast.
The names of the nominees for our board of directors and information
about them are set forth below.
E. SCOTT BEATTIE, age 44, has served as chairman of the board of
directors since April 2000, as our chief executive officer since March 1998
and as a director of the company (including the predecessor fragrance company)
since January 1995. Mr. Beattie served as our president from April 1997 to
March 2003, as our chief operating officer from April 1997 until March 1998
and as vice chairman of the board of directors and assistant secretary of the
company from November 1995 to April 1997. Mr. Beattie served as executive vice
president of Bedford Capital Corporation, a Toronto, Canada-based merchant
banking firm, from March 1995 to March 1998. Prior to co-founding Bedford
Capital corporation, Mr. Beattie served as vice president and director of
mergers & acquisitions of Merrill Lynch, Inc., where he specialized in
management buyouts and divestitures. Mr. Beattie was also a manager of
Andersen Consulting, specializing in the design and implementation of
enterprise resource planning systems. Mr. Beattie is a director of Bedford
Capital Corporation. Mr. Beattie is also a director of the Cosmetic, Toiletry
& Fragrance Association and a member of the advisory board of the Ivey
Business School.
J.W. NEVIL THOMAS, age 65, has served as vice chairman of the board of
directors since April 1997 and previously served as chairman of the board of
directors (including the predecessor fragrance company) from July 1992 to
April 1997. Since 1970, Mr. Thomas has served as president of Nevcorp, a
financial and management consulting firm that is controlled by Mr. Thomas.
Mr. Thomas is chairman of the board of Bedford Capital Corporation and a
director of Pet Valu, Inc., a pet food retailer.
FRED BERENS, age 60, has served as a director of the company (including
the predecessor fragrance company) since July 1992. Mr. Berens has served as
senior vice president - investments of Prudential Securities, Inc., an
investment banking firm, since March 1965. Mr. Berens served as a director of
the company, when it was known as Suave Shoe Corporation, until December 1994.
RICHARD C.W. MAURAN, age 69, has served as a director of the company
(including the predecessor fragrance company) since July 1992. Mr. Mauran is
a private investor and serves as a director of Bedford Capital Corporation.
GEORGE DOOLEY, age 70, has served as a director of the company since
March 1996. Mr. Dooley has served as president and chief executive officer of
(i) Community Television Foundation of South Florida, Inc., a not-for-profit
corporation
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supporting, and a licensee of, public television station WPBT Channel 2, since
1955, (ii) WPBT Communications Foundation, Inc., a not-for-profit corporation
supporting public television station WPBT Channel 2, since 1981, and (iii)
Comtel, Inc., a company providing television facilities to television
producers, since 1981.
WILLIAM M. TATHAM, age 43, has served as a director of the company since
July 2001. Mr. Tatham has served as chief executive officer of XJ Partners,
Inc., a Canada-based strategy consulting company, since September 2001. From
November 2000 to June 2001, Mr. Tatham served as vice president and general
manager of Siebel Systems, Inc., an eBusiness applications software company.
From 1990 until its acquisition by Siebel Systems in November 2000, Mr. Tatham
served as the president and chief executive officer of Janna Systems, Inc., a
Canada-based software development company that Mr. Tatham founded. Mr. Tatham
serves as a director of Triple G Systems Group, Inc., a Canada-based developer
of laboratory information systems.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
EACH NOMINEE FOR DIRECTOR.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Federal securities laws require our directors, executive officers, and
persons who beneficially own more than ten percent of our common stock to file
reports of initial ownership and reports of subsequent changes in ownership
with the Securities and Exchange Commission and to provide us copies of these
reports. Specific due dates have been established, and we are required to
disclose any failure of these persons to file timely those reports during our
fiscal year ended January 31, 2003. To the best of our knowledge, based
solely upon a review of copies of reports furnished to us, filings with the
Securities and Exchange Commission and written representations that no other
reports were required, all of our directors, executive officers and ten
percent or greater beneficial owners of common stock made all such filings
timely, except that the filing of an initial statement of beneficial ownership
of securities by Conopco, Inc., when their beneficial ownership of our common
stock exceeded ten percent was late.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended January 31, 2003, the board of directors
held six meetings, and each director attended at least 75% of the total
meetings of the board of directors and at least 75% of the total meetings of
the committees of the board of directors on which he served. In addition to
the meetings, the board of directors and its committees review and act upon
matters through written consent procedures. The board of directors has an
audit committee and a compensation committee.
The audit committee consists of Messrs. Berens, Dooley and Thomas, all
of whom are independent, as defined in the Marketplace Rules of The Nasdaq
Stock Market, Inc. and Section 301 of the Sarbanes-Oxley Act of 2002. The
audit committee oversees our accounting and financial reporting processes and
the audit of our financial statements; reviews the financial statements and
accounting matters relating to those statements; evaluates the quality and
adequacy of our internal controls; and appoints, negotiates the compensation
for and oversees the services provided by our independent auditors. The audit
committee met four times during the fiscal year ended January 31, 2003.
Under the provisions of the Sarbanes-Oxley Act of 2002, we will be
required to disclose whether we have at least one member of the audit
committee who is an "audit committee financial expert" (as that term is
defined by the Securities and Exchange Commission). The board of directors
has reviewed the experience of the members of our audit committee and has
found that two members of the audit committee meet the qualifications to be an
"audit committee financial expert" under the recently adopted Securities and
Exchange Commission rules issued pursuant to the Sarbanes-Oxley Act. In
addition, the board of directors has designated Mr. Berens as the member of
the audit committee who will serve as the "audit committee financial expert."
The compensation committee consists of Messrs. Berens and Dooley, both
of whom are independent. The compensation committee administers our stock
incentive plans, recommends
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compensation policies and strategies to the board of directors and reviews and
approves the compensation of our executive officers and other key management
personnel. The compensation committee met once and acted by written consent
four times during the fiscal year ended January 31, 2003.
The board of directors does not have a standing nominating committee and
performs this function itself.
DIRECTOR COMPENSATION
The board of directors' general policy is that compensation for
independent directors should consist of both cash and equity-based
compensation. Directors who are our employees (currently Mr. Beattie) are not
paid for board service in addition to their regular employee compensation.
For board service during our last fiscal year, non-employee directors
(currently Messrs. Berens, Dooley, Mauran, Tatham and Thomas) received an
annual retainer of $3,000 and a fee of $500 for each meeting of our board of
directors attended or a committee of the board attended on a date separate
from a board meeting. Non-employee directors received a grant of stock
options for 15,000 shares of our common stock under our Non-Employee Director
Stock Option Plan upon re-election to the board at the 2002 annual meeting of
shareholders. These options will be exercisable on the next annual meeting
date if the director is re-elected to the board. For fiscal year 2003, any
newly-elected director would have received a grant of stock options for 7,000
shares of our common stock under our Non-Employee Director Stock Option Plan
upon initial election to the board, which would have been exercisable one year
from the date of grant. The exercise price for each option is equal to the
closing price of our common stock on the date of grant. In addition, our
board members were reimbursed for all expenses incurred in connection with
their activities as directors.
We recently retained Mercer Human Resource Consulting, a global
compensation and benefits consulting firm, to review board of directors
compensation. A study of a peer group of companies indicated that cash
compensation for our non-employee directors was significantly below that of
the peer group, but equity compensation was greater than that of the peer
group. As a result of Mercer's study of board compensation practices of a
peer group of companies, in recognition of the board's increased workload and
to permit the company to continue to attract and retain board members in the
future, our board of directors approved a number of changes to board
compensation for non-employee directors. Specifically, beginning with the
June 2003 annual meeting of shareholders, (1) the annual cash retainer for
service on our board of directors will be $25,000, (2) board and committee
meeting fees will be increased from $500 to $1,000, except when the committee
meeting is on the same day as a board meeting, in which case the committee
meeting fee will be $500, (3) a $3,500 annual retainer will be paid to the
audit committee chairperson and a $2,500 annual retainer will be paid to the
compensation committee chairperson, (4) the number of shares of common stock
for which stock options are granted annually under the Non-Employee Director
Stock Option Plan upon re-election to the board will be decreased to 5,000
shares, (5) the initial election grant of stock options for directors will be
eliminated and (6) the vesting period on director option grants will be
changed so that all options granted will vest three years after the date of
grant in order to promote director retention. Our board members will continue
to be reimbursed for all expenses incurred in connection with their activities
as directors.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual
compensation for services in all capacities to us for the twelve months ended
January 31, 2003, January 31, 2002 and January 31, 2001 of the chief executive
officer, each of our four executive officers who were serving in that capacity
at January 31, 2003 and an additional highly compensated officer as required
by the rules of the Securities and Exchange Commission:
Long-Term Compensation
Annual Compensation Awards
------------------------- ----------------------
Other All
Annual Restricted Securities Other
Compen- Stock Underlying Compen-
Name and Year Salary Bonus sation Awards Options sation
Principal Position (1) ($) ($) ($)(2) ($) (#) ($)(3)
- ------------------ ------ ------- ------- ------- ---------- ---------- -------
E. Scott Beattie 1/31/03 413,333 187,500 394 929,890 (4) 135,000 (5) 15,006
Chairman and 1/31/02 400,000 -- 3,195 12,677 (6) -- 13,432
Chief Executive 1/31/01 375,000 200,313 3,984 -- 550,000 (7) 9,499
Officer
Paul F. West 1/31/03 345,833 113,750 525 451,871 (4) 65,000 (5) 13,411
President and 1/31/02 325,000 -- 76,281 8,711 (6) -- 5,354
Chief Operating 1/31/01 250,000 126,563 2,686 -- 220,750 (7) 7,433
Officer
Stephen J. Smith 1/31/03 305,000 166,800 -- 281,735 (4) 40,000 (5) 9,981
Executive Vice 1/31/02 214,807 -- 125,163 1,938 (6) 100,000 1,487
President and
Chief Financial
Officer (8)
Ronald L. Rolleston 1/31/03 287,500 117,083 393 280,483 (4) 40,000 (5) 12,760
Executive Vice
President, Global
Marketing
Joel B. Ronkin 1/31/03 208,333 92,500 159 176,454 (4) 25,000 (5) 10,722
Senior Vice
President and
Chief Adminis-
trative Officer
Gretchen Goslin 1/31/03 254,167 134,750 456 144,128 (4) 20,000 (5) 12,190
Executive Vice 1/31/02 250,000 -- 1,657 6,533 (6) -- 10,798
President, Global 1/31/01 222,115 91,406 1,828 -- 130,750 (7) 6,884
Travel Retail (9)
(1) The amounts shown for "1/31/03," "1/31/02" and "1/31/01" are for the
fiscal years ended January 31, 2003, 2002 and 2001, respectively.
(2) During the fiscal years ended January 31, 2003, 2002 and 2001,
respectively, the named executives were reimbursed for the following
amounts of taxes incurred as a result of the payment of executive
disability insurance premiums: (a) E. Scott Beattie - $394, $3,195 and
$3,984; (b) Paul F. West - $525, $2,703 and $2,686; (c) Ronald L.
Rolleston - $393 (fiscal 2003); (d) Joel B. Ronkin - $159 (fiscal
2003); and (e) Gretchen Goslin $456, $1,657 and $1,828. The amount
shown for Mr. West for the fiscal year ended January 31, 2002 also
includes $58,141 that was reimbursed by us for relocation-related
expenses, as well as $15,437 that was reimbursed by us for the payment
of taxes on the relocation reimbursement benefit. The amounts reflected
in the above table do not include any other amounts for perquisites and
other personal benefits. Except as stated above for Mr. West and as
stated in Note 8 for Mr. Smith, the aggregate amount of such
compensation for each named executive did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus and, accordingly,
has been omitted from the table as permitted by the rules of the
Securities and Exchange Commission.
(3) Amounts consist of matching payments made by us under our 401(k) plan,
term life insurance premiums and disability insurance premiums paid or
reimbursed by us. For the fiscal year ended January 31, 2003, these
amounts were as follows:
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401(k) Life Disability
Name Match($) Insurance($) Insurance($)
---------------- -------- -------------- ------------
E. Scott Beattie 8,000 1,433 5,573
Paul F. West 8,000 1,321 4,090
Stephen J. Smith 8,000 1,165 816
Ronald L. Rolleston 8,000 955 3,805
Joel B. Ronkin 8,000 796 1,926
Gretchen Goslin 8,000 971 3,219
(4) During the fiscal year ended January 31, 2003, we granted to each of
the named executives two types of restricted stock: (a) performance
accelerated restricted stock (PARS), which have a vesting period of six
years that can be accelerated to three, four or five years from the date
of grant if the company's total shareholder return exceeds the median
total shareholder return of the companies comprising the Russell 2000
Index over the respective three, four or five-year period, and was
granted to members of our management team, and (b) regular restricted
stock, which vests one year from the date of grant and was granted to
all our regular, full-time employees based in the United States and
Puerto Rico. Shares of both PARS and regular restricted stock vest only
if the employee is still employed by us on the vesting date (with
limited exceptions), and the shares are eligible for the payment of
dividends, if the board of directors were to declare dividends on the
common stock.
On March 22, 2002, we granted PARS to the named executives in the
following amounts: (i) Mr. Beattie - 81,000 shares; (ii) Mr. West -
39,000 shares; (iii) Mr. Smith - 24,000 shares; (iv) Mr. Rolleston -
24,000 shares; (v) Mr. Ronkin - 15,000 shares; and (vi) Ms. Goslin -
12,000 shares. Grants of PARS are periodic in nature, and the grants
to the named executives and other managers of the company in March 2002
were intended to front-load approximately four years' worth of PARS
grants because vesting can occur anywhere from three to six years from
the date of grant.
In addition to the PARS, we also granted on two different dates during
the fiscal year ended January 31, 2003 regular restricted stock to all
regular, full-time employees based in the United States and Puerto Rico,
including the named executives. Specifically, on March 21, 2002 and
September 3, 2002, we granted shares of regular restricted stock to the
named executives as follows: (i) Mr. Beattie - 539 and 671 shares,
respectively; (ii) Mr. West - 439 and 557 shares, respectively; (iii)
Mr. Smith - 405 and 578 shares, respectively; (iv) Mr. Rolleston - 337
and 524 shares, respectively; (v) Mr. Ronkin - 270 and 381 shares,
respectively; and (vi) Ms. Goslin - 337 and 481 shares, respectively.
The dollar value of the restricted stock granted during the fiscal year
ended January 31, 2003 was determined by multiplying the total number of
shares of restricted stock granted to the named executives on the three
dates of such grants by the respective closing prices of our common
stock on those grant dates. Those prices were as follows: (A) $11.12
on March 21, 2002; (B) $11.33 on March 22, 2002; and (C) $9.19 on
September 3, 2002. At January 31, 2003, based on the $12.15 closing
price of our common stock on that date, (a) Mr. Beattie had 82,210
shares of restricted stock (valued at $998,852); (b) Mr. West had 39,996
shares of restricted stock (valued at $485,951); (c) Mr. Smith had
24,983 shares of restricted stock (valued at $303,543); (d) Mr.
Rolleston had 24,861 shares of restricted stock (valued at $302,061);
(e) Mr. Ronkin had 15,651 shares of restricted stock (valued at
$190,160); and (f) Ms. Goslin had 12,818 shares of restricted stock
(valued at $155,739).
(5) Option grants awarded during the fiscal year ended January 31, 2003
were for performance during the fiscal year ended January 31, 2002.
(6) During the fiscal year ended January 31, 2002, shares of regular
restricted stock were granted to all our regular, full-time employees
based in the United States and Puerto Rico on October 12, 2001,
including the named executives. The dollar value of the regular
restricted stock was determined by multiplying the number of shares of
restricted stock granted during the fiscal year ended January 31, 2002
by $9.99 (representing the closing price of our common stock on the date
of grant).
(7) Option grants awarded during the fiscal year ended January 31, 2001
include options to purchase 150,000, 100,000 and 75,000 shares of common
stock, which were granted in March 2000 to Mr. Beattie, Mr. West and Ms.
Goslin, respectively, for performance during the fiscal year ended
January 31, 2000.
- 9 -
(8) Mr. Smith was appointed to the position of executive vice president and
chief financial officer in May 2001. Other annual compensation for the
fiscal year ended January 31, 2002 also includes $65,163 paid to offset
the amounts Mr. Smith was foregoing in incentive compensation from his
prior employer and $60,000 paid to Mr. Smith to defray certain of the
tax consequences resulting from the termination of his prior employment
(of which $30,000 will be deducted from future bonuses). Mr. Smith's
stock option grant during the fiscal year ended January 31, 2002 was
issued in May 2001 as an incentive to join us.
(9) Ms. Goslin is a "named executive" as defined in Item 402(a)(3) of
Regulation S-K, but has not been an executive officer of the company
since April 2002.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock options
granted during the fiscal year ended January 31, 2003 to the named executives:
Individual Grants
----------------------- Potential
% of Total Realizable
Number of Options Value at Assumed
Securities Granted to Exercise Annual Rates
Underlying Employees or Base of Stock Price
Options in Fiscal Price Expiration Appreciation for
Name Granted(#) Year ($/Share)(1) Date Option Terms($)(2)
- ------------------- ----------- ---------- ------------ ---------- ------------------
5% 10%
------- ---------
E. Scott Beattie 135,000 (3) 15.0% 11.33 3/22/12 961,926 2,437,709
Paul F. West 65,000 (3) 7.2% 11.33 3/22/12 463,149 1,173,712
Stephen J. Smith 40,000 (3) 4.5% 11.33 3/22/12 285,015 722,284
Ronald L. Rolleston 40,000 (3) 4.5% 11.33 3/22/12 285,015 722,284
Joel B. Ronkin 25,000 (3) 2.8% 11.33 3/22/12 178,134 451,428
Gretchen Goslin 20,000 (3) 2.2% 11.33 3/22/12 142,508 361,142
(1) The exercise price of the options granted was based upon the closing
price of our common stock on the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based on assumed rates of stock price appreciation of 5% and
10% compounded annually from the date the respective options were granted
to their expiration dates. Hypothetical gains are calculated based on
rules promulgated by the Securities and Exchange Commission and do not
represent an estimate by us of our future stock price growth. This table
does not take into account any appreciation in the price of our common
stock to date. Actual gains, if any, on option exercises and common
stock holdings are dependent on the timing of those exercises and the
future performance of the common stock. There can be no assurances that
the rates of appreciation assumed in this table can be achieved, or that
the amounts reflected will be received by the named executives.
(3) The option vests in equal thirds over a three-year period on the
anniversary date of the grant if the employee is still employed by us at
that time (with limited exceptions) unless there is a change in control,
in which case the option vests immediately.
- 10 -
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning options
exercised by the named executives during the fiscal year ended January 31,
2003 and unexercised options held by the named executives at January 31, 2003:
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options at Options at Fiscal
On Value Fiscal Year-End Year-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($)(1) Unexercisable Unexercisable (2)
- ------------------- -------- -------- ----------------- -----------------
E. Scott Beattie 50,000 178,000 781,667 / 318,333 461,900 / 311,950
Paul F. West -- -- 156,666 / 179,084 575,831 / 413,004
Stephen J. Smith -- -- 0 / 140,000 0 / 32,800
Ronald L. Rolleston -- -- 53,333 / 97,417 134,165 / 214,044
Joel B. Ronkin -- -- 30,000 / 70,750 40,250 / 154,784
Gretchen Goslin 10,000 20,300 76,667 / 84,083 262,750 / 231,184
(1) Value is based on the difference between the option exercise price and the
closing price of the common stock on the date of exercise multiplied by the
number of shares underlying the option.
(2) Value is based on the difference between the option exercise price and the
closing price of the common stock on January 31, 2003 multiplied by the
number of shares underlying the option.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information concerning common stock
authorized for issuance under compensation plans of the company at January 31,
2003:
Number
of securities
remaining
Number Weighted- available for
of securities average future issuance
to be issued exercise under equity
upon exercise price of compensation
of outstanding outstanding plans (excluding
options, options, securities
warrants warrants reflected in
and rights and rights column (a))
Plan Category (a) (b) (c)
- ------------------------- -------------- ----------- ----------------
Equity compensation plans
approved by security
holders 3,906,442 $11.59 241,638
- --------------------------------------------------------------------------------
Equity compensation plans
not approved by security
holders -- -- --
- --------------------------------------------------------------------------------
Total 3,906,442 $11.59 241,638
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
None of our executive officers has employment contracts. In March 2002,
the compensation committee of the board recommended, and the board approved, a
severance and change in control arrangement for senior executives, including
the named executives. Under the arrangement, the executive receives severance
benefits, based on his or her position and responsibility, in the event the
executive's employment is terminated without "cause" and is not the result of
a resignation or death. Currently, the severance benefit for the named
executives is as follows: (a) Mr. Beattie, 24 months of base salary; (b) Mr.
West, 18 months of base salary; (c) Mr. Smith, 24 months of base salary plus
preceding year's bonus; (d) Mr. Rolleston, 12 months of base salary; and (e)
Mr. Ronkin and Ms. Goslin, 9 months of base salary.
Under the change in control arrangement, a severance benefit is paid to
senior executives based on a "base amount" in the event there is an actual or
constructive termination of employment (e.g.,
- 11 -
decrease in pay or job responsibility) following a change in control. "Base
amount" is the average salary plus average bonus the executive has received
over the most recent five-year period. The monthly base amount is the base
amount divided by twelve. Currently, the severance benefit due to a change in
control for the named executives is as follows: (a) Mr. Beattie, 35.88
months of monthly base amount; (b) Mr. West, 24 months of monthly base amount;
(c) Mr. Smith, 24 months of base salary plus preceding year's bonus; (d) Mr.
Rolleston, 18 months of monthly base amount; and (e) Mr. Ronkin and Ms.
Goslin, 12 months of monthly base amount.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All members of the compensation committee of the board of directors
during the fiscal year ended January 31, 2003 were independent directors, and
none of them were employees or former employees of the company. During the
fiscal year ended January 31, 2003, none of our executive officers served on
the compensation committee (or equivalent), or the board of directors, of
another entity whose executive officer(s) served on the compensation committee
of our board of directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW OF COMPENSATION PHILOSOPHY AND PROGRAM
The compensation committee of the board of directors is responsible for
reviewing annually and approving Elizabeth Arden's compensation strategy and,
consistent with that strategy, the compensation of its executive officers and
other key management personnel. In addition, the compensation committee
is responsible for establishing general compensation philosophies for non-
management employees, which are then executed by certain members of Elizabeth
Arden's senior management, as well as for administering the company's stock
incentive plans. The compensation committee consists entirely of independent
directors who are not officers or employees of Elizabeth Arden.
Elizabeth Arden's executive compensation program consists of base
salaries, short-term incentive cash payments and long-term incentive
compensation. All of the components of executive compensation are designed to
facilitate fulfillment of the compensation objectives of the compensation
committee. Those objectives include: (i) providing market-competitive
compensation to attract, retain and motivate key management personnel; (ii)
relating management compensation to the achievement of company goals
and performance; and (iii) aligning the interests of management with those of
the company's shareholders. The determination of the total compensation
package for Elizabeth Arden's senior management and other key personnel was
made after reviewing and considering a number of factors, including
achievement of company goals and the individual's contribution to the
achievement of those goals, job responsibility, level of individual
performance, compensation levels at competitive companies, as well as
companies of similar size and type to Elizabeth Arden, and the company's
historical compensation levels. Except for short-term incentive cash
payments, which generally are based on an individual's attainment of certain
pre-determined key performance indicators and company financial performance
targets, the compensation decisions for fiscal 2003 were based upon an overall
review of all of the relevant factors without giving specific weight to any
one factor.
EVALUATION OF COMPENSATION STRATEGY AND PROGRAMS
Last year, the compensation committee, with assistance from Mercer Human
Resource Consulting, a global compensation and benefits consulting firm,
formalized the company's compensation strategy and its executive compensation
program. To assist the compensation committee with its annual review of the
company's compensation strategy, the compensation committee retained Mercer to
re-evaluate the strategy and programs adopted last year for executives and
employees to ensure that the strategy and programs accomplish the compensation
committee's objectives.
- 12 -
After a review of market conditions and competitive practices, the
compensation committee determined that the compensation strategy adopted last
year in many ways established compensation practices that are now being
adopted by other companies as best practices and should remain in effect. In
accordance with that strategy, we intend to target base salaries below market
median levels for the most senior executives and at market median levels for
other executives and key employees. Total cash compensation, which includes
base salary and bonus, will be targeted at levels that are somewhat above
the market median for positions below the senior executive level, while total
cash compensation levels for senior executives will be targeted at slightly
lower levels due to our desire to place the primary compensation emphasis on
long-term incentives. The relatively greater emphasis on long-term incentives
for our management group underscores Elizabeth Arden's primary business
strategy of maximizing shareholder value.
Consistent with Elizabeth Arden's formalized compensation strategy, we
have adopted a general framework for determining the various components of the
compensation of the company's management group on an annual basis. In
general, short-term incentive cash payments (e.g., bonuses) and long-term
incentive grants (e.g., stock options and restricted stock grants) will be
determined as a percentage of base salary, with variances based on level of
responsibility, individual performance and market conditions.
SHORT-TERM INCENTIVE PROGRAM
Elizabeth Arden's short-term incentive program is cash-based and is
designed to motivate and reward eligible employees for both company and
individual performance. The incentive program is designed to result in
incentive payments below the market median when company performance is below
targets, and incentive payments above the market median when company
performance exceeds targets. Short-term incentive program payouts are
determined, in most cases, based upon the achievement of two types of
performance objectives: company performance targets and individual key
performance indicators. Generally, more senior-level employees have a greater
percentage of their bonuses tied to company performance than individual
performance in comparison with less senior-level employees. The short-term
incentive opportunities of both our chief executive officer and our chief
operating officer are based 100% upon company performance. The maximum short-
term incentive payout opportunity is two times base salary.
For fiscal 2003 bonus purposes, the primary factor used for the
measurement of company performance was the company's achievement of actual
versus planned corporate EBITDA (net income plus provision for income taxes,
plus interest expense, plus depreciation and amortization). While the
company did not achieve its budgeted EBITDA target, we determined that it was
appropriate to pay bonuses equal to 50% of the company performance portion of
each participant's bonus potential due to the 149% increase in EBITDA in
fiscal 2003 compared to fiscal 2002, as well as the improved operating and
balance sheet performance of the company during fiscal 2003, which included,
among other corporate metrics, increasing sales by 13%, increasing diluted
earnings per share (EPS) from a loss of $1.92 to earnings of $0.78 and
generating $28.6 million of free cash flow from operating activities. With
respect to individual performance, eligible short-term incentive program
participants were evaluated based upon their achievement of certain key
performance indicators established for each participant for fiscal 2003.
Neither the chief executive officer nor the chief operating officer were
eligible for or received any short-term incentive payout as a result of
individual performance in fiscal 2003, as their short-term incentive
opportunities are based 100% upon company performance.
LONG-TERM INCENTIVE PROGRAMS
Prior to fiscal 2003, the company provided long-term incentives to
executives and key employees primarily through incentive stock options and
non-qualified stock options. The compensation committee decided in fiscal
2003, as part of its review of executive compensation, to use annual grants of
non-qualified stock options and periodic grants of performance-accelerated
restricted stock (PARS) for individuals at certain managerial levels. PARS
are restricted stock awards with a vesting period of six years that can be
accelerated to three, four or five years from the date of grant if Elizabeth
Arden's total
- 13 -
shareholder return exceeds the median total shareholder return of the
companies comprising the Russell 2000 Index over the respective three,
four or five-year period. If Elizabeth Arden's return were to exceed the
return of that index in three, four or five years, the PARS would vest at that
time, and a new grant of PARS would be triggered. Below a certain managerial
level, employees are eligible to be nominated by senior management for
restricted stock or non-qualified stock options out of a pool of shares set
aside for that purpose.
As part of its review of executive compensation and, more specifically,
our long-term incentive programs, Mercer analyzed the long-term incentive
programs of companies that were of a similar size or type or from a similar
industry as the company, including other consumer product companies and
similarly financially-leveraged companies. As a result of this review, we
have determined that the annualized level of stock incentive grants (i.e., run
rate) should be capped at approximately 3.3% of diluted common shares, which
is down from the 4.42% run rate cap established by the compensation committee
last year and is roughly equivalent to the 67th percentile of peer company run
rates. While the lowered run rate of 3.3% is above the median of those
companies comprising the peer group reviewed in the Mercer study, this is
largely a function of the relatively small number of diluted common shares
outstanding (as the company has funded its acquisitions primarily through the
use of debt rather than equity) and the need for the company to provide equity
grants to a larger number of employees than in the past. For example, in
2000, prior to the company's acquisition of the Elizabeth Arden business,
approximately 33 employees received stock incentive grants. In 2002, 171
employees in 12 countries received stock incentive grants.
While we believe it is appropriate to reduce the annualized run rate of
stock incentive grants based upon market conditions, we note that this
reduction will result in approximately a 40% to 60% reduction in stock
incentive grants to be awarded to our management team this year for fiscal
2003 performance from the amounts that market data suggests should be awarded
pursuant to the company's compensation strategy. To help lessen the impact of
the run rate cap, we have decided that it is appropriate to grant restricted
stock this year in addition to stock options, with approximately an equal
value of each being granted to eligible employees. The use of restricted
stock allows us to provide more long-term incentive value to the company's
employees while staying within the lowered run rate of 3.3%.
The compensation committee used this revised approach in determining the
appropriate number and type of shares to be awarded for fiscal 2003
performance. Subject to the approval by our shareholders of an increase in
the number of shares authorized to be issued under the 2000 Stock Incentive
Plan, the compensation committee authorized the grant of stock incentives to
managerial employees in an aggregate amount of 600,000 shares, consisting of
approximately 425,000 shares in the form of stock options (which is
approximately 53% lower than the prior year's awards), including 150,560
shares to the executive officers, as well as the grant of approximately
175,000 shares in the form of restricted stock, including 75,280 shares to the
executive officers. If shareholder approval is received, the stock options
and restricted stock would vest in equal thirds after each succeeding year
from the date of grant (which would be the date the approval is received),
assuming the person receiving the grant is employed by the company at the time
of vesting, and the exercise price of the stock options would be the fair
market value of the company's common stock on the date the approval is
received. The option grants expire ten years from the date of grant.
Additionally, the compensation committee decided to set aside
approximately 25,000 shares of restricted stock and stock options to grant to
other employees who made a significant contribution to the company on the
basis of nominations made by the employees' department heads or general
managers related to fiscal 2003 performance. These restricted stock and stock
option grants are also subject to receiving shareholder approval and would
vest one year from the date of grant (i.e., the date the shareholder
approval is received), assuming the person receiving the award is employed by
the company at the time of vesting.
- 14 -
The amount and allocation of individual stock incentive grants related
to fiscal 2003 performance were set by the compensation committee for all
executive officers and were set by senior management, consistent with the
guidelines established by the compensation committee, for all other eligible
employees based on a number of factors, including job responsibilities,
individual performance and market conditions.
STOCK OWNERSHIP GUIDELINES
The company maintains stock ownership requirements for all executives at
the level of senior vice president and above. All executives at that level
are required to comply with these guidelines within five years of the date
that the guidelines were established, which occurred on March 22, 2002. In
the interest of encouraging the company's senior executives to comply on a
more expedited basis with the stock ownership guidelines, the compensation
committee has enhanced the guidelines to require the executives to (1) retain
all shares (net of taxes) received in connection with the exercise of stock
option grants or upon the vesting of restricted stock until 50% of the stock
ownership requirements are satisfied and (2) meet 50% of the stock ownership
requirements within 2.5 years of the beginning of the 5-year compliance
period. If any executive does not meet the stock ownership guidelines by the
end of the two and one-half year compliance period, the company may enforce
the ownership requirements by requiring the payment of cash bonuses to that
executive in the form of company stock. The ownership requirements range from
one times base salary for senior vice presidents to five times base salary for
the chief executive officer. The ownership guidelines may be reviewed from
time to time to ensure market competitiveness and to reflect appropriate
market conditions. The company's chief executive officer already complies
with the stricter 5-year ownership requirements.
CHIEF EXECUTIVE OFFICER COMPENSATION
One of the compensation committee's responsibilities includes reviewing
and establishing the compensation of the company's chief executive officer.
Based on a review of market data of similarly-situated executives conducted by
Mercer, the compensation committee determined last year that the cash
compensation of the company's chief executive officer was significantly below
market levels. Mercer recommended that each executive position, including the
chief executive officer, should be assigned to a salary range established
based upon the company's compensation strategy as relates to comparative
market pay levels, with each executive's actual salary falling within the
minimum and maximum for their respective ranges. While Mr. Beattie's salary
was well below the range minimum for his position, Mr. Beattie indicated that
he would prefer to defer any consideration of a significant salary increase
until the next fiscal year (i.e., fiscal 2004) in light of Elizabeth Arden's
performance during fiscal 2002. Accordingly, Mr. Beattie's base salary for
fiscal 2003 was set at $416,000.
In connection with its review of executive compensation this year, we
asked Mercer to update its review of chief executive officer compensation.
Based on this updated review of market data, we once again determined that the
cash compensation of Mr. Beattie was significantly below market levels. As a
result and considering Mr. Beattie's past performance, including the much-
improved performance of the business in fiscal 2003, and his expected
contributions in the future, the compensation committee set Mr. Beattie's base
salary for fiscal 2004 at $600,000. This would place his salary within the
pay range for his position, but significantly below the median base salary for
chief executive officers of a peer group of companies, which was estimated at
$943,000.
Taking into account the decreased stock incentive run rate we adopted
this year and applying the company's compensation strategy in an equitable
fashion, we granted Mr. Beattie, subject to shareholder approval of the
amendment to the company's 2000 Stock Incentive Plan, an option to purchase
75,600 shares of common stock and an award of 37,800 shares of restricted
stock related to fiscal 2003 performance. The stock option and restricted
stock would vest in equal thirds after each succeeding year from the date of
grant (which would be the date the shareholder approval is received), assuming
Mr. Beattie is employed by the company at the time of vesting, and the
exercise price of the stock options would be the fair market value of the
company's common stock on the date shareholder approval is received. The
stock option would expire ten years from the date of grant. In addition, Mr.
Beattie earned
- 15 -
a bonus of $187,500 in connection with the company's short-term incentive
program for fiscal 2003 as a result of the 50% corporate-performance bonus
payout we previously discussed. The overall compensation package established
for Mr. Beattie for the upcoming fiscal year will reach only approximately the
33rd percentile of chief executive officers of the peer group of companies.
Fred Berens
George Dooley
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 2002, we provided a loan to Mr. Beattie in the aggregate
principal amount of $500,000, which matures on March 31, 2004 and bears
quarterly interest at a rate of 5%. This loan replaced earlier loans made by
us to Mr. Beattie in 1998. In July 2002, Mr. Beattie repaid $100,000 of the
principal amount of the loan. At May 9, 2003, the principal amount and
accrued interest on the loan outstanding were approximately $402,167
cumulatively. The highest amount of principal and accrued interest on the
loan outstanding at any time during the fiscal year ended January 31, 2003 was
$500,000. In accordance with the Sarbanes-Oxley Act of 2002, which became law
on July 31, 2002, we are prohibited from extending loans such as Mr. Beattie's
loan to executive officers and directors. Under the Sarbanes-Oxley Act, the
loan to Mr. Beattie is permitted to continue in effect but may not be renewed
or materially modified.
- 16 -
PERFORMANCE GRAPH
The following performance graph data and table compare the cumulative
total shareholder returns, including the reinvestment of dividends, on our
common stock with the companies in Russell 2000 Index and a market-weighted
index of publicly traded peer companies for the period from January 31, 1998
through January 31, 2003. We have elected to modify our peer group to
include four new consumer product companies (Avon Products, Inc., Chattem,
Inc., The Estee Lauder Companies, Inc. and Revlon, Inc.) and remove Allou
Healthcare, Inc., Parlux Fragrances, Inc. and eCom Ventures, Inc. (formerly
known as Perfumania, Inc.). The four additional peers are more comparable to
our business enterprise and/or are more similar to our market capitalization
since the acquisition of the Elizabeth Arden business on January 23, 2001. We
believe the new peer group is a good representation of consumer products and
beauty companies with similar market capitalizations and/or business models to
our company. The publicly traded companies in the new peer group are Avon
Products, Inc., Chattem, Inc., The Estee Lauder Companies, Inc., Inter
Parfums, Inc. (formerly known as Jean Philippe Fragrances, Inc.) and Revlon,
Inc. We also have elected to modify the index against which we are measured
from The Nasdaq Stock Market (U.S.) Index to the Russell 2000 Index, which we
believe is more representative of our market capitalization. The graph and
table assume that $100 was invested on January 31, 1998 in each of the Russell
2000 Index, the Nasdaq Stock Market (U.S.) Index, the new and old peer groups
and our common stock, and that all dividends were reinvested. Our common
stock is listed on The Nasdaq National Market under the symbol "RDEN."
[Graphic Omitted]
January 31,
1998 1999 2000 2001 2002 2003
----- ------ ------ ------ ------ ------
Elizabeth Arden, Inc. 100.0 72.44 59.09 121.03 91.45 110.54
Russell 2000 Index 100.0 100.33 118.14 122.50 118.09 92.26
Nasdaq Stock Market
(U.S.) Index 100.0 156.46 244.12 171.44 120.40 82.97
New Peer Group 100.0 127.52 125.44 134.45 145.26 147.31
Old Peer Group 100.0 159.41 149.97 126.41 150.43 144.62
- 17 -
PROPOSAL 2 - APPROVAL OF THE AMENDMENT TO
THE 2000 STOCK INCENTIVE PLAN
At the annual meeting, our shareholders will be asked to approve an
amendment to the 2000 Stock Incentive Plan. The 2000 Stock Incentive Plan was
adopted in November 2000 by the board of directors and approved in January
2001 by the shareholders of the company. Currently, 3,000,000 shares of
common stock of the company are authorized to be issued under the 2000 Stock
Incentive Plan. As of April 30, 2003, an aggregate of 2,953,690 shares of
common stock have been granted in the form of stock incentives and are
outstanding, limiting additional grants under the 2000 Stock Incentive Plan to
an aggregate of 46,310 shares. At May 9, 2003, the closing price on The
Nasdaq National Market of our common stock, par value $.01 per share, was
$12.80.
The board of directors and the compensation committee both believe that
it is in the company's best interest to increase the maximum number of shares
of common stock available for grant under the 2000 Stock Incentive Plan so as
to maintain the purpose of the 2000 Stock Incentive Plan, which is to (a)
provide incentives that will attract, retain and motivate highly competent
persons as officers and employees of, and others who provide services to, our
company and our subsidiaries and affiliates, by providing them opportunities
to acquire shares of our common stock or to receive monetary payments based on
the value of such shares as described in the 2000 Stock Incentive Plan and (b)
assist in further aligning the interests of our officers, employees and other
individual service providers to those of our other shareholders. Last year
alone, more than 922 employees in 12 countries received stock incentive
grants. In addition, under the terms of our services agreement with our
corporate spokesperson, Catherine Zeta-Jones, we have issued Ms. Zeta-Jones
shares of restricted stock under the 2000 Stock Incentive Plan as part of her
compensation package.
In making the recommendation of an increase in the size of the 2000
Stock Incentive Plan, we note that (i) many of the options granted under this
plan are currently at exercise prices that exceed the current stock price of
our common stock and have never been repriced and thus may expire unexercised;
(ii) our annualized level of stock incentive grants (i.e., run rate) cap for
future stock incentive grants has been decreased, resulting in an
approximately 40% - 60% reduction in stock incentive grants to be awarded this
year for fiscal 2003 performance from the amounts that market data suggest
should be awarded pursuant to the company's compensation strategy; and (iii)
stock ownership guidelines for all senior executives have been made more
strict. Absent an increase in shares available under the 2000 Stock Incentive
Plan, it will be very difficult to attract, retain and motivate employees
without a significant increase in cash compensation to bring their
compensation up to market-competitive levels. Accordingly, on March 18, 2003,
our board of directors adopted, subject to shareholder approval, an amendment
to the 2000 Stock Incentive Plan increasing the number of shares of common
stock that may be issued under the 2000 Stock Incentive Plan from 3,000,000 to
4,100,000.
The determination on the increase in number of shares available for
issuance under the 2000 Stock Incentive Plan was based on a number of factors,
including the recommendations of Mercer Human Resource Consulting, a global
compensation and benefits consulting firm, based on its review of market
practices of a peer group of companies, the current number of shares of stock
incentive awards outstanding, the number of eligible participants and
projected grant levels. In addition, the number of shares by which the 2000
Stock Incentive Plan would be increased reflects the reduced annualized grant
level of restricted stock.
If our shareholders approve the amendment increasing the number of
shares of common stock that may be issued under the 2000 Stock Incentive Plan,
the compensation committee of the board of directors and the board have
approved the grant of the following stock options (at an exercise price
corresponding to the closing price of the common stock on the date of the
annual shareholders meeting) and restricted stock under the 2000 Stock
Incentive Plan on the date of the annual shareholders meeting as follows:
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New Plan Benefits
2000 Stock Incentive Plan
Dollar Number of Dollar Number of
Value of Units of Value of Units of
Restricted Restricted Stock Stock
Name and Position Stock ($) Stock Options($) Options
- -------------------------- ---------- ---------- ---------- ----------
E. Scott Beattie (1) 37,800 (2) 75,600
Paul F. West (1) 18,480 (2) 36,960
Stephen J. Smith (1) 9,000 (2) 18,000
Ronald L. Rolleston (1) 5,000 (2) 10,000
Joel B. Ronkin (1) 5,000 (2) 10,000
Gretchen Goslin (3) (1) 4,000 (2) 8,000
Executive Group (1) 75,280 (2) 150,560
Non-Executive Director
Group -- -- -- --
Non-Executive Officer
Employee Group (Estimate) (1) 110,000 (2) 275,000
(1) The dollar value of the restricted stock is based on the closing price of
our common stock on the grant date, which would be the date of approval of
the amendment to the 2000 Stock Incentive Plan, and is therefore not
determinable at this time. This restricted stock, if granted, will vest
in equal thirds over a three-year period from the date of the shareholder
approval of the amendment to the 2000 Stock Incentive Plan.
(2) The dollar value of the common stock underlying the stock options is based
on the closing price of our common stock on the grant date, which would be
the date of approval of the amendment to the 2000 Stock Incentive Plan,
and is therefore not determinable at this time. These stock options, if
granted, will vest in equal thirds over a three-year period from the date
of the shareholder approval of the amendment to the 2000 Stock Incentive
Plan.
(3) Ms. Goslin is a named executive as set forth under "Executive
Compensation" but is not an executive officer of the company.
The following summary of the 2000 Stock Incentive Plan is not intended
to be complete and is qualified in its entirety by reference to the 2000
Stock Incentive Plan, as amended, and proposed to the shareholders for
approval, which is attached as Exhibit A to this Proxy Statement.
SUMMARY OF THE 2000 STOCK INCENTIVE PLAN
ADMINISTRATION. The 2000 Stock Incentive Plan will be administered by
the compensation committee of the board of directors (the "Committee"), which
is comprised of not less than two members who shall be (i) "Non-Employee
Directors" within the meaning of Rule 16b-3(b)(3) (or any successor rule)
promulgated under the Securities Exchange Act of 1934, as amended, and (ii)
"outside directors" within the meaning of Treasury Regulation Section 1.162-
27(e)(3) under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). The Committee is authorized, subject to the provisions of the
2000 Stock Incentive Plan, to establish such rules and regulations as it deems
necessary for the proper administration of the 2000 Stock Incentive Plan and
to make such determinations and interpretations and to take such action in
connection with the 2000 Stock Incentive Plan and any Benefits granted as it
deems necessary or advisable. Thus, among the Committee's powers are the
authority to select officers and other employees of, and consultants and
advisors to, us and our subsidiaries to receive Benefits, and to determine the
form, amount and other terms and conditions of Benefits, the timing of any
grants, the number of shares subject to each award, the period of
exercisability, the designation of options as ISOs or NSOs (as defined herein)
and the other terms and provisions thereof. The current members of the
Committee are Fred Berens and George Dooley.
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ELIGIBILITY. Options may be granted to officers and employees of, and
consultants and advisors to, our company and our subsidiaries and affiliates
as the Committee in its sole discretion determines to be significantly
responsible for our success and future growth and profitability.
TYPE OF BENEFITS. Benefits under the 2000 Stock Incentive Plan may be
granted in any one or a combination of (a) Stock Options, (b) Stock
Appreciation Rights, (c) Stock Awards, (d) Performance Awards and (e) Stock
Units (each as described in the 2000 Stock Incentive Plan, and collectively,
the "Benefits"). Stock Awards, Performance Awards, and Stock Units may, as
determined by the Committee in its discretion, constitute Performance-Based
Awards, as described in Section 11 of the 2000 Stock Incentive Plan. Benefits
shall be evidenced by agreements (which need not be identical) in such forms
as the Committee may from time to time approve; provided, however, that in the
event of any conflict between the provisions of the 2000 Stock Incentive Plan
and any such agreements, the provisions of the 2000 Stock Incentive Plan shall
prevail. Benefits may be granted singly, in combination, or in tandem as
determined by the Committee.
STOCK OPTIONS. Under the 2000 Stock Incentive Plan, the Committee may
grant awards in the form of options to purchase shares of Common Stock.
Options may either be incentive stock options ("ISOs"), qualifying for special
tax treatment, or non-qualified options. The Committee will, with regard to
each stock option, determine the number of shares subject to the option, the
manner and time of the option's exercise (but in no event later than ten years
after the date of grant) and vesting, and the exercise price per share of
stock subject to the option; however, the exercise price shall not be less
than 100% of the fair market value of the Common Stock as reflected by the
closing price of the Common Stock on the date the stock option is granted (the
"Fair Market Value"). The exercise price may be paid in cash or, in the
discretion of the Committee, by the delivery of shares of our Common Stock
then owned by the participant, or by delivery to us of (x) irrevocable
instructions to deliver directly to a broker the stock certificates
representing the shares for which the Option is being exercised, and (y)
irrevocable instructions to such broker to sell such shares for which the
Option is being exercised, and promptly deliver to us the portion of the
proceeds equal to the Option exercise price and any amount necessary to
satisfy our obligation for withholding taxes, or any combination thereof. For
purposes of making payment in shares of Common Stock, such shares shall be
valued at their Fair Market Value on the date of exercise of the Option and
shall have been held by the Participant for at least six months. The
Committee may prescribe any other method of paying the exercise price that it
determines to be consistent with applicable law and the purpose of the 2000
Stock Incentive Plan, including, without limitation, in lieu of the exercise
of a Stock Option by delivery of shares of Common Stock then owned by a
participant, providing us with a notarized statement attesting to the number
of shares owned, where upon verification by us, we would issue to the
participant only the number of incremental shares to which the participant is
entitled upon exercise of the Stock Option or by us retaining from the shares
of Common Stock to be delivered upon the exercise of the Stock Option that
number of shares having a Fair Market Value on the date of exercise equal to
the option price of the number of shares with respect to which the Participant
exercises the Stock Option.
In the case of ISOs, however, the exercise price per share of ISOs
granted to any holder of our capital stock (or any subsidiary or parent
corporation) representing 10% or more of our voting power (or any subsidiary
or parent corporation) will be in an amount that the Committee determines, in
its good faith judgment, to be not less than 110% of the Fair Market Value of
the Common Stock on the date the ISO is granted.
Options granted under the 2000 Stock Incentive Plan are exercisable at
such times, in such amounts and during such period or periods as the Committee
may determine at the date the option is granted, which period or periods will
end, at the discretion of the Committee, not more than 10 years after the date
of grant and, in the case of a person who at the date of grant owns our
capital stock (or the capital stock of any subsidiary or parent corporation)
representing 10% or more of our voting power (or the voting power of any
subsidiary or parent corporation), not more than five years from the date of
grant. Except as otherwise provided under the Code, to the extent that the
aggregate fair market value of shares subject to ISOs (under any of our plans
or the plans of any subsidiary or parent corporation) exercisable
- 20 -
for the first time in any calendar year exceeds $100,000, such excess will be
treated s NSOs (as defined below).
STOCK APPRECIATION RIGHTS (SARs). The 2000 Stock Incentive Plan
authorizes the Committee to grant an SAR either in tandem with a stock option
or independent of a stock option. An SAR is a right to receive a payment, in
cash, Common Stock, or a combination thereof, equal to the excess of (x) the
Fair Market Value, or other specified valuation (which shall not be greater
than the Fair Market Value), of a specified number of shares of Common Stock
on the date the right is exercised over (y) the fair market value, or other
specified valuation (which shall not be less than Fair Market Value), of such
shares of Common Stock on the date the right is granted, all as determined by
the committee. Each SAR shall be subject to such terms and conditions as the
Committee shall impose from time to time.
STOCK AWARDS. The Committee may, in its discretion, grant Stock Awards
(which may include mandatory payment of bonus incentive compensation in stock)
consisting of Common Stock issued or transferred to participants with or
without other payments therefor. Stock Awards may be subject to such terms
and conditions as the Committee determines appropriate, including, without
limitation, restrictions on the sale or other disposition of such shares, the
right of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods, and may
constitute Performance-Based Awards, as described below. The Stock Award
shall specify whether the participant shall have, with respect to the shares
of Common Stock subject to a Stock Award, all of the rights of a holder of
shares of Common Stock, including the right to receive dividends and to vote
the shares.
PERFORMANCE AWARDS. The 2000 Stock Incentive Plan allows for the grant
of performance awards which may take the form of shares of Common Stock or
stock units, or any combination thereof and which may constitute Performance-
based Awards. Such awards will be contingent upon the attainment over a
period to be determined by the Committee of certain performance targets. The
length of the performance period, the performance targets to be achieved and
the measure of whether and to what degree such targets have been achieved will
be determined by the Committee. Payment of earned performance awards will be
made in accordance with terms and conditions prescribed or authorized by the
Committee. The participant may elect to defer, or the Committee may require
the deferral of, the receipt of performance awards upon such terms as the
Committee deems appropriate.
STOCK UNITS. The Committee may, in its discretion, grant Stock Units to
participants, which may constitute Performance-Based Awards and which may be
entitled to a Dividend Equivalent Right. A "Stock Unit" means a notional
account representing one share of Common Stock. A "Dividend Equivalent Right"
means the right to receive the amount of any dividend paid on the share of
Common Stock underlying a Stock Unit. The Committee determines the criteria
for the vesting of Stock Units and whether a participant granted a Stock Unit
shall be entitled to Dividend Equivalent Rights (as defined in the 2000 Stock
Incentive Plan). Upon vesting of a Stock Unit, unless the Committee has
determined to defer payment with respect to such unit or a participant has
elected to defer payment, shares of Common Stock representing the Stock Units
will be distributed to the participant (unless the Committee provides
for the payment of the Stock Units in cash, or partly in cash and partly in
shares of Common Stock, equal to the value of the shares of Common Stock which
would otherwise be distributed to the participant).
PERFORMANCE-BASED AWARDS. Certain Benefits granted under the 2000 Stock
Incentive Plan may be granted in a manner such that the Benefit qualifies for
the performance-based compensation exemption to Section 162(m) of the Code
("Performance-Based Awards"). As determined by the Committee in its
sole discretion, either the granting or vesting of such Performance-Based
Awards will be based upon one or more of the following factors: net sales,
earnings, net sales growth, market share, net operating profit, expense
targets, working capital targets relating to inventory and/or accounts
receivable, operating margin, return on equity, return on assets, planning
accuracy, market price per share and total return to shareholders, or any
combination of the foregoing.
With respect to Performance-Based Awards, the Committee shall establish
in writing, (x) the goals applicable to a given period and such performance
goals shall state, in terms of an objective formula
- 21 -
or standard, the method for computing the amount of compensation payable to
the participant if such performance goals are obtained and (y) the individual
employees or class of employees to which such performance-based goals apply no
later than 90 days after the commencement of such period (but in no event
after 25% of such period has elapsed). No Performance-Based Award shall be
payable to, or vest with respect to, as the case may be, any participant for a
given fiscal period until the Committee certifies in writing that the
objective performance goals (and any other material terms) applicable to such
period have been satisfied.
FOREIGN LAWS. The Committee may grant Benefits to individual
participants who are subject to the tax laws of nations other than the United
States, which Benefits may have terms and conditions as determined by the
Committee as necessary to comply with applicable foreign laws. The Committee
may take any action which it deems advisable to obtain approval of such
Benefits by the appropriate foreign governmental entity; provided, however,
that no such Benefits may be granted to such individuals and no action may be
taken which would result in a violation of the Exchange Act, the Code or any
other applicable law.
OTHER TERMS OF BENEFITS. The 2000 Stock Incentive Plan provides that
Benefits shall not be transferable other than by will or the laws of descent
and distribution. The Committee shall determine the treatment to be afforded
to a participant in the event of termination of employment for any reason
including death, disability or retirement. Notwithstanding the foregoing,
other than with respect to incentive stock options, the Committee may permit
the transferability of an award by a participant to members of the
participant's immediate family or trusts for the benefit of such person or
family partnerships.
Upon the grant of any Benefit under the 2000 Stock Incentive Plan, the
Committee may, by way of an agreement with the participant, establish such
other terms, conditions, restrictions and/or limitations covering the grant of
the Benefit as are not inconsistent with the 2000 Stock Incentive Plan. No
Benefit shall be granted under the 2000 Stock Incentive Plan after November
20, 2010. The Committee reserves the right to amend, suspend or terminate the
2000 Stock Incentive Plan at any time, subject to the rights of participants
with respect to any outstanding Benefits. No Amendment of the 2000 Stock
Incentive Plan may be made without approval of our shareholders if the
amendment will: (i) disqualify any ISOs granted under the 2000 Stock
Incentive Plan; (ii) increase the total number of shares which may be issued
under the 2000 Stock Incentive Plan; (iii) increase the maximum number of
shares with respect to stock options, SARs and other Benefits that may be
granted to any individual under the 2000 Stock Incentive Plan; (iv) change the
types of factors on which Performance-Based Awards are to be based under the
2000 Stock Incentive Plan; or (v) modify the requirements as to eligibility
for participation in the 2000 Stock Incentive Plan.
The 2000 Stock Incentive Plan contains provisions for equitable
adjustment of Benefits in the event of a merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, reverse stock
split, split up, spinoff, combination of shares, exchange of shares, dividend
in kind or other like change in capital structure or distribution (other than
normal cash dividends) to our shareholders. The 2000 Stock Incentive Plan
contains provisions for the acceleration of exercisability or vesting of
Benefits in the event of a "change in control" (as defined in Section 280G of
the Code) of our company, including the cash settlement of such Benefits.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE 2000 STOCK INCENTIVE PLAN
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The statements in the
following paragraphs of the principal federal income tax consequences of
Benefits under the 2000 Stock Incentive Plan are based on statutory authority
and judicial and administrative interpretations, as of the date of this Proxy
Statement, which are subject to change at any time (possibly with retroactive
effect). The law is technical and complex, and the discussion below
represents only a general summary.
INCENTIVE STOCK OPTIONS. ISOs granted under the 2000 Stock Incentive
Plan are intended to meet the definitional requirements of Section 422(b) of
the Code for "incentive stock options."
- 22 -
An employee who receives an ISO does not recognize any taxable income
upon the grant of such ISO. Similarly, the exercise of an ISO generally does
not give rise to federal income tax to the employee, provided that (i) the
federal "alternative minimum tax," which depends on the employee's particular
tax situation, does not apply and (ii) the employee is employed by us from the
date of grant of the option until three months prior to the exercise thereof,
except where such employment terminates by reason of disability (where the
three-month period is extended to one year) or death (where this requirement
does not apply). If an employee exercises an ISO after these requisite
periods, the ISO will be treated as an NSO (as defined below) and will be
subject to the rules set forth below under the caption "Non-Qualified Stock
Options and Stock Appreciation Rights."
Further, if after exercising an ISO, an employee disposes of the Common
Stock so acquired more than two years from the date of grant and more than one
year from the date of transfer of the Common Stock pursuant to the exercise of
such ISO (the "applicable holding period"), the employee will generally
recognize a long-term capital gain or loss equal to the difference, if any,
between the amount received for the shares and the exercise price. If,
however, an employee does not hold the shares so acquired for the applicable
holding period -- thereby making a "disqualifying disposition" -- the employee
would recognize ordinary income equal to the excess of the fair market value
of the shares at the time the ISO was exercised over the exercise price and
the balance, if any, income would be long-term capital gain (provided the
holding period for the shares exceeded one year and the employee held such
shares as a capital asset at such time). If the disqualifying disposition is
a sale or exchange that would permit a loss to be recognized under the Code
(were a loss in fact to be realized), and the sale proceeds are less than the
fair market value of the shares on the date of exercise, the employee's
ordinary income therefrom would be limited to the gain (if any) realized on
the sale.
An employee who exercises an ISO by delivering Common Stock previously
acquired pursuant to the exercise of another ISO is treated as making a
"disqualifying disposition" of Common Stock if such shares are delivered
before the expiration of their applicable holding period. Upon the exercise
of an ISO with previously acquired shares as to which no disqualifying
disposition occurs, despite some uncertainty, it appears that the employee
would not recognize gain or loss with respect to such previously acquired
shares.
We will not be allowed a federal income tax deduction upon the grant or
exercise of an ISO or the disposition, after the applicable holding period, of
the Common Stock acquired upon exercise of an ISO. In the event of a
disqualifying disposition, we generally will be entitled to a deduction in an
amount equal to the ordinary income included by the employee, provided that
such amount constitutes an ordinary and necessary business expense to us and
is reasonable and the limitations of Sections 280G and 162(m) of the Code
(discussed below) do not apply.
NON-QUALIFIED STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. Non-
qualified stock options ("NSOs") granted under the 2000 Stock Incentive Plan
are options that do not qualify as ISOs. An employee who receives an NSO or
an SAR will not recognize any taxable income upon the grant of such NSO or
SAR. However, the employee generally will recognize ordinary income upon
exercise of an NSO in an amount equal to the excess of the fair market value
of the shares of Common Stock at the time of exercise over the exercise price.
Similarly, upon the receipt of cash or shares pursuant to the exercise of an
SAR, the individual generally will recognize ordinary income in an amount
equal to the sum of the cash and the fair market value of the shares received.
As a result of Section 16(b) of the Exchange Act, under certain
circumstances, the timing of income recognition may be deferred (generally for
up to six months (the "Deferral Period")) for any individual who is an officer
or director of our company or a beneficial owner of more than ten percent
(10%) of any class of our equity securities. Absent a Section 83(b) election
(as described below under "Other Awards"), recognition of income by the
individual will be deferred until the expiration of the Deferral Period, if
any.
- 23 -
The ordinary income recognized with respect to the receipt of shares or
cash upon exercise of an NSO or an SAR will be subject to both wage
withholding and other employment taxes. In addition to the customary methods
of satisfying the withholding tax liabilities that arise upon the exercise of
an SAR for shares or upon the exercise of an NSO, we may satisfy the liability
in whole or in part by withholding shares of Common Stock from those that
otherwise would be issuable to the individual or by the employee tendering
other shares owned by him or her, valued at their fair market value as of the
date that the tax withholding obligation arises.
A federal income tax deduction generally will be allowed to us in an
amount equal to the ordinary income included by the individual with respect to
his or her NSO or SAR, provided that such amount constitutes an ordinary and
necessary business expense to us and is reasonable and the limitations of
Sections 280G and 162(m) of the Code do not apply.
If an individual exercises an NSO by delivering shares of Common Stock,
other than shares previously acquired pursuant to the exercise of an ISO which
is treated as a "disqualifying disposition" as described above, the individual
will not recognize gain or loss with respect to the exchange of such shares,
even if their then fair market value is different from the individual's tax
basis. The individual, however, will be taxed as described above with respect
to the exercise of the NSO as if he or she had paid the exercise price in cash
and we likewise generally will be entitled to an equivalent tax deduction.
OTHER AWARDS. With respect to other Benefits under the 2000 Stock
Incentive Plan that are settled either in cash or in shares of Common Stock
that are either transferable or not subject to a substantial risk of
forfeiture (as defined in the Code and the regulations thereunder), employees
generally will recognize ordinary income equal to the amount of cash or the
fair market value of the Common Stock received.
With respect to Benefits under the 2000 Stock Incentive Plan that are
settled in shares of Common Stock that are restricted to transferability or
subject to a substantial risk of forfeiture -- absent a written election
pursuant to Section 83(b) of the Code filed with the Internal Revenue Service
within 30 days after the date of transfer of such shares pursuant to the award
(a "Section 83(b) election") -- an individual will recognize ordinary income
at the earlier of the time at which (i) the shares become transferable or (ii)
the restrictions that impose a substantial risk of forfeiture of such shares
lapse, in an amount equal to the excess of the fair market value (on such
date) of such shares over the price paid for the award, if any. If a Section
83(b) election is made, the individual will recognize ordinary income, as of
the transfer date, in an amount equal to the excess of the fair market value
of the Common Stock as of that date over the price paid for such award, if
any.
The ordinary income recognized with respect to the receipt of cash,
shares of Common Stock or other property under the 2000 Stock Incentive Plan,
will be subject to both wage withholding and other employment taxes.
We generally will be allowed a deduction for federal income tax purposes
in an amount equal to the ordinary income recognized by the employee, provided
that such amount constitutes an ordinary and necessary business expense and is
reasonable and the limitations of Sections 280G and 162(m) of the Code do not
apply.
DIVIDENDS AND DIVIDEND EQUIVALENTS. To the extent Benefits under the
2000 Stock Incentive Plan earn dividends or dividend equivalents, whether paid
currently or credited to an account established under the 2000 Stock Incentive
Plan, an individual generally will recognize ordinary income with respect to
such dividends or dividend equivalents.
CHANGE IN CONTROL. In general, if the total amount of payments to an
individual that are contingent upon a "change in control" of our company,
including payments under the 2000 Stock Incentive Plan that vest upon a
"change in control," equals or exceeds three times the individual's "base
amount" (generally, such individual's average annual compensation for the five
calendar years preceding the change in control), then, subject to certain
exceptions, the payments may be treated as "parachute
- 24 -
payments" under the Code, in which case a portion of such payments would be
non-deductible to us and the individual would be subject to a 20% excise tax
on such portion of the payments.
CERTAIN LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION. With
certain exceptions, Section 162(m) of the Code denies a deduction to publicly
held corporations for compensation paid to certain executive officers in
excess of $1 million per executive per taxable year (including any deduction
with respect to the exercise of an NSO or SAR or the disqualifying disposition
of stock purchased pursuant to an ISO). One such exception applies to certain
performance-based compensation provided that such compensation has been
approved by shareholders in a separate vote and certain other requirements are
met.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT OF THE 2000 STOCK INCENTIVE PLAN.
AUDIT COMMITTEE REPORT
The audit committee is comprised solely of independent directors, as
defined in Section 301 of the Sarbanes-Oxley Act of 2002 and in the
Marketplace Rules of The Nasdaq Stock Market, Inc. The audit committee
operates under a written charter that was adopted by the board of directors
and was attached as Appendix A to the proxy statement for the annual meeting
held on September 13, 2001. The audit committee reviews and assesses the
adequacy of our charter annually, and the audit committee expects the board
will amend the charter based on the audit committee's recommendations as
necessary to reflect new regulatory requirements such as those established
pursuant to the Sarbanes-Oxley Act of 2002 and the associated Nasdaq rules.
Elizabeth Arden's management is responsible for the preparation,
presentation and integrity of the company's financial statements; internal
controls; accounting and financial reporting principles and procedures
designed to ensure compliance with accounting standards and applicable laws.
The company's independent auditors are responsible for performing an
independent audit of the financial statements in accordance with generally
accepted auditing standards. Although the audit committee members possess
broad experience in analyzing and reviewing financial statements, we are not
professional accountants or auditors, and our functions are not intended to
duplicate or to certify the actions of management of Elizabeth Arden and the
independent auditors.
As described more fully in our charter, the audit committee's
responsibilities include reviewing the following with Elizabeth Arden's
management, its finance staff and the independent auditors: (i) analyses and
reports prepared by management and the independent auditors of significant
financial reporting issues and judgments made in connection with the
preparation of the company's financial statements; (ii) the quality and
adequacy of the company's internal controls; (iii) major changes to the
company's auditing and accounting principles and practices as suggested by the
independent auditors or management; (iv) the results of the audit, any
problems or difficulties the auditors may have encountered, changes in scope
of the audit and any management letters provided by the auditors and the
company's responses to these letters; and (v) any legal and regulatory matters
that may have a material impact on the company's financial statements. The
audit committee is also responsible for (i)the appointment, compensation,
retention and oversight of the company's independent auditors; (ii) pre-
approving the retention of the company's independent auditors for permitted
non-audit services and (iii) reviewing the independent auditors' independence.
The audit committee reviewed and discussed with management the audited
financial statements of the company for the fiscal year ended January 31,
2003. The committee discussed with PricewaterhouseCoopers LLP, the company's
independent auditors, the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended, "Communication with Audit Committees."
The audit committee also considered whether the provision by
PricewaterhouseCoopers of non-audit services to the company is compatible with
maintaining the auditors' independence. The audit
- 25 -
committee received from PricewaterhouseCoopers the written disclosures and
letter required by Independence Standards Board Standard No. 1, as amended,
"Independence Discussions with Audit Committees," and discussed with
PricewaterhouseCoopers their independence from the company, including any
relationships that may impact their independence.
Based on the review and discussions referred to in this report, the
audit committee recommended to the board of directors that the audited
financial statements be included in Elizabeth Arden's Annual Report on Form
10-K for the year ended January 31, 2003 for filing with the Securities and
Exchange Commission.
In fiscal 2004, we adopted the following policy regarding the provision
by our independent auditors of non-audit services and the corresponding fees,
and the procedures for approval of these services and fees: (i) the chief
financial officer and general counsel of the company will evaluate the
proposed engagement to confirm that the engagement is not prohibited by any
applicable rules of the Securities and Exchange Commission or the Nasdaq Stock
Market, (ii) following the confirmation by the chief financial officer and the
general counsel, the chairperson of the audit committee will determine whether
the company should engage the independent public auditor for the non-audit
services and, if so, negotiate the terms of the engagement with the
independent public auditor and (iii) the chairperson of the audit committee
will report to the full audit committee at its next regularly scheduled
meeting about any engagements of the independent public auditor for non-audit
services that have been approved.
Fred Berens
George Dooley
J.W. Nevil Thomas
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The audit committee of the board of directors has appointed
PricewaterhouseCoopers LLP as our independent auditors for the fiscal year
ending January 31, 2004. The appointment of independent auditors by the audit
committee is submitted annually for approval by the shareholders. Although
shareholder approval is not required, if the shareholders do not ratify the
appointment, the audit committee will reconsider the matter. Representatives
of PricewaterhouseCoopers are expected to be present at the annual meeting,
will be given an opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions from
shareholders.
On July 11, 2001, the board of directors decided not to reappoint
Deloitte & Touche LLP as our independent auditors and appointed
PricewaterhouseCoopers as our independent auditors and to audit our financial
statements for the fiscal year ended January 31, 2002. The client-auditor
relationship with Deloitte & Touche was terminated effective July 13, 2001,
and the appointment of PricewaterhouseCoopers was effective on July 20, 2001.
The audit committee recommended this decision to the board of directors, and
the board of directors approved the decision. The shareholders of the company
ratified the appointment of PricewaterhouseCoopers as our independent auditors
for the fiscal year ended January 31, 2002 at the annual meeting of
shareholders held on September 13, 2001.
The reports of Deloitte & Touche on our financial statements for the
fiscal years ended January 31, 2000 and 2001 contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle. In connection with its audits of our
fiscal years ended January 31, 2000 and 2001 and through July 13, 2001, there
were no disagreements with Deloitte & Touche on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of Deloitte
& Touche would have caused them to make reference thereto in their report on
the financial statements for those years. During the fiscal years ended
January 31, 2000 and 2001 and through July 13, 2001, there were no reportable
events (as defined in Regulation S-K Item 304(a)(1)(v)(A) through (D)).
- 26 -
We provided Deloitte & Touche a copy of the foregoing disclosures.
Deloitte & Touche provided us with a letter addressed to the Securities and
Exchange Commission stating its concurrence with the above statements on
accounting matters. A copy of that letter, dated July 17, 2001, was filed as
Exhibit 16 to the Form 8-K and the Form 8-K/A filed by us with the Securities
and Exchange Commission on July 20, 2001 in connection with the change of our
independent auditors.
Prior to their engagement as our new independent auditors,
PricewaterhouseCoopers were the auditors of the worldwide Elizabeth Arden
fragrance, cosmetic and skin care business that we acquired in January 2001.
The decision to change independent auditors was based primarily on
PricewaterhouseCoopers' in-depth knowledge of the Elizabeth Arden business,
including its international operations.
During the fiscal years ended January 31, 2000 and 2001 and through
July 20, 2001, we did not consult with PricewaterhouseCoopers regarding either
(i) the application of accounting principles to a specific completed or
proposed transaction or the type of audit opinion that might be rendered on
our financial statements; or (ii) any matter that was either the subject of a
disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K
and the related instructions to Item 304 of Regulation S-K, or a reportable
event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR ENDING JANUARY 31, 2004.
FEES PAID TO PRICEWATERHOUSECOOPERS LLP AND DELOITTE & TOUCHE LLP
The following table shows the fees billed by our independent auditors
for the audit and other services provided for the fiscal years ended January
31, 2003 and 2002, respectively:
2002 2003
--------------------------------- ----------------------
Deloitte
PricewaterhouseCoopers & Touche PricewaterhouseCoopers
---------------------- -------- ----------------------
Audit Fees. . . . . $503,000 $39,000 $600,000
Audit-Related Fees. $82,000 -- $176,200
Tax Fees. . . . . . $941,000 -- $920,600
All Other Fees. . . $35,000 -- $15,900
Total . . . . . . . $1,561,000 $39,000 $1,712,700
AUDIT FEES. The aggregate fees billed by PricewaterhouseCoopers for
professional services rendered for both the audit of our annual consolidated
financial statements and the review of our quarterly financial statements
included in our Forms 10-Q for our fiscal year ended January 31, 2003 were
approximately $600,000. The aggregate fees billed by PricewaterhouseCoopers
for professional services rendered for the audit of our annual consolidated
financial statements for our fiscal year ended January 31, 2002, and the
review of our quarterly financial statements included in our Forms 10-Q for
the second and third quarters of fiscal year 2002, were approximately
$503,000. The aggregate fees billed by Deloitte & Touche for professional
services rendered for the review of our quarterly financial statements
included in our Form 10-Q for the first quarter of fiscal year 2002, were
approximately $39,000. This category also includes advice on audit and
accounting matters that arose as a result of the audit and the review of the
financial statements, the review of Securities and Exchange Commission filings
and the preparation of annual management letters.
AUDIT-RELATED FEES. The aggregate fees billed by PricewaterhouseCoopers
for audit-related services during the fiscal years ended January 31, 2003 and
2002 were approximately $176,200 and $82,000, respectively. The audit-related
services provided by PricewaterhouseCoopers during those years included
such services as statutory audits of the company's international subsidiaries
that were required by local jurisdictions.
- 27 -
TAX FEES. The aggregate fees billed by PricewaterhouseCoopers for tax
services during the fiscal years ended January 31, 2003 and 2002 were
approximately $920,600 and $941,000, respectively. The tax services provided
by PricewaterhouseCoopers during those years included such services as
domestic and international tax planning, tax compliance and general tax
advice.
ALL OTHER FEES. The aggregate fees billed by PricewaterhouseCoopers for
services they provided us, other than the services described above, for fiscal
years 2003 and 2002 were approximately $15,900 and $35,000, respectively. The
other services provided by PricewaterhouseCoopers during fiscal year 2002
related to professional advice regarding international stock incentive grants.
2004 SHAREHOLDERS' PROPOSALS AND NOMINATIONS OF BOARD MEMBERS
If a shareholder intends to present a proposal for action at the 2004
Annual Meeting and wishes to have that proposal considered for inclusion in
our proxy materials in reliance on Rule 14a-8 under the Securities Exchange
Act of 1934, the proposal must be submitted in writing and received by the
secretary of the company by January 22, 2004. The proposal must also meet the
other requirements of the rules of the Securities and Exchange Commission
relating to shareholder proposals.
Our By-Laws establish an advance notice procedure with regard to certain
matters, including shareholder proposals and nominations of individuals for
election to the board of directors. In general, written notice of a
shareholder proposal or a director nomination for an annual meeting must be
received by the secretary of the company no later than March 27, 2004, and
must contain specified information and conform to certain requirements, as set
forth in the By-Laws. If the company's presiding officer at any shareholders'
meeting determines that a shareholder proposal or director nomination was not
made in accordance with the By-Laws, we may disregard that proposal or
nomination.
In addition, if a shareholder submits a proposal outside of Rule 14a-8
for the 2004 Annual Meeting, and the proposal fails to comply with the advance
notice procedure prescribed by the By-Laws, then our proxy may confer
discretionary authority on the persons being appointed as proxies on behalf of
our board of directors to vote on the proposal.
Proposals and nominations should be addressed to: Secretary, Elizabeth
Arden, Inc., 14100 N.W. 60th Avenue, Miami Lakes, Florida 33014.
OTHER MATTERS
The company will bear the expense of soliciting proxies. Proxies will
be solicited principally by mail. Our directors, officers and regular
employees may, however, solicit proxies personally, by telephone or by
facsimile transmission. We will reimburse custodians, nominees or other
persons for their out-of-pocket expenses in sending proxy materials to
beneficial owners.
The board of directors is not aware of any matters to be presented at
the annual meeting other than the matters described herein and does not intend
to bring any other matters before the annual meeting. If any other matters
should, however, come before the annual meeting, or any adjournment or
postponement thereof, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies in accordance with their best
judgment.
By Order of the Board of Directors
OSCAR E. MARINA
Secretary
Miami Lakes, Florida
May 16, 2003
- 28 -
APPENDIX
REVOCABLE PROXY - COMMON STOCK
ELIZABETH ARDEN, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 25, 2003
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Oscar E. Marina and Marilyn Moore Basso as
attorneys and proxies, each with full powers of substitution, to act for the
undersigned to vote all shares of common stock of Elizabeth Arden, Inc., with
respect to which the undersigned is entitled to vote at the annual meeting of
shareholders, to be held at our executive offices at 14100 N.W. 60th Avenue,
Miami Lakes, Florida 33014, on Wednesday, June 25, 2003 at 10:00 a.m., local
time, and at any adjournment or postponement thereof, as stated on the reverse
side.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED IN A TIMELY MANNER, WILL BE
VOTED AT THE ANNUAL MEETING AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF IN
ACCORDANCE WITH THE DIRECTIONS SPECIFIED HEREIN. IF NO DIRECTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR
DIRECTORS LISTED IN PROPOSAL 1, FOR THE APPROVAL OF THE AMENDMENT TO OUR 2000
STOCK INCENTIVE PLAN SET FORTH IN PROPOSAL 2, FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDED JANUARY 31, 2004 SET FORTH IN PROPOSAL 3, AND ON OTHER
MATTERS PRESENTED FOR A VOTE, IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS
ACTING UNDER THIS PROXY. IN THE EVENT ANY NOMINEE FOR ELECTION AS A DIRECTOR
BECOMES UNAVAILABLE TO SERVE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
BALANCE OF THOSE NAMED AND A SUBSTITUTE SELECTED BY THE PERSONS NAMED IN THE
PROXY.
Each shareholder giving a proxy has the power to revoke it any time before
it is voted, either in person at the annual meeting, by written notice to the
Secretary of Elizabeth Arden, Inc. or by delivery of a later-dated proxy.
Attendance at the annual meeting without further action will not automatically
revoke a proxy.
[CONTINUED AND TO BE MARKED, DATED AND SIGNED ON REVERSE SIDE]
[REVERSE SIDE OF CARD]
The Board of Directors recommends a vote FOR Please mark your votes as indicated in
Items 1, 2 and 3. this example [X]
Item 1- ELECTION OF DIRECTORS Item 2- APPROVAL OF THE AMENDMENT TO
THE 2000 STOCK INCENTIVE PLAN.
E. Scott Beattie Richard C.W. Mauran
Fred Berens William M. Tatham FOR AGAINST ABSTAIN
George Dooley J. W. Nevil Thomas
[ ] [ ] [ ]
FOR WITHHOLD AUTHORITY
[ ] [ ]
Instruction: To withhold authority to vote for Item 3- RATIFICATION OF APPOINTMENT
any individual nominee, write that nominee's OF PRICEWATERHOUSECOOPERS LLP
name in the space provided below: AS THE INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDED
JANUARY 31, 2004.
________________________________________
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Other Business
- --------------
In their judgment, the proxies are authorized to vote
upon such other business as may properly come
before the annual meeting and any adjournment
or postponement thereof.
Signature:_______________________ Signature:__________________ Date:_____________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give full title
as such.