ELIZABETH ARDEN, INC.
[Red Door Logo]
FOR IMMEDIATE RELEASE
ELIZABETH ARDEN, INC. REPORTS SECOND QUARTER RESULTS
~ Net Sales Increase 13.6%; EPS Ahead of Consensus Estimates ~
~ Calls for Redemption $20 million of Senior Notes ~
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New York, New York (September 4, 2003) - Elizabeth Arden, Inc. (NASDAQ:
RDEN), a global prestige fragrance and beauty products company, today reported
double-digit sales growth for the second quarter of fiscal 2004 ended July 26,
2003. The Company also announced it has called for redemption $20 million of
its 10 3/8% Senior Notes due 2007.
SECOND QUARTER RESULTS
Net sales for the second quarter increased 13.6% to $144.4 million
compared with net sales of $127.2 million for the second quarter of the prior
fiscal year and exceeded the Company's prior guidance for net sales. Sales
growth was led by strength in the Company's mass business and international
operations. Excluding the impact of foreign currency translation, net sales
increased 9.0%.
Selling, general and administrative expenses increased to $56.3 million
compared with $47.8 million in the prior fiscal year period due to the
Company's increase in selling costs, advertising and promotional expenditures,
as well as the effects of foreign currency translation. Interest expense
declined to $10.2 million in the second quarter from $10.7 million in the
prior fiscal year period reflecting a reduction in the Company's long-term
debt and the benefit of lower interest rates under its bank credit facility.
The loss before income taxes was $14.2 million compared with a loss of
$15.8 million for the second quarter of the prior fiscal year. Net loss
attributable to common shareholders was $11.1 million, or a loss of $0.62 per
share, which was unchanged from the prior fiscal year period, reflecting a
lower effective tax rate this year as compared with the second quarter of the
prior fiscal year. On a per share basis, the results exceeded the analysts'
consensus estimate, which was a loss of $0.68 per share.
The Company's long-term debt outstanding at the end of the second quarter
declined by $18.2 million compared with the end of the second quarter of the
last fiscal year. As of July 26, 2003, short-term borrowings under the
Company's senior credit facility were $79.5 million compared with $74.0
million as of July 27, 2002.
E. Scott Beattie, Chairman and Chief Executive Officer of Elizabeth
Arden, Inc., commented, "The improvement in the second quarter reflects the
continued strength of our mass and international businesses as well as the
gradual recovery in travel retail. Additionally, we are encouraged by the
performance of our new launches as we are realizing the benefits of the
increased advertising and promotion we are putting behind our brand
franchises."
"Looking forward, we have an exciting marketing calendar as well as a strong
line-up of new products. Both ARDENBEAUTY, with a new television commercial
featuring Catherine Zeta-Jones, and House of Taylor's FOREVER ELIZABETH, with
its highly acclaimed television commercial, will be heavily promoted. Our
recent skin and color launches, including COLOR INTRIGUE and CERAMIDE'S PLUMP
PERFECT are performing better than expected, and we also are launching a new
Elizabeth Arden fragrance, RED DOOR REVEALED, this fall. All this, combined
with the strength of our mass and international businesses and the continued
signs of a recovery in the U.S. retail environment, gives us confidence as we
go into the second half of the year."
FIRST HALF RESULTS
Net sales for the first six months of fiscal 2004 increased to $279.2
million compared with $267.5 million for the same period of the prior fiscal
year. Selling, general and administrative expenses were $111.7 million
compared with $101.7 million in the prior fiscal year period. Interest
expense declined to $20.4 million for the first six months from $21.1 million
for the first six months of the last fiscal year. Net loss attributable to
common shareholders for the six-month period was $27.8 million as compared
with a net loss of $21.9 million for the same period last fiscal year.
REDEMPTION OF SENIOR NOTES
The Company called for redemption $20 million of its Series D 10 3/8%
Senior Notes due 2007. The Senior Notes are currently callable at a redemption
price of 103.458% of the principal amount, plus accrued interest. The
redemption date will be October 24, 2003. The Company will fund the
repurchase of its Senior Notes with proceeds from its revolving credit
facility, thereby benefiting from the approximate 600 basis point spread
between the cost of the Company's bank facility and its Senior Notes. The
Company also intends to continue to retire its long-term debt as part of its
initiative to deleverage its balance sheet. The Company expects to incur a
charge of $0.3 million, or $0.01 per fully diluted share, related to the
redemption of its Senior Notes in the third fiscal quarter of the current
fiscal year.
OUTLOOK
Based on the continued strength of the mass business, the success of the
Company's promotional activities and new product launches as well as improving
economic conditions, the Company confirms its previously provided guidance of
annual net sales of $790 million to $805 million and diluted earnings per
share of $0.93 to $0.98, assuming currency exchange rates remain at or near
their present levels.
With respect to the third quarter, the Company estimates net sales of
approximately $315 million to $325 million and earnings per fully diluted
share of $1.50 to $1.65. With respect to the fourth quarter, the Company
estimates net sales of $195 million to $205 million and earnings per fully
diluted share of $0.45 to $0.55. The guidance for the second half of the
current fiscal year reflects a shift in promotional and innovation activities
between the Company's third and fourth fiscal quarters as compared to prior
years.
CONFERENCE CALL INFORMATION
The Company will host a conference call today at 10:00 a.m. Eastern Time
to discuss second quarter results as well as its outlook for the remainder of
fiscal year 2004. All interested parties can listen to a live web cast of the
Company's conference call by logging on to the Company's web site at
www.elizabetharden.com. An online archive of the broadcast will be available
within one hour of the completion of the call and will be accessible on the
Company's web site at www.elizabetharden.com until September 18, 2003.
Elizabeth Arden is a global prestige fragrance and beauty products company.
The Company's portfolio of leading brands includes the fragrance brands Red
Door, Elizabeth Arden green tea, 5th Avenue, ardenbeauty, Elizabeth Taylor's
White Diamonds, Passion and Forever Elizabeth, White Shoulders, Geoffrey
Beene's Grey Flannel, Halston, Halston Z-14, Unbound, PS Fine Cologne for Men,
Design and Wings; the Elizabeth Arden skin care line, including Ceramides and
Eight Hour Cream; and the Elizabeth Arden cosmetics line.
Company Contact: Marcey Becker
Senior Vice President, Finance
(203) 462-5809
Investor Contact: Cara O'Brien/Athan Dounis
Financial Dynamics
(212) 850-5600
Press Contact: Stephanie Sampiere
Financial Dynamics
(212) 850-5600
In connection with the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995, Elizabeth Arden, Inc., is hereby providing
cautionary statements identifying important factors that could cause our
actual results to differ materially from those projected in forward-looking
statements (as defined in such act). Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of words
or phrases such as "will likely result," "are expected to," "will continue,"
"is anticipated," "estimated," "intends," "plans" and "projection") are not
historical facts and may be forward-looking and may involve estimates and
uncertainties which could cause actual results to differ materially from those
expressed in the forward-looking statements. Accordingly, any such statements
are qualified in their entirety by reference to, and are accompanied by, the
following key factors that have a direct bearing on our results of operations:
our substantial indebtedness and debt service obligations; our ability to
successfully and cost-effectively integrate acquired businesses or new brands;
our absence of contracts with customers or suppliers and our ability to
maintain and develop relationships with customers and suppliers; international
and domestic economic and business changes that could impact consumer
confidence; our customers' financial condition; our ability to access capital
for acquisitions; the assumptions underlying our critical accounting
estimates; the retention and availability of key personnel; changes in the
retail, fragrance and cosmetic industries; our ability to launch new products
and implement our growth strategy; the impact of competitive products and
pricing; changes in product mix to less profitable products; risks of
international operations, including foreign currency fluctuations; economic
and political consequences of terrorist attacks and political instability in
certain regions of the world; diseases affecting customer purchasing patterns
including the Severe Acute Respiratory Syndrome (SARS) epidemic, delays in
shipments, inventory shortages and higher costs of production due to
interruption of operations at key manufacturing or fulfillment facilities
that, after consolidations of manufacturing and fulfillment locations,
manufacture or provide logistic services for the majority of our supply of
certain products; changes in the legal, regulatory and political environment
that impact, or will impact, our business, including changes to customs or
trade regulations or accounting standards; legal and regulatory proceedings
that affect, or will affect, our business; and other risks and uncertainties.
We caution that the factors described herein could cause actual results to
differ materially from those expressed in any forward-looking statements we
make and that investors should not place undue reliance on any such
forward-looking statements. Further, any forward-looking statement speaks
only as of the date on which such statement is made, and we undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of anticipated or unanticipated events or circumstances. New
factors emerge from time to time, and it is not possible for us to predict all
of such factors. Further, we cannot assess the impact of each such factor on
our results of operations or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
(Financial Tables To Follow)
ELIZABETH ARDEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(Unaudited)
(In thousands, except percentages and per share data)
Three Months Ended Six Months Ended
July 26, July 27, July 26, July 27,
2003 2002 2003 2002
-------- -------- -------- --------
Net Sales $144,423 $127,186 $279,177 $267,470
Cost of Sales 87,033 78,723 173,055 164,838
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Gross Profit 57,390 48,463 106,122 102,632
Gross Profit Percentage (a) 39.7% 38.1% 38.0% 38.4%
Selling, General and
Administrative Expenses 56,287 47,767 111,746 101,660
Depreciation and Amortization 5,086 6,038 10,215 11,406
------- ------- ------- -------
Total Operating Expenses 61,373 53,805 121,961 113,066
Interest Expense, Net (10,242) (10,651) (20,376) (21,055)
Other Income (Expense) (2) 160 -- 141
Loss Before Income Taxes (14,227) (15,833) (36,215) (31,348)
Benefit from Income Taxes (4,080) (5,699) (10,393) (11,285)
------- ------- ------- -------
Net Loss (10,147) (10,134) (25,822) (20,063)
Accretion and Dividend on
Preferred Stock 987 914 1,963 1,827
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Net Loss Attributable to
Common Shareholders $(11,134) $(11,048) $(27,785) $(21,890)
======= ======= ======= =======
Basic Loss Per Share $(0.62) $(0.62) $(1.55) $(1.24)
Diluted Loss Per Share $(0.62) $(0.62) $(1.55) $(1.24)
Basic Shares 17,916 17,719 17,898 17,716
Diluted Shares 17,916 17,719 17,898 17,716
EBITDA (b) $1,101 $ 856 $(5,624) $1,113
EBITDA Percentage (a) 0.8% 0.7% (2.0)% 0.4%
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(a) Based on the percentages of net sales for the periods.
(b) EBITDA is defined as net income plus the provision for income taxes (or
net loss less the benefit from income taxes), plus interest expense, plus
depreciation and amortization. EBITDA should not be considered as an
alternative to operating income (loss) or net income (loss) (as determined in
accordance with generally accepted accounting principles) as a measure of our
operating performance or to net cash provided by operating, investing and
financing activities (as determined in accordance with generally accepted
accounting principles) as a measure of our ability to meet cash needs. We
believe that EBITDA is a measure commonly reported and widely used by
investors and other interested parties as a measure of a company's operating
performance and debt servicing ability because it assists in comparing
performance on a consistent basis without regard to capital structure
(particularly when acquisitions are involved), depreciation and amortization,
which can vary significantly depending upon accounting methods (particularly
when acquisitions are involved) or non-operating factors (such as historical
cost). Accordingly, as a result of our capital structure and the accounting
method used for our acquisitions, we believe EBITDA is a relevant measure.
This information has been disclosed here to permit a more complete comparative
analysis of our operating performance relative to other companies and of our
debt servicing ability. EBITDA may not, however, be comparable in all
instances to other similar types of measures.
The following is a reconciliation of net loss, as determined in accordance
with generally accepted accounting principles, to EBITDA: (For a
reconciliation of net loss to EBITDA for prior periods, see the Company's
Annual Report on Form 10-K for the fiscal year ended January 31, 2003 which
can be found on the Company's website at www.elizabetharden.com).
(In thousands)
Three Months Ended Six Months Ended
July 26, July 27, July 26, July 27,
2003 2002 2003 2002
-------- -------- -------- --------
Net loss $(10,147) $(10,134) $(25,822) $(20,063)
Plus (less):
Benefit from income taxes (4,080) (5,699) (10,393) (11,285)
Interest expense 10,242 10,651 20,376 21,055
Depreciation and
amortization 5,086 6,038 10,215 11,406
-------- -------- -------- --------
EBITDA $ 1,101 $ 856 $ (5,624) $ 1,113
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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited except for January 31, 2003)
(In thousands)
-------------------- As of ---------------------
July 26, 2003 January 31, 2003 July 27, 2002
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Cash $ 14,285 $ 22,663 $ 15,750
Accounts Receivable, Net 123,337 118,844 110,300
Inventories 268,389 200,876 245,027
Property and Equipment, Net 35,630 36,216 36,863
Exclusive Brand Licenses,
Trademarks and
Intangibles, Net 201,176 205,534 206,928
Total Assets 695,045 627,620 681,216
Short-Term Debt 79,500 2,068 74,000
Current Liabilities 254,583 150,833 243,229
Long-Term Liabilities 316,988 329,309 331,894
Total Debt 392,119 322,397 400,030
Preferred Stock 17,597 15,634 13,807
Shareholders' Equity 105,877 131,844 92,286
Working Capital 186,198 216,461 174,059
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