ELIZABETH ARDEN LOGO
FOR IMMEDIATE RELEASE
ELIZABETH ARDEN, INC. ANNOUNCES SECOND QUARTER
RESULTS FOR FISCAL 2006
~ Net Sales of $346 million; Reported EPS of $1.12 ~
~ Reaffirming Full Year Net Sales and EPS Guidance ~
~ Significant Improvement in Cash Flow From Operations ~
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New York, New York (February 2, 2006) -- Elizabeth Arden, Inc. (NASDAQ:
RDEN), a global prestige beauty products company, today announced financial
results for the second fiscal quarter ended December 31, 2005.
SECOND QUARTER RESULTS
Net sales advanced 7.1% to $346.0 million for the three months ended
December 31, 2005, from $323.0 million in the second quarter of the prior
fiscal year. New products, including the PREVAGE(TM) skin care line, the
fantasy Britney Spears fragrance, which ranked among the top three new
fragrance launches in U.S. department stores, and the new Elizabeth Arden
fragrance 5th Avenue after five led the growth. Net sales increased 8.2%
excluding the unfavorable impact of foreign currency translation.
Net income was $34.0 million, or $1.15 per diluted share, excluding the
impact of FAS 123R, "Share-Based Payment," of $1.4 million before taxes,
compared to $31.7 million, or $1.06 per diluted share, in the same period
last year. On a reported basis, net income was $33.1 million, or $1.12 per
diluted share, exceeding the Company's guidance.
E. Scott Beattie, Chairman and Chief Executive Officer of Elizabeth
Arden, Inc., commented, "We continue to be very excited about PREVAGE(TM),
the breakthrough anti-aging treatment. PREVAGE(TM) began appearing on
counters at U.S. department stores largely in December and quickly became the
number one selling skin care product in its category for the month. Sales
activity has been accelerating in January, which is evidence that our
advertising campaign is resonating well with consumers, and we intend to
intensify our advertising efforts to increase awareness. In addition,
PREVAGE(TM) recently launched at Harrods in the U.K. as the exclusive
European retailer and is on schedule to launch in other international
accounts in the spring. The Harrods launch was extremely successful, and
provides us additional confidence as we roll it out globally. Finally, our
mass business as a whole experienced solid sell-through performance, with
holiday sets experiencing double-digits increases with the largest retailers."
Mr. Beattie continued, "We also are extremely pleased with the success
of our working capital initiatives. We reduced inventories by nearly $50
million year to date and increased inventory turns by 25% as compared to the
prior year. This led to over a $60 million reduction in borrowings under our
working capital facility, and is a testament to our company-wide focus on
improving our return on invested capital.
"As we look forward to the second half of the fiscal year, we are
enthusiastic about the Daytona 500 fragrance launch in the U.S, the roll-out
internationally of fantasy and PREVAGE(TM) and the introduction of the Britney
Spears fragrance curious In Control. Finally, our business strategy in Asia
continues to develop. We just recently completed the acquisition of the
assets of our distributor in Taiwan, which complements the August 2005
acquisition of our distributor in China," commented Mr. Beattie.
The Company also noted that it recently added two key executives to its
international operations. Smith Chih-Hsin Chen, President of Elizabeth Arden
Greater China, joins the Company with extensive beauty sales and marketing
experience and was previously a senior executive at Avon Products Inc., where
he spent 20 years in various sales and operations positions in China, Taiwan
and the U.S. Mr. Chen will be responsible for all of the sales, marketing
and operational activities in the Greater China region. Tamara Minick-
Scokalo, Senior Vice President, Europe, will be responsible for the sales and
marketing activities in Western Europe, including management of all key
European accounts. Ms. Minick-Scokalo has had a long career in sales and
marketing at a number of leading consumer products companies, including
Procter & Gamble where she was responsible for managing various pan-European
businesses.
Concluded Mr. Beattie, "These hires are part of our plan to accelerate
the growth of our Northern Asia business and the growth and profitability of
our business in Europe. Hiring key people in these regions allows us to
maximize the significant brand recognition of the Elizabeth Arden name and
capitalize on the significant growth opportunities that exist for our
Company. While these initiatives were dilutive for the first half of fiscal
2006 and are expected to be so for the remainder of this fiscal year, we
expect positive revenue and earnings contributions from these efforts in
fiscal 2007."
SIX MONTHS RESULTS
For the six-months ended December 31, 2005, net sales increased 7.1% to
$573.3 million from $535.1 million from the six months ended December 31,
2004. Net income was $35.9 million versus $36.5 million for the year-ago
period and earnings per share were $1.21, excluding the impact of FAS 123R,
as compared to $1.23 in the prior year period. On a reported basis, earnings
were $1.15 per share.
STOCK BUYBACK
During the second quarter, the Company purchased 375,336 shares of
common stock for a total purchase price of $7.2 million. The Company
anticipates continuing its $40 million share repurchase program during the
remainder of the 2006 fiscal year and fiscal 2007.
OUTLOOK
Effective July 1, 2005, the Company adopted FAS 123R, "Share-Based
Payment," a new accounting pronouncement requiring the expensing of stock-
based compensation. Under this pronouncement, the Company has elected to
apply the standard prospectively, and prior year results have not been
restated. The earnings guidance, consistent with prior disclosure, includes a
pre-tax charge of approximately $1.4 million for each of the third and fourth
quarters of fiscal 2006, or $0.03 per diluted share, and a pre-tax charge of
$5.7 million, or $0.13 per diluted share, for the full fiscal year related to
this pronouncement. The earnings estimates exclude the debt
extinguishment charge the Company incurred of $0.5 million, or $0.01 per
diluted share, related to the early retirement of the $8.8 million principal
amount of 11 3/4% Senior Notes due 2011 on February 1, 2006. See table below
for reconciliation to earnings per diluted share estimate in accordance with
generally accepted accounting principles ("GAAP").
For the full fiscal year, the Company is reaffirming its expectations
for annual net sales of $980 million to $995 million and reported earnings
per diluted share to range between $1.20 and $1.26. Foreign currency
translation is estimated to negatively impact net sales growth by
approximately 1.0%. Excluding the stock compensation expense related to the
pronouncement mentioned above, earnings per diluted share are expected to
range between $1.33 and $1.39. See table below for reconciliation to
earnings per diluted share estimate in accordance with GAAP.
The following table sets forth the reconciliation of earnings per
diluted share estimate excluding the impact of the adoption of FAS 123R,
share-based payment, and debt extinguishment charges to the earnings per
diluted share estimate in accordance with GAAP. This information is being
provided for comparability purposes so that operating performance is
presented on a consistent basis with prior years.
Full Fiscal Year
------------------
Earnings per diluted share estimate excluding
FAS 123R and debt extinguishment costs $ 1.33 to $ 1.39
Cost associated with adoption of FAS 123R (0.13) (0.13)
------ ------
Earnings per diluted share estimate excluding
debt extinguishment costs 1.20 to 1.26
Debt extinguishment costs (0.01) (0.01)
------ ------
Earnings per diluted share estimate in
accordance with GAAP $ 1.19 to $ 1.25
====== ======
Regarding the second half of the fiscal year, the Company currently
expects net sales and earnings to be weighted more heavily towards the fourth
quarter than in the prior fiscal year. The guidance reflects the launches of
fantasy Britney Spears and PREVAGE(TM) into international markets that will
begin late this quarter, an increase in advertising and promotional expenses
in the third quarter to support these new launches and the continued
rationalization of inventory resulting from the Federated Department Store
and The May Department Stores Company merger. Advertising and promotional
costs are expected to increase double digits as compared to the third quarter
of the prior fiscal year to support new products.
As a result, the Company is introducing net sales guidance in the range
of $195 million to $200 million and $215 million to $225 million for the
third quarter and fourth quarters, respectively. Reported earnings per
diluted share are currently estimated to range between $0.01 to $0.03 and
$0.09 to $0.11 for the third quarter and fourth quarters, respectively.
CONFERENCE CALL INFORMATION
The Company will host a conference call today at 10:00 a.m. Eastern
Standard Time. All interested parties can listen to a live web cast of the
conference call on the Company's web site at www.elizabetharden.com or at
http://phx.corporate-ir.net/phoenix.zhtml?c=98237&p=irol-IRHome. An online
archive of the broadcast will be available within one hour of the completion
of the call and will be accessible on the Company's web site until February
16, 2006.
Elizabeth Arden is a global prestige beauty products company. The Company's
portfolio of brands includes the fragrance brands of Elizabeth Arden: Red
Door, Red Door Revealed, Elizabeth Arden 5th Avenue, Elizabeth Arden after
five, Elizabeth Arden green tea, and Elizabeth Arden Provocative Woman; the
fragrance brands of Elizabeth Taylor: White Diamonds and Passion; the
fragrances brands of Britney Spears: curious, curious in control and fantasy;
the Daytona 500 and GANT adventure men's fragrances; and the fragrances White
Shoulders, Geoffrey Beene's Grey Flannel, the Halston brands, Halston and
Halston Z-14, PS Fine Cologne for Men, Design and Wings; the Elizabeth Arden
skin care lines, including Ceramide and Eight Hour Cream, PREVAGE(TM) anti-
aging treatment and the Elizabeth Arden color cosmetics line.
Company Contact: Marcey Becker, Senior Vice President, Finance
(203) 462-5809
Investor/Press Contact: Allison Malkin/Michael Fox
Integrated Corporate Relations
(203) 682-8200
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, Elizabeth Arden, Inc., is hereby providing
cautionary statements identifying important factors that could cause our
actual results to differ materially from those projected in forward-looking
statements (as defined in such act). Any statements that are not historical
facts and that express, or involve discussions as to, expectations, beliefs,
plans, objectives, assumptions or future events or performance (often, but
not always, through the use of words or phrases such as "will likely result,"
"are expected to," "will continue," "is anticipated," "estimated," "intends,"
"plans" and "projects") may be forward-looking and may involve estimates and
uncertainties which could cause actual results to differ materially from
those expressed in the forward-looking statements. 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 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 and operations; the impact of competitive
products and pricing; risks of international operations, including foreign
currency fluctuations, economic and political consequences of terrorist
attacks, political instability in certain regions of the world, and external
factors affecting customer purchasing patterns; our ability to successfully
launch new products and implement our growth strategy; our ability to
successfully and cost-effectively integrate acquired businesses or new
brands; our substantial indebtedness, debt service obligations and
restrictive covenants in our revolving credit facility and our indenture for
our 7 3/4% senior subordinated notes; our customers' financial condition; our
ability to access capital for acquisitions; changes in product mix to less
profitable products; the retention and availability of key personnel; the
assumptions underlying our critical accounting estimates; delays in
shipments, inventory shortages and higher costs of production due to
interruption of operations at key third party manufacturing or fulfillment
facilities that manufacture or provide logistic services for the majority of
our supply of certain products; changes in the retail, fragrance and cosmetic
industries; our ability to protect our intellectual property rights; 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; 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.
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
-------------------------- --------------------------
December 31, December 31, December 31, December 31,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net Sales $ 345,893 $ 322,951 $ 573,271 $ 535,107
Cost of Sales 200,133 181,348 338,445 303,993
------------ ------------ ------------ ------------
Gross Profit 145,760 141,603 234,826 231,114
Gross Profit Percentage(a) 42.1% 43.8% 41.0% 43.2%
Selling, General and
Administrative Expenses 86,105 83,944 162,496 154,902
Depreciation and Amortization 5,376 5,449 10,649 10,982
------------ ------------ ------------ ------------
Total Operating Expenses 91,481 89,393 173,145 165,884
Interest Expense, Net 6,662 6,274 12,776 12,259
Income Before Income Taxes 47,617 45,936 48,906 52,971
Provision for Income Taxes 14,523 14,210 14,916 16,462
------------ ------------ ------------ ------------
Net Income $ 33,094 $ 31,726 $ 33,990 $ 36,509
============ ============ ============ ============
As reported:
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Basic Income Per Share $ 1.16 $ 1.15 $ 1.19 $ 1.33
Diluted Income Per Share $ 1.12 $ 1.06 $ 1.15 $ 1.23
Basic Shares 28,461 27,519 28,519 27,430
Diluted Shares 29,484 29,888 29,615 29,743
EBITDA(b) $ 59,655 $ 57,659 $ 72,331 $ 76,212
Adjusted before giving
effect to the adoption of
FAS 123R, share-based
payments:(c)
- --------------------------
Net Income $ 34,033 $ 31,726 $ 35,915 $ 36,509
Basic Income Per Share $ 1.20 $ 1.15 $ 1.26 $ 1.33
Diluted Income Per Share $ 1.15 $ 1.06 $ 1.21 $ 1.23
Basic Shares 28,461 27,519 28,519 27,430
Diluted Shares 29,484 29,888 29,615 29,743
EBITDA(b) $ 61,006 $ 57,659 $ 75,101 $ 76,212
(a) Based on the percentage 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 (GAAP)) as a measure
of our operating performance or to net cash provided by operating, investing
and financing activities (as determined in accordance with GAAP) as a measure
of our ability to meet cash needs. We believe that EBITDA is a measure
commonly reported and widely used by investors and other interested parties
as a measure of a company's operating performance and debt servicing ability
because it assists in comparing performance on a consistent basis without
regard to capital structure, depreciation and amortization or non-operating
factors (such as historical cost). Accordingly, as a result of our
capital structure, we believe EBITDA is a relevant measure. This information
has been disclosed here to permit a more complete comparative analysis of our
operating performance relative to other companies and of our debt servicing
ability. EBITDA may not, however, be comparable in all instances to other
similar types of measures.
The following is a reconciliation of net income, as determined in accordance
with GAAP, to EBITDA: (For a reconciliation of net income to EBITDA for prior
periods, see the Company's filings with the Securities and Exchange
Commission which can be found on the Company's website at
www.elizabetharden.com).
(In thousands) Three Months Ended Six Months Ended
-------------------------- --------------------------
December 31, December 31, December 31, December 31,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net income $ 33,094 $ 31,726 $ 33,990 $ 36,509
Plus:
Provision for income taxes 14,523 14,210 14,916 16,462
Interest expense, net 6,662 6,274 12,776 12,259
Depreciation and
amortization 5,376 5,449 10,649 10,982
------------ ------------ ------------ ------------
EBITDA 59,655 57,659 72,331 76,212
Impact of adopting FAS 123R,
share-based payments 1,351 -- 2,770 --
------------ ------------ ------------ ------------
EBITDA, excluding FAS 123R
costs $ 61,006 $ 57,659 $ 75,101 $ 76,212
============ ============ ============ ============
(c) The following tables reconcile the calculation of net income per share
on a basic and fully diluted basis from the amounts reported in accordance
with GAAP to such amounts before giving effect to the impact of adopting FAS
123R, share-based payments, net of taxes. This disclosure is being provided
because we believe it is meaningful to our investors and other interested
parties to understand the Company's operating performance for comparability
purposes and on a consistent basis without regard to the impact of adopting
FAS 123R, share-based payments. The presentation of the non-GAAP information
titled "Net income per share as adjusted, before giving effect to the
adoption of FAS 123R, share-based payments, net of taxes" or "Net income per
diluted share as adjusted, before giving effect to the adoption of FAS 123R,
share-based payments, net of taxes" is not meant to be considered in
isolation or as a substitute for net income or diluted income per share
prepared in accordance with GAAP.
[Remainder of Page Intentionally left Blank]
(In thousands, except per) Three Months Ended Six Months Ended
share data) -------------------------- --------------------------
December 31, December 31, December 31, December 31,
2005 2004 2005 2004
------------ ------------ ------------ ------------
As reported:
- -----------
Basic
Net income as reported $ 33,094 $ 31,726 $ 33,990 $ 36,509
============ ============ ============ ============
Weighted average shares
outstanding as reported 28,461 27,519 28,519 27,430
============ ============ ============ ============
Net income per basic
share as reported $ 1.16 $ 1.15 $ 1.19 $ 1.33
============ ============ ============ ============
Diluted
Net income as reported $ 33,094 $ 31,726 $ 33,990 $ 36,509
============ ============ ============ ============
Weighted average shares
and potential dilutive
shares as reported 29,484 29,888 29,615 29,743
============ ============ ============ ============
Net income per diluted
share as reported $ 1.12 $ 1.06 $ 1.15 $ 1.23
============ ============ ============ ============
Adjusted before giving effect
to the adoption of FAS 123R,
share-based payments,
net of taxes
- -----------------------------
Basic
Net income as reported $ 33,094 $ 31,726 $ 33,990 $ 36,509
Impact of adopting FAS
123R, share-based payments,
net of taxes 939 -- 1,925 --
------------ ------------ ------------ ------------
Net income attributable
to common shareholders
as adjusted, before
giving effect to the
adoption of FAS 123R,
share-based payments,
net of taxes $ 34,033 $ 31,726 $ 35,915 $ 36,509
============ ============ ============ ============
Weighted average shares
outstanding as reported 28,461 27,519 28,519 27,430
============ ============ ============ ============
Net income per share as
adjusted, before giving
effect to the adoption of
FAS 123R, share-based
payments, net of taxes $ 1.20 $ 1.15 $ 1.26 $ 1.33
============ ============ ============ ============
Diluted
Net income as reported $ 33,094 $ 31,726 $ 33,990 $ 36,509
Impact of adopting FAS
123R, share-based
payments, net of taxes 939 -- 1,925 --
------------ ------------ ------------ ------------
Net income as adjusted,
before giving effect
to the adoption of FAS
123R, share-based
payments, net of taxes $ 34,033 $ 31,726 $ 35,915 $ 36,509
============ ============ ============ ============
Weighted average shares and
potential dilutive shares
as reported 29,484 29,888 29,615 29,743
============ ============ ============ ============
Net income per diluted
share as adjusted,
before giving effect
to the adoption of FAS
123R, share-based
payments, net of taxes $ 1.15 $ 1.06 $ 1.21 $ 1.23
============ ============ ============ ============
ELIZABETH ARDEN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
December 31, June 30, December 31,
2005 2005 2004
------------ --------- -------------
Cash $ 20,957 $ 25,316 $ 34,311
Accounts Receivable, Net 221,939 149,965 197,974
Inventories 227,261 273,343 259,709
Property and Equipment, Net 32,625 29,184 39,388
Exclusive Brand Licenses,
Trademarks and Intangibles, Net 184,908 186,527 188,059
Total Assets 725,985 719,897 755,544
Short-Term Debt 20,474 47,700 83,096
Current Portion of Long-Term Debt 8,802 -- --
Current Liabilities 198,503 219,484 273,333
Long-Term Liabilities 234,351 241,213 236,892
Total Debt 254,276 281,502 316,898
Shareholders' Equity 293,131 259,200 245,319
Working Capital 301,341 275,628 237,976