Form 8-K ELIZABETH ARDEN INC For: Nov 04

ELIZABETH ARDEN, INC.

(Exact name of registrant as specified in its charter)

FLORIDA

1-6370

59-0914138

(State or other jurisdiction
of incorporation)

(Commission
File Number)

(I.R.S. Employer
Identification No.)

ELIZABETH ARDEN, INC. ANNOUNCES
FIRST QUARTER FISCAL 2016 RESULTS

Ÿ

Net sales increases driven by the International business and the Elizabeth Arden brand (at constant foreign currency rates)

Ÿ

Foreign currency headwinds to continue, more significantly through the second fiscal quarter, and to negatively impact full year net sales growth by approximately 3% (as compared to the Company's estimate of 2% in August 2015).

Ÿ

Gross margin expansion primarily due to better sales mix, improved commercial execution and improved cost structure;

Ÿ

Lower overall selling, general and administrative expenses, with lower indirect overhead costs and targeted reinvestment in advertising to accelerate revenue growth; and

Ÿ

Improved EBITDA margins from gross margin expansion and lower indirect overhead expenses.

ELIZABETH ARDEN, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(In thousands, except percentages and per share data)

Three Months Ended

September 30,

September 30,

2015

2014

Net Sales

$

265,951

$

270,378

Cost of Goods Sold:

   Cost of Sales

154,890

161,326

   Depreciation Related to Cost of Goods Sold

1,555

1,999

        Total Cost of Goods Sold

156,445

163,325

Gross Profit

109,506

107,053

Gross Profit Percentage

41.2

%

39.6

%

Selling, General and Administrative Expenses

109,675

113,865

Depreciation and Amortization

9,515

10,713

Total Operating Expenses

119,190

124,578

Interest Expense, Net

7,261

7,756

Loss Before Income Taxes

(16,945

)

(25,281

)

(Benefit from) Provision for Income Taxes

(609

)

224

Net Loss

$

(16,336

)

$

(25,505

)

Net Loss Attributable to Noncontrolling Interests

(400

)

(155

)

Net Loss Attributable to Elizabeth Arden Shareholders

(15,936

)

(25,350

)

Less: Accretion and Dividends on Preferred Stock (c)

644

20,446

Net Loss Attributable to Elizabeth Arden Common
   Shareholders

$

(16,580

)

$

(45,796

)

As reported:

Net Loss Per Diluted Share Attributable to Elizabeth Arden
   Common Shareholders

$

(0.56

)

$

(1.54

)

Basic Shares

29,857

29,781

Diluted Shares

29,857

29,781

EBITDA (a)

$

1,386

$

(4,813

)

EBITDA margin (a)

0.5

%

(1.8

)%

Adjusted to exclude non-recurring costs, net of taxes:

Net Sales

$

265,951

$

273,057

Gross Profit

$

112,790

$

109,769

Gross Profit Percentage

42.4

%

40.2

%

Net Loss Per Diluted Share Attributable to Elizabeth Arden
   Common Shareholders

$

(0.18

)

$

(0.43

)

EBITDA (a)

$

9,813

$

1,279

EBITDA margin (a)

3.7

%

0.5

%

(a)    EBITDA is defined as net income attributable to Elizabeth Arden common shareholders plus the provision for income taxes (or net loss attributable to Elizabeth Arden common shareholders, less the benefit from income taxes or plus the provision for income taxes) plus interest expense, plus depreciation and amortization, plus net income (or net loss) attributable to noncontrolling interest, plus accretion and dividends on preferred stock. EBITDA should not be considered as an alternative to income (loss) from operations or net income (loss) attributable to Elizabeth Arden common shareholders (as determined in accordance with generally accepted accounting principles (GAAP)) as a measure of our operating performance or to net cash provided by (used in) operating 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, preferred stock accretion or dividends or non-operating factors (such as historical cost). Accordingly, as a result of our capital structure, we believe EBITDA is a relevant measure. This information has been disclosed here to permit a more complete comparative analysis of our operating performance relative to other companies and of our debt servicing ability. EBITDA may not, however, be comparable in all instances to other similar types of measures. We have also disclosed EBITDA as adjusted without giving effect to the 2014 Performance Improvement Plan, the 2016 Business Transformation Program and restructuring and other non-recurring costs. This disclosure is being provided for comparability purposes because we believe it is meaningful to our investors and other interested parties to understand the EBITDA performance of the Company on a consistent basis without regard to the effect of charges related to the 2014 Performance Improvement Plan, the 2016 Business Transformation Program and restructuring and other non-recurring costs.

      The table below reconciles net (loss) income attributable to Elizabeth Arden common shareholders, as determined in accordance with GAAP, to EBITDA and to EBITDA as adjusted: (For a reconciliation of net income (loss) attributable to Elizabeth Arden common shareholders or net income (loss) to EBITDA for prior periods, see the Company's filings with the Securities and Exchange Commission which can be found on the Company's website at www.elizabetharden.com).

(Amounts in thousands)

Three Months Ended

September 30,
2015

September 30,
2014

Net loss attributable to Elizabeth Arden common shareholders

$

(16,580

)

$

(45,796

)

Plus:

   (Benefit from) provision for income taxes

(609

)

224

   Interest expense, net

7,261

7,756

   Depreciation related to cost of goods sold

1,555

1,999

   Depreciation and amortization

9,515

10,713

   Net loss attributable to noncontrolling interest

(400

)

(155

)

   Accretion and dividends on preferred stock

644

20,446

EBITDA

1,386

(4,813

)

Non-recurring and other costs

8,427

6,092

EBITDA as adjusted

$

9,813

$

1,279

      The table below reconciles net cash flow used in operating activities, as determined in accordance with GAAP, to EBITDA:

(Amounts in thousands)

Three Months Ended

September 30,
2015

September 30,
2014

Net cash used in operating activities

$

(106,948

)

$

(107,875

)

Changes in assets and liabilities, net of acquisitions

103,028

95,564

Interest expense, net

7,261

7,756

Amortization of senior note offering and credit facility costs

(359

)

(421

)

Amortization of senior note premium

212

200

 (Benefit from) provision for income taxes

(609

)

224

Deferred income taxes

493

1,052

Amortization of share-based awards

(1,692

)

(1,252

)

Asset impairments

--

(61

)

EBITDA

$

1,386

$

(4,813

)

      The table below reconciles the amounts reported in accordance with GAAP to such amounts before giving effect to charges related to the 2014 Performance Improvement Plan, the 2016 Business Transformation Program, and restructuring and other non-recurring costs. This disclosure is being provided for comparability purposes because we believe it is meaningful to our investors and other interested parties to understand our operating performance on a consistent basis without regard to the effect of charges related to the 2014 Performance Improvement Plan, the 2016 Business Transformation Program and restructuring and other non-recurring costs. The presentation in the table below of the non-GAAP information included in the "Adjusted" columns is not meant to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

ELIZABETH ARDEN, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Adjusted Amounts

(In thousands, except percentages, per share data and footnotes)

Three Months Ended

Three Months Ended

September 30, 2015

September 30, 2014

Reported

Adjustments

Adjusted

Reported

Adjustments

Adjusted

Net Sales

$

265,951

$

--

$

265,951

$

270,378

$

2,679

$

273,057

Cost of Goods Sold:

   Cost of Sales

154,890

(3,284

) ^(a)

151,606

161,326

(37

)

161,289

   Depreciation Related to Cost of Goods Sold

1,555

--

1,555

1,999

--

1,999

          Total Cost of Goods Sold

$

156,445

$

(3,284

)

$

153,161

$

163,325

$

(37

)

$

163,288

Gross Profit

109,506

3,284

112,790

107,053

2,716

109,769

Gross Profit Percentage

41.2

%

42.4

%

39.6

%

40.2

%

Selling, General and Administrative Expenses

109,675

(5,143

) ^(b)

104,532

113,865

(3,376

)^(f)

110,489

Depreciation and Amortization

9,515

(114

) ^(c)

9,401

10,713

--

10,713

Total Operating Expenses

119,190

(5,257

)

113,933

124,578

(3,376

)

121,202

Interest Expense, Net

7,261

--

7,261

7,756

--

7,756

Loss Before Income Taxes

(16,945

)

8,541

(8,404

)

(25,281

)

6,092

(19,189

)

(Benefit from) Provision for Income Taxes

(609

)

(2,573

)^(d)

(3,182

)

224

(6,613

)^(g)

(6,389

)

Net Loss

(16,336

)

11,114

(5,222

)

(25,505

)

12,705

(12,800

)

(400

)

--

(400

)

(155

)

--

(155

)

Net Loss Attributable to Elizabeth
   Arden Shareholders

(15,936

)

11,114

(4,822

)

(25,350

)

12,705

(12,645

)

Less: Accretion and Dividends on Preferred Stock

644

--

644

20,446

(20,151

)

295

Net Loss Attributable to Elizabeth
   Arden Common Shareholders

$

(16,580

)

$

11,114

$

(5,466

)

$

(45,796

)

$

32,856

$

(12,940

)

EBITDA

$

1,386

$

8,427

$

9,813

$

(4,813

)

$

6,092

$

1,279

Net Loss Per Basic Share Attributable to
   Elizabeth Arden Common Shareholders

$

(0.56

)

$

0.38

$

(0.18

)

$

(1.54

)

$

1.11

$

(0.43

)

Net Loss Per Diluted Share Attributable to
   Elizabeth Arden Common Shareholders

$

(0.56

)

$

0.38

$

(0.18

)

$

(1.54

)

$

1.11

$

(0.43

)

(a)   Includes $3.3 million of inventory costs under our 2016 Business Transformation Program primarily related to the closing of our Brazil affiliate, as well as changes in certain distribution and customer arrangements.

(b)   $5.1 million in expenses under the 2016 Business Transformation Program primarily comprised of severance and other employee-related expenses and related transition costs.

(c)   Includes $0.1 million for the acceleration of depreciation expense for leasehold improvements related to leased space vacated under the 2016 Business Transformation Program.

(d)   On a reported and adjusted basis, our effective tax rate was 3.6% and 39.9%, respectively. The reported tax rate includes valuation allowances of $3.0 million against our U.S. deferred tax assets and $2.0 million against deferred tax assets in certain foreign operations recorded as non-cash charges to income tax expense.

(e)   Includes $2.7 million of returns and markdowns under our 2014 Performance Improvement Plan primarily due to changes to customer and distribution arrangements.

(f)   Includes $3.4 million in expenses under the 2014 Performance Improvement Plan primarily comprised of severance, other employee-related expenses and related transition costs associated with a reduction in global headcount positions.

(g)   On a reported and adjusted basis, our effective tax rate was (0.9)% and 33.3%, respectively. The reported tax rate includes valuation allowances of $7.4 million against our U.S. deferred tax assets recorded as non-cash charges to income tax expense.

(In thousands)

Three Months Ended

% Increase (Decrease)

September 30,
2015

September 30,
2014

GAAP

Constant
Rates⁽¹⁾

Segment Net Sales:

    North America

$

172,196

$

172,359

(0.1

)%

1.2

%

    International

93,755

100,698

(6.9

)%

5.4

%

Total

$

265,951

$

273,057

(2.6

)%

2.8

%

Reconciliation:

  Segment Net Sales

$

265,951

$

273,057

--

--

    Less:

       Unallocated sales returns and markdowns (2)

--

2,679

--

--

Net Sales

$

265,951

$

270,378

(1.6

)%

3.8

%

(In thousands)

Three Months Ended

% Increase (Decrease)

September 30, 2015

September 30, 2014

GAAP

Constant
Rates⁽¹⁾

Product Category Net Sales:

    Elizabeth Arden Brand

$

99,098

$

100,051

(1.0

)%

8.1

%

    Celebrity, Lifestyle, Designer and
      Other Fragrances

166,853

170,327

(2.0

)%

1.3

%

Total

$

265,951

$

270,378

(1.6

)%

3.8

%

(In thousands)

Three Months Ended

% Increase (Decrease)

September 30, 2015

September 30, 2014

GAAP

Constant
Rates (1)

Product Category Net Sales:

    Elizabeth Arden Brand

$

99,098

$

102,432

(3.3

)%

5.6

%

    Celebrity, Lifestyle, Designer and
      Other Fragrances

166,853

170,625

(2.2

)%

1.1

%

Total

$

265,951

$

273,057

(2.6

)%

2.8

%

(1)    Constant currency information compares results between periods assuming exchange rates had remained constant period-over-period and excludes gains and losses from foreign currency contracts in all periods. We calculate constant currency information by translating current-period results using prior-year GAAP foreign currency exchange rates.

(2)    Amounts for the three months ended September 30, 2014, exclude returns and markdowns under our 2014 Performance Improvement Plan.

ELIZABETH ARDEN, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET DATA

(Unaudited)

(In thousands)

September 30, 2015

June 30,
2015

September 30,
2014

Cash

$

37,252

$

46,085

$

50,828

Accounts Receivable, Net

192,516

105,414

244,470

Inventories

264,280

240,740

359,874

Property and Equipment, Net

97,688

105,821

113,372

Exclusive Brand Licenses, Trademarks and Intangibles, Net

222,172

224,895

270,941

Goodwill

31,607

31,607

31,607

Total Assets

901,829

813,224

1,143,610

Short-Term Debt

110,600

8,300

146,747

Current Liabilities

325,097

215,977

340,380

Long-Term Liabilities

408,076

410,535

410,586

Long-Term Debt

355,422

355,634

356,232

Redeemable Noncontrolling Interest

3,792

4,222

5,398

Redeemable Preferred Stock

50,000

50,000

50,000

Total Shareholders' Equity

114,864

132,490

337,246

Working Capital

198,673

207,923

356,534

SUPPLEMENTARY CASH FLOW INFORMATION

(Unaudited)

Three Months Ended

(In thousands)

September 30,
2015

September 30,
2014

Net cash used in operating activities

$

(106,948

)

$

(107,875

)

Net cash used in investing activities

(2,432

)

(7,305

)

Net cash provided by financing activities

101,954

111,012

Net decrease in cash and cash equivalents

(8,833

)

(5,480

)

          The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. This press release and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management's plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "will" and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective products, future operating or financial performance or results of current and anticipated products or sales efforts, expenses and/or cost savings, interest rates, foreign exchange rates, the outcome of contingencies such as legal proceedings, and financial results. A list of factors that could cause our actual results of operations and financial condition to differ materially is set forth below, and these factors are discussed in greater detail under Item 1A -- "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended June 30, 2015:

*

our ability to implement our 2014 Performance Improvement Plan and our 2016 Business Transformation Program or other restructuring or cost saving initiatives, our ability to realize the anticipated benefits of our 2014 Performance Improvement Plan, our 2016 Business Transformation Program and any other restructuring or cost saving initiatives and/or changes in the timing of such benefits;

*

whether we will incur higher than anticipated costs, expenses or charges related to the implementation of our 2016 Business Transformation Program or any additional restructuring or cost savings activities, and/or changes in the expected timing of such costs, expenses or charges;

*

decisions or actions resulting from our continued reexamination of our business, including implementing any additional restructuring activities, and the timing and amount of any costs, expenses or charges that may be incurred as a result, or the benefits anticipated to result from such decisions or actions;

*

our ability to realize benefits from the strategic investment made by affiliates of Rhône Capital L.L.C. in our company;

*

factors affecting our relationships with our customers or our customers' businesses, including the absence of contracts with customers, our customers' financial condition, reduction in consumer traffic or demand, and changes in the retail, fragrance and cosmetic industries, such as the consolidation of retailers and the closing of retail doors as well as retailer inventory control practices, including, but not limited to, levels of inventory carried at point of sale and practices used to control inventory shrinkage;

*

risks of international operations, including foreign currency fluctuations, hedging activities, restrictions on our ability to repatriate cash, economic and political consequences of terrorist attacks, disruptions in travel, unfavorable changes in U.S. or international laws or regulations, diseases and pandemics, and political instability in certain regions of the world;

*

our reliance on license agreements with third parties for the rights to sell most of our prestige fragrance brands;

*

our reliance on third-party manufacturers for our owned and licensed products and our absence of contracts with suppliers of distributed brands or raw materials and components for manufacturing of owned and licensed brands;

*

delays in shipments, inventory shortages and higher supply chain costs due to the loss of or disruption in our distribution facilities or at key third-party manufacturing or fulfillment facilities that manufacture or provide logistic services for our products;

*

our ability to respond in a timely manner to changing consumer preferences and purchasing patterns and other international and domestic conditions and events that impact retailer and/or consumer confidence and demand, such as domestic or international recessions or economic uncertainty;

*

our ability to protect our intellectual property rights and to operate our business without infringing the intellectual property rights of others;

*

the success, or changes in the timing or scope, of our new product launches, advertising and merchandising programs;

*

our ability to successfully manage our inventories;

*

the quality, safety and efficacy of our products;

*

the impact of competitive products and pricing;

*

our ability to (i) implement our growth strategy and acquire or license additional brands or secure additional distribution arrangements, (ii) successfully and cost-effectively integrate acquired businesses or new brands, (iii) successfully expand our geographic presence and distribution channels, and (iv) finance our growth strategy and our working capital requirements;

*

our level of indebtedness, our ability to realize sufficient cash flows from operations to meet our debt service obligations and working capital requirements, and restrictive covenants in our revolving credit facility, second lien credit agreement, and the indenture for our 7 3/8% senior notes;

*

our ability to realize sufficient cash flows from operations to meet our dividend and redemption obligations under the terms of our preferred stock, and our ability to comply with our other obligations under the terms of our preferred stock, including those set forth in the shareholders agreement relating thereto;

*

changes in product mix to less profitable products;

*

the retention and availability of key personnel;

*

changes in the legal, regulatory and political environment that impact, or will impact, our business, including changes to customs or trade regulations, laws or regulations relating to ingredients or other chemicals or raw materials contained in products, advertising or packaging, or accounting standards or critical accounting estimates;

*

the success of our global Elizabeth Arden brand repositioning efforts and global business strategy;

*

the impact of tax audits, including the ultimate outcome of the pending Internal Revenue Service examination of our U.S. federal tax returns for the fiscal years ended June 30, 2010, 2011 and 2012, changes in tax laws or tax rates, and our ability to utilize our deferred tax assets and/or the establishment of valuation allowances related thereto;