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Elizabeth Arden (RDEN) Posts Q4 Loss of $1.04/Share, Rhône Capital to Make Strategic Investment

August 19, 2014 7:21 AM EDT
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Price: $13.98 --0%

Financial Fact:
Net income: -23.13M

Today's EPS Names:
FSI, RELV, NEOM, More
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(Updated - August 19, 2014 7:24 AM EDT)

Elizabeth Arden, Inc. (Nasdaq: RDEN) reported Q4 EPS of ($1.04), $0.70 worse than the analyst estimate of ($0.34). Revenue for the quarter came in at $191.72 million versus the consensus estimate of $241.64 million.

OUTLOOK

Fiscal 2015 will be focused on stabilizing the business and will be the first year of a multi-year plan to rebuild profitability. The Company expects a modest improvement in adjusted earnings for fiscal 2015 over the prior year with continued improvement in fiscal 2016. Specifically, for fiscal 2015, the Company currently expects the following:

  • The first quarter of fiscal 2015 will continue to be challenged by the same factors that affected recent quarters
  • Net sales headwinds to continue for the first half of fiscal 2015, resulting primarily from a lower level of product innovation as compared to the first half of the prior fiscal year
  • Net sales increases in the second half of the fiscal year versus the prior year period as the year-over-year product launch comparisons moderate and the Company begins to realize the impact of improved pricing
  • Gross margin expansion due to improved pricing, better mix, lower discounts and realization of reduced supply chain and product costs
  • Lower overall selling, general and administrative expenses, with some reinvestment of 2014 Improvement Plan savings to drive future growth
  • Improved EBITDA margins from gross margin expansion and lower selling, general and administrative expenses
  • Stronger cash flow from operations as a result of higher earnings and lower investment in inventory

STRATEGIC INVESTMENT BY RHÔNE CAPITAL

The Company also announced today that investment funds affiliated with Rhône Capital L.L.C. (“Rhône Capital”) have agreed to purchase $50 million of redeemable preferred stock of the Company and also will receive warrants to purchase 2.5 million shares of the Company’s common stock at an exercise price of $20.39 per share, representing approximately 7.6% of the Company’s outstanding common stock on an as-exercised basis. Rhône Capital also has advised the Company that, subject to market conditions and applicable legal or regulatory approvals, it intends to increase its ownership of the Company’s common stock over time. Rhône Capital has agreed to enter into a standstill with the Company, pursuant to which it will not acquire more than 30% of the Company’s common stock after giving effect to the exercise of the warrants. Dividends on the preferred stock will be payable at a rate of 5% annually. Goldman, Sachs & Co. acted as financial advisor to the Company, and Weil, Gotshal & Manges LLP acted as legal counsel to the Company.

Rhône Capital is an investment firm focused on global investments in businesses with international presence and global scale, with particular expertise in the consumer product, retail and beauty sectors and with a track record of adding value in public companies as a minority investor. In connection with its investment, Rhône Capital has the right to designate one member to the Company’s Board of Directors for so long as it maintains its initial percentage interest in the Company, and the right to designate an additional member in the event that Rhône Capital acquires an ownership stake in the Company’s common stock of 20% or more on a fully diluted basis.

M. Steven Langman, Co-Founder of Rhône Capital, commented, “Having assessed the opportunity, and focused on the market positioning of Elizabeth Arden, the quality and potential of Elizabeth Arden’s brand portfolio, and the quality of the Company’s management team, we firmly believe that this represents a unique investment opportunity to partner with a proven entrepreneurial organization and help them achieve their ambition to be a leader in the global beauty industry.”

E. Scott Beattie, Chairman, President and Chief Executive Officer of Arden, commented, “I am very excited to have Rhône Capital as an equity partner, to support the turnaround of our business in the short-term and the continued global growth and development of our brands and organization in the future. I am confident that we have a compelling business plan to improve the Company's performance. Rhône Capital’s investment and commitment to Elizabeth Arden in light of its significant experience in our industry is evidence that Rhône Capital shares our optimism and belief in the outlook for the Company."

For earnings history and earnings-related data on Elizabeth Arden, Inc. (RDEN) click here.



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