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Elizabeth Arden Inc. Reports Operating Results (10-Q)

February 03, 2012 | About:
10qk

10qk

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Elizabeth Arden Inc. (RDEN) filed Quarterly Report for the period ended 2011-12-31.

Elizabeth Arden Inc. has a market cap of $1.11 billion; its shares were traded at around $38.36 with a P/E ratio of 22.4 and P/S ratio of 0.9.

Highlight of Business Operations:

Net Sales. Net sales increased by 6.0% or $24.3 million for the three months ended December 31, 2011, compared to the three months ended December 31, 2010. Excluding the favorable impact of foreign currency, net sales increased by 5.8% or $23.4 million. Net sales for Elizabeth Arden branded products increased by $14.2 million due to higher sales in all product categories, primarily led by higher sales of skin care products. Net sales of licensed and other owned products increased by $5.7 million primarily due to the launches of the Taylor Swift fragrance Wonderstruck and the John Varvatos fragrance Star USA, and higher sales of Curve and Juicy Couture fragrances. Partially offsetting these increases were lower sales of Britney Spears fragrances, in part due to the prior year launch of Radiance, as well as Mariah Carey fragrances. Sales of distributed brands were approximately $4.0 million higher than the prior year period. Pricing changes had an immaterial effect on net sales.

SG&A. Selling, general and administrative expenses increased 8.7%, or $11.8 million, for the three months ended December 31, 2011, compared to the three months ended December 31, 2010. The increase was due to higher marketing and sales expenses of $10.2 million and higher general and administrative expenses of $1.6 million. The increase in marketing and sales expenses was primarily due to (i) higher trade advertising, sales promotion and direct selling expenses of $5.8 million, (ii) higher media expenses of $4.6 million as a result of the timing of spend on fragrance launches which were more concentrated in the second quarter of the current fiscal year as compared to the prior year, and (iii) higher marketing and sales overhead expenses of $1.4 million, partially offset by lower royalty expenses of $2.4 million due primarily to the amendment to the license agreement with Liz Claiborne (see Note 6 -- "Exclusive Brand Licenses, Trademarks and Intangibles, Net and Goodwill" to the Notes to Unaudited Consolidated Financial Statements). The increase in general and administrative expenses was principally due to the unfavorable impact of foreign currency translation of certain of our affiliates' balance sheets as the current year included losses of $2.3 million compared to losses of $0.1 million in the prior year period. The three months ended December 31, 2010 also included total restructuring and Global Efficiency Re-engineering Initiative-related one-time costs of $0.4 million. For the three months ended December 31, 2011 and 2010 total share-based compensation cost charged against income for all stock plans was $1.3 million and $1.2 million, respectively.

Net sales increased by 6.2% or $43.0 million for the six months ended December 31, 2011, compared to the six months ended December 31, 2010. Excluding the favorable impact of foreign currency, net sales increased by 4.7% or $32.6 million. Net sales for Elizabeth Arden branded products increased by $28.0 million due to higher sales in all product categories, primarily led by higher sales of skin care products. Net sales of licensed and other owned products increased by $8.7 million primarily due to the launches of the Taylor Swift fragrance Wonderstruck and the John Varvatos fragrance Star USA as well as higher sales of Curve fragrances. Partially offsetting these increases were lower sales of Mariah Carey and Britney Spears fragrances, as well as lower sales of Juicy Couture fragrances, due in part to the prior year launch of Peace, Love & Juicy Couture. Sales of distributed brands were $6.6 million higher than the prior year period. Pricing changes had an immaterial effect on net sales.

SG&A. Selling, general and administrative expenses increased 8.3%, or $20.5 million, for the six months ended December 31, 2011, compared to the six months ended December 31, 2010. The increase was due to higher marketing and sales expenses of $13.3 million and higher general and administrative expenses of $7.2 million. The increase in marketing and sales expenses was primarily due to (i) higher trade advertising, sales promotion and direct selling expenses of $11.5 million, (ii) higher marketing and sales overhead expenses of $3.9 million, and (iii) higher media expenses of $2.1 million, partially offset by lower royalty expenses of $4.9 million primarily due to the amendment to the license agreement with Liz Claiborne (see Note 6 - "Exclusive Brand Licenses, Trademarks and Intangibles, Net and Goodwill" to the Notes to Unaudited Consolidated Financial Statements). The increase in general and administrative expenses was principally due to (i) the unfavorable impact of foreign currency translation of certain of our affiliates' balance sheets as the current year included losses of $4.3 million compared to gains of $1.2 million in the prior year period, and (ii) higher payroll related costs of $4.8 million, partially offset by lower professional services costs of $1.1 million. The six months ended December 31, 2010 also included total restructuring and Global Efficiency Re-engineering Initiative-related one-time costs of $1.4 million. For the six months ended December 31, 2011 and 2010, total share-based compensation cost charged against income for all stock plans was $2.5 million and $2.4 million, respectively.

For the six months ended December 31, 2011, net cash provided by operating activities was $49.2 million, as compared to $54.3 million for the six months ended December 31, 2010. Net income adjusted for non-cash items increased by $18.3 million as compared to the prior year. Working capital changes utilized cash of $36.0 million in the current year period as compared to $12.5 million in the prior year. The increase in cash utilized by working capital changes primarily related to (i) timing of payments for advertising and promotional activities, (ii) higher cash payments in the current year period related to prior year incentive compensation costs, (iii) the timing of interest payments as a result of our debt refinancing completed in the third quarter of fiscal 2011, (iv) lower royalty accruals primarily due to the amendment to the license agreement with Liz Claiborne that became effective in August 2011, and (v) higher accounts receivable balances due to the higher sales in the current year. These increases were partially offset by higher accounts payable primarily due to timing of payments to vendors and higher inventory purchases.

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