Elizabeth Arden gets $50 million equity infusion from RhoneCapital, ends Q2 with $440 million debt

By Lisa Kerner

Charlotte, N.C., Aug. 19 – Elizabeth Arden, Inc. completed its strategic review process with an investment by RhoneCapital LLC, said president and chief executive officer E. Scott Beattie.

Beattie made the remarks Tuesday during the company’s fourth fiscal quarter- and year-end 2014 earnings conference call.

Investment funds affiliated with Rhone agreed to purchase $50 million of redeemable preferred stock of Elizabeth Arden. In addition, Rhone will also receive warrants to purchase 2.5 million shares of the company’s common stock at an exercise price of $20.39 per share, or about 7.6% of the company’s outstanding common stock on an as-exercised basis, according to a news release.

Rhone intends to increase its ownership of Elizabeth Arden’s common stock over time and agreed to enter into a standstill agreement in which it will not acquire more than 30% of the company’s common stock after giving effect to the exercise of the warrants.

Improvement plan underway

Beattie said that while 2014 was “a very disappointing year,” the company completed changes under its 2014 improvement plan announced in June. Changes under the plan included flattening and simplifying Elizabeth Arden’s marketing and reducing the cost structure of its international business, according to Beattie.

The Miramar, Fla.-based beauty products company expects annualized savings of $27 million to $35 million under the improvement plan.

New chief financial officer Rod Little said that, although the company has made many “significant interventions” to stabilize the business and positively impact results, “fiscal ‘15 will be a transition year.” The focus for fiscal 2015 is “on making the necessary changes to turn the business around and get back to consistent and reliable sales and earnings growth,” said Little on the call.

Little said the company is making “good progress” on all four of its priorities to drive improved performance. These priorities include improving distribution quality, improving gross margin and improving the pace and effectiveness of the innovation program, as well as simplifying and streamlining the organization.

Financial highlights

Elizabeth Arden ended the year with total debt of $440 million, including $80 million outstanding on the credit line and $350 million outstanding on a bond, according to senior vice president of finance Marcey Becker.

The company ended the fiscal year on June 30 with net sales of $1.16 billion, a decrease of 13.4% from the prior year. The net loss per diluted share for the fiscal year was $4.90.

Net sales for the quarter ended June 30 were down 28.4% year over year at $191.7 million. Fourth-quarter net loss per diluted share was $5.24.

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