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Net revenues from continuing operations for the second fiscal quarter were $84.2 million, 2% below the prior year's comparable quarter net revenues from continuing operations of $85.5 million. The reported results reflect the recent divestitures of Denorex(R), Prell(R) and Zincon(R) shampoo brands from the Company's Personal Care segment, which the Company announced on October 28, 2009. The revenues and results from these three brands are classified as discontinued operations. The results of the second quarter reflect revenue increases for the Over-the-Counter Healthcare segment and the Personal Care segment, offset by revenue declines in the Household Cleaning Products segment.
Operating income from continuing operations for the second fiscal quarter was $21.2 million, $1.3 million greater than year ago operating income from continuing operations of $19.9 million. The increase in operating income from continuing operations was a result of a 28% decrease in advertising and promotional (A&P) expenditures compared to the last fiscal year, primarily due to decreased spending on Allergen Block products compared to introductory spending levels last year. Partially offsetting the decrease in A&P expenditures was a 12% increase in G&A expenses which was due to $2.5 million of expenses related to a reduction in force and the organizational changes. The Company currently anticipates annualized savings of approximately $2 million as a result of the reduction in force.
Income from continuing operations for the second fiscal quarter was $9.7 million, or 19% higher than the prior year comparable period's results.
Total net income for the second quarter, including that related to the discontinued operations, was $9.9 million, $1.4 million or 16% greater than the prior year comparable period results of $8.5 million.
Earnings per share from continuing operations were $0.20 compared to $0.17 in the prior fiscal year.
Commentary
"Overall we are pleased with the results of the second quarter and remain cautiously optimistic for the balance of the year," said Matthew Mannelly, President and CEO. "Based on our brands' strength in the categories in which we compete, combined with the passion and experience of our team, we believe we are well positioned for future growth as the economy strengthens," he said.
First Half of Fiscal 2010
Net revenues from continuing operations for the first six months of fiscal 2010 were $155.2 million, a decrease of 0.9% from the prior year's comparable period's results of $156.5 million. Income from continuing operations was $17.7 million, an increase of 14%, compared to $15.5 million in the comparable period. Total net income of $18.2 million, or $0.36 per share, including that related to the discontinued operations, was 12% higher than the comparable period's results of $16.3 million, or $0.33 per share.
Free Cash Flow and Debt Repayment
Free cash flow is a "non-GAAP" financial measure as that term is defined by the Securities and Exchange Commission in Regulation G. Free cash flow is presented in this news release because management believes it is a commonly used measure of liquidity, and indicative of cash available for debt repayment and acquisitions. The Company defines "free cash flow" as operating cash flow from continuing operations less capital expenditures.
The Company's free cash flow for the second quarter ended September 30, 2009 was $21.7 million, an increase of 2% over the prior year's comparable quarter. Free cash flow is composed of operating cash flow from continuing operation of $21.8 million less capital expenditures of $100,000. This compares to the prior year comparable quarter's free cash flow of $21.2 million, composed of operating cash flow from continuing operations of $21.2 million less capital expenditures of $48,000. The increase was primarily due to the increase in net income from continuing operations.
The Company's continued strong cash flow resulted in debt repayments of $23.0 million on its term loan during the second quarter. Total debt was reduced to $338.3 million at September 30, 2009. Following the divestitures of the three shampoo brands on October 28, 2009, the Company paid down an additional $8 million on its term loan with the proceeds of the sale.
Second Quarter Results by Segment
Net revenues for the OTC Healthcare segment were $51.4 million, 2% higher than the prior year comparable period. Increased sales of Chloraseptic(R), Clear Eyes(R), Compound W(R), Little Remedies(R), New Skin(R) and The Doctor's(R) brands, led to the increase in revenues for this segment. Partially offsetting these increases were revenue declines for the Allergen Block products and the Wartner(R) brand.
Net revenues for the Household Cleaning products segment were $29.0 million, 10% lower than the prior year comparable period. Comet(R), Spic and Span(R) and Chore Boy(R) brands all experienced sales declines during the quarter.
Net revenues from continuing operations for the Personal Care segment were $3.8 million, 24% greater than the prior year comparable period. The revenue increase was primarily due to sales increases on the Cutex(R) line of nail polish removers.
Conference Call
The Company will host a conference call to review its second quarter and six month results on Thursday, November 5, 2009 at 8:30am EST. The toll free dial-in numbers are 1-800-706-7749 within North America and 1-617-614-3474 outside of North America. The conference passcode is "prestige". Telephonic replays will be available for two weeks following the completion of the call and can be accessed at 1-888-286-8010 within North America and at 617-801-6888 outside North America. The passcode is 28607458.
About Prestige Brands Holdings, Inc.
The Company markets and distributes brand name over-the-counter healthcare, personal care and household cleaning products throughout the U.S., Canada and certain international markets. Key brands include Chloraseptic(R), Compound W(R), Clear Eyes(R), Murine(R), New-Skin(R), Little Remedies(R), The Doctor's(R) NightGuard(TM), Cutex(R), Comet(R), Spic and Span(R), and other well-known brands.
Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of the federal securities laws and is intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" generally can be identified by the use of forward-looking terminology such as "assumptions," "target," "guidance," "outlook," "plans," "projection," "may," "will," "would," "expect," "intend," "estimate," "anticipate," "believe," "potential," "continue" (or the negative or other derivatives of each of these terms) or similar terminology. The "forward-looking statements" include, without limitation, statements regarding the outlook for the Company's market and the demand for its products, future revenues, future debt retirement and our ability to manage costs and expenses, including those associated with interest rate risk. These projections and statements are based on management's estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those projected as a result of certain factors. A discussion of factors that could cause actual results to vary is included in the Company's Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission.
Prestige Brands Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)
ThreeMonthsEndedSeptember30 SixMonthsEndedSeptember30
(In thousands, except share data) 2009 2008 2009 2008
Revenues
Net sales $ 83,737 $ 84,858 $ 154,133 $ 155,237
Other revenues 444 682 1,060 1,300
Total revenues 84,181 85,540 155,193 156,537
Cost of Sales
Cost of sales 39,847 40,402 73,029 73,309
Gross profit 44,334 45,138 82,164 83,228
Operating Expenses
Advertising and promotion 9,782 13,543 18,547 20,780
General and administrative 10,481 9,363 18,675 17,336
Depreciation and amortization 2,841 2,308 5,186 4,615
Total operating expenses 23,104 25,214 42,408 42,731
Operating income 21,230 19,924 39,756 40,497
Other (income) expense
Interest income - (56) - (129)
Interest expense 5,642 6,835 11,295 15,591
Total other (income) expense 5,642 6,779 11,295 15,462
Income from continuing operations before income taxes 15,588 13,145 28,461 25,035
Provision for income taxes 5,908 4,982 10,787 9,488
Income from continuing operations 9,680 8,163 17,674 15,547
Discontinued Operations
Income from operations of assets held for sale, net of income tax 243 359 574 756
Net income $ 9,923 $ 8,522 $ 18,248 $ 16,303
Basic earnings per share:
Income from continuing operations $ 0.19 $ 0.16 $ 0.35 $ 0.31
Net income $ 0.20 $ 0.17 $ 0.36 $ 0.33
Diluted earnings per share:
Income from continuing operations $ 0.19 $ 0.16 $ 0.35 $ 0.31
Net income $ 0.20 $ 0.17 $ 0.36 $ 0.33
Weighted average shares outstanding:
Basic 50,012 49,924 49,997 49,902
Diluted 50,055 50,037 50,080 50,036
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands)
Assets September 30, March 31,
2009 2009
Current assets
Cash and cash equivalents $ 34,829 $ 35,181
Accounts receivable 39,152 36,025
Inventories 24,955 25,939
Deferred income tax assets 5,362 4,022
Prepaid expenses and other current assets 2,460 1,358
Inventories of operations held for sale 1,535 1,038
Total current assets 108,293 103,563
Property and equipment 1,291 1,367
Goodwill 114,240 114,240
Intangible assets 564,259 569,137
Other long-term assets 3,646 4,602
Intangible assets of operations held for sale 7,574 8,472
Total Assets $ 799,303 $ 801,381
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 21,444 $ 15,898
Accrued interest payable 5,360 5,371
Other accrued liabilities 17,951 9,407
Current portion of long-term debt 3,550 3,550
Total current liabilities 48,305 34,226
Long-term debt 334,787 374,787
Deferred income tax liabilities 103,231 97,983
Total Liabilities 486,323 506,996
Stockholders' Equity
Preferred stock - $0.01 par value
Authorized - 5,000 shares
Issued and outstanding - None
Common stock - $0.01 par value
Authorized - 250,000 shares
Issued - 50,154 shares at September 30, 2009 and 50,060 shares at 502 501
March 31, 2009
Additional paid-in capital 382,790 382,803
Treasury stock, at cost - 124 shares at September 30, 2009 and (63) (63)
March 31, 2009
Accumulated other comprehensive loss (975) (1,334)
Retained deficit (69,274) (87,522)
Total stockholders' equity 312,980 294,385
Total Liabilities and Stockholders' Equity $ 799,303 $ 801,381
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended September 30
(In thousands) 2009 2008
Operating Activities
Net income $ 18,248 $ 16,303
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 6,084 5,513
Deferred income taxes 3,687 5,042
Amortization of deferred financing costs 956 1,159
Stock-based compensation 848 1,577
Changes in operating assets and liabilities
Accounts receivable (3,127) 1,725
Inventories 984 4,011
Inventories held for sale (497) 313
Prepaid expenses and other current assets (1,102) (828)
Accounts payable 5,546 (1,582)
Accrued liabilities 8,253 3,443
Net cash provided by operating activities 39,880 36,676
Investing Activities
Purchases of equipment (232) (109)
Business acquisition purchase price adjustments - (4,000)
Net cash used for investing activities (232) (4,109)
Financing Activities
Repayment of long-term debt (40,000) (26,000)
Purchase of common stock for treasury - (15)
Net cash used for financing activities (40,000) (26,015)
Increase (Decrease) in cash (352) 6,552
Cash - beginning of period 35,181 6,078
Cash - end of period $ 34,829 $ 12,630
Interest paid $ 10,350 $ 14,775
Income taxes paid $ 6,307 $ 4,761
Three Months Ended September 30, 2009
Over-the-Counter Household Personal
Healthcare Cleaning Care Consolidated
(In thousands)
Net sales $ 51,368 $ 28,602 $ 3,767 $ 83,737
Other revenues 9 411 24 444
Total revenues 51,377 29,013 3,791 84,181
Cost of sales 19,217 18,483 2,147 39,847
Gross profit 32,160 10,530 1,644 44,334
Advertising and promotion 7,378 2,285 119 9,782
Contribution margin $ 24,782 $ 8,245 $ 1,525 34,552
Other operating expenses 13,322
Operating income 21,230
Other (income) expense 5,642
Provision for income taxes 5,908
Income from continuing operations 9,680
Income from discontinued operations
(assets held for sale), net of income tax 243
Net income $ 9,923
Six Months Ended September 30,2009
Over-the-Counter Household Personal
Healthcare Cleaning Care Consolidated
(In thousands)
Net sales $ 91,640 $ 55,443 $ 7,050 $ 154,133
Other revenues 20 1,017 23 1,060
Total revenues 91,660 56,460 7,073 155,193
Cost of sales 32,745 36,284 4,000 73,029
Gross profit 58,915 20,176 3,073 82,164
Advertising and promotion 14,118 4,204 225 18,547
Contribution margin $ 44,797 $ 15,972 $ 2,848 63,617
Other operating expenses 23,861
Operating income 39,756
Other (income) expense 11,295
Provision for income taxes 10,787
Income from continuing operations 17,674
Income from discontinued operations
(assets held for sale), net of income tax 574
Net income $ 18,248
Three Months Ended September 30, 2008
Over-the-Counter Household Personal
Healthcare Cleaning Care Consolidated
(In thousands)
Net sales $ 50,318 $ 31,482 $ 3,058 $ 84,858
Other revenues 24 658 -- 682
Total revenues 50,342 32,140 3,058 85,540
Cost of sales 17,567 20,937 1,898 40,402
Gross profit 32,775 11,203 1,160 45,138
Advertising and promotion 10,654 2,731 158 13,543
Contribution margin $ 22,121 $ 8,472 $ 1,002 31,595
Other operating expenses 11,671
Operating income 19,924
Other (income) expense 6,779
Provision for income taxes 4,982
Income from continuing operations 8,163
Income from discontinued operations
(assets held for sale), net of income tax 359
Net income $ 8,522
Six Months Ended September 30, 2008
Over-the-Counter Household Personal
Healthcare Cleaning Care Consolidated
(In thousands)
Net sales $ 89,564 $ 59,886 $ 5,787 $ 155,237
Other revenues 24 1,276 -- 1,300
Total revenues 89,588 61,162 5,787 156,537
Cost of sales 30,775 38,860 3,674 73,309
Gross profit 58,813 22,302 2,113 83,228
Advertising and promotion 15,691 4,801 288 20,780
Contribution margin $ 43,122 $ 17,501 $ 1,825 62,448
Other operating expenses 21,951
Operating income 40,497
Other (income) expense 15,462
Provision for income taxes 9,488
Income from continuing operations 15,547
Income from discontinued operations
(assets held for sale), net of income tax 756
Net income $ 16,303
SOURCE: Prestige Brands Holdings, Inc.
Prestige Brands Holdings, Inc. Dean Siegal, 914-524-6819
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