News Releases
For the Quarter, Net Revenue Up 1%; Net Income Up 25%; Free Cash Flow Up 40%; Debt Paid Down $11 Million
IRVINGTON, N.Y.--(BUSINESS WIRE)--Nov. 6, 2008--Prestige Brands Holdings, Inc. (NYSE:PBH) today announced results for the second quarter and first half of fiscal year 2009, which ended on September 30, 2008.
Net revenues for the second fiscal quarter were $88.1 million, 1% above the prior year's comparable quarter net revenues of $87.3 million. This resulted primarily from increases in sales of the Clear Eyes(R), Comet(R) and Little Remedies(R) brands, as well as the introduction of two new products, Chloraseptic(TM) Allergen Block and Little Allergies(TM) Allergen Block. Partially offsetting those increases were declines in Murine(R) Ear, Compound W(R) and Wartner(R) brands.
Quarterly operating income of $20.5 million was essentially flat to the prior year's comparable quarter operating income of $20.6 million. This was primarily due to higher advertising and promotion expenditures (A&P) to introduce the two new products, partially offset by higher gross margins and lower general and administrative expenses (G&A).
Net income for the second fiscal quarter was $8.5 million, or $0.17 per share, an increase of 25% over the prior year's comparable quarter net income of $6.8 million, or $0.14 per share. The improvement in net income was primarily due to a $2.9 million, or a 30% reduction in interest expense which resulted from the significant repayment of debt over the past fiscal year, combined with comparatively lower interest rates.
First Half of Fiscal 2009
Net revenues for the first six months of fiscal 2009 were $161.6 million, a decrease of 2.6% from the prior year's comparable period revenues of $165.9 million. Operating income was $41.7 million, 4.6% below the comparable period's results of $43.7 million. Net income of $16.3 million, or $0.33 per share during the first six months, was 7.6% higher than the comparable period's net income of $15.1 or $0.30 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 less capital expenditures.
The Company's free cash flow for the second quarter ended September 30, 2008 was $18.2 million, an increase of 40% over the prior year's comparable quarter. Free cash flow is composed of operating cash flow of $18.3 million less capital expenditures of $48,000. This compares to the prior year comparable quarter's free cash flow of $13.0 million, comprised of operating cash flow of $13.1 million less capital expenditures of $100,000. The increase was primarily due to an increase in net income and an improvement in working capital.
The Company's continued strong cash flow resulted in debt repayments of $11.0 million during the second fiscal quarter. Total debt has been reduced to $385.2 million at September 30, 2008. During the past twelve months, the Company's senior secured term loan facility has been reduced by $51.9 million to $259.2 million with the average interest rate dropping to 4.75% in the current quarter from 7.74% for the year ago quarter.
During the past twelve months, the Company's free cash flow has been used primarily to retire debt. As a result of the current banking and economic environment, the Company recently made the decision to enhance its liquidity position, and intends to reduce outstanding debt only modestly during the remainder of the fiscal year and build its cash reserves to approximately $30 million. Once that cash reserve objective is realized, the Company intends to resume debt repayments.
Second Quarter Results by Segment
Over-The-Counter (OTC) Healthcare Products
Net revenues of the OTC healthcare products segment were $50.3 million for the second fiscal quarter, an increase of 1% over the prior year's comparable period revenues of $50.0 million. The increase was due to sales increases of the Clear Eyes(R), Little Remedies(R) and The Doctor's(R) brands, as well as the introduction of Chloraseptic(TM) Allergen Block and Little Allergies(TM) Allergen Block products. These sales gains were partially offset by declines in the Compound W(R) and Wartner(R) wart care brands resulting from unfavorable pricing dynamics specifically in the cryogenic segment of this category.
Household Products
Net revenues for the household products segment were $32.1 million for the second fiscal quarter, an increase of 2% over the prior year's comparable period revenues of $31.4 million. The increase is attributable to sales increases in the Comet(R) brand, led by Comet(R) Spray Gel Mildew Stain Remover introduced in the prior fiscal year. Sales declines in the Spic and Span(R) and Chore Boy(R) line partially offset this increase.
Personal Care Products
Net revenues for the personal care products segment, the Company's smallest business segment, were $5.6 million for the second fiscal quarter, a slight decrease from net revenues of $5.9 million in the prior year's comparable period.
Commentary
"In an increasingly challenging operating environment, we generally are pleased with the overall results of the second quarter and the quality of our earnings," said Mark Pettie, Chairman and CEO. "We expect the investments we made during the quarter to set the stage for improved organic growth in the second half. We are also pleased with steps that we undertook to strengthen our balance sheet by reducing debt and minimizing working capital in this economy. Combined with our operating results, these steps also enabled us to deliver another period of very solid cash flow."
Conference Call
The Company will host a conference call to review its second quarter and six month results on Thursday, November 6, 2008 at 8:30 am. The toll free dial in number is 1-866-700-7173 within North America and 1-617-213-8838 outside North America. The conference pass code 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 1-617-801-6888 outside North America. The pass code is 55096352.
About Prestige Brands Holdings, Inc.
Prestige Brands markets and distributes brand name over-the-counter healthcare, personal care and household products throughout the United States, Canada and certain international markets. Key brands include Compound W(R) wart treatment, Chloraseptic(R) sore throat relief products, New Skin(R) liquid bandage, Clear eyes(R) and Murine(R) eye and ear care products, Little Remedies(R) pediatric over-the-counter healthcare products, The Doctor's(R) Night Guard(TM) dental protector, Cutex(R) nail polish remover, Comet(R) and Spic and Span(R) household cleaners, and other well-recognized brands.
Forward-Looking Statements
Note: 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)
Three Months Six Months
Ended September 30 Ended September 30
------------------- -------------------
(In thousands, except per
share data) 2008 2007 2008 2007
--------- --------- --------- ---------
Revenues
Net sales $87,369 $86,840 $160,285 $164,881
Other revenues 682 497 1,300 1,067
--------- --------- --------- ---------
Total revenues 88,051 87,337 161,585 165,948
--------- --------- --------- ---------
Cost of Sales
Costs of sales 41,792 42,770 76,064 80,092
--------- --------- --------- ---------
Gross profit 46,259 44,567 85,521 85,856
--------- --------- --------- ---------
Operating Expenses
Advertising and promotion 13,638 11,017 20,957 18,803
General and administrative 9,363 10,184 17,336 17,830
Depreciation and amortization 2,757 2,756 5,513 5,507
--------- --------- --------- ---------
Total operating expenses 25,758 23,957 43,806 42,140
--------- --------- --------- ---------
Operating income 20,501 20,610 41,715 43,716
--------- --------- --------- ---------
Other (income) expense
Interest income (56) (173) (129) (360)
Interest expense 6,835 9,768 15,591 19,642
--------- --------- --------- ---------
Total other (income)
expense 6,779 9,595 15,462 19,282
--------- --------- --------- ---------
Income before income taxes 13,722 11,015 26,253 24,434
Provision for income taxes 5,200 4,186 9,950 9,285
--------- --------- --------- ---------
Net income $ 8,522 $ 6,829 $ 16,303 $ 15,149
========= ========= ========= =========
Basic earnings per share $ 0.17 $ 0.14 $ 0.33 $ 0.30
========= ========= ========= =========
Diluted earnings per share $ 0.17 $ 0.14 $ 0.33 $ 0.30
========= ========= ========= =========
Weighted average shares
outstanding:
Basic 49,924 49,710 49,902 49,686
========= ========= ========= =========
Diluted 50,037 50,046 50,036 50,042
========= ========= ========= =========
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands)
Assets September March 31,
30, 2008 2008
----------- -----------
Current assets
Cash and cash equivalents $ 12,630 $ 6,078
Accounts receivable 42,494 44,219
Inventories 25,372 29,696
Deferred income tax assets 3,249 3,066
Prepaid expenses and other current assets 3,144 2,316
----------- -----------
Total current assets 86,889 85,375
Property and equipment 1,284 1,433
Goodwill 309,879 308,915
Intangible assets 641,428 646,683
Other long-term assets 6,450 6,750
----------- -----------
Total Assets $1,045,930 $1,049,156
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 17,430 $ 20,539
Accrued interest payable 5,428 5,772
Other accrued liabilities 11,158 8,030
Current portion of long-term debt 3,550 3,550
----------- -----------
Total current liabilities 37,566 37,891
Long-term debt 381,675 407,675
Other long-term liabilities -- 2,377
Deferred income tax liabilities 128,272 122,140
----------- -----------
Total Liabilities 547,513 570,083
----------- -----------
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 - 50,060 shares 501 501
Additional paid-in capital 381,941 380,364
Treasury stock, at cost - 119 shares and 59
shares at
September 30 and March 31, 2008, respectively (62) (47)
Accumulated other comprehensive income 480 (999)
Retained earnings 115,557 99,254
----------- -----------
Total stockholders' equity 498,417 479,073
----------- -----------
Total Liabilities and Stockholders' Equity $1,045,930 $1,049,156
=========== ===========
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
September 30
-------------------
(In thousands) 2008 2007
--------- ---------
Operating Activities
Net income $ 16,303 $ 15,149
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,513 5,507
Deferred income taxes 5,042 4,622
Amortization of deferred financing costs 1,159 1,561
Stock-based compensation 1,577 1,146
Changes in operating assets and liabilities
Accounts receivable 1,725 (11,345)
Inventories 4,324 2,390
Prepaid expenses and other current assets (828) (1,692)
Accounts payable (1,582) 1,884
Accrued liabilities 407 2,270
--------- ---------
Net cash provided by operating activities 33,640 21,492
--------- ---------
Investing Activities
Purchases of equipment (109) (194)
Business acquisition purchase price adjustments (964) (16)
--------- ---------
Net cash used for investing activities (1,073) (210)
--------- ---------
Financing Activities
Repayment of long-term debt (26,000) (26,237)
Purchase of common stock for treasury (15) (4)
--------- ---------
Net cash used for financing activities (26,015) (26,241)
--------- ---------
Increase (Decrease) in cash 6,552 (4,959)
Cash - beginning of period 6,078 13,758
--------- ---------
Cash - end of period $ 12,630 $ 8,799
========= =========
Interest paid $ 14,775 $ 18,078
========= =========
Income taxes paid $ 4,761 $ 5,664
========= =========
Prestige Brands Holdings, Inc.
Consolidating Statements of Operations
(Unaudited)
Three Months Ended September 30, 2008
------------------------------------------
Over-the-
Counter Household Personal
Healthcare Cleaning Care Consolidated
---------- --------- -------- ------------
Net sales $50,318 $31,482 $5,569 $87,369
Other revenues 24 658 -- 682
---------- --------- -------- ------------
Total revenues 50,342 32,140 5,569 88,051
Cost of sales 17,567 20,937 3,288 41,792
---------- --------- -------- ------------
Gross profit 32,775 11,203 2,281 46,259
Advertising and promotion 10,654 2,731 253 13,638
---------- --------- -------- ------------
Contribution margin $22,121 $ 8,472 $2,028 32,621
========== ========= ========
Other operating expenses 12,120
------------
Operating income 20,501
Other (income) expense 6,779
Provision for income taxes 5,200
------------
Net income $ 8,522
============
Six Months Ended September 30, 2008
------------------------------------------
Over-the-
Counter Household Personal
Healthcare Cleaning Care Consolidated
---------- --------- -------- ------------
Net sales $89,564 $59,886 $10,835 $160,285
Other revenues 24 1,276 -- 1,300
---------- --------- -------- ------------
Total revenues 89,588 61,162 10,835 161,585
Cost of sales 30,775 38,860 6,429 76,064
---------- --------- -------- ------------
Gross profit 58,813 22,302 4,406 85,521
Advertising and promotion 15,691 4,801 465 20,957
---------- --------- -------- ------------
Contribution margin $43,122 $17,501 $ 3,941 64,564
========== ========= ========
Other operating expenses 22,849
------------
Operating income 41,715
Other (income) expense 15,462
Provision for income taxes 9,950
------------
Net income $ 16,303
============
Prestige Brands Holdings, Inc.
Consolidating Statements of Operations
(Unaudited)
Three Months Ended September 30, 2007
------------------------------------------
Over-the-
Counter Household Personal
Healthcare Cleaning Care Consolidated
---------- --------- -------- ------------
Net sales $50,003 30,925 $5,912 $86,840
Other revenues -- 497 -- 497
---------- --------- -------- ------------
Total revenues 50,003 31,422 5,912 87,337
Cost of sales 19,688 19,587 3,495 42,770
---------- --------- -------- ------------
Gross profit 30,315 11,835 2,417 44,567
Advertising and promotion 8,154 2,575 288 11,017
---------- --------- -------- ------------
Contribution margin $22,161 $ 9,260 $2,129 33,550
========== ========= ========
Other operating expenses 12,940
------------
Operating income 20,610
Other (income) expense 9,595
Provision for income taxes 4,186
------------
Net income $ 6,829
============
Six Months Ended September 30, 2007
------------------------------------------
Over-the-
Counter Household Personal
Healthcare Cleaning Care Consolidated
---------- --------- -------- ------------
Net sales $92,429 $60,270 $12,182 $164,881
Other revenues -- 1,039 28 1,067
---------- --------- -------- ------------
Total revenues 92,429 61,309 12,210 165,948
Cost of sales 35,074 37,980 7,038 80,092
---------- --------- -------- ------------
Gross profit 57,355 23,329 5,172 85,856
Advertising and promotion 14,035 4,203 565 18,803
---------- --------- -------- ------------
Contribution margin $43,320 $19,126 $ 4,607 67,053
========== ========= ========
Other operating expenses 23,337
------------
Operating income 43,716
Other (income) expense 19,282
Provision for income taxes 9,285
------------
Net income $ 15,149
============
CONTACT: Prestige Brands Holdings, Inc.
Dean Siegal, 914-524-6819
SOURCE: Prestige Brands Holdings, Inc.