News Releases
Q2: Revenues Up 15%; Net Income of $0.18 per Share Up 19%; Free Cash Flow Up 45%
IRVINGTON, N.Y.--(BUSINESS WIRE)--Nov. 1, 2006--Prestige Brands Holdings, Inc. (NYSE:PBH), a consumer products company with a diversified portfolio of well-recognized brands, today announced results for the second quarter and first half of fiscal year 2007, which ended on September 30, 2006. Highlights of the quarter include:
- Total revenues for the second quarter were $84.6 million, an increase of 15% over the prior year comparable period.
- Excluding the impact of acquisitions, revenues were 7% higher than the prior year comparable period.
- Net income of $8.8 million, or $0.18 per share, was 19% higher than the prior year comparable period.
- Free cash flow of $21.2 million was 45% higher than the prior year comparable period.
Total revenues for the second fiscal quarter ended September 30, 2006 were $84.6 million, 15% higher than net revenues of $73.3 million for the prior year comparable period. The increase is due primarily to strong sales in the over-the-counter products (OTC) and household products segments of the business. Revenues resulting from the acquisitions of Chore Boy(R) and The Doctor's(R) brands in the third quarter of fiscal 2006 also contributed to the growth. Excluding the impact of these acquisitions, revenues increased by 7%.
Operating income of $24.2 million was $3.4 million, or 16% higher than prior year comparable period operating income of $20.8 million. The increase in operating profit is primarily due to sales gains in the over-the-counter and household products segments, and a reduction in advertising and promotion spending behind the personal care segment, partially offset by higher general and administrative expenses.
Net income of $8.8 million, or $0.18 per fully diluted share for the second quarter of fiscal 2007 was 19% higher than the prior year comparable period net income of $7.4 million or $0.15 per fully diluted share.
First Six Months of Fiscal 2007
Total revenues for the first six months of fiscal 2007 were $160.5 million, an increase of 17% over the comparable prior year period. Excluding the impact of the Chore Boy(R) and The Doctor's(R) brand acquisitions, revenues increased 8%. Operating income of $47.5 million was 22% higher than prior year comparable period operating income of $39.1 million. Net income of $17.0 million, or $0.34 per fully diluted share, was 28% higher than net income of $13.3 million or $0.27 per fully diluted share in the prior year.
Q2 Results by Segment OTC Products: Up 13%Total revenues of $46.3 million for the over-the-counter products segment were 13% higher than prior year comparable period revenues of $40.8 million. Increases in this segment resulted primarily from sales gains in key brands, as well as the acquisition of The Doctor's(R) oral care line acquired in November 2005. Chloraseptic(R), Clear eyes(R), Compound W(R), Little Remedies(R), and Murine(R) all posted increases over the second quarter of fiscal 2006. Excluding the impact of The Doctor's acquisition, revenues increased by 5%.
Household Products: Up 24%
Total revenues for the household products segment were $31.3 million in the second fiscal quarter, $6.0 million or 24% higher than the prior year comparable period revenues of $25.3 million. The two core brands in this business segment, Comet(R) and Spic and Span(R), contributed significantly to this increase, continuing the trend reported in the first fiscal quarter of this year. Excluding the impact of the acquisition of Chore Boy(R), revenues increased by 13%.
Personal Care: Down 4%
Total revenues for the personal care segment were $7.0 million, a decrease of 4% compared to prior year period revenues of $7.3 million. This decline reflects continued softness in two of the three key brands in this segment.
First Six Months by Segment OTC Products: Up 16%Total revenues of $85.9 million for the over-the-counter products segment were 16% greater than prior year comparable period revenues of $74.1 million. The increase resulted primarily from sales increases for the major brands in the segment; Chloraseptic(R), Clear eyes(R), Compound W(R), Little Remedies(R), Murine(R), Dermoplast(R), as well as sales of The Doctor's(R) oral care line acquired in November 2005. Excluding the impact of The Doctor's acquisition, revenues increased by 7%.
Household Products: Up 28%
Total revenues of $61.3 million for the household products segment were $13.3 million, or 28% greater than the prior year comparable period. The increase was due to strong year over year gains for the Comet(R) and Spic and Span(R) brands, as well as the Chore Boy(R) acquisition in October of 2005. Excluding the impact of the Chore Boy acquisition, revenues increased by 13%.
Personal Care: Down 9%
Total revenues of $13.3 million for the personal care segment were $5.3 million, or 9% below revenues of $14.6 million for the comparable prior year period, primarily due to declines in the Cutex(R) and Denorex(R) brands.
Free Cash Flow
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 that it is a commonly used measure of liquidity, and is 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 quarter ended September 30, 2006 was $21.2 million, composed of operating cash flows of $21.2 million, less capital expenditures of $0.0 million. Free cash flow for the six months ended September 30, 2006 was $42.4 million, composed of operating cash flows of $42.7 million, less capital expenditures of $0.3 million. The Company's free cash flow was higher than net income primarily due to the amortization of intangible assets, cash provided by a working capital decline, and relatively low capital expenditures.
Acquisition Announced
On September 25, 2006, the Company announced the acquisition of Wartner USA B.V., the owner of the Wartner(R) brand of over-the-counter wart treatment products for approximately $31.2 million in cash and the assumption of approximately $5 million of contingent payments to a former owner. Wartner is the #3 brand in the U.S. over-the-counter wart treatment category with approximately $11 million in trailing 12 month sales. The Company also markets the Compound W(R) line of wart treatment products and believes this strategic acquisition will enhance its leadership in the category. This acquisition had no material effect on the operating results of the second fiscal quarter.
Commentary and Outlook
Commenting on the results of the quarter and the first half of fiscal 2007, Peter C. Mann, Chairman and CEO said, "We are pleased with the results of the fiscal year to date which are in line with our expectations. The Company's financial position is strong, our key brand franchises are healthy, and we have a good pipeline of new items and programs. For the full fiscal year 2007, we expect that organic revenue growth, excluding the impact of acquisitions, will be slightly above our long-term growth outlook of 3-4%, and net income will grow less rapidly than total revenue growth. In the second half of the year, net income will be somewhat impacted by higher investments in A&P support behind many of our key brands."
Conference Call
The Company will host a conference call to review its second quarter and six month results on Thursday, November 2nd at 8:30am EST. The toll free number is 866-202-3109 within North America and 617-213-8844 from outside North America. The conference pass code is "prestige". Telephonic replays will be available for two weeks following completion of the call and can be accessed at 888-286-8010 within North America and at 617-801-6888 from outside North America. The pass code is 54554715.
About Prestige Brands Holdings, Inc.
Located in Irvington, New York, Prestige Brands Holdings, Inc. is a marketer and distributor of brand name over-the-counter, personal care and household products sold throughout the U.S. and Canada. Key brands include Compound W(R) wart remover, Chloraseptic(R) sore throat treatment, New-Skin(R) liquid bandage, Clear eyes(R) and Murine(R) eye care products, Little Remedies(R) pediatric over-the-counter products, Cutex(R) nail polish remover, Comet(R) and Spic and Span(R) household products, and other well-known brands.
Forward Looking Statements
Note: This news release may contain "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," or "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 Prestige Brands Holdings' market and the demand for its products, earnings per share, future cash flows from operations, future revenues and margin requirement and expansion, the success of new product introductions, growth in costs and expenses, and the impact of acquisitions, divestitures, restructurings and other unusual items, including Prestige Brands Holdings' ability to integrate and obtain the anticipated results and synergies from its acquisitions. 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 results to vary is included in the Company's Annual Report on Form 10-K and other periodic and other 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) 2006 2005 2006 2005
--------- --------- --------- ---------
Revenues
Net sales $84,033 $73,320 $159,600 $136,748
Other revenues 518 25 874 50
--------- --------- --------- ---------
Total revenues 84,551 73,345 160,474 136,798
--------- --------- --------- ---------
Cost of Sales
Costs of sales 41,259 35,549 77,584 64,498
--------- --------- --------- ---------
Gross profit 43,292 37,796 82,890 72,300
--------- --------- --------- ---------
Operating Expenses
Advertising and promotion 9,455 10,217 16,857 18,922
General and administrative 7,259 4,117 13,693 9,023
Depreciation 219 487 439 975
Amortization of intangible
assets 2,193 2,148 4,386 4,296
--------- --------- --------- ---------
Total operating expenses 19,126 16,969 35,375 33,216
--------- --------- --------- ---------
Operating income 24,166 20,827 47,515 39,084
--------- --------- --------- ---------
Other income (expense)
Interest income 403 226 588 307
Interest expense (10,146) (8,897) (20,123) (17,488)
--------- --------- --------- ---------
Total other income
(expense) (9,743) (8,671) (19,535) (17,181)
--------- --------- --------- ---------
Income before provision for
income taxes 14,423 12,156 27,980 21,903
Provision for income taxes 5,639 4,782 10,940 8,600
--------- --------- --------- ---------
Net income $8,784 $7,374 $17,040 $13,303
========= ========= ========= =========
Basic earnings per share $0.18 $0.15 $0.35 $0.27
========= ========= ========= =========
Diluted earnings per share $0.18 $0.15 $0.34 $0.27
========= ========= ========= =========
Weighted average shares
outstanding:
Basic 49,451 48,791 49,389 48,757
========= ========= ========= =========
Diluted 49,994 49,949 49,991 49,932
========= ========= ========= =========
Prestige Brands Holdings, Inc.
Segment Results
(Unaudited)
Three Months Ended September 30, 2006
-----------------------------------------
Over-the- Household Personal
Counter Cleaning Care Consolidated
Drug
--------- --------- -------- ------------
(in thousands)
Net sales $46,255 $30,732 $7,046 $84,033
Other revenues -- 518 -- 518
--------- --------- -------- ------------
Total revenues 46,255 31,250 7,046 84,551
Cost of sales 18,001 18,941 4,317 41,259
--------- --------- -------- ------------
Gross profit 28,254 12,309 2,729 43,292
Advertising and promotion 7,058 2,020 377 9,455
--------- --------- -------- ------------
Contribution margin $21,196 $10,289 $2,352 33,837
========= ========= ========
Other operating expenses 9,671
------------
Operating income 24,166
Other (income) expense 9,743
Provision for income taxes 5,639
------------
Net income $8,784
============
Six Months Ended September 30, 2006
-----------------------------------------
Over-the- Household Personal
Counter Cleaning Care Consolidated
Drug
--------- --------- -------- ------------
(in thousands)
Net sales $85,853 $60,470 $13,277 $159,600
Other revenues -- 874 -- 874
--------- --------- -------- ------------
Total revenues 85,853 61,344 13,277 160,474
Cost of sales 32,398 37,095 8,091 77,584
--------- --------- -------- ------------
Gross profit 53,455 24,249 5,186 82,890
Advertising and promotion 12,483 3,710 664 16,857
--------- --------- -------- ------------
Contribution margin $40,972 $20,539 $4,522 66,033
========= ========= ========
Other operating expenses 18,518
------------
Operating income 47,515
Other (income) expense 19,535
Provision for income taxes 10,940
------------
Net income $17,040
============
Three Months Ended September 30, 2005
-----------------------------------------
Over-the- Household Personal
Counter Cleaning Care Consolidated
Drug
--------- --------- -------- ------------
(in thousands)
Net sales $40,759 $25,229 $7,332 $73,320
Other revenues -- 25 -- 25
--------- --------- -------- ------------
Total revenues 40,759 25,254 7,332 73,345
Cost of sales 15,558 15,535 4,456 35,549
--------- --------- -------- ------------
Gross profit 25,201 9,719 2,876 37,796
Advertising and promotion 7,127 1,740 1,350 10,217
--------- --------- -------- ------------
Contribution margin $18,074 $7,979 $1,526 27,579
========= ========= ========
Other operating expenses 6,752
------------
Operating income 20,827
Other income (expense) (8,671)
Provision for income taxes (4,782)
------------
Net income $7,374
============
Six Months Ended September 30, 2005
-----------------------------------------
Over-the- Household Personal
Counter Cleaning Care Consolidated
Drug
--------- --------- -------- ------------
(in thousands)
Net sales $74,148 $48,012 $14,588 $136,748
Other revenues 50 -- 50
--------- --------- -------- ------------
Total revenues 74,148 48,062 14,588 136,798
Cost of sales 27,223 28,922 8,353 64,498
--------- --------- -------- ------------
Gross profit 46,925 19,140 6,235 72,300
Advertising and promotion 13,266 3,510 2,146 18,922
--------- --------- -------- ------------
Contribution margin $33,659 $15,630 $4,089 53,378
========= ========= ========
Other operating expenses 14,294
------------
Operating income 39,084
Other income (expense) (17,181)
Provision for income taxes (8,600)
------------
Net income $13,303
============
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands) September 30, 2006 March 31, 2006
------------------ --------------
Assets
Current assets
Cash $10,508 $8,200
Accounts receivable 37,447 40,042
Inventories 29,272 33,841
Deferred income tax assets 2,405 3,227
Prepaid expenses and other current
assets 1,748 701
------------------ --------------
Total current assets 81,380 86,011
Property and equipment 1,527 1,653
Goodwill 302,786 297,935
Intangible assets 662,290 637,197
Other long-term assets 13,815 15,849
------------------ --------------
Total Assets $1,061,798 $1,038,645
================== ==============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $22,584 $18,065
Accrued interest payable 7,773 7,563
Income taxes payable 64 1,795
Other accrued liabilities 8,714 4,582
Current portion of long-term debt 3,730 3,730
------------------ --------------
Total current liabilities 42,865 35,735
Long-term debt 486,035 494,900
Other accrued liabilities 2,801 --
Deferred income tax liabilities 103,954 98,603
------------------ --------------
Total liabilities 635,655 629,238
------------------ --------------
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 and outstanding - 50,060
shares at September 30, 2006 and
March 31, 2006 501 501
Additional paid-in capital 378,794 378,570
Treasury stock, at cost - 52 shares
at September 30, 2006 and 18 shares
at March 31, 2006 (36) (30)
Accumulated other comprehensive
income 587 1,109
Retained earnings 46,297 29,257
------------------ --------------
Total stockholders' equity 426,143 409,407
------------------ --------------
Total Liabilities and Stockholders'
Equity $1,061,798 $1,038,645
================== ==============
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) Six Months Ended September 30
-----------------------------
2006 2005
-------------- --------------
Operating Activities
Net income $17,040 $13,303
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 4,825 5,271
Deferred income taxes 6,197 7,961
Amortization of deferred financing
costs 1,609 1,136
Stock-based compensation 224 110
Changes in operating assets and
liabilities
Accounts receivable 2,595 3,366
Inventories 5,202 (8,054)
Prepaid expenses and other current
assets (1,047) (104)
Accounts payable 4,494 1,020
Income taxes payable (1,731) --
Accrued liabilities 3,326 521
-------------- --------------
Net cash provided by operating
activities 42,734 24,530
-------------- --------------
Investing Activities
Purchases of equipment (313) (297)
Purchase of business (31,242) --
-------------- --------------
Net cash used for investing activities (31,555) (297)
-------------- --------------
Financing Activities
Repayment of notes (8,865) (1,865)
Payment of deferred financing costs -- (33)
Purchase of common stock for treasury (6) (21)
Additional costs associated with initial
public offering -- (63)
-------------- --------------
Net cash used for financing activities (8,871) (1,982)
-------------- --------------
Increase in cash 2,308 22,251
Cash - beginning of period 8,200 5,334
-------------- --------------
Cash - end of period $10,508 $27,585
============== ==============