News Releases
IRVINGTON, N.Y.--(BUSINESS WIRE)--May 9, 2007--Prestige Brands Holdings, Inc. (NYSE:PBH) today announced results for the fourth quarter and fiscal year ended March 31, 2007.
Fourth Quarter, Fiscal Year 2007
The Company reported revenues of $78.0 million for the quarter ended March 31, 2007, a decrease of 2% versus the comparable period of the prior year when the Company reported revenues of $80.0 million. The quarter benefited from revenues derived from the September 2006 acquisition of the Wartner(R) brand wart treatment products. Excluding this acquisition, revenues would have declined by approximately 5%. As previously announced, the results of the quarter reflect a weaker year-over-year cold/flu season that affected the Company's Chloraseptic(R) and Little Remedies(R) product lines, as well as declines in its personal care segment.
Operating income of $22.6 million for the quarter was $2.5 million or 13% higher than the prior year's operating income of $20.1 million. Excluding the non-cash asset impairment charge of $9.3 million in the fourth quarter of fiscal 2006, operating income for the fourth quarter of fiscal 2007 of $22.6 million, was $6.9 million less than the prior year comparable quarter's adjusted operating income of $29.5 million. The primary factors affecting operating income were lower gross margin and increased A&P and G&A expenses during the quarter. The Company's gross margin decreased as a percent of sales from 54.8% to 50.3%, primarily due to an increase in obsolescence reserves of $2.6 million related to cough/cold products facing expiration dating.
Net income for the quarter ended March 31, 2007 was $8.4 million or $0.17 per diluted share versus $3.6 million, or $0.07 per diluted share, for the comparable quarter of the prior year. "Adjusted net income" was $7.9 million, a decline of $4.2 million from fiscal 2006 fourth quarter "adjusted net income" of $12.1 million. See the attached reconciliation of net income to adjusted net income, a "non-GAAP financial measure" as that term is defined by the Securities and Exchange Commission in Regulation G.
Revenues by Segment for the Fourth Quarter Ended March 31, 2007
The Over-The-Counter (OTC) segment's fourth quarter revenues of $43.3 million were 3% below those of the prior year of $44.7 million. Excluding the effects of the Wartner(R) acquisition, OTC organic revenues were down 7%. Weakness in the cold/flu season led to declines in Chloraseptic(R) and Little Remedies(R) product lines, which was partially offset by strong performance in The Doctor's(R) line of oral care items.
The Company's Household Cleaning Products segment reported revenues of $29.0 million, slightly above the prior year of $28.9 million. The segment's leading brand, Comet(R), registered a slight decline in revenues primarily due to a difference in promotional events compared to the prior year's quarter. This was offset by strong performance of Chore Boy(R) household scrubbers, and Spic and Span(R) household cleaners, which grew approximately 11% and 9%, respectively, during the fourth quarter.
Revenues for the Personal Care segment, which account for approximately 8% of total corporate revenues, declined $0.5 million from $6.3 million, or 9%, to $5.8 million, which was in line with expectations.
Fiscal Year 2007
The Company reported total revenues of $318.6 million for the fiscal year ended March 31, 2007, or 7% greater than fiscal 2006 revenues of $296.7 million.
Operating income of $94.7 million for fiscal 2007 was $10.8 million or 13% higher than fiscal 2006 operating income of $83.9 million. Excluding the intangible asset impairment charge of $9.3 million in fiscal 2006, adjusted operating income for fiscal 2007 increased $1.5 million from fiscal 2006 adjusted operating income of $93.5 million. The increase in operating income was the result of the sales increase, partially offset by increased cost of sales and G&A expenses. See attached reconciliation of operating income to adjusted operating income, a "non-GAAP financial measure."
The Company's reported net income of $36.1 million, or $0.72 per diluted share, was up 37%, or $9.8 million in fiscal 2007. "Adjusted net income" of $34.2 million for fiscal 2007, declined 2% from fiscal 2006 "adjusted net income" of $34.8 million. "Adjusted net income" resulted in "adjusted earnings per share" of $0.68 per diluted share for fiscal 2007 versus $0.70 per diluted share in fiscal 2006. See the attached reconciliation of net income to adjusted net income and adjusted net income per share each of which is a "non-GAAP financial measure."
Free Cash Flow
Free cash flow also is a "non-GAAP financial measure". Free cash flow is presented in this news release because management believes that it is a commonly used measure of liquidity, 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 fourth quarter ended March 31, 2007 was $16.5 million, with operating cash flows of $16.6 million, less capital expenditures of $0.1 million. For fiscal year 2007, free cash flow was $71.4 million, 34% higher than the $53.3 million reported in the prior fiscal year, primarily as a result of a reduction in net working capital.
The Company's free cash flow was higher than net income due primarily to the non-cash charges related to the asset impairment and deferred income taxes combined with the Company's long-term tax shield related to the amortization of intangible assets and goodwill, net operating loss carry forwards, amortization of certain debt acquisition costs, and relatively low capital expenditures.
During the fourth quarter the Company paid down approximately $7.9 million of senior bank debt, thereby reducing debt outstanding to $463.4 million at March 31, 2007.
Outlook
For fiscal year 2008, which commenced April 1, 2007, the Company expects organic revenue growth to be within its current long-term average growth rate of 3-4%, with total net revenues slightly higher as a result of a full year of the acquisition of the Wartner(R) brand. The Company also expects reported net income growth slightly below total net revenue growth, resulting primarily from increased A&P expenditures. Acquisitions, if any, would be incremental to that growth. The Company expects its free cash flow will again surpass net income in fiscal year 2008, driven by the tax benefits of accelerated amortization of intangible assets plus the amortization of certain debt acquisition costs. However, the Company expects cash flow for fiscal year 2008 to be lower than the $71.4 million achieved in fiscal year 2007 because working capital, which declined substantially in fiscal year 2007, is expected to increase at the rate of sales in fiscal year 2008.
According to Mark Pettie, Chairman of the Board and CEO, "Our focus is to deliver improved organic growth in fiscal year 2008 and beyond. We expect to achieve this through several initiatives, which include product innovation, stepped up A&P investment, strengthening our distribution base, systematically reducing costs, and reviewing our supplier network to reduce complexities."
Conference Call
The Company will host a conference call today at 10:00 am EDT.
To access the conference call, listeners calling from within North America may dial 866-510-0711 at least 15 minutes prior to the start of the call. Those wishing to access the call from outside North America should dial 617-597-5379. The conference pass code is "prestige". The Company will provide a live internet webcast as well as an archived replay, which can be accessed from the Investor Relations page of http://www.prestigebrandsinc.com.
Telephonic replays will be available for two weeks following completion of the live 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 51786688.
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 products, personal care and household products sold throughout the U.S., Canada, and certain international markets. 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 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," 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
Three Months Ended
March 31
------------------
(In thousands, except per share data) 2007 2006
--------- --------
Revenues
Net sales $ 77,683 $79,662
Other revenues 353 352
--------- --------
Total revenues 78,036 80,014
--------- --------
Cost of Sales
Cost of sales 38,797 36,206
--------- --------
Gross profit 39,239 43,808
--------- --------
Operating Expenses
Advertising and promotion 6,196 5,775
General and administrative 7,655 5,954
Depreciation 128 263
Amortization of intangible assets 2,627 2,431
Impairment of goodwill -- 1,892
Impairment of intangible asset -- 7,425
--------- --------
Total operating expenses 16,606 23,740
--------- --------
Operating income 22,633 20,068
--------- --------
Other income (expense)
Interest income 185 117
Interest expense (10,000) (9,756)
--------- --------
Total other income (expense) (9,815) (9,639)
--------- --------
Income before income taxes 12,818 10,429
Provision for income taxes (4,423) (6,800)
--------- --------
Net income $ 8,395 $ 3,629
========= ========
Basic earnings per share $ 0.17 $ 0.07
========= ========
Diluted earnings per share $ 0.17 $ 0.07
========= ========
Weighted average shares outstanding:
Basic 49,607 49,077
========= ========
Diluted 50,027 50,008
========= ========
Prestige Brands Holdings, Inc.
Consolidated Statements of Operations
Year Ended March 31
-----------------------------
(In thousands, except per share data) 2007 2006 2005
--------- --------- ---------
Revenues
Net sales $316,847 $296,239 $288,918
Other revenues 1,787 429 151
--------- --------- ---------
Total revenues 318,634 296,668 289,069
--------- --------- ---------
Cost of Sales
Cost of sales 153,147 139,430 139,009
--------- --------- ---------
Gross profit 165,487 157,238 150,060
--------- --------- ---------
Operating Expenses
Advertising and promotion 32,005 32,082 29,697
General and administrative 28,416 21,158 20,198
Depreciation 744 1,736 1,899
Amortization of intangible assets 9,640 9,041 7,901
Impairment of goodwill -- 1,892 --
Impairment of intangible asset -- 7,425 --
--------- --------- ---------
Total operating expenses 70,805 73,334 59,695
--------- --------- ---------
Operating income 94,682 83,904 90,365
--------- --------- ---------
Other income (expense)
Interest income 972 568 371
Interest expense (40,478) (36,914) (45,097)
Loss on disposal of equipment -- -- (9)
Loss on extinguishment of debt -- -- (26,854)
--------- --------- ---------
Total other income (expense) (39,506) (36,346) (71,589)
--------- --------- ---------
Income before income taxes 55,176 47,558 18,776
Provision for income taxes (19,098) (21,281) (8,556)
--------- --------- ---------
Net income 36,078 26,277 10,220
Cumulative preferred dividends on Senior
Preferred and Class B Preferred Units -- -- (25,395)
--------- --------- ---------
Net income (loss) available common
stockholders $ 36,078 $ 26,277 $(15,175)
========= ========= =========
Basic earnings (loss) per share $ 0.73 $ 0.54 $ (0.55)
========= ========= =========
Diluted earnings (loss) per share $ 0.72 $ 0.53 $ (0.55)
========= ========= =========
Weighted average shares outstanding:
Basic 49,460 48,908 27,546
========= ========= =========
Diluted 50,020 50,008 27,546
========= ========= =========
Prestige Brands Holdings, Inc.
Consolidated Balance Sheets
(In thousands)
Assets March 31, March 31,
2007 2006
----------- -----------
Current assets
Cash and cash equivalents $ 13,758 $ 8,200
Accounts receivable 35,167 40,042
Inventories 30,173 33,841
Deferred income tax assets 2,735 3,227
Prepaid expenses and other current assets 1,935 701
----------- -----------
Total current assets 83,768 86,011
Property and equipment 1,449 1,653
Goodwill 310,947 297,935
Intangible assets 657,058 637,197
Other long-term assets 10,194 15,849
----------- -----------
Total Assets $1,063,416 $1,038,645
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 19,303 $ 18,065
Accrued interest payable 7,552 7,563
Income taxes payable -- 1,795
Other accrued liabilities 10,505 4,582
Current portion of long-term debt 3,550 3,730
----------- -----------
Total current liabilities 40,910 35,735
Long-term debt 459,800 494,900
Other long-term liabilities 2,801 --
Deferred income tax liabilities 114,571 98,603
----------- -----------
Total Liabilities 618,082 629,238
----------- -----------
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 - 50,060 shares and 50,056 shares at
March 31, 2007 and 2006, respectively 501 501
Additional paid-in capital 379,225 378,570
Treasury stock, at cost - 55 shares and 18
shares at March 31, 2007 and 2006,
respectively (40) (30)
Accumulated other comprehensive income 313 1,109
Retained earnings 65,335 29,257
----------- -----------
Total stockholders' equity 445,334 409,407
----------- -----------
Total Liabilities and Stockholders' Equity $1,063,416 $1,038,645
=========== ===========
Prestige Brands Holdings, Inc.
Consolidated Statements of Cash Flows
Year Ended March 31
------------------------------
(In thousands) 2007 2006 2005
--------- --------- ----------
Operating Activities
Net income $ 36,078 $ 26,277 $ 10,220
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 10,384 10,777 9,800
Amortization of financing costs 3,257 2,649 2,943
Impairment of goodwill and
intangible assets -- 9,317 --
Deferred income taxes 9,662 14,976 8,344
Stock-based compensation 655 383 --
Loss on extinguishment of debt -- -- 26,854
Other -- -- 9
Changes in operating assets and
liabilities, net of effects of
purchases of businesses
Accounts receivable 4,875 (1,350) (7,227)
Inventories 4,292 (7,156) 2,922
Prepaid expenses and other assets (1,235) 2,623 (1,490)
Accounts payable (186) (6,037) 5,059
Income taxes payable (1,795) 1,795 --
Other accrued liabilities 5,912 (393) (6,392)
--------- --------- ----------
Net cash provided by operating
activities 71,899 53,861 51,042
--------- --------- ----------
Investing Activities
Purchases of equipment (540) (519) (365)
Purchases of intangible assets -- (22,655) --
Change in other assets due to purchase
price adjustments 750 -- --
Purchases of businesses, net (31,261) (30,989) (425,479)
--------- --------- ----------
Net cash used for investing activities (31,051) (54,163) (425,844)
--------- --------- ----------
Financing Activities
Proceeds from the issuance of notes -- 30,000 698,512
Payment of deferred financing costs -- (13) (24,539)
Repayment of notes (35,280) (26,730) (529,538)
Prepayment penalty -- -- (10,875)
Payments on interest rate caps -- -- (2,283)
Proceeds from the issuance of equity,
net -- (63) 475,554
Redemption of equity interests (10) (26) (230,088)
--------- --------- ----------
Net cash provided by (used for)
financing activities (35,290) 3,168 376,743
--------- --------- ----------
Increase in cash 5,558 2,866 1,941
Cash - beginning of year 8,200 5,334 3,393
--------- --------- ----------
Cash - end of year $ 13,758 $ 8,200 $ 5,334
========= ========= ==========
Prestige Brands Holdings, Inc.
Reconciliation to Adjusted Operating Income and Net Income
Three Months
Ended March 31
-----------------
(In thousands, except per share data) 2007 2006
-------- --------
Adjusted Operating Income
----------------------------------------------------
Operating Income $22,633 $20,068
Charges due to inventory step-up -- 149
Impairment of goodwill and intangible assets -- 9,317
-------- --------
Adjusted Operating Income $22,633 $29,534
======== ========
Reconciliation to Adjusted Net Income
----------------------------------------------------
Income before income taxes $12,818 $10,429
Charges due to inventory step-up -- 149
Impairment of goodwill and intangible assets -- 9,317
-------- --------
Adjusted income before income taxes 12,818 19,895
Provision for income taxes (applicable effective
rates applied to each period excluding adjustments
applicable to deferred tax rates); 38.4% in fiscal
2007 and 39.1% in fiscal 2006) (4,923) (7,759)
-------- --------
Adjusted Net Income $ 7,895 $12,136
======== ========
Adjusted net income per common share
Basic $ 0.16 $ 0.25
======== ========
Diluted $ 0.16 $ 0.24
======== ========
Weighted average shares outstanding:
Basic 49,607 49,077
======== ========
Diluted 50,027 50,008
======== ========
Prestige Brands Holdings, Inc.
Reconciliation to Adjusted Operating Income and Net Income
Year Ended March 31
-------------------
2007 2006
--------- ---------
Adjusted Operating Income
--------------------------------------------------
Operating Income $ 94,682 $ 83,904
Charges due to inventory step-up 276 248
Impairment of goodwill and intangible assets -- 9,317
--------- ---------
Adjusted Operating Income $ 94,958 $ 93,469
========= =========
Reconciliation to Adjusted Net Income
--------------------------------------------------
Income before income taxes $ 55,176 $ 47,558
Charges due to inventory step-up 276 248
Impairment of goodwill and intangible assets -- 9,317
--------- ---------
Adjusted income before income taxes 55,452 57,123
Provision for income taxes (applicable effective
rates applied to each period, excluding
adjustments applicable to deferred tax rates);
38.4% in fiscal 2007 and 39.1% in fiscal 2006) (21,293) (22,278)
--------- ---------
Adjusted Net Income $ 34,159 $ 34,845
========= =========
Adjusted net income per common share
Basic $ 0.69 $ 0.71
========= =========
Diluted $ 0.68 $ 0.70
========= =========
Weighted average shares outstanding:
Basic 49,460 48,907
========= =========
Diluted 50,020 50,008
========= =========
Prestige Brands Holdings, Inc.
Segment Information
Three Months Ended March 31, 2007
----------------------------------------------
Over-the- Household Personal Consolidated
Counter Drug Cleaning Care
------------- --------- --------- ------------
Net sales $ 43,277 $ 28,624 $ 5,782 $ 77,683
Other revenues -- 353 -- 353
------------- --------- --------- ------------
Total revenues 43,277 28,977 5,782 78,036
Cost of sales 17,403 18,120 3,274 38,797
------------- --------- --------- ------------
Gross profit 25,874 10,857 2,508 39,239
Advertising and
promotion 4,628 1,375 193 6,196
------------- --------- --------- ------------
Contribution margin $ 21,246 $ 9,482 $ 2,315 33,043
============= ========= =========
Other operating
expenses 10,410
------------
Operating income 22,633
Other expenses 9,815
Provision for income
taxes 4,423
------------
Net income $ 8,395
============
Three Months Ended March 31, 2006
----------------------------------------------
Over-the- Household Personal Consolidated
Counter Drug Cleaning Care
------------- --------- --------- ------------
Net sales $ 44,747 $ 28,573 $ 6,342 $ 79,662
Other revenues -- 352 -- 352
------------- --------- --------- ------------
Total revenues 44,747 28,925 6,342 80,014
Cost of sales 15,323 17,352 3,531 36,206
------------- --------- --------- ------------
Gross profit 29,424 11,573 2,811 43,808
Advertising and
promotion 4,216 1,267 292 5,775
------------- --------- --------- ------------
Contribution margin $ 25,208 $ 10,306 $ 2,519 38,033
============= ========= =========
Other operating
expenses 17,965
------------
Operating income 20,068
Other expenses 9,639
Provision for income
taxes 6,800
------------
Net income $ 3,629
============
Prestige Brands Holdings, Inc.
Segment Information
Year Ended March 31, 2007
----------------------------------------------
Over-the- Household Personal Consolidated
Counter Drug Cleaning Care
------------- --------- --------- ------------
Net sales $ 174,704 $117,249 $ 24,894 $ 316,847
Other revenues -- 1,787 -- 1,787
------------- --------- --------- ------------
Total revenues 174,704 119,036 24,894 318,634
Cost of sales 65,601 73,002 14,544 153,147
------------- --------- --------- ------------
Gross profit 109,103 46,034 10,350 165,487
Advertising and
promotion 24,201 6,679 1,125 32,005
------------- --------- --------- ------------
Contribution margin $ 84,902 $ 39,355 $ 9,225 133,482
============= ========= =========
Other operating
expenses 38,800
------------
Operating income 94,682
Other expenses 39,506
Provision for income
taxes 19,098
------------
Net income $ 36,078
============
Year Ended March 31, 2006
---------------------------------------------
Over-the- Household Personal Consolidated
Counter Drug Cleaning Care
------------- --------- -------- ------------
Net sales $ 160,942 $107,372 $27,925 $ 296,239
Other revenues -- 429 -- 429
------------- --------- -------- ------------
Total revenues 160,942 107,801 27,925 296,668
Cost of sales 58,491 65,088 15,851 139,430
------------- --------- -------- ------------
Gross profit 102,451 42,713 12,074 157,238
Advertising and
promotion 22,424 6,495 3,163 32,082
------------- --------- -------- ------------
Contribution margin $ 80,027 $ 36,218 $ 8,911 125,156
============= ========= ========
Other operating expenses 41,252
------------
Operating income 83,904
Other expenses 36,346
Provision for income
taxes 21,281
------------
Net income $ 26,277
============